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) February 27, 2014

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 and fiscal year ended January 3, 2014.

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 February 27, 2014, reporting financial results for the quarter and fiscal year ended January 3, 2014.

 

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: February 27, 2014

    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 February 27, 2014, reporting financial results for the quarter and fiscal year ended January 3, 2014.
EX-99.1

Exhibit 99.1

 

LOGO

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 Fourth Quarter and Full Year

2013 Financial Results and Provides 2014 Outlook

ORLANDO, Fla. – February 27, 2014 – Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported fourth quarter and full year 2013 financial results and provided its outlook for 2014. Due to the company’s reporting calendar, the fourth quarter and full year 2013 include the impact of an additional week of financial results as compared to 2012.

Highlights for the fourth quarter of 2013, include:

 

   

Adjusted EBITDA totaled $38 million.

 

   

North America volume per guest (VPG) increased 6.8 percent year-over-year to $3,103.

 

   

North America contract sales, excluding residential sales, increased 9.9 percent to $179 million.

 

   

Company and North America adjusted development margin was 22.9 percent and 25.4 percent, respectively.

 

   

Adjusted fully diluted earnings per share were $0.32.

 

   

The company repurchased 505,023 shares of its common stock under its share repurchase program for a total of $25.6 million through the end of 2013 and has repurchased an additional 530,189 shares for a total of $26.3 million from January 4, 2014 through February 26, 2014.

 

   

In February 2014, the company disposed of a golf course and adjacent undeveloped land in Orlando, Florida for $22 million of net cash proceeds.

Fourth quarter 2013 net income was $6 million, or $0.15 diluted earnings per share, compared to a net loss of $11 million in the fourth quarter of 2012. Reported development margin increased to 23.3 percent in the fourth quarter of 2013 from 19.8 percent in the fourth quarter of 2012. North America reported development margin increased to 26.0 percent in the fourth quarter of 2013 from 24.2 percent in the fourth quarter of 2012.

Full year 2013 highlights include:

 

   

Adjusted EBITDA totaled $175 million.

 

   

Adjusted development margin increased to 19.8 percent from 16.1 percent in 2012. North America adjusted development margin increased to 21.8 percent from 18.6 percent in 2012.

 

   

Adjusted fully diluted earnings per share were $2.31.

 

   

The company generated adjusted free cash flow of $175 million.


Marriott Vacations Worldwide Reports Fourth Quarter and Full Year 2013 Financial Results and Provides 2014 Outlook / 2

 

Full year 2013 net income was $80 million, or $2.18 diluted earnings per share, compared to reported net income of $7 million in 2012, or $0.18 diluted earnings per share. Reported development margin increased to 21.2 percent for the full year 2013 from 14.0 percent in 2012. North America reported development margin increased to 22.1 percent for the full year 2013 from 18.2 percent in 2012. Net cash provided by operating activities was $162 million for 2013.

Adjusted EBITDA is defined as earnings before interest expense (excluding consumer financing interest expense), income taxes, depreciation and amortization, as adjusted for organizational and separation related costs in connection with the company’s spin-off from Marriott International, Inc. (the “Spin-off”) and other activity. Non-GAAP financial measures, such as Adjusted EBITDA, adjusted net income, adjusted development margin, and adjusted free cash flow are reconciled in the Press Release Schedules that follow. Adjustments are shown and described in further detail on schedules A-1 through A-20.

2014 Outlook highlights:

 

   

Adjusted EBITDA of $185 million to $200 million.

 

   

Company contract sales growth (excluding residential) of 5 percent to 8 percent.

 

   

Adjusted company development margin of 20.0 percent to 21.0 percent.

 

   

Adjusted North America development margin of 22.0 percent to 23.0 percent.

 

   

Adjusted free cash flow of $135 million to $160 million.

Schedules A-1 through A-20 reconcile the non-GAAP financial measures set forth above to the following full year 2014 expected results: reported net income of $84 million to $93 million; reported company development margin of 19.4 percent to 20.4 percent; reported North America development margin of 22.0 to 23.0 percent; and net cash provided by operating activities of $160 million to $180 million.

“We closed the year on a positive note with strong fourth quarter performance. VPG in our key North America segment was up 6.8 percent in the quarter compared to 2012, driven by continued improvement in closing efficiency,” said Stephen P. Weisz, president and chief executive officer. “Consistent results throughout the year contributed to another year of solid performance in 2013. For the full year, we drove 27 percent growth in adjusted EBITDA, and company adjusted development margin improved 370 basis points to 19.8 percent.”

Weisz concluded, “We expect another year of top-line and bottom-line growth in 2014 as we continue to focus on improving development margins, while seeking out exciting new locations for our Marriott Vacation Club Destinations program that will provide new sales distribution.”

Fourth Quarter 2013 Results

Due to the company’s reporting calendar, fourth quarter 2013 financial results included the impact of an additional week compared to the fourth quarter of 2012. Fourth quarter 2013 adjusted net income totaled $12 million, a $6 million decrease from $18 million of adjusted net income in the fourth quarter of 2012. Fourth quarter 2013 adjusted net income reflects a $10 million increase in pre-tax income that resulted


Marriott Vacations Worldwide Reports Fourth Quarter and Full Year 2013 Financial Results and Provides 2014 Outlook / 3

 

from the exclusion of $5 million of organizational and separation related costs, $5 million for litigation settlement charges in the company’s Europe segment, and a $1 million charge in connection with the company’s interest in an equity method investment in a joint venture project in its North America segment, partially offset by the exclusion of $1 million of pre-tax income related to the impact of extended rescission periods in the company’s Europe segment. Fourth quarter 2012 adjusted net income reflects a $44 million increase in pre-tax income that resulted from the exclusion of $39 million of litigation settlement charges in the company’s former Luxury segment, $7 million of organizational and separation related costs, and $6 million related primarily to the closing of off-site sales locations in its Asia Pacific segment and severance in its Europe segment, partially offset by an $8 million gain from the sale of a golf course and spa. In addition, adjusted development margin for both periods is adjusted, as appropriate, for the impact of revenue reportability.

Total company contract sales were $213 million, an $18 million increase from the fourth quarter of 2012, driven by $22 million of higher contract sales in the company’s North America segment, including approximately $9 million of contract sales from the additional week in the quarter. For the fourth quarter of 2013, total revenues from the sale of vacation ownership products were $200 million, a decrease of $2 million from the prior year period.

Adjusted development margin was $45 million, a $13 million increase from the fourth quarter of 2012. Adjusted development margin percentage increased 5 percentage points to 22.9 percent in the fourth quarter of 2013. Reported development margin was $47 million, a $7 million increase from the fourth quarter of 2012. Reported development margin percentage increased 3.5 percentage points to 23.3 percent in the fourth quarter of 2013.

Resort management and other services revenues totaled $81 million, a $4 million increase from the fourth quarter of 2012. Resort management and other services revenues, net of expenses, were $23 million, a $5 million increase over the fourth quarter of 2012. Results reflected improvements in ancillary operations and higher management fees.

Rental revenues totaled $69 million, an $11 million, or 17.2 percent, increase from the fourth quarter of 2012. These results reflect a 15 percent increase in transient keys rented as well as a 10 percent increase in average transient rate driven by stronger consumer demand and a favorable mix of available rental inventory. Rental revenues, net of expenses, were a loss of $13 million in the quarter compared to a loss of $9 million in the fourth quarter of 2012, reflecting higher costs associated with the company’s exchange offerings within its MVCD program and $1 million of higher redemption costs associated with Marriott Rewards points issued prior to the Spin-off.

General and administrative expenses were $33 million in the fourth quarter of 2013, a $6 million increase from the fourth quarter of 2012, reflecting $3 million of higher personnel related costs, $3 million of higher legal related expenses, and $1 million related to the 53rd week in the 2013 fiscal reporting calendar, partially offset by $1 million of savings related to organizational and separation related efforts in the human resources, information technology and finance and accounting areas.

Adjusted EBITDA was $38 million in the fourth quarter of 2013, a $10 million decrease from the fourth quarter of 2012.


Marriott Vacations Worldwide Reports Fourth Quarter and Full Year 2013 Financial Results and Provides 2014 Outlook / 4

 

Segment Results

Effective December 29, 2012, the company combined the reporting of the financial results of its former Luxury segment with its North America segment based upon its decision to scale back separate development activity for the luxury market and to aggregate future marketing and sales efforts for upscale and luxury inventory. Existing service standards and on-site management remain unaffected by these reporting changes. Prior year amounts have been recast for consistency with current year’s presentation.

North America

VPG increased 6.8 percent to $3,103 in the fourth quarter of 2013 from $2,904 in the fourth quarter of 2012, driven by higher pricing and improved closing efficiency. Total North America contract sales were $186 million in the fourth quarter of 2013, an increase of $22 million over the prior year period, including approximately $9 million related to the additional week in the quarter. Contract sales in the quarter included $7 million related to the disposition of residential inventory primarily at the company’s Ritz-Carlton Club and Residences, San Francisco project as compared to $1 million of residential sales in the fourth quarter of 2012.

Fourth quarter 2013 North America segment financial results were $93 million, a $30 million increase over the fourth quarter of 2012. The increase was driven by a $39 million litigation settlement in the fourth quarter of 2012 at the company’s Ritz-Carlton Club and Residences, San Francisco project, $5 million of higher sales of vacation ownership products net of expenses and $5 million of higher resort management and other services net of expenses. These increases were partially offset by a $9 million gain mainly from the sale of a golf course and spa in the fourth quarter of 2012, a $6 million decrease in rental revenues net of expenses, $2 million of lower financing revenues, and $2 million of higher royalty fee and other charges.

Revenues from the sale of vacation ownership products increased $3 million to $176 million in the fourth quarter, resulting primarily from $22 million of higher contract sales and $4 million of lower sales reserve activity, partially offset by $22 million of lower year-over-year revenue reportability. Development margin was $46 million, a $5 million increase from the fourth quarter of 2012. Adjusted development margin was $44 million, a $16 million increase from the prior year quarter. Adjusted development margin percentage increased 6.1 percentage points to 25.4 percent in the fourth quarter of 2013. Reported development margin percentage increased 1.8 percentage points to 26.0 percent in the fourth quarter of 2013. The impact of revenue reportability is illustrated on schedule A-12.

Asia Pacific

Asia Pacific contract sales declined $1 million to $13 million in the fourth quarter of 2013 and total revenues declined $4 million to $20 million, reflecting the impact of the closure of two under-performing off-site sales centers in the fourth quarter of 2012. Segment financial results were $3 million, $3 million higher than the fourth quarter of 2012.


Marriott Vacations Worldwide Reports Fourth Quarter and Full Year 2013 Financial Results and Provides 2014 Outlook / 5

 

Europe

Fourth quarter 2013 contract sales declined $3 million to $14 million as the Europe segment continued to sell through its remaining developer inventory. Europe adjusted segment financial results were $3 million, flat to the fourth quarter of 2012. Reported segment financial results were down $3 million from the fourth quarter of 2012 to a loss of $1 million, due primarily to a $5 million litigation settlement charge in the fourth quarter of 2013.

Full Year 2013 Results

Full year 2013 adjusted net income totaled $85 million, a $38 million increase from $47 million of adjusted net income for the full year 2012. Full year 2013 adjusted net income reflects an $8 million increase in pre-tax income that resulted from the exclusion of $12 million of organizational and separation related costs, $4 million for litigation settlement charges mainly in the company’s Europe segment, $3 million for severance and an impairment charge in the company’s Europe segment, and $1 million charge in connection with the company’s interest in an equity method investment in a joint venture project in its North America segment, partially offset by the exclusion of $12 million of pre-tax income related to the impact of extended rescission periods in the company’s Europe segment. Full year 2012 adjusted net income reflects a $60 million increase in pre-tax income that resulted from the exclusion of $41 million of litigation settlement charges in the company’s former Luxury segment, $16 million of organizational and separation related costs, $6 million related primarily to the closing of off-site sales locations in its Asia Pacific segment and severance in its Europe segment, and $1 million related to costs associated with removing the Ritz-Carlton brand from one of the company’s properties, an $8 million gain from the sale of a golf course and spa, $2 million of non-cash impairment reversals, and the inclusion of $6 million of pre-tax income related to the impact of extended rescission periods in the company’s Europe segment. In addition, adjusted development margin for both periods is adjusted, as appropriate, for the impact of revenue reportability.

For the full year, total company contract sales were $694 million, up $6 million from $688 million in 2012, including approximately $9 million of contract sales from the additional week in 2013. North America contract sales were $623 million, up $40 million from 2012, driven by an 8 percent increase in VPG to $3,200, and $9 million of contract sales from the additional week in 2013. Full year 2013 adjusted development margin increased to 19.8 percent in 2013 from 16.1 percent in 2012. Adjusted EBITDA in 2013 totaled $175 million, at the high end of the company’s guidance range of $165 million to $175 million, and $37 million higher than 2012.

Organizational and Separation Plan

During the fourth quarter of 2013, the company incurred $8 million of costs in connection with its continued organizational and separation related efforts, of which approximately $3 million was capitalized during the quarter. Remaining spending for these efforts of approximately $5 million to $8 million is expected to be incurred by the end of 2014.

These costs primarily relate to establishing the company’s own information technology systems and services, independent accounts payable functions and reorganization of existing human resources and information technology organizations to support the company’s stand-alone public company needs. Once


Marriott Vacations Worldwide Reports Fourth Quarter and Full Year 2013 Financial Results and Provides 2014 Outlook / 6

 

completed, these efforts are expected to generate approximately $15 million to $20 million of annualized savings, of which approximately $10 million has been realized cumulatively to date, including $5 million reflected in the company’s full-year 2013 financial results.

Share Repurchase Activity

During the fourth quarter of 2013, the company repurchased 505,023 shares of its common stock at an average price of $50.75 per share for a total repurchase amount of $25.6 million. The company has repurchased an additional 530,189 shares subsequent to the end of the fourth quarter of 2013 through February 26, 2014 at an average price of $49.65 per share.

Subsequent Event

As part of its strategy to dispose of excess land and inventory, the company completed the sale of a golf course and adjacent undeveloped land in Orlando, Florida in February, resulting in $22 million of net cash proceeds for an estimated gain of approximately $2 million.

Balance Sheet and Liquidity

On January 3, 2014, cash and cash equivalents totaled $200 million. Since the end of 2012, real estate inventory balances declined $17 million to $864 million, including $369 million of finished goods, $151 million of work-in-process and $344 million of land and infrastructure. The company had $718 million in debt outstanding at the end of the fourth quarter of 2013, flat compared to year-end 2012, including $674 million in non-recourse securitized notes and $40 million of mandatorily redeemable preferred stock of a subsidiary of the company. As of January 3, 2014, the company had $199 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit and had $78 million of vacation ownership notes receivable eligible for securitization.

Outlook

For the full year 2014, the company is providing the following guidance:

 

Adjusted EBITDA    $185 million to $200 million
Adjusted company development margin    20.0 percent to 21.0 percent
Adjusted North America development margin    22.0 percent to 23.0 percent
Adjusted free cash flow    $135 million to $160 million
Company contract sales growth (excluding residential)    5 percent to 8 percent
Adjusted net income    $87 million to $96 million
Adjusted fully diluted earnings per share    $2.41 to $2.67
North America contract sales growth (excluding residential)    4 percent to 7 percent

Schedules A-1 through A-20 reconcile the non-GAAP financial measures set forth above to the following full year 2014 expected results: reported net income of $84 million to $93 million; reported company development margin of 19.4 percent to 20.4 percent; reported North America development margin of 22.0 to 23.0 percent; and net cash provided by operating activities of $160 million to $180 million.


Marriott Vacations Worldwide Reports Fourth Quarter and Full Year 2013 Financial Results and Provides 2014 Outlook / 7

 

Fourth Quarter and Full Year 2013 Earnings Conference Call

The company will hold a conference call at 10:00 a.m. EST today to discuss fourth quarter and full year 2013 results as well its outlook for 2014. Participants may access the call by dialing (866) 225-8754 or (480) 629-9835 for international callers. A live webcast of the call will also be available in the Investor Relations section of the company’s website at www.marriottvacationsworldwide.com.

An audio replay of the conference call will be available for seven days and can be accessed at (800) 406-7325 or (303) 590-3030 for international callers. The replay passcode is 4666198. 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. In late 2011, Marriott Vacations Worldwide was established as an independent, public company focusing primarily on vacation ownership experiences. Since entering the industry in 1984 as part of Marriott International, Inc., the company earned its position as a leader and innovator in vacation ownership products. The company preserves high standards of excellence in serving its customers, investors and associates while maintaining a long-term relationship with Marriott International. Marriott Vacations Worldwide offers a diverse portfolio of quality products, programs and management expertise with more than 60 resorts and approximately 420,000 Owners and Members. Its brands include: Marriott Vacation Club, The Ritz-Carlton Destination Club and Grand Residences by Marriott. For more information, please visit www.marriottvacationsworldwide.com.

Note on forward-looking statements: This press release and accompanying schedules contain “forward-looking statements” within the meaning of federal securities laws, including statements about future operating results, organizational and separation related efforts, 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 February 27, 2014 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

PRESS RELEASE SCHEDULES

QUARTER 4, 2013

TABLE OF CONTENTS

 

Consolidated Statements of Operations - 17 Weeks Ended January 3, 2014 and 16 Weeks Ended December 28, 2012

     A-1   

Consolidated Statements of Operations - 53 Weeks Ended January 3, 2014 and 52 Weeks Ended December 28, 2012

     A-2   

North America Segment Financial Results - 17 Weeks Ended January 3, 2014 and 16 Weeks Ended December 28, 2012

     A-3   

North America Segment Financial Results - 53 Weeks Ended January 3, 2014 and 52 Weeks Ended December 28, 2012

     A-4   

Asia Pacific Segment Financial Results - 17 Weeks Ended January 3, 2014 and 16 Weeks Ended December 28, 2012

     A-5   

Asia Pacific Segment Financial Results - 53 Weeks Ended January 3, 2014 and 52 Weeks Ended December 28, 2012

     A-6   

Europe Segment Financial Results - 17 Weeks Ended January 3, 2014 and 16 Weeks Ended December 28, 2012

     A-7   

Europe Segment Financial Results - 53 Weeks Ended January 3, 2014 and 52 Weeks Ended December 28, 2012

     A-8   

Corporate and Other Financial Results - 17 Weeks and 53 Weeks Ended January 3, 2014 and 16 Weeks and 52 Weeks Ended December 28, 2012

     A-9   

Consolidated Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin
(Adjusted Sale of Vacation Ownership Products Net of Expenses) - 17 Weeks Ended January 3, 2014 and 16 Weeks Ended December 28, 2012

     A-10   

Consolidated Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin
(Adjusted Sale of Vacation Ownership Products Net of Expenses) - 53 Weeks Ended January 3, 2014 and 52 Weeks Ended December 28, 2012

     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) - 17 Weeks Ended January 3, 2014 and 16 Weeks Ended December 28, 2012

     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) - 53 Weeks Ended January 3, 2014 and 52 Weeks Ended December 28, 2012

     A-13   

EBITDA and Adjusted EBITDA - 17 Weeks and 53 Weeks Ended January 3, 2014 and 16 Weeks and 52 Weeks Ended December 28, 2012

     A-14   

Adjusted Net Income and Adjusted Earnings Per Share - Diluted, Adjusted EBITDA and Adjusted Development Margin - 2014 Outlook

     A-15   

2013 Adjusted Free Cash Flow and 2014 Adjusted Free Cash Flow Outlook

     A-16   

2014 Normalized Adjusted Free Cash Flow Outlook

     A-17   

Non-GAAP Financial Measures

     A-18   

Consolidated Balance Sheets

     A-21   

Consolidated Statements of Cash Flows

     A-22   


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

17 Weeks Ended January 3, 2014 and 16 Weeks Ended December 28, 2012

(In millions, except per share amounts)

 

     As Reported
17 Weeks Ended
January 3, 2014
    Certain
Charges
    Europe
Rescission
Adjustment
    As Adjusted
17 Weeks Ended
January 3, 2014 **
    As Reported
16 Weeks Ended
December 28, 2012
    Certain
Charges
    Europe
Rescission
Adjustment
    As Adjusted
16 Weeks Ended
December 28, 2012 **
 

Revenues

               

Sale of vacation ownership products

  $ 200      $ —        $ (1   $ 199      $ 202      $ —        $ —        $ 202   

Resort management and other services

    81        —          —          81        77        —          —          77   

Financing

    44        —          —          44        45        —          —          45   

Rental

    69        —          —          69        58        —          —          58   

Other

    8        —          —          8        9        —          —          9   

Cost reimbursements

    125        —          —          125        108        —          —          108   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    527        —          (1     526        499        —          —          499   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

               

Cost of vacation ownership products

    57        —          —          57        64        —          —          64   

Marketing and sales

    96        —          —          96        98        (5     —          93   

Resort management and other services

    58        —          —          58        59        (1     —          58   

Financing

    9        —          —          9        8        —          —          8   

Rental

    82        —          —          82        67        —          —          67   

Other

    5        —          —          5        6        —          —          6   

General and administrative

    33        —          —          33        27        —          —          27   

Organizational and separation related

    5        (5     —          —          7        (7     —          —     

Litigation settlement

    5        (5     —          —          39        (39     —          —     

Consumer financing interest

    9        —          —          9        11        —          —          11   

Royalty fee

    21        —          —          21        20        —          —          20   

Cost reimbursements

    125        —          —          125        108        —          —          108   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    505        (10     —          495        514        (52     —          462   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains and other income

    —          —          —          —          9        (8     —          1   

Equity in earnings

    —          —          —          —          1        —          —          1   

Interest expense

    4        —          —          4        5        —          —          5   

Impairment (charges) reversals on equity investment

    (1     1        —          —          —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    17        11        (1     27        (10     44        —          34   

Provision for income taxes

    (11     (3     (1     (15     (1     (16     1        (16
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 6      $ 8      $ (2   $ 12      $ (11   $ 28      $ 1      $ 18   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share - Basic

  $ 0.16          $ 0.34      $ (0.33       $ 0.49   
 

 

 

       

 

 

   

 

 

       

 

 

 

Earnings per share - Diluted

  $ 0.15          $ 0.32      $ (0.33       $ 0.47   
 

 

 

       

 

 

   

 

 

       

 

 

 

Basic Shares

    35.4            35.4        34.7            34.7   

Diluted Shares

    36.6            36.6        34.7            36.5   
    As Reported
17 Weeks Ended
January 3, 2014
                      As Reported
16 Weeks Ended
December 28, 2012
                   

Contract Sales

               

Vacation ownership

  $ 206            $ 194         

Residential products

    7              1         
 

 

 

         

 

 

       

Total contract sales

  $ 213            $ 195         
 

 

 

         

 

 

       

 

** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
NOTE: We have restated 2012 Sale of vacation ownership products revenue, Cost of vacation ownership products and Marketing and sales expenses, Income before income taxes, Provision for income taxes, Net income, Earnings per share - Basic, and Earnings per share - Diluted to correct prior period misstatements. Earnings per share - Basic and Earnings per share - Diluted are calculated using whole dollars.

 

A-1


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

53 Weeks Ended January 3, 2014 and 52 Weeks Ended December 28, 2012

(In millions, except per share amounts)

 

    As Reported
53 Weeks Ended
January 3, 2014
    Certain
Charges
    Europe
Rescission
Adjustment
    As Adjusted
53 Weeks Ended
January 3, 2014 **
    As Reported
52 Weeks Ended
December 28, 2012
    Certain
Charges
    Europe
Rescission
Adjustment
    As Adjusted
52 Weeks Ended
December 28, 2012 **
 

Revenues

               

Sale of vacation ownership products

  $ 672      $ —        $ (21   $ 651      $ 618      $ —        $ 9      $ 627   

Resort management and other services

    260        —          —          260        253        —          —          253   

Financing

    141        —          —          141        151        —          —          151   

Rental

    262        —          —          262        225        —          —          225   

Other

    30        —          —          30        30        —          —          30   

Cost reimbursements

    385        —          —          385        362        —          —          362   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    1,750        —          (21     1,729        1,639        —          9        1,648   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

               

Cost of vacation ownership products

    214        —          (7     207        203        —          2        205   

Marketing and sales

    316        (2     (2     312        329        (6     1        324   

Resort management and other services

    190        —          —          190        199        (1     —          198   

Financing

    25        —          —          25        26        —          —          26   

Rental

    251        —          —          251        225        —          —          225   

Other

    16        —          —          16        14        —          —          14   

General and administrative

    99        —          —          99        86        —          —          86   

Organizational and separation related

    12        (12     —          —          16        (16     —          —     

Litigation settlement

    4        (4     —          —          41        (41     —          —     

Consumer financing interest

    31        —          —          31        41        —          —          41   

Royalty fee

    62        —          —          62        61        —          —          61   

Impairment

    1        (1     —          —          —          —          —          —     

Cost reimbursements

    385        —          —          385        362        —          —          362   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    1,606        (19     (9     1,578        1,603        (64     3        1,542   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains and other income

    1        —          —          1        9        (8     —          1   

Equity in earnings

    —          —          —          —          1        —          —          1   

Interest expense

    13        —          —          13        17        —          —          17   

Impairment (charges) reversals on equity investment

    (1     1        —          —          2        (2     —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    131        20        (12     139        31        54        6        91   

Provision for income taxes

    (51     (5     2        (54     (24     (20     —          (44
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 80      $ 15      $ (10   $ 85      $ 7      $ 34      $ 6      $ 47   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share - Basic

  $ 2.25          $ 2.40      $ 0.19          $ 1.36   
 

 

 

       

 

 

   

 

 

       

 

 

 

Earnings per share - Diluted

  $ 2.18          $ 2.31      $ 0.18          $ 1.29   
 

 

 

       

 

 

   

 

 

       

 

 

 

Basic Shares

    35.4            35.4        34.4            34.4   

Diluted Shares

    36.6            36.6        36.2            36.2   
    As Reported
53 Weeks Ended
January 3, 2014
                      As Reported
52 Weeks Ended
December 28, 2012
                   

Contract Sales

               

Vacation ownership

  $ 679            $ 687         

Residential products

    15              1         
 

 

 

         

 

 

       

Total contract sales

  $ 694            $ 688         
 

 

 

         

 

 

       

 

** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
NOTE: We have restated 2012 Sale of vacation ownership products revenue, Cost of vacation ownership products and Marketing and sales expenses, Income before income taxes, Provision for income taxes, Net income, Earnings per share - Basic, and Earnings per share - Diluted to correct prior period misstatements. Earnings per share - Basic and Earnings per share - Diluted are calculated using whole dollars.

 

A-2


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA SEGMENT

17 Weeks Ended January 3, 2014 and 16 Weeks Ended December 28, 2012

(In millions)

 

    As Reported
17 Weeks Ended
January 3, 2014
    Certain
Charges
    As Adjusted
17 Weeks Ended
January 3, 2014 **
    As Reported
16 Weeks Ended
December 28, 2012
    Certain
Charges
    As Adjusted
16 Weeks Ended
December 28, 2012 **
 

Revenues

           

Sale of vacation ownership products

  $ 176      $ —        $ 176      $ 173      $ —        $ 173   

Resort management and other services

    71        —          71        67        —          67   

Financing

    41        —          41        43        —          43   

Rental

    61        —          61        51        —          51   

Other

    8        —          8        9        —          9   

Cost reimbursements

    111        —          111        94        —          94   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    468        —          468        437        —          437   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    47        —          47        55        —          55   

Marketing and sales

    83        —          83        77        —          77   

Resort management and other services

    50        —          50        51        (1     50   

Rental

    74        —          74        58        —          58   

Other

    5        —          5        6        —          6   

Litigation settlement

    —          —          —          39        (39     —     

Royalty fee

    4        —          4        3        —          3   

Cost reimbursements

    111        —          111        94        —          94   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    374        —          374        383        (40     343   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains and other income

    —          —          —          9        (8     1   

Impairment (charges) reversals on equity investment

    (1     1        —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ 93      $ 1      $ 94      $ 63      $ 32      $ 95   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported
17 Weeks Ended
January 3, 2014
                As Reported
16 Weeks Ended
December 28, 2012
             

Contract Sales

           

Vacation ownership

  $ 179          $ 163       

Residential products

    7            1       
 

 

 

       

 

 

     

Total contract sales

  $ 186          $ 164       
 

 

 

       

 

 

     

 

** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

NOTE: We combined the financial results of the former Luxury segment with the North America segment beginning with the first quarter of 2013 and have recast prior year presentation for consistency. As a result of a realignment of our management structure, beginning with the first quarter of 2013 we no longer allocate certain general and administrative expenses to our reportable segments. Prior year reportable segment information has been adjusted to reflect this change.

 

A-3


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA SEGMENT

53 Weeks Ended January 3, 2014 and 52 Weeks Ended December 28, 2012

(In millions)

 

    As Reported
53 Weeks Ended
January 3, 2014
    Certain
Charges
    As Adjusted
53 Weeks Ended
January 3, 2014 **
    As Reported
52 Weeks Ended
December 28, 2012
    Certain
Charges
    As Adjusted
52 Weeks Ended
December 28, 2012 **
 

Revenues

           

Sale of vacation ownership products

  $ 583      $ —        $ 583      $ 532      $ —        $ 532   

Resort management and other services

    226        —          226        220        —          220   

Financing

    132        —          132        143        —          143   

Rental

    233        —          233        198        —          198   

Other

    29        —          29        29        —          29   

Cost reimbursements

    342        —          342        322        —          322   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    1,545        —          1,545        1,444        —          1,444   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    184        —          184        176        —          176   

Marketing and sales

    270        —          270        260        (1     259   

Resort management and other services

    161        —          161        171        (1     170   

Rental

    222        —          222        196        —          196   

Other

    15        —          15        13        —          13   

Organizational and separation related

    —          —          —          1        (1     —     

Litigation settlement

    (1     1        —          41        (41     —     

Royalty fee

    10        —          10        9        —          9   

Cost reimbursements

    342        —          342        322        —          322   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    1,203        1        1,204        1,189        (44     1,145   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains and other income

    1        —          1        9        (8     1   

Impairment (charges) reversals on equity investment

    (1     1        —          2        (2     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ 342      $ —        $ 342      $ 266      $ 34      $ 300   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported
53 Weeks Ended
January 3, 2014
                As Reported
52 Weeks Ended
December 28, 2012
             

Contract Sales

           

Vacation ownership

  $ 608          $ 582       

Residential products

    15            1       
 

 

 

       

 

 

     

Total contract sales

  $ 623          $ 583       
 

 

 

       

 

 

     

 

** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

NOTE: We combined the financial results of the former Luxury segment with the North America segment beginning with the first quarter of 2013 and have recast prior year presentation for consistency. As a result of a realignment of our management structure, beginning with the first quarter of 2013 we no longer allocate certain general and administrative expenses to our reportable segments. Prior year reportable segment information has been adjusted to reflect this change.

 

A-4


MARRIOTT VACATIONS WORLDWIDE CORPORATION

ASIA PACIFIC SEGMENT

17 Weeks Ended January 3, 2014 and 16 Weeks Ended December 28, 2012

(In millions)

 

    As Reported
17 Weeks Ended
January 3, 2014
    Certain
Charges
    As Adjusted
17 Weeks Ended
January 3, 2014 **
    As Reported
16 Weeks Ended
December 28, 2012
    Certain
Charges
    As Adjusted
16 Weeks Ended
December 28, 2012 **
 

Revenues

           

Sale of vacation ownership products

  $ 11      $ —        $ 11      $ 14      $ —        $ 14   

Resort management and other services

    1        —          1        1        —          1   

Financing

    2        —          2        1        —          1   

Rental

    2        —          2        2        —          2   

Cost reimbursements

    4        —          4        6        —          6   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    20        —          20        24        —          24   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    3        —          3        3        —          3   

Marketing and sales

    6        —          6        12        (4     8   

Rental

    4        —          4        4        —          4   

Cost reimbursements

    4        —          4        6        —          6   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    17        —          17        25        (4     21   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity in earnings

    —          —          —          1        —          1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ 3      $ —        $ 3      $ —        $ 4      $ 4   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported
17 Weeks Ended
January 3, 2014
                As Reported
16 Weeks Ended
December 28, 2012
             

Contract Sales

  $ 13          $ 14       
 

 

 

       

 

 

     

 

** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

NOTE: As a result of a realignment of our management structure, beginning with the first quarter of 2013 we no longer allocate certain general and administrative expenses to our reportable segments. Prior year reportable segment information has been adjusted to reflect this change.

 

A-5


MARRIOTT VACATIONS WORLDWIDE CORPORATION

ASIA PACIFIC SEGMENT

53 Weeks Ended January 3, 2014 and 52 Weeks Ended December 28, 2012

(In millions)

 

    As Reported
53 Weeks Ended
January 3, 2014
    Certain
Charges
    As Adjusted
53 Weeks Ended
January 3, 2014 **
    As Reported
52 Weeks Ended
December 28, 2012
    Certain
Charges
    As Adjusted
52 Weeks Ended
December 28, 2012 **
 

Revenues

           

Sale of vacation ownership products

  $ 34      $ —        $ 34      $ 54      $ —        $ 54   

Resort management and other services

    4        —          4        4        —          4   

Financing

    5        —          5        4        —          4   

Rental

    7        —          7        7        —          7   

Cost reimbursements

    14        —          14        14        —          14   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    64        —          64        83        —          83   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

           

Cost of vacation ownership products

    7        —          7        12        —          12   

Marketing and sales

    20        —          20        40        (4     36   

Resort management and other services

    2        —          2        2        —          2   

Rental

    12        —          12        11        —          11   

Royalty fee

    1        —          1        1        —          1   

Cost reimbursements

    14        —          14        14        —          14   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    56        —          56        80        (4     76   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity in earnings

    —          —          —          1        —          1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ 8      $ —        $ 8      $ 4      $ 4      $ 8   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported
53 Weeks Ended
January 3, 2014
                As Reported
52 Weeks Ended
December 28, 2012
             

Contract Sales

  $ 37          $ 57       
 

 

 

       

 

 

     

 

** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

NOTE: As a result of a realignment of our management structure, beginning with the first quarter of 2013 we no longer allocate certain general and administrative expenses to our reportable segments. Prior year reportable segment information has been adjusted to reflect this change.

 

A-6


MARRIOTT VACATIONS WORLDWIDE CORPORATION

EUROPE SEGMENT

17 Weeks Ended January 3, 2014 and 16 Weeks Ended December 28, 2012

(In millions)

 

    As Reported
17 Weeks Ended
January 3, 2014
    Certain
Charges
    Europe
Rescission
Adjustment
    As Adjusted
17 Weeks Ended
January 3, 2014 **
    As Reported
16 Weeks Ended
December 28, 2012
    Certain
Charges
    Europe
Rescission
Adjustment
    As Adjusted
16 Weeks Ended
December 28, 2012 **
 

Revenues

               

Sale of vacation ownership products

  $ 13      $ —        $ (1   $ 12      $ 15      $ —        $ —        $ 15   

Resort management and other services

    9        —          —          9        9        —          —          9   

Financing

    1        —          —          1        1        —          —          1   

Rental

    6        —          —          6        5        —          —          5   

Cost reimbursements

    10        —          —          10        8        —          —          8   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    39        —          (1     38        38        —          —          38   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

               

Cost of vacation ownership products

    5        —          —          5        5        —          —          5   

Marketing and sales

    7        —          —          7        9        (1     —          8   

Resort management and other services

    8        —          —          8        8        —          —          8   

Rental

    4        —          —          4        5        —          —          5   

Litigation settlement

    5        (5     —          —          —          —          —          —     

Royalty fee

    1        —          —          1        1        —          —          1   

Cost reimbursements

    10        —          —          10        8        —          —          8   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    40        (5     —          35        36        (1     —          35   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ (1   $ 5      $ (1   $ 3      $ 2      $ 1      $ —        $ 3   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported
17 Weeks Ended
January 3, 2014
                      As Reported
16 Weeks Ended
December 28, 2012
                   

Contract Sales

  $ 14            $ 17         
 

 

 

         

 

 

       

 

** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

NOTE: As a result of a realignment of our management structure, beginning with the first quarter of 2013 we no longer allocate certain general and administrative expenses to our reportable segments. Prior year reportable segment information has been adjusted to reflect this change. We have restated 2012 Sale of vacation ownership products revenue, Cost of vacation ownership products and Marketing and sales expenses, and Segment financial results to correct prior period misstatements.

 

A-7


MARRIOTT VACATIONS WORLDWIDE CORPORATION

EUROPE SEGMENT

53 Weeks Ended January 3, 2014 and 52 Weeks Ended December 28, 2012

(In millions)

 

    As Reported
53 Weeks Ended
January 3, 2014
    Certain
Charges
    Europe
Rescission
Adjustment
    As Adjusted
53 Weeks Ended
January 3, 2014 **
    As Reported
52 Weeks Ended
December 28, 2012
    Certain
Charges
    Europe
Rescission
Adjustment
    As Adjusted
52 Weeks Ended
December 28, 2012 **
 

Revenues

               

Sale of vacation ownership products

  $ 55      $ —        $ (21   $ 34      $ 32      $ —        $ 9      $ 41   

Resort management and other services

    30        —          —          30        29        —          —          29   

Financing

    4        —          —          4        4        —          —          4   

Rental

    22        —          —          22        20        —          —          20   

Other

    1        —          —          1        1        —          —          1   

Cost reimbursements

    29        —          —          29        26        —          —          26   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    141        —          (21     120        112        —          9        121   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

               

Cost of vacation ownership products

    16        —          (7     9        9        —          2        11   

Marketing and sales

    26        (2     (2     22        29        (1     1        29   

Resort management and other services

    27        —          —          27        26        —          —          26   

Rental

    17        —          —          17        18        —          —          18   

Other

    1        —          —          1        1        —          —          1   

Litigation settlement

    5        (5     —          —          —          —          —          —     

Royalty fee

    1        —          —          1        1        —          —          1   

Impairment

    1        (1     —          —          —          —          —          —     

Cost reimbursements

    29        —          —          29        26        —          —          26   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    123        (8     (9     106        110        (1     3        112   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment financial results

  $ 18      $ 8      $ (12   $ 14      $ 2      $ 1      $ 6      $ 9   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported
53 Weeks Ended
January 3, 2014
                      As Reported
52 Weeks Ended
December 28, 2012
                   

Contract Sales

  $ 34            $ 48         
 

 

 

         

 

 

       

 

** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

NOTE: As a result of a realignment of our management structure, beginning with the first quarter of 2013 we no longer allocate certain general and administrative expenses to our reportable segments. Prior year reportable segment information has been adjusted to reflect this change. We have restated 2012 Sale of vacation ownership products revenue, Cost of vacation ownership products and Marketing and sales expenses, and Segment financial results to correct prior period misstatements.

 

A-8


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CORPORATE AND OTHER

17 Weeks and 53 Weeks Ended January 3, 2014 and 16 Weeks and 52 Weeks Ended December 28, 2012

(In millions)

 

    As Reported
17 Weeks Ended

January 3, 2014
    Certain
Charges
    As Adjusted
17 Weeks Ended
January 3, 2014 **
    As Reported
16 Weeks Ended
December 28, 2012
    Certain
Charges
    As Adjusted
16 Weeks Ended
December 28, 2012 **
 

Expenses

           

Cost of vacation ownership products

  $ 2      $ —        $ 2      $ 1      $ —        $ 1   

Financing

    9        —          9        8        —          8   

General and administrative

    33        —          33        27        —          27   

Organizational and separation related

    5        (5     —          7        (7     —     

Consumer financing interest

    9          9        11        —          11   

Royalty fee

    16        —          16        16        —          16   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    74        (5     69        70        (7     63   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial results

  $ (74   $ 5      $ (69   $ (70   $ 7      $ (63
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported
53 Weeks Ended
January 3, 2014
    Certain
Charges
    As Adjusted
53 Weeks Ended
January 3, 2014**
    As Reported
52 Weeks Ended
December 28, 2012
    Certain
Charges
    As Adjusted
52 Weeks Ended
December 28, 2012**
 

Expenses

           

Cost of vacation ownership products

  $ 7      $ —        $ 7      $ 6      $ —        $ 6   

Financing

    25        —          25        26        —          26   

General and administrative

    99        —          99        86        —          86   

Organizational and separation related

    12        (12     —          15        (15     —     

Consumer financing interest

    31        —          31        41        —          41   

Royalty fee

    50        —          50        50        —          50   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    224        (12     212        224        (15     209   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial results

  $ (224   $ 12      $ (212   $ (224   $ 15      $ (209
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

NOTE: Corporate and Other captures information not specifically attributable to any individual segment including expenses in support of our financing operations, non-capitalizable development expenses supporting overall company development, company-wide general and administrative costs, interest expense and the fixed royalty fee payable under the license agreements with Marriott International, Inc. As a result of a realignment of our management structure, beginning with the first quarter of 2013 we no longer allocate certain general and administrative expenses to our reportable segments. Prior year reportable segment information has been adjusted to reflect this change.

 

A-9


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In millions)

 

     17 Weeks Ended
January 3, 2014
    16 Weeks Ended
December 28, 2012
 

Contract sales

    

Vacation ownership

   $ 206      $ 194   

Residential products

     7        1   
  

 

 

   

 

 

 

Total contract sales

     213        195   
  

 

 

   

 

 

 

Revenue recognition adjustments:

    

Reportability 1

     1        24   

Europe rescission adjustment2

     1        —     

Sales Reserve3

     (10     (13

Other4

     (5     (4
  

 

 

   

 

 

 

Sale of vacation ownership products

   $ 200      $ 202   
  

 

 

   

 

 

 

 

1 

Adjustment for lack of required downpayment or contract sales in rescission period.

2 

Adjustment to eliminate the impact of extended rescission periods in our Europe segment. Please see schedule A-19 for additional information.

3

Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve.

4

Adjustment represents sales incentives for plus points that will ultimately be recognized upon usage or expiration as rental revenues rather than revenues from the Sale of vacation ownership products.

MARRIOTT VACATIONS WORLDWIDE CORPORATION

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

($ in millions)

 

    As Reported
17 Weeks Ended
January 3, 2014
    Certain
Charges
    Europe
Rescission
Adjustment
    Revenue
Recognition
Reportability
Adjustment
    As Adjusted
17 Weeks Ended
January 3, 2014 **
    As Reported
16 Weeks Ended
December 28, 2012
    Certain
Charges
    Europe
Rescission
Adjustment
    Revenue
Recognition
Reportability
Adjustment
    As Adjusted
16 Weeks Ended
December 28, 2012 **
 

Sale of vacation ownership products

  $ 200      $ —        $ (1   $ (1   $ 198      $ 202      $ —        $ —        $ (24   $ 178   

Less:

                   

Cost of vacation ownership products

    57        —          —          —          57        64        —          —          (9     55   

Marketing and sales

    96        —          —          —          96        98        (5     —          (2     91   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin

  $ 47      $ —        $ (1   $ (1   $ 45      $ 40      $ 5      $ —        $ (13   $ 32   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin percentage1

    23.3           22.9     19.8           17.9

 

** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 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.

NOTE: We have restated 2012 Sale of vacation ownership products, Cost of vacation ownership products, Marketing and sales, and Development margin to correct prior period misstatements.

 

A-10


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In millions)

 

     53 Weeks Ended
January 3, 2014
    52 Weeks Ended
December 28, 2012
 

Contract sales

    

Vacation ownership

   $ 679      $ 687   

Residential products

     15        1   
  

 

 

   

 

 

 

Total contract sales

     694        688   
  

 

 

   

 

 

 

Revenue recognition adjustments:

    

Reportability 1

     9        (6

Europe rescission adjustment2

     21        (9

Sales Reserve3

     (36     (42

Other4

     (16     (13
  

 

 

   

 

 

 

Sale of vacation ownership products

   $ 672      $ 618   
  

 

 

   

 

 

 

 

1 

Adjustment for lack of required downpayment or contract sales in rescission period.

2 

Adjustment to eliminate the impact of extended rescission periods in our Europe segment. Please see schedule A-19 for additional information.

3

Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve.

4

Adjustment represents sales incentives for plus points that will ultimately be recognized upon usage or expiration as rental revenues rather than revenues from the Sale of vacation ownership products.

MARRIOTT VACATIONS WORLDWIDE CORPORATION

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

($ in millions)

 

    As Reported
53 Weeks Ended
January 3, 2014
    Certain
Charges
    Europe
Rescission
Adjustment
    Revenue
Recognition
Reportability
Adjustment
    As Adjusted
53 Weeks Ended
January 3, 2014 **
    As Reported
52 Weeks Ended
December 28, 2012
    Certain
Charges
    Europe
Rescission
Adjustment
    Revenue
Recognition
Reportability
Adjustment
    As Adjusted
52 Weeks Ended
December 28, 2012 **
 

Sale of vacation ownership products

  $ 672      $ —        $ (21   $ (9   $ 642      $ 618      $ —        $ 9      $ 6      $ 633   

Less:

                   

Cost of vacation ownership products

    214        —          (7     (3     204        203        —          2        2        207   

Marketing and sales

    316        (2     (2     (1     311        329        (6     1        —          324   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin

  $ 142      $ 2      $ (12   $ (5   $ 127      $ 86      $ 6      $ 6      $ 4      $ 102   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin percentage1

    21.2           19.8     14.0           16.1

 

** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 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.

NOTE: We have restated 2012 Sale of vacation ownership products, Cost of vacation ownership products, Marketing and sales, and Development margin to correct prior period misstatements.

 

A-11


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In millions)

 

     17 Weeks Ended
January 3, 2014
    16 Weeks Ended
December 28, 2012
 

Contract sales

    

Vacation ownership

   $ 179      $ 163   

Residential products

     7        1   
  

 

 

   

 

 

 

Total contract sales

     186        164   
  

 

 

   

 

 

 

Revenue recognition adjustments:

    

Reportability 1

     3        25   

Sales Reserve 2

     (8     (12

Other 3

     (5     (4
  

 

 

   

 

 

 

Sale of vacation ownership products

   $ 176      $ 173   
  

 

 

   

 

 

 

 

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 represents sales incentives for plus points that will ultimately be recognized upon usage or expiration as rental revenues rather than revenues from the Sale of vacation ownership products.

MARRIOTT VACATIONS WORLDWIDE CORPORATION

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

($ in millions)

 

    As Reported
17 Weeks Ended
January 3, 2014
    Certain
Charges
    Revenue
Recognition
Reportability
Adjustment
    As Adjusted
17 Weeks Ended
January 3, 2014 **
    As Reported
16 Weeks Ended
December 28, 2012
    Certain
Charges
    Revenue
Recognition
Reportability
Adjustment
    As Adjusted
16 Weeks Ended
December 28, 2012 **
 

Sale of vacation ownership products

  $ 176      $ —        $ (3   $ 173      $ 173      $ —        $ (25   $ 148   

Less:

               

Cost of vacation ownership products

    47        —          (1     46        55        —          (10     45   

Marketing and sales

    83        —          —          83        77        —          (2     75   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin

  $ 46      $ —        $ (2   $ 44      $ 41      $ —        $ (13   $ 28   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin percentage1

    26.0         25.4     24.2         19.3

 

** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 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.

NOTE: We combined the financial results of the former Luxury segment with the North America segment beginning with the first quarter of 2013 and have recast prior year presentation for consistency.

 

A-12


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS

(In millions)

 

     53 Weeks Ended
January 3, 2014
    52 Weeks Ended
December 28, 2012
 

Contract sales

    

Vacation ownership

   $ 608      $ 582   

Residential products

     15        1   
  

 

 

   

 

 

 

Total contract sales

     623        583   
  

 

 

   

 

 

 

Revenue recognition adjustments:

    

Reportability 1

     5        (4

Sales Reserve 2

     (29     (34

Other 3

     (16     (13
  

 

 

   

 

 

 

Sale of vacation ownership products

   $ 583      $ 532   
  

 

 

   

 

 

 

 

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 represents sales incentives for plus points that will ultimately be recognized upon usage or expiration as rental revenues rather than revenues from the Sale of vacation ownership products.

MARRIOTT VACATIONS WORLDWIDE CORPORATION

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

($ in millions)

 

    As Reported
53 Weeks Ended
January 3, 2014
    Certain
Charges
    Revenue
Recognition
Reportability
Adjustment
    As Adjusted
53 Weeks Ended
January 3, 2014 **
    As Reported
52 Weeks Ended
December 28, 2012
    Certain
Charges
    Revenue
Recognition
Reportability
Adjustment
    As Adjusted
52 Weeks Ended
December 28, 2012 **
 

Sale of vacation ownership products

  $ 583      $ —        $ (5   $ 578      $ 532      $ —        $ 4      $ 536   

Less:

               

Cost of vacation ownership products

    184        —          (2     182        176        —          1        177   

Marketing and sales

    270        —          —          270        260        (1     —          259   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin

  $ 129      $ —        $ (3   $ 126      $ 96      $ 1      $ 3      $ 100   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Development margin percentage1

    22.1         21.8     18.2         18.6

 

** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 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.

NOTE: We combined the financial results of the former Luxury segment with the North America segment beginning with the first quarter of 2013 and have recast prior year presentation for consistency.

 

A-13


MARRIOTT VACATIONS WORLDWIDE CORPORATION

EBITDA AND ADJUSTED EBITDA

17 Weeks and 53 Weeks Ended January 3, 2014 and 16 Weeks and 52 Weeks Ended December 28, 2012

(In millions)

 

    As Reported
17 Weeks Ended
January 3, 2014
    Certain
Charges
    Europe
Rescission
Adjustment
    As Adjusted
17 Weeks Ended
January 3, 2014 **
    As Reported
16 Weeks Ended
December 28, 2012
    Certain
Charges
    Europe
Rescission
Adjustment
    As Adjusted
16 Weeks Ended
December 28, 2012 **
 

Net income

  $ 6      $ 8      $ (2   $ 12      $ (11   $ 28      $ 1      $ 18   

Interest expense1

    4        —          —          4        5        —          —          5   

Tax provision

    11        3        1        15        1        16        (1     16   

Depreciation and amortization

    7        —          —          7        9        —          —          9   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA **

  $ 28      $ 11      $ (1   $ 38      $ 4      $ 44      $ —        $ 48   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    As Reported
53 Weeks Ended
January 3, 2014
    Certain
Charges
    Europe
Rescission
Adjustment
    As Adjusted
53 Weeks Ended
January 3, 2014**
    As Reported
52 Weeks Ended
December 28, 2012
    Certain
Charges
    Europe
Rescission
Adjustment
    As Adjusted
52 Weeks Ended
December 28, 2012**
 

Net income

  $ 80      $ 15      $ (10   $ 85      $ 7      $ 34      $ 6      $ 47   

Interest expense1

    13        —          —          13        17        —          —          17   

Tax provision

    51        5        (2     54        24        20        —          44   

Depreciation and amortization

    23        —          —          23        30        —          —          30   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA **

  $ 167      $ 20      $ (12   $ 175      $ 78      $ 54      $ 6      $ 138   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 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.

NOTE: We now report consumer financing interest expense separately from all other interest expense. As a result, adjusted EBITDA as reported in these schedules is equivalent to the non-GAAP financial measure adjusted EBITDA, as adjusted reported prior to the third quarter of 2013. In addition, we have restated 2012 Net income and Tax provision to correct prior period misstatements.

 

A-14


MARRIOTT VACATIONS WORLDWIDE CORPORATION

2014 ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE—DILUTED OUTLOOK

(In millions, except per share amounts)

 

     Fiscal Year 2014
(low)
    Fiscal Year 2014
(high)
 

Net income

   $ 84      $ 93   

Adjustments to reconcile Net income to Adjusted net income

    

Organizational and separation related and other charges1

     5        5   

Provision for income taxes on adjustments to net income

     (2     (2
  

 

 

   

 

 

 

Adjusted net income**

   $ 87      $ 96   
  

 

 

   

 

 

 

Earnings per share - Diluted2

   $ 2.33      $ 2.58   

Adjusted earnings per share - Diluted**, 2

   $ 2.41      $ 2.67   

Diluted shares 2

     36.0        36.0   

 

** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 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 $4 million for organizational and separation related efforts and $1 million for restructuring / severance costs in our Europe segment.

2

Earnings per share - Diluted, Adjusted earnings per share - Diluted, and Diluted shares outlook includes the impact of share repurchase activity only through February 26th, 2014.

MARRIOTT VACATIONS WORLDWIDE CORPORATION

2014 ADJUSTED EBITDA OUTLOOK

(In millions)

 

     Fiscal Year 2014
(low)
     Fiscal Year 2014
(high)
 

Adjusted net income **

   $ 87       $ 96   

Interest expense1

     11         11   

Tax provision

     66         72   

Depreciation and amortization

     21         21   
  

 

 

    

 

 

 

Adjusted EBITDA**

   $ 185       $ 200   
  

 

 

    

 

 

 

 

** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 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

2014 ADJUSTED DEVELOPMENT MARGIN OUTLOOK

 

     Total MVW               North America  
     Fiscal Year
2014 (low)
    Fiscal Year
2014 (high)
              Fiscal Year
2014 (low)
    Fiscal Year
2014 (high)
 

Development margin1

     19.9     20.9           22.0     23.0

Adjustments to reconcile Development margin to Adjusted development margin

              

Other charges2

     0.1     0.1           0.0     0.0
  

 

 

   

 

 

         

 

 

   

 

 

 

Adjusted development margin**, 1

     20.0     21.0           22.0     23.0
  

 

 

   

 

 

         

 

 

   

 

 

 

 

** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 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.

2

Other charges adjustment includes $1 million for restructuring / severance costs in our Europe segment recorded under the “Marketing and sales” caption.

 

A-15


MARRIOTT VACATIONS WORLDWIDE CORPORATION

2013 ADJUSTED FREE CASH FLOW AND 2014 ADJUSTED FREE CASH FLOW OUTLOOK

(In millions)

 

     2013           Fiscal Year 2014
(low)
    Fiscal Year 2014
(high)
 

Adjusted net income **

   $ 85           $ 87      $ 96   

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

           

Adjustments for non-cash items1

     78             70        70   

Deferred income taxes / income taxes payable

     20             17        20   

Net changes in assets and liabilities:

           

Notes receivable originations

     (260          (287     (282

Notes receivable collections

     310             290        292   

Inventory

     34             33        38   

Liability for Marriott Rewards customer loyalty program

     (45          (34     (32

Organizational and separation related, litigation and other charges

     (46          (5     (5

Other working capital changes

     (14          (11     (17
  

 

 

        

 

 

   

 

 

 

Net cash provided by operating activities

     162             160        180   

Capital expenditures for property and equipment (excluding inventory)

           

Organizational and separation related capital expenditures

     (6          (4     (4

Other

     (16          (28     (25

Increase in restricted cash

     (17          (2     —     

Borrowings from securitization transactions

     361             210        210   

Repayment of debt related to securitizations

     (361          (210     (210
  

 

 

        

 

 

   

 

 

 

Free cash flow**

     123             126        151   

Add:

           

Organizational and separation related, litigation, and other charges

     52             9        9   
  

 

 

        

 

 

   

 

 

 

Adjusted free cash flow**

   $ 175           $ 135      $ 160   
  

 

 

        

 

 

   

 

 

 

 

** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 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, share-based compensation, gain / loss on dispositions, and impairment activity.

NOTE: We now include borrowings from securitization transactions and repayment of debt related to securitizations in our free cash flow. As a result, free cash flow as reported in this schedule is equivalent to the non-GAAP financial measure adjusted free cash flow reported in prior releases, and adjusted free cash flow reported in this schedule is equivalent to the non-GAAP financial measure adjusted free cashflow, as adjusted reported in prior releases.

 

 

A-16


MARRIOTT VACATIONS WORLDWIDE CORPORATION

2014 NORMALIZED ADJUSTED FREE CASH FLOW OUTLOOK

(In millions)

 

     Current Guidance                        
     Low          High           Mid-Point          Adjustments          Normalized  

Adjusted net income **

   $ 87         $ 96           $ 92         $ —           $ 92   

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

                          

Adjustments for non-cash items1

     70           70             70           —             70   

Deferred income taxes / income taxes payable

     17           20             19           (9 )2         10   

Net changes in assets and liabilities:

                          

Notes receivable originations

     (287        (282          (285        —             (285

Notes receivable collections

     290           292             291           —             291   

Inventory

     33           38             36           (36 )3         —     

Liability for Marriott Rewards customer loyalty program

     (34        (32          (33        33 4         —     

Organizational and separation related and other charges

     (5        (5          (5        5 5         —     

Other working capital changes

     (11        (17          (14        4 6         (10
  

 

 

      

 

 

        

 

 

      

 

 

      

 

 

 

Net cash provided by operating activities

     160           180             170           (2        168   

Capital expenditures for property and equipment (excluding inventory)

                          

Organizational and separation related capital expenditures

     (4        (4          (4        4 5         —     

Other

     (28        (25          (27        8 7         (19

Increase in restricted cash

     (2        —               (1        —             (1

Borrowings from securitization transactions

     210           210             210           —             210   

Repayment of debt related to securitizations

     (210        (210          (210        —             (210
  

 

 

      

 

 

        

 

 

      

 

 

      

 

 

 

Free cash flow**

     126           151             139           10           149   

Add:

                          

Organizational and separation related and other charges

     9           9             9           (9        —     
  

 

 

      

 

 

        

 

 

      

 

 

      

 

 

 

Adjusted free cash flow**

   $ 135         $ 160           $ 148         $ 1         $ 149   
  

 

 

      

 

 

        

 

 

      

 

 

      

 

 

 
                          

 

 

                 

 

 

 

 

** Denotes non-GAAP financial measures. Please see schedules A-18 through A-20 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
NOTE: We now include borrowings from securitization transactions and repayment of debt related to securitizations in our free cash flow. As a result, free cash flow as reported in this schedule is equivalent to the non- GAAP financial measure adjusted free cash flow reported in prior releases, and adjusted free cash flow reported in this schedule is equivalent to the non-GAAP financial measure adjusted free cashflow, as adjusted reported in prior releases.
1 

Includes depreciation, amortization of debt issuance costs, provision for loan losses, share-based compensation, and gain / loss on dispositions.

2 

Represents cash taxes slightly lower than tax provision.

3 

Represents adjustment to align real estate inventory spending with real estate inventory costs (i.e., product costs).

4 

Represents payment for Marriott Rewards Points issued prior to the Spin-off. Liability to be fully paid in 2016.

5 

Represents costs associated with organizational and separation related efforts (efforts projected to be completed in 2014) as well as restructuring / severance costs in our Europe segment.

6 

Represents normalized other working capital changes.

7 

Represents normalized capital expenditures for property and equipment.

 

A-17


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 press release 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 charges incurred in the 17 weeks and 53 weeks ended January 3, 2014 and the 16 weeks and 52 weeks ended December 28, 2012, exclude the gain on the disposition of a golf course and related assets in the 16 weeks and 52 weeks ended December 28, 2012, and exclude adjustments related to the extension of rescission periods in our Europe segment (“Europe Rescission Adjustments”), because these non-GAAP financial measures allow for period-over-period comparisons of our on-going core operations before the impact of certain charges, gains and Europe Rescission Adjustments. These non-GAAP financial measures also facilitate our comparison of results from our on-going core operations before certain charges, gains and Europe Rescission Adjustments with results from other vacation ownership companies.

Certain Charges—17 weeks and 53 weeks ended January 3, 2014. In our Statement of Operations for the 17 weeks ended January 3, 2014, we recorded $11 million of pre-tax charges, which included $5 million of organizational and separation related costs recorded under the “Organizational and separation related” caption, $5 million for a litigation settlement in our Europe segment recorded under the “Litigation settlement” caption, and a $1 million increase in our accrual for remaining costs we expect to incur in connection with our interest in an equity method investment in a joint venture project in our North America segment recorded under the “Impairment (charges) reversals on equity investment” caption. In our Statement of Operations for the 53 weeks ended January 3, 2014, we recorded $20 million of pre-tax charges, which included $12 million of organizational and separation related costs recorded under the “Organizational and separation related” caption, an $8 million increase in our accrual for remaining costs we expect to incur in connection with our interest in an equity method investment in a joint venture project in our North America segment recorded under the “Impairment (charges) reversals on equity investment” caption, $5 million for a litigation settlement in our Europe segment recorded under the “Litigation settlement” caption, $2 million of severance costs in our Europe segment recorded under the “Marketing and sales” caption, and a $1 million pre-tax non-cash impairment charge related to a leased golf course at a project in our Europe segment recorded under the “Impairment” caption, partially offset by a $7 million gain for cash received in payment of fully reserved receivables in connection with an equity method investment in a joint venture project in our North America segment recorded under the “Impairment (charges) reversals on equity investment” caption, and a $1 million reversal of a previously recorded litigation settlement related to a project in our North America segment, based upon an agreement to settle the matter for an amount less than our accrual, recorded under the “Litigation settlement” caption.

Certain Charges—16 weeks and 52 weeks ended December 28, 2012. In our Statement of Operations for the 16 weeks ended December 28, 2012, we recorded $52 million of pre-tax charges, which included $39 million for litigation settlement charges in our North America segment recorded under the “Litigation settlement” caption, $7 million of organizational and separation related costs recorded under the “Organizational and separation related” caption, $4 million related to closing off-site sales locations in our Asia Pacific segment recorded under the “Marketing and sales” caption, $1 million of severance in our Europe segment recorded under the “Marketing and sales” caption, and $1 million of costs associated with removing the Ritz-Carlton brand from one of our properties in our North America segment recorded under the “Resort management and other services” caption. In our Statement of Operations for the 52 weeks ended December 28, 2012, we recorded $62 million of pre-tax charges, which included $41 million for litigation settlement charges in our North America segment recorded under the “Litigation settlement” caption, $16 million of organizational and separation related costs recorded under the “Organizational and separation related” caption, $4 million related to closing off-site sales locations in our Asia Pacific segment recorded under the “Marketing and sales” caption, $1 million of severance in our Europe segment recorded under the “Marketing and sales” caption, $1 million of severance in our North America segment recorded under the “Marketing and sales” caption, and $1 million of costs associated with removing the Ritz-Carlton brand from one of our properties in our North America segment recorded under the “Resort management and other services” caption, partially offset by the reversal of $2 million of a previously recorded impairment charge recorded in our North America segment under the “Impairment reversals on equity investment” caption related to an equity investment in a joint venture project because the actual costs incurred to suspend our marketing and sales operations at the project were lower than previously estimated.

 

A-18


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NON-GAAP FINANCIAL MEASURES

 

Adjusted Net Income (continued)

 

Gain on the disposition of a golf course and related assets—16 weeks and 52 weeks ended December 28, 2012. In our Statements of Operations for the 16 weeks and 52 weeks ended December 28, 2012, we recorded a net $8 million gain associated with the sale of the golf course, clubhouse and spa formerly known as The Ritz-Carlton Golf Club and Spa, Jupiter in our North America segment under the “Gains and other income” caption.

Europe Rescission Adjustments. In the second quarter of 2013, during the course of an internal review of certain sales documentation processes related to the sale of certain vacation ownership interests in properties associated with our Europe segment, we determined that the documentation we provided for certain sales of vacation ownership products was not strictly compliant. As a result, in accordance with applicable European regulation, the period of time during which purchasers of such interests may rescind their purchases was extended. We record revenues from the sale of vacation ownership products once the rescission period has ended. Originally, we recorded revenues from these sales of vacation ownership products based on the rescission periods in effect assuming compliant documentation had been provided to the purchasers, rather than the extended periods. As a result, we recognized revenue in incorrect periods between fiscal years 2010 and 2013 and misstated revenues in our previously filed consolidated financial statements. We provided compliant documentation to purchasers for whom the extended rescission period had not yet expired. As compliant documentation was subsequently provided as part of the corrective actions we took, the extended rescission period for most of the purchases at issue ended during the second quarter of 2013. To better reflect our on-going core operations and allow for period-over-period comparisons, we have excluded the impact associated with the extended rescission periods in our adjusted financial measures for each period presented.

17 weeks and 53 weeks ended January 3, 2014. In our Statement of Operations for the 17 weeks ended January 3, 2014, we recorded after-tax Europe Rescission Adjustments of $2 million, which included a $1 million pre-tax increase in Sale of vacation ownership products revenues and a $1 million decrease in the Provision for income taxes associated with the change in Income before income taxes. In our Statement of Operations for the 53 weeks ended January 3, 2014, we recorded after-tax Europe Rescission Adjustments of $10 million, which included a $21 million pre-tax increase in Sale of vacation ownership products revenues, pre-tax increases of $7 million and $2 million in Cost of vacation ownership products expense and Marketing and sales expense, respectively, associated with the change in revenues from the Sale of vacation ownership products, and a $2 million increase in the Provision for income taxes associated with the change in Income before income taxes.

16 weeks and 52 weeks ended December 28, 2012. In our Statement of Operations for the 16 weeks ended December 28, 2012, we recorded after-tax Europe Rescission Adjustments of $1 million, which included a $1 million increase in the Provision for income taxes. In our Statement of Operations for the 52 weeks ended December 28, 2012, we recorded after-tax Europe Rescission Adjustments of $6 million, which included a $9 million pre-tax decrease in Sale of vacation ownership products revenues, and pre-tax decreases of $2 million and $1 million in Cost of vacation ownership products expense and Marketing and sales expense, respectively, associated with the change in revenues from the Sale of vacation ownership products.

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 charges and Europe Rescission Adjustments 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, certain charges and Europe Rescission Adjustments to our Development Margin.

 

A-19


MARRIOTT VACATIONS WORLDWIDE CORPORATION

NON-GAAP FINANCIAL MEASURES

 

Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”). EBITDA is defined as earnings, or net income, before interest expense (excluding consumer financing interest expense), provision for income taxes, depreciation and amortization. For purposes of our EBITDA calculation (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. Beginning with the third quarter of 2013, we now report consumer financing interest expense separately from all other interest expense. As a result, adjusted EBITDA as reported in these schedules is equivalent to the non-GAAP financial measure adjusted EBITDA, as adjusted reported prior to the third quarter of 2013.

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 charges, gains and Europe Rescission Adjustments, 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 charges, gains and Europe Rescission Adjustments. Together, EBITDA and Adjusted EBITDA facilitate our comparison of results from our on-going core operations before the impact of certain charges, gains and Europe Rescission Adjustments with results from other vacation ownership companies.

Free Cash Flow. We also evaluate Free Cash Flow as a liquidity measure that provides useful information to management and investors about the amount of cash provided by operating activities after capital expenditures for property and equipment, changes in restricted cash, and the borrowing and repayment activity related to our securitizations. We consider Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including acquisitions and strengthening the balance sheet. Analysis of Free Cash Flow also facilitates management’s comparison of our results with our competitors’ results. We now include borrowings from securitization transactions and repayment of debt related to securitizations in our free cash flow. As a result, free cash flow as reported in this schedule is equivalent to the non-GAAP financial measure adjusted free cash flow reported in prior releases, and adjusted free cash flow reported in this schedule is equivalent to the non-GAAP financial measure adjusted free cash flow, as adjusted reported in prior releases.

Adjusted Free Cash Flow. We also evaluate Adjusted Free Cash Flow, which reflects additional adjustments for organizational and separation related, litigation, and other cash charges, 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-20


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED BALANCE SHEETS

Fiscal Year-End 2013 and 2012

(In millions, except per share amounts)

 

     2013     2012  

ASSETS

    

Cash and cash equivalents

   $ 200      $ 103   

Restricted cash (including $34 and $31 from VIEs, respectively)

     86        68   

Accounts and contracts receivable (including $5 and $5 from VIEs, respectively)

     109        100   

Vacation ownership notes receivable (including $719 and $727 from VIEs, respectively)

     970        1,056   

Inventory

     870        888   

Property and equipment

     254        261   

Other

     143        137   
  

 

 

   

 

 

 

Total Assets

   $ 2,632      $ 2,613   
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Accounts payable

   $ 129      $ 113   

Advance deposits

     48        64   

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

     185        181   

Deferred revenue

     19        32   

Payroll and benefits liability

     82        82   

Liability for Marriott Rewards customer loyalty program

     114        159   

Deferred compensation liability

     37        45   

Mandatorily redeemable preferred stock of consolidated subsidiary

     40        40   

Debt (including $674 and $674 from VIEs, respectively)

     678        678   

Other

     31        38   

Deferred taxes

     60        42   
  

 

 

   

 

 

 

Total Liabilities

     1,423        1,474   
  

 

 

   

 

 

 

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

     —          —     

Common stock—$.01 par value; 100,000,000 shares authorized; 35,637,765 and 35,026,533 shares issued and outstanding, respectively

     —          —     

Treasury stock—at cost; 505,023 shares in 2013 and none in 2012

     (26     —     

Additional paid-in capital

     1,130        1,116   

Accumulated other comprehensive income

     23        21   

Retained earnings

     82        2   
  

 

 

   

 

 

 

Total Equity

     1,209        1,139   
  

 

 

   

 

 

 

Total Liabilities and Equity

   $ 2,632      $ 2,613   
  

 

 

   

 

 

 

The abbreviation VIEs above means Variable Interest Entities.

NOTE: We have restated 2012 Inventory, Other assets, Advance deposits, Deferred taxes and Retained earnings to correct prior period misstatements.

 

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MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Fiscal Years 2013 and 2012

(In millions)

 

     2013     2012  

OPERATING ACTIVITIES

    

Net income

   $ 80      $ 7   

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

    

Depreciation

     23        30   

Amortization of debt issuance costs

     6        7   

Provision for loan losses

     36        42   

Share-based compensation

     12        12   

Gain on disposal of property and equipment, net

     (1     (8

Deferred income taxes

     18        (47

Equity method income

     —          (1

Impairment charges

     1        —     

Impairment charges (reversals) on equity investment

     1        (2

Net change in assets and liabilities:

    

Accounts and contracts receivable

     (8     (3

Notes receivable originations

     (260     (262

Notes receivable collections

     310        311   

Inventory

     34        66   

Other assets

     (7     23   

Accounts payable, advance deposits and accrued liabilities

     (16     27   

Liability for Marriott Rewards customer loyalty program

     (45     (64

Deferred revenue

     (13     4   

Payroll and benefit liabilities

     —          27   

Deferred compensation liability

     (8     (2

Other liabilities

     (3     (5

Other, net

     2        1   
  

 

 

   

 

 

 

Net cash provided by operating activities

     162        163   
  

 

 

   

 

 

 

INVESTING ACTIVITIES

    

Capital expenditures for property and equipment (excluding inventory)

     (22     (17

(Increase) decrease in restricted cash

     (17     12   

Dispositions

     3        8   
  

 

 

   

 

 

 

Net cash (used in) provided by investing activities

     (36     3   
  

 

 

   

 

 

 

FINANCING ACTIVITIES

    

Borrowings from securitization transactions

     361        238   

Repayment of debt related to securitization transactions

     (361     (411

Borrowings on Revolving Corporate Credit Facility

     25        15   

Repayment of Revolving Corporate Credit Facility

     (25     (15

Debt issuance costs

     (5     (7

Purchase of treasury stock

     (26     —     

Proceeds from stock option exercises

     4        9   

Excess tax benefits from share-based compensation

     3        3   

Payment of withholding taxes on vesting of restricted stock units

     (5     (4
  

 

 

   

 

 

 

Net cash used in financing activities

     (29     (172
  

 

 

   

 

 

 

Effect of changes in exchange rates on cash and cash equivalents

     —          (1

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

     97        (7

CASH AND CASH EQUIVALENTS, beginning of period

     103        110   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS, end of period

   $ 200      $ 103   
  

 

 

   

 

 

 

NOTE: We have restated 2012 Net income and reclassified certain items within Operating Activities to correct prior period misstatements.

 

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