Document


 
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) May 7, 2019
_________________________
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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company  ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, $0.01 Par Value
 
VAC
 
New York Stock Exchange

 

1



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 ended March 31, 2019.
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) The following exhibits are being filed herewith: 
Exhibit Number
 
Description
 
Press release dated May 7, 2019, reporting financial results for the quarter ended March 31, 2019.

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: May 7, 2019
By:
/s/ John E. Geller, Jr.
 
Name:
John E. Geller, Jr.
 
Title:
Executive Vice President and Chief Financial and Administrative Officer


2
Exhibit
Exhibit 99.1


https://cdn.kscope.io/610b83cb6d5efe7100857b925c16df31-mvwbannerforpressrelease.jpg
Neal Goldner
Investor Relations
Marriott Vacations Worldwide Corporation
407.206.6149
Neal.Goldner@mvwc.com
Ed Kinney
Corporate Communications
Marriott Vacations Worldwide Corporation
407.206.6278
Ed.Kinney@mvwc.com

Marriott Vacations Worldwide (“MVW”) Reports First Quarter Financial Results
ORLANDO, Fla. – May 7, 2019 – Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported first quarter financial results and reaffirmed its guidance for the full year 2019.
On September 1, 2018, the company completed its acquisition of ILG, Inc. (“ILG”). In addition to a discussion of first quarter reported results presented in accordance with United States generally accepted accounting principles (“GAAP”), the company is providing adjusted results of operations from January 1 to March 31, 2019 to further assist investors. Throughout this press release, the results from the business associated with the brands that existed prior to the ILG Acquisition are referred to as “Legacy-MVW,” while the results from the business and brands that were acquired from ILG are referred to as “Legacy-ILG.” In addition, to provide a more meaningful year-over-year comparison of financial results, the company is providing Q1 2018 financial information in the Financial Schedules that follow that combine Legacy-MVW’s and Legacy-ILG’s Q1 2018 financial results, conformed to the current year presentation.
First Quarter 2019 Highlights:
Consolidated vacation ownership contract sales increased 74% to $354 million compared to the first quarter of 2018.
Legacy-MVW vacation ownership contract sales increased 10%.
Combined vacation ownership contract sales increased 5%.
Net income attributable to common shareholders was $24 million, or $0.51 per fully diluted share (“EPS”), compared to net income attributable to common shareholders of $36 million, or $1.32 per fully diluted share, in the first quarter of 2018.
Adjusted net income attributable to common shareholders increased 76% to $67 million compared to the first quarter of 2018 and Adjusted fully diluted EPS increased 4% to $1.45.
Adjusted EBITDA increased to $166 million in the first quarter of 2019 compared to $63 million in the first quarter of 2018. Revenue reportability negatively impacted Adjusted EBITDA in the first quarter of 2019 by $21 million, $13 million higher than the first quarter of 2018.
Legacy-MVW Adjusted EBITDA increased 16%.
On a combined basis, Adjusted EBITDA increased 4% and, excluding the impact of the disposition of VRI Europe, which was sold in the fourth quarter of 2018, Adjusted EBITDA increased 6%.
The company repurchased 1.2 million shares of its common stock for $106 million in the first quarter of 2019 at an average price per share of $86.32 and paid dividends of $41 million.



Marriott Vacations Worldwide Reports First Quarter Financial Results / 2

The company reaffirms its 2019 full year Adjusted EBITDA, Adjusted Free Cash Flow and contract sales guidance and raises its full year Adjusted fully diluted EPS projection.
“I am very pleased with our strong start to the year with Legacy-MVW contract sales increasing 10% and Legacy-MVW Adjusted EBITDA growing 16%,” said Stephen P. Weisz, President and Chief Executive Officer. “The integration of ILG is progressing well, and we started to gain traction on sales initiatives as we progressed through the quarter. We remain on track to realize more than $100 million of synergies from this acquisition and are very excited about the opportunities provided by this transformational business combination.”
First Quarter 2019 Segment Results
Vacation Ownership
Consolidated vacation ownership contract sales were $354 million, an increase of 74% compared to the prior year. Legacy-MVW contract sales grew 10% in the quarter and Legacy-MVW North America VPG increased 1%. On a combined basis, consolidated contract sales increased 5% compared to the prior year, reflecting the strong growth from Legacy-MVW, partially offset, as anticipated, by slower growth at Legacy-ILG as we continue to integrate the business.
Development margin was $44 million compared to $24 million in the first quarter of 2018 and development margin percentage was 14.5%. On a combined basis, adjusted development margin, which excludes the impact of revenue reportability and other charges, increased 30% to $67 million in the first quarter of 2019. Adjusted development margin percentage on a combined basis was 20.5% in the quarter compared to 16.8% in the prior year.
Resort management and other services revenues totaled $125 million, an increase of 79% compared to the first quarter of 2018, and were $59 million net of expenses. On a combined basis, resort management and other services net of expenses increased 5% compared to the prior year.
Rental revenues totaled $147 million, an increase of 98% compared to the first quarter of 2018, and were $45 million net of expenses. On a combined basis, rental revenues net of expenses were 4% higher year-over-year.
Financing revenues increased 89% to $67 million compared to the first quarter of 2018 and were $45 million net of expenses. On a combined basis, financing revenues net of expenses increased 12% compared to the prior year.
Vacation Ownership segment financial results were $133 million for the first quarter of 2019, an increase of 64% compared to the prior year. On a combined basis, Vacation Ownership segment Adjusted EBITDA increased 5% to $171 million compared to the prior year.
Exchange & Third-Party Management
Exchange & Third-Party Management revenues totaled $124 million in the first quarter of 2019. Total Interval Network active members at the end of the first quarter of 2019 were 1.7 million and average revenue per member in the first quarter of 2019 was $46.24.
Exchange & Third-Party Management segment financial results and Adjusted EBITDA were $52 million and $66 million, respectively, in the first quarter of 2019.
Balance Sheet and Liquidity
On March 31, 2019, cash and cash equivalents totaled $222 million. The inventory balance at the end of the first quarter included $862 million of finished goods and $37 million of work-in-progress. The company had $3.9 billion in debt outstanding, net of unamortized debt issuance costs, at the end of the first quarter, an increase of $0.1 billion from year-end 2018. This debt included $2.2 billion of corporate debt and $1.7 billion of debt related to the company’s securitized notes receivable. As of March 31, 2019, the company’s combined debt to adjusted EBITDA ratio was 2.7x.
As of March 31, 2019, the company had $521 million in available capacity under its revolving credit facility and $132 million of gross vacation ownership notes receivable eligible for securitization.



Marriott Vacations Worldwide Reports First Quarter Financial Results / 3

2019 Outlook
The Financial Schedules that follow reconcile the non-GAAP financial measures set forth below to the following full year 2019 expected GAAP results for MVW.
 
 
Current Guidance
Net income attributable to common shareholders
 
$219 million
to
$233 million
Fully diluted EPS
 
$4.76
to
$5.07
Net cash provided by operating activities
 
$286 million
to
$311 million
2019 expected GAAP results and guidance above include an estimate of the impact of future spending associated with on-going ILG integration efforts.
The company reaffirms its full year 2019 guidance as reflected in the chart below:
 
 
Current Guidance
Adjusted free cash flow
 
$400 million
to
$475 million
Adjusted net income attributable to common shareholders
 
$337 million
to
$365 million
Adjusted fully diluted EPS
 
$7.33
to
$7.94
Adjusted EBITDA
 
$745 million
to
$785 million
Consolidated contract sales
 
$1,530 million
to
$1,600 million
Adjusted fully diluted EPS increased from the previous guidance of $7.23 to $7.83 due to a reduction in shares outstanding.
Non-GAAP Financial Information
Non-GAAP financial measures, such as adjusted net income, adjusted EBITDA, adjusted fully diluted earnings per share, adjusted free cash flow, adjusted development margin and adjusted and combined financial measures are reconciled and adjustments are shown and described in further detail in the Financial Schedules that follow.
First Quarter 2019 Earnings Conference Call
The company will hold a conference call at 10:00 a.m. ET today to discuss these results and the guidance for full year 2019. Participants may access the call by dialing 877-407-8289 or +1-201-689-8341 for international callers. A live webcast of the call will also be available in the Investor Relations section of the company’s website at www.marriottvacationsworldwide.com.
An audio replay of the conference call will be available for seven days and can be accessed at 877-660-6853 or +1-201-612-7415 for international callers. The conference ID for the recording is 13689493. The webcast will also be available on the company’s website.

###

About Marriott Vacations Worldwide Corporation
Marriott Vacations Worldwide Corporation is a leading global vacation company that offers vacation ownership, exchange, rental and resort and property management, along with related businesses, products and services. The company has a diverse portfolio that includes seven vacation ownership brands. It also includes exchange networks and membership programs, as well as management of other resorts and lodging properties. As a leader and innovator in the vacation industry, the company upholds the highest standards of excellence in serving its customers, investors and associates while maintaining exclusive, long-term relationships with Marriott International and Hyatt Hotels Corporation for the development, sales and marketing of vacation ownership products and services. For more information, please visit www.marriottvacationsworldwide.com




Marriott Vacations Worldwide Reports First Quarter Financial Results / 4

Note on forward-looking statements
This press release and accompanying schedules contain “forward-looking statements” within the meaning of federal securities laws, including statements about future operating results, estimates, and assumptions, and similar statements concerning anticipated future events and expectations that are not historical facts, including guidance about full year 2019 results, expected full year 2019 GAAP results and expected synergies from the ILG acquisition. The company cautions you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including volatility in the economy and the credit markets, changes in supply and demand for vacation ownership and residential products, competitive conditions, the availability of capital to finance growth, and other matters referred to under the heading “Risk Factors” contained in the company’s most recent Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) and in subsequent SEC filings, any of which could cause actual results to differ materially from those expressed in or implied in this press release. These statements are made as of May 7, 2019 and the company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.




Financial Schedules Follow





MARRIOTT VACATIONS WORLDWIDE CORPORATION
FINANCIAL SCHEDULES
QUARTER 1, 2019
TABLE OF CONTENTS
 
Interim Consolidated Statements of Income
A-1
Operating Metrics
A-2
Adjusted Net Income Attributable to Common Shareholders, Adjusted Earnings Per Share - Diluted, EBITDA and Adjusted EBITDA
A-3
Reconciliation of Adjusted Financial Information
A-4
Vacation Ownership Interim Segment Financial Results
A-5
Consolidated Contract Sales to Adjusted Development Margin
A-6
Reconciliation of Vacation Ownership Segment Interim Adjusted Financial Results
A-7
Reconciliation of Adjusted Financial Information - Consolidated and Vacation Ownership Segment EBITDA and Adjusted EBITDA
A-8
Exchange & Third-Party Management Interim Segment Financial Results
A-9
Corporate and Other Interim Financial Results
A-10
Vacation Ownership and Exchange & Third-Party Management Segment Adjusted EBITDA and Corporate and Other Adjusted Financial Results
A-11
Reconciliation of Combined Financial Information - Consolidated Results
A-12
Reconciliation of Combined Financial Information - EBITDA, Adjusted EBITDA and Adjusted Development Margin
A-13
Reconciliation of Combined Financial Information - Vacation Ownership Segment Financial Results
A-14
Reconciliation of Combined Financial Information - Exchange & Third-Party Management Segment Financial Results and Corporate and Other Financial Results
A-15
Reconciliation of Combined Financial Information - Segment Adjusted EBITDA and Corporate and Other Adjusted Financial Results
A-16
2019 Outlook - Adjusted Net Income Attributable to Common Shareholders, Adjusted Earnings Per Share - Diluted and Adjusted EBITDA
A-17
2019 Outlook - Adjusted Free Cash Flow
A-18
Interim Consolidated Balance Sheets
A-19
Interim Consolidated Statements of Cash Flows
A-20
Non-GAAP Financial Measures
A-21
 
 
NOTE: Total contract sales consist of the total amount of vacation ownership product sales under contract signed during the period for which we have received a down payment of at least ten percent of the contract price, reduced by actual rescissions during the period, inclusive of contracts associated with sales of vacation ownership products on behalf of third parties, which we refer to as “resales contract sales.”




A-1

MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
(Unaudited)
 
Three Months Ended
 
March 31, 2019
 
March 31, 2018
REVENUES
 
 
 
Sale of vacation ownership products
$
301

 
$
175

Management and exchange
239

 
70

Rental
165

 
75

Financing
68

 
35

Cost reimbursements
287

 
216

TOTAL REVENUES
1,060

 
571

EXPENSES
 
 
 
Cost of vacation ownership products
80

 
46

Marketing and sales
188

 
105

Management and exchange
116

 
36

Rental
108

 
55

Financing
22

 
11

General and administrative
78

 
28

Depreciation and amortization
37

 
6

Litigation settlement
1

 

Royalty fee
26

 
15

Impairment
26

 

Cost reimbursements
287

 
216

TOTAL EXPENSES
969

 
518

Gains and other income, net
8

 
1

Interest expense
(34
)
 
(4
)
ILG acquisition-related costs
(26
)
 
(1
)
Other

 
(2
)
INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS
39

 
47

Provision for income taxes
(15
)
 
(11
)
NET INCOME
24

 
36

Net income attributable to noncontrolling interests

 

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
24

 
$
36

 
 
 
 
EARNINGS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS
 
 
 
Basic
$
0.52

 
$
1.35

Diluted
$
0.51

 
$
1.32

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


A-2

MARRIOTT VACATIONS WORLDWIDE CORPORATION
OPERATING METRICS
(Contract sales in millions)
 
Three Months Ended
 
 
 
March 31, 2019
 
March 31, 2018
 
Change %
Vacation Ownership
 
 
 
 
 
Total contract sales
$
365

 
$
204

 
79%
Consolidated contract sales
$
354

 
$
204

 
74%
Legacy-MVW contract sales
$
223

 
$
204

 
10%
Legacy-MVW North America contract sales
$
201

 
$
188

 
8%
Legacy-MVW North America VPG
$
3,777

 
$
3,728

 
1%
Legacy-ILG contract sales
$
131

 
$

 
NM
Legacy-ILG VPG
$
3,042

 
$

 
NM
 
 
 
 
 
 
Exchange & Third-Party Management
 
 
 
 
 
Total active members at end of period (000's)(1)
1,694

 

 
 
Average revenue per member(1)
$
46.24

 

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

OPERATING METRICS
INCLUDING THE THREE MONTHS ENDED MARCH 31, 2018 ON A COMBINED BASIS
(Contract sales in millions)
 
Three Months Ended
 
 
 
March 31, 2019
 
March 31, 2018
 
Change %
Vacation Ownership
 
 
 
 
 
Total contract sales
$
365

 
$
352

 
4%
Consolidated contract sales
$
354

 
$
337

 
5%
Legacy-MVW contract sales
$
223

 
$
204

 
10%
Legacy-MVW North America contract sales
$
201

 
$
188

 
8%
Legacy-MVW North America VPG
$
3,777

 
$
3,728

 
1%
Legacy-ILG contract sales
$
131

 
$
133

 
(2%)
Legacy-ILG VPG
$
3,042

 
$
3,227

 
(6%)
 
 
 
 
 
 
Exchange & Third-Party Management
 
 
 
 
 
Total active members at end of period (000's)(1)
1,694

 
1,822

 
(7%)
Average revenue per member(1)
$
46.24

 
$
47.61

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


A-3

MARRIOTT VACATIONS WORLDWIDE CORPORATION
(In millions, except per share amounts)
ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS AND
ADJUSTED EARNINGS PER SHARE - DILUTED
 
Three Months Ended
 
March 31, 2019
 
March 31, 2018
Net income attributable to common shareholders
$
24

 
$
36

Certain items:
 
 
 
Litigation settlement
1

 

Gains and other income, net
(8
)
 
(1
)
ILG acquisition-related costs
26

 
1

Impairment
26

 

Purchase price adjustments(1)
15

 

Share-based compensation (ILG acquisition-related)

 

Other
1

 
2

Certain items before provision for income taxes
61

 
2

Provision for income taxes on certain items
(18
)
 
(1
)
Adjusted net income attributable to common shareholders **
$
67

 
$
37

Earnings per share - Diluted
$
0.51

 
$
1.32

Adjusted earnings per share - Diluted **
$
1.45

 
$
1.39

Diluted Shares
46,077

 
27,306

 
 
 
 
(1) Purchase price adjustments of $15 million (of which $1 million impacted adjusted EBITDA) included a decrease to amortization expense ($14 million) and a net $2 million decrease to sale of vacation ownership product expenses, partially offset by $1 million increases to both interest expense and financing expense. Please see “Non-GAAP Financial Measures” for additional information about certain items.
EBITDA AND ADJUSTED EBITDA
 
Three Months Ended
 
March 31, 2019
 
March 31, 2018
Net income attributable to common shareholders
$
24

 
$
36

Interest expense(1)
34

 
4

Tax provision
15

 
11

Depreciation and amortization
37

 
6

EBITDA **
110

 
57

Share-based compensation expense
9

 
4

Certain items before provision for income taxes(2)
47

 
2

Adjusted EBITDA **
$
166

 
$
63

 
 
 
 
(1) Interest expense excludes consumer financing interest expense.
 
 
(2) Excludes certain items included in depreciation and amortization and share-based compensation. Please see “Non-GAAP Financial Measures” for additional information about certain items.
ADJUSTED EBITDA BY SEGMENT
 
Three Months Ended
 
March 31, 2019
 
March 31, 2018
Vacation Ownership
$
171

 
$
88

Exchange & Third-Party Management
66

 

Segment adjusted EBITDA**
237

 
88

General and administrative
(72
)
 
(25
)
Consolidated property owners’ associations
1

 

Adjusted EBITDA**
$
166

 
$
63

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



A-4

MARRIOTT VACATIONS WORLDWIDE CORPORATION
RECONCILIATION OF ADJUSTED(1) FINANCIAL INFORMATION
THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(In millions)
 
As Reported
Three Months Ended
 
Less: Legacy-ILG Three Months Ended
 
As Adjusted
Three Months Ended**
 
As Reported
Three Months Ended
 
March 31, 2019
 
March 31, 2018
REVENUES
 
 
 
 
 
 
 
Sale of vacation ownership products
$
301

 
$
125

 
$
176

 
$
175

Management and exchange
239

 
162

 
77

 
70

Rental
165

 
85

 
80

 
75

Financing
68

 
27

 
41

 
35

Cost reimbursements
287

 
59

 
228

 
216

TOTAL REVENUES
1,060

 
458

 
602

 
571

EXPENSES
 
 
 
 
 
 
 
Cost of vacation ownership products
80

 
36

 
44

 
46

Marketing and sales
188

 
80

 
108

 
105

Management and exchange
116

 
78

 
38

 
36

Rental
108

 
51

 
57

 
55

Financing
22

 
10

 
12

 
11

General and administrative
78

 
46

 
32

 
28

Depreciation and amortization
37

 
29

 
8

 
6

Litigation settlement
1

 

 
1

 

Royalty fee
26

 
10

 
16

 
15

Impairment
26

 

 
26

 

Cost reimbursements
287

 
59

 
228

 
216

TOTAL EXPENSES
969

 
399

 
570

 
518

Gains and other income, net
8

 

 
8

 
1

Interest expense
(34
)
 
(2
)
 
(32
)
 
(4
)
ILG acquisition-related costs
(26
)
 
(8
)
 
(18
)
 
(1
)
Other

 

 

 
(2
)
INCOME (LOSS) BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS
39

 
49

 
(10
)
 
47

(Provision) benefit for income taxes
(15
)
 
(17
)
 
2

 
(11
)
NET INCOME (LOSS)
24

 
32

 
(8
)
 
36

Net income attributable to noncontrolling interests

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
24

 
$
32

 
$
(8
)
 
$
36

(1) Adjusted to exclude Legacy-ILG results.
 
 
 
 
 
 
 
** Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use.


A-5

MARRIOTT VACATIONS WORLDWIDE CORPORATION
VACATION OWNERSHIP SEGMENT INTERIM FINANCIAL RESULTS
(In millions)

 
Three Months Ended
 
March 31, 2019
 
March 31, 2018
REVENUES
 
 
 
Sale of vacation ownership products
$
301

 
$
175

Resort management and other services
125

 
70

Rental
147

 
75

Financing
67

 
35

Cost reimbursements
291

 
216

TOTAL REVENUES
931

 
571

EXPENSES
 
 
 
Cost of vacation ownership products
80

 
46

Marketing and sales
177

 
105

Resort management and other services
66

 
36

Rental
102

 
55

Financing
22

 
11

Depreciation and amortization
17

 
5

Litigation settlement
1

 

Royalty fee
26

 
15

Impairment
26

 

Cost reimbursements
291

 
216

TOTAL EXPENSES
808

 
489

Gains and other income, net
9

 
1

Other

 
(2
)
SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS
132

 
81

Net loss attributable to noncontrolling interests
1

 

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
133

 
$
81




A-6

MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED CONTRACT SALES TO ADJUSTED DEVELOPMENT MARGIN
THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(In millions)
 
Three Months Ended
 
March 31, 2019
 
March 31, 2018
Consolidated contract sales
$
354

 
$
204

Less resales contract sales
(8
)
 
(8
)
Consolidated contract sales, net of resales
346

 
196

Plus:
 
 
 
Settlement revenue
9

 
4

Resales revenue
3

 
2

Revenue recognition adjustments:
 
 
 
Reportability
(30
)
 
(12
)
Sales reserve
(19
)
 
(9
)
Other(1)
(8
)
 
(6
)
Sale of vacation ownership products
301

 
175

Less:
 
 
 
Cost of vacation ownership products
(80
)
 
(46
)
Marketing and sales
(177
)
 
(105
)
Development margin
44

 
24

Revenue recognition reportability adjustment
21

 
8

Purchase price adjustment
2

 

Adjusted development margin **
$
67

 
$
32

Development margin percentage(2)
14.5%
 
13.9%
Adjusted development margin percentage(2)
20.5%
 
17.4%
** Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use.
(1) Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue and other adjustments to Sale of vacation ownership products revenue.
(2) Development margin percentage represents Development margin divided by Sale of vacation ownership products. Adjusted development margin percentage represents Adjusted development margin divided by Sale of vacation ownership products revenue after adjusting for revenue reportability and other charges.





A-7

MARRIOTT VACATIONS WORLDWIDE CORPORATION
RECONCILIATION OF VACATION OWNERSHIP SEGMENT INTERIM ADJUSTED(1) FINANCIAL RESULTS
THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(In millions)
 
As Reported
Three Months Ended
 
Less: Legacy-ILG Three Months Ended
 
As Adjusted
Three Months Ended**
 
As Reported
Three Months Ended
 
March 31, 2019
 
March 31, 2018
REVENUES
 
 
 
 
 
 
 
Sale of vacation ownership products
$
301

 
$
125

 
$
176

 
$
175

Resort management and other services
125

 
48

 
77

 
70

Rental
147

 
67

 
80

 
75

Financing
67

 
26

 
41

 
35

Cost reimbursements
291

 
63

 
228

 
216

TOTAL REVENUES
931

 
329

 
602

 
571

EXPENSES
 
 
 
 
 
 
 
Cost of vacation ownership products
80

 
36

 
44

 
46

Marketing and sales
177

 
69

 
108

 
105

Resort management and other services
66

 
28

 
38

 
36

Rental
102

 
45

 
57

 
55

Financing
22

 
10

 
12

 
11

Depreciation and amortization
17

 
11

 
6

 
5

Litigation settlement
1

 

 
1

 

Royalty fee
26

 
10

 
16

 
15

Impairment
26

 

 
26

 

Cost reimbursements
291

 
63

 
228

 
216

TOTAL EXPENSES
808

 
272

 
536

 
489

Gains and other income, net
9

 

 
9

 
1

Other

 

 

 
(2
)
SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS
132

 
57

 
75

 
81

Net loss attributable to noncontrolling interests
1

 
1

 

 

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
133

 
$
58

 
$
75

 
$
81

 
 
 
 
 
 
 
 
(1) Adjusted to exclude Legacy-ILG results.
 
 
 
 
 
 
 
** Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use.


A-8

MARRIOTT VACATIONS WORLDWIDE CORPORATION
RECONCILIATION OF ADJUSTED(1) FINANCIAL INFORMATION
CONSOLIDATED AND VACATION OWNERSHIP SEGMENT EBITDA AND ADJUSTED EBITDA
THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(In millions)
CONSOLIDATED
 
As Reported
Three Months Ended
 
Less: Legacy-ILG Three Months Ended
 
As Adjusted
Three Months Ended**
 
As Reported
Three Months Ended
 
March 31, 2019
 
March 31, 2018
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
24

 
$
32

 
$
(8
)
 
$
36

Interest expense
34

 
2

 
32

 
4

Tax provision
15

 
17

 
(2
)
 
11

Depreciation and amortization
37

 
29

 
8

 
6

EBITDA **
110

 
80

 
30

 
57

Share-based compensation expense
9

 
4

 
5

 
4

Certain items(2)
47

 
9

 
38

 
2

ADJUSTED EBITDA **
$
166

 
$
93

 
$
73

 
$
63

 
 
 
 
 
 
 
 
VACATION OWNERSHIP
 
 
 
 
 
 
 
 
 
As Reported
Three Months Ended
 
Less: Legacy-ILG Three Months Ended
 
As Adjusted
Three Months Ended**
 
As Reported
Three Months Ended
 
March 31, 2019
 
March 31, 2018
SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
133

 
$
58

 
$
75

 
$
81

Adjustments:
 
 
 
 
 
 
 
Depreciation and amortization
17

 
11

 
6

 
5

Share-based compensation expense
2

 
1

 
1

 
1

Certain items(3)
19

 
1

 
18

 
1

SEGMENT ADJUSTED EBITDA **
$
171

 
$
71

 
$
100

 
$
88

 
 
 
 
 
 
 
 
** Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use.
(1) Adjusted to exclude Legacy-ILG results.
 
 
 
 
 
 
 
(2) Consolidated Legacy-ILG three months ended March 31, 2019 certain items include $8 million of ILG acquisition-related costs and $1 million of purchase accounting adjustments.
(3) Vacation Ownership Legacy-ILG three months ended March 31, 2019 certain items include $1 million of purchase accounting adjustments.



A-9

MARRIOTT VACATIONS WORLDWIDE CORPORATION
EXCHANGE & THIRD-PARTY MANAGEMENT INTERIM SEGMENT FINANCIAL RESULTS
(In millions)

 
Three Months Ended
 
March 31, 2019
 
March 31, 2018
REVENUES
 
 
 
Management and exchange
$
82

 
$

Rental
17

 

Financing
1

 

Cost reimbursements
24

 

TOTAL REVENUES
124

 

EXPENSES
 
 
 
Marketing and sales
11

 

Management and exchange
17

 

Rental
8

 

Depreciation and amortization
12

 

Cost reimbursements
24

 

TOTAL EXPENSES
72

 

SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS
52

 

Net loss attributable to noncontrolling interests

 

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
52

 
$




A-10

MARRIOTT VACATIONS WORLDWIDE CORPORATION
CORPORATE AND OTHER INTERIM FINANCIAL RESULTS
(In millions)

 
Three Months Ended
 
March 31, 2019
 
March 31, 2018
REVENUES
 
 
 
Management and exchange(1)
$
32

 
$

Rental(1)
1

 

Cost reimbursements(1)
(28
)
 

TOTAL REVENUES
5

 

EXPENSES
 
 
 
Management and exchange(1)
33

 

Rental(1)
(2
)
 

General and administrative
78

 
28

Depreciation and amortization
8

 
1

Cost reimbursements(1)
(28
)
 

TOTAL EXPENSES
89

 
29

Losses and other expense, net
(1
)
 

Interest expense
(34
)
 
(4
)
ILG acquisition-related costs
(26
)
 
(1
)
FINANCIAL RESULTS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS
(145
)
 
(34
)
Provision for income taxes
(15
)
 
(11
)
Net income attributable to noncontrolling interests
(1
)
 

FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
(161
)
 
$
(45
)
 
(1) Represents the impact of the consolidation of owners’ associations of the acquired Legacy-ILG vacation ownership properties under the voting interest model, which represents the portion related to individual or third-party vacation ownership interest (“VOI”) owners.



A-11

MARRIOTT VACATIONS WORLDWIDE CORPORATION
VACATION OWNERSHIP AND EXCHANGE & THIRD-PARTY MANAGEMENT SEGMENT ADJUSTED EBITDA AND CORPORATE AND OTHER ADJUSTED FINANCIAL RESULTS
(In millions)

VACATION OWNERSHIP
 
Three Months Ended
 
March 31, 2019
 
March 31, 2018
SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
133

 
$
81

Adjustments:
 
 
 
Depreciation and amortization
17

 
5

Share-based compensation expense
2

 
1

Certain items(1),(2)
19

 
1

SEGMENT ADJUSTED EBITDA **
$
171

 
$
88

 
 
 
 
EXCHANGE & THIRD-PARTY MANAGEMENT
 
Three Months Ended
 
March 31, 2019
 
March 31, 2018
SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
52

 
$

Adjustments:
 
 
 
Depreciation and amortization
12

 

Share-based compensation expense
1

 

Certain items(3)
1

 

SEGMENT ADJUSTED EBITDA **
$
66

 
$

 
 
 
 
CORPORATE AND OTHER
 
Three Months Ended
 
March 31, 2019
 
March 31, 2018
FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
(161
)
 
$
(45
)
Less certain items:
 
 
 
Gains and other income, net
1

 

ILG acquisition-related costs
26

 
1

Other
(1
)
 

ADJUSTED FINANCIAL RESULTS **
$
(135
)
 
$
(44
)
 
 
 
 
** Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use.
(1) Vacation Ownership three months ended March 31, 2019 certain items include $26 million of asset impairments, $1 million of litigation settlements and $1 million of purchase accounting adjustments, partially offset by $9 million of gains and other income.
(2) Vacation Ownership three months ended March 31, 2018 certain items include $2 million of acquisition costs associated with the then anticipated future capital efficient acquisition of the operating property in San Francisco, partially offset by $1 million favorable true up of previously recorded costs associated with Hurricane Irma and Hurricane Maria (recorded in Gains and other income).
(3) Exchange & Third-Party Management three months ended March 31, 2019 certain items include $1 million of purchase accounting adjustments.



A-12

MARRIOTT VACATIONS WORLDWIDE CORPORATION
RECONCILIATION OF COMBINED(1) FINANCIAL INFORMATION
CONSOLIDATED RESULTS
THREE MONTHS ENDED MARCH 31, 2018
(In millions)
 
Legacy-ILG
 
Reclassifications(1)
 
Legacy-ILG Reclassified**
 
Legacy-MVW
 
Combined**
REVENUES
 
 
 
 

 
 
 

Sale of vacation ownership products
$
123

 
$
(1
)
 
$
122

 
$
175

 
$
297

Service and membership related
152

 
(152
)
 

 

 

Management and exchange

 
179

 
179

 
70

 
249

Rental and ancillary services
118

 
(118
)
 

 

 

Rental

 
90

 
90

 
75

 
165

Financing
24

 
1

 
25

 
35

 
60

Cost reimbursements
65

 
2

 
67

 
216

 
283

TOTAL REVENUES
482

 
1

 
483

 
571

 
1,054

EXPENSES
 
 
 
 
 
 
 
 


Cost of vacation ownership products
39

 
4

 
43

 
46

 
89

Marketing and sales
78

 
(3
)
 
75

 
105

 
180

Cost of service and membership related sales
64

 
(64
)
 

 

 

Management and exchange

 
77

 
77

 
36

 
113

Cost of sales of rental and ancillary services
72

 
(72
)
 

 

 

Rental

 
51

 
51

 
55

 
106

Financing
8

 
 
 
8

 
11

 
19

General and administrative
59

 
2

 
61

 
28

 
89

Depreciation and amortization
20

 
(1
)
 
19

 
6

 
25

Royalty fee
11

 

 
11

 
15

 
26

Cost reimbursements
65

 
2

 
67

 
216

 
283

TOTAL EXPENSES
416

 
(4
)
 
412

 
518

 
930

Gains (losses) and other income (expense), net
5

 
(2
)
 
3

 
1

 
4

Interest expense
(7
)
 
(1
)
 
(8
)
 
(4
)
 
(12
)
ILG acquisition-related costs

 

 

 
(1
)
 
(1
)
Equity in earnings from unconsolidated entities
1

 
(1
)
 

 

 

Other

 
(1
)
 
(1
)
 
(2
)
 
(3
)
INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS
65

 

 
65

 
47

 
112

Provision for income taxes
(20
)
 

 
(20
)
 
(11
)
 
(31
)
NET INCOME
45

 

 
45

 
36

 
81

Net income attributable to noncontrolling interests
(2
)
 

 
(2
)
 

 
(2
)
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
43

 
$

 
$
43

 
$
36

 
$
79

 
 
 
 
 
 
 
 
 
 
** Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use.
(1) See “Non-GAAP Financial Measures - Combined Financial Information” for basis of presentation.



A-13

MARRIOTT VACATIONS WORLDWIDE CORPORATION
RECONCILIATION OF COMBINED(1) FINANCIAL INFORMATION
EBITDA, ADJUSTED EBITDA AND ADJUSTED DEVELOPMENT MARGIN
THREE MONTHS ENDED MARCH 31, 2018
(In millions)


EBITDA AND ADJUSTED EBITDA
 
Legacy-ILG Reclassified**
 
Legacy-MVW
 
Combined**
Net income attributable to common shareholders
$
43

 
$
36

 
$
79

Interest expense(2)
8

 
4

 
12

Tax provision
20

 
11

 
31

Depreciation and amortization
19

 
6

 
25

EBITDA **
90

 
57

 
147

Share-based compensation expense
6

 
4

 
10

Certain items before provision for income taxes(3),(4)
2

 
2

 
4

Adjusted EBITDA **
$
98

 
$
63

 
$
161

 
 
 
 
 
 
ADJUSTED DEVELOPMENT MARGIN
 
Legacy-ILG Reclassified**
 
Legacy-MVW
 
Combined**
Sale of vacation ownership products
$
122

 
$
175

 
$
297

Less:
 
 
 
 


Cost of vacation ownership products
43

 
46

 
89

Marketing and sales
60

 
105


165

Development margin
19

 
24

 
43

Revenue recognition reportability adjustment

 
8

 
8

Adjusted development margin **
$
19

 
$
32


$
51

Development margin percentage(5)
15.2%
 
13.9%
 
14.5%
Adjusted development margin percentage(5)
15.7%
 
17.4%
 
16.8%
** Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use.
(1) See “Non-GAAP Financial Measures - Combined Financial Information” for basis of presentation.
(2) Interest expense excludes consumer financing interest expense.
(3) Excludes certain items included in depreciation and amortization and share-based compensation.
(4) Legacy-ILG certain items include $2 million of impairments, $1 million of costs related to the ILG Board of Directors’ strategic review, $1 million of other acquisition costs, $1 million of hurricane insurance deductible costs, $1 million of litigation costs, and $1 million of others charges, partially offset by $5 million of foreign currency translation adjustments.
(5) Development margin percentage represents Development margin divided by Sale of vacation ownership products. Adjusted development margin percentage represents Adjusted development margin divided by Sale of vacation ownership products revenue after adjusting for revenue reportability.



A-14

MARRIOTT VACATIONS WORLDWIDE CORPORATION
RECONCILIATION OF COMBINED(1) FINANCIAL INFORMATION
VACATION OWNERSHIP SEGMENT FINANCIAL RESULTS
THREE MONTHS ENDED MARCH 31, 2018
(In millions)
 
Legacy-ILG
 
Reclassifications(1)
 
Legacy-ILG Reclassified**
 
Legacy-MVW
 
Combined**
REVENUES
 
 
 
 
 
 
 
 
 
Sale of vacation ownership products
$
123

 
$
(1
)
 
$
122

 
$
175

 
$
297

Resort Operations revenue
63

 
(63
)
 

 

 

Management fee and other revenue
57

 
(57
)
 

 

 

Resort management and other services

 
50

 
50

 
70

 
120

Rental

 
69

 
69

 
75

 
144

Financing
24

 

 
24

 
35

 
59

Cost reimbursements
44

 
15

 
59

 
216

 
275

TOTAL REVENUES
311

 
13

 
324

 
571

 
895

EXPENSES
 
 
 
 
 
 
 
 
 
Cost of vacation ownership products
39

 
4

 
43

 
46

 
89

Marketing and sales
66

 
(6
)
 
60

 
105

 
165

Cost of service and membership related sales
45

 
(45
)
 

 

 

Resort management and other services

 
27

 
27

 
36

 
63

Cost of sales of rental and ancillary services
43

 
(43
)
 

 

 

Rental

 
46

 
46

 
55

 
101

Financing
8

 
(1
)
 
7

 
11

 
18

General and administrative
26

 
(26
)
 

 

 

Depreciation and amortization
12

 
(4
)
 
8

 
5

 
13

Royalty fee
11

 

 
11

 
15

 
26

Cost reimbursements
44

 
15

 
59

 
216

 
275

TOTAL EXPENSES
294

 
(33
)
 
261

 
489

 
750

Gains and other income, net
7

 
(2
)
 
5

 
1

 
6

Equity in earnings from unconsolidated entities
1

 
(1
)
 

 

 

Other

 
(1
)
 
(1
)
 
(2
)
 
(3
)
SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS
25

 
42

 
67

 
81

 
148

Net income attributable to noncontrolling interests
(2
)
 
2

 

 

 

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
23

 
$
44

 
$
67

 
$
81

 
$
148

 
 
 
 
 
 
 
 
 
 
** Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use.
(1) See “Non-GAAP Financial Measures - Combined Financial Information” for basis of presentation.



A-15

MARRIOTT VACATIONS WORLDWIDE CORPORATION
RECONCILIATION OF COMBINED(1) FINANCIAL INFORMATION
EXCHANGE & THIRD-PARTY MANAGEMENT SEGMENT FINANCIAL RESULTS AND
CORPORATE AND OTHER FINANCIAL RESULTS
THREE MONTHS ENDED MARCH 31, 2018
(In millions)
EXCHANGE & THIRD-PARTY MANAGEMENT
 
Legacy-ILG
 
Reclassifications(1)
 
Legacy-ILG Reclassified**
 
Legacy-MVW
 
Combined**
TOTAL REVENUES
$
171

 
$
(16
)
 
$
155

 
$

 
$
155

TOTAL EXPENSES
(122
)
 
38

 
(84
)
 

 
(84
)
Losses and other expense, net
(2
)
 

 
(2
)
 

 
(2
)
SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS
47

 
22

 
69

 

 
69

Net income attributable to noncontrolling interests

 
(1
)
 
(1
)
 

 
(1
)
SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
47

 
$
21

 
$
68

 
$

 
$
68

 
 
 
 
 
 
 
 
 
 
CORPORATE AND OTHER
 
Legacy-ILG
 
Reclassifications(1)
 
Legacy-ILG Reclassified**
 
Legacy-MVW
 
Combined**
TOTAL REVENUES
$

 
$
4

 
$
4

 
$

 
$
4

TOTAL EXPENSES

 
(67
)
 
(67
)
 
(29
)
 
(96
)
Interest expense
(7
)
 
(1
)
 
(8
)
 
(4
)
 
(12
)
ILG acquisition-related costs

 

 

 
(1
)
 
(1
)
FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS
(7
)
 
(64
)
 
(71
)
 
(34
)
 
(105
)
Provision for income taxes
(20
)
 

 
(20
)
 
(11
)
 
(31
)
Net income attributable to noncontrolling interests

 
(1
)
 
(1
)
 

 
(1
)
FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
(27
)
 
$
(65
)
 
$
(92
)
 
$
(45
)
 
$
(137
)
 
 
 
 
 
 
 
 
 
 
** Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use.
(1) See “Non-GAAP Financial Measures - Combined Financial Information” for basis of presentation.



A-16

MARRIOTT VACATIONS WORLDWIDE CORPORATION
RECONCILIATION OF COMBINED(1) FINANCIAL INFORMATION
SEGMENT ADJUSTED EBITDA AND CORPORATE AND OTHER ADJUSTED FINANCIAL RESULTS
THREE MONTHS ENDED MARCH 31, 2018
(In millions)
VACATION OWNERSHIP
 
Legacy-ILG
 
Reclassifications(1)
 
Legacy-ILG Reclassified**
 
Legacy-MVW
 
Combined**
SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
23

 
$
44

 
$
67

 
$
81

 
$
148

Adjustments:
 
 
 
 
 
 
 
 
 
Depreciation and amortization
12

 
(4
)
 
8

 
5

 
13

Share-based compensation expense
2

 

 
2

 
1

 
3

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

 
(2
)
SEGMENT ADJUSTED EBITDA **
$
36

 
$
38

 
$
74

 
$
88

 
$
162

 
 
 
 
 
 
 
 
 
 
EXCHANGE & THIRD-PARTY MANAGEMENT
 
Legacy-ILG
 
Reclassifications(1)
 
Legacy-ILG Reclassified**
 
Legacy-MVW
 
Combined**
SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
47

 
$
21

 
$
68

 
$

 
$
68

Adjustments:
 
 
 
 
 
 
 
 
 
Depreciation and amortization
8

 

 
8

 

 
8

Share-based compensation expense
4

 
(1
)
 
3

 

 
3

Certain items(3)
3

 
(1
)
 
2

 

 
2

SEGMENT ADJUSTED EBITDA **
$
62

 
$
19

 
$
81

 
$

 
$
81

 
 
 
 
 
 
 
 
 
 
CORPORATE AND OTHER
 
Legacy-ILG
 
Reclassifications(1)
 
Legacy-ILG Reclassified**
 
Legacy-MVW
 
Combined**
FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
(27
)
 
$
(65
)
 
$
(92
)
 
$
(45
)
 
$
(137
)
Less certain items:
 
 
 
 
 
 
 
 
 
ILG acquisition-related costs

 

 

 
1

 
1

ADJUSTED FINANCIAL RESULTS **
$
(27
)
 
$
(65
)
 
$
(92
)
 
$
(44
)
 
$
(136
)
 
 
 
 
 
 
 
 
 
 
** Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use.
(1) See “Non-GAAP Financial Measures - Combined Financial Information” for basis of presentation.
(2) Vacation Ownership Legacy-ILG certain items include $7 million of foreign currency translation adjustments, partially offset by $2 million of impairments, $1 million of other acquisition costs, $1 million of hurricane insurance deductible costs, $1 million of litigation costs, and $1 million of others charges.
(3) Exchange & Third-Party Management Legacy-ILG certain items include $2 million of foreign currency translation adjustments and $1 million of costs related to the ILG Board of Directors’ strategic review.



A-17

MARRIOTT VACATIONS WORLDWIDE CORPORATION
2019 ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS AND ADJUSTED EARNINGS PER SHARE - DILUTED OUTLOOK
(In millions, except per share amounts)
 
Fiscal Year
2019 (low)
 
Fiscal Year
2019 (high)
Net income attributable to common shareholders
$
219

 
$
233

Adjustments to reconcile Net income attributable to common shareholders to Adjusted net income attributable to common shareholders
 
 
 
Certain items(1)
157

 
177

Provision for income taxes on adjustments to net income
(39
)
 
(45
)
Adjusted net income attributable to common shareholders **
$
337

 
$
365

Earnings per share - Diluted(2)
$
4.76

 
$
5.07

Adjusted earnings per share - Diluted ** (2)
$
7.33

 
$
7.94

Diluted shares
46.0

 
46.0

 
(1) Certain items adjustment includes $60 million to $80 million of anticipated ILG acquisition-related costs, $76 million of anticipated purchase price adjustments (including $58 million related to the amortization of intangibles), $26 million of asset impairments, $1 million of litigation settlements and $1 million of other severance costs, partially offset by $7 million of gains and other income.
 
(2) Earnings per share - Diluted, Adjusted earnings per share - Diluted, and Diluted shares outlook includes the impact of share repurchase activity only through May 3, 2019.
 
** Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
2019 ADJUSTED EBITDA OUTLOOK
(In millions)
 
Fiscal Year
2019 (low)
 
Fiscal Year
2019 (high)
Net income attributable to common shareholders
$
219

 
$
233

Interest expense(1)
128

 
128

Tax provision
119

 
125

Depreciation and amortization
142

 
142

EBITDA **
608

 
628

Share-based compensation expense
38

 
38

Certain items(2)
99

 
119

Adjusted EBITDA **
$
745

 
$
785

 
(1) Interest expense excludes consumer financing interest expense.
 
(2) Certain items adjustment includes $60 million to $80 million of anticipated ILG acquisition-related costs, $26 million of asset impairments, $18 million of anticipated purchase price adjustments, $1 million of litigation settlements and $1 million of other severance costs, partially offset by $7 million of gains and other income.
 
** Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use.




A-18

MARRIOTT VACATIONS WORLDWIDE CORPORATION
2019 ADJUSTED FREE CASH FLOW OUTLOOK
(In millions)

 
Fiscal Year
2019 (low)
 
Fiscal Year
2019 (high)
Net cash provided by operating activities
$
286

 
$
311

Capital expenditures for property and equipment (excluding inventory)
(100
)
 
(110
)
Borrowings from securitization transactions
725

 
760

Repayment of debt related to securitizations
(510
)
 
(520
)
Free cash flow **
401

 
441

Adjustments:
 
 
 
Net change in borrowings available from the securitization of eligible vacation ownership notes receivable through the warehouse credit facility(1)
(60
)
 
(45
)
Inventory / other payments associated with capital efficient inventory arrangements
(31
)
 
(31
)
Certain items(2)
100

 
120

Change in restricted cash
(10
)
 
(10
)
Adjusted free cash flow **
$
400

 
$
475


(1) Represents the net change in borrowings available from the securitization of eligible vacation ownership notes receivable through the warehouse credit facility between the 2018 and 2019 year ends.
 
(2) Certain items adjustment includes $60 million to $80 million of anticipated ILG acquisition-related costs, $16 million of litigation settlement payments and $24 million of tax payments related to Legacy-ILG prior to the acquisition and delayed 2018 payments due to the hurricanes.
 
** Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use.




A-19

MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED BALANCE SHEETS
(In millions, except share and per share data)
(Unaudited)
 
 
March 31, 2019
 
December 31, 2018
ASSETS
 
 
 
Cash and cash equivalents
$
222

 
$
231

Restricted cash (including $65 and $69 from VIEs, respectively)
356

 
383

Accounts receivable, net (including $11 and $11 from VIEs, respectively)
277

 
324

Vacation ownership notes receivable, net (including $1,645 and $1,627 from VIEs, respectively)
2,055

 
2,039

Inventory
910

 
863

Property and equipment
848

 
951

Goodwill
2,828

 
2,828

Intangibles, net
1,092

 
1,107

Other (including $31 and $26 from VIEs, respectively)
524

 
292

TOTAL ASSETS
$
9,112

 
$
9,018

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Accounts payable
$
168

 
$
245

Advance deposits
128

 
113

Accrued liabilities (including $2 and $2 from VIEs, respectively)
520

 
423

Deferred revenue
437

 
319

Payroll and benefits liability
172

 
211

Deferred compensation liability
100

 
93

Securitized debt, net (including $1,699 and $1,706 from VIEs, respectively)
1,688

 
1,694

Debt, net
2,201

 
2,124

Other
15

 
12

Deferred taxes
332

 
318

TOTAL LIABILITIES
5,761

 
5,552

Contingencies and Commitments (Note 11)
 
 
 
Preferred stock — $0.01 par value; 2,000,000 shares authorized; none issued or outstanding

 

Common stock — $0.01 par value; 100,000,000 shares authorized; 57,839,682 and 57,626,462 shares issued, respectively
1

 
1

Treasury stock — at cost; 12,857,638 and 11,633,731 shares, respectively
(895
)
 
(790
)
Additional paid-in capital
3,717

 
3,721

Accumulated other comprehensive income
4

 
6

Retained earnings
519

 
523

TOTAL MVW SHAREHOLDERS' EQUITY
3,346

 
3,461

Noncontrolling interests
5

 
5

TOTAL EQUITY
3,351

 
3,466

TOTAL LIABILITIES AND EQUITY
$
9,112

 
$
9,018

The abbreviation VIEs above means Variable Interest Entities.


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MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
Three Months Ended
 
March 31, 2019
 
March 31, 2018
OPERATING ACTIVITIES
 
 
 
Net income
$
24

 
$
36

Adjustments to reconcile net income to net cash, cash equivalents and restricted cash provided by operating activities:
 
 
 
Depreciation and amortization of intangibles
37

 
6

Amortization of debt discount and issuance costs
5

 
4

Vacation ownership notes receivable reserve
20

 
9

Share-based compensation
7

 
4

Impairment charges
26

 

Deferred income taxes
5

 
7

Net change in assets and liabilities, net of the effects of acquisition:
 
 
 
Accounts receivable
2

 
29

Vacation ownership notes receivable originations
(194
)
 
(105
)
Vacation ownership notes receivable collections
154

 
79

Inventory
39

 
1

Other assets
(99
)
 
(25
)
Accounts payable, advance deposits and accrued liabilities
(83
)
 
(42
)
Deferred revenue
117

 
45

Payroll and benefit liabilities
(41
)
 
(31
)
Deferred compensation liability
6

 
4

Other liabilities
2

 
(1
)
Other, net
1

 
3

Net cash, cash equivalents and restricted cash provided by operating activities
28

 
23

INVESTING ACTIVITIES
 
 
 
Capital expenditures for property and equipment (excluding inventory)
(10
)
 
(3
)
Proceeds from collection of notes receivable
38

 

Purchase of company owned life insurance
(1
)
 
(9
)
Net cash, cash equivalents and restricted cash provided by (used in) investing activities
27

 
(12
)
FINANCING ACTIVITIES
 
 
 
Borrowings from securitization transactions
124

 

Repayment of debt related to securitization transactions
(133
)
 
(86
)
Proceeds from debt
125

 

Repayments of debt
(52
)
 

Debt issuance costs

 
(1
)
Repurchase of common stock
(106
)
 
(2
)
Payment of dividends
(41
)
 
(21
)
Payment of withholding taxes on vesting of restricted stock units
(9
)
 
(9
)
Net cash, cash equivalents and restricted cash used in financing activities
(92
)
 
(119
)
Effect of changes in exchange rates on cash, cash equivalents and restricted cash
1

 
2

Decrease in cash, cash equivalents and restricted cash
(36
)
 
(106
)
Cash, cash equivalents and restricted cash, beginning of period
614

 
491

Cash, cash equivalents and restricted cash, end of period
$
578

 
$
385



A-21


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 by GAAP. We discuss our reasons for reporting these non-GAAP financial measures below, and the financial schedules included herein 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 attributable to common shareholders, 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.
Certain Items Excluded from Adjusted Net Income Attributable to Common Shareholders, Adjusted EBITDA and Adjusted Development Margin
We evaluate non-GAAP financial measures, including Adjusted Net Income attributable to common shareholders, Adjusted EBITDA and Adjusted Development Margin, that exclude certain items in the quarters ended March 31, 2019 and March 31, 2018, because these non-GAAP financial measures allow for period-over-period comparisons of our on-going core operations before the impact of these items. These non-GAAP financial measures also facilitate our comparison of results from our on-going core operations before these items with results from other vacation ownership companies.
Certain items - Quarter Ended March 31, 2019
In our Statement of Income for the quarter ended March 31, 2019, we recorded $61 million of net pre-tax items, which included $26 million of ILG acquisition-related costs, $26 million of asset impairments, $1 million of litigation settlements, $1 million of other severance costs and $15 million of purchase accounting adjustments (of which $1 million impacted adjusted EBITDA ), partially offset by $8 million of gains and other income.
Certain items - Quarter Ended March 31, 2018
In our Statement of Income for the quarter ended March 31, 2018, we recorded $2 million of net pre-tax items, which included $3 million of acquisition costs, including $2 million of acquisition costs associated with the then anticipated future capital efficient acquisition of the operating property in San Francisco and $1 million of other acquisition costs, partially offset by $1 million favorable true up of previously recorded costs associated with Hurricane Irma and Hurricane Maria (recorded in Gains and other income).
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 may include adjustments for certain items as itemized in the discussion in the preceding paragraph. 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 Expense, Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted EBITDA
EBITDA is defined as earnings, or net income attributable to common shareholders, before interest expense (excluding consumer financing interest expense), provision for income taxes, depreciation and amortization. For purposes of our EBITDA and Adjusted EBITDA calculations, we do not adjust for consumer financing interest expense because we consider it to be an operating expense of our business. We consider EBITDA and Adjusted EBITDA to be indicators of operating performance, which we use to measure our ability to service debt, fund capital expenditures and expand our business. We also use EBITDA and Adjusted EBITDA, as do analysts, lenders, investors and others, because these measures exclude 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 and Adjusted EBITDA


A-22

also exclude 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 reflects additional adjustments for certain items, as itemized in the discussion of Adjusted Net Income Attributable to Common Shareholders above, and excludes 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. Prior period presentation has been recast for consistency. 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 the excluded 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.
Free Cash Flow and Adjusted Free Cash Flow
We evaluate Free Cash Flow and Adjusted Free Cash Flow as liquidity measures that provide 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, which cash can be used for strategic opportunities, including acquisitions and strengthening the balance sheet. Adjusted Free Cash Flow, which reflects additional adjustments to Free Cash Flow for the impact of acquisition, litigation and other cash charges, allows for period-over-period comparisons of the cash generated by our business before the impact of these items. Analysis of Free Cash Flow and Adjusted Free Cash Flow also facilitates management’s comparison of our results with our competitors’ results.
Combined Debt to Adjusted EBITDA Ratio
We calculate combined debt to adjusted EBITDA ratio by dividing net debt by combined adjusted EBITDA, where net debt represents total debt less securitized debt, gross notes eligible for securitization at the end of such period at an estimated 85% advance rate, and cash and cash equivalents other than an estimated $150 million for working capital requirements, and combined adjusted EBITDA is derived by combining the second and third quarters of 2018 adjusted EBITDA for Legacy-MVW and Legacy-ILG with the fourth quarter of 2018 and the first quarter of 2019 adjusted EBITDA for MVW, and adding $87 million of additional cost synergies.
Combined Financial Information
The unaudited combined financial information presented herein combines Legacy-MVW and Legacy-ILG results of operation for the quarter ended March 31, 2018, and is presented to facilitate comparisons with our results following the acquisition of ILG. We evaluate the combined financial information, and believe it provides useful information to investors, because it provides for a more meaningful comparison of our results following the acquisition of ILG with the results of the combined businesses for the prior year comparable period. The combined financial information for the quarter ended March 31, 2018 was derived by combining the Legacy-MVW and Legacy-ILG financial results for such quarter included in the Quarterly Reports on Form 10-Q filed by MVW and ILG, respectively, with the Securities and Exchange Commission (the “SEC”) on May 4, 2018. Prior to combining the financial information, Legacy-ILG’s financial results were reclassified to conform with MVW’s current year financial statement presentation, referred to as “Legacy-ILG Reclassified” in the financial schedules. No other adjustments have been made to the Legacy-MVW or Legacy-ILG results to derive the combined financial information. The combined financial information is provided for informational purposes only and is not intended to represent or to be indicative of the actual results of operations that the combined MVW and ILG business would have reported had the ILG acquisition been completed prior to the beginning of fiscal year 2018 and should not be taken as being indicative of future combined results of operations. The actual results may differ significantly from those reflected in the combined financial information.
Adjusted Financial Information
The unaudited adjusted financial information for the quarter ended March 31, 2019 included in the Reconciliation of Adjusted Financial Information and the Reconciliation of Vacation Ownership Segment Interim Adjusted Financial Results was derived by subtracting the Legacy-ILG results of operation for such quarter from MVW’s results of operation for the quarter and is presented to facilitate comparisons of Legacy-MVW results following the acquisition of ILG. We evaluate the adjusted financial information, and believe it provides useful information to investors, because it provides for a more meaningful comparison of Legacy-MVW results following the acquisition of ILG with Legacy-MVW results for the prior year comparable period.