Marriott Vacations Worldwide Reports First Quarter Financial Results
ORLANDO, Fla., April 28, 2016 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported first quarter financial results and reaffirmed its guidance for the full year 2016.
"Our first quarter results were in-line with our expectations as we continue our journey to execute our long term growth strategies," said Stephen P. Weisz, president and chief executive officer. "First time buyer tours were up in the quarter, sales of new tour packages continue to grow ahead of expectations, and we have six new sales distributions coming on-line this year. For these reasons and more, I remain confident in our overall strategy and in reaffirming our previously provided full year 2016 guidance."
First quarter 2016 highlights:
- Adjusted fully diluted earnings per share (EPS) was $0.87, up 2.4 percent from $0.85 in the first quarter of 2015.
- Adjusted EBITDA totaled $51.6 million, a decrease of $8.6 million year-over-year.
- Company vacation ownership contract sales (which exclude residential sales) were $153.5 million, down 9.7 percent year-over-year. North America vacation ownership contract sales were $139.7 million, down 10.5 percent year-over-year.
- Financing revenues, net of expenses and consumer financing interest expense, were $19.2 million, a $1.1 million, or 6.1 percent, increase from the first quarter of 2015.
- Adjusted resort management and other services revenues, net of expenses, totaled $23.6 million, a $1.6 million, or 7.4 percent, increase from the first quarter of 2015.
- During the first quarter of 2016, the company repurchased over 1.3 million shares of its common stock for $73.2 million.
- The company completed the acquisition of an operating property located in the South Beach area of Miami Beach for $23.5 million for future use in its Marriott Vacation Club Destinations program.
First quarter 2016 net income was $24.4 million, or $0.82 diluted EPS, compared to net income of $34.1 million, or $1.03 diluted EPS, in the first quarter of 2015.
Non-GAAP financial measures, such as adjusted EBITDA, adjusted net income, adjusted earnings per share, adjusted development margin and adjusted free cash flow are reconciled and adjustments are shown and described in further detail on pages A-1 through A-12 of the Financial Schedules that follow.
First Quarter 2016 Results
Company Results
Total company vacation ownership contract sales were $153.5 million, $16.5 million lower than the first quarter of last year. The decrease was driven mainly by $15.9 million of lower contract sales to existing owners in the company's North America segment, as the prior year benefited from enhancements the company made to owner recognition levels. These enhancements helped drive a 7 percent increase in owner tours and a 1.4 point improvement in owner closing efficiency last year, resulting in contract sales growth of over 10 percent as compared to the first quarter of 2014. In addition, our Latin America sales channels were down roughly $2.5 million compared to the first quarter of last year, as the company continued to be impacted by a stronger U.S. dollar.
Adjusted development margin was $23.7 million, a $10.1 million decrease from the first quarter of 2015. Adjusted development margin percentage was 17.3 percent in the first quarter of 2016 compared to 21.6 percent in the first quarter of 2015 reflecting higher marketing and sales spending which included costs to drive future tour flow and start-up costs associated with the company's new sales distributions as well as the impact of lower contract sales volumes. Development margin was $24.3 million, a $14.6 million decrease from the first quarter of 2015. Development margin percentage was 17.6 percent in the first quarter of 2016 compared to 21.2 percent in the first quarter of 2015.
Excluding the results of operations for the portion of the Surfers Paradise, Australia property that the company intends to sell, adjusted rental revenues totaled $78.2 million, a $2.0 million increase from the first quarter of 2015. Results reflected $1.4 million of higher revenue from operating properties we intend to convert to timeshare inventory, and $0.4 million of higher plus points revenue. Rental revenues net of expenses were $15.6 million, a $0.4 million decrease from the first quarter of 2015.
Excluding the results of operations for the portion of the Surfers Paradise, Australia property that the company intends to sell, adjusted resort management and other services revenues totaled $67.9 million, a $3.5 million increase from the first quarter of 2015. Adjusted resort management and other services revenues, net of expenses, were $23.6 million, a $1.6 million increase, or 7.4 percent, over the first quarter of 2015. Resort management and other services revenues, net of expenses, totaled $23.8 million, a $1.8 million increase, or 8.3 percent, from the first quarter of 2015.
Financing revenues totaled $29.2 million, a $0.2 million increase from the first quarter of 2015. Financing revenues, net of expenses and consumer financing interest expense, were $19.2 million, a $1.1 million increase, or 6.1 percent, from the first quarter of 2015.
General and administrative expenses were $25.3 million in the first quarter of 2016, a $2.5 million increase from the first quarter of 2015, driven by nearly $2 million of higher spending related to enhancements to the company's owner facing technology as well as inflationary cost increases.
Adjusted EBITDA was $51.6 million in the first quarter of 2016, an $8.6 million, or 14.2 percent, decrease from $60.2 million in the first quarter of 2015.
Segment Results
North America
North America vacation ownership contract sales were $139.7 million in the first quarter of 2016, a decrease of $16.3 million, or 10.5 percent, from the prior year period. The decrease was driven mainly by $15.9 million of lower contract sales to existing owners, as the prior year benefited from enhancements the company made to owner recognition levels that helped drive a 7 percent increase in owner tours and a 1.4 point improvement in owner closing efficiency, resulting in contract sales growth of over 10 percent as compared to the first quarter of 2014. In addition, our Latin America sales channels were down roughly $2.5 million, as the company continued to be impacted by a stronger U.S. dollar.
Total tours in the first quarter of 2016 decreased 4.0 percent, driven by a decline in owner tours, which were down nearly 7 percent year-over-year. VPG decreased 3.9 percent to $3,496 in the first quarter of 2016 from $3,640 in the first quarter of 2015, driven by an 8 percent decline in owner VPG. The overall decline in VPG in the quarter was driven by lower closing efficiency, offset partially by higher points purchased per contract and pricing.
First quarter 2016 North America adjusted segment financial results were $91.5 million, a decrease of $5.2 million from the first quarter of 2015. The decrease was driven primarily by $6.5 million of lower development margin and $0.6 million of lower rental revenues net of expenses. These decreases were partially offset by $1.9 million of higher resort management and other services revenues net of expenses and $0.4 million of higher financing revenues. North America segment financial results were $89.5 million, an $8.2 million decrease from the first quarter of 2015.
Adjusted development margin was $25.7 million, an $8.7 million decrease from the prior year quarter. Adjusted development margin percentage was 20.6 percent in the first quarter of 2016 compared to 23.7 percent in the first quarter of 2015. Development margin was $25.7 million, a $6.5 million decrease from the first quarter of 2015. Development margin percentage was 20.6 percent in the first quarter of 2016 compared to 22.7 percent in the prior year quarter.
Asia Pacific
Total vacation ownership contract sales in the segment were $9.4 million, an increase of $0.8 million, or nearly 9 percent, from the first quarter of 2015. Adjusted segment financial results were $1.0 million, a $2.5 million decrease from the first quarter of 2015. Adjusted development margin was $2.2 million lower than the first quarter of last year, reflecting $0.8 million of higher marketing and sales costs related to start-up costs associated with the company's new sales distribution in Surfers Paradise, Australia and $1.1 million of positive product cost true-up activity in 2015. Segment financial results were $1.0 million, an $8.4 million decrease from the first quarter of 2015 also reflecting $5.9 million of development margin in the prior year quarter related to the sale of all 18 residential units at the company's former Macau location.
Europe
First quarter 2016 contract sales were $4.4 million, a decrease of $0.9 million from the first quarter of 2015. Segment financial results were $0.4 million, a $0.4 million increase from the first quarter of 2015 due primarily to higher development margin.
Share Repurchase Program and Dividends
During the first quarter of 2016, the company repurchased over 1.3 million shares of its common stock for a total of $73.2 million under its share repurchase program and paid two quarterly cash dividends totaling $17.6 million.
Balance Sheet and Liquidity
On March 25, 2016, cash and cash equivalents totaled $106.6 million. Since the beginning of the year, real estate inventory balances increased $46.0 million to $709.9 million, including $317.8 million of finished goods, $30.0 million of work-in-progress, and $362.1 million of land and infrastructure. The company had $699.3 million in gross debt outstanding at the end of the first quarter, an increase of $11.2 million from year-end 2015, consisting primarily of $688.0 million in gross non-recourse securitized notes. In addition, $40.0 million of gross mandatorily redeemable preferred stock of a subsidiary of the company was outstanding at the end of the first quarter of 2016.
As of March 25, 2016, the company had approximately $196.7 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit and approximately $102.3 million of gross vacation ownership notes receivable eligible for securitization in its warehouse credit facility.
Outlook
The company is reaffirming the following guidance for the full year 2016:
| Adjusted EBITDA |
$261 million to $276 million |
|
| Adjusted fully diluted EPS |
$4.31 to $4.66 |
|
| Adjusted net income |
$126 million to $136 million |
|
| Adjusted free cash flow |
$135 million to $155 million |
|
| Company contract sales growth |
4 percent to 8 percent |
Pages A-1 through A-12 of the Financial Schedules reconcile the non-GAAP financial measures set forth above to the following full year 2016 expected GAAP results: net income of $123 million to $134 million; net cash provided by operating activities of $136 million to $146 million; and fully diluted EPS of $4.21 to $4.59, which increased from the previous guidance of $4.16 to $4.50 due entirely to a reduction in shares outstanding.
First Quarter 2016 Earnings Conference Call
The company will hold a conference call at 10:00 a.m. ET today to discuss these results and its guidance for full year 2016. Participants may access the call by dialing (877) 407-8289 or (201) 689-8341 for international callers. A live webcast of the call will also be available in the Investor Relations section of the company's website at www.marriottvacationsworldwide.com.
An audio replay of the conference call will be available for seven days and can be accessed at (877) 660-6853 or (201) 612-7415 for international callers. The conference ID for the recording is 13633825. The webcast will also be available on the company's website.
About Marriott Vacations Worldwide Corporation
Marriott Vacations Worldwide Corporation is a leading global pure-play vacation ownership company, offering a diverse portfolio of quality products, programs and management expertise with over 60 resorts. Its brands include Marriott Vacation Club, The Ritz-Carlton Destination Club and Grand Residences by Marriott. Since entering the industry in 1984 as part of Marriott International, Inc., the company earned its position as a leader and innovator in vacation ownership products. The company preserves high standards of excellence in serving its customers, investors and associates while maintaining a long-term relationship with Marriott International. For more information, please visit www.marriottvacationsworldwide.com.
Note on forward-looking statements: This press release and accompanying schedules contain "forward-looking statements" within the meaning of federal securities laws, including statements about future operating results, estimates, and assumptions, and similar statements concerning anticipated future events and expectations that are not historical facts. The company cautions you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including volatility in the economy and the credit markets, supply and demand changes for vacation ownership and residential products, competitive 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 April 28, 2016 and the company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
Financial Schedules Follow
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
|
| FINANCIAL SCHEDULES |
|
| QUARTER 1, 2016 |
|
| TABLE OF CONTENTS |
|
| Consolidated Statements of Income - 12 Weeks Ended March 25, 2016 and March 27, 2015 |
A-1 |
| North America Segment Financial Results - 12 Weeks Ended March 25, 2016 and March 27, 2015 |
A-2 |
| Asia Pacific Segment Financial Results - 12 Weeks Ended March 25, 2016 and March 27, 2015 |
A-3 |
| Europe Segment Financial Results - 12 Weeks Ended March 25, 2016 and March 27, 2015 |
A-4 |
| Corporate and Other Financial Results - 12 Weeks Ended March 25, 2016 and March 27, 2015 |
A-5 |
| Consolidated Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin |
|
| (Adjusted Sale of Vacation Ownership Products Net of Expenses) - 12 Weeks Ended March 25, 2016 and March 27, 2015 |
A-6 |
| North America Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin |
|
| (Adjusted Sale of Vacation Ownership Products Net of Expenses) - 12 Weeks Ended March 25, 2016 and March 27, 2015 |
A-7 |
| EBITDA and Adjusted EBITDA - 12 Weeks Ended March 25, 2016 and March 27, 2015 |
A-8 |
| 2016 Outlook - Adjusted Net Income, Adjusted Earnings Per Share - Diluted and Adjusted EBITDA |
A-9 |
| 2016 Outlook - Adjusted Free Cash Flow and Normalized Adjusted Free Cash Flow |
A-10 |
| Non-GAAP Financial Measures |
A-11 |
| Consolidated Balance Sheets |
A-13 |
| Consolidated Statements of Cash Flows |
A-14 |
| A-1 |
|||||||||||||||||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
|||||||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME |
|||||||||||||||||||
| 12 Weeks Ended March 25, 2016 and March 27, 2015 |
|||||||||||||||||||
| (In thousands, except per share amounts) |
|||||||||||||||||||
| As Reported |
As Adjusted |
As Reported |
As Adjusted |
||||||||||||||||
| 12 Weeks Ended |
Certain |
12 Weeks Ended |
12 Weeks Ended |
Certain |
12 Weeks Ended |
||||||||||||||
| March 25, 2016 |
Items |
March 25, 2016 |
** |
March 27, 2015 |
Items |
March 27, 2015 |
** |
||||||||||||
| Revenues |
|||||||||||||||||||
| Sale of vacation ownership products |
$ 138,369 |
$ - |
$ 138,369 |
$ 183,906 |
$ (28,420) |
$ 155,486 |
|||||||||||||
| Resort management and other services |
69,629 |
(1,736) |
67,893 |
64,417 |
- |
64,417 |
|||||||||||||
| Financing |
29,224 |
- |
29,224 |
29,052 |
- |
29,052 |
|||||||||||||
| Rental |
80,288 |
(2,056) |
78,232 |
76,199 |
- |
76,199 |
|||||||||||||
| Cost reimbursements |
107,533 |
- |
107,533 |
101,306 |
- |
101,306 |
|||||||||||||
| Total revenues |
425,043 |
(3,792) |
421,251 |
454,880 |
(28,420) |
426,460 |
|||||||||||||
| Expenses |
|||||||||||||||||||
| Cost of vacation ownership products |
35,617 |
- |
35,617 |
64,962 |
(21,583) |
43,379 |
|||||||||||||
| Marketing and sales |
78,412 |
- |
78,412 |
79,995 |
(922) |
79,073 |
|||||||||||||
| Resort management and other services |
45,797 |
(1,548) |
44,249 |
42,409 |
- |
42,409 |
|||||||||||||
| Financing |
4,629 |
- |
4,629 |
4,905 |
- |
4,905 |
|||||||||||||
| Rental |
64,660 |
(2,060) |
62,600 |
60,158 |
- |
60,158 |
|||||||||||||
| General and administrative |
25,297 |
- |
25,297 |
22,777 |
- |
22,777 |
|||||||||||||
| Organizational and separation related |
- |
- |
- |
192 |
(192) |
- |
|||||||||||||
| Reversal of litigation expense |
(303) |
303 |
- |
(262) |
262 |
- |
|||||||||||||
| Consumer financing interest |
5,362 |
- |
5,362 |
6,021 |
- |
6,021 |
|||||||||||||
| Royalty fee |
13,357 |
- |
13,357 |
13,000 |
- |
13,000 |
|||||||||||||
| Cost reimbursements |
107,533 |
- |
107,533 |
101,306 |
- |
101,306 |
|||||||||||||
| Total expenses |
380,361 |
(3,305) |
377,056 |
395,463 |
(22,435) |
373,028 |
|||||||||||||
| Gains and other income |
7 |
(7) |
- |
887 |
(887) |
- |
|||||||||||||
| Interest expense |
(1,982) |
- |
(1,982) |
(2,974) |
- |
(2,974) |
|||||||||||||
| Other |
(2,542) |
2,570 |
28 |
13 |
- |
13 |
|||||||||||||
| Income before income taxes |
40,165 |
2,076 |
42,241 |
57,343 |
(6,872) |
50,471 |
|||||||||||||
| Provision for income taxes |
(15,757) |
(779) |
(16,536) |
(23,289) |
975 |
(22,314) |
|||||||||||||
| Net income |
$ 24,408 |
$ 1,297 |
$ 25,705 |
$ 34,054 |
$ (5,897) |
$ 28,157 |
|||||||||||||
| Earnings per share - Basic |
$ 0.84 |
$ 0.88 |
$ 1.05 |
$ 0.87 |
|||||||||||||||
| Earnings per share - Diluted |
$ 0.82 |
$ 0.87 |
$ 1.03 |
$ 0.85 |
|||||||||||||||
| Basic Shares |
29,123 |
29,123 |
32,299 |
32,299 |
|||||||||||||||
| Diluted Shares |
29,640 |
29,640 |
33,009 |
33,009 |
|||||||||||||||
| As Reported |
As Reported |
||||||||||||||||||
| 12 Weeks Ended |
12 Weeks Ended |
||||||||||||||||||
| March 25, 2016 |
March 27, 2015 |
||||||||||||||||||
| Contract Sales |
|||||||||||||||||||
| Vacation ownership |
$ 153,494 |
$ 169,950 |
|||||||||||||||||
| Residential products |
- |
28,420 |
|||||||||||||||||
| Total contract sales |
$ 153,494 |
$ 198,370 |
|||||||||||||||||
| ** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
|||||||||||||||||||||||||
| NOTE: Earnings per share - Basic and Earnings per share - Diluted are calculated using whole dollars. |
|||||||||||||||||||||||||
| A-2 |
||||||||||||||||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
||||||||||||||||||
| NORTH AMERICA SEGMENT |
||||||||||||||||||
| 12 Weeks Ended March 25, 2016 and March 27, 2015 |
||||||||||||||||||
| (In thousands) |
||||||||||||||||||
| As Reported |
As Adjusted |
As Reported |
As Adjusted |
|||||||||||||||
| 12 Weeks Ended |
Certain |
12 Weeks Ended |
12 Weeks Ended |
Certain |
12 Weeks Ended |
|||||||||||||
| March 25, 2016 |
Items |
March 25, 2016 |
** |
March 27, 2015 |
Items |
March 27, 2015 |
** |
|||||||||||
| Revenues |
||||||||||||||||||
| Sale of vacation ownership products |
$ 124,684 |
$ - |
$ 124,684 |
$ 141,728 |
$ - |
$ 141,728 |
||||||||||||
| Resort management and other services |
61,665 |
- |
61,665 |
58,575 |
- |
58,575 |
||||||||||||
| Financing |
27,408 |
- |
27,408 |
27,056 |
- |
27,056 |
||||||||||||
| Rental |
72,508 |
- |
72,508 |
71,715 |
- |
71,715 |
||||||||||||
| Cost reimbursements |
99,182 |
- |
99,182 |
92,854 |
- |
92,854 |
||||||||||||
| Total revenues |
385,447 |
- |
385,447 |
391,928 |
- |
391,928 |
||||||||||||
| Expenses |
||||||||||||||||||
| Cost of vacation ownership products |
30,662 |
- |
30,662 |
40,501 |
- |
40,501 |
||||||||||||
| Marketing and sales |
68,315 |
- |
68,315 |
69,017 |
- |
69,017 |
||||||||||||
| Resort management and other services |
38,152 |
- |
38,152 |
36,968 |
- |
36,968 |
||||||||||||
| Rental |
55,956 |
- |
55,956 |
54,611 |
- |
54,611 |
||||||||||||
| Organizational and separation related |
- |
- |
- |
139 |
(139) |
- |
||||||||||||
| Reversal of litigation expense |
(303) |
303 |
- |
(262) |
262 |
- |
||||||||||||
| Royalty fee |
1,686 |
- |
1,686 |
1,260 |
- |
1,260 |
||||||||||||
| Cost reimbursements |
99,182 |
- |
99,182 |
92,854 |
- |
92,854 |
||||||||||||
| Total expenses |
293,650 |
303 |
293,953 |
295,088 |
123 |
295,211 |
||||||||||||
| Gains and other income |
7 |
(7) |
- |
880 |
(880) |
- |
||||||||||||
| Other |
(2,280) |
2,308 |
28 |
16 |
- |
16 |
||||||||||||
| Segment financial results |
$ 89,524 |
$ 1,998 |
$ 91,522 |
$ 97,736 |
$ (1,003) |
$ 96,733 |
||||||||||||
| As Reported |
As Reported |
|||||||||||||||||
| 12 Weeks Ended |
12 Weeks Ended |
|||||||||||||||||
| March 25, 2016 |
March 27, 2015 |
|||||||||||||||||
| Contract Sales |
||||||||||||||||||
| Vacation ownership |
$ 139,650 |
$ 155,993 |
||||||||||||||||
| Total contract sales |
$ 139,650 |
$ 155,993 |
||||||||||||||||
| ** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
||||||||||||||||||||||||
| A-3 |
||||||||||||||||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
||||||||||||||||||
| ASIA PACIFIC SEGMENT |
||||||||||||||||||
| 12 Weeks Ended March 25, 2016 and March 27, 2015 |
||||||||||||||||||
| (In thousands) |
||||||||||||||||||
| As Reported |
As Adjusted |
As Reported |
As Adjusted |
|||||||||||||||
| 12 Weeks Ended |
Certain |
12 Weeks Ended |
12 Weeks Ended |
Certain |
12 Weeks Ended |
|||||||||||||
| March 25, 2016 |
Items |
March 25, 2016 |
** |
March 27, 2015 |
Items |
March 27, 2015 |
** |
|||||||||||
| Revenues |
||||||||||||||||||
| Sale of vacation ownership products |
$ 8,525 |
$ - |
$ 8,525 |
$ 36,278 |
$ (28,420) |
$ 7,858 |
||||||||||||
| Resort management and other services |
3,497 |
(1,736) |
1,761 |
863 |
- |
863 |
||||||||||||
| Financing |
981 |
- |
981 |
1,006 |
- |
1,006 |
||||||||||||
| Rental |
5,621 |
(2,056) |
3,565 |
2,352 |
- |
2,352 |
||||||||||||
| Cost reimbursements |
873 |
- |
873 |
866 |
- |
866 |
||||||||||||
| Total revenues |
19,497 |
(3,792) |
15,705 |
41,365 |
(28,420) |
12,945 |
||||||||||||
| Expenses |
||||||||||||||||||
| Cost of vacation ownership products |
1,709 |
- |
1,709 |
21,996 |
(21,583) |
413 |
||||||||||||
| Marketing and sales |
6,211 |
- |
6,211 |
5,557 |
(922) |
4,635 |
||||||||||||
| Resort management and other services |
3,552 |
(1,548) |
2,004 |
850 |
- |
850 |
||||||||||||
| Rental |
5,788 |
(2,060) |
3,728 |
2,496 |
- |
2,496 |
||||||||||||
| Royalty fee |
146 |
- |
146 |
157 |
- |
157 |
||||||||||||
| Cost reimbursements |
873 |
- |
873 |
866 |
- |
866 |
||||||||||||
| Total expenses |
18,279 |
(3,608) |
14,671 |
31,922 |
(22,505) |
9,417 |
||||||||||||
| Gains and other income |
- |
- |
- |
3 |
(3) |
- |
||||||||||||
| Other |
(208) |
208 |
- |
(3) |
- |
(3) |
||||||||||||
| Segment financial results |
$ 1,010 |
$ 24 |
$ 1,034 |
$ 9,443 |
$ (5,918) |
$ 3,525 |
||||||||||||
| As Reported |
As Reported |
|||||||||||||||||
| 12 Weeks Ended |
12 Weeks Ended |
|||||||||||||||||
| March 25, 2016 |
March 27, 2015 |
|||||||||||||||||
| Contract Sales |
||||||||||||||||||
| Vacation ownership |
$ 9,426 |
$ 8,659 |
||||||||||||||||
| Residential products |
- |
28,420 |
||||||||||||||||
| Total contract sales |
$ 9,426 |
$ 37,079 |
||||||||||||||||
| ** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
||||||||||||||||||||||||
| A-4 |
||||||||||||||||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
||||||||||||||||||
| EUROPE SEGMENT |
||||||||||||||||||
| 12 Weeks Ended March 25, 2016 and March 27, 2015 |
||||||||||||||||||
| (In thousands) |
||||||||||||||||||
| As Reported |
As Adjusted |
As Reported |
As Adjusted |
|||||||||||||||
| 12 Weeks Ended |
Certain |
12 Weeks Ended |
12 Weeks Ended |
Certain |
12 Weeks Ended |
|||||||||||||
| March 25, 2016 |
Items |
March 25, 2016 |
** |
March 27, 2015 |
Items |
March 27, 2015 |
** |
|||||||||||
| Revenues |
||||||||||||||||||
| Sale of vacation ownership products |
$ 5,160 |
$ - |
$ 5,160 |
$ 5,900 |
$ - |
$ 5,900 |
||||||||||||
| Resort management and other services |
4,467 |
- |
4,467 |
4,979 |
- |
4,979 |
||||||||||||
| Financing |
835 |
- |
835 |
990 |
- |
990 |
||||||||||||
| Rental |
2,159 |
- |
2,159 |
2,132 |
- |
2,132 |
||||||||||||
| Cost reimbursements |
7,478 |
- |
7,478 |
7,586 |
- |
7,586 |
||||||||||||
| Total revenues |
20,099 |
- |
20,099 |
21,587 |
- |
21,587 |
||||||||||||
| Expenses |
||||||||||||||||||
| Cost of vacation ownership products |
1,291 |
- |
1,291 |
852 |
- |
852 |
||||||||||||
| Marketing and sales |
3,886 |
- |
3,886 |
5,421 |
- |
5,421 |
||||||||||||
| Resort management and other services |
4,093 |
- |
4,093 |
4,591 |
- |
4,591 |
||||||||||||
| Rental |
2,916 |
- |
2,916 |
3,051 |
- |
3,051 |
||||||||||||
| Royalty fee |
49 |
- |
49 |
76 |
- |
76 |
||||||||||||
| Cost reimbursements |
7,478 |
- |
7,478 |
7,586 |
- |
7,586 |
||||||||||||
| Total expenses |
19,713 |
- |
19,713 |
21,577 |
- |
21,577 |
||||||||||||
| Gains and other income |
- |
- |
- |
4 |
(4) |
- |
||||||||||||
| Segment financial results |
$ 386 |
$ - |
$ 386 |
$ 14 |
$ (4) |
$ 10 |
||||||||||||
| As Reported |
As Reported |
|||||||||||||||||
| 12 Weeks Ended |
12 Weeks Ended |
|||||||||||||||||
| March 25, 2016 |
March 27, 2015 |
|||||||||||||||||
| Contract Sales |
||||||||||||||||||
| Vacation ownership |
$ 4,418 |
$ 5,298 |
||||||||||||||||
| Total contract sales |
$ 4,418 |
$ 5,298 |
||||||||||||||||
| ** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
||||||||||||||||||||||||
| A-5 |
||||||||||||||||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
||||||||||||||||||
| CORPORATE AND OTHER |
||||||||||||||||||
| 12 Weeks Ended March 25, 2016 and March 27, 2015 |
||||||||||||||||||
| (In thousands) |
||||||||||||||||||
| As Reported |
As Adjusted |
As Reported |
As Adjusted |
|||||||||||||||
| 12 Weeks Ended |
Certain |
12 Weeks Ended |
12 Weeks Ended |
Certain |
12 Weeks Ended |
|||||||||||||
| March 25, 2016 |
Items |
March 25, 2016 |
** |
March 27, 2015 |
Items |
March 27, 2015 |
** |
|||||||||||
| Expenses |
||||||||||||||||||
| Cost of vacation ownership products |
$ 1,955 |
$ - |
$ 1,955 |
$ 1,613 |
$ - |
$ 1,613 |
||||||||||||
| Financing |
4,629 |
- |
4,629 |
4,905 |
- |
4,905 |
||||||||||||
| General and administrative |
25,297 |
- |
25,297 |
22,777 |
- |
22,777 |
||||||||||||
| Organizational and separation related |
- |
- |
- |
53 |
(53) |
- |
||||||||||||
| Consumer Financing Interest |
5,362 |
- |
5,362 |
6,021 |
- |
6,021 |
||||||||||||
| Royalty fee |
11,476 |
- |
11,476 |
11,507 |
- |
11,507 |
||||||||||||
| Total expenses |
48,719 |
- |
48,719 |
46,876 |
(53) |
46,823 |
||||||||||||
| Interest expense |
(1,982) |
- |
(1,982) |
(2,974) |
- |
(2,974) |
||||||||||||
| Other |
(54) |
54 |
- |
- |
- |
- |
||||||||||||
| Financial results |
$ (50,755) |
$ 54 |
$ (50,701) |
$ (49,850) |
$ 53 |
$ (49,797) |
||||||||||||
| ** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
||||||||||||||||||||||||
| NOTE: Corporate and Other consists of results not specifically attributable to an individual segment, including expenses incurred to support our financing operations, non-capitalizable development expenses supporting overall company development, company-wide general and administrative costs, and the fixed royalty fee payable under the license agreements with Marriott International, consumer financing interest expense, other interest expense and other charges. |
||||||||||||||||||||||||
| A-6 |
|||||||||||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
|||||||||||||
| CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS |
|||||||||||||
| (In thousands) |
|||||||||||||
| 12 Weeks Ended |
|||||||||||||
| March 25, 2016 |
March 27, 2015 |
||||||||||||
| Contract sales |
|||||||||||||
| Vacation ownership |
$ 153,494 |
$ 169,950 |
|||||||||||
| Residential products |
- |
28,420 |
|||||||||||
| Total contract sales |
153,494 |
198,370 |
|||||||||||
| Revenue recognition adjustments: |
|||||||||||||
| Reportability1 |
786 |
(1,513) |
|||||||||||
| Sales Reserve 2 |
(8,223) |
(8,367) |
|||||||||||
| Other 3 |
(7,688) |
(4,584) |
|||||||||||
| Sale of vacation ownership products |
$ 138,369 |
$ 183,906 |
|||||||||||
| 1 Adjustment for lack of required downpayment or contract sales in rescission period. |
|||||||||||||||
| 2 Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve. |
|||||||||||||||
| 3 Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue. |
|||||||||||||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
||||||||||||||||||||||||
| CONSOLIDATED ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES) |
||||||||||||||||||||||||
| (In thousands) |
||||||||||||||||||||||||
| Revenue |
Revenue |
|||||||||||||||||||||||
| As Reported |
Recognition |
As Adjusted |
As Reported |
Recognition |
As Adjusted |
|||||||||||||||||||
| 12 Weeks Ended |
Certain |
Reportability |
12 Weeks Ended |
12 Weeks Ended |
Certain |
Reportability |
12 Weeks Ended |
|||||||||||||||||
| March 25, 2016 |
Items |
Adjustment |
March 25, 2016 |
** |
March 27, 2015 |
Items |
Adjustment |
March 27, 2015 |
** |
|||||||||||||||
| Sale of vacation ownership products |
$ 138,369 |
$ - |
$ (786) |
$ 137,583 |
$ 183,906 |
$ (28,420) |
$ 1,513 |
$ 156,999 |
||||||||||||||||
| Less: |
||||||||||||||||||||||||
| Cost of vacation ownership products |
35,617 |
- |
(104) |
35,513 |
64,962 |
(21,583) |
562 |
43,941 |
||||||||||||||||
| Marketing and sales |
78,412 |
- |
(82) |
78,330 |
79,995 |
(922) |
105 |
79,178 |
||||||||||||||||
| Development margin |
$ 24,340 |
$ - |
$ (600) |
$ 23,740 |
$ 38,949 |
$ (5,915) |
$ 846 |
$ 33,880 |
||||||||||||||||
| Development margin percentage1 |
17.6% |
17.3% |
21.2% |
21.6% |
||||||||||||||||||||
| ** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
||||||||||||||||||||||||||||
| 1 Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars. |
||||||||||||||||||||||||||||
| A-7 |
||||||||||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
||||||||||||
| NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS |
||||||||||||
| (In thousands) |
||||||||||||
| 12 Weeks Ended |
||||||||||||
| March 25, 2016 |
March 27, 2015 |
|||||||||||
| Contract sales |
||||||||||||
| Vacation ownership |
$ 139,650 |
$ 155,993 |
||||||||||
| Residential products |
- |
- |
||||||||||
| Total contract sales |
139,650 |
155,993 |
||||||||||
| Revenue recognition adjustments: |
||||||||||||
| Reportability1 |
88 |
(3,444) |
||||||||||
| Sales Reserve 2 |
(7,406) |
(6,334) |
||||||||||
| Other 3 |
(7,648) |
(4,487) |
||||||||||
| Sale of vacation ownership products |
$ 124,684 |
$ 141,728 |
||||||||||
| 1 Adjustment for lack of required downpayment or contract sales in rescission period. |
||||||||||||||
| 2 Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve. |
||||||||||||||
| 3 Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue. |
||||||||||||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
||||||||||||||||||||||||||
| NORTH AMERICA ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES) |
||||||||||||||||||||||||||
| (In thousands) |
||||||||||||||||||||||||||
| Revenue |
Revenue |
|||||||||||||||||||||||||
| As Reported |
Recognition |
As Adjusted |
As Reported |
Recognition |
As Adjusted |
|||||||||||||||||||||
| 12 Weeks Ended |
Certain |
Reportability |
12 Weeks Ended |
12 Weeks Ended |
Certain |
Reportability |
12 Weeks Ended |
|||||||||||||||||||
| March 25, 2016 |
Items |
Adjustment |
March 25, 2016 |
** |
March 27, 2015 |
Items |
Adjustment |
March 27, 2015 |
** |
|||||||||||||||||
| Sale of vacation ownership products |
$ 124,684 |
$ - |
$ (88) |
$ 124,596 |
$ 141,728 |
$ - |
$ 3,444 |
$ 145,172 |
||||||||||||||||||
| Less: |
||||||||||||||||||||||||||
| Cost of vacation ownership products |
30,662 |
- |
(24) |
30,638 |
40,501 |
- |
980 |
41,481 |
||||||||||||||||||
| Marketing and sales |
68,315 |
- |
(8) |
68,307 |
69,017 |
- |
324 |
69,341 |
||||||||||||||||||
| Development margin |
$ 25,707 |
$ - |
$ (56) |
$ 25,651 |
$ 32,210 |
$ - |
$ 2,140 |
$ 34,350 |
||||||||||||||||||
| Development margin percentage1 |
20.6% |
20.6% |
22.7% |
23.7% |
||||||||||||||||||||||
| ** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
||||||||||||||||||||||||||||||
| 1 Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars. |
||||||||||||||||||||||||||||||
| A-8 |
|||||||||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
|||||||||||
| EBITDA AND ADJUSTED EBITDA |
|||||||||||
| 12 Weeks Ended March 25, 2016 and March 27, 2015 |
|||||||||||
| (In thousands) |
|||||||||||
| 12 Weeks Ended |
|||||||||||
| March 25, 2016 |
March 27, 2015 |
||||||||||
| Net income |
$ 24,408 |
$ 34,054 |
|||||||||
| Interest expense 1 |
1,982 |
2,974 |
|||||||||
| Tax provision |
15,757 |
23,289 |
|||||||||
| Depreciation and amortization |
5,125 |
4,065 |
|||||||||
| EBITDA ** |
47,272 |
64,382 |
|||||||||
| Non-cash share-based compensation 2 |
2,524 |
2,643 |
|||||||||
| Certain items |
1,795 |
(6,872) |
|||||||||
| ADJUSTED EBITDA ** |
$ 51,591 |
$ 60,153 |
|||||||||
| ** Denotes non-GAAP financial measures. Please see pages A-11 and A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
|||||||||||
| 1 Interest expense excludes consumer financing interest expense. |
|||||||||||
| 2 Beginning with the first quarter of 2016, non-cash share-based compensation expense is excluded from our Adjusted EBITDA, and prior period presentation has been recast for consistency. Please see pages A-11 and A-12 for additional information. |
|||||||||||
| A-9 |
|||||||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
|||||||||
| 2016 ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE - DILUTED OUTLOOK |
|||||||||
| (In millions, except per share amounts) |
|||||||||
| Fiscal Year |
Fiscal Year |
||||||||
| Net income |
$ 123 |
$ 134 |
|||||||
| Adjustments to reconcile Net income to Adjusted net income |
|||||||||
| Certain items1 |
5 |
4 |
|||||||
| Provision for income taxes on adjustments to net income |
(2) |
(2) |
|||||||
| Adjusted net income** |
$ 126 |
$ 136 |
|||||||
| Earnings per share - Diluted 2 |
$ 4.21 |
$ 4.59 |
|||||||
| Adjusted earnings per share - Diluted**, 2 |
$ 4.31 |
$ 4.66 |
|||||||
| Diluted shares2 |
29.2 |
29.2 |
|||||||
| ** Denotes non-GAAP financial measures. Please see pages A-11 through A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
|||||||||
| 1 Certain items adjustment includes approximately $4 million to $5 million of non-capitalizable transaction costs. |
|||||||||
| 2 Earnings per share - Diluted, Adjusted earnings per share - Diluted, and Diluted shares outlook includes the impact of share repurchase activity only through April 28, 2016. |
|||||||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
|||||||||
| 2016 ADJUSTED EBITDA OUTLOOK |
|||||||||
| (In millions) |
|||||||||
| Fiscal Year |
Fiscal Year |
||||||||
| Adjusted net income ** |
$ 126 |
$ 136 |
|||||||
| Interest expense1 |
8 |
8 |
|||||||
| Tax provision |
90 |
95 |
|||||||
| Depreciation and amortization |
22 |
22 |
|||||||
| Non-cash share-based compensation 2 |
15 |
15 |
|||||||
| Adjusted EBITDA** |
$ 261 |
$ 276 |
|||||||
| ** Denotes non-GAAP financial measures. Please see pages A-11 through A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
|||||||||
| 1 Interest expense excludes consumer financing interest expense. |
|||||||||
| 2 Beginning with the first quarter of 2016, non-cash share-based compensation expense is excluded from our Adjusted EBITDA, and prior period presentation has been recast for consistency. Please see pages A-11 and A-12 for additional information. |
| A-10 |
||||||||||||||||||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
||||||||||||||||||||
| 2016 ADJUSTED FREE CASH FLOW AND NORMALIZED ADJUSTED FREE CASH FLOW OUTLOOK |
||||||||||||||||||||
| (In millions) |
||||||||||||||||||||
| Current Guidance |
||||||||||||||||||||
| Low |
High |
Mid-Point |
Adjustments |
Normalized |
||||||||||||||||
| Adjusted net income ** |
$ 126 |
$ 136 |
$ 131 |
$ - |
$ 131 |
|||||||||||||||
| Adjustments to reconcile Adjusted net income to net cash provided by operating activities: |
||||||||||||||||||||
| Adjustments for non-cash items1 |
84 |
84 |
84 |
- |
84 |
|||||||||||||||
| Deferred income taxes |
30 |
35 |
33 |
- |
33 |
|||||||||||||||
| Net changes in assets and liabilities: |
||||||||||||||||||||
| Notes receivable originations |
(355) |
(370) |
(363) |
- |
(363) |
|||||||||||||||
| Notes receivable collections |
239 |
245 |
242 |
- |
242 |
|||||||||||||||
| Inventory |
(10) |
(5) |
(8) |
8 |
4 |
- |
||||||||||||||
| Other working capital changes |
22 |
21 |
22 |
- |
22 |
|||||||||||||||
| Net cash provided by operating activities |
136 |
146 |
141 |
8 |
149 |
|||||||||||||||
| Capital expenditures for property and equipment (excluding inventory): |
||||||||||||||||||||
| New sales centers 2 |
(20) |
(18) |
(19) |
19 |
2 |
- |
||||||||||||||
| Other |
(24) |
(22) |
(23) |
3 |
5 |
(20) |
||||||||||||||
| Decrease in restricted cash |
(5) |
(5) |
(5) |
5 |
6 |
- |
||||||||||||||
| Borrowings from securitization transactions |
290 |
292 |
291 |
- |
291 |
|||||||||||||||
| Repayment of debt related to securitizations |
(235) |
(233) |
(234) |
- |
(234) |
|||||||||||||||
| Free cash flow** |
142 |
160 |
151 |
35 |
186 |
|||||||||||||||
| Adjustments: |
||||||||||||||||||||
| Net change in borrowings available from the securitization of eligible vacation ownership notes receivable through the warehouse credit facility 3 |
(7) |
(5) |
(6) |
- |
(6) |
|||||||||||||||
| Adjusted free cash flow** |
$ 135 |
$ 155 |
$ 145 |
$ 35 |
$ 180 |
|||||||||||||||
| ** Denotes non-GAAP financial measures. Please see pages A-11 through A-12 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
|||||||||||||||||||||||||||||||
| 1 Includes depreciation, amortization of debt issuance costs, provision for loan losses, and share-based compensation. |
|||||||||||||||||||||||||||||||
| 2 Represents the incremental investment in new sales centers. |
|||||||||||||||||||||||||||||||
| 3 Represents the net change in borrowings available from the securitization of eligible vacation ownership notes receivable through the warehouse credit facility between the 2015 and 2016 year ends. |
|||||||||||||||||||||||||||||||
| 4 Represents adjustment to align real estate inventory spending with real estate inventory costs (i.e., product costs). |
|||||||||||||||||||||||||||||||
| 5 Represents normalized capital expenditures for property and equipment. |
|||||||||||||||||||||||||||||||
| 6 Represents normalized restricted cash activity. |
|||||||||||||||||||||||||||||||
| A-11 |
||||||||||||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
||||||||||||||
| NON-GAAP FINANCIAL MEASURES |
||||||||||||||
| In our press release and schedules, and on the related conference call, we report certain financial measures that are not prescribed or authorized by United States generally accepted accounting principles ("GAAP"). We discuss our reasons for reporting these non-GAAP financial measures below, and the financial schedules reconcile the most directly comparable GAAP financial measure to each non-GAAP financial measure that we report (identified by a double asterisk ("**") on the preceding pages). Although we evaluate and present these non-GAAP financial measures for the reasons described below, please be aware that these non-GAAP financial measures have limitations and should not be considered in isolation or as a substitute for revenues, net income, earnings per share or any other comparable operating measure prescribed by GAAP. In addition, these non-GAAP financial measures may be calculated and / or presented differently than measures with the same or similar names that are reported by other companies, and as a result, the non-GAAP financial measures we report may not be comparable to those reported by others. |
||||||||||||||
| Adjusted Net Income. We evaluate non-GAAP financial measures, including Adjusted Net Income, Adjusted EBITDA, and Adjusted Development Margin, that exclude certain items in the 12 weeks ended March 25, 2016 and March 27, 2015 because these non-GAAP financial measures allow for period-over-period comparisons of our on-going core operations before the impact of these items. These non-GAAP financial measures also facilitate our comparison of results from our on-going core operations before these items with results from other vacation ownership companies. |
||||||||||||||
| Certain items - 12 weeks ended March 25, 2016. In our Statement of Income for the 12 weeks ended March 25, 2016, we recorded $2.1 million of net pre-tax charges, which included $2.6 million of adjustments for transaction costs associated with acquisitions ($2.3 million in our North America segment, $0.2 million in our Asia Pacific segment and less than $0.1 million in our Corporate and Other segment) recorded under the "Other" caption, partially offset by a $0.3 million reversal of litigation expense in our in our North America segment recorded under the "Reversal of litigation expense" caption because actual costs were lower than expected, $0.2 million of net adjustments to exclude the results of operations from the portion of the Surfers Paradise, Australia property that we intend to sell, comprised of $2.1 million of Rental revenue and $1.7 million of Resort management and other services revenue, with corresponding adjustments of $2.1 million and $1.5 million to the respective expenses (of which $0.3 million was depreciation) in our Asia Pacific segment, as well as less than $0.1 million on the "Gains and other income" caption in our North America segment. |
||||||||||||||
| Certain items - 12 weeks ended March 27, 2015. In our Statement of Income for the 12 weeks ended March 27, 2015, we recorded $6.9 million of net pre-tax items, which included a $28.4 million adjustment to exclude the bulk sale of 18 units in our Asia Pacific segment recorded under the "sale of vacation ownership products" caption, with corresponding adjustments of $21.6 million and $0.9 million to the "Cost of vacation ownership products" and Marketing and sales" captions, respectively, a $0.9 million gain associated with the sale of a golf course and adjacent undeveloped land in our North America segment under the "Gains and other income" caption, and a $0.3 million reversal of litigation expense in our North America segment recorded under the "Reversal of litigation expense" caption because actual costs were lower than expected, partially offset by $0.2 million of organizational and separation related costs ($0.1 million in our North America segment and $0.1 million in our Corporate and Other segment) recorded under the "Organizational and separation related" caption. |
||||||||||||||
| Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses). We evaluate Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses) as an indicator of operating performance. Adjusted Development Margin adjusts Sale of vacation ownership products revenues for the impact of revenue reportability, includes corresponding adjustments to Cost of vacation ownership products expense and Marketing and sales expense associated with the change in revenues from the Sale of vacation ownership products, and includes adjustments for certain items as itemized in the discussion of Adjusted Net Income above. We evaluate Adjusted Development Margin because it allows for period-over-period comparisons of our on-going core operations before the impact of revenue reportability and certain items to our Development Margin. |
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| A-12 |
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| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
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| NON-GAAP FINANCIAL MEASURES |
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| Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"). EBITDA is defined as earnings, or net income, before interest expense (excluding consumer financing interest expense), provision for income taxes, depreciation and amortization. For purposes of our EBITDA calculation, we do not adjust for consumer financing interest expense because the associated debt is secured by vacation ownership notes receivable that have been sold to bankruptcy remote special purpose entities and is generally non-recourse to us. Further, we consider consumer financing interest expense to be an operating expense of our business. |
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| 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. |
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| Adjusted EBITDA. We also evaluate Adjusted EBITDA, which reflects additional adjustments for certain items, as itemized in the discussion of Adjusted Net Income on page A-11. Additionally, beginning with the first quarter of 2016, we exclude non-cash share-based compensation expense to address considerable variability among companies in recording compensation expense because companies use share-based payment awards differently, both in the type and quantity of awards granted. Prior period presentation has been recast for consistency. We evaluate Adjusted EBITDA as an indicator of operating performance because it allows for period-over-period comparisons of our on-going core operations before the impact of these items. Together, EBITDA and Adjusted EBITDA facilitate our comparison of results from our on-going core operations before the impact of these items with results from other vacation ownership companies. |
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| 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. |
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| Adjusted Free Cash Flow. We also evaluate Adjusted Free Cash Flow, which reflects additional adjustments for organizational and separation related, litigation, and other cash items, as referred to in the discussion of Adjusted Net Income above. We evaluate Adjusted Free Cash Flow as a liquidity measure that provides useful information to management and investors about the amount of cash provided by operating activities after capital expenditures for property and equipment, changes in restricted cash, and the borrowing and repayment activity related to our securitizations, excluding the impact of organizational and separation related, litigation, and other cash charges. We consider Adjusted Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including acquisitions and strengthening the balance sheet. Analysis of Adjusted Free Cash Flow also facilitates management's comparison of our results with our competitors' results. |
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| 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. |
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| A-13 |
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| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
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| INTERIM CONSOLIDATED BALANCE SHEETS |
|||||
| (In thousands, except share and per share data) |
|||||
| (unaudited) |
|||||
| March 25, |
January 1, |
||||
| ASSETS |
|||||
| Cash and cash equivalents |
$ 106,613 |
$ 177,061 |
|||
| Restricted cash (including $24,768 and $26,884 from VIEs, respectively) |
55,252 |
71,451 |
|||
| Accounts and contracts receivable, net (including $4,527 and $4,893 from VIEs, respectively) |
131,538 |
131,850 |
|||
| Vacation ownership notes receivable, net (including $680,888 and $669,179 from VIEs, respectively) |
908,587 |
920,631 |
|||
| Inventory |
715,072 |
669,243 |
|||
| Property and equipment |
222,516 |
288,803 |
|||
| Other |
191,207 |
140,679 |
|||
| Total Assets |
$ 2,330,785 |
$ 2,399,718 |
|||
| LIABILITIES AND EQUITY |
|||||
| Accounts payable |
$ 80,618 |
$ 139,120 |
|||
| Advance deposits |
77,141 |
69,064 |
|||
| Accrued liabilities (including $292 and $669 from VIEs, respectively) |
178,642 |
164,791 |
|||
| Deferred revenue |
28,562 |
35,276 |
|||
| Payroll and benefits liability |
75,749 |
104,331 |
|||
| Liability for Marriott Rewards customer loyalty program |
- |
35 |
|||
| Deferred compensation liability |
55,437 |
51,031 |
|||
| Mandatorily redeemable preferred stock of consolidated subsidiary, net |
39,029 |
38,989 |
|||
| Debt, net (including $688,023 and $684,604 from VIEs, respectively) |
689,234 |
678,793 |
|||
| Other |
72,582 |
32,945 |
|||
| Deferred taxes |
114,765 |
109,076 |
|||
| Total Liabilities |
1,411,759 |
1,423,451 |
|||
| Preferred stock - $.01 par value; 2,000,000 shares authorized; none issued or outstanding |
- |
- |
|||
| Common stock - $.01 par value; 100,000,000 shares authorized; 36,564,810 and 36,393,800 shares issued, respectively |
366 |
364 |
|||
| Treasury stock - at cost; 8,171,238 and 6,844,256 shares, respectively |
(503,218) |
(429,990) |
|||
| Additional paid-in capital |
1,149,442 |
1,150,731 |
|||
| Accumulated other comprehensive income |
12,937 |
11,381 |
|||
| Retained earnings |
259,499 |
243,781 |
|||
| Total Equity |
919,026 |
976,267 |
|||
| Total Liabilities and Equity |
$ 2,330,785 |
$ 2,399,718 |
|||
| The abbreviation VIEs above means Variable Interest Entities. |
|||||
| A-14 |
|||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
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| INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||
| (In thousands) |
|||||
| (Unaudited) |
|||||
|
12 weeks ended |
|||||
| March 25, 2016 |
March 27, 2015 |
||||
| OPERATING ACTIVITIES |
|||||
| Net income |
$24,408 |
$34,054 |
|||
| Adjustments to reconcile net income to net cash provided by operating activities: |
|||||
| Depreciation |
5,125 |
4,065 |
|||
| Amortization of debt issuance costs |
1,300 |
1,267 |
|||
| Provision for loan losses |
8,287 |
8,437 |
|||
| Share-based compensation |
2,524 |
2,643 |
|||
| Deferred income taxes |
5,549 |
8,600 |
|||
| Equity method income |
(28) |
(13) |
|||
| Gain on disposal of property and equipment, net |
(7) |
(887) |
|||
| Non-cash reversal of litigation expense |
(303) |
(262) |
|||
| Net change in assets and liabilities: |
|||||
| Accounts and contracts receivable |
21 |
(4,643) |
|||
| Notes receivable originations |
(57,524) |
(48,946) |
|||
| Notes receivable collections |
60,532 |
67,518 |
|||
| Inventory |
(14,970) |
44,883 |
|||
| Purchase of operating hotels for future conversion to inventory |
- |
(46,614) |
|||
| Other assets |
(5,285) |
(8,096) |
|||
| Accounts payable, advance deposits and accrued liabilities |
(27,836) |
(25,064) |
|||
| Deferred revenue |
(6,785) |
(11,624) |
|||
| Payroll and benefit liabilities |
(28,586) |
(19,583) |
|||
| Liability for Marriott Rewards customer loyalty program |
(36) |
(4,474) |
|||
| Deferred compensation liability |
4,406 |
2,921 |
|||
| Other liabilities |
39,399 |
27,937 |
|||
| Other, net |
(313) |
(50) |
|||
| Net cash provided by operating activities |
9,878 |
32,069 |
|||
| INVESTING ACTIVITIES |
|||||
| Capital expenditures for property and equipment (excluding inventory) |
(6,331) |
(10,562) |
|||
| Decrease in restricted cash |
16,133 |
47,103 |
|||
| Dispositions, net |
9 |
197 |
|||
| Net cash provided by investing activities |
9,811 |
36,738 |
|||
| FINANCING ACTIVITIES |
|||||
| Borrowings from securitization transactions |
51,130 |
- |
|||
| Repayment of debt related to securitization transactions |
(47,711) |
(78,811) |
|||
| Proceeds from vacation ownership inventory arrangement |
- |
5,375 |
|||
| Repurchase of common stock |
(73,228) |
(51,281) |
|||
| Payment of dividends |
(17,585) |
(8,081) |
|||
| Proceeds from stock option exercises |
- |
90 |
|||
| Payment of withholding taxes on vesting of restricted stock units |
(3,864) |
(9,061) |
|||
| Other |
591 |
80 |
|||
| Net cash used in financing activities |
(90,667) |
(141,689) |
|||
| Effect of changes in exchange rates on cash and cash equivalents |
530 |
(1,453) |
|||
| DECREASE IN CASH AND CASH EQUIVALENTS |
(70,448) |
(74,335) |
|||
| CASH AND CASH EQUIVALENTS, beginning of period |
177,061 |
346,515 |
|||
| CASH AND CASH EQUIVALENTS, end of period |
$106,613 |
$272,180 |
|||
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SOURCE Marriott Vacations Worldwide
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