8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) February 25, 2016

Marriott Vacations Worldwide Corporation

(Exact name of registrant as specified in its charter)

 

Delaware   001-35219   45-2598330
(State or other jurisdiction   (Commission   (IRS Employer
of incorporation)   File Number)   Identification No.)

 

6649 Westwood Blvd., Orlando, FL   32821
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code (407) 206-6000

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02 Results of Operations and Financial Condition.

Marriott Vacations Worldwide Corporation (“Marriott Vacations Worldwide”) today issued a press release reporting financial results for the quarter and fiscal year ended January 1, 2016.

A copy of Marriott Vacations Worldwide’s press release is attached as Exhibit 99.1 and is incorporated by reference.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit 99.1    Press release dated February 25, 2016, reporting financial results for the quarter and fiscal year ended January 1, 2016.

 

1


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    MARRIOTT VACATIONS WORLDWIDE CORPORATION
    (Registrant)
Date: February 25, 2016     By:  

/s/ John E. Geller, Jr.

    Name:   John E. Geller, Jr.
    Title:   Executive Vice President and Chief Financial Officer

 

2


EXHIBIT INDEX

 

Exhibit No.

  

Description

99.1    Press release dated February 25, 2016, reporting financial results for the quarter and fiscal year ended January 1, 2016.

 

EX-99.1

Exhibit 99.1

 

 

LOGO

Jeff Hansen

Investor Relations

Marriott Vacations Worldwide Corporation

407.206.6149

Jeff.Hansen@mvwc.com

Ed Kinney

Corporate Communications

Marriott Vacations Worldwide Corporation

407.206.6278

Ed.Kinney@mvwc.com

Marriott Vacations Worldwide Reports Fourth Quarter and

Full Year 2015 Financial Results and 2016 Outlook

ORLANDO, Fla. – February 25, 2016 – Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported fourth quarter and full year 2015 financial results and provided its outlook for the full year 2016.

“2015 was a solid year for Marriott Vacations Worldwide, as we delivered nearly $236 million of adjusted EBITDA and nearly $229 million of adjusted free cash flow, and returned over $225 million of capital to our shareholders,” said Stephen P. Weisz, president and chief executive officer. “We continue to execute against our growth strategy by adding new destinations that provide on-site sales distributions and growing our tour pipeline. With the recent announcements of our new New York City and Miami Beach locations, we are targeting to open six new sales centers during 2016. We are excited about the future for our company and are targeting meaningful adjusted EBITDA growth and adjusted free cash flow in 2016.”

Fourth quarter 2015 highlights:

 

    Adjusted EBITDA totaled $69.0 million, an increase of $20.3 million, or 41.8 percent, year-over-year, with growth coming from all lines of business.

 

    Adjusted fully diluted earnings per share (EPS) was $1.11, up over 60 percent from $0.69 in the fourth quarter of 2014.

 

    North America contract sales, excluding residential sales, were $182.0 million, down 2.0 percent year-over-year. Excluding contract sales from the company’s Latin American sales channels, North America contract sales were $169.8 million, up 1.4 percent over the fourth quarter of 2014.

 

    During the fourth quarter of 2015, the company repurchased nearly 1.6 million shares of its common stock for approximately $95.3 million.

 

    Subsequent to the end of the fourth quarter, the company entered into a capital efficient transaction with a third party to purchase the 176-room The Strand Hotel in New York City in phases over time, beginning in 2018. The company also completed the acquisition of The Edgewater Hotel, a 49-room operating hotel located in Miami. The company intends to sell inventory from these properties as part of its North America points program.

Fourth quarter 2015 net income was $33.1 million, or $1.06 diluted EPS, compared to net income of $0.5 million, or $0.01 diluted EPS, in the fourth quarter of 2014.

Full year 2015 highlights:

 

    Adjusted EBITDA totaled $235.9 million, above the high end of the company’s guidance range of $222 million to $232 million. Results reflected an increase of $36.2 million, or 18.1 percent, year-over-year.


Marriott Vacations Worldwide Reports Fourth Quarter and Full Year 2015 Financial Results and Provides 2016 Outlook / 2

 

    The company generated adjusted free cash flow of $228.9 million, exceeding its $175 million to $200 million guidance range. Results exclude the company’s decision to accelerate the payment of $66 million of its pre-spin Marriott Rewards liability that was due in February of 2016 for points issued prior to the spin-off.

 

    The company repurchased nearly 2.9 million shares of its common stock at an average price of $70.48 per share for a total of $201.4 million. Including dividends paid during the year, the company returned a total of $225.2 million to its shareholders in 2015.

 

    North America adjusted development margin percentage was 22.9 percent. Company adjusted development margin percentage was 20.9 percent, slightly below the company’s guidance that results would be towards the lower end of its 21 percent to 22 percent range.

 

    North America VPG totaled $3,386, in line with 2014; tours increased 2.5 percent year-over-year.

 

    Adjusted fully diluted EPS increased 26.3 percent to $3.70 compared to $2.93 in 2014, higher than the company’s $3.33 to $3.52 guidance range.

Full year 2015 net income totaled $122.8 million, or $3.82 diluted earnings per share, compared to reported net income of $80.8 million in 2014, or $2.33 diluted earnings per share. North America development margin percentage was 22.9 percent in 2015 compared to 23.4 percent in the prior year. Company development margin percentage in 2015 was 20.8 percent compared to 20.9 percent in 2014. Net cash provided by operating activities was $109.0 million for 2015.

Non-GAAP financial measures, such as adjusted EBITDA, adjusted net income, adjusted earnings per share, adjusted development margin and adjusted free cash flow are reconciled and adjustments are shown and described in further detail on pages A-1 through A-20 of the Financial Schedules that follow.

2016 Outlook:

To facilitate comparisons with the company’s competitors and to eliminate the variability among companies in reporting compensation expense, beginning in the first quarter of 2016, adjusted EBITDA will exclude all non-cash share-based compensation expense which was approximately $14 million in 2015 and is expected to be slightly higher in 2016. The company’s outlook for 2016 reflects this adjustment.

 

    Adjusted EBITDA of $261 million to $276 million

 

    Adjusted fully diluted EPS of $4.23 to $4.56

 

    Adjusted Net Income of $126 million to $136 million

 

    Company contract sales growth (excluding residential) of 4 percent to 8 percent

 

    Adjusted free cash flow of $135 million to $155 million

The non-GAAP financial measures set forth above are reconciled on pages A-1 through A-20 of the Financial Schedules to the following full year 2016 expected GAAP results: net income of $124 million to $134 million; fully diluted EPS of $4.16 to $4.50; and net cash provided by operating activities of $129 million to $142 million.


Marriott Vacations Worldwide Reports Fourth Quarter and Full Year 2015 Financial Results and Provides 2016 Outlook / 3

 

Fourth Quarter 2015 Results

Company Results

Total company contract sales, excluding residential sales, were $204.2 million, $7.4 million lower than the fourth quarter of last year. The decrease was driven by $3.7 million of lower contract sales in the company’s North America segment, $2.1 million of lower contract sales in the company’s Europe segment and $1.6 million of lower contract sales in the company’s Asia Pacific segment.

Adjusted development margin was $38.1 million, a $5.2 million decrease from the fourth quarter of 2014. Adjusted development margin percentage was 20.1 percent in the fourth quarter of 2015 compared to 21.4 percent in the fourth quarter of 2014. Development margin was $44.0 million, a $5.4 million increase from the fourth quarter of 2014, reflecting the turnaround of unfavorable revenue reportability from the third quarter of 2015. Development margin percentage was 22.1 percent in the fourth quarter of 2015 compared to 19.8 percent in the fourth quarter of 2014.

Excluding the results of operations for the portion of the Surfers Paradise, Australia hotel that the Company intends to sell, adjusted rental revenues totaled $83.5 million, a $10.2 million increase from the fourth quarter of 2014, reflecting a 4 percent increase in transient rate, a 2 percent increase in transient keys rented, $4.4 million from revenue associated with operating hotels prior to conversion to timeshare, and $0.8 million of higher plus points revenue. Adjusted rental revenues, net of expenses, were $13.6 million, an $11.8 million increase from the fourth quarter of 2014, of which $5.9 million relates to lower costs year-over-year associated with the company’s pre-spin Marriott Rewards liability. Rental revenues net of expenses were $12.9 million, an $11.1 million increase from the fourth quarter of 2014.

Excluding the results of operations for the portion of the Surfers Paradise, Australia hotel that the Company intends to sell, adjusted resort management and other services revenues totaled $95.0 million, a $6.1 million increase from the fourth quarter of 2014. Adjusted resort management and other services revenues, net of expenses, were $34.4 million, a $3.7 million increase over the fourth quarter of 2014. Resort management and other services revenues net of expenses totaled $35.3 million, a $4.6 million increase from the fourth quarter of 2014.

Financing revenues totaled $38.4 million, a $0.5 million decrease from the fourth quarter of 2014. Financing revenues, net of expenses and consumer financing interest expense, were $22.6 million, a $0.3 million increase from the fourth quarter of 2014.

Adjusted EBITDA was $69.0 million in the fourth quarter of 2015, a $20.3 million, or 41.8 percent, increase from $48.7 million in the fourth quarter of 2014.

Segment Results

North America

North America contract sales, excluding residential sales, were $182.0 million in the fourth quarter of 2015, a decrease of $3.7 million, or 2.0 percent, from the prior year period, driven by a stronger U.S. dollar that negatively impacted sales channels to Latin American customers by over $6.1 million year-over-year. Excluding contract sales from the company’s Latin American channels, North America contract sales were $169.8 million, up 1.4 percent.


Marriott Vacations Worldwide Reports Fourth Quarter and Full Year 2015 Financial Results and Provides 2016 Outlook / 4

 

Tours increased 4.5 percent year-over-year. VPG decreased 2.9 percent to $3,162 in the fourth quarter of 2015 from $3,255 in the fourth quarter of 2014, driven by lower closing efficiency offset partially by higher pricing.

Fourth quarter 2015 North America segment financial results were $121.8 million, an increase of $38.5 million from the fourth quarter of 2014. The increase was driven primarily by a $23.8 million non-cash charge in the prior year fourth quarter related to the disposition of partially developed land, an operating golf course, spa and clubhouse and related facilities at the company’s former resort in Abaco, Bahamas and settlement of related litigation, $10.8 million of higher rental revenues net of expenses, $4.9 million of higher development margin, and $3.4 million of higher resort management and other services revenues net of expenses, partially offset by $3.5 million of gains in the prior year fourth quarter related primarily to the disposition of undeveloped and partially developed land, an operating golf course and related assets in Kauai, Hawaii.

Adjusted development margin was $37.4 million, a $4.6 million decrease from the prior year quarter. Adjusted development margin percentage was 22.1 percent in the fourth quarter of 2015 compared to 23.5 percent in the fourth quarter of 2014. Development margin was $44.1 million, a $4.9 million increase from the fourth quarter of 2014. Development margin percentage was 24.5 percent in the fourth quarter of 2015 compared to 22.6 percent in the prior year quarter.

Asia Pacific

Total contract sales in the segment were $10.6 million, a decrease of $1.6 million in the fourth quarter of 2015. Excluding the results of operations for the portion of the Surfers Paradise, Australia hotel that the Company intends to sell, adjusted segment financial results were $2.0 million, a $1.8 million decrease from the fourth quarter of 2014. Results reflected $2.3 million of lower development margin from lower contract sales and higher marketing and sales costs and $0.4 million of lower adjusted resort management and other services revenues net of expenses, partially offset by $0.9 million of higher adjusted rental revenues net of expenses associated with the portion of the Surfers Paradise, Australia hotel that the company plans to convert into vacation ownership interests for future use.

Europe

Fourth quarter 2015 contract sales were $11.6 million, a decrease of $2.1 million from the fourth quarter of 2014. Segment financial results were $4.7 million, a $2.9 million increase from the fourth quarter of 2014 due to higher development margin from favorable revenue reportability year-over-year and higher resort management and other services revenues net of expenses.

Full Year 2015 Results

For the full year, total company contract sales, excluding residential sales, were $699.9 million, up $1.1 million, or 0.2 percent, from $698.8 million in 2014, driven by $11.7 million of higher contract sales in the company’s North America segment, and $0.2 million of higher contract sales in the company’s Asia Pacific segment. These increases were partially offset by $10.8 million of lower contract sales in the company’s Europe segment.


Marriott Vacations Worldwide Reports Fourth Quarter and Full Year 2015 Financial Results and Provides 2016 Outlook / 5

 

North America contract sales, excluding residential sales, were $631.4 million, 1.9 percent higher than 2014. Excluding contract sales in the company’s Latin American channels, North America contract sales were $585.0 million, up $24.9 million, or 4.4 percent, from 2014. Full year 2015 total company adjusted development margin decreased to 20.9 percent in 2015 from 22.0 percent in 2014.

Adjusted EBITDA in 2015 totaled $235.9 million, $36.2 million, or 18.1 percent, higher than 2014. Full year 2015 adjusted free cash flow was $228.9 million. Adjusted net income in 2015 totaled $118.9 million, an increase of $17.4 million over 2014. Full year 2015 adjusted fully diluted EPS was $3.70, $0.77 higher than 2014.

Share Repurchase Program

During the fourth quarter of 2015, the company repurchased 1.6 million shares of its common stock for a total of nearly $95.3 million under its share repurchase program. In total, the company returned $225.2 million to its shareholders during 2015, through the repurchase of nearly 2.9 million shares for $201.4 million and $23.8 million in dividends paid. Subsequent to the end of 2015, through February 24, 2016, the company repurchased 0.9 million shares for over $45 million.

On February 11, 2016, the Board of Directors authorized the company to repurchase up to 2.0 million additional shares of its common stock under its share repurchase program. Combined with the shares not yet purchased under its previous authorization, the company is authorized to purchase approximately 3.1 million additional shares.

Balance Sheet and Liquidity

On January 1, 2016, cash and cash equivalents totaled $177.1 million. Since the beginning of the year, real estate inventory balances declined $104.3 million to $663.9 million, including $332.9 million of finished goods and $331.0 million of land and infrastructure. The company had $688.1 million in gross debt outstanding at the end of 2015, a decrease of $23.2 million from year-end 2014, consisting primarily of $684.6 million in gross non-recourse securitized notes. In addition, $40.0 million of gross mandatorily redeemable preferred stock of a subsidiary of the company was outstanding at the end of 2015.

As of January 1, 2016, the company had approximately $196.7 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit and approximately $110 million of gross vacation ownership notes receivable eligible for securitization in its warehouse credit facility.

Fourth Quarter 2015 Earnings Conference Call

The company will hold a conference call at 10:00 a.m. EST today to discuss these results and the guidance for full year 2016. 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 13628123. The webcast will also be available on the company’s website.

###


Marriott Vacations Worldwide Reports Fourth Quarter and Full Year 2015 Financial Results and Provides 2016 Outlook / 6

 

About Marriott Vacations Worldwide Corporation

Marriott Vacations Worldwide Corporation is a leading global pure-play vacation ownership company, offering a diverse portfolio of quality products, programs and management expertise with 63 resorts. Its brands include Marriott Vacation Club, The Ritz-Carlton Destination Club and Grand Residences by Marriott. Since entering the industry in 1984 as part of Marriott International, Inc., the company earned its position as a leader and innovator in vacation ownership products. The company preserves high standards of excellence in serving its customers, investors and associates while maintaining a long-term relationship with Marriott International. For more information, please visit www.marriottvacationsworldwide.com.

Note on forward-looking statements: This press release and accompanying schedules contain “forward-looking statements” within the meaning of federal securities laws, including statements about future operating results, estimates, and assumptions, and similar statements concerning anticipated future events and expectations that are not historical facts. The company cautions you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including volatility in the economy and the credit markets, supply and demand changes for vacation ownership and residential products, competitive conditions, the availability of capital to finance growth, and other matters referred to under the heading “Risk Factors” contained in the company’s most recent Annual Report on Form 10-K filed with the U.S Securities and Exchange Commission (the “SEC”) and in subsequent SEC filings, any of which could cause actual results to differ materially from those expressed in or implied in this press release. These statements are made as of February 25, 2016 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, 2015

TABLE OF CONTENTS

 

Consolidated Statements of Income - 16 Weeks Ended January 1, 2016 and January 2, 2015

     A-1   

Consolidated Statements of Income - 52 Weeks Ended January 1, 2016 and January 2, 2015

     A-2   

North America Segment Financial Results - 16 Weeks Ended January 1, 2016 and January 2, 2015

     A-3   

North America Segment Financial Results - 52 Weeks Ended January 1, 2016 and January 2, 2015

     A-4   

Asia Pacific Segment Financial Results - 16 Weeks Ended January 1, 2016 and January 2, 2015

     A-5   

Asia Pacific Segment Financial Results - 52 Weeks Ended January 1, 2016 and January 2, 2015

     A-6   

Europe Segment Financial Results - 16 Weeks Ended January 1, 2016 and January 2, 2015

     A-7   

Europe Segment Financial Results - 52 Weeks Ended January 1, 2016 and January 2, 2015

     A-8   

Corporate and Other Financial Results - 16 Weeks and 52 Weeks Ended January 1, 2016 and January 2, 2015

     A-9   

Consolidated Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin
(Adjusted Sale of Vacation Ownership Products Net of Expenses) - 16 Weeks Ended January 1, 2016 and January 2, 2015

     A-10   

Consolidated Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin
(Adjusted Sale of Vacation Ownership Products Net of Expenses) - 52 Weeks Ended January 1, 2016 and January 2, 2015

     A-11   

North America Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin
(Adjusted Sale of Vacation Ownership Products Net of Expenses) - 16 Weeks Ended January 1, 2016 and January 2, 2015

     A-12   

North America Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin
(Adjusted Sale of Vacation Ownership Products Net of Expenses) - 52 Weeks Ended January 1, 2016 and January 2, 2015

     A-13   

EBITDA and Adjusted EBITDA - 16 Weeks and 52 Weeks Ended January 1, 2016 and January 2, 2015

     A-14   

2015 Adjusted Free Cash Flow

     A-15   

2016 Outlook - Adjusted Net Income, Adjusted Earnings Per Share - Diluted and Adjusted EBITDA

     A-16   

2016 Outlook - Adjusted Free Cash Flow and Normalized Adjusted Free Cash Flow

     A-17   

Non-GAAP Financial Measures

     A-18   

Consolidated Balance Sheets

     A-21   

Consolidated Statements of Cash Flows

     A-22   


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

16 Weeks Ended January 1, 2016 and January 2, 2015

(In thousands, except per share amounts)

 

     As Reported           As Adjusted     As Reported           As Adjusted  
     16 Weeks Ended     Certain     16 Weeks Ended     16 Weeks Ended     Certain     16 Weeks Ended  
     January 1, 2016     Items     January 1, 2016 **     January 2, 2015     Items     January 2, 2015**  

Revenues

            

Sale of vacation ownership products

   $ 199,251      $ —        $ 199,251      $ 194,692      $ —        $ 194,692   

Resort management and other services

     99,921        (4,889     95,032        88,935        —          88,935   

Financing

     38,393        —          38,393        38,907        —          38,907   

Rental

     88,117        (4,604     83,513        73,335        —          73,335   

Cost reimbursements

     119,938        —          119,938        115,026        —          115,026   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     545,620        (9,493     536,127        510,895        —          510,895   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

            

Cost of vacation ownership products

     53,442        —          53,442        57,519        —          57,519   

Marketing and sales

     101,839        —          101,839        98,583        (65     98,518   

Resort management and other services

     64,597        (3,990     60,607        58,197        —          58,197   

Financing

     7,716        —          7,716        8,172        —          8,172   

Rental

     75,169        (5,249     69,920        71,534        —          71,534   

General and administrative

     34,080        —          34,080        31,649        —          31,649   

Organizational and separation related

     442        (442     —          1,166        (1,166     —     

Litigation settlement

     4        (4     —          23,844        (23,844     —     

Consumer financing interest

     8,100        —          8,100        8,497        —          8,497   

Royalty fee

     18,551        —          18,551        18,550        —          18,550   

Impairment

     324        (324     —          521        (521     —     

Cost reimbursements

     119,938        —          119,938        115,026        —          115,026   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     484,202        (10,009     474,193        493,258        (25,596     467,662   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains and other income

     65        (65     —          3,322        (3,322     —     

Interest expense

     (3,988     —          (3,988     (4,054     —          (4,054

Equity in earnings

     39        —          39        (82     —          (82

Impairment charges on equity investment

     —          —          —          540        (540     —     

Other

     (1,987     1,987        —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     55,547        2,438        57,985        17,363        21,734        39,097   

Provision for income taxes

     (22,398     (922     (23,320     (16,866     748        (16,118
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 33,149      $ 1,516      $ 34,665      $ 497      $ 22,482      $ 22,979   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share - Basic

   $ 1.08        $ 1.13      $ 0.02        $ 0.71   
  

 

 

     

 

 

   

 

 

     

 

 

 

Earnings per share - Diluted

   $ 1.06        $ 1.11      $ 0.01        $ 0.69   
  

 

 

     

 

 

   

 

 

     

 

 

 

Basic Shares

     30,623          30,623        32,507          32,507   

Diluted Shares

     31,297          31,297        33,427          33,427   
     As Reported                 As Reported              
     16 Weeks Ended                 16 Weeks Ended              
     January 1, 2016                 January 2, 2015              

Contract Sales

            

Vacation ownership

   $ 204,239          $ 211,683       

Residential products

     —              3,700       
  

 

 

       

 

 

     

Total contract sales

   $ 204,239          $ 215,383       
  

 

 

       

 

 

     

 

** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

 

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

 

 

A-1


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

52 Weeks Ended January 1, 2016 and January 2, 2015

(In thousands, except per share amounts)

 

     As Reported           As Adjusted     As Reported           As Adjusted  
     52 Weeks Ended     Certain     52 Weeks Ended     52 Weeks Ended     Certain     52 Weeks Ended  
     January 1, 2016     Items     January 1, 2016 **     January 2, 2015     Items     January 2, 2015**  

Revenues

            

Sale of vacation ownership products

   $ 675,329      $ (28,420   $ 646,909      $ 647,488      $ —        $ 647,488   

Resort management and other services

     312,229        (4,889     307,340        298,283        —          298,283   

Financing

     124,033        —          124,033        128,909        —          128,909   

Rental

     312,997        (4,604     308,393        264,307        —          264,307   

Cost reimbursements

     405,875        —          405,875        396,795        —          396,795   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     1,830,463        (37,913     1,792,550        1,735,782        —          1,735,782   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

            

Cost of vacation ownership products

     204,299        (21,583     182,716        196,444        —          196,444   

Marketing and sales

     330,599        (922     329,677        315,410        (352     315,058   

Resort management and other services

     199,895        (3,990     195,905        199,258        200        199,458   

Financing

     24,194        —          24,194        24,148        —          24,148   

Rental

     259,729        (5,249     254,480        237,920        —          237,920   

General and administrative

     102,963        (1,767     101,196        98,562        —          98,562   

Organizational and separation related

     1,174        (1,174     —          3,438        (3,438     —     

Litigation settlement

     (232     232        —          19,494        (19,494     —     

Consumer financing interest

     24,658        —          24,658        26,464        —          26,464   

Royalty fee

     58,982        —          58,982        59,970        —          59,970   

Impairment

     324        (324     —          1,381        (1,381     —     

Cost reimbursements

     405,875        —          405,875        396,795        —          396,795   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     1,612,460        (34,777     1,577,683        1,579,284        (24,465     1,554,819   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains and other income

     9,557        (9,557     —          5,171        (5,171     —     

Interest expense

     (12,810     —          (12,810     (11,692     —          (11,692

Equity in earnings

     187        —          187        74        —          74   

Impairment charges on equity investment

     —          —          —          540        (540     —     

Other

     (8,440     8,440        —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     206,497        (4,253     202,244        150,591        18,754        169,345   

Provision for income taxes

     (83,698     366        (83,332     (69,835     1,986        (67,849
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 122,799      $ (3,887   $ 118,912      $ 80,756      $ 20,740      $ 101,496   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share - Basic

   $ 3.90        $ 3.78      $ 2.40        $ 3.01   
  

 

 

     

 

 

   

 

 

     

 

 

 

Earnings per share - Diluted

   $ 3.82        $ 3.70      $ 2.33        $ 2.93   
  

 

 

     

 

 

   

 

 

     

 

 

 

Basic Shares

     31,487          31,487        33,665          33,665   

Diluted Shares

     32,168          32,168        34,636          34,636   
     As Reported                 As Reported              
     52 Weeks Ended                 52 Weeks Ended              
     January 1, 2016                 January 2, 2015              

Contract Sales

            

Vacation ownership

   $ 699,884          $ 698,765       

Residential products

     28,420            14,514       
  

 

 

       

 

 

     

Total contract sales

   $ 728,304          $ 713,279       
  

 

 

       

 

 

     

 

** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

 

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

 

A-2


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA SEGMENT

16 Weeks Ended January 1, 2016 and January 2, 2015

(In thousands)

 

    As Reported           As Adjusted     As Reported           As Adjusted  
    16 Weeks Ended     Certain     16 Weeks Ended     16 Weeks Ended     Certain     16 Weeks Ended  
    January 1, 2016     Items     January 1, 2016**     January 2, 2015     Items     January 2, 2015**  

Revenues

           

Sale of vacation ownership products

  $ 179,990      $ —        $ 179,990      $ 173,670      $ —        $ 173,670   

Resort management and other services

    83,390        —          83,390        78,131        —          78,131   

Financing

    35,929        —          35,929        36,224        —          36,224   

Rental

    74,742        —          74,742        65,725        —          65,725   

Cost reimbursements

    109,015        —          109,015        102,654        —          102,654   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    483,066        —          483,066        456,404        —          456,404   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    47,129        —          47,129        49,680        —          49,680   

Marketing and sales

    88,754        —          88,754        84,801        —          84,801   

Resort management and other services

    50,989        —          50,989        49,127        —          49,127   

Rental

    61,562        —          61,562        63,387        —          63,387   

Organizational and separation related

    219        (219     —          369        (369     —     

Litigation settlement

    —          —          —          23,844        (23,844     —     

Royalty fee

    2,797        —          2,797        2,799        —          2,799   

Impairment

    324        (324     —          521        (521     —     

Cost reimbursements

    109,015        —          109,015        102,654        —          102,654   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    360,789        (543     360,246        377,182        (24,734     352,448   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains and other income

    66        (66     —          3,453        (3,453     —     

Equity in earnings

    44        —          44        35        —          35   

Impairment charges on equity investment

    —          —          —          540        (540     —     

Other

    (622     622        —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ 121,765      $ 1,099      $ 122,864      $ 83,250      $ 20,741      $ 103,991   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported                 As Reported              
    16 Weeks Ended                 16 Weeks Ended              
    January 1, 2016                 January 2, 2015              

Contract Sales

           

Vacation ownership

  $ 182,018          $ 185,760       

Residential products

    —              3,700       
 

 

 

       

 

 

     

Total contract sales

  $ 182,018          $ 189,460       
 

 

 

       

 

 

     

 

** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

 

A-3


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA SEGMENT

52 Weeks Ended January 1, 2016 and January 2, 2015

(In thousands)

 

     As Reported           As Adjusted      As Reported            As Adjusted  
     52 Weeks Ended     Certain     52 Weeks Ended      52 Weeks Ended      Certain     52 Weeks Ended  
     January 1, 2016     Items     January 1, 2016**      January 2, 2015      Items     January 2, 2015**  

Revenues

              

Sale of vacation ownership products

   $ 586,774      $ —        $ 586,774       $ 577,781       $ —        $ 577,781   

Resort management and other services

     272,596        —          272,596         262,727         —          262,727   

Financing

     115,738        —          115,738         120,111         —          120,111   

Rental

     277,348        —          277,348         234,668         —          234,668   

Cost reimbursements

     369,467        —          369,467         354,270         —          354,270   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total revenues

     1,621,923        —          1,621,923         1,549,557         —          1,549,557   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Expenses

              

Cost of vacation ownership products

     164,200        —          164,200         170,012         —          170,012   

Marketing and sales

     288,260        —          288,260         272,302         —          272,302   

Resort management and other services

     166,233        —          166,233         168,764         —          168,764   

Rental

     225,043        —          225,043         209,371         —          209,371   

Organizational and separation related

     532        (532     —           894         (894     —     

Litigation settlement

     (370     370        —           19,244         (19,244     —     

Royalty fee

     7,971        —          7,971         8,825         —          8,825   

Impairment

     324        (324     —           1,381         (1,381     —     

Cost reimbursements

     369,467        —          369,467         354,270         —          354,270   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total expenses

     1,221,660        (486     1,221,174         1,205,063         (21,519     1,183,544   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Gains and other income

     9,600        (9,600     —           5,350         (5,350     —     

Equity in losses

     200        —          200         205         —          205   

Impairment charges on equity investment

     —          —          —           540         (540     —     

Other

     (622     622        —           —           —          —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Segment financial results

   $ 409,441      $ (8,492   $ 400,949       $ 350,589       $ 15,629      $ 366,218   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
     As Reported                  As Reported               
     52 Weeks Ended                  52 Weeks Ended               
     January 1, 2016                  January 2, 2015               

Contract Sales

              

Vacation ownership

   $ 631,403           $ 619,688        

Residential products

     —               14,514        
  

 

 

        

 

 

      

Total contract sales

   $ 631,403           $ 634,202        
  

 

 

        

 

 

      

 

** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

 

A-4


MARRIOTT VACATIONS WORLDWIDE CORPORATION

ASIA PACIFIC SEGMENT

16 Weeks Ended January 1, 2016 and January 2, 2015

(In thousands)

 

    As Reported           As Adjusted     As Reported           As Adjusted  
    16 Weeks Ended     Certain     16 Weeks Ended     16 Weeks Ended     Certain     16 Weeks Ended  
    January 1, 2016     Items     January 1, 2016**     January 2, 2015     Items     January 2, 2015**  

Revenues

           

Sale of vacation ownership products

  $ 9,436      $ —        $ 9,436      $ 12,782      $ —        $ 12,782   

Resort management and other services

    7,951        (4,889     3,062        1,714        —          1,714   

Financing

    1,289        —          1,289        1,356        —          1,356   

Rental

    8,546        (4,604     3,942        2,513        —          2,513   

Cost reimbursements

    953        —          953        954        —          954   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    28,175        (9,493     18,682        19,319        —          19,319   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    1,646        —          1,646        2,859        —          2,859   

Marketing and sales

    6,354        —          6,354        6,160        29        6,189   

Resort management and other services

    6,925        (3,990     2,935        1,138        —          1,138   

Rental

    9,836        (5,249     4,587        4,094        —          4,094   

Royalty fee

    238        —          238        203        —          203   

Cost reimbursements

    953        —          953        954        —          954   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    25,952        (9,239     16,713        15,408        29        15,437   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Losses and other expense

    —          —          —          (1     1        —     

Equity in losses

    (5     —          (5     (117     —          (117

Other

    (287     287        —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ 1,931      $ 33      $ 1,964      $ 3,793      $ (28   $ 3,765   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported                 As Reported              
    16 Weeks Ended                 16 Weeks Ended              
    January 1, 2016                 January 2, 2015              

Contract Sales

           

Vacation ownership

  $ 10,577          $ 12,162       

Residential products

    —              —         
 

 

 

       

 

 

     

Total contract sales

  $ 10,577          $ 12,162       
 

 

 

       

 

 

     

 

** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

 

A-5


MARRIOTT VACATIONS WORLDWIDE CORPORATION

ASIA PACIFIC SEGMENT

52 Weeks Ended January 1, 2016 and January 2, 2015

(In thousands)

 

    As Reported           As Adjusted     As Reported           As Adjusted  
    52 Weeks Ended     Certain     52 Weeks Ended     52 Weeks Ended     Certain     52 Weeks Ended  
    January 1, 2016     Items     January 1, 2016**     January 2, 2015     Items     January 2, 2015**  

Revenues

           

Sale of vacation ownership products

  $ 59,592      $ (28,420   $ 31,172      $ 34,645      $ —        $ 34,645   

Resort management and other services

    11,990        (4,889     7,101        4,437        —          4,437   

Financing

    4,346        —          4,346        4,498        —          4,498   

Rental

    14,970        (4,604     10,366        7,642        —          7,642   

Cost reimbursements

    3,060        —          3,060        3,320        —          3,320   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    93,958        (37,913     56,045        54,542        —          54,542   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    26,877        (21,583     5,294        8,318        —          8,318   

Marketing and sales

    20,365        (922     19,443        18,707        29        18,736   

Resort management and other services

    10,694        (3,990     6,704        3,175        —          3,175   

Rental

    19,255        (5,249     14,006        12,388        —          12,388   

Royalty fee

    684        —          684        686        —          686   

Cost reimbursements

    3,060        —          3,060        3,320        —          3,320   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    80,935        (31,744     49,191        46,594        29        46,623   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Losses and other expense

    (29     29        —          (9     9        —     

Equity in losses

    (13     —          (13     (131     —          (131

Other

    (5,718     5,718        —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ 7,263      $ (422   $ 6,841      $ 7,808      $ (20   $ 7,788   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported                 As Reported              
    52 Weeks Ended                 52 Weeks Ended              
    January 1, 2016                 January 2, 2015              

Vacation ownership

  $ 34,105          $ 33,906       

Residential products

    28,420            —         
 

 

 

       

 

 

     

Total contract sales

  $ 62,525          $ 33,906       
 

 

 

       

 

 

     

 

** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

 

NOTE: Asia Pacific segment revenues and expenses for the twelve weeks ended March 28, 2014 have been restated to reclassify a portion of Cost reimbursements from the Asia Pacific segment to the Europe segment to correct certain immaterial prior period errors.

 

A-6


MARRIOTT VACATIONS WORLDWIDE CORPORATION

EUROPE SEGMENT

16 Weeks Ended January 1, 2016 and January 2, 2015

(In thousands)

 

    As Reported           As Adjusted     As Reported           As Adjusted  
    16 Weeks Ended     Certain     16 Weeks Ended     16 Weeks Ended     Certain     16 Weeks Ended  
    January 1, 2016     Items     January 1, 2016**     January 2, 2015     Items     January 2, 2015**  

Revenues

           

Sale of vacation ownership products

  $ 9,825      $ —        $ 9,825      $ 8,240      $ —        $ 8,240   

Resort management and other services

    8,580        —          8,580        9,090        —          9,090   

Financing

    1,175        —          1,175        1,327        —          1,327   

Rental

    4,829        —          4,829        5,097        —          5,097   

Cost reimbursements

    9,970        —          9,970        11,418        —          11,418   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    34,379        —          34,379        35,172        —          35,172   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    2,354        —          2,354        1,988        —          1,988   

Marketing and sales

    6,731        —          6,731        7,622        (94     7,528   

Resort management and other services

    6,683        —          6,683        7,932        —          7,932   

Rental

    3,771        —          3,771        4,053        —          4,053   

Royalty fee

    174        —          174        205        —          205   

Cost reimbursements

    9,970        —          9,970        11,418        —          11,418   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    29,683        —          29,683        33,218        (94     33,124   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Losses and other expense

    (1     1        —          (137     137        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ 4,695      $ 1      $ 4,696      $ 1,817      $ 231      $ 2,048   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported                 As Reported              
    16 Weeks Ended                 16 Weeks Ended              
    January 1, 2016                 January 2, 2015              

Contract Sales

  $ 11,644          $ 13,761       
 

 

 

       

 

 

     

 

** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

 

A-7


MARRIOTT VACATIONS WORLDWIDE CORPORATION

EUROPE SEGMENT

52 Weeks Ended January 1, 2016 and January 2, 2015

(In thousands)

 

    As Reported           As Adjusted     As Reported           As Adjusted  
    52 Weeks Ended     Certain     52 Weeks Ended     52 Weeks Ended     Certain     52 Weeks Ended  
    January 1, 2016     Items     January 1, 2016**     January 2, 2015     Items     January 2, 2015**  

Revenues

           

Sale of vacation ownership products

  $ 28,963      $ —        $ 28,963      $ 35,062      $ —        $ 35,062   

Resort management and other services

    27,643        —          27,643        31,119        —          31,119   

Financing

    3,949        —          3,949        4,300        —          4,300   

Rental

    20,679        —          20,679        21,997        —          21,997   

Cost reimbursements

    33,348        —          33,348        39,205        —          39,205   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    114,582        —          114,582        131,683        —          131,683   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    6,509        —          6,509        8,711        —          8,711   

Marketing and sales

    21,974        —          21,974        24,401        (381     24,020   

Resort management and other services

    22,968        —          22,968        27,319        200        27,519   

Rental

    15,431        —          15,431        16,161        —          16,161   

Royalty fee

    464        —          464        631        —          631   

Cost reimbursements

    33,348        —          33,348        39,205        —          39,205   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    100,694        —          100,694        116,428        (181     116,247   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Losses and other expense

    (14     14        —          (176     176        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ 13,874      $ 14      $ 13,888      $ 15,079      $ 357      $ 15,436   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported                 As Reported              
    52 Weeks Ended                 52 Weeks Ended              
    January 1, 2016                 January 2, 2015              

Contract Sales

  $ 34,376          $ 45,171       
 

 

 

       

 

 

     

 

** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

 

NOTE: Europe segment revenues and expenses for the twelve weeks ended March 28, 2014 have been restated to reclassify a portion of Cost reimbursements from the Asia Pacific segment to the Europe segment to correct certain immaterial prior period errors.

 

A-8


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CORPORATE AND OTHER

16 Weeks and 52 Weeks Ended January 1, 2016 and January 2, 2015

(In thousands)

 

     As Reported           As Adjusted     As Reported           As Adjusted  
     16 Weeks Ended     Certain     16 Weeks Ended     16 Weeks Ended     Certain     16 Weeks Ended  
     January 1, 2016     Items     January 1, 2016**     January 2, 2015     Items     January 2, 2015**  

Expenses

            

Cost of vacation ownership products

   $ 2,313      $ —        $ 2,313      $ 2,992      $ —        $ 2,992   

Financing

     7,716        —          7,716        8,172        —          8,172   

General and administrative

     34,080        —          34,080        31,649        —          31,649   

Organizational and separation related

     223        (223     —          797        (797     —     

Litigation settlement

     4        (4     —          —          —          —     

Consumer financing interest

     8,100          8,100        8,497          8,497   

Royalty fee

     15,342        —          15,342        15,343        —          15,343   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

   $ 67,778      $ (227   $ 67,551      $ 67,450      $ (797   $ 66,653   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains and other income

     —          —          —          7        (7     —     

Interest expense

     (3,988     —          (3,988     (4,054     —          (4,054

Other

     (1,078     1,078        —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial results

   $ (72,844   $ 1,305      $ (71,539   $ (71,497   $ 790      $ (70,707
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     As Reported           As Adjusted     As Reported           As Adjusted  
     52 Weeks Ended     Certain     52 Weeks Ended     52 Weeks Ended     Certain     52 Weeks Ended  
     January 1, 2016     Items     January 1, 2016**     January 2, 2015     Items     January 2, 2015**  

Expenses

            

Cost of vacation ownership products

   $ 6,713      $ —        $ 6,713      $ 9,403      $ —        $ 9,403   

Financing

     24,194        —          24,194        24,148        —          24,148   

General and administrative

     102,963        (1,767     101,196        98,562        —          98,562   

Organizational and separation related

     642        (642     —          2,544        (2,544     —     

Litigation settlement

     138        (138     —          250        (250     —     

Consumer financing interest

     24,658        —          24,658        26,464        —          26,464   

Royalty fee

     49,863        —          49,863        49,828        —          49,828   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

   $ 209,171      $ (2,547   $ 206,624      $ 211,199      $ (2,794   $ 208,405   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains and other income

     —          —          —          6        (6     —     

Interest expense

     (12,810     —          (12,810     (11,692     —          (11,692

Other

     (2,100     2,100        —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial results

   $ (224,081   $ 4,647      $ (219,434   $ (222,885   $ 2,788      $ (220,097
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

 

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

 

A-9


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In thousands)

 

     16 Weeks Ended      16 Weeks Ended  
     January 1, 2016      January 2, 2015  

Contract sales

     

Vacation ownership

   $ 204,239       $ 211,683   

Residential products

     —           3,700   
  

 

 

    

 

 

 

Total contract sales

     204,239         215,383   
  

 

 

    

 

 

 

Revenue recognition adjustments:

     

Reportability 1

     9,472         (7,274

Sales Reserve2

     (9,853      (8,265

Other3

     (4,607      (5,152
  

 

 

    

 

 

 

Sale of vacation ownership products

   $ 199,251       $ 194,692   
  

 

 

    

 

 

 

 

1  Adjustment for lack of required downpayment or contract sales in rescission period.
2 Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve.
3 Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue.

MARRIOTT VACATIONS WORLDWIDE CORPORATION

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

(In thousands)

 

                Revenue                       Revenue        
    As Reported           Recognition     As Adjusted     As Reported           Recognition     As Adjusted  
    16 Weeks Ended     Certain     Reportability     16 Weeks Ended     16 Weeks Ended     Certain     Reportability     16 Weeks Ended  
    January 1, 2016     Items     Adjustment     January 1, 2016**     January 2, 2015     Items     Adjustment     January 2, 2015**  

Sale of vacation ownership products

  $ 199,251      $ —        $ (9,472   $ 189,779      $ 194,692      $ —        $ 7,274      $ 201,966   

Less:

               

Cost of vacation ownership products

    53,442        —          (2,612     50,830        57,519        —          1,972        59,491   

Marketing and sales

    101,839        —          (962     100,877        98,583        (65     649        99,167   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin

  $ 43,970      $ —        $ (5,898   $ 38,072      $ 38,590      $ 65      $ 4,653      $ 43,308   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin percentage1

    22.1         20.1     19.8         21.4

 

** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1  Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars.

 

A-10


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In thousands)

 

     52 Weeks Ended      52 Weeks Ended  
     January 1, 2016      January 2, 2015  

Contract sales

     

Vacation ownership

   $ 699,884       $ 698,765   

Residential products

     28,420         14,514   
  

 

 

    

 

 

 

Total contract sales

     728,304         713,279   
  

 

 

    

 

 

 

Revenue recognition adjustments:

     

Reportability 1

     (1,652      (15,502

Sales Reserve2

     (32,999      (31,273

Other3

     (18,324      (19,016
  

 

 

    

 

 

 

Sale of vacation ownership products

   $ 675,329       $ 647,488   
  

 

 

    

 

 

 

 

1  Adjustment for lack of required downpayment or contract sales in rescission period.
2 Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve.
3 Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue.

MARRIOTT VACATIONS WORLDWIDE CORPORATION

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

(In thousands)

 

                Revenue                       Revenue        
    As Reported           Recognition     As Adjusted     As Reported           Recognition     As Adjusted  
    52 Weeks Ended     Certain     Reportability     52 Weeks Ended     52 Weeks Ended     Certain     Reportability     52 Weeks Ended  
    January 1, 2016     Items     Adjustment     January 1, 2016**     January 2, 2015     Items     Adjustment     January 2, 2015**  

Sale of vacation ownership products

  $ 675,329      $ (28,420   $ 1,652      $ 648,561      $ 647,488      $ —        $ 15,502      $ 662,990   

Less:

               

Cost of vacation ownership products

    204,299        (21,583     623        183,339        196,444        —          4,517        200,961   

Marketing and sales

    330,599        (922     (28     329,649        315,410        (352     1,287        316,345   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin

  $ 140,431      $ (5,915   $ 1,057      $ 135,573      $ 135,634      $ 352      $ 9,698      $ 145,684   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin percentage1

    20.8         20.9     20.9         22.0

 

** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1  Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars.

 

A-11


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In thousands)

 

     16 Weeks Ended      16 Weeks Ended  
     January 1, 2016      January 2, 2015  

Contract sales

     

Vacation ownership

   $ 182,018       $ 185,760   

Residential products

     —           3,700   
  

 

 

    

 

 

 

Total contract sales

     182,018         189,460   
  

 

 

    

 

 

 

Revenue recognition adjustments:

     

Reportability 1

     10,510         (4,615

Sales Reserve 2

     (8,191      (6,135

Other 3

     (4,347      (5,040
  

 

 

    

 

 

 

Sale of vacation ownership products

   $ 179,990       $ 173,670   
  

 

 

    

 

 

 

 

1  Adjustment for lack of required downpayment or contract sales in rescission period.
2 Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve.
3 Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue.

MARRIOTT VACATIONS WORLDWIDE CORPORATION

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

(In thousands)

 

                Revenue                       Revenue        
    As Reported           Recognition     As Adjusted     As Reported           Recognition     As Adjusted  
    16 Weeks Ended     Certain     Reportability     16 Weeks Ended     16 Weeks Ended     Certain     Reportability     16 Weeks Ended  
    January 1, 2016     Items     Adjustment     January 1, 2016**     January 2, 2015     Items     Adjustment     January 2, 2015**  

Sale of vacation ownership products

  $ 179,990      $ —        $ (10,510   $ 169,480      $ 173,670      $ —        $ 4,615      $ 178,285   

Less:

               

Cost of vacation ownership products

    47,129        —          (2,828     44,301        49,680        —          1,395        51,075   

Marketing and sales

    88,754        —          (993     87,761        84,801        —          430        85,231   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin

  $ 44,107      $ —        $ (6,689   $ 37,418      $ 39,189      $ —        $ 2,790      $ 41,979   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin percentage1

    24.5         22.1     22.6         23.5

 

** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1  Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars.

 

A-12


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In thousands)

 

     52 Weeks Ended      52 Weeks Ended  
     January 1, 2016      January 2, 2015  

Contract sales

     

Vacation ownership

   $ 631,403       $ 619,688   

Residential products

     —           14,514   
  

 

 

    

 

 

 

Total contract sales

     631,403         634,202   
  

 

 

    

 

 

 

Revenue recognition adjustments:

     

Reportability1

     (841      (12,911

Sales Reserve2

     (26,077      (24,753

Other3

     (17,711      (18,757
  

 

 

    

 

 

 

Sale of vacation ownership products

   $ 586,774       $ 577,781   
  

 

 

    

 

 

 

 

1  Adjustment for lack of required downpayment or contract sales in rescission period.
2 Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve.
3 Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue.

MARRIOTT VACATIONS WORLDWIDE CORPORATION

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

(In thousands)

 

                Revenue                       Revenue        
    As Reported           Recognition     As Adjusted     As Reported           Recognition     As Adjusted  
    52 Weeks Ended     Certain     Reportability     52 Weeks Ended     52 Weeks Ended     Certain     Reportability     52 Weeks Ended  
    January 1, 2016     Items     Adjustment     January 1, 2016**     January 2, 2015     Items     Adjustment     January 2, 2015**  

Sale of vacation ownership products

  $ 586,774      $ —        $ 841      $ 587,615      $ 577,781      $ —        $ 12,911      $ 590,692   

Less:

               

Cost of vacation ownership products

    164,200        —          407        164,607        170,012        —          3,904        173,916   

Marketing and sales

    288,260        —          74        288,334        272,302        —          1,209        273,511   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin

  $ 134,314      $ —        $ 360      $ 134,674      $ 135,467      $ —        $ 7,798      $ 143,265   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin percentage1

    22.9         22.9     23.4         24.3

 

** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1  Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars.

 

A-13


MARRIOTT VACATIONS WORLDWIDE CORPORATION

EBITDA AND ADJUSTED EBITDA

16 Weeks and 52 Weeks Ended January 1, 2016 and January 2, 2015

(In thousands)

 

     As Reported
16 Weeks Ended
January 1, 2016
     Certain
Items
    As Adjusted
16 Weeks Ended
January 1, 2016**
     As Reported
16 Weeks Ended
January 2, 2015
     Certain
Items
    As Adjusted
16 Weeks Ended
January 2, 2015**
 

Net income

   $ 33,149       $ 1,516      $ 34,665       $ 497       $ 22,482      $ 22,979   

Interest expense1

     3,988         —          3,988         4,054         —          4,054   

Tax provision

     22,398         922        23,320         16,866         (748     16,118   

Depreciation and amortization

     8,367         (1,341     7,026         5,499         —          5,499   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

EBITDA**

   $ 67,902       $ 1,097      $ 68,999       $ 26,916       $ 21,734      $ 48,650   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
     As Reported
52 Weeks Ended
January 1, 2016
     Certain
Items
    As Adjusted
52 Weeks Ended
January 1, 2016**
     As Reported
52 Weeks Ended
January 2, 2015
     Certain
Items
    As Adjusted
52 Weeks Ended
January 2, 2015**
 

Net income

   $ 122,799       $ (3,887   $ 118,912       $ 80,756       $ 20,740      $ 101,496   

Interest expense1

     12,810         —          12,810         11,692         —          11,692   

Tax provision

     83,698         (366     83,332         69,835         (1,986     67,849   

Depreciation and amortization

     22,217         (1,341     20,876         18,682         —          18,682   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

EBITDA**

   $ 241,524       $ (5,594   $ 235,930       $ 180,965       $ 18,754      $ 199,719   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1  Interest expense excludes consumer financing interest expense.

 

A-14


MARRIOTT VACATIONS WORLDWIDE CORPORATION

2015 ADJUSTED FREE CASH FLOW

(In thousands)

 

     2015  

Adjusted net income**

   $ 118,912   

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

  

Adjustments for non-cash items1

     74,246   

Deferred income taxes / income taxes payable

     28,067   

Net changes in assets and liabilities:

  

Notes receivable originations

     (311,195

Notes receivable collections

     270,170   

Inventory

     72,158   

Purchase of operating hotels for future conversion to inventory2

     (61,554

Liability for Marriott Rewards customer loyalty program

     (89,251

Organizational and separation related and other charges

     (3,964

Other working capital changes

     11,445   
  

 

 

 

Net cash provided by operating activities

     109,034   

Capital expenditures for property and equipment (excluding inventory):

  

New sales centers3

     (11,752

Organizational and separation related capital expenditures

     (3,798

Other

     (20,185

Investment in operating portion of Surfers Paradise hotel that will be sold4

     (47,658

Decrease in restricted cash

     37,681   

Borrowings from securitization transactions

     255,000   

Repayment of debt related to securitizations

     (278,427
  

 

 

 

Free cash flow**

     39,895   

Adjustments:

  

Organizational and separation related and other charges

     7,762   

Proceeds from sale of operating portion of Surfers Paradise hotel4

     47,658   

Accelerated payment of liability for Marriott Rewards customer loyalty program5

     66,000   

Net change in borrowings available from the securitization of eligible vacation ownership notes receivable through the warehouse credit facility6

     67,541   
  

 

 

 

Adjusted free cash flow**

   $ 228,856   
  

 

 

 

 

** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1  Includes depreciation, amortization of debt issuance costs, provision for loan losses, and share-based compensation.
2  Represents adjustment for the investment in operating hotels prior to future conversion to inventory.
3  Represents incremental investment in new sales centers, mainly to support new sales distributions.
4  Represents the estimated investment in, as well as the estimated proceeds from the subsequent sale of, the operating portion of the Surfers Paradise hotel.
5  Represents the portion of the Q1 2016 liability for Marriott Rewards customer loyalty program payment that was accelerated in to Q4 2015.
6  Represents the net change in borrowings available from the securitization of eligible vacation ownership notes receivable through the warehouse credit facility between the 2014 and 2015 year ends.

 

A-15


MARRIOTT VACATIONS WORLDWIDE CORPORATION

2016 ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE—DILUTED OUTLOOK

(In millions, except per share amounts)

 

     Fiscal Year
2016 (low)
     Fiscal Year
2016 (high)
 

Net income

   $ 124       $ 134   

Adjustments to reconcile Net income to Adjusted net income

     

Certain items1

     3         3   

Gain / (loss) on dispositions2

     —           —     

Provision for income taxes on adjustments to net income

     (1      (1
  

 

 

    

 

 

 

Adjusted net income**

   $ 126       $ 136   
  

 

 

    

 

 

 

Earnings per share - Diluted3

   $ 4.16       $ 4.50   

Adjusted earnings per share - Diluted**,3

   $ 4.23       $ 4.56   

Diluted shares 3

     29.8         29.8   

 

** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1  Certain items adjustment includes approximately $3 million of non-capitalizable transaction costs.
2 Gain / (loss) on dispositions adjustment includes the estimated net impact to pre-tax income associated with dispositions in the North America segment and Asia Pacific segment.
3 Earnings per share - Diluted, Adjusted earnings per share - Diluted, and Diluted shares outlook includes the impact of share repurchase activity only through February 24, 2016.

MARRIOTT VACATIONS WORLDWIDE CORPORATION

2016 ADJUSTED EBITDA OUTLOOK

(In millions)

 

     Fiscal Year
2016 (low)
     Fiscal Year
2016 (high)
 

Adjusted net income**

   $ 126       $ 136   

Interest expense1

     8         8   

Tax provision

     90         95   

Depreciation and amortization

     22         22   

Non-cash share-based compensation2

     15         15   
  

 

 

    

 

 

 

Adjusted EBITDA**

   $ 261       $ 276   
  

 

 

    

 

 

 

 

** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1  Interest expense excludes consumer financing interest expense.
2  Beginning with the first quarter of 2016 our Adjusted EBITDA will exclude non-cash share-based compensation expense, and prior period presentation will be recast for consistency. Please see page A - 19 for additional information.

 

A-16


MARRIOTT VACATIONS WORLDWIDE CORPORATION

2016 ADJUSTED FREE CASH FLOW AND NORMALIZED ADJUSTED FREE CASH FLOW OUTLOOK

(In millions)

 

     Current Guidance                       
     Low     High         Mid-Point          Adjustments         Normalized  

Adjusted net income**

   $ 126      $ 136        $ 131         $ —          $ 131   

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

                     

Adjustments for non-cash items1

     80        82          81           —            81   

Deferred income taxes / income taxes payable

     41        41          41           —            41   

Net changes in assets and liabilities:

                     

Notes receivable originations

     (348     (361       (355        —            (355

Notes receivable collections

     236        237          237           —            237   

Inventory

     (11     (5       (8        8 4        —     

Other working capital changes

     5        12          9           8 5        17   
  

 

 

   

 

 

     

 

 

      

 

 

     

 

 

 

Net cash provided by operating activities

     129        142          136           16          152   

Capital expenditures for property and equipment (excluding inventory):

                     

New sales centers2

     (18     (18       (18        18 2        —     

Other

     (18     (18       (18        (2 )6        (20

Decrease in restricted cash

     (3     (3       (3        3 7        —     

Borrowings from securitization transactions

     292        294          293           —            293   

Repayment of debt related to securitizations

     (234     (233       (234        —            (234
  

 

 

   

 

 

     

 

 

      

 

 

     

 

 

 

Free cash flow**

     148        164          156           35          191   

Adjustments:

                     

Net change in borrowings available from the securitization of eligible vacation ownership notes receivable through the warehouse credit facility3

     (13     (9       (11        —            (11
  

 

 

   

 

 

     

 

 

      

 

 

     

 

 

 

Adjusted free cash flow**

   $ 135      $ 155        $ 145         $ 35        $ 180   
  

 

 

   

 

 

     

 

 

      

 

 

     

 

 

 
                                               

 

** Denotes non-GAAP financial measures. Please see pages A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1  Includes depreciation, amortization of debt issuance costs, provision for loan losses, and share-based compensation.
2  Represents the incremental investment in new sales centers.
3  Represents the net change in borrowings available from the securitization of eligible vacation ownership notes receivable through the warehouse credit facility between the 2015 and 2016 year ends.
4  Represents adjustment to align real estate inventory spending with real estate inventory costs (i.e., product costs).
5  Represents normalized other working capital changes.
6  Represents normalized capital expenditures for property and equipment.
7  Represents normalized restricted cash activity.

 

A-17


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NON-GAAP FINANCIAL MEASURES

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

Adjusted Net Income. We evaluate non-GAAP financial measures, including Adjusted Net Income, Adjusted EBITDA, and Adjusted Development Margin, that exclude certain items and gains (losses) and other income (expense) in the 16 weeks and 52 weeks ended January 1, 2016 and January 2, 2015 because these non-GAAP financial measures allow for period-over-period comparisons of our on-going core operations before the impact of certain items and gains (losses) and other income (expense). These non-GAAP financial measures also facilitate our comparison of results from our on-going core operations before certain items and gains (losses) and other income (expense) with results from other vacation ownership companies.

Certain items—16 weeks and 52 weeks ended January 1, 2016. In our Statement of Income for the 16 weeks ended January 1, 2016, we recorded $2.5 million of net pre-tax items, which included nearly $2.0 million of adjustments for transaction costs ($1.3 million in our Corporate and Other segment, nearly $0.4 million in our North America segment, and $0.3 million in our Asia Pacific segment) recorded under the “Other” caption, more than $0.4 million of organizational and separation related costs recorded under the “Organizational and separation related” caption, and a more than $0.3 million impairment associated with a project in our North America segment recorded under the “Impairment” caption, partially offset by nearly $0.3 million of net adjustments to exclude the results of operations from the portion of the Surfers Paradise, Australia hotel that will be sold, comprised of $4.9 million of Resort management and other services revenue and $4.6 million of Rental revenue, with corresponding adjustments of $4.0 million and $5.2 million to the respective expenses. In our Statement of Income for the 52 weeks ended January 1, 2016, we recorded $5.3 million of net pre-tax items, which included more than $8.4 million of adjustments for transaction costs ($5.7 million in our Asia Pacific segment, nearly $2.4 million in our Corporate and Other segment, and nearly $0.4 million in our North America segment) recorded under the “Other” caption, a $1.8 million adjustment for refurbishment costs at a project in our North America segment, nearly $1.2 million of organizational and separation related costs recorded under the “Organizational and separation related” caption, a more than $0.3 million impairment associated with a project in our North America segment recorded under the “Impairment” caption, and less than $0.1 million of net litigation related matters recorded under the “Litigation settlement” caption, partially offset by $5.9 million of net adjustments to exclude the bulk sale of 18 units in our Asia Pacific segment, comprised of $28.4 million of “Sale of vacation ownership products” revenue, with corresponding adjustments of $21.6 million and $0.9 million to the “Cost of vacation ownership products” and Marketing and sales” captions, respectively, nearly $0.3 million of net adjustments to exclude the results of operations from the portion of the Surfers Paradise, Australia hotel that will be sold, comprised of $4.9 million of Resort management and other services revenue and $4.6 million of Rental revenue, with corresponding adjustments of $4.0 million and $5.2 million to the respective expenses, and a $0.3 million reversal of an accrual associated with a 2014 golf course disposition recorded under the “Litigation settlement” caption because actual costs were lower than expected.

Certain items—16 weeks and 52 weeks ended January 2, 2015. In our Statement of Income for the 16 weeks ended January 2, 2015, we recorded $25.1 million of net pre-tax charges which consisted of a $23.8 million non-cash loss associated with the disposition of partially developed land, an operating golf course, spa and clubhouse and related facilities at a former resort in our North America segment and settlement of related litigation under the “Litigation settlement” caption, $1.2 million of organizational and separation related costs recorded under the “Organizational and separation related” caption, $0.5 million of non-cash impairment charges associated with projects in our North America segment recorded under the “Impairment” caption, and less than $0.1 million of severance charges in our Europe segment recorded under the “Marketing and sales” caption, partially offset by a $0.5 million reduction to the reserve for remaining costs we expect to incur in connection with our interest in an equity method investment in a joint venture project in our North America segment recorded under the “Impairment reversals on equity investment” caption. In our Statement of Income for the 52 weeks ended January 2, 2015, we recorded $23.9 million of net pre-tax charges which consisted of a $23.8 million non-cash loss associated with the disposition of partially developed land, an operating golf course, spa and clubhouse and related facilities at a former resort in our North America segment and settlement of related litigation, a $3.0 million accrual for a litigation settlement in our North America segment and a $0.3 million accrual for a litigation settlement in our Corporate and other segment, all of which were recorded under the “Litigation settlement” caption, $3.4 million of organizational and separation related costs recorded under the “Organizational and separation related” caption, $1.4 million of non-cash impairment charges associated with projects in our North America segment recorded under the “Impairment” caption and $0.4 million of severance charges in our Europe segment recorded under the “Marketing and sales” caption, partially offset by $7.6 million of income associated with the settlement of a dispute with a former service provider in our North America segment recorded under the “Litigation settlement” caption, a $0.5 million reduction to the reserve for remaining costs we expect to incur in connection with our interest in an equity method investment in a joint venture project in our North America segment recorded under the “Impairment reversals on equity investment” caption and a $0.2 million reversal of a severance accrual in our Europe segment recorded under the “Resort management and other services” caption because actual costs were lower than expected.

 

A-18


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NON-GAAP FINANCIAL MEASURES

Gains (losses) and other income (expense)—16 weeks and 52 weeks ended January 1, 2016. In our Statement of Income for the 16 weeks ended January 1, 2016, we recorded net gains and other income of less than $0.1 million on the “Gains and other income” caption. In our Statement of Income for the 52 weeks ended January1, 2016, we recorded $9.6 million of net gains, of which $9.5 million was associated with the sale of undeveloped land and the sale of a golf course and adjacent undeveloped land in our North America segment under the “Gains and other income” caption.

Gains (losses) and other income (expense)—16 weeks and 52 weeks ended January 2, 2015. In our Statement of Income for the 16 weeks ended January 2, 2015, we recorded $3.3 million of net gains primarily associated with the sale of undeveloped and partially developed land, an operating golf course and related assets in our North America segment under the “Gains (losses) and other income (expense)” caption. In our Statement of Income for the 52 weeks ended January 2, 2015, we recorded $5.2 million of net gains primarily associated with the sale of undeveloped and partially developed land, an operating golf course and related assets, the sale of a golf course and adjacent undeveloped land, the sale of an undeveloped parcel of land, and the disposition of a project, all of which occurred in our North America segment and were recorded under the “Gains and other income” caption.

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

Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”). EBITDA is defined as earnings, or net income, before interest expense (excluding consumer financing interest expense), provision for income taxes, depreciation and amortization. For purposes of our EBITDA calculation (which previously adjusted for consumer financing interest expense), we do not adjust for consumer financing interest expense because the associated debt is secured by vacation ownership notes receivable that have been sold to bankruptcy remote special purpose entities and is generally non-recourse to us. Further, we consider consumer financing interest expense to be an operating expense of our business.

We consider EBITDA to be an indicator of operating performance, and we use it to measure our ability to service debt, fund capital expenditures and expand our business. We also use it, as do analysts, lenders, investors and others, because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company’s capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.

Adjusted EBITDA. We also evaluate Adjusted EBITDA, which reflects additional adjustments for certain items and gains (losses) and other income (expense), as itemized in the discussion of Adjusted Net Income above. In addition, beginning with the first quarter of 2016, we will exclude non-cash share-based compensation expense to address considerable variability among companies in recording compensation expense because companies use share-based payment awards differently, both in the type and quantity of awards granted. We evaluate Adjusted EBITDA as an indicator of operating performance because it allows for period-over-period comparisons of our on-going core operations before the impact of these items. Together, EBITDA and Adjusted EBITDA facilitate our comparison of results from our on-going core operations before the impact of these items with results from other vacation ownership companies.

 

A-19


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NON-GAAP FINANCIAL MEASURES

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

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

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

 

 

A-20


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

     January 1,
2016
    January 2,
2015
 

ASSETS

    

Cash and cash equivalents

   $ 177,061      $ 346,515   

Restricted cash (including $26,884 and $34,986 from VIEs, respectively)

     71,451        109,907   

Accounts and contracts receivable, net (including $4,893 and $4,992 from VIEs, respectively)

     131,850        109,700   

Vacation ownership notes receivable, net (including $669,179 and $750,680 from VIEs, respectively)

     920,631        917,228   

Inventory

     669,243        772,784   

Property and equipment

     288,803        147,379   

Other

     135,987        127,066   
  

 

 

   

 

 

 

Total Assets

   $ 2,395,026      $ 2,530,579   
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Accounts payable

   $ 139,120      $ 114,079   

Advance deposits

     69,064        60,192   

Accrued liabilities (including $669 and $1,088 from VIEs, respectively)

     164,791        165,969   

Deferred revenue

     35,276        38,818   

Payroll and benefits liability

     104,331        93,073   

Liability for Marriott Rewards customer loyalty program

     35        89,285   

Deferred compensation liability

     51,031        41,677   

Mandatorily redeemable preferred stock of consolidated subsidiary, net

     38,989        38,816   

Debt, net (including $684,604 and $708,031 from VIEs, respectively)

     678,793        703,013   

Other

     32,945        27,071   

Deferred taxes

     104,384        78,883   
  

 

 

   

 

 

 

Total Liabilities

     1,418,759        1,450,876   
  

 

 

   

 

 

 

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

     —          —     

Common stock - $.01 par value; 100,000,000 shares authorized; 36,393,800 and 36,089,513 shares issued, respectively

     364        361   

Treasury stock - at cost; 6,844,256 and 3,996,725 shares, respectively

     (429,990     (229,229

Additional paid-in capital

     1,150,731        1,137,785   

Accumulated other comprehensive income

     11,381        17,054   

Retained earnings

     243,781        153,732   
  

 

 

   

 

 

 

Total Equity

     976,267        1,079,703   
  

 

 

   

 

 

 

Total Liabilities and Equity

   $ 2,395,026      $ 2,530,579   
  

 

 

   

 

 

 

The abbreviation VIEs above means Variable Interest Entities.

 

A-21


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

     52 weeks ended  
     January 1,
2016
    January 2,
2015
 

OPERATING ACTIVITIES

    

Net income

   $ 122,799      $ 80,756   

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

    

Depreciation

     22,217        18,682   

Amortization of debt issuance costs

     5,586        5,462   

Provision for loan losses

     33,083        30,534   

Share-based compensation

     14,142        13,376   

Employee stock purchase plan

     560        —     

Gain on disposal of property and equipment, net

     (9,557     (5,171

Non-cash litigation settlement

     (262     23,778   

Deferred income taxes

     28,162        18,876   

Equity method income

     (187     (74

Impairment charges

     324        1,381   

Impairment reversals on equity investment

     —          (540

Net change in assets and liabilities:

    

Accounts and contracts receivable

     (24,188     (1,143

Notes receivable originations

     (311,195     (267,917

Notes receivable collections

     270,170        287,240   

Inventory

     72,158        82,690   

Purchase of operating hotels for future conversion to inventory

     (61,554     —     

Other assets

     (10,648     8,659   

Accounts payable, advance deposits and accrued liabilities

     23,419        (10,824

Liability for Marriott Rewards customer loyalty program

     (89,251     (25,022

Deferred revenue

     (3,334     18,119   

Payroll and benefit liabilities

     11,380        8,973   

Deferred compensation liability

     9,354        4,568   

Other liabilities

     1,060        (2,558

Other, net

     4,796        1,566   
  

 

 

   

 

 

 

Net cash provided by operating activities

     109,034        291,411   
  

 

 

   

 

 

 

INVESTING ACTIVITIES

    

Capital expenditures for property and equipment (excluding inventory)

     (35,735     (15,202

Purchase of operating hotel to be sold

     (47,658     —     

Decrease (increase) in restricted cash

     37,681        (24,019

Dispositions, net

     20,644        82,347   
  

 

 

   

 

 

 

Net cash (used in) provided by investing activities

     (25,068     43,126   
  

 

 

   

 

 

 

FINANCING ACTIVITIES

    

Borrowings from securitization transactions

     255,000        262,638   

Repayment of debt related to securitization transactions

     (278,427     (229,434

Proceeds from vacation ownership inventory arrangement

     5,375        —     

Debt issuance costs

     (5,335     (6,498

Repurchase of common stock

     (201,380     (203,595

Payment of dividends

     (23,793     (8,179

Proceeds from stock option exercises

     97        2,977   

Excess tax benefits from share-based compensation

     9,380        4,519   

Payment of withholding taxes on vesting of restricted stock units

     (10,894     (8,078

Other

     230        —     
  

 

 

   

 

 

 

Net cash used in financing activities

     (249,747     (185,650
  

 

 

   

 

 

 

Effect of changes in exchange rates on cash and cash equivalents

     (3,673     (1,883

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

     (169,454     147,004   

CASH AND CASH EQUIVALENTS, beginning of period

     346,515        199,511   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS, end of period

   $ 177,061      $ 346,515   
  

 

 

   

 

 

 

 

A-22