Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) July 23, 2015

Marriott Vacations Worldwide Corporation

(Exact name of registrant as specified in its charter)

 

Delaware   001-35219   45-2598330

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

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

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

N/A

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

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

 

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

 

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

 

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

 

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

 

 

 


Item 2.02 Results of Operations and Financial Condition.

Marriott Vacations Worldwide Corporation (“Marriott Vacations Worldwide”) today issued a press release reporting financial results for the quarter ended June 19, 2015.

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

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit 99.1 Press release dated July 23, 2015, reporting financial results for the quarter ended June 19, 2015.

 

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: July 23, 2015 By:

/s/ John E. Geller, Jr.

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

 

2


EXHIBIT INDEX

 

Exhibit No.

  

Description

99.1    Press release dated July 23, 2015, reporting financial results for the quarter ended June 19, 2015.
EX-99.1

Exhibit 99.1

 

LOGO

Jeff Hansen

Investor Relations

Marriott Vacations Worldwide Corporation

407.206.6149

Jeff.Hansen@mvwc.com

Ed Kinney

Corporate Communications

Marriott Vacations Worldwide Corporation

407.206.6278

Ed.Kinney@mvwc.com

Marriott Vacations Worldwide Reports Second Quarter 2015 Financial Results

ORLANDO, Fla. – July 23, 2015 – Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported second quarter 2015 financial results and provided updated guidance for the full year 2015.

Second quarter 2015 highlights:

 

    Adjusted fully diluted earnings per share (EPS) increased to $0.91, up 4.6 percent from $0.87 in the second quarter of 2014.

 

    Adjusted EBITDA totaled $57.7 million, an increase of $1.0 million, or 2 percent, year-over-year.

 

    North America contract sales were $150.6 million, up 3.4 percent year-over-year.

 

    North America tours increased 1.2 percent year-over-year.

 

    North America volume per guest (VPG) increased 0.6 percent year-over-year to $3,404.

 

    Company adjusted development margin was 21.0 percent and North America adjusted development margin was 23.0 percent.

 

    The company completed the sale of its undeveloped land in Kauai, Hawaii, for gross cash proceeds of $20 million.

 

    During the second quarter of 2015, the company repurchased $15 million of its common stock, bringing total 2015 repurchases through the end of the second quarter to $66.2 million.

 

    Subsequent to the end of the second quarter, the company purchased 71 units in The Mayflower Hotel, Autograph Collection in Washington, D.C.

Second quarter 2015 net income was $34.0 million, or $1.05 diluted EPS, compared to net income of $35.3 million, or $1.00 diluted EPS, in the second quarter of 2014. Company development margin was 21.3 percent and North America development margin was 23.6 percent in the second quarter of 2015.

Non-GAAP financial measures such as adjusted EBITDA, adjusted net income, adjusted earnings per share and adjusted development margin are reconciled and adjustments are shown and described in further detail on pages A-1 through A-19 of the Financial Schedules that follow.

“We’re pleased with our solid second quarter financial results, delivering nearly $58 million of Adjusted EBITDA,” said Stephen P. Weisz, president and chief executive officer. “Our North America contract sales grew 3.4 percent on continued growth in tour volumes and slightly higher VPG and our company development margin remained in line with our full year expectations. With a strong first half of the year behind us, we are reaffirming Adjusted EBITDA guidance of $222 million to $232 million for full year 2015.”


Marriott Vacations Worldwide Reports Second Quarter 2015 Financial Results / 2

 

Second Quarter 2015 Results

Company Results

Total company contract sales were $165.9 million, $1.3 million higher than the second quarter of last year. The increase was driven by $5.0 million of higher contract sales in the company’s North America segment and $0.7 million of higher contract sales in the company’s Asia Pacific segment, partially offset by $4.3 million of lower contract sales in the company’s Europe segment.

Adjusted development margin was $32.3 million, a $4.4 million decrease from the second quarter of 2014. Adjusted development margin percentage was 21.0 percent in the second quarter of 2015 compared to 24.2 percent in the second quarter of 2014. Development margin was $33.1 million, a $3.8 million decrease from the second quarter of 2014. Development margin percentage was 21.3 percent in the second quarter of 2015 compared to 24.2 percent in the second quarter of 2014.

Rental revenues totaled $72.6 million, a $10.8 million increase from the second quarter of 2014, reflecting a 4 percent increase in transient rate and a 6 percent increase in transient keys rented. Rental revenues, net of expenses, were $10.8 million, a $4.0 million increase from the second quarter of 2014.

Resort management and other services revenues totaled $74.1 million, a $0.8 million decrease from the second quarter of 2014. Resort management and other services revenues, net of expenses, were $28.6 million, a $2.1 million, or 8 percent, increase over the second quarter of 2014.

Financing revenues totaled $28.3 million, a $1.5 million decrease from the second quarter of 2014. Financing revenues, net of expenses and consumer financing interest expense, were $17.0 million, a $1.7 million decrease from the second quarter of 2014.

Adjusted EBITDA was $57.7 million in the second quarter of 2015, a $1.0 million, or 1.7 percent, increase from $56.7 million in the second quarter of 2014.

Segment Results

North America

VPG increased 0.6 percent to $3,404 in the second quarter of 2015 from $3,383 in the second quarter of 2014, driven by improved closing efficiency and higher pricing, offset partially by fewer points purchased per contract. North America contract sales were $150.6 million in the second quarter of 2015, an increase of $5.0 million, or 3.4 percent, over the prior year period.

Second quarter 2015 North America segment financial results were $104.6 million, an increase of $2.9 million from the second quarter of 2014. The increase was driven primarily by $8.2 million of higher gains mainly associated with the disposition of the company’s property in Kauai, Hawaii, $4.2 million of higher rental revenues net of expenses, $2.1 million of higher resort management and other services revenues net of expenses and $0.8 million related to an impairment charge in the prior year period. These increases were offset partially by $7.5 million of lower litigation settlements due mainly to the settlement of a dispute with a former service provider in the prior year period, $2.0 million of lower development margin, $2.0 million from the reversal of


Marriott Vacations Worldwide Reports Second Quarter 2015 Financial Results / 3

 

a charge in the prior year period related to the company’s interest in an equity method investment in a joint venture project and $1.5 million of lower financing revenues.

Adjusted development margin was $32.3 million, a $3.0 million decrease from the prior year quarter. Adjusted development margin percentage was 23.0 percent in the second quarter of 2015 compared to 26.3 percent in the second quarter of 2014. Development margin was $33.5 million, a $2.0 million decrease from the second quarter of 2014. Development margin percentage was 23.6 percent in the second quarter of 2015 compared to 26.3 percent in the prior year quarter.

Asia Pacific

Total contract sales in the segment were $8.0 million, an increase of $0.7 million in the second quarter of 2015. Segment financial results were a loss of $0.1 million, a $1.5 million decrease from the second quarter of 2014, reflecting $1.3 million of transaction costs associated with the company’s future new resort and sales distribution in Australia.

Europe

Second quarter 2015 contract sales were $7.3 million, a decrease of $4.3 million from the second quarter of 2014. Segment financial results were $3.0 million, a $2.2 million decrease from the second quarter of 2014 due to lower development margin from lower contract sales.

Share Repurchase Program

In total for 2015, through the end of the second quarter, the company repurchased approximately $66.2 million of its common stock.

Balance Sheet and Liquidity

On June 19, 2015, cash and cash equivalents totaled $250.9 million. Since the beginning of the year, real estate inventory balances declined $69.1 million to $699.1 million, including $335.3 million of finished goods and $363.8 million of land and infrastructure. The company had $568.1 million in gross debt outstanding at the end of the second quarter of 2015, a decrease of $143.3 million from year-end 2014, consisting primarily of $564.7 million in gross non-recourse securitized notes. In addition, $40.0 million of gross mandatorily redeemable preferred stock of a subsidiary of the company was outstanding at the end of the second quarter of 2015.

As of June 19, 2015, the company had approximately $197 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit, and approximately $207 million of gross vacation ownership notes receivable eligible for securitization into its warehouse credit facility.

Outlook

The company is providing the following updated guidance for the full year 2015:

 

    

Current Guidance

  

Previous Guidance

Adjusted free cash flow

   $175 million to $200 million    $145 million to $170 million


Marriott Vacations Worldwide Reports Second Quarter 2015 Financial Results / 4

 

The company is reaffirming the following guidance for the full year 2015:

 

    

Current Guidance

Adjusted EBITDA

   $222 million to $232 million

Company contract sales growth (excluding residential)

   5 percent to 8 percent

Adjusted company development margin

   21 percent to 22 percent

Adjusted net income

   $108 million to $114 million

Adjusted fully diluted earnings per share

   $3.29 to $3.48

Pages A-1 through A-19 of the Financial Schedules reconcile the non-GAAP financial measures set forth above to the following full year 2015 expected GAAP results: net income of $114 million to $121 million; fully diluted EPS of $3.49 to $3.70; company development margin of 21.1 percent to 22.1 percent; and net cash provided by operating activities of $170 million to $185 million.

Second Quarter 2015 Earnings Conference Call

The company will hold a conference call at 10:00 a.m. EST today to discuss these results and the updated guidance for full year 2015. Participants may access the call by dialing (877) 407-8289 or (201) 689-8341 for international callers. A live webcast of the call will also be available in the Investor Relations section of the company’s website at www.marriottvacationsworldwide.com.

An audio replay of the conference call will be available for seven days and can be accessed at (877) 660-6853 or (201) 612-7415 for international callers. The conference ID for the recording is 13613029. The webcast will also be available on the company’s website.

###

About Marriott Vacations Worldwide Corporation

Marriott Vacations Worldwide Corporation is a leading global pure-play vacation ownership company, offering a diverse portfolio of quality products, programs and management expertise with 60 resorts. Its brands include Marriott Vacation Club, The Ritz-Carlton Destination Club and Grand Residences by Marriott. Since entering the industry in 1984 as part of Marriott International, Inc., the company earned its position as a leader and innovator in vacation ownership products. The company preserves high standards of excellence in serving its customers, investors and associates while maintaining a long-term relationship with Marriott International. For more information, please visit www.marriottvacationsworldwide.com.

Note on forward-looking statements: This press release and accompanying schedules contain “forward-looking statements” within the meaning of federal securities laws, including statements about future operating results, estimates, and assumptions, and similar statements concerning anticipated future events and expectations that are not historical facts. The company cautions you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including volatility in the economy and the credit markets, supply and demand changes for vacation ownership and residential products, competitive


Marriott Vacations Worldwide Reports Second Quarter 2015 Financial Results / 5

 

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 July 23, 2015 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 2, 2015

TABLE OF CONTENTS

 

Consolidated Statements of Income - 12 Weeks Ended June 19, 2015 and June 20, 2014

     A-1   

Consolidated Statements of Income - 24 Weeks Ended June 19, 2015 and June 20, 2014

     A-2   

North America Segment Financial Results - 12 Weeks Ended June 19, 2015 and June 20, 2014

     A-3   

North America Segment Financial Results - 24 Weeks Ended June 19, 2015 and June 20, 2014

     A-4   

Asia Pacific Segment Financial Results - 12 Weeks Ended June 19, 2015 and June 20, 2014

     A-5   

Asia Pacific Segment Financial Results - 24 Weeks Ended June 19, 2015 and June 20, 2014

     A-6   

Europe Segment Financial Results - 12 Weeks Ended June 19, 2015 and June 20, 2014

     A-7   

Europe Segment Financial Results - 24 Weeks Ended June 19, 2015 and June 20, 2014

     A-8   

Corporate and Other Financial Results - 12 Weeks and 24 Weeks Ended June 19, 2015 and June 20, 2014

     A-9   

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 June 19, 2015 and June 20, 2014

     A-10   

Consolidated Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin
(Adjusted Sale of Vacation Ownership Products Net of Expenses) - 24 Weeks Ended June 19, 2015 and June 20, 2014

     A-11   

North America Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin
(Adjusted Sale of Vacation Ownership Products Net of Expenses) - 12 Weeks Ended June 19, 2015 and June 20, 2014

     A-12   

North America Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin
(Adjusted Sale of Vacation Ownership Products Net of Expenses) - 24 Weeks Ended June 19, 2015 and June 20, 2014

     A-13   

EBITDA and Adjusted EBITDA - 12 Weeks and 24 Weeks Ended June 19, 2015 and June 20, 2014

     A-14   

2015 Outlook - Adjusted Net Income and Adjusted Earnings Per Share - Diluted, Adjusted EBITDA and Adjusted Development Margin

     A-15   

2015 Outlook - Adjusted Free Cash Flow and Normalized Adjusted Free Cash Flow

     A-16   

Non-GAAP Financial Measures

     A-17   

Consolidated Balance Sheets

     A-20   

Consolidated Statements of Cash Flows

     A-21   


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

12 Weeks Ended June 19, 2015 and June 20, 2014

(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  
     June 19, 2015     Items     June 19, 2015**     June 20, 2014     Items     June 20, 2014**  

Revenues

            

Sale of vacation ownership products

   $ 155,370      $ —        $ 155,370      $ 152,562      $ —        $ 152,562   

Resort management and other services

     74,063        —          74,063        74,821        —          74,821   

Financing

     28,294        —          28,294        29,817        —          29,817   

Rental

     72,642        —          72,642        61,827        —          61,827   

Cost reimbursements

     92,458        —          92,458        90,875        —          90,875   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     422,827        —          422,827        409,902        —          409,902   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

            

Cost of vacation ownership products

     45,119        —          45,119        43,414        —          43,414   

Marketing and sales

     77,137        —          77,137        72,227        (287     71,940   

Resort management and other services

     45,480        —          45,480        48,308        —          48,308   

Financing

     6,085        —          6,085        5,438        —          5,438   

Rental

     61,835        —          61,835        54,991        —          54,991   

General and administrative

     22,892        —          22,892        23,153        —          23,153   

Organizational and separation related

     101        (101     —          1,089        (1,089     —     

Litigation settlement

     26        (26     —          (7,575     7,575        —     

Consumer financing interest

     5,248        —          5,248        5,737        —          5,737   

Royalty fee

     13,431        —          13,431        13,653        —          13,653   

Impairment

     —          —          —          834        (834     —     

Cost reimbursements

     92,458        —          92,458        90,875        —          90,875   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     369,812        (127     369,685        352,144        5,365        357,509   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains and other income

     8,625        (8,625     —          409        (409     —     

Interest Expense

     (3,009     —          (3,009     (2,601     —          (2,601

Equity in earnings

     85        —          85        81        —          81   

Impairment reversals on equity investment

     —          —          —          2,000        (2,000     —     

Other

     (1,272     1,272        —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     57,444        (7,226     50,218        57,647        (7,774     49,873   

Provision for income taxes

     (23,403     2,804        (20,599     (22,344     3,158        (19,186
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 34,041      $ (4,422   $ 29,619      $ 35,303      $ (4,616   $ 30,687   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share - Basic

   $ 1.07        $ 0.93      $ 1.03        $ 0.89   
  

 

 

     

 

 

   

 

 

     

 

 

 

Earnings per share - Diluted

   $ 1.05        $ 0.91      $ 1.00        $ 0.87   
  

 

 

     

 

 

   

 

 

     

 

 

 

Basic Shares

     31,858          31,858        34,292          34,292   

Diluted Shares

     32,517          32,517        35,239          35,239   
     As Reported                 As Reported              
     12 Weeks Ended                 12 Weeks Ended              
     June 19, 2015                 June 20, 2014              

Contract Sales

            

Vacation ownership

   $ 165,938          $ 164,589       

Residential products

     —              —         
  

 

 

       

 

 

     

Total contract sales

   $ 165,938          $ 164,589       
  

 

 

       

 

 

     

 

** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 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. Beginning with the fourth quarter of 2014, we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.

 

A-1


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

24 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands, except per share amounts)

 

    As Reported           As Adjusted     As Reported           As Adjusted  
    24 Weeks Ended     Certain     24 Weeks Ended     24 Weeks Ended     Certain     24 Weeks Ended  
    June 19, 2015     Items     June 19, 2015**     June 20, 2014     Items     June 20, 2014**  

Revenues

           

Sale of vacation ownership products

  $ 339,276      $ (28,420   $ 310,856      $ 297,412      $ —        $ 297,412   

Resort management and other services

    138,480        —          138,480        138,367        —          138,367   

Financing

    57,346        —          57,346        60,457        —          60,457   

Rental

    148,841        —          148,841        125,352        —          125,352   

Cost reimbursements

    193,764        —          193,764        190,261        —          190,261   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    877,707        (28,420     849,287        811,849        —          811,849   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    110,081        (21,583     88,498        90,285        —          90,285   

Marketing and sales

    157,132        (922     156,210        143,447        (287     143,160   

Resort management and other services

    87,889        —          87,889        93,204        200        93,404   

Financing

    10,990        —          10,990        10,542        —          10,542   

Rental

    121,993        —          121,993        111,781        —          111,781   

General and administrative

    45,669        —          45,669        44,981        —          44,981   

Organizational and separation related

    293        (293     —          1,940        (1,940     —     

Litigation settlement

    (236     236        —          (7,575     7,575        —     

Consumer financing interest

    11,269        —          11,269        12,362        —          12,362   

Royalty fee

    26,431        —          26,431        27,081        —          27,081   

Impairment

    —          —          —          834        (834     —     

Cost reimbursements

    193,764        —          193,764        190,261        —          190,261   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    765,275        (22,562     742,713        719,143        4,714        723,857   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains and other income

    9,512        (9,512     —          1,642        (1,642     —     

Interest Expense

    (5,983     —          (5,983     (4,748     —          (4,748

Equity in earnings

    98        —          98        118        —          118   

Other

    (1,272     1,272        —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    114,787        (14,098     100,689        89,718        (6,356     83,362   

Provision for income taxes

    (46,692     3,779        (42,913     (35,107     2,537        (32,570
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 68,095      $ (10,319   $ 57,776      $ 54,611      $ (3,819   $ 50,792   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share - Basic

  $ 2.12        $ 1.80      $ 1.58        $ 1.47   
 

 

 

     

 

 

   

 

 

     

 

 

 

Earnings per share - Diluted

  $ 2.08        $ 1.76      $ 1.54        $ 1.43   
 

 

 

     

 

 

   

 

 

     

 

 

 

Basic Shares

    32,078          32,078        34,583          34,583   

Diluted Shares

    32,760          32,760        35,557          35,557   
    As Reported                 As Reported              
    24 Weeks Ended                 24 Weeks Ended              
    June 19, 2015                 June 20, 2014              

Contract Sales

           

Vacation ownership

  $ 335,888          $ 319,837       

Residential products

    28,420            6,326       
 

 

 

       

 

 

     

Total contract sales

  $ 364,308          $ 326,163       
 

 

 

       

 

 

     

 

** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 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. Beginning with the fourth quarter of 2014, we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.

 

A-2


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA SEGMENT

12 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands)

 

    As Reported           As Adjusted     As Reported           As Adjusted  
    12 Weeks Ended     Certain     12 Weeks Ended     12 Weeks Ended     Certain     12 Weeks Ended  
    June 19, 2015     Items     June 19, 2015**     June 20, 2014     Items     June 20, 2014**  

Revenues

           

Sale of vacation ownership products

  $ 142,148      $ —        $ 142,148      $ 134,590      $ —        $ 134,590   

Resort management and other services

    66,194        —          66,194        65,480        —          65,480   

Financing

    26,354        —          26,354        27,807        —          27,807   

Rental

    65,756        —          65,756        54,404        —          54,404   

Cost reimbursements

    84,037        —          84,037        80,642        —          80,642   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    384,489        —          384,489        362,923        —          362,923   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    40,834        —          40,834        37,433        —          37,433   

Marketing and sales

    67,837        —          67,837        61,722        —          61,722   

Resort management and other services

    39,101        —          39,101        40,527        —          40,527   

Rental

    55,128        —          55,128        47,985        —          47,985   

Organizational and separation related

    115        (115     —          388        (388     —     

Litigation settlement

    (108     108        —          (7,575     7,575        —     

Royalty fee

    1,686        —          1,686        1,820        —          1,820   

Impairment

    —          —          —          834        (834     —     

Cost reimbursements

    84,037        —          84,037        80,642        —          80,642   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    288,630        (7     288,623        263,776        6,353        270,129   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains and other income

    8,658        (8,658     —          448        (448     —     

Equity in earnings

    86        —          86        81        —          81   

Impairment reversals on equity investment

    —          —          —          2,000        (2,000     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ 104,603      $ (8,651   $ 95,952      $ 101,676      $ (8,801   $ 92,875   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported                 As Reported              
    12 Weeks Ended                 12 Weeks Ended              
    June 19, 2015                 June 20, 2014              

Contract Sales

           

Vacation ownership

  $ 150,605          $ 145,597       

Residential products

    —              —         
 

 

 

       

 

 

     

Total contract sales

  $ 150,605          $ 145,597       
 

 

 

       

 

 

     

 

** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

 

NOTE: Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.

 

A-3


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA SEGMENT

24 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands)

 

    As Reported           As Adjusted     As Reported           As Adjusted  
    24 Weeks Ended     Certain     24 Weeks Ended     24 Weeks Ended     Certain     24 Weeks Ended  
    June 19, 2015     Items     June 19, 2015**     June 20, 2014     Items     June 20, 2014**  

Revenues

           

Sale of vacation ownership products

  $ 283,876      $ —        $ 283,876      $ 265,932      $ —        $ 265,932   

Resort management and other services

    124,769        —          124,769        122,640        —          122,640   

Financing

    53,410        —          53,410        56,368        —          56,368   

Rental

    137,471        —          137,471        113,727        —          113,727   

Cost reimbursements

    176,891        —          176,891        170,585        —          170,585   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    776,417        —          776,417        729,252        —          729,252   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    81,335        —          81,335        78,938        —          78,938   

Marketing and sales

    136,854        —          136,854        124,409        —          124,409   

Resort management and other services

    76,069        —          76,069        79,616        —          79,616   

Rental

    109,739        —          109,739        99,022        —          99,022   

Organizational and separation related

    254        (254     —          405        (405     —     

Litigation settlement

    (370     370        —          (7,575     7,575        —     

Royalty fee

    2,946        —          2,946        3,497        —          3,497   

Impairment

    —          —          —          834        (834     —     

Cost reimbursements

    176,891        —          176,891        170,585        —          170,585   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    583,718        116        583,834        549,731        6,336        556,067   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains and other income

    9,538        (9,538     —          1,690        (1,690     —     

Equity in earnings

    102        —          102        120        —          120   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ 202,339      $ (9,654   $ 192,685      $ 181,331      $ (8,026   $ 173,305   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported                 As Reported              
    24 Weeks Ended                 24 Weeks Ended              
    June 19, 2015                 June 20, 2014              

Contract Sales

           

Vacation ownership

  $ 306,598          $ 285,774       

Residential products

    —              6,326       
 

 

 

       

 

 

     

Total contract sales

  $ 306,598          $ 292,100       
 

 

 

       

 

 

     

 

** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

 

NOTE: Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.

 

A-4


MARRIOTT VACATIONS WORLDWIDE CORPORATION

ASIA PACIFIC SEGMENT

12 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands)

 

    As Reported           As Adjusted     As Reported           As Adjusted  
    12 Weeks Ended     Certain     12 Weeks Ended     12 Weeks Ended     Certain     12 Weeks Ended  
    June 19, 2015     Items     June 19, 2015**     June 20, 2014     Items     June 20, 2014**  

Revenues

           

Sale of vacation ownership products

  $ 7,575      $ —        $ 7,575      $ 7,954      $ —        $ 7,954   

Resort management and other services

    964        —          964        926        —          926   

Financing

    1,043        —          1,043        1,047        —          1,047   

Rental

    1,503        —          1,503        1,581        —          1,581   

Cost reimbursements

    632        —          632        722        —          722   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    11,717        —          11,717        12,230        —          12,230   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    1,803        —          1,803        2,047        —          2,047   

Marketing and sales

    4,432        —          4,432        4,243        —          4,243   

Resort management and other services

    655        —          655        642        —          642   

Rental

    2,794        —          2,794        2,936        —          2,936   

Royalty fee

    150        —          150        147        —          147   

Cost reimbursements

    632        —          632        722        —          722   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    10,466        —          10,466        10,737        —          10,737   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains and other income

    (33     33        —          —          —          —     

Equity in losses

    (1     —          (1     —          —          —     

Other

    (1,272     1,272        —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ (55   $ 1,305      $ 1,250      $ 1,493      $ —        $ 1,493   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported                 As Reported              
    12 Weeks Ended                 12 Weeks Ended              
    June 19, 2015                 June 20, 2014              

Contract Sales

           

Vacation ownership

  $ 7,992          $ 7,337       

Residential products

    —              —         
 

 

 

       

 

 

     

Total contract sales

  $ 7,992          $ 7,337       
 

 

 

       

 

 

     

 

** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

 

NOTE: Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.

 

A-5


MARRIOTT VACATIONS WORLDWIDE CORPORATION

ASIA PACIFIC SEGMENT

24 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands)

 

    As Reported           As Adjusted     As Reported           As Adjusted  
    24 Weeks Ended     Certain     24 Weeks Ended     24 Weeks Ended     Certain     24 Weeks Ended  
    June 19, 2015     Items     June 19, 2015**     June 20, 2014     Items     June 20, 2014**  

Revenues

           

Sale of vacation ownership products

  $ 43,853      $ (28,420   $ 15,433      $ 14,222      $ —        $ 14,222   

Resort management and other services

    1,827        —          1,827        1,832        —          1,832   

Financing

    2,049        —          2,049        2,104        —          2,104   

Rental

    3,855        —          3,855        3,556        —          3,556   

Cost reimbursements

    1,498        —          1,498        1,663        —          1,663   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    53,082        (28,420     24,662        23,377        —          23,377   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    23,799        (21,583     2,216        3,500        —          3,500   

Marketing and sales

    9,989        (922     9,067        8,021        —          8,021   

Resort management and other services

    1,505        —          1,505        1,342        —          1,342   

Rental

    5,290        —          5,290        5,532        —          5,532   

Royalty fee

    307        —          307        324        —          324   

Cost reimbursements

    1,498        —          1,498        1,663        —          1,663   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    42,388        (22,505     19,883        20,382        —          20,382   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains and other income

    (30     30        —          (8     8        —     

Equity in losses

    (4     —          (4     (2     —          (2

Other

    (1,272     1,272        —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ 9,388      $ (4,613   $ 4,775      $ 2,985      $ 8      $ 2,993   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported                 As Reported              
    24 Weeks Ended                 24 Weeks Ended              
    June 19, 2015                 June 20, 2014              

Contract Sales

           

Vacation ownership

    16,651            13,960       

Residential products

    28,420            —         
 

 

 

       

 

 

     

Total contract sales

  $ 45,071          $ 13,960       
 

 

 

       

 

 

     

 

** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

 

NOTE: Asia Pacific segment revenues and expenses for the twelve weeks ended March 28, 2014 have been restated to reclassify a portion of Cost reimbursements from the Asia Pacific segment to the Europe segment to correct certain immaterial prior period errors. Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.

 

A-6


MARRIOTT VACATIONS WORLDWIDE CORPORATION

EUROPE SEGMENT

12 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands)

 

    As Reported           As Adjusted     As Reported           As Adjusted  
    12 Weeks Ended     Certain     12 Weeks Ended     12 Weeks Ended     Certain     12 Weeks Ended  
    June 19, 2015     Items     June 19, 2015**     June 20, 2014     Items     June 20, 2014**  

Revenues

           

Sale of vacation ownership products

  $ 5,647      $ —        $ 5,647      $ 10,018      $ —        $ 10,018   

Resort management and other services

    6,905        —          6,905        8,415        —          8,415   

Financing

    897        —          897        963        —          963   

Rental

    5,383        —          5,383        5,842        —          5,842   

Cost reimbursements

    7,789        —          7,789        9,511        —          9,511   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    26,621        —          26,621        34,749        —          34,749   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    1,233        —          1,233        2,389        —          2,389   

Marketing and sales

    4,868        —          4,868        6,262        (287     5,975   

Resort management and other services

    5,724        —          5,724        7,139        —          7,139   

Rental

    3,913        —          3,913        4,070        —          4,070   

Royalty fee

    88        —          88        180        —          180   

Cost reimbursements

    7,789        —          7,789        9,511        —          9,511   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    23,615        —          23,615        29,551        (287     29,264   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains and other income

    —          —          —          (39     39        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ 3,006      $ —        $ 3,006      $ 5,159      $ 326      $ 5,485   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported                 As Reported              
    12 Weeks Ended                 12 Weeks Ended              
    June 19, 2015                 June 20, 2014              

Contract Sales

  $ 7,341          $ 11,655       
 

 

 

       

 

 

     

 

** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

 

NOTE: Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.

 

A-7


MARRIOTT VACATIONS WORLDWIDE CORPORATION

EUROPE SEGMENT

24 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands)

 

    As Reported           As Adjusted     As Reported           As Adjusted  
    24 Weeks Ended     Certain     24 Weeks Ended     24 Weeks Ended     Certain     24 Weeks Ended  
    June 19, 2015     Items     June 19, 2015**     June 20, 2014     Items     June 20, 2014**  

Revenues

           

Sale of vacation ownership products

  $ 11,547      $ —        $ 11,547      $ 17,258      $ —        $ 17,258   

Resort management and other services

    11,884        —          11,884        13,895        —          13,895   

Financing

    1,887        —          1,887        1,985        —          1,985   

Rental

    7,515        —          7,515        8,069        —          8,069   

Cost reimbursements

    15,375        —          15,375        18,013        —          18,013   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    48,208        —          48,208        59,220        —          59,220   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    2,085        —          2,085        3,835        —          3,835   

Marketing and sales

    10,289        —          10,289        11,017        (287     10,730   

Resort management and other services

    10,315        —          10,315        12,246        200        12,446   

Rental

    6,964        —          6,964        7,227        —          7,227   

Royalty fee

    164        —          164        282        —          282   

Cost reimbursements

    15,375        —          15,375        18,013        —          18,013   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    45,192        —          45,192        52,620        (87     52,533   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains and other income

    4        (4     —          (39     39        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ 3,020      $ (4   $ 3,016      $ 6,561      $ 126      $ 6,687   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported                 As Reported              
    24 Weeks Ended                 24 Weeks Ended              
    June 19, 2015                 June 20, 2014              

Contract Sales

  $ 12,639          $ 20,103       
 

 

 

       

 

 

     

 

** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

 

NOTE: Europe segment revenues and expenses for the twelve weeks ended March 28, 2014 have been restated to reclassify a portion of Cost reimbursements from the Asia Pacific segment to the Europe segment to correct certain immaterial prior period errors. Beginning with the fourth quarter of 2014 we have combined results from Other into Resort management and other services and have recast prior year presentation for consistency.

 

A-8


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CORPORATE AND OTHER

12 Weeks and 24 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands)

 

     As Reported           As Adjusted      As Reported            As Adjusted  
     12 Weeks Ended     Certain     12 Weeks Ended      12 Weeks Ended      Certain     12 Weeks Ended  
     June 19, 2015     Items     June 19, 2015**      June 20, 2014      Items     June 20, 2014**  

Expenses

              

Cost of vacation ownership products

   $ 1,249      $ —        $ 1,249       $ 1,545       $ —        $ 1,545   

Financing

     6,085        —          6,085         5,438         —          5,438   

General and administrative

     22,892        —          22,892         23,153         —          23,153   

Organizational and separation related

     (14     14        —           701         (701     —     

Litigation settlement

     134        (134     —           —           —          —     

Consumer financing interest

     5,248        —          5,248         5,737         —          5,737   

Royalty fee

     11,507        —          11,507         11,506         —          11,506   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total expenses

   $ 47,101      $ (120   $ 46,981       $ 48,080       $ (701   $ 47,379   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
     As Reported           As Adjusted      As Reported            As Adjusted  
     24 Weeks Ended     Certain     24 Weeks Ended      24 Weeks Ended      Certain     24 Weeks Ended  
     June 19, 2015     Items     June 19, 2015**      June 20, 2014      Items     June 20, 2014**  

Expenses

              

Cost of vacation ownership products

   $ 2,862      $ —        $ 2,862       $ 4,012       $ —        $ 4,012   

Financing

     10,990        —          10,990         10,542         —          10,542   

General and administrative

     45,669        —          45,669         44,981         —          44,981   

Organizational and separation related

     39        (39     —           1,535         (1,535     —     

Litigation settlement

     134        (134     —           —           —          —     

Consumer financing interest

     11,269        —          11,269         12,362         —          12,362   

Royalty fee

     23,014        —          23,014         22,978         —          22,978   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total expenses

   $ 93,977      $ (173   $ 93,804       $ 96,410       $ (1,535   $ 94,875   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

 

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

 

A-9


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In thousands)

 

     12 Weeks Ended  
     June 19, 2015      June 20, 2014  

Contract sales

     

Vacation ownership

   $ 165,938       $ 164,589   

Residential products

     —           —     
  

 

 

    

 

 

 

Total contract sales

     165,938         164,589   
  

 

 

    

 

 

 

Revenue recognition adjustments:

     

Reportability1

     1,440         829   

Sales Reserve2

     (7,179      (8,047

Other3

     (4,829      (4,809
  

 

 

    

 

 

 

Sale of vacation ownership products

   $ 155,370       $ 152,562   
  

 

 

    

 

 

 

 

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

MARRIOTT VACATIONS WORLDWIDE CORPORATION

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

(In thousands)

 

                Revenue                       Revenue        
    As Reported           Recognition     As Adjusted     As Reported           Recognition     As Adjusted  
    12 Weeks Ended     Certain     Reportability     12 Weeks Ended     12 Weeks Ended     Certain     Reportability     12 Weeks Ended  
    June 19, 2015     Items     Adjustment     June 19, 2015**     June 20, 2014     Items     Adjustment     June 20, 2014**  

Sale of vacation ownership products

  $ 155,370      $ —        $ (1,440   $ 153,930      $ 152,562      $ —        $ (829   $ 151,733   

Less:

               

Cost of vacation ownership products

    45,119        —          (464     44,655        43,414        —          (198     43,216   

Marketing and sales

    77,137        —          (157     76,980        72,227        (287     (121     71,819   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin

  $ 33,114      $ —        $ (819   $ 32,295      $ 36,921      $ 287      $ (510   $ 36,698   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin percentage1

    21.3         21.0     24.2         24.2

 

** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1  Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars.

 

A-10


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In thousands)

 

     24 Weeks Ended  
     June 19, 2015      June 20, 2014  

Contract sales

     

Vacation ownership

   $ 335,888       $ 319,837   

Residential products

     28,420         6,326   
  

 

 

    

 

 

 

Total contract sales

     364,308         326,163   
  

 

 

    

 

 

 

Revenue recognition adjustments:

     

Reportability1

     (73      (3,725

Sales Reserve2

     (15,546      (15,698

Other3

     (9,413      (9,328
  

 

 

    

 

 

 

Sale of vacation ownership products

   $ 339,276       $ 297,412   
  

 

 

    

 

 

 

 

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

MARRIOTT VACATIONS WORLDWIDE CORPORATION

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

(In thousands)

 

                Revenue                       Revenue        
    As Reported           Recognition     As Adjusted     As Reported           Recognition     As Adjusted  
    24 Weeks Ended     Certain     Reportability     24 Weeks Ended     24 Weeks Ended     Certain     Reportability     24 Weeks Ended  
    June 19, 2015     Items     Adjustment     June 19, 2015**     June 20, 2014     Items     Adjustment     June 20, 2014**  

Sale of vacation ownership products

  $ 339,276      $ (28,420   $ 73      $ 310,929      $ 297,412      $ —        $ 3,725      $ 301,137   

Less:

               

Cost of vacation ownership products

    110,081        (21,583     98        88,596        90,285        —          1,216        91,501   

Marketing and sales

    157,132        (922     (52     156,158        143,447        (287     253        143,413   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin

  $ 72,063      $ (5,915   $ 27      $ 66,175      $ 63,680      $ 287      $ 2,256      $ 66,223   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin percentage1

    21.2         21.3     21.4         22.0

 

** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1  Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars.

 

A-11


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In thousands)

 

     12 Weeks Ended  
     June 19, 2015      June 20, 2014  

Contract sales

     

Vacation ownership

   $ 150,605       $ 145,597   

Residential products

     —           —     
  

 

 

    

 

 

 

Total contract sales

     150,605         145,597   
  

 

 

    

 

 

 

Revenue recognition adjustments:

     

Reportability1

     1,942         208   

Sales Reserve2

     (5,651      (6,424

Other3

     (4,748      (4,791
  

 

 

    

 

 

 

Sale of vacation ownership products

   $ 142,148       $ 134,590   
  

 

 

    

 

 

 

 

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

MARRIOTT VACATIONS WORLDWIDE CORPORATION

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

(In thousands)

 

                Revenue                       Revenue        
    As Reported           Recognition     As Adjusted     As Reported           Recognition     As Adjusted  
    12 Weeks Ended     Certain     Reportability     12 Weeks Ended     12 Weeks Ended     Certain     Reportability     12 Weeks Ended  
    June 19, 2015     Items     Adjustment     June 19, 2015**     June 20, 2014     Items     Adjustment     June 20, 2014**  

Sale of vacation ownership products

  $ 142,148      $ —        $ (1,942   $ 140,206      $ 134,590      $ —        $ (208   $ 134,382   

Less:

               

Cost of vacation ownership products

    40,834        —          (553     40,281        37,433        —          (58     37,375   

Marketing and sales

    67,837        —          (182     67,655        61,722        —          (20     61,702   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin

  $ 33,477      $ —        $ (1,207   $ 32,270      $ 35,435      $ —        $ (130   $ 35,305   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin percentage1

    23.6         23.0     26.3         26.3

 

** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1  Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars.

 

A-12


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In thousands)

 

     24 Weeks Ended  
     June 19, 2015      June 20, 2014  

Contract sales

     

Vacation ownership

   $ 306,598       $ 285,774   

Residential products

     —           6,326   
  

 

 

    

 

 

 

Total contract sales

     306,598         292,100   
  

 

 

    

 

 

 

Revenue recognition adjustments:

     

Reportability1

     (1,502      (4,192

Sales Reserve2

     (11,985      (12,751

Other3

     (9,235      (9,225
  

 

 

    

 

 

 

Sale of vacation ownership products

   $ 283,876       $ 265,932   
  

 

 

    

 

 

 

 

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

MARRIOTT VACATIONS WORLDWIDE CORPORATION

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

(In thousands)

 

                Revenue                       Revenue        
    As Reported           Recognition     As Adjusted     As Reported           Recognition     As Adjusted  
    24 Weeks Ended     Certain     Reportability     24 Weeks Ended     24 Weeks Ended     Certain     Reportability     24 Weeks Ended  
    June 19, 2015     Items     Adjustment     June 19, 2015**     June 20, 2014     Items     Adjustment     June 20, 2014**  

Sale of vacation ownership products

  $ 283,876      $ —        $ 1,502      $ 285,378      $ 265,932      $ —        $ 4,192      $ 270,124   

Less:

               

Cost of vacation ownership products

    81,335        —          427        81,762        78,938        —          1,318        80,256   

Marketing and sales

    136,854        —          142        136,996        124,409        —          394        124,803   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin

  $ 65,687      $ —        $ 933      $ 66,620      $ 62,585      $ —        $ 2,480      $ 65,065   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin percentage1

    23.1         23.3     23.5         24.1

 

** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1  Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars.

 

A-13


MARRIOTT VACATIONS WORLDWIDE CORPORATION

EBITDA AND ADJUSTED EBITDA

12 Weeks and 24 Weeks Ended June 19, 2015 and June 20, 2014

(In thousands)

 

     As Reported
12 Weeks Ended
June 19, 2015
     Certain
Items
    As Adjusted
12 Weeks Ended
June 19, 2015**
     As Reported
12 Weeks Ended
June 20, 2014
     Certain
Items
    As Adjusted
12 Weeks Ended
June 20, 2014**
 

Net income

   $ 34,041       $ (4,422   $ 29,619       $ 35,303       $ (4,616   $ 30,687   

Interest expense1

     3,009         —          3,009         2,601         —          2,601   

Tax provision

     23,403         (2,804     20,599         22,344         (3,158     19,186   

Depreciation and amortization

     4,493         —          4,493         4,264         —          4,264   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

EBITDA**

   $ 64,946       $ (7,226   $ 57,720       $ 64,512       $ (7,774   $ 56,738   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
     As Reported
24 Weeks Ended
June 19, 2015
     Certain
Items
    As Adjusted
24 Weeks Ended
June 19, 2015**
     As Reported
24 Weeks Ended
June 20, 2014
     Certain
Items
    As Adjusted
24 Weeks Ended
June 20, 2014**
 

Net income

   $ 68,095       $ (10,319   $ 57,776       $ 54,611       $ (3,819   $ 50,792   

Interest expense1

     5,983         —          5,983         4,748         —          4,748   

Tax provision

     46,692         (3,779     42,913         35,107         (2,537     32,570   

Depreciation and amortization

     8,558         —          8,558         8,922         —          8,922   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

EBITDA**

   $ 129,328       $ (14,098   $ 115,230       $ 103,388       $ (6,356   $ 97,032   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1  Interest expense excludes consumer financing interest expense.

 

A-14


MARRIOTT VACATIONS WORLDWIDE CORPORATION

2015 ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE—DILUTED OUTLOOK

(In millions, except per share amounts)

 

     Fiscal Year
2015 (low)
     Fiscal Year
2015 (high)
 

Net income

   $ 114       $ 121   

Adjustments to reconcile Net income to Adjusted net income

     

Organizational and separation related and other charges1

     7         6   

Gain on dispositions2

     (10      (10

Bulk sales3

     (6      (6

Provision for income taxes on adjustments to net income

     3         3   
  

 

 

    

 

 

 

Adjusted net income**

   $ 108       $ 114   
  

 

 

    

 

 

 

Earnings per share - Diluted4

   $ 3.49       $ 3.70   

Adjusted earnings per share - Diluted**,4

   $ 3.29       $ 3.48   

Diluted shares4

     32.7         32.7   

 

** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1  Organizational and separation related and other charges adjustment includes $1.8 million for organizational and separation related efforts and $4 million to $5 million of non-capitalizable transaction costs in our Asia Pacific and North America segments.
2  Gain on dispositions adjustment includes a $0.9 million gain associated with the sale of a golf course and adjacent undeveloped land and an $8.7 million gain on the sale of undeveloped land in our North America segment.
3 Bulk sales adjustment includes the net $5.9 million of pre-tax income associated with the sale of the 18 units in the Asia Pacific segment.
4 Earnings per share - Diluted, Adjusted earnings per share - Diluted, and Diluted shares outlook includes the impact of share repurchase activity only through June 19, 2015.

MARRIOTT VACATIONS WORLDWIDE CORPORATION

2015 ADJUSTED EBITDA OUTLOOK

(In millions)

 

     Fiscal Year
2015 (low)
     Fiscal Year
2015 (high)
 

Adjusted net income**

   $ 108       $ 114   

Interest expense1

     12         12   

Tax provision

     81         85   

Depreciation and amortization

     21         21   
  

 

 

    

 

 

 

Adjusted EBITDA**

   $ 222       $ 232   
  

 

 

    

 

 

 

 

** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 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.

MARRIOTT VACATIONS WORLDWIDE CORPORATION

2015 ADJUSTED DEVELOPMENT MARGIN OUTLOOK

 

     Total MVW  
     Fiscal Year
2015 (low)
    Fiscal Year
2015 (high)
 

Development margin1

     21.1     22.1

Adjustments to reconcile Development margin to Adjusted development margin

    

Revenue recognition reportability

     (0.1 %)      (0.1 %) 
  

 

 

   

 

 

 

Adjusted development margin**,1

     21.0     22.0
  

 

 

   

 

 

 

 

** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1  Development margin represents Development margin dollars divided by Sale of vacation ownership products revenues. Development margin is calculated using whole dollars.

 

A-15


MARRIOTT VACATIONS WORLDWIDE CORPORATION

2015 ADJUSTED FREE CASH FLOW AND NORMALIZED ADJUSTED FREE CASH FLOW OUTLOOK

(In millions)

 

     Current Guidance                       
     Low     High         Mid-Point          Adjustments         Normalized  

Adjusted net income**

   $ 108      $ 114       $ 111         $ —          $ 111  

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

                     

Adjustments for non-cash items1

     73        75         74           —            74  

Deferred income taxes / income taxes payable

     18        20         19           —            19  

Net changes in assets and liabilities:

                     

Notes receivable originations

     (293     (299 )       (296        —            (296 )

Notes receivable collections

     269        275         272           —            272  

Inventory

     47        52          50           (60 )6        (10 )

Purchase of operating hotel for future conversion to inventory2

     (47     (47 )       (47        47 2        —     

Liability for Marriott Rewards customer loyalty program

     (21     (21 )       (21        21 7        —     

Organizational and separation related and other charges

     (5     (5 )       (5        5 8        —     

Other working capital changes

     21        21          21           (6 )9        15  
  

 

 

   

 

 

     

 

 

      

 

 

     

 

 

 

Net cash provided by operating activities

  170      185     178      7      185  

Capital expenditures for property and equipment (excluding inventory):

   

New sales centers3

  (20   (18 )   (19   19 3    —     

Organizational and separation related capital expenditures

  (4   (4 )   (4   4 8    —     

Other

  (24   (23 )   (24   4 10    (20 )

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

  (45   (45 )   (45   45 4    —     

Decrease in restricted cash

  1      5     3      —        3  

Borrowings from securitization transactions

  251      258     255      (45 )11    210  

Repayment of debt related to securitizations

  (244   (250 )   (247   —        (247 )
  

 

 

   

 

 

     

 

 

      

 

 

     

 

 

 

Free cash flow**

  85      108     97      34      131  

Adjustments:

   

Organizational and separation related and other charges

  9      9     9      (9 )7    —     

Proceeds from sale of operating portion of Surfers Paradise hotel4

  45      45     45      (45 )4    —     

Net change in borrowings available from the securitization of eligible vacation ownership notes receivable through the warehouse credit facility5

  36      38     37      —        37    
  

 

 

   

 

 

     

 

 

      

 

 

     

 

 

 

Adjusted free cash flow**

$ 175    $ 200   $ 188    $ (20 $ 168  
  

 

 

   

 

 

     

 

 

      

 

 

     

 

 

 
                             

 

** Denotes non-GAAP financial measures. Please see pages A-17 through A-19 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1  Includes depreciation, amortization of debt issuance costs, provision for loan losses, and share-based compensation.
2  Represents adjustment for investment in an operating hotel prior to future conversion to inventory.
3  Represents incremental investment in new sales centers, mainly to support new sales distributions.
4  Represents the estimated investment in, as well as the estimated proceeds from the subsequent sale of, the operating portion of the Surfers Paradise hotel.
5  Represents the net change in borrowings available from the securitization of eligible vacation ownership notes receivable through the warehouse credit facility between the 2014 and 2015 year ends.
6  Represents adjustment to align real estate inventory spending with real estate inventory costs (i.e., product costs).
7  Represents payment for Marriott Rewards Points issued prior to the Spin-off. Liability to be fully paid in 2016.
8  Represents costs associated with organizational and separation related efforts.
9  Represents normalized other working capital changes.
10  Represents normalized capital expenditures for property and equipment.
11  Represents normalized borrowings from securitization transactions.

 

A-16


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NON-GAAP FINANCIAL MEASURES

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

Adjusted Net Income. We evaluate non-GAAP financial measures, including Adjusted Net Income, Adjusted EBITDA, and Adjusted Development Margin, that exclude certain items and net gains in the 12 weeks and 24 weeks ended June 19, 2015 and June 20, 2014 because these non-GAAP financial measures allow for period-over-period comparisons of our on-going core operations before the impact of certain items and gains. These non-GAAP financial measures also facilitate our comparison of results from our on-going core operations before certain items and gains with results from other vacation ownership companies.

Certain items—12 weeks and 24 weeks ended June 19, 2015. In our Statement of Income for the 12 weeks ended June 19, 2015, we recorded $1.4 million of net pre-tax items, which included a $1.3 million adjustment for transaction costs associated with a commitment to purchase an operating hotel in our Asia Pacific segment recorded under the “Other transaction related” caption, $0.1 million of organizational and separation related costs recorded under the “Organizational and separation related” caption and less than $0.1 million of net litigation related matters recorded under the “Litigation settlement” caption. In our Statement of Income for the 24 weeks ended June 19, 2015, we recorded $4.6 million of net pre-tax items, which included a $28.4 million adjustment to exclude the bulk sale of 18 units in our Asia Pacific segment recorded under the “Sale of vacation ownership products” caption, with corresponding adjustments of $21.6 million and $0.9 million to the “Cost of vacation ownership products” and Marketing and sales” captions, respectively, a $1.3 million adjustment for transaction costs associated with a commitment to purchase an operating hotel in our Asia Pacific segment recorded under the “Other transaction related” caption, $0.3 million of organizational and separation related costs recorded under the “Organizational and separation related” caption and less than $0.1 million of net litigation related matters recorded under the “Litigation settlement” caption, partially offset by a $0.3 million reversal of an accrual associated with a 2014 golf course disposition recorded under the “Litigation settlement” caption because actual costs were lower than expected.

Certain items—12 weeks and 24 weeks ended June 20, 2014. In our Statement of Income for the 12 weeks ended June 20, 2014, we recorded $7.4 million of net pre-tax income, which included $7.6 million of income associated with the settlement of a dispute with a former service provider in our North America segment recorded under the “Litigation settlement” caption and the reversal of a $2.0 million reserve for remaining costs we expect to incur in connection with our interest in an equity method investment in a joint venture project in our North America segment recorded under the “Impairment reversals on equity investment” caption, partially offset by $1.1 million of organizational and separation related costs recorded under the “Organizational and separation related” caption, a $0.8 million impairment charge associated with a project in our North America segment recorded under the “Impairment” caption and $0.3 million of severance charges in our Europe segment recorded under the “Marketing and sales” caption. In our Statement of Income for the 24 weeks ended June 20, 2014, we recorded $4.7 million of net pre-tax income, which included $7.6 million of income associated with the settlement of a dispute with a former service provider in our North America segment recorded under the “Litigation settlement” caption and a $0.2 million reversal of a severance accrual in our Europe segment recorded under the “Resort management and other services” caption because actual costs were lower than expected, partially offset by $1.9 million of organizational and separation related costs recorded under the “Organizational and separation related” caption, a $0.8 million impairment charge associated with a project in our North America segment recorded under the “Impairment” caption and $0.3 million of severance charges in our Europe segment recorded under the “Marketing and sales” caption.

 

A-17


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NON-GAAP FINANCIAL MEASURES

Net gains—12 weeks and 24 weeks ended June 19, 2015. In our Statement of Income for the 12 weeks ended June 19, 2015, we recorded an $8.7 million gain associated with the sale of undeveloped land in our North America segment under the “Gains and other income” caption. In our Statement of Income for the 24 weeks ended June 19, 2015, we recorded $9.5 million of net gains associated with the sale of undeveloped land and the sale of a golf course and adjacent undeveloped land in our North America segment under the “Gains and other income” caption.

Net gains—12 weeks and 24 weeks ended June 20, 2014. In our Statement of Income for the 12 weeks ended June 20, 2014, we recorded $0.4 million of net gains associated with the sale of a golf course and adjacent undeveloped land, the sale of an undeveloped parcel of land, and the disposition of a project, all of which occurred in our North America segment and were recorded under the “Gains and other income” caption. In our Statement of Income for the 24 weeks ended June 20, 2014, we recorded $1.6 million of net gains associated with the sale of a golf course and adjacent undeveloped land, the sale of an undeveloped parcel of land, and the disposition of a project, all of which occurred in our North America segment and were recorded under the “Gains and other income” caption.

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

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

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

Adjusted EBITDA. We also evaluate Adjusted EBITDA, which reflects additional adjustments for certain items and gains, as itemized in the discussion of Adjusted Net Income above. 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 certain items and gains. Together, EBITDA and Adjusted EBITDA facilitate our comparison of results from our on-going core operations before the impact of certain items and gains with results from other vacation ownership companies.

 

A-18


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NON-GAAP FINANCIAL MEASURES

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

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

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

 

A-19


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

     (unaudited)        
     June 19,
2015
    January 2,
2015
 

ASSETS

    

Cash and cash equivalents

   $ 250,906      $ 346,515   

Restricted cash (including $37,017 and $34,986 from VIEs, respectively)

     65,559        109,907   

Accounts and contracts receivable (including $3,429 and $4,992 from VIEs, respectively)

     116,544        109,700   

Vacation ownership notes receivable (including $547,158 and $750,680 from VIEs, respectively)

     878,858        917,228   

Inventory

     704,707        772,784   

Property and equipment

     188,714        147,379   

Other

     117,924        127,066   
  

 

 

   

 

 

 

Total Assets

   $ 2,323,212      $ 2,530,579   
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Accounts payable

   $ 80,450      $ 114,079   

Advance deposits

     64,148        60,192   

Accrued liabilities (including $1,576 and $1,088 from VIEs, respectively)

     137,261        165,969   

Deferred revenue

     32,845        38,818   

Payroll and benefits liability

     74,582        93,073   

Liability for Marriott Rewards customer loyalty program

     79,939        89,285   

Deferred compensation liability

     46,534        41,677   

Mandatorily redeemable preferred stock of consolidated subsidiary

     38,895        38,816   

Debt (including $564,657 and $708,031 from VIEs, respectively)

     561,133        703,013   

Other

     50,053        27,071   

Deferred taxes

     96,748        78,883   
  

 

 

   

 

 

 

Total Liabilities

     1,262,588        1,450,876   
  

 

 

   

 

 

 

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

     —          —     

Common stock - $.01 par value; 100,000,000 shares authorized; 36,346,990 and 36,089,513 shares issued, respectively

     363        361   

Treasury stock - at cost; 4,814,451 and 3,996,725 shares, respectively

     (295,466     (229,229

Additional paid-in capital

     1,135,143        1,137,785   

Accumulated other comprehensive income

     14,756        17,054   

Retained earnings

     205,828        153,732   
  

 

 

   

 

 

 

Total Equity

     1,060,624        1,079,703   
  

 

 

   

 

 

 

Total Liabilities and Equity

   $ 2,323,212      $ 2,530,579   
  

 

 

   

 

 

 

The abbreviation VIEs above means Variable Interest Entities.

 

A-20


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

     24 weeks ended  
     June 19,
2015
    June 20,
2014
 

OPERATING ACTIVITIES

    

Net income

   $ 68,095      $ 54,611   

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

    

Depreciation

     8,558        8,922   

Amortization of debt issuance costs

     2,506        2,566   

Provision for loan losses

     15,662        15,603   

Share-based compensation

     6,588        6,180   

Deferred income taxes

     17,850        (5,299

Equity method income

     (98     (118

Gain on disposal of property and equipment, net

     (9,512     (1,642

Non-cash litigation settlement

     (262     —     

Impairment charges

     —          834   

Impairment charges on equity investment

     —          —     

Net change in assets and liabilities:

    

Accounts and contracts receivable

     (6,068     (11,822

Notes receivable originations

     (112,060     (103,908

Notes receivable collections

     132,397        137,460   

Inventory

     68,629        36,805   

Purchase of operating hotel for future conversion to inventory

     (46,614     —     

Other assets

     8,154        26,546   

Accounts payable, advance deposits and accrued liabilities

     (66,223     (55,865

Liability for Marriott Rewards customer loyalty program

     (9,345     (14,284

Deferred revenue

     (5,955     (310

Payroll and benefit liabilities

     (18,382     (14,832

Deferred compensation liability

     4,858        1,882   

Other liabilities

     18,013        15,397   

Other, net

     1,874        (564
  

 

 

   

 

 

 

Net cash provided by operating activities

     78,665        98,162   
  

 

 

   

 

 

 

INVESTING ACTIVITIES

    

Capital expenditures for property and equipment (excluding inventory)

     (15,718     (3,003

Decrease in restricted cash

     43,758        43,958   

Dispositions, net

     20,346        33,169   
  

 

 

   

 

 

 

Net cash provided by investing activities

     48,386        74,124   
  

 

 

   

 

 

 

FINANCING ACTIVITIES

    

Borrowings from securitization transactions

     —          22,638   

Repayment of debt related to securitization transactions

     (143,374     (130,954

Debt issuance costs

     (30     (140

Proceeds from vacation ownership inventory arrangement

     5,375        —     

Repurchase of common stock

     (66,237     (89,448

Payment of dividends

     (8,085     —     

Proceeds from stock option exercises

     92        968   

Payment of withholding taxes on vesting of restricted stock units

     (9,353     (5,091

Other

     109        —     
  

 

 

   

 

 

 

Net cash used in financing activities

     (221,503     (202,027
  

 

 

   

 

 

 

Effect of changes in exchange rates on cash and cash equivalents

     (1,157     3   

DECREASE IN CASH AND CASH EQUIVALENTS

     (95,609     (29,738

CASH AND CASH EQUIVALENTS, beginning of period

     346,515        199,511   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS, end of period

   $ 250,906      $ 169,773   
  

 

 

   

 

 

 

 

A-21