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Marriott Vacations Worldwide ("MVW") Reports First Quarter Financial Results

ORLANDO, Fla., May 7, 2019 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported first quarter financial results and reaffirmed its guidance for the full year 2019.

Marriott Vacations Worldwide Corporation. (PRNewsFoto/Marriott Vacations Worldwide)

On September 1, 2018, the company completed its acquisition of ILG, Inc. ("ILG"). In addition to a discussion of first quarter reported results presented in accordance with United States generally accepted accounting principles ("GAAP"), the company is providing adjusted results of operations from January 1 to March 31, 2019 to further assist investors. Throughout this press release, the results from the business associated with the brands that existed prior to the ILG Acquisition are referred to as "Legacy-MVW," while the results from the business and brands that were acquired from ILG are referred to as "Legacy-ILG."  In addition, to provide a more meaningful year-over-year comparison of financial results, the company is providing Q1 2018 financial information in the Financial Schedules that follow that combine Legacy-MVW's and Legacy-ILG's Q1 2018 financial results, conformed to the current year presentation.

First Quarter 2019 Highlights:

  • Consolidated vacation ownership contract sales increased 74% to $354 million compared to the first quarter of 2018.
    • Legacy-MVW vacation ownership contract sales increased 10%.
    • Combined vacation ownership contract sales increased 5%.
  • Net income attributable to common shareholders was $24 million, or $0.51 per fully diluted share ("EPS"), compared to net income attributable to common shareholders of $36 million, or $1.32 per fully diluted share, in the first quarter of 2018.
  • Adjusted net income attributable to common shareholders increased 76% to $67 million compared to the first quarter of 2018 and Adjusted fully diluted EPS increased 4% to $1.45.
  • Adjusted EBITDA increased to $166 million in the first quarter of 2019 compared to $63 million in the first quarter of 2018. Revenue reportability negatively impacted Adjusted EBITDA in the first quarter of 2019 by $21 million, $13 million higher than the first quarter of 2018.
    • Legacy-MVW Adjusted EBITDA increased 16%.
    • On a combined basis, Adjusted EBITDA increased 4% and, excluding the impact of the disposition of VRI Europe, which was sold in the fourth quarter of 2018, Adjusted EBITDA increased 6%.
  • The company repurchased 1.2 million shares of its common stock for $106 million in the first quarter of 2019 at an average price per share of $86.32 and paid dividends of $41 million.
  • The company reaffirms its 2019 full year Adjusted EBITDA, Adjusted Free Cash Flow and contract sales guidance and raises its full year Adjusted fully diluted EPS projection.

"I am very pleased with our strong start to the year with Legacy-MVW contract sales increasing 10% and Legacy-MVW Adjusted EBITDA growing 16%," said Stephen P. Weisz, President and Chief Executive Officer. "The integration of ILG is progressing well, and we started to gain traction on sales initiatives as we progressed through the quarter.  We remain on track to realize more than $100 million of synergies from this acquisition and are very excited about the opportunities provided by this transformational business combination."

First Quarter 2019 Segment Results

Vacation Ownership

Consolidated vacation ownership contract sales were $354 million, an increase of 74% compared to the prior year.  Legacy-MVW contract sales grew 10% in the quarter and Legacy-MVW North America VPG increased 1%. On a combined basis, consolidated contract sales increased 5% compared to the prior year, reflecting the strong growth from Legacy-MVW, partially offset, as anticipated, by slower growth at Legacy-ILG as we continue to integrate the business.

Development margin was $44 million compared to $24 million in the first quarter of 2018 and development margin percentage was 14.5%. On a combined basis, adjusted development margin, which excludes the impact of revenue reportability and other charges, increased 30% to $67 million in the first quarter of 2019. Adjusted development margin percentage on a combined basis was 20.5% in the quarter compared to 16.8% in the prior year.

Resort management and other services revenues totaled $125 million, an increase of 79% compared to the first quarter of 2018, and were $59 million net of expenses. On a combined basis, resort management and other services net of expenses increased 5% compared to the prior year.

Rental revenues totaled $147 million, an increase of 98% compared to the first quarter of 2018, and were $45 million net of expenses. On a combined basis, rental revenues net of expenses were 4% higher year-over-year.

Financing revenues increased 89% to $67 million compared to the first quarter of 2018 and were $45 million net of expenses. On a combined basis, financing revenues net of expenses increased 12% compared to the prior year.

Vacation Ownership segment financial results were $133 million for the first quarter of 2019, an increase of 64% compared to the prior year. On a combined basis, Vacation Ownership segment Adjusted EBITDA increased 5% to $171 million compared to the prior year.

Exchange & Third-Party Management

Exchange & Third-Party Management revenues totaled $124 million in the first quarter of 2019. Total Interval Network active members at the end of the first quarter of 2019 were 1.7 million and average revenue per member in the first quarter of 2019 was $46.24.

Exchange & Third-Party Management segment financial results and Adjusted EBITDA were $52 million and $66 million, respectively, in the first quarter of 2019.

Balance Sheet and Liquidity

On March 31, 2019, cash and cash equivalents totaled $222 million. The inventory balance at the end of the first quarter included $862 million of finished goods and $37 million of work-in-progress. The company had $3.9 billion in debt outstanding, net of unamortized debt issuance costs, at the end of the first quarter, an increase of $0.1 billion from year-end 2018. This debt included $2.2 billion of corporate debt and $1.7 billion of debt related to the company's securitized notes receivable. As of March 31, 2019, the company's combined debt to adjusted EBITDA ratio was 2.7x.

As of March 31, 2019, the company had $521 million in available capacity under its revolving credit facility and $132 million of gross vacation ownership notes receivable eligible for securitization.

2019 Outlook

The Financial Schedules that follow reconcile the non-GAAP financial measures set forth below to the following full year 2019 expected GAAP results for MVW.

   

Current Guidance

Net income attributable to common shareholders

 

$219 million

to

$233 million

Fully diluted EPS

 

$4.76

to

$5.07

Net cash provided by operating activities

 

$286 million

to

$311 million

2019 expected GAAP results and guidance above include an estimate of the impact of future spending associated with on-going ILG integration efforts.

The company reaffirms its full year 2019 guidance as reflected in the chart below:

   

Current Guidance

Adjusted free cash flow

 

$400 million

to

$475 million

Adjusted net income attributable to common shareholders

 

$337 million

to

$365 million

Adjusted fully diluted EPS

 

$7.33

to

$7.94

Adjusted EBITDA

 

$745 million

to

$785 million

Consolidated contract sales

 

$1,530 million

to

$1,600 million

Adjusted fully diluted EPS increased from the previous guidance of $7.23 to $7.83 due to a reduction in shares outstanding.

Non-GAAP Financial Information

Non-GAAP financial measures, such as adjusted net income, adjusted EBITDA, adjusted fully diluted earnings per share, adjusted free cash flow, adjusted development margin and adjusted and combined financial measures are reconciled and adjustments are shown and described in further detail in the Financial Schedules that follow.

First Quarter 2019 Earnings Conference Call

The company will hold a conference call at 10:00 a.m. ET today to discuss these results and the guidance for full year 2019. Participants may access the call by dialing 877-407-8289 or +1-201-689-8341 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 +1-201-612-7415 for international callers. The conference ID for the recording is 13689493. The webcast will also be available on the company's website.

About Marriott Vacations Worldwide Corporation

Marriott Vacations Worldwide Corporation is a leading global vacation company that offers vacation ownership, exchange, rental and resort and property management, along with related businesses, products and services. The company has a diverse portfolio that includes seven vacation ownership brands. It also includes exchange networks and membership programs, as well as management of other resorts and lodging properties. As a leader and innovator in the vacation industry, the company upholds the highest standards of excellence in serving its customers, investors and associates while maintaining exclusive, long-term relationships with Marriott International and Hyatt Hotels Corporation for the development, sales and marketing of vacation ownership products and services. 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, including guidance about full year 2019 results, expected full year 2019 GAAP results and expected synergies from the ILG acquisition. 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, changes in supply and demand for vacation ownership and residential products, competitive conditions, the availability of capital to finance growth, and other matters referred to under the heading "Risk Factors" contained in the company's most recent Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the "SEC") and in subsequent SEC filings, any of which could cause actual results to differ materially from those expressed in or implied in this press release. These statements are made as of May 7, 2019 and the company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Financial Schedules Follow

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

FINANCIAL SCHEDULES

QUARTER 1, 2019

 

TABLE OF CONTENTS

 

Interim Consolidated Statements of Income

A-1

Operating Metrics

A-2

Adjusted Net Income Attributable to Common Shareholders, Adjusted Earnings Per Share - Diluted, EBITDA and Adjusted EBITDA

A-3

Reconciliation of Adjusted Financial Information

A-4

Vacation Ownership Interim Segment Financial Results

A-5

Consolidated Contract Sales to Adjusted Development Margin

A-6

Reconciliation of Vacation Ownership Segment Interim Adjusted Financial Results

A-7

Reconciliation of Adjusted Financial Information - Consolidated and Vacation Ownership Segment EBITDA and Adjusted EBITDA

A-8

Exchange & Third-Party Management Interim Segment Financial Results

A-9

Corporate and Other Interim Financial Results

A-10

Vacation Ownership and Exchange & Third-Party Management Segment Adjusted EBITDA and Corporate and Other Adjusted Financial Results

A-11

Reconciliation of Combined Financial Information - Consolidated Results

A-12

Reconciliation of Combined Financial Information - EBITDA, Adjusted EBITDA and Adjusted Development Margin

A-13

Reconciliation of Combined Financial Information - Vacation Ownership Segment Financial Results

A-14

Reconciliation of Combined Financial Information - Exchange & Third-Party Management Segment Financial Results and Corporate and Other Financial Results

A-15

Reconciliation of Combined Financial Information - Segment Adjusted EBITDA and Corporate and Other Adjusted Financial Results

A-16

2019 Outlook - Adjusted Net Income Attributable to Common Shareholders, Adjusted Earnings Per Share - Diluted and Adjusted EBITDA

A-17

2019 Outlook - Adjusted Free Cash Flow

A-18

Interim Consolidated Balance Sheets

A-19

Interim Consolidated Statements of Cash Flows

A-20

Non-GAAP Financial Measures

A-21

   

NOTE:  Total contract sales consist of the total amount of vacation ownership product sales under contract signed during the period for which we have received a down payment of at least ten percent of the contract price, reduced by actual rescissions during the period, inclusive of contracts associated with sales of vacation ownership products on behalf of third parties, which we refer to as "resales contract sales."

 

A-1

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)

(Unaudited)

 
 

Three Months Ended

 

March 31, 2019

 

March 31, 2018

REVENUES

     

Sale of vacation ownership products

$

301

   

$

175

 

Management and exchange

239

   

70

 

Rental

165

   

75

 

Financing

68

   

35

 

Cost reimbursements

287

   

216

 

TOTAL REVENUES

1,060

   

571

 

EXPENSES

     

Cost of vacation ownership products

80

   

46

 

Marketing and sales

188

   

105

 

Management and exchange

116

   

36

 

Rental

108

   

55

 

Financing

22

   

11

 

General and administrative

78

   

28

 

Depreciation and amortization

37

   

6

 

Litigation settlement

1

   

 

Royalty fee

26

   

15

 

Impairment

26

   

 

Cost reimbursements

287

   

216

 

TOTAL EXPENSES

969

   

518

 

Gains and other income, net

8

   

1

 

Interest expense

(34)

   

(4)

 

ILG acquisition-related costs

(26)

   

(1)

 

Other

   

(2)

 

INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS

39

   

47

 

Provision for income taxes

(15)

   

(11)

 

NET INCOME

24

   

36

 

Net income attributable to noncontrolling interests

   

 

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

24

   

$

36

 
       

EARNINGS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

     

Basic

$

0.52

   

$

1.35

 

Diluted

$

0.51

   

$

1.32

 
       

NOTE: Earnings per share - Basic and Earnings per share - Diluted are calculated using whole dollars.

 

A-2

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

OPERATING METRICS

(Contract sales in millions)

 
 

Three Months Ended

   
 

March 31, 2019

 

March 31, 2018

 

Change %

Vacation Ownership

         

Total contract sales

$

365

   

$

204

   

79%

Consolidated contract sales

$

354

   

$

204

   

74%

Legacy-MVW contract sales

$

223

   

$

204

   

10%

Legacy-MVW North America contract sales

$

201

   

$

188

   

8%

Legacy-MVW North America VPG

$

3,777

   

$

3,728

   

1%

Legacy-ILG contract sales

$

131

   

$

   

NM

Legacy-ILG VPG

$

3,042

   

$

   

NM

           

Exchange & Third-Party Management

         

Total active members at end of period (000's)(1)

1,694

   

     

Average revenue per member(1)

$

46.24

   

     
           

(1) Only includes members of the Interval International exchange network.

 

OPERATING METRICS

INCLUDING THE THREE MONTHS ENDED MARCH 31, 2018 ON A COMBINED BASIS

(Contract sales in millions)

 
 

Three Months Ended

   
 

March 31, 2019

 

March 31, 2018

 

Change %

Vacation Ownership

         

Total contract sales

$

365

   

$

352

   

4%

Consolidated contract sales

$

354

   

$

337

   

5%

Legacy-MVW contract sales

$

223

   

$

204

   

10%

Legacy-MVW North America contract sales

$

201

   

$

188

   

8%

Legacy-MVW North America VPG

$

3,777

   

$

3,728

   

1%

Legacy-ILG contract sales

$

131

   

$

133

   

(2%)

Legacy-ILG VPG

$

3,042

   

$

3,227

   

(6%)

           

Exchange & Third-Party Management

         

Total active members at end of period (000's)(1)

1,694

   

1,822

   

(7%)

Average revenue per member(1)

$

46.24

   

$

47.61

   

(3%)

           

(1) Only includes members of the Interval International exchange network.

 

A-3

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

(In millions, except per share amounts)

 

ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS AND

ADJUSTED EARNINGS PER SHARE - DILUTED

 
 

Three Months Ended

 

March 31, 2019

 

March 31, 2018

Net income attributable to common shareholders

$

24

   

$

36

 

Certain items:

     

Litigation settlement

1

   

 

Gains and other income, net

(8)

   

(1)

 

ILG acquisition-related costs

26

   

1

 

Impairment

26

   

 

Purchase price adjustments(1)

15

   

 

Share-based compensation (ILG acquisition-related)

   

 

Other

1

   

2

 

Certain items before provision for income taxes

61

   

2

 

Provision for income taxes on certain items

(18)

   

(1)

 

Adjusted net income attributable to common shareholders **

$

67

   

$

37

 

Earnings per share - Diluted

$

0.51

   

$

1.32

 

Adjusted earnings per share - Diluted **

$

1.45

   

$

1.39

 

Diluted Shares

46,077

   

27,306

 

(1) Purchase price adjustments of $15 million (of which $1 million impacted adjusted EBITDA) included a decrease to amortization expense ($14 million) and a net $2 million decrease to sale of vacation ownership product expenses, partially offset by $1 million increases to both interest expense and financing expense.  Please see "Non-GAAP Financial Measures" for additional information about certain items.

 

EBITDA AND ADJUSTED EBITDA

 
 

Three Months Ended

 

March 31, 2019

 

March 31, 2018

Net income attributable to common shareholders

$

24

   

$

36

 

Interest expense(1)

34

   

4

 

Tax provision

15

   

11

 

Depreciation and amortization

37

   

6

 

EBITDA **

110

   

57

 

Share-based compensation expense

9

   

4

 

Certain items before provision for income taxes(2)

47

   

2

 

Adjusted EBITDA **

$

166

   

$

63

 
       

(1) Interest expense excludes consumer financing interest expense.

   

(2) Excludes certain items included in depreciation and amortization and share-based compensation.  Please see "Non-GAAP Financial Measures" for additional information about certain items.

 

ADJUSTED EBITDA BY SEGMENT

 
 

Three Months Ended

 

March 31, 2019

 

March 31, 2018

Vacation Ownership

$

171

   

$

88

 

Exchange & Third-Party Management

66

   

 

Segment adjusted EBITDA**

237

   

88

 

General and administrative

(72)

   

(25)

 

Consolidated property owners' associations

1

   

 

Adjusted EBITDA**

$

166

   

$

63

 
 

** Denotes non-GAAP financial measures. Please see "Non-GAAP Financial Measures" for additional information about our reasons for providing these alternative financial measures and limitations on their use.

 

A-4

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

RECONCILIATION OF ADJUSTED(1) FINANCIAL INFORMATION

THREE MONTHS ENDED MARCH 31, 2019 AND 2018

(In millions)

 
 

As Reported
Three Months
Ended

 

Less: Legacy-
ILG Three
Months Ended

 

As Adjusted
Three Months
Ended**

 

As Reported
Three Months
Ended

 

March 31, 2019

 

March 31, 2018

REVENUES

             

Sale of vacation ownership products

$

301

   

$

125

   

$

176

   

$

175

 

Management and exchange

239

   

162

   

77

   

70

 

Rental

165

   

85

   

80

   

75

 

Financing

68

   

27

   

41

   

35

 

Cost reimbursements

287

   

59

   

228

   

216

 

TOTAL REVENUES

1,060

   

458

   

602

   

571

 

EXPENSES

             

Cost of vacation ownership products

80

   

36

   

44

   

46

 

Marketing and sales

188

   

80

   

108

   

105

 

Management and exchange

116

   

78

   

38

   

36

 

Rental

108

   

51

   

57

   

55

 

Financing

22

   

10

   

12

   

11

 

General and administrative

78

   

46

   

32

   

28

 

Depreciation and amortization

37

   

29

   

8

   

6

 

Litigation settlement

1

   

   

1

   

 

Royalty fee

26

   

10

   

16

   

15

 

Impairment

26

   

   

26

   

 

Cost reimbursements

287

   

59

   

228

   

216

 

TOTAL EXPENSES

969

   

399

   

570

   

518

 

Gains and other income, net

8

   

   

8

   

1

 

Interest expense

(34)

   

(2)

   

(32)

   

(4)

 

ILG acquisition-related costs

(26)

   

(8)

   

(18)

   

(1)

 

Other

   

   

   

(2)

 

INCOME (LOSS) BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS

39

   

49

   

(10)

   

47

 

(Provision) benefit for income taxes

(15)

   

(17)

   

2

   

(11)

 

NET INCOME (LOSS)

24

   

32

   

(8)

   

36

 

Net income attributable to noncontrolling interests

   

   

   

 

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

24

   

$

32

   

$

(8)

   

$

36

 
               

(1) Adjusted to exclude Legacy-ILG results.

** Denotes non-GAAP financial measures. Please see "Non-GAAP Financial Measures" for additional information about our reasons for providing these alternative financial measures and limitations on their use.

 

A-5

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

VACATION OWNERSHIP SEGMENT INTERIM FINANCIAL RESULTS

(In millions)

 
 

Three Months Ended

 

March 31, 2019

 

March 31, 2018

REVENUES

     

Sale of vacation ownership products

$

301

   

$

175

 

Resort management and other services

125

   

70

 

Rental

147

   

75

 

Financing

67

   

35

 

Cost reimbursements

291

   

216

 

TOTAL REVENUES

931

   

571

 

EXPENSES

     

Cost of vacation ownership products

80

   

46

 

Marketing and sales

177

   

105

 

Resort management and other services

66

   

36

 

Rental

102

   

55

 

Financing

22

   

11

 

Depreciation and amortization

17

   

5

 

Litigation settlement

1

   

 

Royalty fee

26

   

15

 

Impairment

26

   

 

Cost reimbursements

291

   

216

 

TOTAL EXPENSES

808

   

489

 

Gains and other income, net

9

   

1

 

Other

   

(2)

 

SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS

132

   

81

 

Net loss attributable to noncontrolling interests

1

   

 

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

133

   

$

81

 

 

A-6

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED CONTRACT SALES TO ADJUSTED DEVELOPMENT MARGIN

THREE MONTHS ENDED MARCH 31, 2019 AND 2018

(In millions)

 
 

Three Months Ended

 

March 31, 2019

 

March 31, 2018

Consolidated contract sales

$

354

   

$

204

 

Less resales contract sales

(8)

   

(8)

 

Consolidated contract sales, net of resales

346

   

196

 

Plus:

     

Settlement revenue

9

   

4

 

Resales revenue

3

   

2

 

Revenue recognition adjustments:

     

Reportability

(30)

   

(12)

 

Sales reserve

(19)

   

(9)

 

Other(1)

(8)

   

(6)

 

Sale of vacation ownership products

301

   

175

 

Less:

     

Cost of vacation ownership products

(80)

   

(46)

 

Marketing and sales

(177)

   

(105)

 

Development margin

44

   

24

 

Revenue recognition reportability adjustment

21

   

8

 

Purchase price adjustment

2

   

 

Adjusted development margin **

$

67

   

$

32

 

Development margin percentage(2)

14.5%

 

13.9%

Adjusted development margin percentage(2)

20.5%

 

17.4%

 

** Denotes non-GAAP financial measures. Please see "Non-GAAP Financial Measures" for additional information about our reasons for providing these alternative financial measures and limitations on their use.

(1) Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue and other adjustments to Sale of vacation ownership products revenue.

(2) Development margin percentage represents Development margin divided by Sale of vacation ownership products. Adjusted development margin percentage represents Adjusted development margin divided by Sale of vacation ownership products revenue after adjusting for revenue reportability and other charges.

 

A-7

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

RECONCILIATION OF VACATION OWNERSHIP SEGMENT INTERIM ADJUSTED(1) FINANCIAL RESULTS

 THREE MONTHS ENDED MARCH 31, 2019 AND 2018

 (In millions)

 
 

As Reported
Three Months
Ended

 

Less: Legacy-
ILG Three
Months Ended

 

As Adjusted
Three Months
Ended**

 

As Reported
Three Months
Ended

 

March 31, 2019

 

March 31, 2018

REVENUES

             

Sale of vacation ownership products

$

301

   

$

125

   

$

176

   

$

175

 

Resort management and other services

125

   

48

   

77

   

70

 

Rental

147

   

67

   

80

   

75

 

Financing

67

   

26

   

41

   

35

 

Cost reimbursements

291

   

63

   

228

   

216

 

TOTAL REVENUES

931

   

329

   

602

   

571

 

EXPENSES

             

Cost of vacation ownership products

80

   

36

   

44

   

46

 

Marketing and sales

177

   

69

   

108

   

105

 

Resort management and other services

66

   

28

   

38

   

36

 

Rental

102

   

45

   

57

   

55

 

Financing

22

   

10

   

12

   

11

 

Depreciation and amortization

17

   

11

   

6

   

5

 

Litigation settlement

1

   

   

1

   

 

Royalty fee

26

   

10

   

16

   

15

 

Impairment

26

   

   

26

   

 

Cost reimbursements

291

   

63

   

228

   

216

 

TOTAL EXPENSES

808

   

272

   

536

   

489

 

Gains and other income, net

9

   

   

9

   

1

 

Other

   

   

   

(2)

 

SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS

132

   

57

   

75

   

81

 

Net loss attributable to noncontrolling interests

1

   

1

   

   

 

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

133

   

$

58

   

$

75

   

$

81

 
               

(1) Adjusted to exclude Legacy-ILG results.

** Denotes non-GAAP financial measures. Please see "Non-GAAP Financial Measures" for additional information about our reasons for providing these alternative financial measures and limitations on their use.

 

A-8

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

RECONCILIATION OF ADJUSTED(1) FINANCIAL INFORMATION

CONSOLIDATED AND VACATION OWNERSHIP SEGMENT EBITDA AND ADJUSTED EBITDA

THREE MONTHS ENDED MARCH 31, 2019 AND 2018

(In millions)

 

CONSOLIDATED

 

As Reported
Three Months
Ended

 

Less: Legacy-
ILG Three
Months Ended

 

As Adjusted
Three Months
Ended**

 

As Reported
Three Months
Ended

 

March 31, 2019

 

March 31, 2018

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

24

   

$

32

   

$

(8)

   

$

36

 

Interest expense

34

   

2

   

32

   

4

 

Tax provision

15

   

17

   

(2)

   

11

 

Depreciation and amortization

37

   

29

   

8

   

6

 

EBITDA **

110

   

80

   

30

   

57

 

Share-based compensation expense

9

   

4

   

5

   

4

 

Certain items(2)

47

   

9

   

38

   

2

 

ADJUSTED EBITDA **

$

166

   

$

93

   

$

73

   

$

63

 
               

VACATION OWNERSHIP

               
 

As Reported
Three Months
Ended

 

Less: Legacy-
ILG Three
Months Ended

 

As Adjusted
Three Months
Ended**

 

As Reported
Three Months
Ended

 

March 31, 2019

 

March 31, 2018

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

133

   

$

58

   

$

75

   

$

81

 

Adjustments:

             

Depreciation and amortization

17

   

11

   

6

   

5

 

Share-based compensation expense

2

   

1

   

1

   

1

 

Certain items(3)

19

   

1

   

18

   

1

 

SEGMENT ADJUSTED EBITDA **

$

171

   

$

71

   

$

100

   

$

88

 
 

** Denotes non-GAAP financial measures. Please see "Non-GAAP Financial Measures" for additional information about our reasons for providing these alternative financial measures and limitations on their use.

(1) Adjusted to exclude Legacy-ILG results.

(2) Consolidated Legacy-ILG three months ended March 31, 2019 certain items include $8 million of ILG acquisition-related costs and $1 million of purchase accounting adjustments.

(3) Vacation Ownership Legacy-ILG three months ended March 31, 2019 certain items include $1 million of purchase accounting adjustments.

 

A-9

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

EXCHANGE & THIRD-PARTY MANAGEMENT INTERIM SEGMENT FINANCIAL RESULTS

(In millions)

 
 

Three Months Ended

 

March 31, 2019

 

March 31, 2018

REVENUES

     

Management and exchange

$

82

   

$

 

Rental

17

   

 

Financing

1

   

 

Cost reimbursements

24

   

 

TOTAL REVENUES

124

   

 

EXPENSES

     

Marketing and sales

11

   

 

Management and exchange

17

   

 

Rental

8

   

 

Depreciation and amortization

12

   

 

Cost reimbursements

24

   

 

TOTAL EXPENSES

72

   

 

SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS

52

   

 

Net loss attributable to noncontrolling interests

   

 

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

52

   

$

 

 

A-10

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CORPORATE AND OTHER INTERIM FINANCIAL RESULTS

(In millions)

 
 

Three Months Ended

 

March 31, 2019

 

March 31, 2018

REVENUES

     

Management and exchange(1)

$

32

   

$

 

Rental(1)

1

   

 

Cost reimbursements(1)

(28)

   

 

TOTAL REVENUES

5

   

 

EXPENSES

     

Management and exchange(1)

33

   

 

Rental(1)

(2)

   

 

General and administrative

78

   

28

 

Depreciation and amortization

8

   

1

 

Cost reimbursements(1)

(28)

   

 

TOTAL EXPENSES

89

   

29

 

Losses and other expense, net

(1)

   

 

Interest expense

(34)

   

(4)

 

ILG acquisition-related costs

(26)

   

(1)

 

FINANCIAL RESULTS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS

(145)

   

(34)

 

Provision for income taxes

(15)

   

(11)

 

Net income attributable to noncontrolling interests

(1)

   

 

FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

(161)

   

$

(45)

 
 

(1) Represents the impact of the consolidation of owners' associations of the acquired Legacy-ILG vacation ownership properties under the voting interest model, which represents the portion related to individual or third-party vacation ownership interest ("VOI") owners.

 

A-11

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

VACATION OWNERSHIP AND EXCHANGE & THIRD-PARTY MANAGEMENT SEGMENT

ADJUSTED EBITDA AND CORPORATE AND OTHER ADJUSTED FINANCIAL RESULTS

(In millions)

 

VACATION OWNERSHIP

 
 

Three Months Ended

 

March 31, 2019

 

March 31, 2018

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

133

   

$

81

 

Adjustments:

     

Depreciation and amortization

17

   

5

 

Share-based compensation expense

2

   

1

 

Certain items(1),(2)

19

   

1

 

SEGMENT ADJUSTED EBITDA **

$

171

   

$

88

 
       

EXCHANGE & THIRD-PARTY MANAGEMENT

 
 

Three Months Ended

 

March 31, 2019

 

March 31, 2018

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

52

   

$

 

Adjustments:

     

Depreciation and amortization

12

   

 

Share-based compensation expense

1

   

 

Certain items(3)

1

   

 

SEGMENT ADJUSTED EBITDA **

$

66

   

$

 
       

CORPORATE AND OTHER

 
 

Three Months Ended

 

March 31, 2019

 

March 31, 2018

FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

(161)

   

$

(45)

 

Less certain items:

     

Gains and other income, net

1

   

 

ILG acquisition-related costs

26

   

1

 

Other

(1)

   

 

ADJUSTED FINANCIAL RESULTS **

$

(135)

   

$

(44)

 
       

** Denotes non-GAAP financial measures. Please see "Non-GAAP Financial Measures" for additional information about our reasons for providing these alternative financial measures and limitations on their use.

(1) Vacation Ownership three months ended March 31, 2019 certain items include $26 million of asset impairments, $1 million of litigation settlements and $1 million of purchase accounting adjustments, partially offset by $9 million of gains and other income.

(2) Vacation Ownership three months ended March 31, 2018 certain items include $2 million of acquisition costs associated with the then anticipated future capital efficient acquisition of the operating property in San Francisco, partially offset by $1 million favorable true up of previously recorded costs associated with Hurricane Irma and Hurricane Maria (recorded in Gains and other income).

(3) Exchange & Third-Party Management three months ended March 31, 2019 certain items include $1 million of purchase accounting adjustments.

 

A-12

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

RECONCILIATION OF COMBINED(1) FINANCIAL INFORMATION

CONSOLIDATED RESULTS

THREE MONTHS ENDED MARCH 31, 2018

(In millions)

 
 

Legacy-ILG

 

Reclassifications(1)

 

Legacy-ILG
Reclassified**

 

Legacy-MVW

 

Combined**

REVENUES

                 

Sale of vacation ownership products

$

123

   

$

(1)

   

$

122

   

$

175

   

$

297

 

Service and membership related

152

   

(152)

   

   

   

 

Management and exchange

   

179

   

179

   

70

   

249

 

Rental and ancillary services

118

   

(118)

   

   

   

 

Rental

   

90

   

90

   

75

   

165

 

Financing

24

   

1

   

25

   

35

   

60

 

Cost reimbursements

65

   

2

   

67

   

216

   

283

 

TOTAL REVENUES

482

   

1

   

483

   

571

   

1,054

 

EXPENSES

                 

Cost of vacation ownership products

39

   

4

   

43

   

46

   

89

 

Marketing and sales

78

   

(3)

   

75

   

105

   

180

 

Cost of service and membership related sales

64

   

(64)

   

   

   

 

Management and exchange

   

77

   

77

   

36

   

113

 

Cost of sales of rental and ancillary services

72

   

(72)

   

   

   

 

Rental

   

51

   

51

   

55

   

106

 

Financing

8

       

8

   

11

   

19

 

General and administrative

59

   

2

   

61

   

28

   

89

 

Depreciation and amortization

20

   

(1)

   

19

   

6

   

25

 

Royalty fee

11

   

   

11

   

15

   

26

 

Cost reimbursements

65

   

2

   

67

   

216

   

283

 

TOTAL EXPENSES

416

   

(4)

   

412

   

518

   

930

 

Gains (losses) and other income (expense), net

5

   

(2)

   

3

   

1

   

4

 

Interest expense

(7)

   

(1)

   

(8)

   

(4)

   

(12)

 

ILG acquisition-related costs

   

   

   

(1)

   

(1)

 

Equity in earnings from unconsolidated entities

1

   

(1)

   

   

   

 

Other

   

(1)

   

(1)

   

(2)

   

(3)

 

INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS

65

   

   

65

   

47

   

112

 

Provision for income taxes

(20)

   

   

(20)

   

(11)

   

(31)

 

NET INCOME

45

   

   

45

   

36

   

81

 

Net income attributable to noncontrolling interests

(2)

   

   

(2)

   

   

(2)

 

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

43

   

$

   

$

43

   

$

36

   

$

79

 
 

** Denotes non-GAAP financial measures. Please see "Non-GAAP Financial Measures" for additional information about our reasons for providing these alternative financial measures and limitations on their use.

(1) See "Non-GAAP Financial Measures - Combined Financial Information" for basis of presentation.

 

A-13

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

RECONCILIATION OF COMBINED(1) FINANCIAL INFORMATION

EBITDA, ADJUSTED EBITDA AND ADJUSTED DEVELOPMENT MARGIN

THREE MONTHS ENDED MARCH 31, 2018

(In millions)

 

EBITDA AND ADJUSTED EBITDA

 
 

Legacy-ILG
Reclassified**

 

Legacy-MVW

 

Combined**

Net income attributable to common shareholders

$

43

   

$

36

   

$

79

 

Interest expense(2)

8

   

4

   

12

 

Tax provision

20

   

11

   

31

 

Depreciation and amortization

19

   

6

   

25

 

EBITDA **

90

   

57

   

147

 

Share-based compensation expense

6

   

4

   

10

 

Certain items before provision for income taxes(3),(4)

2

   

2

   

4

 

Adjusted EBITDA **

$

98

   

$

63

   

$

161

 
           

ADJUSTED DEVELOPMENT MARGIN

 
 

Legacy-ILG
Reclassified**

 

Legacy-MVW

 

Combined**

Sale of vacation ownership products

$

122

   

$

175

   

$

297

 

Less:

         

Cost of vacation ownership products

43

   

46

   

89

 

Marketing and sales

60

   

105

   

165

 

Development margin

19

   

24

   

43

 

Revenue recognition reportability adjustment

   

8

   

8

 

Adjusted development margin **

$

19

   

$

32

   

$

51

 

Development margin percentage(5)

15.2%

   

13.9%

   

14.5%

 

Adjusted development margin percentage(5)

15.7%

   

17.4%

   

16.8%

 
 

** Denotes non-GAAP financial measures. Please see "Non-GAAP Financial Measures" for additional information about our reasons for providing these alternative financial measures and limitations on their use.

(1) See "Non-GAAP Financial Measures - Combined Financial Information" for basis of presentation.

(2) Interest expense excludes consumer financing interest expense.

(3) Excludes certain items included in depreciation and amortization and share-based compensation.

(4) Legacy-ILG certain items include $2 million of impairments, $1 million of costs related to the ILG Board of Directors' strategic review, $1 million of other acquisition costs, $1 million of hurricane insurance deductible costs, $1 million of litigation costs, and $1 million of others charges, partially offset by $5 million of foreign currency translation adjustments.

(5) Development margin percentage represents Development margin divided by Sale of vacation ownership products. Adjusted development margin percentage represents Adjusted development margin divided by Sale of vacation ownership products revenue after adjusting for revenue reportability.

 

A-14

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

RECONCILIATION OF COMBINED(1) FINANCIAL INFORMATION

VACATION OWNERSHIP SEGMENT FINANCIAL RESULTS

THREE MONTHS ENDED MARCH 31, 2018

(In millions)

 
 

Legacy-ILG

 

Reclassifications(1)

 

Legacy-ILG
Reclassified**

 

Legacy-MVW

 

Combined**

REVENUES

                 

Sale of vacation ownership products

$

123

   

$

(1)

   

$

122

   

$

175

   

$

297

 

Resort Operations revenue

63

   

(63)

   

   

   

 

Management fee and other revenue

57

   

(57)

   

   

   

 

Resort management and other services

   

50

   

50

   

70

   

120

 

Rental

   

69

   

69

   

75

   

144

 

Financing

24

   

   

24

   

35

   

59

 

Cost reimbursements

44

   

15

   

59

   

216

   

275

 

TOTAL REVENUES

311

   

13

   

324

   

571

   

895

 

EXPENSES

                 

Cost of vacation ownership products

39

   

4

   

43

   

46

   

89

 

Marketing and sales

66

   

(6)

   

60

   

105

   

165

 

Cost of service and membership related sales

45

   

(45)

   

   

   

 

Resort management and other services

   

27

   

27

   

36

   

63

 

Cost of sales of rental and ancillary services

43

   

(43)

   

   

   

 

Rental

   

46

   

46

   

55

   

101

 

Financing

8

   

(1)

   

7

   

11

   

18

 

General and administrative

26

   

(26)

   

   

   

 

Depreciation and amortization

12

   

(4)

   

8

   

5

   

13

 

Royalty fee

11

   

   

11

   

15

   

26

 

Cost reimbursements

44

   

15

   

59

   

216

   

275

 

TOTAL EXPENSES

294

   

(33)

   

261

   

489

   

750

 

Gains and other income, net

7

   

(2)

   

5

   

1

   

6

 

Equity in earnings from unconsolidated entities

1

   

(1)

   

   

   

 

Other

   

(1)

   

(1)

   

(2)

   

(3)

 

SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS

25

   

42

   

67

   

81

   

148

 

Net income attributable to noncontrolling interests

(2)

   

2

   

   

   

 

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

23

   

$

44

   

$

67

   

$

81

   

$

148

 
                   

** Denotes non-GAAP financial measures. Please see "Non-GAAP Financial Measures" for additional information about our reasons for providing these alternative financial measures and limitations on their use.

(1) See "Non-GAAP Financial Measures - Combined Financial Information" for basis of presentation.

 

A-15

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

RECONCILIATION OF COMBINED(1) FINANCIAL INFORMATION

EXCHANGE & THIRD-PARTY MANAGEMENT SEGMENT FINANCIAL RESULTS AND

CORPORATE AND OTHER FINANCIAL RESULTS

THREE MONTHS ENDED MARCH 31, 2018

(In millions)

 

EXCHANGE & THIRD-PARTY MANAGEMENT

 
 

Legacy-ILG

 

Reclassifications(1)

 

Legacy-ILG
Reclassified**

 

Legacy-MVW

 

Combined**

TOTAL REVENUES

$

171

   

$

(16)

   

$

155

   

$

   

$

155

 

TOTAL EXPENSES

(122)

   

38

   

(84)

   

   

(84)

 

Losses and other expense, net

(2)

   

   

(2)

   

   

(2)

 

SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS

47

   

22

   

69

   

   

69

 

Net income attributable to noncontrolling interests

   

(1)

   

(1)

   

   

(1)

 

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

47

   

$

21

   

$

68

   

$

   

$

68

 
                   

CORPORATE AND OTHER

 
 

Legacy-ILG

 

Reclassifications(1)

 

Legacy-ILG
Reclassified**

 

Legacy-MVW

 

Combined**

TOTAL REVENUES

$

   

$

4

   

$

4

   

$

   

$

4

 

TOTAL EXPENSES

   

(67)

   

(67)

   

(29)

   

(96)

 

Interest expense

(7)

   

(1)

   

(8)

   

(4)

   

(12)

 

ILG acquisition-related costs

   

   

   

(1)

   

(1)

 

FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS

(7)

   

(64)

   

(71)

   

(34)

   

(105)

 

Provision for income taxes

(20)

   

   

(20)

   

(11)

   

(31)

 

Net income attributable to noncontrolling interests

   

(1)

   

(1)

   

   

(1)

 

FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

(27)

   

$

(65)

   

$

(92)

   

$

(45)

   

$

(137)

 
                   

** Denotes non-GAAP financial measures. Please see "Non-GAAP Financial Measures" for additional information about our reasons for providing these alternative financial measures and limitations on their use.

(1) See "Non-GAAP Financial Measures - Combined Financial Information" for basis of presentation.

 

A-16

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

RECONCILIATION OF COMBINED(1) FINANCIAL INFORMATION

SEGMENT ADJUSTED EBITDA AND CORPORATE AND OTHER ADJUSTED FINANCIAL RESULTS

THREE MONTHS ENDED MARCH 31, 2018

(In millions)