Marriott Vacations Worldwide Reports First Quarter Financial Results
"Our first quarter results were in-line with our expectations as we continue our journey to execute our long term growth strategies," said
First quarter 2016 highlights:
- Adjusted fully diluted earnings per share (EPS) was
$0.87 , up 2.4 percent from$0.85 in the first quarter of 2015. - Adjusted EBITDA totaled
$51.6 million , a decrease of$8.6 million year-over-year. - Company vacation ownership contract sales (which exclude residential sales) were
$153.5 million , down 9.7 percent year-over-year.North America vacation ownership contract sales were$139.7 million , down 10.5 percent year-over-year. - Financing revenues, net of expenses and consumer financing interest expense, were
$19.2 million , a$1.1 million , or 6.1 percent, increase from the first quarter of 2015. - Adjusted resort management and other services revenues, net of expenses, totaled
$23.6 million , a$1.6 million , or 7.4 percent, increase from the first quarter of 2015. - During the first quarter of 2016, the company repurchased over 1.3 million shares of its common stock for
$73.2 million . - The company completed the acquisition of an operating property located in the South Beach area of
Miami Beach for$23.5 million for future use in itsMarriott Vacation Club Destinations program.
First quarter 2016 net income was
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-12 of the Financial Schedules that follow.
First Quarter 2016 Results
Company Results
Total company vacation ownership contract sales were
Adjusted development margin was
Excluding the results of operations for the portion of the Surfers Paradise,
Excluding the results of operations for the portion of the Surfers Paradise,
Financing revenues totaled
General and administrative expenses were
Adjusted EBITDA was
Segment Results
Total tours in the first quarter of 2016 decreased 4.0 percent, driven by a decline in owner tours, which were down nearly 7 percent year-over-year. VPG decreased 3.9 percent to
First quarter 2016 North America adjusted segment financial results were
Adjusted development margin was
Total vacation ownership contract sales in the segment were
First quarter 2016 contract sales were
Share Repurchase Program and Dividends
During the first quarter of 2016, the company repurchased over 1.3 million shares of its common stock for a total of
Balance Sheet and Liquidity
On
As of
Outlook
The company is reaffirming the following guidance for the full year 2016:
Adjusted EBITDA |
|
|
Adjusted fully diluted EPS |
|
|
Adjusted net income |
|
|
Adjusted free cash flow |
|
|
Company contract sales growth |
4 percent to 8 percent |
Pages A-1 through A-12 of the Financial Schedules reconcile the non-GAAP financial measures set forth above to the following full year 2016 expected GAAP results: net income of
First Quarter 2016 Earnings Conference Call
The company will hold a conference call at
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 13633825. The webcast will also be available on the company's website.
About
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.
Financial Schedules Follow
| |
FINANCIAL SCHEDULES | |
QUARTER 1, 2016 | |
TABLE OF CONTENTS | |
Consolidated Statements of Income - 12 Weeks Ended |
A-1 |
North America Segment Financial Results - 12 Weeks Ended |
A-2 |
Asia Pacific Segment Financial Results - 12 Weeks Ended |
A-3 |
Europe Segment Financial Results - 12 Weeks Ended |
A-4 |
Corporate and Other Financial Results - 12 Weeks Ended |
A-5 |
Consolidated Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin |
|
(Adjusted Sale of Vacation Ownership Products Net of Expenses) - 12 Weeks Ended |
A-6 |
North America Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin |
|
(Adjusted Sale of Vacation Ownership Products Net of Expenses) - 12 Weeks Ended |
A-7 |
EBITDA and Adjusted EBITDA - 12 Weeks Ended |
A-8 |
2016 Outlook - Adjusted Net Income, Adjusted Earnings Per Share - Diluted and Adjusted EBITDA |
A-9 |
2016 Outlook - Adjusted Free Cash Flow and Normalized Adjusted Free Cash Flow |
A-10 |
Non-GAAP Financial Measures |
A-11 |
Consolidated Balance Sheets |
A-13 |
Consolidated Statements of Cash Flows |
A-14 |
A-1 |
|||||||||||||||||||
|
|||||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME |
|||||||||||||||||||
12 Weeks Ended |
|||||||||||||||||||
(In thousands, except per share amounts) |
|||||||||||||||||||
As Reported |
As Adjusted |
As Reported |
As Adjusted |
||||||||||||||||
12 Weeks Ended |
Certain |
12 Weeks Ended |
12 Weeks Ended |
Certain |
12 Weeks Ended |
||||||||||||||
|
Items |
|
** |
|
Items |
|
** |
||||||||||||
Revenues |
|||||||||||||||||||
Sale of vacation ownership products |
$ 138,369 |
$ - |
$ 138,369 |
$ 183,906 |
$ (28,420) |
$ 155,486 |
|||||||||||||
Resort management and other services |
69,629 |
(1,736) |
67,893 |
64,417 |
- |
64,417 |
|||||||||||||
Financing |
29,224 |
- |
29,224 |
29,052 |
- |
29,052 |
|||||||||||||
Rental |
80,288 |
(2,056) |
78,232 |
76,199 |
- |
76,199 |
|||||||||||||
Cost reimbursements |
107,533 |
- |
107,533 |
101,306 |
- |
101,306 |
|||||||||||||
Total revenues |
425,043 |
(3,792) |
421,251 |
454,880 |
(28,420) |
426,460 |
|||||||||||||
Expenses |
|||||||||||||||||||
Cost of vacation ownership products |
35,617 |
- |
35,617 |
64,962 |
(21,583) |
43,379 |
|||||||||||||
Marketing and sales |
78,412 |
- |
78,412 |
79,995 |
(922) |
79,073 |
|||||||||||||
Resort management and other services |
45,797 |
(1,548) |
44,249 |
42,409 |
- |
42,409 |
|||||||||||||
Financing |
4,629 |
- |
4,629 |
4,905 |
- |
4,905 |
|||||||||||||
Rental |
64,660 |
(2,060) |
62,600 |
60,158 |
- |
60,158 |
|||||||||||||
General and administrative |
25,297 |
- |
25,297 |
22,777 |
- |
22,777 |
|||||||||||||
Organizational and separation related |
- |
- |
- |
192 |
(192) |
- |
|||||||||||||
Reversal of litigation expense |
(303) |
303 |
- |
(262) |
262 |
- |
|||||||||||||
Consumer financing interest |
5,362 |
- |
5,362 |
6,021 |
- |
6,021 |
|||||||||||||
Royalty fee |
13,357 |
- |
13,357 |
13,000 |
- |
13,000 |
|||||||||||||
Cost reimbursements |
107,533 |
- |
107,533 |
101,306 |
- |
101,306 |
|||||||||||||
Total expenses |
380,361 |
(3,305) |
377,056 |
395,463 |
(22,435) |
373,028 |
|||||||||||||
Gains and other income |
7 |
(7) |
- |
887 |
(887) |
- |
|||||||||||||
Interest expense |
(1,982) |
- |
(1,982) |
(2,974) |
- |
(2,974) |
|||||||||||||
Other |
(2,542) |
2,570 |
28 |
13 |
- |
13 |
|||||||||||||
Income before income taxes |
40,165 |
2,076 |
42,241 |
57,343 |
(6,872) |
50,471 |
|||||||||||||
Provision for income taxes |
(15,757) |
(779) |
(16,536) |
(23,289) |
975 |
(22,314) |
|||||||||||||
Net income |
$ 24,408 |
$ 1,297 |
$ 25,705 |
$ 34,054 |
$ (5,897) |
$ 28,157 |
|||||||||||||
Earnings per share - Basic |
$ 0.84 |
$ 0.88 |
$ 1.05 |
$ 0.87 |
|||||||||||||||
Earnings per share - Diluted |
$ 0.82 |
$ 0.87 |
$ 1.03 |
$ 0.85 |
|||||||||||||||
Basic Shares |
29,123 |
29,123 |
32,299 |
32,299 |
|||||||||||||||
Diluted Shares |
29,640 |
29,640 |
33,009 |
33,009 |
|||||||||||||||
As Reported |
As Reported |
||||||||||||||||||
12 Weeks Ended |
12 Weeks Ended |
||||||||||||||||||
|
|
||||||||||||||||||
Contract Sales |
|||||||||||||||||||
Vacation ownership |
$ 153,494 |
$ 169,950 |
|||||||||||||||||
Residential products |
- |
28,420 |
|||||||||||||||||
Total contract sales |
$ 153,494 |
$ 198,370 |
|||||||||||||||||
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 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 | ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
12 Weeks Ended | ||||||||||||||||||
(In thousands) | ||||||||||||||||||
As Reported |
As Adjusted |
As Reported |
As Adjusted |
|||||||||||||||
12 Weeks Ended |
Certain |
12 Weeks Ended |
12 Weeks Ended |
Certain |
12 Weeks Ended |
|||||||||||||
|
Items |
|
** |
|
Items |
|
** | |||||||||||
Revenues |
||||||||||||||||||
Sale of vacation ownership products |
$ 124,684 |
$ - |
$ 124,684 |
$ 141,728 |
$ - |
$ 141,728 |
||||||||||||
Resort management and other services |
61,665 |
- |
61,665 |
58,575 |
- |
58,575 |
||||||||||||
Financing |
27,408 |
- |
27,408 |
27,056 |
- |
27,056 |
||||||||||||
Rental |
72,508 |
- |
72,508 |
71,715 |
- |
71,715 |
||||||||||||
Cost reimbursements |
99,182 |
- |
99,182 |
92,854 |
- |
92,854 |
||||||||||||
Total revenues |
385,447 |
- |
385,447 |
391,928 |
- |
391,928 |
||||||||||||
Expenses |
||||||||||||||||||
Cost of vacation ownership products |
30,662 |
- |
30,662 |
40,501 |
- |
40,501 |
||||||||||||
Marketing and sales |
68,315 |
- |
68,315 |
69,017 |
- |
69,017 |
||||||||||||
Resort management and other services |
38,152 |
- |
38,152 |
36,968 |
- |
36,968 |
||||||||||||
Rental |
55,956 |
- |
55,956 |
54,611 |
- |
54,611 |
||||||||||||
Organizational and separation related |
- |
- |
- |
139 |
(139) |
- |
||||||||||||
Reversal of litigation expense |
(303) |
303 |
- |
(262) |
262 |
- |
||||||||||||
Royalty fee |
1,686 |
- |
1,686 |
1,260 |
- |
1,260 |
||||||||||||
Cost reimbursements |
99,182 |
- |
99,182 |
92,854 |
- |
92,854 |
||||||||||||
Total expenses |
293,650 |
303 |
293,953 |
295,088 |
123 |
295,211 |
||||||||||||
Gains and other income |
7 |
(7) |
- |
880 |
(880) |
- |
||||||||||||
Other |
(2,280) |
2,308 |
28 |
16 |
- |
16 |
||||||||||||
Segment financial results |
$ 89,524 |
$ 1,998 |
$ 91,522 |
$ 97,736 |
$ (1,003) |
$ 96,733 |
||||||||||||
As Reported |
As Reported |
|||||||||||||||||
12 Weeks Ended |
12 Weeks Ended |
|||||||||||||||||
|
|
|||||||||||||||||
Contract Sales |
||||||||||||||||||
Vacation ownership |
$ 139,650 |
$ 155,993 |
||||||||||||||||
Total contract sales |
$ 139,650 |
$ 155,993 |
||||||||||||||||
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
A-3 | ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
12 Weeks Ended | ||||||||||||||||||
(In thousands) | ||||||||||||||||||
As Reported |
As Adjusted |
As Reported |
As Adjusted |
|||||||||||||||
12 Weeks Ended |
Certain |
12 Weeks Ended |
12 Weeks Ended |
Certain |
12 Weeks Ended |
|||||||||||||
|
Items |
|
** |
|
Items |
|
** | |||||||||||
Revenues |
||||||||||||||||||
Sale of vacation ownership products |
$ 8,525 |
$ - |
$ 8,525 |
$ 36,278 |
$ (28,420) |
$ 7,858 |
||||||||||||
Resort management and other services |
3,497 |
(1,736) |
1,761 |
863 |
- |
863 |
||||||||||||
Financing |
981 |
- |
981 |
1,006 |
- |
1,006 |
||||||||||||
Rental |
5,621 |
(2,056) |
3,565 |
2,352 |
- |
2,352 |
||||||||||||
Cost reimbursements |
873 |
- |
873 |
866 |
- |
866 |
||||||||||||
Total revenues |
19,497 |
(3,792) |
15,705 |
41,365 |
(28,420) |
12,945 |
||||||||||||
Expenses |
||||||||||||||||||
Cost of vacation ownership products |
1,709 |
- |
1,709 |
21,996 |
(21,583) |
413 |
||||||||||||
Marketing and sales |
6,211 |
- |
6,211 |
5,557 |
(922) |
4,635 |
||||||||||||
Resort management and other services |
3,552 |
(1,548) |
2,004 |
850 |
- |
850 |
||||||||||||
Rental |
5,788 |
(2,060) |
3,728 |
2,496 |
- |
2,496 |
||||||||||||
Royalty fee |
146 |
- |
146 |
157 |
- |
157 |
||||||||||||
Cost reimbursements |
873 |
- |
873 |
866 |
- |
866 |
||||||||||||
Total expenses |
18,279 |
(3,608) |
14,671 |
31,922 |
(22,505) |
9,417 |
||||||||||||
Gains and other income |
- |
- |
- |
3 |
(3) |
- |
||||||||||||
Other |
(208) |
208 |
- |
(3) |
- |
(3) |
||||||||||||
Segment financial results |
$ 1,010 |
$ 24 |
$ 1,034 |
$ 9,443 |
$ (5,918) |
$ 3,525 |
||||||||||||
As Reported |
As Reported |
|||||||||||||||||
12 Weeks Ended |
12 Weeks Ended |
|||||||||||||||||
|
|
|||||||||||||||||
Contract Sales |
||||||||||||||||||
Vacation ownership |
$ 9,426 |
$ 8,659 |
||||||||||||||||
Residential products |
- |
28,420 |
||||||||||||||||
Total contract sales |
$ 9,426 |
$ 37,079 |
||||||||||||||||
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
A-4 | ||||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
12 Weeks Ended | ||||||||||||||||||
(In thousands) | ||||||||||||||||||
As Reported |
As Adjusted |
As Reported |
As Adjusted |
|||||||||||||||
12 Weeks Ended |
Certain |
12 Weeks Ended |
12 Weeks Ended |
Certain |
12 Weeks Ended |
|||||||||||||
|
Items |
|
** |
|
Items |
|
** | |||||||||||
Revenues |
||||||||||||||||||
Sale of vacation ownership products |
$ 5,160 |
$ - |
$ 5,160 |
$ 5,900 |
$ - |
$ 5,900 |
||||||||||||
Resort management and other services |
4,467 |
- |
4,467 |
4,979 |
- |
4,979 |
||||||||||||
Financing |
835 |
- |
835 |
990 |
- |
990 |
||||||||||||
Rental |
2,159 |
- |
2,159 |
2,132 |
- |
2,132 |
||||||||||||
Cost reimbursements |
7,478 |
- |
7,478 |
7,586 |
- |
7,586 |
||||||||||||
Total revenues |
20,099 |
- |
20,099 |
21,587 |
- |
21,587 |
||||||||||||
Expenses |
||||||||||||||||||
Cost of vacation ownership products |
1,291 |
- |
1,291 |
852 |
- |
852 |
||||||||||||
Marketing and sales |
3,886 |
- |
3,886 |
5,421 |
- |
5,421 |
||||||||||||
Resort management and other services |
4,093 |
- |
4,093 |
4,591 |
- |
4,591 |
||||||||||||
Rental |
2,916 |
- |
2,916 |
3,051 |
- |
3,051 |
||||||||||||
Royalty fee |
49 |
- |
49 |
76 |
- |
76 |
||||||||||||
Cost reimbursements |
7,478 |
- |
7,478 |
7,586 |
- |
7,586 |
||||||||||||
Total expenses |
19,713 |
- |
19,713 |
21,577 |
- |
21,577 |
||||||||||||
Gains and other income |
- |
- |
- |
4 |
(4) |
- |
||||||||||||
Segment financial results |
$ 386 |
$ - |
$ 386 |
$ 14 |
$ (4) |
$ 10 |
||||||||||||
As Reported |
As Reported |
|||||||||||||||||
12 Weeks Ended |
12 Weeks Ended |
|||||||||||||||||
|
|
|||||||||||||||||
Contract Sales |
||||||||||||||||||
Vacation ownership |
$ 4,418 |
$ 5,298 |
||||||||||||||||
Total contract sales |
$ 4,418 |
$ 5,298 |
||||||||||||||||
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
A-5 | ||||||||||||||||||
| ||||||||||||||||||
CORPORATE AND OTHER | ||||||||||||||||||
12 Weeks Ended | ||||||||||||||||||
(In thousands) | ||||||||||||||||||
As Reported |
As Adjusted |
As Reported |
As Adjusted |
|||||||||||||||
12 Weeks Ended |
Certain |
12 Weeks Ended |
12 Weeks Ended |
Certain |
12 Weeks Ended |
|||||||||||||
|
Items |
|
** |
|
Items |
|
** | |||||||||||
Expenses |
||||||||||||||||||
Cost of vacation ownership products |
$ 1,955 |
$ - |
$ 1,955 |
$ 1,613 |
$ - |
$ 1,613 |
||||||||||||
Financing |
4,629 |
- |
4,629 |
4,905 |
- |
4,905 |
||||||||||||
General and administrative |
25,297 |
- |
25,297 |
22,777 |
- |
22,777 |
||||||||||||
Organizational and separation related |
- |
- |
- |
53 |
(53) |
- |
||||||||||||
Consumer Financing Interest |
5,362 |
- |
5,362 |
6,021 |
- |
6,021 |
||||||||||||
Royalty fee |
11,476 |
- |
11,476 |
11,507 |
- |
11,507 |
||||||||||||
Total expenses |
48,719 |
- |
48,719 |
46,876 |
(53) |
46,823 |
||||||||||||
Interest expense |
(1,982) |
- |
(1,982) |
(2,974) |
- |
(2,974) |
||||||||||||
Other |
(54) |
54 |
- |
- |
- |
- |
||||||||||||
Financial results |
$ (50,755) |
$ 54 |
$ (50,701) |
$ (49,850) |
$ 53 |
$ (49,797) |
||||||||||||
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 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 with Marriott International, consumer financing interest expense, other interest expense and other charges. |
A-6 | |||||||||||||
| |||||||||||||
CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS | |||||||||||||
(In thousands) | |||||||||||||
12 Weeks Ended |
|||||||||||||
|
|
||||||||||||
Contract sales |
|||||||||||||
Vacation ownership |
$ 153,494 |
$ 169,950 |
|||||||||||
Residential products |
- |
28,420 |
|||||||||||
Total contract sales |
153,494 |
198,370 |
|||||||||||
Revenue recognition adjustments: |
|||||||||||||
Reportability1 |
786 |
(1,513) |
|||||||||||
Sales Reserve 2 |
(8,223) |
(8,367) |
|||||||||||
Other 3 |
(7,688) |
(4,584) |
|||||||||||
Sale of vacation ownership products |
$ 138,369 |
$ 183,906 |
|||||||||||
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. |
| ||||||||||||||||||||||||
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 |
|||||||||||||||||||
12 Weeks Ended |
Certain |
Reportability |
12 Weeks Ended |
12 Weeks Ended |
Certain |
Reportability |
12 Weeks Ended |
|||||||||||||||||
|
Items |
Adjustment |
|
** |
|
Items |
Adjustment |
|
** | |||||||||||||||
Sale of vacation ownership products |
$ 138,369 |
$ - |
$ (786) |
$ 137,583 |
$ 183,906 |
$ (28,420) |
$ 1,513 |
$ 156,999 |
||||||||||||||||
Less: |
||||||||||||||||||||||||
Cost of vacation ownership products |
35,617 |
- |
(104) |
35,513 |
64,962 |
(21,583) |
562 |
43,941 |
||||||||||||||||
Marketing and sales |
78,412 |
- |
(82) |
78,330 |
79,995 |
(922) |
105 |
79,178 |
||||||||||||||||
Development margin |
$ 24,340 |
$ - |
$ (600) |
$ 23,740 |
$ 38,949 |
$ (5,915) |
$ 846 |
$ 33,880 |
||||||||||||||||
Development margin percentage1 |
17.6% |
17.3% |
21.2% |
21.6% |
||||||||||||||||||||
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 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-7 | ||||||||||||
| ||||||||||||
| ||||||||||||
(In thousands) | ||||||||||||
12 Weeks Ended | ||||||||||||
|
| |||||||||||
Contract sales |
||||||||||||
Vacation ownership |
$ 139,650 |
$ 155,993 | ||||||||||
Residential products |
- |
- | ||||||||||
Total contract sales |
139,650 |
155,993 | ||||||||||
Revenue recognition adjustments: |
||||||||||||
Reportability1 |
88 |
(3,444) | ||||||||||
Sales Reserve 2 |
(7,406) |
(6,334) | ||||||||||
Other 3 |
(7,648) |
(4,487) | ||||||||||
Sale of vacation ownership products |
$ 124,684 |
$ 141,728 | ||||||||||
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. |
| ||||||||||||||||||||||||||
| ||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Revenue |
Revenue |
|||||||||||||||||||||||||
As Reported |
Recognition |
As Adjusted |
As Reported |
Recognition |
As Adjusted |
|||||||||||||||||||||
12 Weeks Ended |
Certain |
Reportability |
12 Weeks Ended |
12 Weeks Ended |
Certain |
Reportability |
12 Weeks Ended |
|||||||||||||||||||
|
Items |
Adjustment |
|
** |
|
Items |
Adjustment |
|
** | |||||||||||||||||
Sale of vacation ownership products |
$ 124,684 |
$ - |
$ (88) |
$ 124,596 |
$ 141,728 |
$ - |
$ 3,444 |
$ 145,172 |
||||||||||||||||||
Less: |
||||||||||||||||||||||||||
Cost of vacation ownership products |
30,662 |
- |
(24) |
30,638 |
40,501 |
- |
980 |
41,481 |
||||||||||||||||||
Marketing and sales |
68,315 |
- |
(8) |
68,307 |
69,017 |
- |
324 |
69,341 |
||||||||||||||||||
Development margin |
$ 25,707 |
$ - |
$ (56) |
$ 25,651 |
$ 32,210 |
$ - |
$ 2,140 |
$ 34,350 |
||||||||||||||||||
Development margin percentage1 |
20.6% |
20.6% |
22.7% |
23.7% |
||||||||||||||||||||||
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 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-8 |
|||||||||||
|
|||||||||||
EBITDA AND ADJUSTED EBITDA |
|||||||||||
12 Weeks Ended |
|||||||||||
(In thousands) |
|||||||||||
12 Weeks Ended |
|||||||||||
|
|
||||||||||
Net income |
$ 24,408 |
$ 34,054 |
|||||||||
Interest expense 1 |
1,982 |
2,974 |
|||||||||
Tax provision |
15,757 |
23,289 |
|||||||||
Depreciation and amortization |
5,125 |
4,065 |
|||||||||
EBITDA ** |
47,272 |
64,382 |
|||||||||
Non-cash share-based compensation 2 |
2,524 |
2,643 |
|||||||||
Certain items |
1,795 |
(6,872) |
|||||||||
ADJUSTED EBITDA ** |
$ 51,591 |
$ 60,153 |
|||||||||
** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 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, non-cash share-based compensation expense is excluded from our Adjusted EBITDA, and prior period presentation has been recast for consistency. Please see pages A-11 and A-12 for additional information. |
A-9 |
|||||||||
|
|||||||||
2016 ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE - DILUTED OUTLOOK |
|||||||||
(In millions, except per share amounts) |
|||||||||
Fiscal Year |
Fiscal Year |
||||||||
Net income |
$ 123 |
$ 134 |
|||||||
Adjustments to reconcile Net income to Adjusted net income |
|||||||||
Certain items1 |
5 |
4 |
|||||||
Provision for income taxes on adjustments to net income |
(2) |
(2) |
|||||||
Adjusted net income** |
$ 126 |
$ 136 |
|||||||
Earnings per share - Diluted 2 |
$ 4.21 |
$ 4.59 |
|||||||
Adjusted earnings per share - Diluted**, 2 |
$ 4.31 |
$ 4.66 |
|||||||
Diluted shares2 |
29.2 |
29.2 |
|||||||
** Denotes non-GAAP financial measures. Please see pages A-11 through A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use. | |||||||||
1 Certain items adjustment includes approximately | |||||||||
2 Earnings per share - Diluted, Adjusted earnings per share - Diluted, and Diluted shares outlook includes the impact of share repurchase activity only through | |||||||||
|
|||||||||
2016 ADJUSTED EBITDA OUTLOOK |
|||||||||
(In millions) |
|||||||||
Fiscal Year |
Fiscal Year |
||||||||
Adjusted net income ** |
$ 126 |
$ 136 |
|||||||
Interest expense1 |
8 |
8 |
|||||||
Tax provision |
90 |
95 |
|||||||
Depreciation and amortization |
22 |
22 |
|||||||
Non-cash share-based compensation 2 |
15 |
15 |
|||||||
Adjusted EBITDA** |
$ 261 |
$ 276 |
|||||||
** Denotes non-GAAP financial measures. Please see pages A-11 through A-12 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, non-cash share-based compensation expense is excluded from our Adjusted EBITDA, and prior period presentation has been recast for consistency. Please see pages A-11 and A-12 for additional information. |
A-10 | ||||||||||||||||||||
| ||||||||||||||||||||
2016 ADJUSTED FREE CASH FLOW AND NORMALIZED ADJUSTED FREE CASH FLOW OUTLOOK | ||||||||||||||||||||
(In millions) | ||||||||||||||||||||
Current Guidance |
||||||||||||||||||||
Low |
High |
|
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 |
84 |
84 |
84 |
- |
84 |
|||||||||||||||
Deferred income taxes |
30 |
35 |
33 |
- |
33 |
|||||||||||||||
Net changes in assets and liabilities: |
||||||||||||||||||||
Notes receivable originations |
(355) |
(370) |
(363) |
- |
(363) |
|||||||||||||||
Notes receivable collections |
239 |
245 |
242 |
- |
242 |
|||||||||||||||
Inventory |
(10) |
(5) |
(8) |
8 |
4 |
- |
||||||||||||||
Other working capital changes |
22 |
21 |
22 |
- |
22 |
|||||||||||||||
Net cash provided by operating activities |
136 |
146 |
141 |
8 |
149 |
|||||||||||||||
Capital expenditures for property and equipment (excluding inventory): |
||||||||||||||||||||
New sales centers 2 |
(20) |
(18) |
(19) |
19 |
2 |
- |
||||||||||||||
Other |
(24) |
(22) |
(23) |
3 |
5 |
(20) |
||||||||||||||
Decrease in restricted cash |
(5) |
(5) |
(5) |
5 |
6 |
- |
||||||||||||||
Borrowings from securitization transactions |
290 |
292 |
291 |
- |
291 |
|||||||||||||||
Repayment of debt related to securitizations |
(235) |
(233) |
(234) |
- |
(234) |
|||||||||||||||
Free cash flow** |
142 |
160 |
151 |
35 |
186 |
|||||||||||||||
Adjustments: |
||||||||||||||||||||
Net change in borrowings available from the securitization of eligible vacation ownership notes receivable through the warehouse credit facility 3 |
(7) |
(5) |
(6) |
- |
(6) |
|||||||||||||||
Adjusted free cash flow** |
$ 135 |
$ 155 |
$ 145 |
$ 35 |
$ 180 |
|||||||||||||||
** Denotes non-GAAP financial measures. Please see pages A-11 through A-12 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 capital expenditures for property and equipment. | |||||||||||||||||||||||||||||||
6 Represents normalized restricted cash activity. |
A-11 | ||||||||||||||
| ||||||||||||||
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 | ||||||||||||||
Adjusted Net Income. We evaluate non-GAAP financial measures, including Adjusted Net Income, Adjusted EBITDA, and Adjusted Development Margin, that exclude certain items in the 12 weeks ended | ||||||||||||||
Certain items - 12 weeks ended | ||||||||||||||
Certain items - 12 weeks ended | ||||||||||||||
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. |
A-12 |
|||||||||||||||||
|
|||||||||||||||||
NON-GAAP FINANCIAL MEASURES |
|||||||||||||||||
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, 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, as itemized in the discussion of Adjusted Net Income on page A-11. Additionally, beginning with the first quarter of 2016, we 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. 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 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. | |||||||||||||||||
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 |
A-13 | |||||
| |||||
INTERIM CONSOLIDATED BALANCE SHEETS | |||||
(In thousands, except share and per share data) | |||||
(unaudited) |
|||||
|
|
||||
ASSETS |
|||||
Cash and cash equivalents |
$ 106,613 |
$ 177,061 |
|||
Restricted cash (including |
55,252 |
71,451 |
|||
Accounts and contracts receivable, net (including |
131,538 |
131,850 |
|||
Vacation ownership notes receivable, net (including |
908,587 |
920,631 |
|||
Inventory |
715,072 |
669,243 |
|||
Property and equipment |
222,516 |
288,803 |
|||
Other |
191,207 |
140,679 |
|||
Total Assets |
$ 2,330,785 |
$ 2,399,718 |
|||
LIABILITIES AND EQUITY |
|||||
Accounts payable |
$ 80,618 |
$ 139,120 |
|||
Advance deposits |
77,141 |
69,064 |
|||
Accrued liabilities (including |
178,642 |
164,791 |
|||
Deferred revenue |
28,562 |
35,276 |
|||
Payroll and benefits liability |
75,749 |
104,331 |
|||
Liability for |
- |
35 |
|||
Deferred compensation liability |
55,437 |
51,031 |
|||
Mandatorily redeemable preferred stock of consolidated subsidiary, net |
39,029 |
38,989 |
|||
Debt, net (including |
689,234 |
678,793 |
|||
Other |
72,582 |
32,945 |
|||
Deferred taxes |
114,765 |
109,076 |
|||
Total Liabilities |
1,411,759 |
1,423,451 |
|||
Preferred stock - |
- |
- |
|||
Common stock - |
366 |
364 |
|||
|
(503,218) |
(429,990) |
|||
Additional paid-in capital |
1,149,442 |
1,150,731 |
|||
Accumulated other comprehensive income |
12,937 |
11,381 |
|||
Retained earnings |
259,499 |
243,781 |
|||
Total Equity |
919,026 |
976,267 |
|||
Total Liabilities and Equity |
$ 2,330,785 |
$ 2,399,718 |
|||
The abbreviation VIEs above means Variable Interest Entities. |
A-14 | |||||
| |||||
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||
(In thousands) | |||||
(Unaudited) | |||||
12 weeks ended | |||||
|
| ||||
OPERATING ACTIVITIES |
|||||
Net income |
|
| |||
Adjustments to reconcile net income to net cash provided by operating activities: |
|||||
Depreciation |
5,125 |
4,065 | |||
Amortization of debt issuance costs |
1,300 |
1,267 | |||
Provision for loan losses |
8,287 |
8,437 | |||
Share-based compensation |
2,524 |
2,643 | |||
Deferred income taxes |
5,549 |
8,600 | |||
Equity method income |
(28) |
(13) | |||
Gain on disposal of property and equipment, net |
(7) |
(887) | |||
Non-cash reversal of litigation expense |
(303) |
(262) | |||
Net change in assets and liabilities: |
|||||
Accounts and contracts receivable |
21 |
(4,643) | |||
Notes receivable originations |
(57,524) |
(48,946) | |||
Notes receivable collections |
60,532 |
67,518 | |||
Inventory |
(14,970) |
44,883 | |||
Purchase of operating hotels for future conversion to inventory |
- |
(46,614) | |||
Other assets |
(5,285) |
(8,096) | |||
Accounts payable, advance deposits and accrued liabilities |
(27,836) |
(25,064) | |||
Deferred revenue |
(6,785) |
(11,624) | |||
Payroll and benefit liabilities |
(28,586) |
(19,583) | |||
Liability for |
(36) |
(4,474) | |||
Deferred compensation liability |
4,406 |
2,921 | |||
Other liabilities |
39,399 |
27,937 | |||
Other, net |
(313) |
(50) | |||
Net cash provided by operating activities |
9,878 |
32,069 | |||
INVESTING ACTIVITIES |
|||||
Capital expenditures for property and equipment (excluding inventory) |
(6,331) |
(10,562) | |||
Decrease in restricted cash |
16,133 |
47,103 | |||
Dispositions, net |
9 |
197 | |||
Net cash provided by investing activities |
9,811 |
36,738 | |||
FINANCING ACTIVITIES |
|||||
Borrowings from securitization transactions |
51,130 |
- | |||
Repayment of debt related to securitization transactions |
(47,711) |
(78,811) | |||
Proceeds from vacation ownership inventory arrangement |
- |
5,375 | |||
Repurchase of common stock |
(73,228) |
(51,281) | |||
Payment of dividends |
(17,585) |
(8,081) | |||
Proceeds from stock option exercises |
- |
90 | |||
Payment of withholding taxes on vesting of restricted stock units |
(3,864) |
(9,061) | |||
Other |
591 |
80 | |||
Net cash used in financing activities |
(90,667) |
(141,689) | |||
Effect of changes in exchange rates on cash and cash equivalents |
530 |
(1,453) | |||
DECREASE IN CASH AND CASH EQUIVALENTS |
(70,448) |
(74,335) | |||
CASH AND CASH EQUIVALENTS, beginning of period |
177,061 |
346,515 | |||
CASH AND CASH EQUIVALENTS, end of period |
|
|
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