Marriott Vacations Worldwide Reports First Quarter 2012 Financial Results

ORLANDO, Fla., May 3, 2012 /PRNewswire/ -- Today, Marriott Vacations Worldwide Corporation (NYSE: VAC), the leading global pure-play vacation ownership company, reported first quarter 2012 financial results and reaffirmed the company's full-year outlook for 2012 based upon positive trends in important North America metrics to date.

First Quarter 2012 highlights include:

• North America segment gross contract sales increased 18 percent to $130 million.
• Volume per guest (VPG) in the North America segment increased 18 percent year-over-year to $2,942.
• Total gross contract sales increased 6 percent to $154 million.
• Total revenues were $372 million, including $146 million from rentals, resort management and other services and financing.
• Adjusted EBITDA (earnings before interest expense, taxes, depreciation and amortization), as adjusted for organizational and separation related costs totaled $29 million. 
• Real estate inventory balance declined by $27 million in the first quarter.
• Adjusted fully diluted earnings per share (EPS) in the first quarter was $0.27.

First quarter 2012 reported net income totaled $9 million, or $0.24 a share, compared to reported net income of $19 million in the first quarter of 2011. First quarter 2012 adjusted net income totaled $10 million, flat to adjusted net income on a pro forma basis for the first quarter of 2011. Adjustments are shown on schedule A-1 and described in further detail on schedule A-11. First quarter 2012 adjusted results exclude $2 million of pre-tax organizational and separation related costs. First quarter 2011 adjusted results include $17 million of pre-tax pro forma adjustments to reflect the company's position as if it were a standalone, public company since the beginning of 2011 rather than from the actual spin-off date in November 2011, as well as $2 million of legal related charges and severance costs.

"We're pleased to report our first full quarter as a newly independent company shows 2012 is off to a strong start. Double-digit growth in both VPG and contract sales in North America demonstrated solid marketing and sales execution," said Stephen P. Weisz, president and chief executive officer. "We also made significant progress toward improving our margin on the sale of vacation ownership products, or what we call development margin, and are well on our way toward our targeted development margin of over 12 percent for the year. This demonstrates the leverage in our business model and the progress we have made on this key strategic initiative." 

Weisz continued, "Our contract sales growth in North America underscores the strong value proposition of our Marriott Vacation Club Destinations program. Coupled with our focus on our cost structure, we are confident in the outlook for the balance of 2012. Given our first quarter growth came from North America, our largest and most profitable segment, we believe it is more likely that we will perform toward the higher end of our 2012 guidance range."

First Quarter 2012 Results

For the first quarter, which ended March 23, 2012, total revenues were $372 million, including $86 million in cost reimbursements. Total revenues increased $1 million from the 2011 first quarter reflecting higher rental revenues, cost reimbursements and resort management and other services revenues. These increases were partially offset by lower revenue from the sale of vacation ownership products primarily due to revenue reportability and lower financing revenues from lower interest income on a declining notes receivable portfolio.

While company-owned gross contract sales increased $13 million in the first quarter, revenue from the sale of vacation ownership products of $134 million declined 6 percent from the prior year quarter due to $20 million of revenue reportability and $2 million of higher notes receivable reserve activity resulting primarily from higher contract sales volumes. The $20 million of revenue reportability was driven by $9 million of favorable revenue reportability in the first quarter of 2011, due to year-end 2010 sales associated with the launch of the company's Marriott Vacation Club Destinations program that were recognized during the first quarter of 2011, and $11 million of unfavorable revenue reportability in the current year quarter from strong contract sales growth that resulted in an increase in contract sales in rescission periods at the end of the quarter. The impact of revenue reportability on the first quarter results for both 2012 and 2011 is illustrated on schedules A-7 (total company) and A-8 (North America) attached.

Total gross contract sales, excluding the impact of contract cancellation allowances and reversals, totaled $154 million, a 6 percent increase from $145 million in gross contract sales in the first quarter of 2011, driven by an 18 percent increase in contract sales in the North America segment, partially offset by lower contract sales in the Europe, Luxury and Asia Pacific segments. Revenues from the sale of vacation ownership products, net of expenses, were $12 million, $5 million lower than the first quarter of 2011 on an adjusted basis and $3 million lower than the first quarter of 2011 on an as reported basis, primarily from the impact of revenue reportability. 

Rental revenues totaled $56 million, a 14 percent increase from the first quarter of 2011, reflecting higher demand for rental inventory with transient keys rented up 4 percent company-wide. Combined with higher revenues from Plus Points, one time use points provided as incentives, the company generated $8 million of rental revenue net of expenses, a $6 million increase from the first quarter of 2011.  

Resort management and other services revenues totaled $54 million, a 6 percent increase over the 2011 period, reflecting higher management fees, higher annual club dues in connection with the company's Marriott Vacation Club Destinations program and higher ancillary revenues from food and beverage and golf operations. The company generated $10 million of resort management and other services revenues, net of expenses, a $3 million increase from the first quarter of 2011. 

Adjusted net income of $10 million was flat in the first quarter of 2012 compared to adjusted net income on a pro forma basis of $10 million in the first quarter of 2011.   

Adjusted EBITDA, as adjusted for organizational and separation related costs, was $29 million in the first quarter of 2012, an increase of $1 million from Adjusted EBITDA on an as adjusted pro forma basis of $28 million in the 2011 quarter. First quarter 2012 reported net income totaled $9 million compared to reported net income of $19 million in the first quarter of 2011.   

Segment Results

North America

Total North America contract sales increased $20 million, or 18 percent, to $130 million. VPG increased 18 percent to $2,942 in the first quarter of 2012 from $2,493 in the first quarter of 2011, driven by across the board improvements in closing efficiency, price and volume per contract.

First quarter 2012 North America segment results increased $6 million to $72 million from $66 million in adjusted segment results on a pro forma basis in the first quarter of 2011. The increase was primarily driven by $5 million of higher rental revenues net of expenses, $4 million of higher resort management and other services revenues net of expenses and $1 million of higher other revenues net of expenses.  These increases were partially offset by $4 million of lower financing revenues net of expenses from a declining notes receivable portfolio. North America segment reported financial results increased to $72 million in the first quarter of 2012, $4 million higher than the first quarter of 2011.

Asia Pacific

Asia Pacific contract sales declined $2 million to $13 million. Total revenues in this segment declined $2 million to $18 million reflecting lower revenues from the sale of vacation ownership products. As a result, first quarter 2012 segment results were $1 million, $2 million lower than the first quarter of 2011.

Luxury and Europe

As inventory in the Luxury and Europe segments continues to decline, consistent with the strategy stated for these segments, first quarter 2012 gross contract sales declined to $11 million. Adjusted segment results for Luxury and Europe declined $1 million to a loss of $4 million in the first quarter of 2012.  Luxury and Europe combined segment reported financial results improved $1 million to a loss of $4 million in the first quarter of 2012. 

Balance Sheet and Liquidity

On March 23, 2012, cash and cash equivalents totaled $77 million. During the 2012 first quarter, real estate inventory balances declined $27 million to $926 million, including $519 million of finished goods, $115 million of work-in-process and $292 million of land and infrastructure. The company had $774 million in corporate level debt outstanding at quarter-end, a decline of $76 million from year-end 2011, including $662 million in non-recourse securitized notes receivable and $109 million drawn on its $300 million warehouse credit facility. In addition, the company had $195 million in available capacity under its revolving credit facility. Given the amount of cash on hand, the company did not draw down on its warehouse credit facility during the quarter and had $79 million of notes that were eligible for securitization on March 23, 2012.

Outlook

For the full year 2012, the company is reaffirming its guidance previously provided on March 15, 2012 as follows:

• Total gross contract sales growth of 4 percent to 8 percent
• Adjusted EBITDA of $115 million to $125 million
• Net income of $37 million to $43 million
• Fully diluted earnings per share of $1.03 to $1.17
• Adjusted Free Cash Flow of $85 million to $100 million

See schedule A-11 for a reconciliation of Adjusted EBITDA, Adjusted free cash flow and other non-GAAP financial measures.

First Quarter 2012 Earnings Conference Call

The company will hold a conference call at 10:00 AM EDT today to discuss these results. Participants may access the call by dialing (866) 225-8754 or (480) 629-9866 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 (800) 406-7325 or (303) 590-3030 for international callers. The replay passcode is 4532362. The webcast will also be available on the company's website for 90 days following the call.

About Marriott Vacations Worldwide Corporation

Marriott Vacations Worldwide Corporation is the leading global pure-play vacation ownership company. Through a spin-off in late 2011, Marriott Vacations Worldwide was established as an independent, public company focusing primarily on vacation ownership experiences. 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. Marriott Vacations Worldwide offers a diverse portfolio of quality products, programs and management expertise with more than 60 resorts and more than 420,000 Owners and Members. Its brands include: Marriott Vacation Club, The Ritz-Carlton Destination Club and Grand Residences by Marriott. 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 earnings trends, estimates, and assumptions, and similar statements concerning anticipated future events and expectations that are not historical facts. We caution 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 Information Statement filed as an exhibit to our Annual Report  on Form 10-K for the year ended December 30, 2011 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 presentation. These statements are made as of May 3, 2012 and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

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