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))

 

 

 

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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

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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

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EXHIBIT INDEX

 

Exhibit No.		Description
99.1		Press release dated July 23, 2015, reporting financial results for the quarter ended June 19, 2015.

Exhibit 99.1

 

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.”

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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