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

ORLANDO, Fla., Nov. 4, 2019 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported third quarter financial results.

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

In addition to a discussion of the third quarter reported results presented in accordance with United States generally accepted accounting principles ("GAAP"), to provide a more meaningful year-over-year comparison of financial results, the company is also providing third quarter 2018 financial information in the financial schedules that follow that combine the third quarter reported 2018 financial results of the company with the financial results for the first two months of the 2018 third quarter for the brands and businesses acquired by the company in its acquisition of ILG, Inc. ("ILG") in September 2018, conformed to the current year presentations.

Third Quarter 2019 Highlights:

  • Consolidated vacation ownership contract sales increased 40% to $390 million.
    • On a combined basis, consolidated vacation ownership contract sales increased nearly 5%. After adjusting for a $7 million adverse impact from Hurricane Dorian (the "Hurricane"), sales would have increased 6.5%.
  • Net loss attributable to common shareholders was $9 million, or $0.21 loss per fully diluted share ("EPS"), compared to net loss attributable to common shareholders of $36 million, or $1.08 loss per fully diluted share, in the third quarter of 2018.
  • Adjusted net income attributable to common shareholders increased 83% to $86 million and Adjusted fully diluted EPS increased 39% to $1.97.
  • Adjusted EBITDA increased 89% to $190 million in the third quarter of 2019.
    • On a combined basis, Adjusted EBITDA increased 18% and would have increased 21% excluding VRI Europe, which was disposed of in the fourth quarter of 2018.
    • The company estimates that the Hurricane negatively impacted its third quarter Adjusted EBITDA by $1 million and expects the 2019 full-year impact to be $4 million.
  • The company received $38 million of insurance proceeds during the quarter related to business interruption losses at its Westin St. John property. These proceeds have been excluded from the company's calculation of Adjusted EBITDA and Adjusted Free Cash Flow.
  • Subsequent to the end of the third quarter, the company completed a $315 million note securitization at a blended interest rate of 2.29 percent and a 98 percent advance rate.
  • The company repurchased over 1.3 million shares of its common stock for $127 million in the third quarter of 2019 at an average price per share of $97.06.
    • Subsequent to the end of the quarter, the company repurchased an additional 431 thousand shares of its common stock for $46 million bringing its year-to-date share repurchases to 4.1 million shares, or $388 million.
  • The company updated its 2019 guidance primarily to reflect the impact of the Hurricane.

"I'm very excited about the improvements we've been able to drive at the acquired vacation ownership brands contributing to our 18% Adjusted EBITDA growth in the third quarter on a combined basis," said Stephen P. Weisz, president and chief executive officer. "The third quarter also marked the one-year anniversary of the ILG acquisition and the integration continues to  progress nicely, which enabled us to recently increase our run-rate synergy target to $125 million by the end of 2021."

Third Quarter 2019 Segment Results

Vacation Ownership

Revenues excluding cost reimbursements increased 43% in the third quarter driven by a 40% increase in consolidated vacation ownership contract sales. On a combined basis, revenues excluding cost reimbursements increased 4% with consolidated contract sales increasing nearly 5%.  Contract sales in the quarter were adversely impacted by $7 million due to the Hurricane.

Vacation Ownership segment financial results were $100 million for the third quarter of 2019.  On a combined basis, Vacation Ownership segment Adjusted EBITDA increased 11% to $195 million in the third quarter and margin improved 180 basis points, excluding cost reimbursements.

Exchange & Third-Party Management

Exchange & Third-Party Management revenues totaled $112 million in the third quarter of 2019.  Interval International average revenue per member increased 2% to $40.89 and active members totaled 1.7 million at the end of the third quarter of 2019.

Exchange & Third-Party Management segment financial results and Adjusted EBITDA were $46 million and $56 million, respectively, in the third quarter of 2019.  On a combined basis, Exchange & Third-Party Management segment Adjusted EBITDA decreased 7% after adjusting 2018 to exclude VRI Europe.

Corporate and Other

Corporate and Other results, which consist primarily of general and administrative costs, decreased $19 million in the third quarter of 2019 as a result of synergy savings and lower compensation related expenses, partially offset by normal inflationary cost increases.

Balance Sheet and Liquidity

On September 30, 2019, cash and cash equivalents totaled $183 million. The inventory balance at the end of the third quarter included $840 million of finished goods and $59 million of work-in-progress. The company had $4.0 billion in debt outstanding, net of unamortized debt issuance costs, at the end of the third quarter. This debt included $2.3 billion of corporate debt and $1.7 billion of non-recourse debt related to the company's securitized notes receivable.

As of September 30, 2019, the company had $372 million in available capacity under its revolving credit facility.

Subsequent to the end of the third quarter, the company completed a $315 million note securitization at a blended interest rate of 2.29 percent and a 98 percent advance rate.

Subsequent to the end of the third quarter, the company issued $350 million of 4.750% senior notes due in 2028 and redeemed its 5.625% senior notes due in 2023 and repaid a portion of its outstanding borrowings under its Revolving Credit Facility.

Proceeds from Asset Dispositions

As a result of the ILG Acquisition, the company performed a comprehensive review of its Vacation Ownership property and equipment including undeveloped parcels, future phases of existing resorts, operating hotels and other non-core assets, to determine the best strategic direction with respect to these assets.  As a result of the review, the company currently expects proceeds from future asset dispositions to be between $160 million and $220 million.

2019 Hurricane Impact

During the third quarter of 2019, several properties in the company's Vacation Ownership segment were negatively impacted by the Hurricane. As a result of mandatory evacuations, resort and sales center shutdowns, and cancellations of reservations and scheduled tours, the company estimates contract sales in the third quarter were adversely impacted by $7 million. In addition, the company estimates full year 2019 Adjusted EBITDA to be adversely impacted by roughly $4 million, of which $1 million related to the third quarter of 2019.

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 the company.

 

Current Guidance

Net income attributable to common shareholders

$130 million

to

$144 million

Fully diluted EPS

$2.92

to

$3.23

Net cash provided by operating activities

$277 million

to

$307 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 updated its full year 2019 guidance as reflected in the chart below:

 

Current Guidance

Adjusted free cash flow

$440 million

to

$490 million

Adjusted net income attributable to common shareholders

$342 million

to

$364 million

Adjusted fully diluted EPS

$7.67

to

$8.16

Adjusted EBITDA

$745 million

to

$775 million

Combined consolidated contract sales growth

5%

to

8%

           

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.

Third Quarter 2019 Earnings Conference Call

The company will hold a conference call on November 5, 2019 at 8:30 a.m. ET to discuss these results and the guidance for full year 2019. 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.

Investors will be able to access an audio replay of the conference call at ir.mvwc.com from 10:00 a.m. on November 5, 2019 until 10:00 p.m. on November 19, 2019. To access the replay, dial (877) 660-6853 or (201) 612-7415 for international callers. The conference ID for the recording is 13695443.

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 November 4, 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 3, 2019

 

TABLE OF CONTENTS

 

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

Vacation Ownership Segment Financial Results

A-4

Consolidated Contract Sales to Adjusted Development Margin

A-5

Exchange & Third-Party Management Segment Financial Results

A-6

Corporate and Other Financial Results

A-7

Vacation Ownership and Exchange & Third-Party Management - Segment Adjusted EBITDA

A-8

Reconciliation of Combined Financial Information - Consolidated Results

A-9

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

A-10

Reconciliation of Combined Financial Information - Vacation Ownership Segment Financial Results

A-11

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

A-12

Reconciliation of Combined Financial Information - Segment Adjusted EBITDA

A-13

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

A-14

2019 Outlook - Adjusted Free Cash Flow

A-15

Non-GAAP Financial Measures

A-16

 

A-1

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)

(Unaudited)

 
 

Three Months Ended

 

Nine Months Ended

 

September 30,
2019

 

September 30,
2018

 

September 30,
2019

 

September 30,
2018

REVENUES

             

Sale of vacation ownership products

$

350

   

$

252

   

$

1,001

   

$

632

 

Management and exchange

231

   

126

   

709

   

274

 

Rental

149

   

90

   

472

   

239

 

Financing

72

   

48

   

209

   

119

 

Cost reimbursements

337

   

234

   

876

   

652

 

TOTAL REVENUES

1,139

   

750

   

3,267

   

1,916

 

EXPENSES

             

Cost of vacation ownership products

91

   

64

   

262

   

167

 

Marketing and sales

188

   

135

   

569

   

346

 

Management and exchange

115

   

65

   

349

   

140

 

Rental

111

   

74

   

323

   

191

 

Financing

23

   

19

   

70

   

40

 

General and administrative

68

   

53

   

225

   

114

 

Depreciation and amortization

33

   

18

   

106

   

29

 

Litigation charges

3

   

17

   

5

   

33

 

Royalty fee

27

   

19

   

79

   

50

 

Impairment

73

   

   

99

   

 

Cost reimbursements

337

   

234

   

876

   

652

 

TOTAL EXPENSES

1,069

   

698

   

2,963

   

1,762

 

(Losses) gains and other (expense) income, net

(5)

   

2

   

5

   

(4)

 

Interest expense

(31)

   

(14)

   

(100)

   

(23)

 

ILG acquisition-related costs

(32)

   

(78)

   

(94)

   

(98)

 

Other

1

   

   

1

   

(3)

 

INCOME (LOSS) BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS

3

   

(38)

   

116

   

26

 

(Provision) benefit for income taxes

(10)

   

2

   

(50)

   

(15)

 

NET (LOSS) INCOME

(7)

   

(36)

   

66

   

11

 

Net income attributable to noncontrolling interests

(2)

   

   

(2)

   

 

NET (LOSS) INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

(9)

   

$

(36)

   

$

64

   

$

11

 
               

(LOSSES) EARNINGS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

             

Basic

$

(0.21)

   

$

(1.08)

   

$

1.44

   

$

0.39

 

Diluted

$

(0.21)

   

$

(1.08)

   

$

1.43

   

$

0.38

 
 
 

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

 

 

Change
%

 

Nine Months Ended

 

 

Change
%

 

September 30,
2019

 

September 30,
2018

   

September 30,
2019

 

September 30,
2018

 

Vacation Ownership

                     

Total contract sales

$

401

   

$

283

   

42%

 

$

1,164

   

$

719

   

62%

Consolidated contract sales(1)

$

390

   

$

279

   

40%

 

$

1,130

   

$

715

   

58%

Consolidated VPG

$

3,461

   

$

3,515

   

(2%)

 

$

3,370

   

$

3,541

   

(5%)

Legacy-MVW

                     

Consolidated contract sales(1)

$

244

   

$

242

   

1%

 

$

713

   

$

678

   

5%

VPG(2)

$

3,789

   

$

3,781

   

—%

 

$

3,754

   

$

3,727

   

1%

Legacy-ILG

                     

Consolidated contract sales(1)

$

146

   

$

37

   

NM

 

$

417

   

$

37

   

NM

VPG

$

3,232

   

$

   

NM

 

$

3,085

   

$

   

NM

                       

Exchange & Third-Party Management

                     

Total active members at end of period (000's)(3)

1,701

   

1,802

   

NM

 

1,701

   

1,802

   

NM

Average revenue per member(3)

$

40.89

   

$

   

NM

 

$

130.21

   

$

   

NM

 
 

(1) 2019 third quarter and full year contract sales adversely impacted by more than $7 million from Hurricane Dorian (approximately $6 million at Legacy-MVW properties and $1 million at Legacy-ILG properties).

(2) Represents Legacy-MVW North America VPG.

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

 

COMBINED OPERATING METRICS

(Contract sales in millions)

 
 

Three Months Ended

 

 

Change
%

Nine Months Ended

 

 

Change
%

 

September 30,
2019

 

September 30,
2018

 

September 30,
2019

 

September 30,
2018

 

Vacation Ownership

                   

Total contract sales

$

401

   

$

385

   

4%

$

1,164

   

$

1,115

   

4%

Consolidated contract sales(1)

$

390

   

$

373

   

5%

$

1,130

   

$

1,074

   

5%

Consolidated VPG

$

3,461

   

$

3,367

   

3%

$

3,370

   

$

3,344

   

1%

Legacy-ILG

                   

Consolidated contract sales(1)

$

146

   

$

131

   

11%

$

417

   

$

396

   

5%

VPG

$

3,232

   

$

2,966

   

9%

$

3,085

   

$

3,010

   

2%

                     

Exchange & Third-Party Management

                   

Total active members at end of period (000's)(2)

1,701

   

1,802

   

(6%)

1,701

   

1,802

   

(6%)

Average revenue per member(2)

$

40.89

   

$

39.97

   

2%

$

130.21

   

$

129.75

   

—%

 
 

(1) 2019 third quarter and full year contract sales adversely impacted by more than $7 million from Hurricane Dorian (approximately $6 million at Legacy-MVW properties and $1 million at Legacy-ILG properties).

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

 

 

A-3

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

(In millions, except per share amounts)

(Unaudited)

 

ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS AND

ADJUSTED EARNINGS PER SHARE - DILUTED

 
 

Three Months Ended

 

Nine Months Ended

 

September 30,
2019

 

September 30,
2018

 

September 30,
2019

 

September 30,
2018

Net (loss) income attributable to common shareholders

$

(9)

   

$

(36)

   

$

64

   

$

11

 

Certain items:

             

Litigation charges

3

   

17

   

5

   

33

 

Losses (gains) and other expense (income), net

5

   

(2)

   

(5)

   

4

 

ILG acquisition-related costs

32

   

78

   

94

   

98

 

Impairment

73

   

   

99

   

 

Purchase price adjustments

14

   

5

   

46

   

5

 

Share-based compensation (ILG acquisition-related)

   

7

   

   

7

 

Other

1

   

   

2

   

3

 

Certain items before provision for income taxes

128

   

105

   

241

   

150

 

Provision for income taxes on certain items

(33)

   

(21)

   

(62)

   

(32)

 

Adjusted net income attributable to common shareholders **

$

86

   

$

48

   

$

243

   

$

129

 

(Losses) earnings per share - Diluted

$

(0.21)

   

$

(1.08)

   

$

1.43

   

$

0.38

 

Adjusted earnings per share - Diluted **

$

1.97

   

$

1.42

   

$

5.40

   

$

4.39

 

Diluted Shares

43,383

   

32,782

   

45,096

   

29,355

 
               

Please see "Non-GAAP Financial Measures" for additional information about certain items.

 

EBITDA AND ADJUSTED EBITDA

 

Three Months Ended

 

Nine Months Ended

 

September 30,
2019

 

September 30,
2018

 

September 30,
2019

 

September 30,
2018

Net (loss) income attributable to common shareholders

$

(9)

   

$

(36)

   

$

64

   

$

11

 

Interest expense(1)

31

   

14

   

100

   

23

 

Tax provision

10

   

(2)

   

50

   

15

 

Depreciation and amortization

33

   

18

   

106

   

29

 

EBITDA **

65

   

(6)

   

320

   

78

 

Share-based compensation expense

9

   

13

   

29

   

23

 

Certain items before provision for income taxes(2)

116

   

93

   

202

   

138

 

Adjusted EBITDA **

$

190

   

$

100

   

$

551

   

$

239

 
               

(1) Interest expense excludes consumer financing interest expense associated with term loan securitization transactions.

(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

 

Nine Months Ended

 

September 30,
2019

 

September 30,
2018

 

September 30,
2019

 

September 30,
2018

Vacation Ownership

$

195

   

$

123

   

$

574

   

$

315

 

Exchange & Third-Party Management

56

   

19

   

180

   

19

 

Segment adjusted EBITDA**

251

   

142

   

754

   

334

 

General and administrative

(61)

   

(42)

   

(204)

   

(95)

 

Consolidated property owners' associations

   

   

1

   

 

Adjusted EBITDA**

$

190

   

$

100

   

$

551

   

$

239

 
               

** 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

VACATION OWNERSHIP SEGMENT FINANCIAL RESULTS

(In millions)

(Unaudited)

 
 

Three Months Ended

 

Nine Months Ended

 

September 30,
2019

 

September 30,
2018

 

September 30,
2019

 

September 30,
2018

REVENUES

             

Sale of vacation ownership products

$

350

   

$

252

   

$

1,001

   

$

632

 

Resort management and other services

125

   

91

   

384

   

239

 

Rental

135

   

86

   

423

   

235

 

Financing

71

   

48

   

206

   

119

 

Cost reimbursements

343

   

232

   

892

   

650

 

TOTAL REVENUES

1,024

   

709

   

2,906

   

1,875

 

EXPENSES

             

Cost of vacation ownership products

91

   

64

   

262

   

167

 

Marketing and sales

176

   

131

   

534

   

342

 

Resort management and other services

66

   

48

   

202

   

123

 

Rental

107

   

74

   

308

   

191

 

Financing

23

   

19

   

69

   

40

 

Depreciation and amortization

16

   

10

   

50

   

19

 

Litigation charges

2

   

17

   

4

   

33

 

Royalty fee

27

   

19

   

79

   

50

 

Impairment

73

   

   

99

   

 

Cost reimbursements

343

   

232

   

892

   

650

 

TOTAL EXPENSES

924

   

614

   

2,499

   

1,615

 

Gains and other income, net

1

   

1

   

9

   

2

 

Other

1

   

   

1

   

(3)

 

SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS

102

   

96

   

417

   

259

 

Net income attributable to noncontrolling interests

(2)

   

   

(1)

   

 

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

100

   

$

96

   

$

416

   

$

259

 

 

A-5

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED CONTRACT SALES TO ADJUSTED DEVELOPMENT MARGIN

(In millions)

(Unaudited)

 
 

Three Months Ended

 

Nine Months Ended

 

September 30,
2019

 

September 30,
2018

 

September 30,
2019

 

September 30,
2018

Consolidated contract sales

$

390

   

$

279

   

$

1,130

   

$

715

 

Less resales contract sales

(7)

   

(8)

   

(23)

   

(23)

 

Consolidated contract sales, net of resales

383

   

271

   

1,107

   

692

 

Plus:

             

Settlement revenue

10

   

6

   

30

   

14

 

Resales revenue

3

   

3

   

10

   

8

 

Revenue recognition adjustments:

             

Reportability

(2)

   

   

(40)

   

(16)

 

Sales reserve

(33)

   

(18)

   

(79)

   

(42)

 

Other(1)

(11)

   

(10)

   

(27)

   

(24)

 

Sale of vacation ownership products

350

   

252

   

1,001

   

632

 

Less:

             

Cost of vacation ownership products

(91)

   

(64)

   

(262)

   

(167)

 

Marketing and sales

(176)

   

(131)

   

(534)

   

(342)

 

Development margin

83

   

57

   

205

   

123

 

Revenue recognition reportability adjustment

2

   

1

   

28

   

11

 

Purchase price adjustment

3

   

   

8

   

 

Adjusted development margin **

$

88

   

$

58

   

$

241

   

$

134

 

Development margin percentage(2)

23.6%

   

22.5%

   

20.4%

   

19.3%

 

Adjusted development margin percentage(2)

24.8%

   

23.0%

   

23.2%

   

20.7%

 
 

** 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-6

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

EXCHANGE & THIRD-PARTY MANAGEMENT SEGMENT FINANCIAL RESULTS

(In millions)

(Unaudited)

 
 

Three Months Ended

 

Nine Months Ended

 

September 30,
2019

 

September 30,
2018

 

September 30,
2019

 

September 30,
2018

REVENUES

             

Management and exchange

$

75

   

$

28

   

$

232

   

$

28

 

Rental

14

   

4

   

48

   

4

 

Financing

1

   

   

3

   

 

Cost reimbursements

22

   

8

   

68

   

8

 

TOTAL REVENUES

112

   

40

   

351

   

40

 

EXPENSES

             

Marketing and sales

12

   

4

   

35

   

4

 

Management and exchange

15

   

8

   

48

   

8

 

Rental

7

   

2

   

22

   

2

 

Financing

   

   

1

   

 

Depreciation and amortization

11

   

6

   

35

   

6

 

Cost reimbursements

22

   

8

   

68

   

8

 

TOTAL EXPENSES

67

   

28

   

209

   

28

 

Gains and other income, net

1

   

   

1

   

 

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

46

   

$

12

   

$

143

   

$

12

 

 

A-7

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CORPORATE AND OTHER FINANCIAL RESULTS

(In millions)

(Unaudited)

 
 

Three Months Ended

 

Nine Months Ended

 

September 30,
2019

 

September 30,
2018

 

September 30,
2019

 

September 30,
2018

REVENUES

             

Management and exchange(1)

$

31

   

$

7

   

$

93

   

$

7

 

Rental(1)

   

   

1

   

 

Cost reimbursements(1)

(28)

   

(6)

   

(84)

   

(6)

 

TOTAL REVENUES

3

   

1

   

10

   

1

 

EXPENSES

             

Management and exchange(1)

34

   

9

   

99

   

9

 

Rental(1)

(3)

   

(2)

   

(7)

   

(2)

 

General and administrative

68

   

53

   

225

   

114

 

Depreciation and amortization

6

   

2

   

21

   

4

 

Litigation charges

1

   

   

1

   

 

Cost reimbursements(1)

(28)

   

(6)

   

(84)

   

(6)

 

TOTAL EXPENSES

78

   

56

   

255

   

119

 

(Losses) gains and other (expense) income, net

(7)

   

1

   

(5)

   

(6)

 

Interest expense

(31)

   

(14)

   

(100)

   

(23)

 

ILG acquisition-related costs

(32)

   

(78)

   

(94)

   

(98)

 

Other

   

   

   

 

FINANCIAL RESULTS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS

(145)

   

(146)

   

(444)

   

(245)

 

Provision for income taxes

(10)

   

2

   

(50)

   

(15)

 

Net income attributable to noncontrolling interests

   

   

(1)

   

 

FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

(155)

   

$

(144)

   

$

(495)

   

$

(260)

 
 
 

(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-8

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

VACATION OWNERSHIP AND EXCHANGE & THIRD-PARTY MANAGEMENT

SEGMENT ADJUSTED EBITDA

(In millions)

(Unaudited)

 

VACATION OWNERSHIP

       
 

Three Months Ended

 

Nine Months Ended

 

September 30,
2019

 

September 30,
2018

 

September 30,
2019

 

September 30,
2018

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

100

   

$

96

   

$

416

   

$

259

 

Depreciation and amortization

16

   

10

   

50

   

19

 

EBITDA **

116

   

106

   

466

   

278

 

Share-based compensation expense

2

   

2

   

6

   

4

 

Certain items(1) (2)(3)(4)

77

   

15

   

102

   

33

 

SEGMENT ADJUSTED EBITDA **

$

195

   

$

123

   

$

574

   

$

315

 
               

EXCHANGE & THIRD-PARTY MANAGEMENT

       
 

Three Months Ended

 

Nine Months Ended

 

September 30,
2019

 

September 30,
 2018

 

September 30,
2019

 

September 30,
2018

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

46

   

$

12

   

$

143

   

$

12

 

Depreciation and amortization

11

   

6

   

35

   

6

 

EBITDA **

57

   

18

   

178

   

18

 

Share-based compensation expense

   

   

2

   

 

Certain items(5)(6)

(1)

   

1

   

   

1

 

SEGMENT ADJUSTED EBITDA **

$

56

   

$

19

   

$

180

   

$

19

 
 
 

** 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) Certain items in the Vacation Ownership segment for the third quarter of 2019 consisted of $73 million of asset impairment, $2 million of purchase accounting adjustments, $2 million of litigation charges, and $1 million of acquisition costs, partially offset by $1 million of gains and other income.

(2) Certain items in the Vacation Ownership segment for the third quarter of 2018 consisted of $17 million of litigation charges related to a project in Hawaii, partially offset by $1 million of gains and other income and $1 million of purchase accounting adjustments.

(3)  Certain items in the Vacation Ownership segment for the first nine months of 2019 consisted of $99 million of asset impairment, $7 million of purchase accounting adjustments, $4 million of litigation charges, and $1 million of acquisition costs, partially offset by $9 million of gains and other income.

(4)  Certain items in the Vacation Ownership segment for the first nine months of 2018 consisted of $33 million of litigation charges (including $17 million related to a project in Hawaii, $11 million related to a project in San Francisco and $5 million related to a project in Lake Tahoe) and $3 million of acquisition costs associated with the then anticipated capital efficient acquisition of an operating property in San Francisco, partially offset by $2 million of gains and other income and $1 million of purchase accounting adjustments.

(5) Certain items in the Exchange & Third-Party Management segment for the third quarter of 2019 consisted of $1 million of gains and other income.

(6) Certain items in the Exchange & Third-Party Management segment for the first nine months of 2019 consisted of $1 million of purchase accounting adjustments offset by $1 million of gains and other income.

 

A-9

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

RECONCILIATION OF COMBINED(1) FINANCIAL INFORMATION

CONSOLIDATED RESULTS

THREE MONTHS ENDED SEPTEMBER 30, 2018

(In millions)

(Unaudited)

 
 

Legacy-ILG
Reclassified**
(July/August)(2)

 

MVW

 

Combined**

REVENUES

         

Sale of vacation ownership products

$

88

   

$

252

   

$

340

 

Management and exchange

118

   

126

   

244

 

Rental

57

   

90

   

147

 

Financing

15

   

48

   

63

 

Cost reimbursements

43

   

234

   

277

 

TOTAL REVENUES

321

   

750

   

1,071

 

EXPENSES

         

Cost of vacation ownership products

22

   

64

   

86

 

Marketing and sales

54

   

135

   

189

 

Management and exchange

56

   

65

   

121

 

Rental

34

   

74

   

108

 

Financing

5

   

19

   

24

 

General and administrative

50

   

53

   

103

 

Depreciation and amortization

14

   

18

   

32

 

Litigation charges

   

17

   

17

 

Royalty fee

8

   

19

   

27

 

Cost reimbursements

43

   

234

   

277

 

TOTAL EXPENSES

286

   

698

   

984

 

Gains and other income, net

5

   

2

   

7

 

Interest expense

(6)

   

(14)

   

(20)

 

ILG acquisition-related costs

(32)

   

(78)

   

(110)

 

INCOME (LOSS) BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS

2

   

(38)

   

(36)

 

Benefit for income taxes

   

2

   

2

 

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

2

   

$

(36)

   

$

(34)

 
 
 

** 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) Per Legacy-ILG management's internal records.

 

A-10

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

RECONCILIATION OF COMBINED(1) FINANCIAL INFORMATION

EBITDA, ADJUSTED EBITDA AND ADJUSTED DEVELOPMENT MARGIN

THREE MONTHS ENDED SEPTEMBER 30, 2018

(In millions)

(Unaudited)

 

EBITDA AND ADJUSTED EBITDA

           
 

Legacy-ILG
Reclassified**
(July/August)(2)

 

MVW

 

Combined**

Net (loss) income attributable to common shareholders

$

2

   

$

(36)

   

$

(34)

 

Interest expense(3)

6

   

14

   

20

 

Tax provision

   

(2)

   

(2)

 

Depreciation and amortization

14

   

18

   

32

 

EBITDA **

22

   

(6)

   

16

 

Share-based compensation expense

5

   

13

   

18

 

Certain items before provision for income taxes(4)

33

   

93

   

126

 

Adjusted EBITDA **

$

60

   

$

100

   

$

160

 
           

ADJUSTED DEVELOPMENT MARGIN

           
 

Legacy-ILG
Reclassified**
(July/August)(2)

 

MVW

 

Combined**

Sale of vacation ownership products

$

88

   

$

252

   

$

340

 

Less:

         

Cost of vacation ownership products

22

   

64

   

86

 

Marketing and sales

42

   

131

   

173

 

Development margin

24

   

57

   

81

 

Revenue recognition reportability adjustment

(2)

   

1

   

(1)

 

Adjusted development margin **

$

22

   

$

58

   

$

80

 

Development margin percentage(5)

27.8%

   

22.5%

   

23.9%

 

Adjusted development margin percentage(5)

26.4%

   

23.0%

   

23.9%

 
 

** 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) Per Legacy-ILG management's internal records.

(3) Interest expense excludes consumer financing interest expense.

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

(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-11

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

RECONCILIATION OF COMBINED(1) FINANCIAL INFORMATION

VACATION OWNERSHIP SEGMENT FINANCIAL RESULTS

THREE MONTHS ENDED SEPTEMBER 30, 2018

(In millions)

(Unaudited)

 
   

Legacy-ILG
Reclassified**
(July/August)(2)

 

MVW

 

Combined**

REVENUES

           

Sale of vacation ownership products

 

$

88

   

$

252

   

$

340

 

Management fee and other revenue

 

33

   

91

   

124

 

Rental

 

45

   

86

   

131

 

Financing

 

14

   

48

   

62

 

Cost reimbursements

 

45

   

232

   

277

 

TOTAL REVENUES

 

225

   

709

   

934

 

EXPENSES

           

Cost of vacation ownership products

 

22

   

64

   

86

 

Marketing and sales

 

42

   

131

   

173

 

Resort management and other services

 

21

   

48

   

69

 

Rental

 

31

   

74

   

105

 

Financing

 

5

   

19

   

24

 

Depreciation and amortization

 

5

   

10

   

15

 

Litigation charges

 

   

17

   

17

 

Royalty fee

 

8

   

19

   

27

 

Cost reimbursements

 

45

   

232

   

277

 

TOTAL EXPENSES

 

179

   

614

   

793

 

Gains and other income, net

 

4

   

1

   

5

 

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$

50

   

$

96

   

$

146

 
 
 

** 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) Per Legacy-ILG management's internal records.

 

A-12

 

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 SEPTEMBER 30, 2018

(In millions)

(Unaudited)

 

EXCHANGE & THIRD-PARTY MANAGEMENT

             
   

Legacy-ILG
Reclassified**
(July/August)(2)

 

MVW

 

Combined**

TOTAL REVENUES

 

$

95

   

$

40

   

$

135

 

TOTAL EXPENSES

 

(54)

   

(28)

   

(82)

 

SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS

 

41

   

12

   

53

 

Net income attributable to noncontrolling interests

 

(1)

   

   

(1)

 

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$

40

   

$

12

   

$

52

 
             

CORPORATE AND OTHER

             
   

Legacy-ILG
Reclassified**
(July/August)(2)

 

MVW

 

Combined**

TOTAL REVENUES

 

$

1

   

$

1

   

$

2

 

TOTAL EXPENSES

 

(53)

   

(56)

   

(109)

 

Gains and other income, net

 

1

   

1

   

2

 

Interest expense

 

(6)

   

(14)

   

(20)

 

ILG acquisition-related costs

 

(32)

   

(78)

   

(110)

 

FINANCIAL RESULTS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS

 

(89)

   

(146)

   

(235)

 

Benefit for income taxes

 

   

2

   

2

 

Net loss attributable to noncontrolling interests

 

1

   

   

1

 

FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$

(88)

   

$

(144)

   

$

(232)

 
 
 

** 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) Per Legacy-ILG management's internal records.

 

A-13

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

RECONCILIATION OF COMBINED(1) FINANCIAL INFORMATION - SEGMENT ADJUSTED EBITDA

THREE MONTHS ENDED SEPTEMBER 30, 2018

(In millions)

(Unaudited)

 

VACATION OWNERSHIP

             
   

Legacy-ILG
Reclassified**
(July/August)(2)

 

MVW

 

Combined**

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$

50

   

$

96

   

$

146

 

Depreciation and amortization

 

5

   

10

   

15

 

EBITDA **

 

55

   

106

   

161

 

Share-based compensation expense

 

(1)

   

2

   

1

 

Certain items

 

(3)

   

15

   

12

 

SEGMENT ADJUSTED EBITDA **

 

$

51

   

$

123

   

$

174

 
             

EXCHANGE & THIRD-PARTY MANAGEMENT

             
   

Legacy-ILG
Reclassified**
(July/August)(2)

 

MVW

 

Combined**

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$

40

   

$

12

   

$

52

 

Depreciation and amortization

 

6

   

6

   

12

 

EBITDA **

 

46

   

18

   

64

 

Share-based compensation expense

 

1

   

   

1

 

Certain items

 

   

1

   

1

 

SEGMENT ADJUSTED EBITDA **

 

$

47

   

$

19

   

$

66

 
             

ADJUSTED EBITDA BY SEGMENT

             
   

Legacy-ILG
Reclassified**
(July/August)(2)

 

MVW

 

Combined**

Vacation Ownership

 

$

51

   

$

123

   

$

174

 

Exchange & Third-Party Management

 

47

   

19

   

66

 

Segment adjusted EBITDA**

 

98

   

142

   

240

 

General and administrative

 

(38)

   

(42)

   

(80)

 

Consolidated property owners' associations

 

   

   

 

ADJUSTED EBITDA**

 

$

60

   

$

100

   

$

160

 
 
 

** 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) Per Legacy-ILG management's internal records.

 

A-14

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

2019 ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS AND ADJUSTED EARNINGS PER SHARE - DILUTED OUTLOOK

(In millions, except per share amounts)

 
 

Fiscal Year
2019 (low)

 

Fiscal Year
2019 (high)

Net income attributable to common shareholders

$

130

   

$

144

 

Adjustments to reconcile Net income attributable to common shareholders to Adjusted net income attributable to common shareholders

     

Certain items(1)

288

   

298

 

Provision for income taxes on adjustments to net income

(76)

   

(78)

 

Adjusted net income attributable to common shareholders **

$

342

   

$

364

 

Earnings per share - Diluted(2)

$

2.92

   

$