Marriott Vacations Worldwide Reports Third Quarter 2015 Financial Results

ORLANDO, Fla., Oct. 15, 2015 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported third quarter 2015 financial results and provided updated guidance for the full year 2015.

Third quarter 2015 highlights:

• Adjusted EBITDA totaled $51.7 million.
• Adjusted fully diluted earnings per share (EPS) was $0.82, up from $0.81 in the third quarter of 2014.
• North America contract sales, excluding residential sales, were $142.8 million.
• Company adjusted development margin was 21.2 percent and North America adjusted development margin was 23.1 percent.
• Resort management and other services revenues net of expenses totaled $26.4 million, up $3.3 million from the third quarter of 2014.
• Rental revenues net of expenses totaled $13.5 million, up $2.5 million from the third quarter of 2014.
• During the third quarter of 2015, the company repurchased $39.9 million of its common stock, bringing total 2015 repurchases through the end of the third quarter to $106.1 million.
• In August 2015, the company completed a securitization of $264 million of vacation ownership notes receivable at a blended borrowing rate of 2.56 percent, generating gross proceeds of $255 million.

Third quarter 2015 net income was $21.6 million, or $0.67 diluted EPS, compared to net income of $25.6 million, or $0.75 diluted EPS, in the third quarter of 2014. Company development margin was 17.8 percent and North America development margin was 20.0 percent in the third 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.

"On an overall basis, we are pleased with our third quarter financial results, delivering nearly $52 million of Adjusted EBITDA," said Stephen P. Weisz, president and chief executive officer. "While our development business in the quarter was negatively impacted by a stronger U.S. dollar and unfavorable revenue reportability, our rentals, resort management and financing businesses remained strong. Excluding the impact of revenue reportability in the quarter, Adjusted EBITDA would have been nearly $59 million. Even with the headwinds from the stronger U.S dollar, we expect full year Adjusted EBITDA to be at the high end of our guidance of $222 million to $232 million, demonstrating the strength of our diversified business model." 

Third Quarter 2015 Results

Company Results

Total company contract sales, excluding residential sales, were $159.8 million, $7.5 million lower than the third quarter of last year. The decrease was driven by $5.4 million of lower contract sales in the company's North America segment, $1.2 million of lower contract sales in the company's Europe segment and $0.9 million of lower contract sales in the company's Asia Pacific segment.

Adjusted development margin was $31.3 million, a $4.8 million decrease from the third quarter of 2014. Adjusted development margin percentage was 21.2 percent in the third quarter of 2015 compared to 22.6 percent in the third quarter of 2014. Development margin was $24.4 million, a $9.0 million decrease from the third quarter of 2014. Development margin percentage was 17.8 percent in the third quarter of 2015 compared to 21.5 percent in the third quarter of 2014.

Rental revenues totaled $76.0 million, a $10.4 million increase from the third quarter of 2014, reflecting a 6 percent increase in transient keys rented, $4.3 million from revenue associated with operating hotels in San Diego and Surfers Paradise, Australia prior to conversion to timeshare, and higher plus points revenue. Rental revenues, net of expenses, were $13.5 million, a $2.5 million increase from the third quarter of 2014.

Resort management and other services revenues totaled $73.8 million, a $2.8 million increase from the third quarter of 2014. Resort management and other services revenues, net of expenses, were $26.4 million, a $3.3 million, or 14 percent, increase over the third quarter of 2014.

Financing revenues totaled $28.3 million, a $1.3 million decrease from the third quarter of 2014. Financing revenues, net of expenses and consumer financing interest expense, were $17.5 million, a $1.0 million decrease from the third quarter of 2014.

Adjusted EBITDA was $51.7 million in the third quarter of 2015, a $2.3 million, or 4.3 percent, decrease from $54.0 million in the third quarter of 2014. Excluding the impact of unfavorable revenue reportability in both years, Adjusted EBITDA would have been $58.6 million in the third quarter of 2015, a $1.8 million, or 3.2 percent, increase from $56.8 million in the third quarter of 2014.

Segment Results

North America

North America contract sales, excluding residential sales, were $142.8 million in the third quarter of 2015, a decrease of $5.4 million, or 3.6 percent, from the prior year period, driven by a stronger U.S. dollar that negatively impacted sales to Latin American and Japanese customers at certain sales locations by nearly $7 million year-over-year. 

VPG decreased 1.4 percent to $3,428 in the third quarter of 2015 from $3,477 in the third quarter of 2014, driven by fewer points purchased per contract, offset partially by higher pricing and improved closing efficiency.  Tours decreased 1.3 percent year-over-year. 

Third quarter 2015 North America segment financial results were $85.3 million, a decrease of $0.7 million from the third quarter of 2014. The decrease was driven primarily by $9.2 million of lower development margin and $1.1 million of lower financing revenues, offset partially by $3.3 million of higher resort management and other services revenues net of expenses, $3.1 million of higher rental revenues net of expenses, and $3.0 million related to a litigation settlement in the prior year period.

Adjusted development margin was $30.6 million, a $5.6 million decrease from the prior year quarter. Adjusted development margin percentage was 23.1 percent in the third quarter of 2015 compared to 25.5 percent in the third quarter of 2014. Development margin was $24.5 million, a $9.2 million decrease from the third quarter of 2014. Development margin percentage was 20.0 percent in the third quarter of 2015 compared to 24.4 percent in the prior year quarter.

Asia Pacific

Total contract sales in the segment were $6.9 million, a decrease of $0.9 million in the third quarter of 2015.  Segment financial results were a loss of $4.1 million, a $5.1 million decrease from the third quarter of 2014, reflecting $4.2 million of transaction costs associated with the purchase of an operating Marriott hotel in Surfers Paradise, Australia.  The company plans to convert a portion of this hotel into vacation ownership interests for future use and to sell the remaining downsized hotel to a third party.

Europe

Third quarter 2015 contract sales were $10.1 million, a decrease of $1.2 million from the third quarter of 2014. Segment financial results were $6.2 million, a $0.5 million decrease from the third quarter of 2014 due to lower development margin from lower contract sales and lower rental revenues net of expenses.

Share Repurchase Program

During the third quarter of 2015, the company purchased 479,612 shares of its common stock for a total of nearly $40 million under its share repurchase program.  In total for 2015, through the end of the third quarter, the company repurchased approximately $106.1 million of its common stock.

On October 12, 2015, the Board of Directors authorized the company to repurchase up to 2.0 million additional shares of its common stock under its share repurchase program.  Combined with the shares not yet purchased under its previous authorization, the company is authorized to purchase up to 3.6 million shares.

Balance Sheet and Liquidity

On September 11, 2015, cash and cash equivalents totaled $321.7 million. Since the beginning of the year, real estate inventory balances declined $52.3 million to $716.0 million, including $351.9 million of finished goods and $364.1 million of land and infrastructure. The company had $780.2 million in gross debt outstanding at the end of the third quarter of 2015, an increase of $68.8 million from year-end 2014, consisting primarily of $776.6 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 third quarter of 2015.

In August 2015, the company completed a securitization of $264 million of vacation ownership notes receivable at a blended borrowing rate of 2.56 percent and an advance rate of 96.5 percent. Approximately $211 million of the vacation ownership notes receivable were purchased on August 13, 2015 by the MVW Owner Trust 2015-1 (the "2015-1 Trust"), and all or a portion of the remaining vacation ownership notes receivable may be purchased by the 2015-1 Trust prior to December 31, 2015. This transaction generated approximately $255 million of gross cash proceeds, of which $51 million will be held in restricted cash until the remaining notes are purchased during the fourth quarter. Approximately $6 million was used to pay transaction expenses and fund required reserves and the remainder will be used for general corporate purposes.

As of September 11, 2015, the company had approximately $197 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit.

Outlook

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 $112 million to $119 million; fully diluted EPS of $3.46 to $3.68; company development margin of 21.1 percent to 22.1 percent; and net cash provided by operating activities of $165 million to $185 million.

Third 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 13620306. 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 61 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 October 15, 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

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