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Marriott Vacations Worldwide Reports Fourth Quarter and Full Year 2018 Financial Results and Provides 2019 Outlook

ORLANDO, Fla., Feb. 28, 2019 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported fourth quarter and full year 2018 financial results and provided guidance for the full year 2019.

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

On September 1, 2018, the company completed its previously announced acquisition of ILG, Inc. ("ILG"). In addition to a discussion of fourth quarter and full year reported results presented in accordance with United States generally accepted accounting principles ("GAAP"), the company is providing adjusted results that exclude ILG results from September 1 to December 31, 2018 to further assist investors. Throughout this press release, the business associated with the operating results for the company excluding the impact of the ILG acquisition is referred to as "Legacy-MVW," while the business and operating results related to the businesses 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 combined financial information in the Financial Schedules that assume the company's acquisition of ILG had been completed at the beginning of the 2017 fiscal year.

Fourth Quarter 2018 Results

  • Net income attributable to common shareholders was $44 million, or $0.91 fully diluted earnings per share ("EPS"), compared to net income attributable to common shareholders of $119 million, or $4.35 fully diluted EPS, in the fourth quarter of 2017.
  • Adjusted net income attributable to common shareholders was $71 million compared to adjusted net income attributable to common shareholders of $54 million in the fourth quarter of 2017. Adjusted fully diluted EPS was $1.49, compared to adjusted fully diluted EPS of $1.96 in the fourth quarter of 2017.
  • Adjusted EBITDA totaled $180 million, an increase of $97 million, or 117 percent. Legacy-MVW's fourth quarter 2018 adjusted EBITDA was $99 million, an increase of $16 million, or 20 percent.
    • On a combined basis, total company adjusted EBITDA of $180 million in the fourth quarter would have shown an increase of $11 million, or 7 percent.
  • Consolidated vacation ownership contract sales were $358 million, an increase of $151 million, or 73 percent. Legacy-MVW vacation ownership contract sales were $224 million, an increase of $17 million, or 8 percent.
    • On a combined basis, total company consolidated contract sales would have increased $25 million, or 8 percent.
  • The company estimates that the 2018 Hurricanes negatively impacted total company adjusted EBITDA and total consolidated contract sales by $2 million and $3 million, respectively, in the fourth quarter of 2018.
  • As part of the ILG Acquisition, the company acquired a 75.5 percent interest in VRI Europe Limited ("VRI Europe"), a joint venture comprised of a European vacation ownership resort management business. During the fourth quarter of 2018, the company sold its interest in VRI Europe to an affiliate of the minority shareholder for $63 million. In connection with the transaction, Interval International entered into a long-term extension of its global affliliation agreement.

Full Year 2018 Results

  • Net income attributable to common shareholders was $55 million, or $1.61 fully diluted EPS, compared to net income attributable to common shareholders of $235 million, or $8.49 fully diluted EPS, in 2017.
  • Adjusted net income attributable to common shareholders was $200 million compared to adjusted net income attributable to common shareholders of $169 million in 2017. Adjusted fully diluted EPS was $5.88, compared to adjusted fully diluted EPS of $6.09 in 2017.
  • Adjusted EBITDA totaled $419 million, an increase of $125 million, or 43 percent. Legacy-MVW's 2018 adjusted EBITDA was $320 million, an increase of $26 million, or 9 percent.
    • On a combined basis, total company adjusted EBITDA for 2018 would have totaled $667 million, an increase of $21 million, or 3 percent.
  • Consolidated vacation ownership contract sales were $1.073 billion, an increase of $247 million, or 30 percent. Legacy-MVW vacation ownership contract sales were $902 million, an increase of $76 million, or 9 percent.
    • On a combined basis, total company consolidated contract sales for 2018 would have totaled $1.4 billion, an increase of $108 million, or 8 percent.
  • The company estimates that the 2018 Hurricanes negatively impacted total company adjusted EBITDA and total consolidated contract sales by $7 million and $9 million, respectively, in 2018.
  • Total Interval Network active members at the end of the year were 1.8 million.
  • The company generated net cash provided by operating activities of $97 million and adjusted free cash flow of $265 million.
  • During 2018, the company repurchased 1.2 million shares of its common stock for $96 million, including $94 million during the fourth quarter, at an average price per share of $77.16. In addition, the company paid dividends of $51 million in 2018.
    • Subsequent to the end of 2018 and through February 26, 2019, the company repurchased over 931 thousand shares of its common stock for nearly $78 million, at an average price per share of $83.28.
  • The company received $38 million, including $6 million subsequent to the end of 2018, in settlement of its Legacy-MVW business interruption claims. In addition, the company received a $25 million advance of its Legacy-ILG business interruption claims.

"I am very pleased with how we closed out 2018, with Adjusted EBITDA and Adjusted Free Cash Flow exceeding our previous guidance," said Stephen P. Weisz, president and chief executive officer. "Looking ahead to 2019, we continue to target strong growth into the new year, with contract sales of $1.53 billion to $1.6 billion, Adjusted EBITDA of $745 million to $785 million, and Adjusted Free Cash Flow of $400 million to $475 million.  But, I am even more excited about what lies ahead for Marriott Vacations Worldwide as we continue to integrate and transform the new company, which we believe will drive significant growth opportunities well into the future.  We continue to target at least $100 million of savings from synergy initiatives and are pleased to report that, as of the end of 2018, our run-rate savings exceeded $30 million.  By the end of 2019, we are targeting run-rate savings of over $50 million, which we estimate will generate $35 million to $40 million of in-the-year savings."

Fourth Quarter 2018 Segment Results

Vacation Ownership

Vacation Ownership segment financial results were $184 million, an increase of $91 million, or 99 percent.  Vacation Ownership segment adjusted EBITDA was $196 million, an increase of $93 million, or 89 percent.

Consolidated vacation ownership contract sales were $358 million, an increase of $151 million, or 73 percent. Legacy-MVW contract sales were $224 million, an increase of $17 million, or 8 percent.  Legacy-MVW North America VPG was $3,496, roughly in line with the prior year.

Development margin was $94 million compared to $54 million in the fourth quarter of 2017 and development margin percentage was 26.4 percent compared to 25.7 percent in the prior year quarter. Adjusted development margin percentage, which excludes the impact of revenue reportability and other charges, was 23.4 percent in the fourth quarter of 2018 compared to 20.6 percent in the fourth quarter of 2017.

Rental revenues totaled $117 million, a $58 million increase from the fourth quarter of 2017. Rental revenues net of expenses were $31 million, a $25 million increase from the fourth quarter of 2017. Legacy-MVW rental revenues net of expenses were $11 million, a $5 million, or 90 percent, increase from the fourth quarter of 2017.

Financing revenues totaled $63 million, a $27 million, or 79 percent, increase from the fourth quarter of 2017. Financing revenues, net of expenses and consumer financing interest expense, were $39 million, a $16 million, or 66 percent, increase from the fourth quarter of 2017.  Legacy-MVW financing revenues, net of expenses and consumer financing interest expense, were $24 million, nearly $1 million, or 2 percent, above the fourth quarter of 2017.

Resort management and other services revenues totaled $120 million, a $50 million, or 72 percent, increase from the fourth quarter of 2017. Resort management and other services revenues, net of expenses, totaled $53 million, a $19 million, or 54 percent, increase from the fourth quarter of 2017.  Legacy-MVW resort management and other services revenues, net of expenses, totaled $38 million, a $4 million, or 10 percent, increase from the fourth quarter of 2017.

Exchange & Third-Party Management

Exchange & Third-Party Management segment financial results were $45 million. Exchange & Third-Party Management segment adjusted EBITDA was $58 million.

Management and exchange revenues totaled $81 million. Management and exchange revenues, net of marketing and sales and related expenses, totaled $48 million.  Rental revenues totaled $14 million. Rental revenues net of expenses were $7 million.

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

Balance Sheet and Liquidity

On December 31, 2018, cash and cash equivalents totaled $231 million. Since the beginning of the year, real estate inventory balances increased $459 million to $852 million, including $475 million related to the ILG acquisition offset partially by a $16 million decrease in Legacy-MVW inventory balances since the beginning of 2018.  The inventory balance at the end of the year included $843 million of finished goods and $9 million of work-in-progress.  The company had $3.8 billion in debt outstanding, net of unamortized debt issuance costs, at the end of the year, an increase of $2.7 billion from year-end 2017. This debt included $2.1 billion of corporate debt and $1.7 billion of debt related to its securitized notes receivable.  As of December 31, 2018, the company's debt to combined adjusted EBITDA ratio was 2.7x, as described further in the Financial Schedules that follow.

As of December 31, 2018, the company had approximately $596 million in available capacity under its revolving corporate credit facility after taking into account outstanding letters of credit, and approximately $51 million of gross vacation ownership notes receivable eligible for securitization under its warehouse credit facility.

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.

Net income attributable to common shareholders

 

$243 million

to

$257 million

Fully diluted EPS

 

$5.21

to

$5.52

Net cash provided by operating activities

 

$286 million

to

$311 million

The company is providing guidance as reflected in the chart below for the full year 2019:

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

 

$7.23

to

$7.83

Adjusted EBITDA

 

$745 million

to

$785 million

Contract sales

 

$1,530 million

to

$1,600 million

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

Fourth Quarter 2018 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 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 13687364. 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 more than 100 resorts and over 660,000 owners and members in a diverse portfolio that includes seven vacation ownership brands. It also includes exchange networks and membership programs comprised of more than 3,200 resorts in over 80 nations and nearly two million members, as well as management of more than 180 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. 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 exchange 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 February 28, 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 4, 2018

 

TABLE OF CONTENTS

 

Consolidated Statements of Income

A-1

Operating Metrics

A-2

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

EBITDA and Adjusted EBITDA
Adjusted EBITDA by Segment

A-3

Consolidated Statements of Income - As Adjusted

A-4

Combined EBITDA and Adjusted EBITDA

A-6

Vacation Ownership Segment Financial Results

A-7

Consolidated Contract Sales to Adjusted Development Margin

A-8

Vacation Ownership Segment Financial Results - As Adjusted

A-9

Exchange & Third-Party Management Segment Financial Results

A-11

Corporate and Other Financial Results

A-12

Cash Flow and Adjusted Free Cash Flow

A-13

2019 Outlook

 

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

Adjusted EBITDA

A-14

2019 Outlook - Adjusted Free Cash Flow

A-15

Non-GAAP Financial Measures

A-16

Consolidated Balance Sheets

A-18

Consolidated Statements of Cash Flows

A-19

 

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

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)

(Unaudited)

 
 

Quarter Ended

 

Fiscal Year Ended

 

December 31,
2018

 

December 31,
2017

 

December 31,
2018

 

December 31,
2017

REVENUES

             

Sale of vacation ownership products

$

358

   

$

208

   

$

990

   

$

757

 

Management and exchange

225

   

70

   

499

   

279

 

Rental

132

   

59

   

371

   

262

 

Financing

64

   

36

   

183

   

135

 

Cost reimbursements

273

   

189

   

925

   

750

 

TOTAL REVENUES

1,052

   

562

   

2,968

   

2,183

 

EXPENSES

             

Cost of vacation ownership products

93

   

53

   

260

   

194

 

Marketing and sales

181

   

101

   

527

   

388

 

Management and exchange

119

   

36

   

259

   

147

 

Rental

90

   

53

   

281

   

221

 

Financing

25

   

13

   

65

   

43

 

General and administrative

84

   

25

   

198

   

106

 

Depreciation and amortization

33

   

5

   

62

   

21

 

Litigation settlement

13

   

2

   

46

   

4

 

Royalty fee

28

   

16

   

78

   

63

 

Cost reimbursements

273

   

189

   

925

   

750

 

TOTAL EXPENSES

939

   

493

   

2,701

   

1,937

 

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

25

   

(1)

   

21

   

6

 

Interest expense

(31)

   

(5)

   

(54)

   

(10)

 

ILG acquisition-related costs

(29)

   

   

(127)

   

(1)

 

Other

(1)

   

(1)

   

(4)

   

(1)

 

INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS

77

   

62

   

103

   

240

 

(Provision) benefit for income taxes

(36)

   

57

   

(51)

   

(5)

 

NET INCOME

41

   

119

   

52

   

235

 

Net loss attributable to noncontrolling interests

3

   

   

3

   

 

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

44

   

$

119

   

$

55

   

$

235

 
               

EARNINGS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

             

Basic

$

0.92

   

$

4.46

   

$

1.64

   

$

8.70

 

Diluted

$

0.91

   

$

4.35

   

$

1.61

   

$

8.49

 
 

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)

 
 

Quarter Ended

     

Fiscal Year Ended

   
 

December
31, 2018

 

December
31, 2017

 

Change
%

 

December
31, 2018

 

December
31, 2017

 

Change
%

Vacation Ownership

                     

Total contract sales

$

370

   

$

207

   

79%

 

$

1,089

   

$

826

   

32%

Consolidated contract sales

$

358

   

$

207

   

73%

 

$

1,073

   

$

826

   

30%

Legacy-MVW North America contract sales

$

200

   

$

186

   

8%

 

$

814

   

$

750

   

9%

Legacy-MVW North America VPG

$

3,496

   

$

3,518

   

(1%)

 

$

3,666

   

$

3,565

   

3%

                       

Exchange & Third-Party Management

                     

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

1,802

   

       

1,802

   

     
 
 

COMBINED OPERATING METRICS

INCLUDING LEGACY-ILG AS IF ACQUIRED AT THE BEGINNING OF FISCAL YEAR 2017

(Contract sales in millions)

 
 

Quarter Ended

     

Fiscal Year Ended

   
 

December
31, 2018

 

December
31, 2017

 

Change
%

 

December
31, 2018

 

December
31, 2017

 

Change
%

Vacation Ownership

                     

Total contract sales

$

370

   

$

348

   

7%

 

$

1,487

   

$

1,387

   

7%

Consolidated contract sales

$

358

   

$

333

   

8%

 

$

1,432

   

$

1,324

   

8%

                       

Exchange & Third-Party Management

                     

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

1,802

   

1,813

   

(1%)

 

1,802

   

1,813

   

(1%)

 

(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

 
 

Quarter Ended

 

Fiscal Year Ended

 

December
31, 2018

 

December
31, 2017

 

December
31, 2018

 

December
31, 2017

Net income attributable to common shareholders

$

44

   

$

119

   

$

55

   

$

235

 

Certain items:

             

Litigation settlement

13

   

2

   

46

   

4

 

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

(25)

   

1

   

(21)

   

(6)

 

ILG acquisition-related costs

29

   

   

127

   

1

 

Purchase price adjustments

19

   

   

24

   

 

Share-based compensation (ILG acquisition-related)

1

   

   

8

   

 

Variable compensation expense related to the impact of the Hurricanes

   

3

   

   

7

 

Other

1

   

1

   

4

   

1

 

Certain items before provision for income taxes

38

   

7

   

188

   

7

 

Provision for income taxes on certain items

(11)

   

(72)

   

(43)

   

(73)

 

Adjusted net income attributable to common shareholders **

$

71

   

$

54

   

$

200

   

$

169

 

Earnings per share - Diluted

$

0.91

   

$

4.35

   

$

1.61

   

$

8.49

 

Adjusted earnings per share - Diluted **

$

1.49

   

$

1.96

   

$

5.88

   

$

6.09

 
 

EBITDA AND ADJUSTED EBITDA

 

Quarter Ended

 

Fiscal Year Ended

 

December
31, 2018

 

December
31, 2017

 

December
31, 2018

 

December
31, 2017

Net income attributable to common shareholders

$

44

   

$

119

   

$

55

   

$

235

 

Interest expense(1)

31

   

5

   

54

   

10

 

Tax provision (benefit)

36

   

(57)

   

51

   

5

 

Depreciation and amortization

33

   

5

   

62

   

21

 

EBITDA **

144

   

72

   

222

   

271

 

Share-based compensation

12

   

4

   

35

   

16

 

Certain items before provision for income taxes(2)

24

   

7

   

162

   

7

 

Adjusted EBITDA **

$

180

   

$

83

   

$

419

   

$

294

 
               

(1) Interest expense excludes consumer financing interest expense.

           

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

 

ADJUSTED EBITDA BY SEGMENT

 

Quarter Ended

 

Fiscal Year Ended

 

December
31, 2018

 

December
31, 2017

 

December
31, 2018

 

December
31, 2017

Vacation Ownership

$

196

   

$

103

   

$

511

   

$

383

 

Exchange & Third-Party Management

58

   

   

77

   

 

Segment adjusted EBITDA

254

   

103

   

588

   

383

 

General and administrative

(76)

   

(20)

   

(171)

   

(89)

 

Consolidated property owners' associations

2

   

   

2

   

 

        Adjusted EBITDA**

$

180

   

$

83

   

$

419

   

$

294

 
 

** 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

CONSOLIDATED STATEMENTS OF INCOME - AS ADJUSTED1

FISCAL YEAR ENDED DECEMBER 31, 2018 AND 2017

(In millions)

 
 

As Reported
Fiscal Year
Ended

 

Less: Legacy-
ILG 122 Days
Ended

 

As Adjusted
Fiscal Year
Ended

 

As Reported
Fiscal Year

Ended

 

December 31, 2018

 

December 31, 2017

REVENUES

             

Sale of vacation ownership products

$

990

   

$

159

   

$

831

   

$

757

 

Management and exchange

499

   

199

   

300

   

279

 

Rental

371

   

87

   

284

   

262

 

Financing

183

   

35

   

148

   

135

 

Cost reimbursements

925

   

88

   

837

   

750

 

TOTAL REVENUES

2,968

   

568

   

2,400

   

2,183

 

EXPENSES

             

Cost of vacation ownership products

260

   

44

   

216

   

194

 

Marketing and sales

527

   

96

   

431

   

388

 

Management and exchange

259

   

106

   

153

   

147

 

Rental

281

   

52

   

229

   

221

 

Financing

65

   

15

   

50

   

43

 

General and administrative

198

   

77

   

121

   

106

 

Depreciation and amortization

62

   

38

   

24

   

21

 

Litigation settlement

46

   

   

46

   

4

 

Royalty fee

78

   

14

   

64

   

63

 

Cost reimbursements

925

   

88

   

837

   

750

 

TOTAL EXPENSES

2,701

   

530

   

2,171

   

1,937

 

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

21

   

(3)

   

24

   

6

 

Interest expense

(54)

   

(2)

   

(52)

   

(10)

 

ILG acquisition-related costs

(127)

   

(32)

   

(95)

   

(1)

 

Other

(4)

   

   

(4)

   

(1)

 

INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS

103

   

1

   

102

   

240

 

Provision for income taxes

(51)

   

(6)

   

(45)

   

(5)

 

NET INCOME (LOSS)

52

   

(5)

   

57

   

235

 

Net loss attributable to noncontrolling interests

3

   

3

   

   

 

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

55

   

(2)

   

57

   

235

 

Interest expense

54

   

2

   

52

   

10

 

Tax provision

51

   

6

   

45

   

5

 

Depreciation and amortization

62

   

38

   

24

   

21

 

EBITDA **

222

   

44

   

178

   

271

 

Share-based compensation

35

   

14

   

21

   

16

 

Certain items before provision for income taxes

162

   

41

   

121

   

7

 

Adjusted EBITDA **

$

419

   

$

99

   

$

320

   

$

294

 
 

(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.

 

 
 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME - AS ADJUSTED1

THREE MONTHS ENDED DECEMBER 31, 2018 AND 2017

(In millions)

 
 

As Reported
Three Months
Ended

 

Less: Legacy-
ILG Three
Months Ended

 

As Adjusted
Three Months
Ended

 

As Reported
Three Months
Ended

 

December 31, 2018

 

December 31, 2017

REVENUES

             

Sale of vacation ownership products

$

358

   

$

124

   

$

234

   

$

208

 

Management and exchange

225

   

149

   

76

   

70

 

Rental

132

   

68

   

64

   

59

 

Financing

64

   

25

   

39

   

36

 

Cost reimbursements

273

   

67

   

206

   

189

 

TOTAL REVENUES

1,052

   

433

   

619

   

562

 

EXPENSES

             

Cost of vacation ownership products

93

   

35

   

58

   

53

 

Marketing and sales

181

   

72

   

109

   

101

 

Management and exchange

119

   

81

   

38

   

36

 

Rental

90

   

37

   

53

   

53

 

Financing

25

   

10

   

15

   

13

 

General and administrative

84

   

54

   

30

   

25

 

Depreciation and amortization

33

   

26

   

7

   

5

 

Litigation settlement

13

   

   

13

   

2

 

Royalty fee

28

   

11

   

17

   

16

 

Cost reimbursements

273

   

67

   

206

   

189

 

TOTAL EXPENSES

939

   

393

   

546

   

493

 

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

25

   

(4)

   

29

   

(1)

 

Interest expense

(31)

   

(1)

   

(30)

   

(5)

 

ILG acquisition-related costs

(29)

   

(11)

   

(18)

   

 

Other

(1)

   

   

(1)

   

(1)

 

INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS

77

   

24

   

53

   

62

 

(Provision) benefit for income taxes

(36)

   

(4)

   

(32)

   

57

 

NET INCOME

41

   

20

   

21

   

119

 

Net loss attributable to noncontrolling interests

3

   

3

   

   

 

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS

44

   

23

   

21

   

119

 

Interest expense

31

   

1

   

30

   

5

 

Tax provision (benefit)

36

   

4

   

32

   

(57)

 

Depreciation and amortization

33

   

26

   

7

   

5

 

EBITDA **

144

   

54

   

90

   

72

 

Share-based compensation

12

   

6

   

6

   

4

 

Certain items before provision for income taxes

24

   

21

   

3

   

7

 

Adjusted EBITDA **

$

180

   

$

81

   

$

99

   

$

83

 
 

(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-6

MARRIOTT VACATIONS WORLDWIDE CORPORATION
COMBINED EBITDA AND ADJUSTED EBITDA
(In millions)

The unaudited combined financial information presented below gives effect to Marriott Vacations Worldwide's acquisition of ILG as if the transaction had occurred on January 1, 2017, and is presented to facilitate comparisons with our results following the acquisition of ILG. Marriott Vacations Worldwide presents the combined financial information for informational purposes only and the combined financial information is not necessarily indicative of what the combined company's results of operations would actually have been had the transaction been completed on the date indicated.  In addition, the combined financial information does not purport to project the future operating results of the combined company.

     
 

Quarter Ended

 

Quarter Ended

       
 

December 31, 2018

 

December 31, 2017

       
 

Legacy
MVW

 

Legacy
ILG
(1)

 

Combined

 

Legacy
MVW

 

Legacy
ILG
(2)

 

Combined

 

Change

 

%
Change

Net income attributable to common shareholders

$

21

   

$

23

   

$

44

   

$

119

   

$

70

   

$

189

         

Interest expense / income

30

   

1

   

31

   

5

   

6

   

11

         

Tax provision (benefit)

32

   

4

   

36

   

(57)

   

(31)

   

(88)

         

Depreciation and amortization

7

   

26

   

33

   

5

   

20

   

25

         

EBITDA **

90

   

54

   

144

   

72

   

65

   

137

         

Share-based compensation

6

   

6

   

12

   

4

   

5

   

9

         

Certain items (3)

3

   

21

   

24

   

7

   

16

   

23

         

Adjusted EBITDA **

$

99

   

$

81

   

$

180

   

$

83

   

$

86

   

$

169

   

$

11

   

7%

                               

(1)  Derived from MVW management's internal records.

 

(2)  Derived from ILG, Inc. management's internal records.
(3) Legacy ILG certain items for periods presented above ending prior to September 1, 2018, consisted primarily of acquisition related and restructuring charges, asset impairments, other non-operating income and expense, net (primarily consisting of net  gains and losses on foreign currency exchange related activity), and the impact of purchase accounting.

 

                               
 

Fiscal Year Ended

 

Fiscal Year Ended

       
 

December 31, 2018

 

December 31, 2017

       
 

Legacy
MVW

 

Legacy
ILG
(1)

 

Combined

 

Legacy
MVW

 

Legacy
ILG
(2)

 

Combined

 

Change

 

%
Change

Net income attributable to common shareholders

$

57

   

$

108

   

$

165

   

$

235

   

$

174

   

$

409

         

Interest expense / income

52

   

20

   

72

   

10

   

25

   

35

         

Tax provision

45

   

47

   

92

   

5

   

26

   

31

         

Depreciation and amortization

24

   

86

   

110

   

21

   

80

   

101

         

EBITDA **

178

   

261

   

439

   

271

   

305

   

576

         

Share-based compensation

21

   

22

   

43

   

16

   

22

   

38

         

Certain items(3)

121

   

64

   

185

   

7

   

25

   

32

         

Adjusted EBITDA **

$

320

   

$

347

   

$

667

   

$

294

   

$

352

   

$

646

   

$

21

   

3%

 

(1)  Derived from ILG, Inc.'s Form 10Q's for Q1 2018 and Q2 2018 and from MVW management's internal records for Q3 2018 and Q4 2018.

(2)  Derived from ILG, Inc.'s Form 8-K dated July 19, 2018.

(3) Legacy ILG certain items for periods presented above ending prior to September 1, 2018, consisted primarily of acquisition related and restructuring charges, asset impairments, other non-operating income and expense, net (primarily consisting of net gains and losses on foreign currency exchange related activity), and the impact of purchase accounting.

 

** 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-7

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

VACATION OWNERSHIP SEGMENT FINANCIAL RESULTS

(In millions)

 
 

Quarter Ended

 

Fiscal Year Ended

 

December 31,
2018

 

December 31,
2017

 

December 31,
2018

 

December 31,
2017

REVENUES

             

Sale of vacation ownership products

$

358

   

$

208

   

$

990

   

$

757

 

Resort management and other services

120

   

70

   

359

   

279

 

Rental

117

   

59

   

352

   

262

 

Financing

63

   

36

   

182

   

135

 

Cost reimbursements

270

   

189

   

920

   

750

 

TOTAL REVENUES

928

   

562

   

2,803

   

2,183

 

EXPENSES

             

Cost of vacation ownership products

93

   

53

   

260

   

194

 

Marketing and sales

171

   

101

   

513

   

388

 

Resort management and other services

67

   

36

   

190

   

147

 

Rental

86

   

53

   

277

   

221

 

Financing

24

   

13

   

64

   

43

 

Depreciation and amortization

18

   

4

   

37

   

17

 

Litigation settlement

13

   

2

   

46

   

4

 

Royalty fee

28

   

16

   

78

   

63

 

Cost reimbursements

270

   

189

   

920

   

750

 

TOTAL EXPENSES

770

   

467

   

2,385

   

1,827

 

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

26

   

(1)

   

28

   

6

 

Other

(1)

   

(1)

   

(4)

   

(1)

 

SEGMENT RESULTS BEFORE NONCONTROLLING INTERESTS

183

   

93

   

442

   

361

 

Net loss attributable to noncontrolling interests

1

   

   

1

   

 

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

184

   

93

   

443

   

361

 

Depreciation and amortization

18

   

4

   

37

   

17

 

Share-based compensation

3

   

1

   

7

   

3

 

Certain items(1)

(9)

   

5

   

24

   

2

 

SEGMENT ADJUSTED EBITDA **

$

196

   

$

103

   

$

511

   

$

383

 
 

** 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:

Three months ended December 31, 2018: $29 million of net business interruption insurance proceeds related to hurricanes, partially offset by $13 million of litigation settlements, $3 million of losses and other expense, $3 million of purchase price adjustments, and $1 million of acquisition related costs.

Year ended December 31, 2018: $46 million of litigation settlements, $4 million of acquisition related costs, $2 million of purchase price accounting adjustments, and $1 million of losses and other expense, partially offset by $29 million of net business interruption insurance proceeds related to hurricanes.

Three months ended December 31, 2017: $2 million of litigation settlements, $1 million of variable compensation expense related to hurricanes, $1 million of losses and other expense, and $1 million of acquisition related costs.

Year ended December 31, 2017: $4 million of litigation settlements, $3 million of variable compensation expense related to hurricanes, $3 million of other losses and expense, and $1 million of acquisition related costs, partially offset by $9 million of business interruption insurance proceeds.

 

A-8

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED CONTRACT SALES TO ADJUSTED DEVELOPMENT MARGIN

(In millions)

 
 

Quarter Ended

 

Fiscal Year Ended

 

December 31,
2018

 

December 31,
2017

 

December 31,
2018

 

December 31,
2017

Consolidated contract sales

$

358

   

$

207

   

$

1,073

   

$

826

 

Less resales contract sales

(7)

   

(6)

   

(30)

   

(23)

 

Consolidated contract sales, net of resales

351

   

201

   

1,043

   

803

 

Plus:

             

Settlement revenue(1)

12

   

4

   

26

   

15

 

Resales revenue(1)

4

   

2

   

12

   

8

 

Revenue recognition adjustments:

             

Reportability

27

   

23

   

11

   

20

 

Sales reserve

(22)

   

(12)

   

(64)

   

(52)

 

Other(2)

(14)

   

(10)

   

(38)

   

(37)

 

Sale of vacation ownership products

358

   

208

   

990

   

757

 

Less:

             

Cost of vacation ownership products

(93)

   

(53)

   

(260)

   

(194)

 

Marketing and sales

(171)

   

(101)

   

(513)

   

(388)

 

Development margin

94

   

54

   

217

   

175

 

Revenue recognition reportability adjustment

(19)

   

(16)

   

(8)

   

(14)

 

Purchase price adjustments

3

   

   

3

   

 

Variable compensation expense related to the impact of the Hurricanes

   

1

   

   

3

 

Adjusted development margin **

$

78

   

$

39

   

$

212

   

$

164

 

Development margin percentage(3)

26.4%

   

25.7%

   

21.9%

   

23.1%

 

Adjusted development margin percentage

23.4%

   

20.6%

   

21.6%

   

22.2%

 
 

** 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)

Previously included in management and exchange revenue prior to the adoption of the Accounting Standards Update 2014-09 – "Revenue from Contracts with Customers (Topic 606)" ("ASU 2014-09"), as amended.

(2)

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.

(3)

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-9

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

VACATION OWNERSHIP SEGMENT FINANCIAL RESULTS - AS ADJUSTED1

FISCAL YEAR ENDED DECEMBER 31, 2018 AND 2017

(In millions)

 
 

As Reported
Fiscal Year
Ended

 

Less: Legacy-
ILG 122 Days
Ended

 

As Adjusted
Fiscal Year
Ended

 

As Reported
Fiscal Year

Ended

 

December 31, 2018

 

December 31, 2017

REVENUES

             

Sale of vacation ownership products

$

990

   

$

159

   

$

831

   

$

757

 

Resort management and other services

359

   

59

   

300

   

279

 

Rental

352

   

68

   

284

   

262

 

Financing

182

   

34

   

148

   

135

 

Cost reimbursements

920

   

83

   

837

   

750

 

TOTAL REVENUES

2,803

   

403

   

2,400

   

2,183

 

EXPENSES

             

Cost of vacation ownership products

260

   

44

   

216

   

194

 

Marketing and sales

513

   

82

   

431

   

388

 

Resort management and other services

190

   

37

   

153

   

147

 

Rental

277

   

48

   

229

   

221

 

Financing

64

   

14

   

50

   

43

 

Depreciation and amortization

37

   

17

   

20

   

17

 

Litigation settlement

46

   

   

46

   

4

 

Royalty fee

78

   

14

   

64

   

63

 

Cost reimbursements

920

   

83

   

837

   

750

 

TOTAL EXPENSES

2,385

   

339

   

2,046

   

1,827

 

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

28

   

(2)

   

30

   

6

 

Other

(4)

   

   

(4)

   

(1)

 

SEGMENT RESULTS BEFORE NONCONTROLLING INTERESTS

442

   

62

   

380

   

361

 

Net loss attributable to noncontrolling interests

1

   

1

   

   

 

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

443

   

63

   

380

   

361

 

Adjustments:

             

Depreciation and amortization

37

   

17

   

20

   

17

 

Share-based compensation

7

   

2

   

5

   

3

 

Certain items

24

   

4

   

20

   

2

 

SEGMENT ADJUSTED EBITDA **

$

511

   

$

86

   

$

425

   

$

383

 
 

(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.

 

 
 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

VACATION OWNERSHIP SEGMENT FINANCIAL RESULTS - AS ADJUSTED1

THREE MONTHS ENDED DECEMBER 31, 2018 AND 2017

(In millions)

 
 

As Reported
Three Months
Ended

 

Less: Legacy-
ILG Three
Months Ended

 

As Adjusted
Three Months
Ended

 

As Reported
Three Months
Ended

 

December 31, 2018

 

December 31, 2017

REVENUES

             

Sale of vacation ownership products

$

358

   

$

124

   

$

234

   

$

208

 

Resort management and other services

120

   

44

   

76

   

70

 

Rental

117

   

53

   

64

   

59

 

Financing

63

   

24

   

39

   

36

 

Cost reimbursements

270

   

64

   

206

   

189

 

TOTAL REVENUES

928

   

309

   

619

   

562

 

EXPENSES

             

Cost of vacation ownership products

93

   

35

   

58

   

53

 

Marketing and sales

171

   

62

   

109

   

101

 

Resort management and other services

67

   

29

   

38

   

36

 

Rental

86

   

33

   

53

   

53

 

Financing

24

   

9

   

15

   

13

 

Depreciation and amortization

18

   

12

   

6

   

4

 

Litigation settlement

13

   

   

13

   

2

 

Royalty fee

28

   

11

   

17

   

16

 

Cost reimbursements

270

   

64

   

206

   

189

 

TOTAL EXPENSES

770

   

255

   

515

   

467

 

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

26

   

(3)

   

29

   

(1)

 

Other

(1)

   

   

(1)

   

(1)

 

SEGMENT RESULTS BEFORE NONCONTROLLING INTERESTS

183

   

51

   

132

   

93

 

Net loss attributable to noncontrolling interests

1

   

1

   

   

 

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

184

   

52

   

132

   

93

 

Adjustments:

             

Depreciation and amortization

18

   

12

   

6

   

4

 

Share-based compensation

3

   

1

   

2

   

1

 

Certain items

(9)

   

6

   

(15)

   

5

 

SEGMENT ADJUSTED EBITDA **

$

196

   

$

71

   

$

125

   

$

103

 
 

(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-11

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

EXCHANGE & THIRD-PARTY MANAGEMENT SEGMENT FINANCIAL RESULTS

(In millions)

 
 

Quarter Ended

 

Fiscal Year Ended

 

December 31,
2018

 

December 31,
2017

 

December 31,
2018

 

December 31,
2017

REVENUES

             

Management and exchange

$

81

   

$

   

$

109

   

$

 

Rental

14

   

   

18

   

 

Financing

1

   

   

1

   

 

Cost reimbursements

25

   

   

33

   

 

TOTAL REVENUES

121

   

   

161

   

 

EXPENSES

             

Marketing and sales

10

   

   

14

   

 

Management and exchange

23

   

   

31

   

 

Rental

7

   

   

9

   

 

Financing

1

   

   

1

   

 

Depreciation and amortization

10

   

   

16

   

 

Cost reimbursements

25

   

   

33

   

 

TOTAL EXPENSES

76

   

   

104

   

 

Gains and other income

1

   

   

1

   

 

SEGMENT RESULTS BEFORE NONCONTROLLING INTERESTS

46

   

   

58

   

 

Net income attributable to noncontrolling interests

(1)

   

   

(1)

   

 

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

45

   

   

57

   

 

Adjustments:

             

Depreciation and amortization

10

   

   

16

   

 

Share-based compensation

1

   

   

1

   

 

Certain items(1)

2

   

   

3

   

 

SEGMENT ADJUSTED EBITDA **

$

58

   

$

   

$

77

   

$

 
 

** 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:

Three months ended December 31, 2018: $3 million of purchase price accounting adjustments, partially offset by $1 million of gains and other income.

Year ended December 31, 2018: $4 million of purchase price accounting adjustments, partially offset by $1 million of gains and other income.

 

A-12

 

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CORPORATE AND OTHER FINANCIAL RESULTS

(In millions)

 
 

Quarter Ended

 

Fiscal Year Ended

 

December 31,
2018

 

December 31,
2017

 

December 31,

2018

 

December 31,
2017

REVENUES

             

Resort management and other services(1)

$

24

   

$

   

$

31

   

$

 

Rental(1)

1

   

   

1

   

 

Cost reimbursements(1)

(22)

   

   

(28)

   

 

TOTAL REVENUES

3

   

   

4

   

 

EXPENSES

             

Resort management and other services(1)

29

   

   

38

   

 

Rental(1)

(3)

   

   

(5)

   

 

General and administrative

84

   

25

   

198

   

106

 

Depreciation

5

   

1

   

9

   

4

 

Cost reimbursements(1)

(22)

   

   

(28)

   

 

TOTAL EXPENSES

93

   

26

   

212