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) October 15, 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 September 11, 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 October 15, 2015, reporting financial results for the quarter ended September 11, 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: October 15, 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 October 15, 2015, reporting financial results for the quarter ended September 11, 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 Third Quarter 2015 Financial Results

Board of Directors authorizes the repurchase of an additional 2.0 million shares under the company’s share repurchase program

ORLANDO, Fla. – October 15, 2015 – Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported third quarter 2015 financial results and provided updated guidance for the full year 2015.

Third quarter 2015 highlights:

 

    Adjusted EBITDA totaled $51.7 million.

 

    Adjusted fully diluted earnings per share (EPS) was $0.82, up from $0.81 in the third quarter of 2014.

 

    North America contract sales, excluding residential sales, were $142.8 million.

 

    Company adjusted development margin was 21.2 percent and North America adjusted development margin was 23.1 percent.

 

    Resort management and other services revenues net of expenses totaled $26.4 million, up $3.3 million from the third quarter of 2014.

 

    Rental revenues net of expenses totaled $13.5 million, up $2.5 million from the third quarter of 2014.

 

    During the third quarter of 2015, the company repurchased $39.9 million of its common stock, bringing total 2015 repurchases through the end of the third quarter to $106.1 million.

 

    In August 2015, the company completed a securitization of $264 million of vacation ownership notes receivable at a blended borrowing rate of 2.56 percent, generating gross proceeds of $255 million.

Third quarter 2015 net income was $21.6 million, or $0.67 diluted EPS, compared to net income of $25.6 million, or $0.75 diluted EPS, in the third quarter of 2014. Company development margin was 17.8 percent and North America development margin was 20.0 percent in the third 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.

“On an overall basis, we are pleased with our third quarter financial results, delivering nearly $52 million of Adjusted EBITDA,” said Stephen P. Weisz, president and chief executive officer. “While our development business in the quarter was negatively impacted by a stronger U.S. dollar and unfavorable revenue reportability, our rentals, resort management and financing businesses remained strong. Excluding the impact of revenue reportability in the quarter, Adjusted EBITDA would have been nearly $59 million. Even with the headwinds from the stronger U.S dollar, we expect full year Adjusted EBITDA to be at the high end of our guidance of $222 million to $232 million, demonstrating the strength of our diversified business model.”


Marriott Vacations Worldwide Reports Third Quarter 2015 Financial Results / 2

 

Third Quarter 2015 Results

Company Results

Total company contract sales, excluding residential sales, were $159.8 million, $7.5 million lower than the third quarter of last year. The decrease was driven by $5.4 million of lower contract sales in the company’s North America segment, $1.2 million of lower contract sales in the company’s Europe segment and $0.9 million of lower contract sales in the company’s Asia Pacific segment.

Adjusted development margin was $31.3 million, a $4.8 million decrease from the third quarter of 2014. Adjusted development margin percentage was 21.2 percent in the third quarter of 2015 compared to 22.6 percent in the third quarter of 2014. Development margin was $24.4 million, a $9.0 million decrease from the third quarter of 2014. Development margin percentage was 17.8 percent in the third quarter of 2015 compared to 21.5 percent in the third quarter of 2014.

Rental revenues totaled $76.0 million, a $10.4 million increase from the third quarter of 2014, reflecting a 6 percent increase in transient keys rented, $4.3 million from revenue associated with operating hotels in San Diego and Surfers Paradise, Australia prior to conversion to timeshare, and higher plus points revenue. Rental revenues, net of expenses, were $13.5 million, a $2.5 million increase from the third quarter of 2014.

Resort management and other services revenues totaled $73.8 million, a $2.8 million increase from the third quarter of 2014. Resort management and other services revenues, net of expenses, were $26.4 million, a $3.3 million, or 14 percent, increase over the third quarter of 2014.

Financing revenues totaled $28.3 million, a $1.3 million decrease from the third quarter of 2014. Financing revenues, net of expenses and consumer financing interest expense, were $17.5 million, a $1.0 million decrease from the third quarter of 2014.

Adjusted EBITDA was $51.7 million in the third quarter of 2015, a $2.3 million, or 4.3 percent, decrease from $54.0 million in the third quarter of 2014. Excluding the impact of unfavorable revenue reportability in both years, Adjusted EBITDA would have been $58.6 million in the third quarter of 2015, a $1.8 million, or 3.2 percent, increase from $56.8 million in the third quarter of 2014.

Segment Results

North America

North America contract sales, excluding residential sales, were $142.8 million in the third quarter of 2015, a decrease of $5.4 million, or 3.6 percent, from the prior year period, driven by a stronger U.S. dollar that negatively impacted sales to Latin American and Japanese customers at certain sales locations by nearly $7 million year-over-year.

VPG decreased 1.4 percent to $3,428 in the third quarter of 2015 from $3,477 in the third quarter of 2014, driven by fewer points purchased per contract, offset partially by higher pricing and improved closing efficiency. Tours decreased 1.3 percent year-over-year.


Marriott Vacations Worldwide Reports Third Quarter 2015 Financial Results / 3

 

Third quarter 2015 North America segment financial results were $85.3 million, a decrease of $0.7 million from the third quarter of 2014. The decrease was driven primarily by $9.2 million of lower development margin and $1.1 million of lower financing revenues, offset partially by $3.3 million of higher resort management and other services revenues net of expenses, $3.1 million of higher rental revenues net of expenses, and $3.0 million related to a litigation settlement in the prior year period.

Adjusted development margin was $30.6 million, a $5.6 million decrease from the prior year quarter. Adjusted development margin percentage was 23.1 percent in the third quarter of 2015 compared to 25.5 percent in the third quarter of 2014. Development margin was $24.5 million, a $9.2 million decrease from the third quarter of 2014. Development margin percentage was 20.0 percent in the third quarter of 2015 compared to 24.4 percent in the prior year quarter.

Asia Pacific

Total contract sales in the segment were $6.9 million, a decrease of $0.9 million in the third quarter of 2015. Segment financial results were a loss of $4.1 million, a $5.1 million decrease from the third quarter of 2014, reflecting $4.2 million of transaction costs associated with the purchase of an operating Marriott hotel in Surfers Paradise, Australia. The company plans to convert a portion of this hotel into vacation ownership interests for future use and to sell the remaining downsized hotel to a third party.

Europe

Third quarter 2015 contract sales were $10.1 million, a decrease of $1.2 million from the third quarter of 2014. Segment financial results were $6.2 million, a $0.5 million decrease from the third quarter of 2014 due to lower development margin from lower contract sales and lower rental revenues net of expenses.

Share Repurchase Program

During the third quarter of 2015, the company purchased 479,612 shares of its common stock for a total of nearly $40 million under its share repurchase program. In total for 2015, through the end of the third quarter, the company repurchased approximately $106.1 million of its common stock.

On October 12, 2015, the Board of Directors authorized the company to repurchase up to 2.0 million additional shares of its common stock under its share repurchase program. Combined with the shares not yet purchased under its previous authorization, the company is authorized to purchase up to 3.6 million shares.


Marriott Vacations Worldwide Reports Third Quarter 2015 Financial Results / 4

 

Balance Sheet and Liquidity

On September 11, 2015, cash and cash equivalents totaled $321.7 million. Since the beginning of the year, real estate inventory balances declined $52.3 million to $716.0 million, including $351.9 million of finished goods and $364.1 million of land and infrastructure. The company had $780.2 million in gross debt outstanding at the end of the third quarter of 2015, an increase of $68.8 million from year-end 2014, consisting primarily of $776.6 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 third quarter of 2015.

In August 2015, the company completed a securitization of $264 million of vacation ownership notes receivable at a blended borrowing rate of 2.56 percent and an advance rate of 96.5 percent. Approximately $211 million of the vacation ownership notes receivable were purchased on August 13, 2015 by the MVW Owner Trust 2015-1 (the “2015-1 Trust”), and all or a portion of the remaining vacation ownership notes receivable may be purchased by the 2015-1 Trust prior to December 31, 2015. This transaction generated approximately $255 million of gross cash proceeds, of which $51 million will be held in restricted cash until the remaining notes are purchased during the fourth quarter. Approximately $6 million was used to pay transaction expenses and fund required reserves and the remainder will be used for general corporate purposes.

As of September 11, 2015, the company had approximately $197 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit.

Outlook

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

 

Adjusted EBITDA

   $222 million to $232 million

Adjusted net income

   $108 million to $114 million

Adjusted company development margin

   21 percent to 22 percent

Adjusted free cash flow

   $175 million to $200 million

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

 

    

Current Guidance

  

Previous Guidance

Company contract sales growth (excluding residential)

   0 percent to 2 percent    5 percent to 8 percent

Adjusted fully diluted earnings per share

   $3.33 to $3.52    $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 $112 million to $119 million; fully diluted EPS of $3.46 to $3.68; company development margin of 21.1 percent to 22.1 percent; and net cash provided by operating activities of $165 million to $185 million.


Marriott Vacations Worldwide Reports Third Quarter 2015 Financial Results / 5

 

Third 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 13620306. 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 61 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 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 October 15, 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 3, 2015

TABLE OF CONTENTS

 

Consolidated Statements of Income - 12 Weeks Ended September 11, 2015 and September 12, 2014

     A-1   

Consolidated Statements of Income - 36 Weeks Ended September 11, 2015 and September 12, 2014

     A-2   

North America Segment Financial Results - 12 Weeks Ended September 11, 2015 and September 12, 2014

     A-3   

North America Segment Financial Results - 36 Weeks Ended September 11, 2015 and September 12, 2014

     A-4   

Asia Pacific Segment Financial Results - 12 Weeks Ended September 11, 2015 and September 12, 2014

     A-5   

Asia Pacific Segment Financial Results - 36 Weeks Ended September 11, 2015 and September 12, 2014

     A-6   

Europe Segment Financial Results - 12 Weeks Ended September 11, 2015 and September 12, 2014

     A-7   

Europe Segment Financial Results - 36 Weeks Ended September 11, 2015 and September 12, 2014

     A-8   

Corporate and Other Financial Results - 12 Weeks and 36 Weeks Ended September 11, 2015 and September 12, 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 September 11, 2015 and September 12, 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) - 36 Weeks Ended September 11, 2015 and September 12, 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 September 11, 2015 and September 12, 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) - 36 Weeks Ended September 11, 2015 and September 12, 2014

     A-13   

EBITDA and Adjusted EBITDA - 12 Weeks and 36 Weeks Ended September 11, 2015 and September 12, 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 September 11, 2015 and September 12, 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  
    September 11, 2015     Charges     September 11, 2015**     September 12, 2014     Charges     September 12, 2014**  

Revenues

           

Sale of vacation ownership products

  $ 136,802      $ —        $ 136,802      $ 155,384      $ —        $ 155,384   

Resort management and other services

    73,828        —          73,828        70,981        —          70,981   

Financing

    28,294        —          28,294        29,545        —          29,545   

Rental

    76,039        —          76,039        65,620        —          65,620   

Cost reimbursements

    92,173        —          92,173        91,508        —          91,508   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    407,136        —          407,136        413,038        —          413,038   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    40,776        —          40,776        48,640        —          48,640   

Marketing and sales

    71,628        —          71,628        73,380        —          73,380   

Resort management and other services

    47,409        —          47,409        47,857        —          47,857   

Financing

    5,488        —          5,488        5,434        —          5,434   

Rental

    62,567        —          62,567        54,605        —          54,605   

General and administrative

    23,214        (1,767     21,447        21,932        —          21,932   

Litigation settlement

    —          —          —          3,225        (3,225     —     

Organizational and separation related

    439        (439     —          332        (332     —     

Consumer financing interest

    5,289        —          5,289        5,605        —          5,605   

Royalty fee

    14,000        —          14,000        14,339        —          14,339   

Impairment

    —          —          —          26        (26     —     

Cost reimbursements

    92,173        —          92,173        91,508        —          91,508   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    362,983        (2,206     360,777        366,883        (3,583     363,300   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Losses) gains and other (expense) income

    (20     20        —          207        (207     —     

Interest expense

    (2,839     —          (2,839     (2,890     —          (2,890

Equity in earnings

    50        —          50        38        —          38   

Other

    (5,181     5,181        —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    36,163        7,407        43,570        43,510        3,376        46,886   

Provision for income taxes

    (14,608     (2,491     (17,099     (17,862     (1,299     (19,161
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 21,555      $ 4,916      $ 26,471      $ 25,648      $ 2,077      $ 27,725   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share - Basic

  $ 0.69        $ 0.84      $ 0.77        $ 0.83   
 

 

 

     

 

 

   

 

 

     

 

 

 

Earnings per share - Diluted

  $ 0.67        $ 0.82      $ 0.75        $ 0.81   
 

 

 

     

 

 

   

 

 

     

 

 

 

Basic Shares

    31,455          31,455        33,374          33,374   

Diluted Shares

    32,128          32,128        34,366          34,366   
    As Reported                 As Reported              
    12 Weeks Ended                 12 Weeks Ended              
    September 11, 2015                 September 12, 2014              

Contract Sales

           

Vacation ownership

  $ 159,757          $ 167,245       

Residential products

    —              4,488       
 

 

 

       

 

 

     

Total contract sales

  $ 159,757          $ 171,733       
 

 

 

       

 

 

     

 

** 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

36 Weeks Ended September 11, 2015 and September 12, 2014

(In thousands, except per share amounts)

 

    As Reported           As Adjusted     As Reported           As Adjusted  
    36 Weeks Ended     Certain     36 Weeks Ended     36 Weeks Ended     Certain     36 Weeks Ended  
    September 11, 2015     Charges     September 11, 2015**     September 12, 2014     Charges     September 12, 2014**  

Revenues

           

Sale of vacation ownership products

  $ 476,078      $ (28,420   $ 447,658      $ 452,796      $ —        $ 452,796   

Resort management and other services

    212,308        —          212,308        209,348        —          209,348   

Financing

    85,640        —          85,640        90,002        —          90,002   

Rental

    224,880        —          224,880        190,972        —          190,972   

Cost reimbursements

    285,937        —          285,937        281,769        —          281,769   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    1,284,843        (28,420     1,256,423        1,224,887        —          1,224,887   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    150,857        (21,583     129,274        138,925        —          138,925   

Marketing and sales

    228,760        (922     227,838        216,827        (287     216,540   

Resort management and other services

    135,298        —          135,298        141,061        200        141,261   

Financing

    16,478        —          16,478        15,976        —          15,976   

Rental

    184,560        —          184,560        166,386        —          166,386   

General and administrative

    68,883        (1,767     67,116        66,913        —          66,913   

Litigation settlement

    (236     236        —          (4,350     4,350        —     

Organizational and separation related

    732        (732     —          2,272        (2,272     —     

Consumer financing interest

    16,558        —          16,558        17,967        —          17,967   

Royalty fee

    40,431        —          40,431        41,420        —          41,420   

Impairment

    —          —          —          860        (860     —     

Cost reimbursements

    285,937        —          285,937        281,769        —          281,769   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    1,128,258        (24,768     1,103,490        1,086,026        1,131        1,087,157   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains and other income

    9,492        (9,492     —          1,849        (1,849     —     

Interest expense

    (8,822     —          (8,822     (7,638     —          (7,638

Equity in earnings

    148        —          148        156        —          156   

Other

    (6,453     6,453        —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    150,950        (6,691     144,259        133,228        (2,980     130,248   

Provision for income taxes

    (61,300     1,288        (60,012     (52,969     1,238        (51,731
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 89,650      $ (5,403   $ 84,247      $ 80,259      $ (1,742   $ 78,517   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share - Basic

  $ 2.81        $ 2.64      $ 2.35        $ 2.30   
 

 

 

     

 

 

   

 

 

     

 

 

 

Earnings per share - Diluted

  $ 2.75        $ 2.59      $ 2.28        $ 2.23   
 

 

 

     

 

 

   

 

 

     

 

 

 

Basic Shares

    31,870          31,870        34,180          34,180   

Diluted Shares

    32,550          32,550        35,161          35,161   
    As Reported                 As Reported              
    36 Weeks Ended                 36 Weeks Ended              
    September 11, 2015                 September 12, 2014              

Contract Sales

           

Vacation ownership

  $ 495,645          $ 487,082       

Residential products

    28,420            10,814       
 

 

 

       

 

 

     

Total contract sales

  $ 524,065          $ 497,896       
 

 

 

       

 

 

     

 

** 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 September 11, 2015 and September 12, 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  
    September 11, 2015     Charges     September 11, 2015**     September 12, 2014     Charges     September 12, 2014**  

Revenues

           

Sale of vacation ownership products

  $ 122,908      $ —        $ 122,908      $ 138,179      $ —        $ 138,179   

Resort management and other services

    64,437        —          64,437        61,956        —          61,956   

Financing

    26,399        —          26,399        27,519        —          27,519   

Rental

    65,135        —          65,135        55,216        —          55,216   

Cost reimbursements

    83,561        —          83,561        81,031        —          81,031   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    362,440        —          362,440        363,901        —          363,901   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    35,736        —          35,736        41,394        —          41,394   

Marketing and sales

    62,652        —          62,652        63,092        —          63,092   

Resort management and other services

    39,175        —          39,175        40,021        —          40,021   

Rental

    53,742        —          53,742        46,962        —          46,962   

Litigation settlement

    —          —          —          2,975        (2,975     —     

Organizational and separation related

    59        (59     —          120        (120     —     

Royalty fee

    2,228        —          2,228        2,529        —          2,529   

Impairment

    —          —          —          26        (26     —     

Cost reimbursements

    83,561        —          83,561        81,031        —          81,031   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    277,153        (59     277,094        278,150        (3,121     275,029   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Losses) gains and other (expense) income

    (4     4        —          207        (207     —     

Equity in earnings

    54        —          54        50        —          50   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ 85,337      $ 63      $ 85,400      $ 86,008      $ 2,914      $ 88,922   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported                 As Reported              
    12 Weeks Ended                 12 Weeks Ended              
    September 11, 2015                 September 12, 2014              

Contract Sales

           

Vacation ownership

  $ 142,787          $ 148,154       

Residential products

    —              4,488       
 

 

 

       

 

 

     

Total contract sales

  $ 142,787          $ 152,642       
 

 

 

       

 

 

     

 

** 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

36 Weeks Ended September 11, 2015 and September 12, 2014

(In thousands)

 

    As Reported           As Adjusted     As Reported           As Adjusted  
    36 Weeks Ended     Certain     36 Weeks Ended     36 Weeks Ended     Certain     36 Weeks Ended  
    September 11, 2015     Charges     September 11, 2015**     September 12, 2014     Charges     September 12, 2014**  

Revenues

           

Sale of vacation ownership products

  $ 406,784      $ —        $ 406,784      $ 404,111      $ —        $ 404,111   

Resort management and other services

    189,206        —          189,206        184,596        —          184,596   

Financing

    79,809        —          79,809        83,887        —          83,887   

Rental

    202,606        —          202,606        168,943        —          168,943   

Cost reimbursements

    260,452        —          260,452        251,616        —          251,616   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    1,138,857        —          1,138,857        1,093,153        —          1,093,153   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    117,071        —          117,071        120,332        —          120,332   

Marketing and sales

    199,506        —          199,506        187,501        —          187,501   

Resort management and other services

    115,244        —          115,244        119,637        —          119,637   

Rental

    163,481        —          163,481        145,984        —          145,984   

Litigation settlement

    (370     370        —          (4,600     4,600        —     

Organizational and separation related

    313        (313     —          525        (525     —     

Royalty fee

    5,174        —          5,174        6,026        —          6,026   

Impairment

    —          —          —          860        (860     —     

Cost reimbursements

    260,452        —          260,452        251,616        —          251,616   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    860,871        57        860,928        827,881        3,215        831,096   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains and other income

    9,534        (9,534     —          1,897        (1,897     —     

Equity in earnings

    156        —          156        170        —          170   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ 287,676      $ (9,591   $ 278,085      $ 267,339      $ (5,112   $ 262,227   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported                 As Reported              
    36 Weeks Ended                 36 Weeks Ended              
    September 11, 2015                 September 12, 2014              

Contract Sales

           

Vacation ownership

  $ 449,385          $ 433,928       

Residential products

    —              10,814       
 

 

 

       

 

 

     

Total contract sales

  $ 449,385          $ 444,742       
 

 

 

       

 

 

     

 

** 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 September 11, 2015 and September 12, 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  
    September 11, 2015     Charges     September 11, 2015**     September 12, 2014     Charges     September 12, 2014**  

Revenues

           

Sale of vacation ownership products

  $ 6,303      $ —        $ 6,303      $ 7,641      $ —        $ 7,641   

Resort management and other services

    2,212        —          2,212        891        —          891   

Financing

    1,008        —          1,008        1,038        —          1,038   

Rental

    2,569        —          2,569        1,573        —          1,573   

Cost reimbursements

    609        —          609        703        —          703   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    12,701        —          12,701        11,846        —          11,846   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    1,432        —          1,432        1,959        —          1,959   

Marketing and sales

    4,022        —          4,022        4,526        —          4,526   

Resort management and other services

    2,264        —          2,264        695        —          695   

Rental

    4,129        —          4,129        2,762        —          2,762   

Royalty fee

    139        —          139        159        —          159   

Cost reimbursements

    609        —          609        703        —          703   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    12,595        —          12,595        10,804        —          10,804   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains and other income

    1        (1     —          —          —          —     

Equity in earnings

    (4     —          (4     (12     —          (12

Other

    (4,159     4,159        —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ (4,056   $ 4,158      $ 102      $ 1,030      $ —        $ 1,030   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported                 As Reported              
    12 Weeks Ended                 12 Weeks Ended              
    September 11, 2015                 September 12, 2014              

Contract Sales

           

Vacation ownership

  $ 6,877          $ 7,784       

Residential products

    —              —         
 

 

 

       

 

 

     

Total contract sales

  $ 6,877          $ 7,784       
 

 

 

       

 

 

     

 

** 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

36 Weeks Ended September 11, 2015 and September 12, 2014

(In thousands)

 

    As Reported           As Adjusted     As Reported           As Adjusted  
    36 Weeks Ended     Certain     36 Weeks Ended     36 Weeks Ended     Certain     36 Weeks Ended  
    September 11, 2015     Charges     September 11, 2015**     September 12, 2014     Charges     September 12, 2014**  

Revenues

           

Sale of vacation ownership products

  $ 50,156      $ (28,420   $ 21,736      $ 21,863      $ —        $ 21,863   

Resort management and other services

    4,039        —          4,039        2,723        —          2,723   

Financing

    3,057        —          3,057        3,142        —          3,142   

Rental

    6,424        —          6,424        5,129        —          5,129   

Cost reimbursements

    2,107        —          2,107        2,366        —          2,366   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    65,783        (28,420     37,363        35,223        —          35,223   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    25,231        (21,583     3,648        5,459        —          5,459   

Marketing and sales

    14,011        (922     13,089        12,547        —          12,547   

Resort management and other services

    3,769        —          3,769        2,037        —          2,037   

Rental

    9,419        —          9,419        8,294        —          8,294   

Royalty fee

    446        —          446        483        —          483   

Cost reimbursements

    2,107        —          2,107        2,366        —          2,366   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    54,983        (22,505     32,478        31,186        —          31,186   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Losses and other expense

    (29     29        —          (8     8        —     

Equity in earnings

    (8     —          (8     (14     —          (14

Other

    (5,431     5,431        —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ 5,332      $ (455   $ 4,877      $ 4,015      $ 8      $ 4,023   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported                 As Reported              
    36 Weeks Ended                 36 Weeks Ended              
    September 11, 2015                 September 12, 2014              

Contract Sales

           

Vacation ownership

  $ 23,528          $ 21,744       

Residential products

    28,420            —         
 

 

 

       

 

 

     

Total contract sales

  $ 51,948          $ 21,744       
 

 

 

       

 

 

     

 

** 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 September 11, 2015 and September 12, 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  
    September 11, 2015     Charges     September 11, 2015**     September 12, 2014     Charges     September 12, 2014**  

Revenues

           

Sale of vacation ownership products

  $ 7,591      $ —        $ 7,591      $ 9,564      $ —        $ 9,564   

Resort management and other services

    7,179        —          7,179        8,134        —          8,134   

Financing

    887        —          887        988        —          988   

Rental

    8,335        —          8,335        8,831        —          8,831   

Cost reimbursements

    8,003        —          8,003        9,774        —          9,774   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    31,995        —          31,995        37,291        —          37,291   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    2,070        —          2,070        2,888        —          2,888   

Marketing and sales

    4,954        —          4,954        5,762        —          5,762   

Resort management and other services

    5,970        —          5,970        7,141        —          7,141   

Rental

    4,696        —          4,696        4,881        —          4,881   

Royalty fee

    126        —          126        144        —          144   

Cost reimbursements

    8,003        —          8,003        9,774        —          9,774   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    25,819        —          25,819        30,590        —          30,590   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Losses and other expense

    (17     17        —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ 6,159      $ 17      $ 6,176      $ 6,701      $ —        $ 6,701   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported                 As Reported              
    12 Weeks Ended                 12 Weeks Ended              
    September 11, 2015                 September 12, 2014              

Contract Sales

  $ 10,093          $ 11,307       
 

 

 

       

 

 

     

 

** 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

36 Weeks Ended September 11, 2015 and September 12, 2014

(In thousands)

 

    As Reported           As Adjusted     As Reported           As Adjusted  
    36 Weeks Ended     Certain     36 Weeks Ended     36 Weeks Ended     Certain     36 Weeks Ended  
    September 11, 2015     Charges     September 11, 2015**     September 12, 2014     Charges     September 12, 2014**  

Revenues

           

Sale of vacation ownership products

  $ 19,138      $ —        $ 19,138      $ 26,822      $ —        $ 26,822   

Resort management and other services

    19,063        —          19,063        22,029        —          22,029   

Financing

    2,774        —          2,774        2,973        —          2,973   

Rental

    15,850        —          15,850        16,900        —          16,900   

Cost reimbursements

    23,378        —          23,378        27,787        —          27,787   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    80,203        —          80,203        96,511        —          96,511   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    4,155        —          4,155        6,723        —          6,723   

Marketing and sales

    15,243        —          15,243        16,779        (287     16,492   

Resort management and other services

    16,285        —          16,285        19,387        200        19,587   

Rental

    11,660        —          11,660        12,108        —          12,108   

Royalty fee

    290        —          290        426        —          426   

Cost reimbursements

    23,378        —          23,378        27,787        —          27,787   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    71,011        —          71,011        83,210        (87     83,123   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Losses and other expense

    (13     13        —          (39     39        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ 9,179      $ 13      $ 9,192      $ 13,262      $ 126      $ 13,388   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported                 As Reported              
    36 Weeks Ended                 36 Weeks Ended              
    September 11, 2015                 September 12, 2014              

Contract Sales

  $ 22,732          $ 31,410       
 

 

 

       

 

 

     

 

** 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 36 Weeks Ended September 11, 2015 and September 12, 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  
    September 11, 2015     Charges     September 11, 2015**     September 12, 2014     Charges     September 12, 2014**  

Expenses

           

Cost of vacation ownership products

  $ 1,538      $ —        $ 1,538      $ 2,399      $ —        $ 2,399   

Financing

    5,488        —          5,488        5,434        —          5,434   

General and administrative

    23,214        (1,767     21,447        21,932        —          21,932   

Litigation settlement

    —          —          —          250        (250     —     

Organizational and separation related

    380        (380     —          212        (212     —     

Consumer financing interest

    5,289        —          5,289        5,605        —          5,605   

Royalty fee

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    47,416        (2,147     45,269        47,339        (462     46,877   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense

    (2,839     —          (2,839     (2,890     —          (2,890

Other

    (1,022     1,022        —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial results

  $ (51,277   $ 3,169      $ (48,108   $ (50,229   $ 462      $ (49,767
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported           As Adjusted     As Reported           As Adjusted  
    36 Weeks Ended     Certain     36 Weeks Ended     36 Weeks Ended     Certain     36 Weeks Ended  
    September 11, 2015     Charges     September 11, 2015**     September 12, 2014     Charges     September 12, 2014**  

Expenses

           

Cost of vacation ownership products

  $ 4,400      $ —        $ 4,400      $ 6,411      $ —        $ 6,411   

Financing

    16,478        —          16,478        15,976        —          15,976   

General and administrative

    68,883        (1,767     67,116        66,913        —          66,913   

Litigation settlement

    134        (134     —          250        (250     —     

Organizational and separation related

    419        (419     —          1,747        (1,747     —     

Consumer financing interest

    16,558        —          16,558        17,967        —          17,967   

Royalty fee

    34,521        —          34,521        34,485        —          34,485   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    141,393        (2,320     139,073        143,749        (1,997     141,752   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense

    (8,822     —          (8,822     (7,638     —          (7,638

Other

    (1,022     1,022        —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial results

  $ (151,237   $ 3,342      $ (147,895   $ (151,389   $ 1,999      $ (149,390
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

** 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  
     September 11, 2015      September 12, 2014  

Contract sales

     

Vacation ownership

   $ 159,757       $ 167,245   

Residential products

     —           4,488   
  

 

 

    

 

 

 

Total contract sales

     159,757         171,733   
  

 

 

    

 

 

 

Revenue recognition adjustments:

     

Reportability1

     (11,051      (4,503

Sales Reserve2

     (7,600      (7,310

Other3

     (4,304      (4,536
  

 

 

    

 

 

 

Sale of vacation ownership products

   $ 136,802       $ 155,384   
  

 

 

    

 

 

 

 

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  
    September 11, 2015     Charges     Adjustment     September 11, 2015**     September 12, 2014     Charges     Adjustment     September 12, 2014**  

Sale of vacation ownership products

  $ 136,802      $ —        $ 11,051      $ 147,853      $ 155,384      $ —        $ 4,503      $ 159,887   

Less:

               

Cost of vacation ownership products

    40,776        —          3,137        43,913        48,640        —          1,329        49,969   

Marketing and sales

    71,628        —          986        72,614        73,380        —          385        73,765   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin

  $ 24,398      $ —        $ 6,928      $ 31,326      $ 33,364      $ —        $ 2,789      $ 36,153   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin percentage1

    17.8         21.2     21.5         22.6

 

** 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)

 

     36 Weeks Ended  
     September 11, 2015      September 12, 2014  

Contract sales

     

Vacation ownership

   $ 495,645       $ 487,082   

Residential products

     28,420         10,814   
  

 

 

    

 

 

 

Total contract sales

     524,065         497,896   
  

 

 

    

 

 

 

Revenue recognition adjustments:

     

Reportability1

     (11,124      (8,228

Sales Reserve2

     (23,146      (23,008

Other3

     (13,717      (13,864
  

 

 

    

 

 

 

Sale of vacation ownership products

   $ 476,078       $ 452,796   
  

 

 

    

 

 

 

 

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  
    36 Weeks Ended     Certain     Reportability     36 Weeks Ended     36 Weeks Ended     Certain     Reportability     36 Weeks Ended  
    September 11, 2015     Charges     Adjustment     September 11, 2015**     September 12, 2014     Charges     Adjustment     September 12, 2014**  

Sale of vacation ownership products

  $ 476,078      $ (28,420   $ 11,124      $ 458,782      $ 452,796      $ —        $ 8,228      $ 461,024   

Less:

               

Cost of vacation ownership products

    150,857        (21,583     3,235        132,509        138,925        —          2,545        141,470   

Marketing and sales

    228,760        (922     934        228,772        216,827        (287     638        217,178   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin

  $ 96,461      $ (5,915   $ 6,955      $ 97,501      $ 97,044      $ 287      $ 5,045      $ 102,376   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin percentage1

    20.3         21.3     21.4         22.2

 

** 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-11


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In thousands)

 

     12 Weeks Ended  
     September 11, 2015      September 12, 2014  

Contract sales

     

Vacation ownership

   $ 142,787       $ 148,154   

Residential products

     —           4,488   
  

 

 

    

 

 

 

Total contract sales

     142,787         152,642   
  

 

 

    

 

 

 

Revenue recognition adjustments:

     

Reportability1

     (9,849      (4,104

Sales Reserve2

     (5,901      (5,867

Other3

     (4,129      (4,492
  

 

 

    

 

 

 

Sale of vacation ownership products

   $ 122,908       $ 138,179   
  

 

 

    

 

 

 

 

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  
    September 11, 2015     Charges     Adjustment     September 11, 2015**     September 12, 2014     Charges     Adjustment     September 12, 2014**  

Sale of vacation ownership products

  $ 122,908      $ —        $ 9,849      $ 132,757      $ 138,179      $ —        $ 4,104      $ 142,283   

Less:

               

Cost of vacation ownership products

    35,736        —          2,808        38,544        41,394        —          1,191        42,585   

Marketing and sales

    62,652        —          925        63,577        63,092        —          385        63,477   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin

  $ 24,520      $ —        $ 6,116      $ 30,636      $ 33,693      $ —        $ 2,528      $ 36,221   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin percentage1

    20.0         23.1     24.4         25.5

 

** 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)

 

     36 Weeks Ended  
     September 11, 2015      September 12, 2014  

Contract sales

     

Vacation ownership

   $ 449,385       $ 433,928   

Residential products

     —           10,814   
  

 

 

    

 

 

 

Total contract sales

     449,385         444,742   
  

 

 

    

 

 

 

Revenue recognition adjustments:

     

Reportability1

     (11,351      (8,296

Sales Reserve2

     (17,886      (18,618

Other3

     (13,364      (13,717
  

 

 

    

 

 

 

Sale of vacation ownership products

   $ 406,784       $ 404,111   
  

 

 

    

 

 

 

 

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  
    36 Weeks Ended     Certain     Reportability     36 Weeks Ended     36 Weeks Ended     Certain     Reportability     36 Weeks Ended  
    September 11, 2015     Charges     Adjustment     September 11, 2015**     September 12, 2014     Charges     Adjustment     September 12, 2014**  

Sale of vacation ownership products

  $ 406,784      $ —        $ 11,351      $ 418,135      $ 404,111      $ —        $ 8,296      $ 412,407   

Less:

               

Cost of vacation ownership products

    117,071        —          3,235        120,306        120,332        —          2,509        122,841   

Marketing and sales

    199,506        —          1,067        200,573        187,501        —          779        188,280   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin

  $ 90,207      $ —        $ 7,049      $ 97,256      $ 96,278      $ —        $ 5,008      $ 101,286   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin percentage1

    22.2         23.3     23.8         24.6

 

** 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 36 Weeks Ended September 11, 2015 and September 12, 2014

(In thousands)

 

     As Reported
12 Weeks Ended
September 11, 2015
     Certain
Charges
    As Adjusted
12 Weeks Ended
September 11, 2015**
     As Reported
12 Weeks Ended
September 12, 2014
     Certain
Charges
    As Adjusted
12 Weeks Ended
September 12, 2014**
 

Net income

   $ 21,555       $ 4,916      $ 26,471       $ 25,648       $ 2,077      $ 27,725   

Interest expense1

     2,839         —          2,839         2,890         —          2,890   

Tax provision

     14,608         2,491        17,099         17,862         1,299        19,161   

Depreciation and amortization

     5,292         —          5,292         4,261         —          4,261   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

EBITDA**

   $ 44,294       $ 7,407      $ 51,701       $ 50,661       $ 3,376      $ 54,037   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
     As Reported
36 Weeks Ended
September 11, 2015
     Certain
Charges
    As Adjusted
36 Weeks Ended
September 11, 2015**
     As Reported
36 Weeks Ended
September 12, 2014
     Certain
Charges
    As Adjusted
36 Weeks Ended
September 12, 2014**
 

Net income

   $ 89,650       $ (5,403   $ 84,247       $ 80,259       $ (1,742   $ 78,517   

Interest expense1

     8,822         —          8,822         7,638         —          7,638   

Tax provision

     61,300         (1,288     60,012         52,969         (1,238     51,731   

Depreciation and amortization

     13,850         —          13,850         13,183         —          13,183   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

EBITDA**

   $ 173,622       $ (6,691   $ 166,931       $ 154,049       $ (2,980   $ 151,069   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

** 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

   $ 112       $ 119   

Adjustments to reconcile Net income to Adjusted net income

     

Organizational and separation related and other charges1

     11         10   

Gain on dispositions2

     (10      (10

Bulk sales3

     (6      (6

Provision for income taxes on adjustments to net income

     1         1   
  

 

 

    

 

 

 

Adjusted net income**

   $ 108       $ 114   
  

 

 

    

 

 

 

Earnings per share - Diluted4

   $ 3.46       $ 3.68   

Adjusted earnings per share - Diluted**,4

   $ 3.33       $ 3.52   

Diluted shares 4

     32.4         32.4   

 

** 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 $2.1 million for organizational and separation related efforts, $1.8 million for refurbishment costs at a project in our North America segment, and $6 million to $7 million of non-capitalizable transaction costs.
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 September 11, 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

     75        78          77           —            77   

Deferred income taxes / income taxes payable

     12        16          14           —            14   

Net changes in assets and liabilities:

                     

Notes receivable originations

     (305     (310       (308        —            (308

Notes receivable collections

     270        274          272           20 6        292   

Inventory

     55        60          58           (68 )7        (10

Purchase of operating hotels for future conversion to inventory2

     (62     (62       (62        62 2        —     

Liability for Marriott Rewards customer loyalty program

     (20     (20       (20        20 8        —     

Organizational and separation related and other charges

     (5     (5       (5        5 9        —     

Other working capital changes

     37        40          39           (24 )10        15   
  

 

 

   

 

 

     

 

 

      

 

 

     

 

 

 

Net cash provided by operating activities

     165        185          176           15          191   

Capital expenditures for property and equipment (excluding inventory):

                     

New sales centers3

     (13     (12       (13        13 3        —     

Organizational and separation related capital expenditures

     (3     (3       (3        3 9        —     

Other

     (24     (22       (23        3 11        (20

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

     (47     (47       (47        47 4        —     

Decrease in restricted cash

     3        4          4           —            4   

Borrowings from securitization transactions

     253        257          255           (45 )12        210   

Repayment of debt related to securitizations

     (255     (259       (257        —            (257
  

 

 

   

 

 

     

 

 

      

 

 

     

 

 

 

Free cash flow**

     79        103          92           36          128   

Adjustments:

                     

Organizational and separation related and other charges

     8        8          8           (8 )9        —     

Proceeds from sale of operating portion of Surfers Paradise hotel4

     47        47          47           (47 )4        —     

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

     41        42          42           —            42   
  

 

 

   

 

 

     

 

 

      

 

 

     

 

 

 

Adjusted free cash flow**

   $ 175      $ 200        $ 189         $ (19     $ 170   
  

 

 

   

 

 

     

 

 

      

 

 

     

 

 

 
                                               

 

** 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 the investment in operating hotels 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 normalized notes receivable collections.
7  Represents adjustment to align real estate inventory spending with real estate inventory costs (i.e., product costs).
8  Represents payment for Marriott Rewards Points issued prior to the Spin-off. Liability to be fully paid in 2016.
9  Represents costs associated with organizational and separation related efforts.
10  Represents normalized other working capital changes.
11  Represents normalized capital expenditures for property and equipment.
12  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 gains (losses) and other income (expense) in the 12 weeks and 36 weeks ended September 11, 2015 and September 12, 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 (losses) and other income (expense). These non-GAAP financial measures also facilitate our comparison of results from our on-going core operations before certain items and gains (losses) and other income (expense) with results from other vacation ownership companies.

Certain items—12 weeks and 36 weeks ended September 11, 2015. In our Statement of Income for the 12 weeks ended September 11, 2015, we recorded $7.4 million of net pre-tax items, which included a $4.2 million adjustment for transaction costs in our Asia Pacific segment and a $1.0 million adjustment for transaction costs in our Corporate and Other segment, both recorded under the “Other” caption, a $1.8 million adjustment for refurbishment costs at a project in our North America segment, and $0.4 million of organizational and separation related costs recorded under the “Organizational and separation related” caption. In our Statement of Income for the 36 weeks ended September 11, 2015, we recorded $2.8 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 $5.4 million adjustment for transaction costs in our Asia Pacific segment and a $1.0 million adjustment for transaction costs in our Corporate and Other segment, both recorded under the “Other” caption, a $1.8 million adjustment for refurbishment costs at a project in our North America segment, $0.7 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, and 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 36 weeks ended September 12, 2014. In our Statement of Income for the 12 weeks ended September 12, 2014, we recorded $3.6 million of net pre-tax items, which included a $3.0 million accrual for a litigation settlement in our North America segment and a $0.3 million accrual for a litigation settlement in our Corporate and Other segment, both recorded under the “Litigation settlement” caption, $0.3 million of organizational and separation related costs recorded under the “Organizational and separation related” caption, and less than a $0.1 million impairment charge associated with a project in our North America segment recorded under the “Impairment” caption. In our Statement of Income for the 36 weeks ended September 12, 2014, we recorded $1.1 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 a $3.0 million accrual for a litigation settlement in our North America segment and a $0.3 million accrual for a litigation settlement in our Corporate and other segment, both recorded under the “Litigation settlement” caption, $2.3 million of organizational and separation related costs recorded under the “Organizational and separation related” caption, a $0.9 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

Gains (losses) and other income (expense)—12 weeks and 36 weeks ended September 11, 2015. In our Statement of Income for the 12 weeks ended September 11, 2015, we recorded net losses and other expense of less than $0.1 million on the “(Losses) gains and other (expense) income” caption. In our Statement of Income for the 36 weeks ended September 11, 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.

Gains (losses) and other income (expense)—12 weeks and 36 weeks ended September 12, 2014. In our Statement of Income for the 12 weeks ended September 12, 2014, we recorded a $0.2 million gain associated with the sale of a golf course and adjacent undeveloped land in our North America segment under the “(Losses) gains and other (expense) income” caption. In our Statement of Income for the 36 weeks ended September 12, 2014, we recorded $1.8 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 (losses) and other income (expense), 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 (losses) and other income (expense). Together, EBITDA and Adjusted EBITDA facilitate our comparison of results from our on-going core operations before the impact of certain items and gains (losses) and other income (expense) 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)        
     September 11,
2015
    January 2,
2015
 

ASSETS

    

Cash and cash equivalents

   $ 321,690      $ 346,515   

Restricted cash (including $93,803 and $34,986 from VIEs, respectively)

     121,752        109,907   

Accounts and contracts receivable, net (including $4,211 and $4,992 from VIEs, respectively)

     128,321        109,700   

Vacation ownership notes receivable, net (including $704,349 and $750,680 from VIEs, respectively)

     887,456        917,228   

Inventory

     721,664        772,784   

Property and equipment

     247,317        147,379   

Other

     98,827        127,066   
  

 

 

   

 

 

 

Total Assets

   $ 2,527,027      $ 2,530,579   
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Accounts payable

   $ 77,516      $ 114,079   

Advance deposits

     66,436        60,192   

Accrued liabilities (including $1,635 and $1,088 from VIEs, respectively)

     150,928        165,969   

Deferred revenue

     44,499        38,818   

Payroll and benefits liability

     87,871        93,073   

Liability for Marriott Rewards customer loyalty program

     73,904        89,285   

Deferred compensation liability

     48,468        41,677   

Mandatorily redeemable preferred stock of consolidated subsidiary, net

     38,935        38,816   

Debt, net (including $776,648 and $708,031 from VIEs, respectively)

     769,716        703,013   

Other

     38,239        27,071   

Deferred taxes

     94,544        78,883   
  

 

 

   

 

 

 

Total Liabilities

     1,491,056        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; 36,355,412 and 36,089,513 shares issued, respectively

     363        361   

Treasury stock - at cost; 5,294,063 and 3,996,725 shares, respectively

     (335,339     (229,229

Additional paid-in capital

     1,138,049        1,137,785   

Accumulated other comprehensive income

     13,305        17,054   

Retained earnings

     219,593        153,732   
  

 

 

   

 

 

 

Total Equity

     1,035,971        1,079,703   
  

 

 

   

 

 

 

Total Liabilities and Equity

   $ 2,527,027      $ 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)

 

     36 weeks ended  
     September 11,
2015
    September 12,
2014
 

OPERATING ACTIVITIES

    

Net income

   $ 89,650      $ 80,259   

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

    

Depreciation

     13,850        13,183   

Amortization of debt issuance costs

     3,739        3,762   

Provision for loan losses

     22,753        22,725   

Share-based compensation

     9,633        9,354   

Deferred income taxes

     17,261        29,523   

Equity method income

     (148     (156

Gain on disposal of property and equipment, net

     (9,492     (1,849

Non-cash litigation settlement

     (262     —     

Impairment charges

     —          860   

Net change in assets and liabilities:

    

Accounts and contracts receivable

     (17,799     (8,609

Notes receivable originations

     (189,029     (169,784

Notes receivable collections

     192,852        203,728   

Inventory

     51,467        61,740   

Purchase of operating hotels for future conversion to inventory

     (61,554     —     

Other assets

     26,524        45,650   

Accounts payable, advance deposits and accrued liabilities

     (52,380     (67,160

Deferred revenue

     5,742        4,228   

Payroll and benefit liabilities

     (4,959     (4,855

Liability for Marriott Rewards customer loyalty program

     (15,384     (22,737

Deferred compensation liability

     6,791        3,340   

Other liabilities

     6,236        3,196   

Other, net

     5,233        80   
  

 

 

   

 

 

 

Net cash provided by operating activities

     100,724        206,478   
  

 

 

   

 

 

 

INVESTING ACTIVITIES

    

Capital expenditures for property and equipment (excluding inventory)

     (20,873     (7,753

Purchase of operating hotel to be sold

     (47,658     —     

(Increase) decrease in restricted cash

     (12,616     20,656   

Dispositions, net

     20,605        33,310   
  

 

 

   

 

 

 

Net cash provided by investing activities Net cash (used in) provided by investing activities

     (60,542     46,213   
  

 

 

   

 

 

 

FINANCING ACTIVITIES

    

Borrowings from securitization transactions

     255,000        22,638   

Repayment of debt related to securitization transactions

     (186,383     (162,680

Proceeds from vacation ownership inventory arrangement

     5,375        —     

Debt issuance costs

     (4,405     (1,676

Repurchase of common stock

     (106,110     (160,155

Payment of dividends

     (16,003     —     

Proceeds from stock option exercises

     96        1,723   

Excess tax benefits from share-based compensation

     68        —     

Payment of withholding taxes on vesting of restricted stock units

     (9,615     (5,130

Other

     213        —     
  

 

 

   

 

 

 

Net cash used in financing activities

     (61,764     (305,280
  

 

 

   

 

 

 

Effect of changes in exchange rates on cash and cash equivalents

     (3,243     (790

DECREASE IN CASH AND CASH EQUIVALENTS

     (24,825     (53,379

CASH AND CASH EQUIVALENTS, beginning of period

     346,515        199,511   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS, end of period

   $ 321,690      $ 146,132   
  

 

 

   

 

 

 

 

A-21