Marriott Vacations Worldwide Reports Second Quarter 2015 Financial Results

Jul 23, 2015, 08:00 ET from Marriott Vacations Worldwide Corporation

ORLANDO, Fla., July 23, 2015 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported second quarter 2015 financial results and provided updated guidance for the full year 2015.

Second quarter 2015 highlights:

  • Adjusted fully diluted earnings per share (EPS) increased to $0.91, up 4.6 percent from $0.87 in the second quarter of 2014.
  • Adjusted EBITDA totaled $57.7 million, an increase of $1.0 million, or 2 percent, year-over-year.
  • North America contract sales were $150.6 million, up 3.4 percent year-over-year.
  • North America tours increased 1.2 percent year-over-year.
  • North America volume per guest (VPG) increased 0.6 percent year-over-year to $3,404.
  • Company adjusted development margin was 21.0 percent and North America adjusted development margin was 23.0 percent.
  • The company completed the sale of its undeveloped land in Kauai, Hawaii, for gross cash proceeds of $20 million.
  • During the second quarter of 2015, the company repurchased $15 million of its common stock, bringing total 2015 repurchases through the end of the second quarter to $66.2 million.
  • Subsequent to the end of the second quarter, the company purchased 71 units in The Mayflower Hotel, Autograph Collection in Washington, D.C.

Second quarter 2015 net income was $34.0 million, or $1.05 diluted EPS, compared to net income of $35.3 million, or $1.00 diluted EPS, in the second quarter of 2014. Company development margin was 21.3 percent and North America development margin was 23.6 percent in the second quarter of 2015.

Non-GAAP financial measures such as adjusted EBITDA, adjusted net income, adjusted earnings per share and adjusted development margin are reconciled and adjustments are shown and described in further detail on pages A-1 through A-19 of the Financial Schedules that follow.

"We're pleased with our solid second quarter financial results, delivering nearly $58 million of Adjusted EBITDA," said Stephen P. Weisz, president and chief executive officer. "Our North America contract sales grew 3.4 percent on continued growth in tour volumes and slightly higher VPG and our company development margin remained in line with our full year expectations. With a strong first half of the year behind us, we are reaffirming Adjusted EBITDA guidance of $222 million to $232 million for full year 2015."

Second Quarter 2015 Results

Company Results

Total company contract sales were $165.9 million, $1.3 million higher than the second quarter of last year. The increase was driven by $5.0 million of higher contract sales in the company's North America segment and $0.7 million of higher contract sales in the company's Asia Pacific segment, partially offset by $4.3 million of lower contract sales in the company's Europe segment.

Adjusted development margin was $32.3 million, a $4.4 million decrease from the second quarter of 2014. Adjusted development margin percentage was 21.0 percent in the second quarter of 2015 compared to 24.2 percent in the second quarter of 2014. Development margin was $33.1 million, a $3.8 million decrease from the second quarter of 2014. Development margin percentage was 21.3 percent in the second quarter of 2015 compared to 24.2 percent in the second quarter of 2014.

Rental revenues totaled $72.6 million, a $10.8 million increase from the second quarter of 2014, reflecting a 4 percent increase in transient rate and a 6 percent increase in transient keys rented. Rental revenues, net of expenses, were $10.8 million, a $4.0 million increase from the second quarter of 2014.

Resort management and other services revenues totaled $74.1 million, a $0.8 million decrease from the second quarter of 2014. Resort management and other services revenues, net of expenses, were $28.6 million, a $2.1 million, or 8 percent, increase over the second quarter of 2014.

Financing revenues totaled $28.3 million, a $1.5 million decrease from the second quarter of 2014. Financing revenues, net of expenses and consumer financing interest expense, were $17.0 million, a $1.7 million decrease from the second quarter of 2014.

Adjusted EBITDA was $57.7 million in the second quarter of 2015, a $1.0 million, or 1.7 percent, increase from $56.7 million in the second quarter of 2014.

Segment Results

North America

VPG increased 0.6 percent to $3,404 in the second quarter of 2015 from $3,383 in the second quarter of 2014, driven by improved closing efficiency and higher pricing, offset partially by fewer points purchased per contract. North America contract sales were $150.6 million in the second quarter of 2015, an increase of $5.0 million, or 3.4 percent, over the prior year period.

Second quarter 2015 North America segment financial results were $104.6 million, an increase of $2.9 million from the second quarter of 2014. The increase was driven primarily by $8.2 million of higher gains mainly associated with the disposition of the company's property in Kauai, Hawaii, $4.2 million of higher rental revenues net of expenses, $2.1 million of higher resort management and other services revenues net of expenses and $0.8 million related to an impairment charge in the prior year period. These increases were offset partially by $7.5 million of lower litigation settlements due mainly to the settlement of a dispute with a former service provider in the prior year period, $2.0 million of lower development margin, $2.0 million from the reversal of a charge in the prior year period related to the company's interest in an equity method investment in a joint venture project and $1.5 million of lower financing revenues.

Adjusted development margin was $32.3 million, a $3.0 million decrease from the prior year quarter. Adjusted development margin percentage was 23.0 percent in the second quarter of 2015 compared to 26.3 percent in the second quarter of 2014. Development margin was $33.5 million, a $2.0 million decrease from the second quarter of 2014. Development margin percentage was 23.6 percent in the second quarter of 2015 compared to 26.3 percent in the prior year quarter.

Asia Pacific

Total contract sales in the segment were $8.0 million, an increase of $0.7 million in the second quarter of 2015.  Segment financial results were a loss of $0.1 million, a $1.5 million decrease from the second quarter of 2014, reflecting $1.3 million of transaction costs associated with the company's future new resort and sales distribution in Australia.

Europe

Second quarter 2015 contract sales were $7.3 million, a decrease of $4.3 million from the second quarter of 2014. Segment financial results were $3.0 million, a $2.2 million decrease from the second quarter of 2014 due to lower development margin from lower contract sales.

Share Repurchase Program

In total for 2015, through the end of the second quarter, the company repurchased approximately $66.2 million of its common stock.

Balance Sheet and Liquidity

On June 19, 2015, cash and cash equivalents totaled $250.9 million. Since the beginning of the year, real estate inventory balances declined $69.1 million to $699.1 million, including $335.3 million of finished goods and $363.8 million of land and infrastructure. The company had $568.1 million in gross debt outstanding at the end of the second quarter of 2015, a decrease of $143.3 million from year-end 2014, consisting primarily of $564.7 million in gross non-recourse securitized notes. In addition, $40.0 million of gross mandatorily redeemable preferred stock of a subsidiary of the company was outstanding at the end of the second quarter of 2015.

As of June 19, 2015, the company had approximately $197 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit, and approximately $207 million of gross vacation ownership notes receivable eligible for securitization into its warehouse credit facility.

Outlook

The company is providing the following updated guidance for the full year 2015:

Current Guidance

Previous Guidance

Adjusted free cash flow

$175 million to $200 million

$145 million to $170 million

The company is reaffirming the following guidance for the full year 2015:

Current Guidance

Adjusted EBITDA

$222 million to $232 million

Company contract sales growth (excluding residential)

5 percent to 8 percent

Adjusted company development margin

21 percent to 22 percent

Adjusted net income

$108 million to $114 million

Adjusted fully diluted earnings per share

$3.29 to $3.48

 

Pages A-1 through A-19 of the Financial Schedules reconcile the non-GAAP financial measures set forth above to the following full year 2015 expected GAAP results: net income of $114 million to $121 million; fully diluted EPS of $3.49 to $3.70; company development margin of 21.1 percent to 22.1 percent; and net cash provided by operating activities of $170 million to $185 million.

Second Quarter 2015 Earnings Conference Call

The company will hold a conference call at 10:00 a.m. EST today to discuss these results and the updated guidance for full year 2015. Participants may access the call by dialing (877) 407-8289 or (201) 689-8341 for international callers. A live webcast of the call will also be available in the Investor Relations section of the company's website at www.marriottvacationsworldwide.com.

An audio replay of the conference call will be available for seven days and can be accessed at (877) 660-6853 or (201) 612-7415 for international callers. The conference ID for the recording is 13613029. The webcast will also be available on the company's website.

About Marriott Vacations Worldwide Corporation

Marriott Vacations Worldwide Corporation is a leading global pure-play vacation ownership company, offering a diverse portfolio of quality products, programs and management expertise with 60 resorts. Its brands include Marriott Vacation Club, The Ritz-Carlton Destination Club and Grand Residences by Marriott. Since entering the industry in 1984 as part of Marriott International, Inc., the company earned its position as a leader and innovator in vacation ownership products. The company preserves high standards of excellence in serving its customers, investors and associates while maintaining a long-term relationship with Marriott International. For more information, please visit www.marriottvacationsworldwide.com.

Note on forward-looking statements: This press release and accompanying schedules contain "forward-looking statements" within the meaning of federal securities laws, including statements about future operating results, estimates, and assumptions, and similar statements concerning anticipated future events and expectations that are not historical facts. The company cautions you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including volatility in the economy and the credit markets, supply and demand changes for vacation ownership and residential products, competitive conditions, the availability of capital to finance growth, and other matters referred to under the heading "Risk Factors" contained in the company's most recent Annual Report on Form 10-K filed with the U.S Securities and Exchange Commission (the "SEC") and in subsequent SEC filings, any of which could cause actual results to differ materially from those expressed in or implied in this press release. These statements are made as of July 23, 2015 and the company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Financial Schedules Follow

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

FINANCIAL SCHEDULES

QUARTER 2, 2015

TABLE OF CONTENTS

Consolidated Statements of Income - 12 Weeks Ended June 19, 2015 and June 20, 2014

 A-1

Consolidated Statements of Income - 24 Weeks Ended June 19, 2015 and June 20, 2014

 A-2

North America Segment Financial Results - 12 Weeks Ended June 19, 2015 and June 20, 2014

 A-3

North America Segment Financial Results - 24 Weeks Ended June 19, 2015 and June 20, 2014

 A-4

Asia Pacific Segment Financial Results - 12 Weeks Ended June 19, 2015 and June 20, 2014

 A-5

Asia Pacific Segment Financial Results - 24 Weeks Ended June 19, 2015 and June 20, 2014

 A-6

Europe Segment Financial Results - 12 Weeks Ended June 19, 2015 and June 20, 2014

 A-7

Europe Segment Financial Results - 24 Weeks Ended June 19, 2015 and June 20, 2014

 A-8

Corporate and Other Financial Results - 12 Weeks and 24 Weeks Ended June 19, 2015 and June 20, 2014

 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 June 19, 2015 and June 20, 2014

 A-10

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

    (Adjusted Sale of Vacation Ownership Products Net of Expenses) - 24 Weeks Ended June 19, 2015 and June 20, 2014

 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 June 19, 2015 and June 20, 2014

 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) - 24 Weeks Ended June 19, 2015 and June 20, 2014

 A-13

EBITDA and Adjusted EBITDA - 12 Weeks and 24 Weeks Ended June 19, 2015 and June 20, 2014

 A-14

2015 Outlook - Adjusted Net Income and Adjusted Earnings Per Share - Diluted, Adjusted EBITDA and Adjusted Development Margin

 A-15

2015 Outlook -  Adjusted Free Cash Flow and Normalized Adjusted Free Cash Flow

 A-16

Non-GAAP Financial Measures

 A-17

Consolidated Balance Sheets

 A-20

Consolidated Statements of Cash Flows

 A-21

 

A-1

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

12 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands, except per share amounts)

As Reported

As Adjusted

As Reported

As Adjusted

12 Weeks Ended

Certain

12 Weeks Ended

12 Weeks Ended

Certain

12 Weeks Ended

June 19, 2015

Items

June 19, 2015

**

June 20, 2014

Items

June 20, 2014

**

Revenues

Sale of vacation ownership products

$               155,370

$            -

$                       155,370

$               152,562

$            -

$               152,562

Resort management and other services

74,063

-

74,063

74,821

-

74,821

Financing

28,294

-

28,294

29,817

-

29,817

Rental

72,642

-

72,642

61,827

-

61,827

Cost reimbursements

92,458

-

92,458

90,875

-

90,875

Total revenues

422,827

-

422,827

409,902

-

409,902

Expenses

Cost of vacation ownership products

45,119

-

45,119

43,414

-

43,414

Marketing and sales

77,137

-

77,137

72,227

(287)

71,940

Resort management and other services

45,480

-

45,480

48,308

-

48,308

Financing

6,085

-

6,085

5,438

-

5,438

Rental

61,835

-

61,835

54,991

-

54,991

General and administrative

22,892

-

22,892

23,153

-

23,153

Organizational and separation related

101

(101)

-

1,089

(1,089)

-

Litigation settlement

26

(26)

-

(7,575)

7,575

-

Consumer financing interest

5,248

-

5,248

5,737

-

5,737

Royalty fee

13,431

-

13,431

13,653

-

13,653

Impairment

-

-

-

834

(834)

-

Cost reimbursements

92,458

-

92,458

90,875

-

90,875

Total expenses

369,812

(127)

369,685

352,144

5,365

357,509

Gains and other income

8,625

(8,625)

-

409

(409)

-

Interest Expense

(3,009)

-

(3,009)

(2,601)

-

(2,601)

Equity in earnings

85

-

85

81

-

81

Impairment reversals on equity investment

-

-

-

2,000

(2,000)

-

Other

(1,272)

1,272

-

-

-

-

Income before income taxes

57,444

(7,226)

50,218

57,647

(7,774)

49,873

Provision for income taxes

(23,403)

2,804

(20,599)

(22,344)

3,158

(19,186)

Net income

$                 34,041

$  (4,422)

$                         29,619

$                 35,303

$  (4,616)

$                 30,687

Earnings per share - Basic

$                     1.07

$                             0.93

$                     1.03

$                     0.89

Earnings per share - Diluted

$                     1.05

$                             0.91

$                     1.00

$                     0.87

Basic Shares

31,858

31,858

34,292

34,292

Diluted Shares

32,517

32,517

35,239

35,239

As Reported

As Reported

12 Weeks Ended

12 Weeks Ended

Contract Sales

June 19, 2015

June 20, 2014

Vacation ownership

$               165,938

$               164,589

Residential products

-

-

Total contract sales

$               165,938

$               164,589

**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. 

NOTE:  Earnings per share - Basic and Earnings per share - Diluted are calculated using whole dollars.  Beginning with the fourth quarter of 2014, we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.

 

A-2

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

24 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands, except per share amounts)

As Reported

As Adjusted

As Reported

As Adjusted

24 Weeks Ended

Certain

24 Weeks Ended

24 Weeks Ended

Certain

24 Weeks Ended

June 19, 2015

Items

June 19, 2015

**

June 20, 2014

Items

June 20, 2014

**

Revenues

Sale of vacation ownership products

$               339,276

$(28,420)

$               310,856

$               297,412

$            -

$               297,412

Resort management and other services

138,480

-

138,480

138,367

-

138,367

Financing

57,346

-

57,346

60,457

-

60,457

Rental

148,841

-

148,841

125,352

-

125,352

Cost reimbursements

193,764

-

193,764

190,261

-

190,261

Total revenues

877,707

(28,420)

849,287

811,849

-

811,849

Expenses

Cost of vacation ownership products

110,081

(21,583)

88,498

90,285

-

90,285

Marketing and sales

157,132

(922)

156,210

143,447

(287)

143,160

Resort management and other services

87,889

-

87,889

93,204

200

93,404

Financing

10,990

-

10,990

10,542

-

10,542

Rental

121,993

-

121,993

111,781

-

111,781

General and administrative

45,669

-

45,669

44,981

-

44,981

Organizational and separation related

293

(293)

-

1,940

(1,940)

-

Litigation settlement

(236)

236

-

(7,575)

7,575

-

Consumer financing interest

11,269

-

11,269

12,362

-

12,362

Royalty fee

26,431

-

26,431

27,081

-

27,081

Impairment

-

-

-

834

(834)

-

Cost reimbursements

193,764

-

193,764

190,261

-

190,261

Total expenses

765,275

(22,562)

742,713

719,143

4,714

723,857

Gains and other income

9,512

(9,512)

-

1,642

(1,642)

-

Interest Expense

(5,983)

-

(5,983)

(4,748)

-

(4,748)

Equity in earnings

98

-

98

118

-

118

Other

(1,272)

1,272

-

-

-

-

Income before income taxes

114,787

(14,098)

100,689

89,718

(6,356)

83,362

Provision for income taxes

(46,692)

3,779

(42,913)

(35,107)

2,537

(32,570)

Net income

$                 68,095

$(10,319)

$                 57,776

$                 54,611

$  (3,819)

$                 50,792

Earnings per share - Basic

$                     2.12

$                     1.80

$                     1.58

$                     1.47

Earnings per share - Diluted

$                     2.08

$                     1.76

$                     1.54

$                     1.43

Basic Shares

32,078

32,078

34,583

34,583

Diluted Shares

32,760

32,760

35,557

35,557

As Reported

As Reported

24 Weeks Ended

24 Weeks Ended

Contract Sales

June 19, 2015

June 20, 2014

Vacation ownership

$               335,888

$               319,837

Residential products

28,420

6,326

Total contract sales

$               364,308

$               326,163

**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. 

NOTE:  Earnings per share - Basic and Earnings per share - Diluted are calculated using whole dollars.  Beginning with the fourth quarter of 2014, we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.

 

A-3

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA SEGMENT

12 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands)

As Reported

As Adjusted

As Reported

As Adjusted

12 Weeks Ended

Certain

12 Weeks Ended

12 Weeks Ended

Certain

12 Weeks Ended

June 19, 2015

Items

June 19, 2015

**

June 20, 2014

Items

June 20, 2014

**

Revenues

Sale of vacation ownership products

$               142,148

$            -

$               142,148

$               134,590

$            -

$               134,590

Resort management and other services

66,194

-

66,194

65,480

-

65,480

Financing

26,354

-

26,354

27,807

-

27,807

Rental

65,756

-

65,756

54,404

-

54,404

Cost reimbursements

84,037

-

84,037

80,642

-

80,642

Total revenues

384,489

-

384,489

362,923

-

362,923

Expenses

Cost of vacation ownership products

40,834

-

40,834

37,433

-

37,433

Marketing and sales

67,837

-

67,837

61,722

-

61,722

Resort management and other services

39,101

-

39,101

40,527

-

40,527

Rental

55,128

-

55,128

47,985

-

47,985

Organizational and separation related

115

(115)

-

388

(388)

-

Litigation settlement

(108)

108

-

(7,575)

7,575

-

Royalty fee

1,686

-

1,686

1,820

-

1,820

Impairment

-

-

-

834

(834)

-

Cost reimbursements

84,037

-

84,037

80,642

-

80,642

Total expenses

288,630

(7)

288,623

263,776

6,353

270,129

Gains and other income

8,658

(8,658)

-

448

(448)

-

Equity in earnings

86

-

86

81

-

81

Impairment reversals on equity investment

-

-

-

2,000

(2,000)

-

Segment financial results

$               104,603

$  (8,651)

$                 95,952

$               101,676

$  (8,801)

$                 92,875

As Reported

As Reported

12 Weeks Ended

12 Weeks Ended

Contract Sales

June 19, 2015

June 20, 2014

Vacation ownership

$               150,605

$               145,597

Residential products

-

-

Total contract sales

$               150,605

$               145,597

**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. 

NOTE:  Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.

 

A-4

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA SEGMENT

24 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands)

As Reported

As Adjusted

As Reported

As Adjusted

24 Weeks Ended

Certain

24 Weeks Ended

24 Weeks Ended

Certain

24 Weeks Ended

June 19, 2015

Items

June 19, 2015

**

June 20, 2014

Items

June 20, 2014

**

Revenues

Sale of vacation ownership products

$               283,876

$            -

$               283,876

$               265,932

$            -

$               265,932

Resort management and other services

124,769

-

124,769

122,640

-

122,640

Financing

53,410

-

53,410

56,368

-

56,368

Rental

137,471

-

137,471

113,727

-

113,727

Cost reimbursements

176,891

-

176,891

170,585

-

170,585

Total revenues

776,417

-

776,417

729,252

-

729,252

Expenses

Cost of vacation ownership products

81,335

-

81,335

78,938

-

78,938

Marketing and sales

136,854

-

136,854

124,409

-

124,409

Resort management and other services

76,069

-

76,069

79,616

-

79,616

Rental

109,739

-

109,739

99,022

-

99,022

Organizational and separation related

254

(254)

-

405

(405)

-

Litigation settlement

(370)

370

-

(7,575)

7,575

-

Royalty fee

2,946

-

2,946

3,497

-

3,497

Impairment

-

-

-

834

(834)

-

Cost reimbursements

176,891

-

176,891

170,585

-

170,585

Total expenses

583,718

116

583,834

549,731

6,336

556,067

Gains and other income

9,538

(9,538)

-

1,690

(1,690)

-

Equity in earnings

102

-

102

120

-

120

Segment financial results

$               202,339

$  (9,654)

$               192,685

$               181,331

$  (8,026)

$               173,305

As Reported

As Reported

24 Weeks Ended

24 Weeks Ended

Contract Sales

June 19, 2015

June 20, 2014

Vacation ownership

$               306,598

$               285,774

Residential products

-

6,326

Total contract sales

$               306,598

$               292,100

**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. 

NOTE:  Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.

 

A-5

MARRIOTT VACATIONS WORLDWIDE CORPORATION

ASIA PACIFIC SEGMENT

12 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands)

As Reported

As Adjusted

As Reported

As Adjusted

12 Weeks Ended

Certain

12 Weeks Ended

12 Weeks Ended

Certain

12 Weeks Ended

June 19, 2015

Items

June 19, 2015

**

June 20, 2014

Items

June 20, 2014

**

Revenues

Sale of vacation ownership products

$                   7,575

$            -

$                   7,575

$                   7,954

$            -

$                   7,954

Resort management and other services

964

-

964

926

-

926

Financing

1,043

-

1,043

1,047

-

1,047

Rental

1,503

-

1,503

1,581

-

1,581

Cost reimbursements

632

-

632

722

-

722

Total revenues

11,717

-

11,717

12,230

-

12,230

Expenses

Cost of vacation ownership products

1,803

-

1,803

2,047

-

2,047

Marketing and sales

4,432

-

4,432

4,243

-

4,243

Resort management and other services

655

-

655

642

-

642

Rental

2,794

-

2,794

2,936

-

2,936

Royalty fee

150

-

150

147

-

147

Cost reimbursements

632

-

632

722

-

722

Total expenses

10,466

-

10,466

10,737

-

10,737

Gains and other income

(33)

33

-

-

-

-

Equity in losses

(1)

-

(1)

-

-

-

Other

(1,272)

1,272

-

-

-

-

Segment financial results

$                      (55)

$    1,305

$                   1,250

$                   1,493

$            -

$                   1,493

As Reported

As Reported

12 Weeks Ended

12 Weeks Ended

Contract Sales

June 19, 2015

June 20, 2014

Vacation ownership

$                   7,992

$                   7,337

Residential products

-

-

Total contract sales

$                   7,992

$                   7,337

**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. 

NOTE:   Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.

 

A-6

MARRIOTT VACATIONS WORLDWIDE CORPORATION

ASIA PACIFIC SEGMENT

24 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands)

As Reported

As Adjusted

As Reported

As Adjusted

24 Weeks Ended

Certain

24 Weeks Ended

24 Weeks Ended

Certain

24 Weeks Ended

June 19, 2015

Items

June 19, 2015

**

June 20, 2014

Items

June 20, 2014

**

Revenues

Sale of vacation ownership products

$                 43,853

$(28,420)

$                 15,433

$                 14,222

$            -

$                 14,222

Resort management and other services

1,827

-

1,827

1,832

-

1,832

Financing

2,049

-

2,049

2,104

-

2,104

Rental

3,855

-

3,855

3,556

-

3,556

Cost reimbursements

1,498

-

1,498

1,663

-

1,663

Total revenues

53,082

(28,420)

24,662

23,377

-

23,377

Expenses

Cost of vacation ownership products

23,799

(21,583)

2,216

3,500

-

3,500

Marketing and sales

9,989

(922)

9,067

8,021

-

8,021

Resort management and other services

1,505

-

1,505

1,342

-

1,342

Rental

5,290

-

5,290

5,532

-

5,532

Royalty fee

307

-

307

324

-

324

Cost reimbursements

1,498

-

1,498

1,663

-

1,663

Total expenses

42,388

(22,505)

19,883

20,382

-

20,382

Gains and other income

(30)

30

-

(8)

8

-

Equity in losses

(4)

-

(4)

(2)

-

(2)

Other

(1,272)

1,272

-

-

-

-

Segment financial results

$                   9,388

$  (4,613)

$                   4,775

$                   2,985

$           8

$                   2,993

As Reported

As Reported

24 Weeks Ended

24 Weeks Ended

Contract Sales

June 19, 2015

June 20, 2014

Vacation ownership

16,651

13,960

Residential products

28,420

-

Total contract sales

$                 45,071

$                 13,960

**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. 

NOTE:   Asia Pacific segment revenues and expenses for the twelve weeks ended March 28, 2014 have been restated to reclassify a portion of Cost reimbursements from the Asia Pacific segment to the Europe segment to correct certain immaterial prior period errors.  Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.

 

A-7

MARRIOTT VACATIONS WORLDWIDE CORPORATION

EUROPE SEGMENT

12 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands)

As Reported

As Adjusted

As Reported

As Adjusted

12 Weeks Ended

Certain

12 Weeks Ended

12 Weeks Ended

Certain

12 Weeks Ended

June 19, 2015

Items

June 19, 2015

**

June 20, 2014

Items

June 20, 2014

**

Revenues

Sale of vacation ownership products

$                   5,647

$            -

$                   5,647

$                 10,018

$            -

$                 10,018

Resort management and other services

6,905

-

6,905

8,415

-

8,415

Financing

897

-

897

963

-

963

Rental

5,383

-

5,383

5,842

-

5,842

Cost reimbursements

7,789

-

7,789

9,511

-

9,511

Total revenues

26,621

-

26,621

34,749

-

34,749

Expenses

Cost of vacation ownership products

1,233

-

1,233

2,389

-

2,389

Marketing and sales

4,868

-

4,868

6,262

(287)

5,975

Resort management and other services

5,724

-

5,724

7,139

-

7,139

Rental

3,913

-

3,913

4,070

-

4,070

Royalty fee

88

-

88

180

-

180

Cost reimbursements

7,789

-

7,789

9,511

-

9,511

Total expenses

23,615

-

23,615

29,551

(287)

29,264

Gains and other income

-

-

-

(39)

39

-

Segment financial results

$                   3,006

$            -

$                   3,006

$                   5,159

$       326

$                   5,485

As Reported

As Reported

12 Weeks Ended

12 Weeks Ended

June 19, 2015

June 20, 2014

Contract Sales

$                   7,341

$                 11,655

**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. 

NOTE:    Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.

 

A-8

MARRIOTT VACATIONS WORLDWIDE CORPORATION

EUROPE SEGMENT

24 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands)

As Reported

As Adjusted

As Reported

As Adjusted

24 Weeks Ended

Certain

24 Weeks Ended

24 Weeks Ended

Certain

24 Weeks Ended

June 19, 2015

Items

June 19, 2015

**

June 20, 2014

Items

June 20, 2014

**

Revenues

Sale of vacation ownership products

$                 11,547

$            -

$                 11,547

$                 17,258

$            -

$                 17,258

Resort management and other services

11,884

-

11,884

13,895

-

13,895

Financing

1,887

-

1,887

1,985

-

1,985

Rental

7,515

-

7,515

8,069

-

8,069

Cost reimbursements

15,375

-

15,375

18,013

-

18,013

Total revenues

48,208

-

48,208

59,220

-

59,220

Expenses

Cost of vacation ownership products

2,085

-

2,085

3,835

-

3,835

Marketing and sales

10,289

-

10,289

11,017

(287)

10,730

Resort management and other services

10,315

-

10,315

12,246

200

12,446

Rental

6,964

-

6,964

7,227

-

7,227

Royalty fee

164

-

164

282

-

282

Cost reimbursements

15,375

-

15,375

18,013

-

18,013

Total expenses

45,192

-

45,192

52,620

(87)

52,533

Gains and other income

4

(4)

-

(39)

39

-

Segment financial results

$                   3,020

$         (4)

$                   3,016

$                   6,561

$       126

$                   6,687

As Reported

As Reported

24 Weeks Ended

24 Weeks Ended

June 19, 2015

June 20, 2014

Contract Sales

$                 12,639

$                 20,103

**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. 

NOTE:   Europe segment revenues and expenses for the twelve weeks ended March 28, 2014 have been restated to reclassify a portion of Cost reimbursements from the Asia Pacific segment to the Europe segment to correct certain immaterial prior period errors.  Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.

 

A-9

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CORPORATE AND OTHER

12 Weeks and 24 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands)

As Reported

As Adjusted

As Reported

As Adjusted

12 Weeks Ended

Certain

12 Weeks Ended

12 Weeks Ended

Certain

12 Weeks Ended

June 19, 2015

Items

June 19, 2015

**

June 20, 2014

Items

June 20, 2014

**

Expenses

Cost of vacation ownership products

$                      1,249

$            -

$                      1,249

$                      1,545

$              -

$                      1,545

Financing

6,085

-

6,085

5,438

-

5,438

General and administrative

22,892

-

22,892

23,153

-

23,153

Organizational and separation related

(14)

14

-

701

(701)

-

Litigation settlement

134

(134)

-

-

-

-

Consumer financing interest

5,248

-

5,248

5,737

-

5,737

Royalty fee

11,507

-

11,507

11,506

-

11,506

Total expenses

$                   47,101

$     (120)

$                   46,981

$                   48,080

$       (701)

$                   47,379

As Reported

As Adjusted

As Reported

As Adjusted

24 Weeks Ended

Certain

24 Weeks Ended

24 Weeks Ended

Certain

24 Weeks Ended

June 19, 2015

Items

June 19, 2015

**

June 20, 2014

Items

June 20, 2014

**

Expenses

Cost of vacation ownership products

$                      2,862

$            -

$                      2,862

$                      4,012

$              -

$                      4,012

Financing

10,990

-

10,990

10,542

-

10,542

General and administrative

45,669

-

45,669

44,981

-

44,981

Organizational and separation related

39

(39)

-

1,535

(1,535)

-

Litigation settlement

134

(134)

-

-

-

-

Consumer financing interest

11,269

-

11,269

12,362

-

12,362

Royalty fee

23,014

-

23,014

22,978

-

22,978

Total expenses

$                   93,977

$     (173)

$                   93,804

$                   96,410

$    (1,535)

$                   94,875

**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use. 

NOTE:  Corporate and Other consists of results not specifically attributable to an individual segment, including expenses incurred to support our financing operations, non-capitalizable development expenses supporting  overall company development, company-wide general and administrative costs, and the fixed royalty fee payable under the license agreements that we entered into with Marriott International in connection with the spin-off, as well as consumer financing interest expense.

 

A-10

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In thousands)

12 Weeks Ended

June 19, 2015

June 20, 2014

Contract sales

Vacation ownership

$             165,938

$               164,589

Residential products

-

-

Total contract sales

165,938

164,589

Revenue recognition adjustments:

Reportability1

1,440

829

Sales Reserve2

(7,179)

(8,047)

Other3

(4,829)

(4,809)

Sale of vacation ownership products

$             155,370

$             152,562

1  Adjustment for lack of required downpayment or contract sales in rescission period.

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

3  Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue.

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

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

(In thousands)

Revenue

Revenue

As Reported

Recognition

As Adjusted

As Reported

Recognition

As Adjusted

12 Weeks Ended

Certain

Reportability

12 Weeks Ended

12 Weeks Ended

Certain

Reportability

12 Weeks Ended

June 19, 2015

Items

Adjustment

June 19, 2015

**

June 20, 2014

Items

Adjustment

June 20, 2014

**

Sale of vacation ownership products

$                  155,370

$            -

$              (1,440)

$                  153,930

$                  152,562

$            -

$                 (829)

$                  151,733

Less:

Cost of vacation ownership products

45,119

-

(464)

44,655

43,414

-

(198)

43,216

Marketing and sales

77,137

-

(157)

76,980

72,227

(287)

(121)

71,819

Development margin

$                    33,114

$            -

$                 (819)

$                    32,295

$                    36,921

$        287

$                 (510)

$                    36,698

Development margin percentage1

21.3%

21.0%

24.2%

24.2%

**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

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

 

A-11

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In thousands)

24 Weeks Ended

June 19, 2015

June 20, 2014

Contract sales

Vacation ownership

$               335,888

$               319,837

Residential products

28,420

6,326

Total contract sales

364,308

326,163

Revenue recognition adjustments:

Reportability1

(73)

(3,725)

Sales Reserve2

(15,546)

(15,698)

Other3

(9,413)

(9,328)

Sale of vacation ownership products

$               339,276

$               297,412

1  Adjustment for lack of required downpayment or contract sales in rescission period.

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

3  Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue.

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

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

(In thousands)

Revenue

Revenue

As Reported

Recognition

As Adjusted

As Reported

Recognition

As Adjusted

24 Weeks Ended

Certain

Reportability

24 Weeks Ended

24 Weeks Ended

Certain

Reportability

24 Weeks Ended

June 19, 2015

Items

Adjustment

June 19, 2015

**

June 20, 2014

Items

Adjustment

June 20, 2014

**

Sale of vacation ownership products

$                  339,276

$   (28,420)

$                     73

$                  310,929

$                  297,412

$            -

$                3,725

$                  301,137

Less:

Cost of vacation ownership products 

110,081

(21,583)

98

88,596

90,285

-

1,216

91,501

Marketing and sales

157,132

(922)

(52)

156,158

143,447

(287)

253

143,413

Development margin

$                    72,063

$     (5,915)

$                     27

$                    66,175

$                    63,680

$        287

$                2,256

$                    66,223

Development margin percentage1

21.2%

21.3%

21.4%

22.0%

**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

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

 

A-12

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In thousands)

12 Weeks Ended

June 19, 2015

June 20, 2014

Contract sales

Vacation ownership

$             150,605

$              145,597

Residential products

-

-

Total contract sales

150,605

145,597

Revenue recognition adjustments:

Reportability1

1,942

208

Sales Reserve 2

(5,651)

(6,424)

Other 3

(4,748)

(4,791)

Sale of vacation ownership products

$             142,148

$              134,590

1  Adjustment for lack of required downpayment or contract sales in rescission period.

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

3  Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue.

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

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

(In thousands)

Revenue

Revenue

As Reported

Recognition

As Adjusted

As Reported

Recognition

As Adjusted

12 Weeks Ended

Certain

Reportability

12 Weeks Ended

12 Weeks Ended

Certain

Reportability

12 Weeks Ended

June 19, 2015

Items

Adjustment

June 19, 2015

**

June 20, 2014

Items

Adjustment

June 20, 2014

**

Sale of vacation ownership products

$                       142,148

$          -

$          (1,942)

$                     140,206

$               134,590

$          -

$             (208)

$               134,382

Less:

Cost of vacation ownership products

40,834

-

(553)

40,281

37,433

-

(58)

37,375

Marketing and sales

67,837

-

(182)

67,655

61,722

-

(20)

61,702

Development margin

$                         33,477

$          -

$          (1,207)

$                       32,270

$                 35,435

$          -

$             (130)

$                 35,305

Development margin percentage1

23.6%

23.0%

26.3%

26.3%

**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

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

 

A-13

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In thousands)

24 Weeks Ended

June 19, 2015

June 20, 2014

Contract sales

Vacation ownership

$           306,598

$             285,774

Residential products

-

6,326

Total contract sales

306,598

292,100

Revenue recognition adjustments:

Reportability1

(1,502)

(4,192)

Sales Reserve 2

(11,985)

(12,751)

Other 3

(9,235)

(9,225)

Sale of vacation ownership products

$           283,876

$             265,932

1  Adjustment for lack of required downpayment or contract sales in rescission period.

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

3  Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue.

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

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

(In thousands)

Revenue

Revenue

As Reported

Recognition

As Adjusted

As Reported

Recognition

As Adjusted

24 Weeks Ended

Certain

Reportability

24 Weeks Ended

24 Weeks Ended

Certain

Reportability

24 Weeks Ended

June 19, 2015

Items

Adjustment

June 19, 2015

**

June 20, 2014

Items

Adjustment

June 20, 2014

**

Sale of vacation ownership products

$               283,876

$          -

$            1,502

$            285,378

$               265,932

$          -

$         4,192

$               270,124

Less:

Cost of vacation ownership products 

81,335

-

427

81,762

78,938

-

1,318

80,256

Marketing and sales

136,854

-

142

136,996

124,409

-

394

124,803

Development margin

$                 65,687

$          -

$               933

$              66,620

$                 62,585

$          -

$         2,480

$                 65,065

Development margin percentage1

23.1%

23.3%

23.5%

24.1%

**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

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

 

A-14

MARRIOTT VACATIONS WORLDWIDE CORPORATION

EBITDA AND ADJUSTED EBITDA

12 Weeks and 24 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands)

As Reported

As Adjusted

As Reported

As Adjusted

12 Weeks Ended

Certain

12 Weeks Ended

12 Weeks Ended

Certain

12 Weeks Ended

June 19, 2015

Items

June 19, 2015

**

June 20, 2014

Items

June 20, 2014

**

Net income

$                 34,041

$  (4,422)

$             29,619

$                 35,303

$ (4,616)

$                 30,687

Interest expense  1

3,009

-

3,009

2,601

-

2,601

Tax provision

23,403

(2,804)

20,599

22,344

(3,158)

19,186

Depreciation and amortization

4,493

-

4,493

4,264

-

4,264

EBITDA **

$                 64,946

$  (7,226)

$             57,720

$                 64,512

$ (7,774)

$                 56,738

As Reported

As Adjusted

As Reported

As Adjusted

24 Weeks Ended

Certain

24 Weeks Ended

24 Weeks Ended

Certain

24 Weeks Ended

June 19, 2015

Items

June 19, 2015

**

June 20, 2014

Items

June 20, 2014

**

Net income

$                 68,095

$(10,319)

$            57,776

$                 54,611

$ (3,819)

$                 50,792

Interest expense  1

5,983

-

5,983

4,748

-

4,748

Tax provision

46,692

(3,779)

42,913

35,107

(2,537)

32,570

Depreciation and amortization

8,558

-

8,558

8,922

-

8,922

EBITDA **

$               129,328

$(14,098)

$          115,230

$               103,388

$ (6,356)

$                 97,032

**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

1  Interest expense excludes consumer financing interest expense.

 

A-15

MARRIOTT VACATIONS WORLDWIDE CORPORATION

2015 ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE - DILUTED OUTLOOK

(In millions, except per share amounts)

Fiscal Year 2015 (low)

Fiscal Year 2015 (high)

Net income

$                                114

$                                  121

Adjustments to reconcile Net income to Adjusted net income

Organizational and separation related and other charges1

7

6

Gain on dispositions 2

(10)

(10)

Bulk sales 3

(6)

(6)

Provision for income taxes on adjustments to net income

3

3

Adjusted net income**

$                                108

$                                  114

Earnings per share - Diluted 4

$                               3.49

$                                 3.70

Adjusted earnings per share - Diluted**, 4

$                               3.29

$                                 3.48

Diluted shares4

32.7

32.7

**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

1   Organizational and separation related and other charges adjustment includes $1.8 million for organizational and separation related efforts and $4 million to $5 million of non-capitalizable transaction costs in our Asia Pacific and North America segments.

2   Gain on dispositions adjustment includes a $0.9 million gain associated with the sale of a golf course and adjacent undeveloped land and an $8.7 million gain on the sale of undeveloped land in our North America segment. 

3     Bulk sales adjustment includes the net $5.9 million of pre-tax income associated with the sale of the 18 units in the Asia Pacific segment.

4      Earnings per share - Diluted, Adjusted earnings per share - Diluted, and Diluted shares outlook includes the impact of share repurchase activity only through June 19, 2015.

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

2015 ADJUSTED EBITDA OUTLOOK

(In millions)

Fiscal Year 2015 (low)

Fiscal Year 2015 (high)

Adjusted net income **                                                                   

$                                108

$                                  114

Interest expense1                                  

12

12

Tax provision                                                                    

81

85

Depreciation and amortization                                                                    

21

21

Adjusted EBITDA**

$                                222

$                                  232

**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 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

2015 ADJUSTED DEVELOPMENT MARGIN OUTLOOK

Total MVW

Fiscal Year 2015 (low)

Fiscal Year 2015 (high)

Development margin1

21.1%

22.1%

Adjustments to reconcile Development margin to Adjusted development margin

Revenue recognition reportability

(0.1%)

(0.1%)

Adjusted development margin**, 1

21.0%

22.0%

**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 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.

 

A-16

MARRIOTT VACATIONS WORLDWIDE CORPORATION

2015 ADJUSTED FREE CASH FLOW AND NORMALIZED ADJUSTED FREE CASH FLOW OUTLOOK

(In millions)

Current Guidance

Low

High

Mid-Point

Adjustments

Normalized

Adjusted net income **

$   108

$   114

$           111

$                   -

$               111

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

Adjustments for non-cash items1

73

75

74

-

74

Deferred income taxes / income taxes payable

18

20

19

-

19

Net changes in assets and liabilities:

Notes receivable originations

(293)

(299)

(296)

-

(296)

Notes receivable collections

269

275

272

-

272

Inventory

47

52

50

(60)

6

(10)

Purchase of operating hotel for future conversion to inventory2

(47)

(47)

(47)

47

2

-

Liability for Marriott Rewards customer loyalty program

(21)

(21)

(21)

21

7

-

Organizational and separation related and other charges

(5)

(5)

(5)

5

8

-

Other working capital changes

21

21

21

(6)

9

15

Net cash provided by operating activities

170

185

178

7

185

Capital expenditures for property and equipment (excluding inventory):

New sales centers 3

(20)

(18)

(19)

19

3

-

Organizational and separation related capital expenditures

(4)

(4)

(4)

4

8

-

Other

(24)

(23)

(24)

4

10

(20)

Investment in operating portion of Surfers Paradise hotel that will be sold 4

(45)

(45)

(45)

45

4

-

Decrease in restricted cash

1

5

3

-

3

Borrowings from securitization transactions

251

258

255

(45)

11

210

Repayment of debt related to securitizations

(244)

(250)

(247)

-

(247)

Free cash flow**

85

108

97

34

131

Adjustments:

Organizational and separation related and other charges

9

9

9

(9)

7

-

Proceeds from sale of operating portion of Surfers Paradise hotel4

45

45

45

(45)

4

-

Net change in borrowings available from the securitization of eligible vacation ownership notes receivable through the warehouse credit facility 5

36

38

37

-

37

Adjusted free cash flow**

$   175

$   200

$           188

$                 (20)

$               168

**  Denotes non-GAAP financial measures.  Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

1  Includes depreciation, amortization of debt issuance costs, provision for loan losses, and share-based compensation.

2  Represents adjustment for investment in an operating hotel prior to future conversion to inventory.

3  Represents incremental investment in new sales centers, mainly to support new sales distributions.

4  Represents the estimated investment in, as well as the estimated proceeds from the subsequent sale of, the operating portion of the Surfers Paradise hotel.

5  Represents the net change in borrowings available from the securitization of eligible vacation ownership notes receivable through the warehouse credit facility between the 2014 and 2015 year ends.   

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

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

8  Represents costs associated with organizational and separation related efforts.

9  Represents normalized other working capital changes.

10  Represents normalized capital expenditures for property and equipment.

11  Represents normalized borrowings from securitization transactions.

 

A-17

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NON-GAAP FINANCIAL MEASURES

In our press release and schedules, and on the related conference call, we report certain financial measures that are not prescribed or authorized by United States generally accepted accounting principles ("GAAP").  We discuss our reasons for reporting these non-GAAP financial measures below, and the financial schedules reconcile the most directly comparable GAAP financial measure to each non-GAAP financial measure that we report (identified by a double asterisk ("**") on the preceding pages).  Although we evaluate and present these non-GAAP financial measures for the reasons described below, please be aware that these non-GAAP financial measures have limitations and should not be considered in isolation or as a substitute for revenues, net income, earnings per share or any other comparable operating measure prescribed by GAAP.  In addition, these non-GAAP financial measures may be calculated and / or presented differently than measures with the same or similar names that are reported by other companies, and as a result, the non-GAAP financial measures we report may not be comparable to those reported by others.

Adjusted Net Income.   We evaluate non-GAAP financial measures, including Adjusted Net Income, Adjusted EBITDA, and Adjusted Development Margin, that exclude certain items and net gains in the 12 weeks and 24 weeks ended June 19, 2015 and June 20, 2014 because these non-GAAP financial measures allow for period-over-period comparisons of our on-going core operations before the impact of certain items and gains.  These non-GAAP financial measures also facilitate our comparison of results from our on-going core operations before certain items and gains with results from other vacation ownership companies.

Certain items - 12 weeks and 24 weeks ended June 19, 2015.  In our Statement of Income for the 12 weeks ended June 19, 2015, we recorded $1.4 million of net pre-tax items, which included a $1.3 million adjustment for transaction costs associated with a commitment to purchase an operating hotel in our Asia Pacific segment recorded under the "Other transaction related" caption, $0.1 million of organizational and separation related costs recorded under the "Organizational and separation related" caption and less than $0.1 million of net litigation related matters recorded under the "Litigation settlement" caption. In our Statement of Income for the 24 weeks ended June 19, 2015, we recorded $4.6 million of net pre-tax items, which included a $28.4 million adjustment to exclude the bulk sale of 18 units in our Asia Pacific segment recorded under the "Sale of vacation ownership products" caption, with corresponding adjustments of $21.6 million and $0.9 million to the "Cost of vacation ownership products" and Marketing and sales" captions, respectively, a $1.3 million adjustment for transaction costs associated with a commitment to purchase an operating hotel in our Asia Pacific segment recorded under the "Other transaction related" caption, $0.3 million of organizational and separation related costs recorded under the "Organizational and separation related" caption and less than $0.1 million of net litigation related matters recorded under the "Litigation settlement" caption, partially offset by a $0.3 million reversal of an accrual associated with a 2014 golf course disposition recorded under the "Litigation settlement" caption because actual costs were lower than expected. 

Certain items - 12 weeks and 24 weeks ended June 20, 2014.  In our Statement of Income for the 12 weeks ended June 20, 2014, we recorded $7.4 million of net pre-tax income, which included $7.6 million of income associated with the settlement of a dispute with a former service provider in our North America segment recorded under the "Litigation settlement" caption and the reversal of a $2.0 million reserve for remaining costs we expect to incur in connection with our interest in an equity method investment in a joint venture project in our North America segment recorded under the "Impairment reversals on equity investment" caption, partially offset by $1.1 million of organizational and separation related costs recorded under the "Organizational and separation related" caption, a $0.8 million impairment charge associated with a project in our North America segment recorded under the "Impairment" caption and $0.3 million of severance charges in our Europe segment recorded under the "Marketing and sales" caption.  In our Statement of Income for the 24 weeks ended June 20, 2014, we recorded $4.7 million of net pre-tax income, which included $7.6 million of income associated with the settlement of a dispute with a former service provider in our North America segment recorded under the "Litigation settlement" caption and a $0.2 million reversal of a severance accrual in our Europe segment recorded under the "Resort management and other services" caption because actual costs were lower than expected, partially offset by $1.9 million of organizational and separation related costs recorded under the "Organizational and separation related" caption, a $0.8 million impairment charge associated with a project in our North America segment recorded under the "Impairment" caption and $0.3 million of severance charges in our Europe segment recorded under the "Marketing and sales" caption. 

 

A-18

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NON-GAAP FINANCIAL MEASURES

Net gains - 12 weeks and 24 weeks ended June 19, 2015.   In our Statement of Income for the 12 weeks ended June 19, 2015, we recorded an $8.7 million gain associated with the sale of undeveloped land in our North America segment under the "Gains and other income" caption.  In our Statement of Income for the 24 weeks ended June 19, 2015, we recorded $9.5 million of net gains associated with the sale of undeveloped land and the sale of a golf course and adjacent undeveloped land in our North America segment under the "Gains and other income" caption.

Net gains - 12 weeks and 24 weeks ended June 20, 2014.   In our Statement of Income for the 12 weeks ended June 20, 2014, we recorded $0.4 million of net gains associated with the sale of a golf course and adjacent undeveloped land, the sale of an undeveloped parcel of land, and the disposition of a project, all of which occurred in our North America segment and were recorded under the "Gains and other income" caption.  In our Statement of Income for the 24 weeks ended June 20, 2014, we recorded $1.6 million of net gains associated with the sale of a golf course and adjacent undeveloped land, the sale of an undeveloped parcel of land, and the disposition of a project, all of which occurred in our North America segment and were recorded under the "Gains and other income" caption.  

Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses).  We evaluate Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses) as an indicator of operating performance.  Adjusted Development Margin adjusts Sale of vacation ownership products revenues for the impact of revenue reportability, includes corresponding adjustments to Cost of vacation ownership products expense and Marketing and sales expense associated with the change in revenues from the Sale of vacation ownership products, and includes adjustments for certain items as itemized in the discussion of Adjusted Net Income above.  We evaluate Adjusted Development Margin because it allows for period-over-period comparisons of our on-going core operations before the impact of revenue reportability and certain items to our Development Margin.

Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA").  EBITDA is defined as earnings, or net income, before interest expense (excluding consumer financing interest expense), provision for income taxes, depreciation and amortization.  For purposes of our EBITDA calculation (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 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 items and gains, 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 items and gains.  Together, EBITDA and Adjusted EBITDA facilitate our comparison of results from our on-going core operations before the impact of certain items and gains with results from other vacation ownership companies. 

 

A-19

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NON-GAAP FINANCIAL MEASURES

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

Adjusted Free Cash Flow.  We also evaluate Adjusted Free Cash Flow, which reflects additional adjustments for organizational and separation related, litigation, and other cash items, as referred to in the discussion of Adjusted Net Income above.  We evaluate Adjusted Free Cash Flow as a liquidity measure that provides useful information to management and investors about the amount of cash provided by operating activities after capital expenditures for property and equipment, changes in restricted cash, and the borrowing and repayment activity related to our securitizations, excluding the impact of organizational and separation related, litigation, and other cash charges.  We consider Adjusted Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including acquisitions and strengthening the balance sheet.  Analysis of Adjusted Free Cash Flow also facilitates management's comparison of our results with our competitors' results.  

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

 

A-20

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(unaudited)

June 19, 2015

January 2, 2015

ASSETS

Cash and cash equivalents

$            250,906

$                346,515

Restricted cash (including $37,017 and $34,986 from VIEs, respectively)

65,559

109,907

Accounts and contracts receivable (including $3,429 and $4,992 from VIEs, respectively)

116,544

109,700

Vacation ownership notes receivable (including $547,158 and $750,680 from VIEs, respectively)

878,858

917,228

Inventory

704,707

772,784

Property and equipment

188,714

147,379

Other 

117,924

127,066

      Total Assets

$         2,323,212

$             2,530,579

LIABILITIES AND EQUITY

Accounts payable

$              80,450

$                114,079

Advance deposits

64,148

60,192

Accrued liabilities (including $1,576 and $1,088 from VIEs, respectively)

137,261

165,969

Deferred revenue

32,845

38,818

Payroll and benefits liability

74,582

93,073

Liability for Marriott Rewards customer loyalty program

79,939

89,285

Deferred compensation liability

46,534

41,677

Mandatorily redeemable preferred stock of consolidated subsidiary

38,895

38,816

Debt (including $564,657 and $708,031 from VIEs, respectively)

561,133

703,013

Other

50,053

27,071

Deferred taxes

96,748

78,883

      Total Liabilities

1,262,588

1,450,876

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

-

-

Common stock - $.01 par value; 100,000,000 shares authorized; 36,346,990 and 36,089,513 shares issued, respectively

363

361

Treasury stock - at cost; 4,814,451 and 3,996,725 shares, respectively

(295,466)

(229,229)

Additional paid-in capital

1,135,143

1,137,785

Accumulated other comprehensive income

14,756

17,054

Retained earnings

205,828

153,732

      Total Equity

1,060,624

1,079,703

      Total Liabilities and Equity

$         2,323,212

$             2,530,579

The abbreviation VIEs above means Variable Interest Entities.

 

                 A-21

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

24 weeks ended

June 19, 2015

June 20, 2014

 OPERATING ACTIVITIES 

 Net income 

$68,095

$54,611

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

 Depreciation 

8,558

8,922

 Amortization of debt issuance costs 

2,506

2,566

 Provision for loan losses 

15,662

15,603

 Share-based compensation 

6,588

6,180

 Deferred income taxes 

17,850

(5,299)

 Equity method income 

(98)

(118)

 Gain on disposal of property and equipment, net 

(9,512)

(1,642)

 Non-cash litigation settlement 

(262)

-

 Impairment charges 

-

834

 Impairment charges on equity investment 

-

-

 Net change in assets and liabilities: 

Accounts and contracts receivable

(6,068)

(11,822)

Notes receivable originations

(112,060)

(103,908)

Notes receivable collections

132,397

137,460

Inventory

68,629

36,805

Purchase of operating hotel for future conversion to inventory

(46,614)

-

Other assets

8,154

26,546

Accounts payable, advance deposits and accrued liabilities

(66,223)

(55,865)

Liability for Marriott Rewards customer loyalty program

(9,345)

(14,284)

Deferred revenue

(5,955)

(310)

Payroll and benefit liabilities

(18,382)

(14,832)

Deferred compensation liability

4,858

1,882

Other liabilities

18,013

15,397

 Other, net 

1,874

(564)

                 Net cash provided by operating activities 

78,665

98,162

 INVESTING ACTIVITIES 

 Capital expenditures for property and equipment (excluding inventory) 

(15,718)

(3,003)

 Decrease in restricted cash 

43,758

43,958

 Dispositions, net 

20,346

33,169

                 Net cash provided by investing activities 

48,386

74,124

 FINANCING ACTIVITIES 

 Borrowings from securitization transactions 

-

22,638

 Repayment of debt related to securitization transactions 

(143,374)

(130,954)

 Debt issuance costs 

(30)

(140)

 Proceeds from vacation ownership inventory arrangement 

5,375

-

 Repurchase of common stock 

(66,237)

(89,448)

 Payment of dividends 

(8,085)

-

 Proceeds from stock option exercises 

92

968

 Payment of withholding taxes on vesting of restricted stock units 

(9,353)

(5,091)

 Other 

109

-

                 Net cash used in financing activities 

(221,503)

(202,027)

 Effect of changes in exchange rates on cash and cash equivalents 

(1,157)

3

 DECREASE IN CASH AND CASH EQUIVALENTS 

(95,609)

(29,738)

 CASH AND CASH EQUIVALENTS, beginning of period 

346,515

199,511

 CASH AND CASH EQUIVALENTS, end of period 

$250,906

$169,773

 

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SOURCE Marriott Vacations Worldwide Corporation