Marriott Vacations Worldwide Reports Second Quarter Financial Results
ORLANDO, Fla., July 21, 2016 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported second quarter financial results and reaffirmed its guidance for the full year 2016.
"Our second quarter results, including contract sales, were solid and in line with our expectations," said Stephen P. Weisz, president and chief executive officer. "And even more importantly, contract sales growth gained momentum as we moved through the second half of the quarter. Additionally, tour activations for the second half of 2016 are substantially ahead of this time last year, and four of our six new sales centers are open and gaining momentum, giving us confidence that we will achieve our 2016 goals and are well positioned for solid growth in the years to come."
Second quarter 2016 highlights:
- Net income was $36.3 million, or $1.26 fully diluted earnings per share (EPS), compared to net income of $34.0 million, or $1.05 fully diluted EPS, in the second quarter of 2015, an increase of 6.7 percent and 20.0 percent, respectively.
- Adjusted EBITDA totaled $64.2 million, an increase of $2.5 million year-over-year, or 4.1 percent.
- Adjusted fully diluted EPS was $1.08 compared to $0.91 in the second quarter of 2015, an increase of 18.7 percent.
- Company vacation ownership contract sales (which exclude residential sales) were $166.0 million, slightly ahead of prior year.
- Company development margin percentage was 23.1 percent compared to 21.3 percent in the second quarter of 2015. Company adjusted development margin percentage was 22.8 percent compared to 21.0 percent in the second quarter of 2015.
- During the second quarter of 2016, the company repurchased nearly 1.5 million shares of its common stock for $90.1 million.
- The company completed the disposition of the non-timeshare portion of its Surfers Paradise, Australia property for approximately $50.9 million in gross cash proceeds.
- The company completed a bulk sale of the remaining 19 residential units at its San Francisco property for $19.5 million in gross cash proceeds.
Non-GAAP financial measures, such as adjusted EBITDA, adjusted net income, adjusted fully diluted earnings per share, and adjusted development margin are reconciled and adjustments are shown and described in further detail on pages A-10 and A-11 of the Financial Schedules that follow.
Second quarter 2016 Results
Company Results
Second quarter 2016 company net income was $36.3 million, a $2.3 million increase from the second quarter of 2015. These results were driven mainly by a $10.5 million gain on the bulk sale of the remaining 19 units at the San Francisco property, $3.0 million of higher resort management and other services revenues net of expenses, $1.7 million of higher financing revenues net of expenses, a $1.7 million reversal of a liability associated with the disposition of a golf course and related assets in Kauai, Hawaii, and $0.7 million of higher development margin. These increases were partially offset by an $8.7 million gain associated with the sale of undeveloped land in Kauai, Hawaii in the prior year, $1.8 million of lower rental revenues net of expenses, $1.7 million of higher general and administrative costs, a $1.5 million loss on the disposition of the non-timeshare portion of the Surfers Paradise, Australia property, $0.7 million of higher acquisition related transaction costs, and $0.6 million of higher royalty fees.
Total company vacation ownership contract sales were $166.0 million, $0.1 million higher than the second quarter of last year. These results reflect increased contract sales of $2.6 million and $2.5 million, respectively, from the company's Europe and Asia Pacific segments, partially offset by $5.0 million of lower contract sales in the company's North America segment, as the first half of the prior year second quarter benefited from enhancements the company made to owner recognition levels. Also contributing to the decrease, the company's Latin America sales channels were down roughly $2.1 million compared to the second quarter of last year, as the company continued to be impacted by a stronger U.S. dollar.
Development margin was $33.8 million, a $0.7 million increase from the second quarter of 2015. Development margin percentage was 23.1 percent compared to 21.3 percent in the prior year quarter, reflecting $9.1 million of lower product costs driven primarily by $6.9 million of favorable product cost true-up activity year-over-year, offset partially by $3.2 million related to higher usage of Plus Points for sales incentives, $3.0 million from higher sales reserve activity mainly associated with a 30 percent, or 12.5 percentage point, increase in financing propensity, and $2.2 million of higher marketing and sales costs driven primarily from start-up costs associated with the company's new sales distributions. Adjusted development margin percentage, which excludes the impact of revenue reportability year-over-year, was 22.8 percent in the second quarter of 2016 compared to 21.0 percent in the second quarter of 2015.
Rental revenues totaled $75.1 million, a $2.4 million increase from the second quarter of 2015. Results were driven mainly by $1.9 million of revenue from the non-timeshare portion of the Surfers Paradise, Australia property the company sold at the end of the second quarter and $1.8 million from a 3 percent increase in transient keys rented, partially offset by $1.6 million from a 3 percent decrease in average transient rate resulting from the mix of inventory available to rent. Rental revenues net of expenses were $9.0 million, a $1.8 million decrease from the second quarter of 2015, primarily reflecting a $0.7 million loss from the portion of the Australia property sold in the quarter as well as higher operating expenses primarily on increased transient keys rented in the quarter.
Resort management and other services revenues totaled $80.9 million, a $6.9 million increase from the second quarter of 2015. Resort management and other services revenues, net of expenses, totaled $31.6 million, a $3.0 million increase, or 10.6 percent, from the second quarter of 2015.
Financing revenues totaled $28.7 million, a $0.4 million increase from the second quarter of 2015. Financing revenues, net of expenses and consumer financing interest expense, were $18.7 million, a $1.7 million increase, or 10.1 percent, from the second quarter of 2015.
General and administrative expenses were $24.6 million in the second quarter of 2016, a $1.7 million increase from the second quarter of 2015, driven by higher spending related to enhancements to the company's owner facing technology as well as inflationary cost increases.
Net income was $36.3 million, compared to net income of $34.0 million in the second quarter of 2015, an increase of $2.3 million, or 6.7 percent. Adjusted EBITDA was $64.2 million in the second quarter of 2016, a $2.5 million, or 4.1 percent, increase from $61.7 million in the second quarter of 2015.
Segment Results
North America
North America vacation ownership contract sales were $145.6 million in the second quarter of 2016, a decrease of $5.0 million, or 3.3 percent, from the prior year period, as the first half of the prior year second quarter benefited from enhancements the company made to owner recognition levels. Also contributing to the decrease, the company's Latin America sales channels were down roughly $2.1 million compared to the second quarter of last year, as the company continued to be impacted by a stronger U.S. dollar.
Total tours in the second quarter of 2016 increased 0.3 percent, driven by a 4 percent increase in first time buyer tours, partially offset by a 2 percent decline in owner tours driven in part by the impact of the enhancements to the owner recognition levels in the first half of last year's second quarter. VPG decreased $20 to $3,384 in the second quarter of 2016 from the second quarter of 2015.
Second quarter 2016 North America segment financial results were $111.7 million, an increase of $7.1 million from the second quarter of 2015. The increase was driven primarily by the $10.5 million gain on the bulk sale at the San Francisco property, $3.0 million of higher development margin, $2.9 million of higher resort management and other services revenues net of expenses, the $1.7 million reversal of a liability associated with the disposition in Kauai, Hawaii, and $0.5 million of higher financing revenues. These increases were partially offset by the $8.7 million gain in the prior year, $1.8 million of acquisition related transaction costs, $0.6 million of higher royalty fees, and $0.6 million of lower rental revenues net of expenses. North America adjusted segment financial results, which exclude the transaction costs in the current year and the gains and other income in both years, were $101.2 million in the second quarter of 2016, a $5.3 million increase from $96.0 million of adjusted segment results in the second quarter of 2015.
Development margin was $36.5 million, a $3.0 million increase from the second quarter of 2015. Development margin percentage was 27.5 percent compared to 23.6 percent in the prior year quarter, reflecting $9.0 million of lower product costs driven primarily by $6.5 million of favorable product cost true-up activity year-over-year, offset partially by $3.2 million related to higher usage of Plus Points for sales incentives, $1.6 million from higher sales reserve activity mainly associated with a 30 percent, or 12.1 percentage point, increase in financing propensity, and $1.3 million of higher marketing and sales costs driven primarily from start-up costs associated with the company's new sales distributions. Adjusted development margin, which excludes the impact of revenue reportability year-over-year, was $34.1 million, a $1.8 million increase from the prior year quarter. Adjusted development margin percentage was 26.5 percent in the second quarter of 2016 compared to 23.0 percent in the second quarter of 2015.
Asia Pacific
Total vacation ownership contract sales in the segment were $10.5 million, an increase of $2.5 million, or roughly 31 percent, from the second quarter of 2015. Segment financial results were a loss of $2.5 million, a $2.4 million decrease from the second quarter of 2015, driven by a $1.5 million loss on the sale of the non-timeshare portion of the Surfers Paradise property, $1.5 million of lower development margin, and $0.6 million of lower rental revenues net of expenses, partially offset by $1.3 million of transaction related costs in the prior year. The lower development margin reflected the impact of start-up costs in the current year associated with the company's new sales distribution in Surfers Paradise, Australia, partially offset by the increase in contract sales. The lower rental revenues net of expenses were driven by losses from operating the Surfers Paradise property.
Europe
Second quarter 2016 contract sales were $9.9 million, an increase of $2.6 million, or more than 35 percent, from the second quarter of 2015. Segment financial results were $2.2 million, an $0.8 million decrease from the second quarter of 2015, driven by $0.5 million of lower rental revenues net of expenses.
Share Repurchase Program and Dividends
During the second quarter of 2016, the company repurchased nearly 1.5 million shares of its common stock for a total of $90.1 million under its share repurchase program, of which nearly 1.2 million shares were purchased under an accelerated share repurchase agreement. In addition, the company paid a quarterly cash dividend of $8.5 million. Through the end of the second quarter, the company returned nearly $190 million to its shareholders through the repurchase of 2.8 million shares for $163.4 million and more than $26 million in dividends paid.
Balance Sheet and Liquidity
On June 17, 2016, cash and cash equivalents totaled $97.4 million. Since the beginning of the year, real estate inventory balances increased $33.9 million to $697.9 million, including $296.5 million of finished goods, $76.6 million of work-in-progress, and $324.8 million of land and infrastructure. The company had $746.3 million in gross debt outstanding at the end of the second quarter, an increase of $58.2 million from year-end 2015, consisting primarily of $691.8 million in gross non-recourse securitized notes and $45.0 million in gross debt outstanding under the company's revolving corporate credit facility. In addition, $40.0 million of gross mandatorily redeemable preferred stock of a subsidiary of the company was outstanding at the end of the second quarter of 2016.
As of June 17, 2016, the company had approximately $151.7 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit and approximately $104.8 million of gross vacation ownership notes receivable eligible for securitization in its warehouse credit facility.
Outlook
Pages A-1 through A-11 of the Financial Schedules reconcile the non-GAAP financial measures set forth below to the following full year 2016 expected GAAP results:
| Net Income |
$130 million to $140 million |
| Fully diluted EPS |
$4.57 to $4.92 |
| Net cash provided by operating activities |
$136 million to $146 million |
| The company is reaffirming the following guidance for the full year 2016: |
|
| Adjusted net income |
$126 million to $136 million |
| Adjusted fully diluted EPS Adjusted EBITDA |
$4.43 to $4.78 $261 million to $276 million |
| Adjusted free cash flow |
$135 million to $155 million |
| Contract sales |
4 percent to 8 percent |
Adjusted fully diluted EPS increased from the previous guidance of $4.31 to $4.66 due entirely to a reduction in shares outstanding.
Second 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 13640097. 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 July 21, 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 |
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| QUARTER 2, 2016 |
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| TABLE OF CONTENTS |
|||||||||||||||
| Consolidated Statements of Income - 12 Weeks and 24 Weeks Ended June 17, 2016 and June 19, 2015 |
A-1 |
||||||||||||||
| Adjusted Net Income, Adjusted Earnings Per Share - Diluted, EBITDA and Adjusted EBITDA - 12 Weeks and 24 Weeks Ended June 17, 2016 and June 19, 2015 |
A-2 |
||||||||||||||
| North America Segment Financial Results - 12 Weeks and 24 Weeks Ended June 17, 2016 and June 19, 2015 |
A-3 |
||||||||||||||
| Asia Pacific Segment Financial Results - 12 Weeks and 24 Weeks Ended June 17, 2016 and June 19, 2015 |
A-4 |
||||||||||||||
| Europe Segment Financial Results - 12 Weeks and 24 Weeks Ended June 17, 2016 and June 19, 2015 |
A-5 |
||||||||||||||
| Corporate and Other Segment Financial Results - 12 Weeks and 24 Weeks Ended June 17, 2016 and June 19, 2015 |
A-6 |
||||||||||||||
| Consolidated Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin |
|||||||||||||||
| (Adjusted Sale of Vacation Ownership Products Net of Expenses) - 12 Weeks and 24 Weeks Ended June 17, 2016 and June 19, 2015 |
A-7 |
||||||||||||||
| 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 and 24 Weeks Ended June 17, 2016 and June 19, 2015 |
A-8 |
||||||||||||||
| 2016 Outlook - Adjusted Net Income, Adjusted Earnings Per Share - Diluted, Adjusted EBITDA and Adjusted Free Cash Flow |
A-9 |
||||||||||||||
| Non-GAAP Financial Measures |
A-10 |
||||||||||||||
| Consolidated Balance Sheets |
A-12 |
||||||||||||||
| Consolidated Statements of Cash Flows |
A-13 |
||||||||||||||
| A-1 |
|||||||||||||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
|||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME |
|||||||||||||||
| 12 Weeks and 24 Weeks Ended June 17, 2016 and June 19, 2015 |
|||||||||||||||
| (In thousands, except per share amounts) |
|||||||||||||||
| 12 Weeks Ended |
24 Weeks Ended |
||||||||||||||
| June 17, 2016 |
June 19, 2015 |
June 17, 2016 |
June 19, 2015 |
||||||||||||
| Revenues |
|||||||||||||||
| Sale of vacation ownership products |
$ 146,450 |
$ 155,370 |
$ 284,819 |
$ 339,276 |
|||||||||||
| Resort management and other services |
80,930 |
74,063 |
150,559 |
138,480 |
|||||||||||
| Financing |
28,654 |
28,294 |
57,878 |
57,346 |
|||||||||||
| Rental |
75,069 |
72,642 |
155,357 |
148,841 |
|||||||||||
| Cost reimbursements |
98,842 |
92,458 |
206,375 |
193,764 |
|||||||||||
| Total revenues |
429,945 |
422,827 |
854,988 |
877,707 |
|||||||||||
| Expenses |
|||||||||||||||
| Cost of vacation ownership products |
33,753 |
45,119 |
69,370 |
110,081 |
|||||||||||
| Marketing and sales |
78,919 |
77,137 |
157,331 |
157,132 |
|||||||||||
| Resort management and other services |
49,311 |
45,480 |
95,108 |
87,889 |
|||||||||||
| Financing |
4,864 |
6,085 |
9,493 |
10,990 |
|||||||||||
| Rental |
66,028 |
61,835 |
130,688 |
121,993 |
|||||||||||
| General and administrative |
24,588 |
22,892 |
49,885 |
45,669 |
|||||||||||
| Organizational and separation related |
- |
101 |
- |
293 |
|||||||||||
| Litigation settlement |
- |
26 |
(303) |
(236) |
|||||||||||
| Consumer financing interest |
5,117 |
5,248 |
10,479 |
11,269 |
|||||||||||
| Royalty fee |
14,026 |
13,431 |
27,383 |
26,431 |
|||||||||||
| Cost reimbursements |
98,842 |
92,458 |
206,375 |
193,764 |
|||||||||||
| Total expenses |
375,448 |
369,812 |
755,809 |
765,275 |
|||||||||||
| Gains and other income |
10,668 |
8,625 |
10,675 |
9,512 |
|||||||||||
| Interest expense |
(2,087) |
(3,009) |
(4,069) |
(5,983) |
|||||||||||
| Other |
(1,911) |
(1,187) |
(4,453) |
(1,174) |
|||||||||||
| Income before income taxes |
61,167 |
57,444 |
101,332 |
114,787 |
|||||||||||
| Provision for income taxes |
(24,858) |
(23,403) |
(40,615) |
(46,692) |
|||||||||||
| Net income |
$ 36,309 |
$ 34,041 |
$ 60,717 |
$ 68,095 |
|||||||||||
| Earnings per share - Basic |
$ 1.28 |
$ 1.07 |
$ 2.11 |
$ 2.12 |
|||||||||||
| Earnings per share - Diluted |
$ 1.26 |
$ 1.05 |
$ 2.08 |
$ 2.08 |
|||||||||||
| Basic Shares |
28,345 |
31,858 |
28,734 |
32,078 |
|||||||||||
| Diluted Shares |
28,834 |
32,517 |
29,244 |
32,760 |
|||||||||||
| 12 Weeks Ended |
24 Weeks Ended |
||||||||||||||
| June 17, 2016 |
June 19, 2015 |
June 17, 2016 |
June 19, 2015 |
||||||||||||
| Contract Sales |
|||||||||||||||
| Vacation ownership |
$ 165,992 |
$ 165,938 |
$ 319,486 |
$ 335,888 |
|||||||||||
| Residential products |
- |
- |
- |
28,420 |
|||||||||||
| Total contract sales |
$ 165,992 |
$ 165,938 |
$ 319,486 |
$ 364,308 |
|||||||||||
| NOTE: Earnings per share - Basic and Earnings per share - Diluted are calculated using whole dollars. |
| A-2 |
||||||||||||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
||||||||||||||
| 12 Weeks and 24 Weeks Ended June 17, 2016 and June 19, 2015 |
||||||||||||||
| (In thousands, except per share amounts) |
||||||||||||||
| ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE - DILUTED |
||||||||||||||
| 12 Weeks Ended |
24 Weeks Ended |
|||||||||||||
| June 17, 2016 |
June 19, 2015 |
June 17, 2016 |
June 19, 2015 |
|||||||||||
| Net income |
$ 36,309 |
$ 34,041 |
$ 60,717 |
$ 68,095 |
||||||||||
| Less certain items: |
||||||||||||||
| Transaction costs |
2,005 |
1,272 |
4,575 |
1,272 |
||||||||||
| Operating results from the sold portion of the Surfers Paradise, Australia property |
190 |
- |
(275) |
- |
||||||||||
| Litigation settlement |
- |
26 |
(303) |
(236) |
||||||||||
| Gains and other income |
(10,668) |
(8,625) |
(10,675) |
(9,512) |
||||||||||
| Asia Pacific bulk sale |
- |
- |
- |
(5,915) |
||||||||||
| Organizational and separation related |
- |
101 |
- |
293 |
||||||||||
| Certain items before depreciation and provision for income taxes 1 |
(8,473) |
(7,226) |
(6,678) |
(14,098) |
||||||||||
| Depreciation on the sold portion of the Surfers Paradise, Australia property |
188 |
- |
469 |
- |
||||||||||
| Provision for income taxes on certain items |
3,261 |
2,804 |
2,482 |
3,779 |
||||||||||
| Adjusted net income ** |
$ 31,285 |
$ 29,619 |
$ 56,990 |
$ 57,776 |
||||||||||
| Earnings per share - Diluted |
$ 1.26 |
$ 1.05 |
$ 2.08 |
$ 2.08 |
||||||||||
| Adjusted earnings per share - Diluted ** |
$ 1.08 |
$ 0.91 |
$ 1.95 |
$ 1.76 |
||||||||||
| Diluted Shares |
28,834 |
32,517 |
29,244 |
32,760 |
||||||||||
| EBITDA AND ADJUSTED EBITDA |
||||||||||||||
| 12 Weeks Ended |
24 Weeks Ended |
|||||||||||||
| June 17, 2016 |
June 19, 2015 |
June 17, 2016 |
June 19, 2015 |
|||||||||||
| Net income |
$ 36,309 |
$ 34,041 |
$ 60,717 |
$ 68,095 |
||||||||||
| Interest expense 2 |
2,087 |
3,009 |
4,069 |
5,983 |
||||||||||
| Tax provision |
24,858 |
23,403 |
40,615 |
46,692 |
||||||||||
| Depreciation and amortization |
5,052 |
4,493 |
10,177 |
8,558 |
||||||||||
| EBITDA ** |
68,306 |
64,946 |
115,578 |
129,328 |
||||||||||
| Non-cash share-based compensation 3 |
4,332 |
3,945 |
6,856 |
6,588 |
||||||||||
| Certain items before depreciation and provision for income taxes 1 |
(8,473) |
(7,226) |
(6,678) |
(14,098) |
||||||||||
| Adjusted EBITDA ** |
$ 64,165 |
$ 61,665 |
$ 115,756 |
$ 121,818 |
||||||||||
| ** Denotes non-GAAP financial measures. Please see pages A-10 and A-11 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
| 1 Please see pages A-10 and A-11 for additional information regarding these items. The certain items adjustment for the Adjusted EBITDA reconciliation excludes depreciation and the provision for income taxes on certain items included in the Adjusted Net Income reconciliation. |
| 2 Interest expense excludes consumer financing interest expense. |
| 3 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-10 and A-11 for additional information. |
| A-3 |
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| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
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| NORTH AMERICA SEGMENT |
|||||||||||||||
| 12 Weeks and 24 Weeks Ended June 17, 2016 and June 19, 2015 |
|||||||||||||||
| (In thousands) |
|||||||||||||||
| 12 Weeks Ended |
24 Weeks Ended |
||||||||||||||
| June 17, 2016 |
June 19, 2015 |
June 17, 2016 |
June 19, 2015 |
||||||||||||
| Revenues |
|||||||||||||||
| Sale of vacation ownership products |
$ 132,473 |
$ 142,148 |
$ 257,157 |
$ 283,876 |
|||||||||||
| Resort management and other services |
69,357 |
66,194 |
131,022 |
124,769 |
|||||||||||
| Financing |
26,853 |
26,354 |
54,261 |
53,410 |
|||||||||||
| Rental |
65,629 |
65,756 |
138,137 |
137,471 |
|||||||||||
| Cost reimbursements |
90,174 |
84,037 |
189,356 |
176,891 |
|||||||||||
| Total revenues |
384,486 |
384,489 |
769,933 |
776,417 |
|||||||||||
| Expenses |
|||||||||||||||
| Cost of vacation ownership products |
29,080 |
40,834 |
59,742 |
81,335 |
|||||||||||
| Marketing and sales |
66,911 |
67,837 |
135,226 |
136,854 |
|||||||||||
| Resort management and other services |
39,337 |
39,101 |
77,489 |
76,069 |
|||||||||||
| Rental |
55,593 |
55,128 |
111,549 |
109,739 |
|||||||||||
| Organizational and separation related |
- |
115 |
- |
254 |
|||||||||||
| Reversal of litigation expense |
- |
(108) |
(303) |
(370) |
|||||||||||
| Royalty fee |
2,254 |
1,686 |
3,940 |
2,946 |
|||||||||||
| Cost reimbursements |
90,174 |
84,037 |
189,356 |
176,891 |
|||||||||||
| Total expenses |
283,349 |
288,630 |
576,999 |
583,718 |
|||||||||||
| Gains and other income |
12,317 |
8,658 |
12,324 |
9,538 |
|||||||||||
| Other |
(1,733) |
86 |
(4,013) |
102 |
|||||||||||
| Segment financial results |
$ 111,721 |
$ 104,603 |
$ 201,245 |
$ 202,339 |
|||||||||||
| Segment financial results |
$ 111,721 |
$ 104,603 |
$ 201,245 |
$ 202,339 |
|||||||||||
| Less certain items: |
|||||||||||||||
| Transaction costs |
1,829 |
- |
4,137 |
- |
|||||||||||
| Reversal of litigation expense |
- |
(108) |
(303) |
(370) |
|||||||||||
| Gains and other income |
(12,317) |
(8,658) |
(12,324) |
(9,538) |
|||||||||||
| Organizational and separation related |
- |
115 |
- |
254 |
|||||||||||
| Certain items |
(10,488) |
(8,651) |
(8,490) |
(9,654) |
|||||||||||
| Adjusted segment financial results ** |
$ 101,233 |
$ 95,952 |
$ 192,755 |
$ 192,685 |
|||||||||||
| 12 Weeks Ended |
24 Weeks Ended |
||||||||||||||
| June 17, 2016 |
June 19, 2015 |
June 17, 2016 |
June 19, 2015 |
||||||||||||
| Contract Sales |
|||||||||||||||
| Vacation ownership |
$ 145,600 |
$ 150,605 |
$ 285,250 |
$ 306,598 |
|||||||||||
| Total contract sales |
$ 145,600 |
$ 150,605 |
$ 285,250 |
$ 306,598 |
|||||||||||
| ** Denotes non-GAAP financial measures. Please see pages A-10 and A-11 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
| A-4 |
|||||||||||||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
|||||||||||||||
| ASIA PACIFIC SEGMENT |
|||||||||||||||
| 12 Weeks and 24 Weeks Ended June 17, 2016 and June 19, 2015 |
|||||||||||||||
| (In thousands) |
|||||||||||||||
| 12 Weeks Ended |
24 Weeks Ended |
||||||||||||||
| June 17, 2016 |
June 19, 2015 |
June 17, 2016 |
June 19, 2015 |
||||||||||||
| Revenues |
|||||||||||||||
| Sale of vacation ownership products |
$ 8,110 |
$ 7,575 |
$ 16,635 |
$ 43,853 |
|||||||||||
| Resort management and other services |
4,573 |
964 |
8,070 |
1,827 |
|||||||||||
| Financing |
1,007 |
1,043 |
1,988 |
2,049 |
|||||||||||
| Rental |
4,828 |
1,503 |
10,449 |
3,855 |
|||||||||||
| Cost reimbursements |
685 |
632 |
1,558 |
1,498 |
|||||||||||
| Total revenues |
19,203 |
11,717 |
38,700 |
53,082 |
|||||||||||
| Expenses |
|||||||||||||||
| Cost of vacation ownership products |
1,597 |
1,803 |
3,306 |
23,799 |
|||||||||||
| Marketing and sales |
6,695 |
4,432 |
12,906 |
9,989 |
|||||||||||
| Resort management and other services |
4,226 |
655 |
7,778 |
1,505 |
|||||||||||
| Rental |
6,766 |
2,794 |
12,554 |
5,290 |
|||||||||||
| Royalty fee |
179 |
150 |
325 |
307 |
|||||||||||
| Cost reimbursements |
685 |
632 |
1,558 |
1,498 |
|||||||||||
| Total expenses |
20,148 |
10,466 |
38,427 |
42,388 |
|||||||||||
| Losses and other expense |
(1,498) |
(33) |
(1,498) |
(30) |
|||||||||||
| Other |
(21) |
(1,273) |
(229) |
(1,276) |
|||||||||||
| Segment financial results |
$ (2,464) |
$ (55) |
$ (1,454) |
$ 9,388 |
|||||||||||
| Segment financial results |
$ (2,464) |
$ (55) |
$ (1,454) |
$ 9,388 |
|||||||||||
| Less certain items: |
|||||||||||||||
| Transaction costs |
19 |
1,272 |
227 |
1,272 |
|||||||||||
| Operating results from the sold portion of the Surfers Paradise, Australia property |
378 |
- |
194 |
- |
|||||||||||
| Losses and other expense |
1,498 |
33 |
1,498 |
30 |
|||||||||||
| Asia Pacific bulk sale |
- |
- |
- |
(5,915) |
|||||||||||
| Certain items |
1,895 |
1,305 |
1,919 |
(4,613) |
|||||||||||
| Adjusted segment financial results ** |
$ (569) |
$ 1,250 |
$ 465 |
$ 4,775 |
|||||||||||
| 12 Weeks Ended |
24 Weeks Ended |
||||||||||||||
| June 17, 2016 |
June 19, 2015 |
June 17, 2016 |
June 19, 2015 |
||||||||||||
| Contract Sales |
|||||||||||||||
| Vacation ownership |
$ 10,454 |
$ 7,992 |
$ 19,880 |
$ 16,651 |
|||||||||||
| Residential products |
- |
- |
- |
28,420 |
|||||||||||
| Total contract sales |
$ 10,454 |
$ 7,992 |
$ 19,880 |
$ 45,071 |
|||||||||||
| ** Denotes non-GAAP financial measures. Please see pages A-10 and A-11 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
| A-5 |
|||||||||||||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
|||||||||||||||
| EUROPE SEGMENT |
|||||||||||||||
| 12 Weeks and 24 Weeks Ended June 17, 2016 and June 19, 2015 |
|||||||||||||||
| (In thousands) |
|||||||||||||||
| 12 Weeks Ended |
24 Weeks Ended |
||||||||||||||
| June 17, 2016 |
June 19, 2015 |
June 17, 2016 |
June 19, 2015 |
||||||||||||
| Revenues |
|||||||||||||||
| Sale of vacation ownership products |
$ 5,867 |
$ 5,647 |
$ 11,027 |
$ 11,547 |
|||||||||||
| Resort management and other services |
7,000 |
6,905 |
11,467 |
11,884 |
|||||||||||
| Financing |
794 |
897 |
1,629 |
1,887 |
|||||||||||
| Rental |
4,612 |
5,383 |
6,771 |
7,515 |
|||||||||||
| Cost reimbursements |
7,983 |
7,789 |
15,461 |
15,375 |
|||||||||||
| Total revenues |
26,256 |
26,621 |
46,355 |
48,208 |
|||||||||||
| Expenses |
|||||||||||||||
| Cost of vacation ownership products |
1,268 |
1,233 |
2,559 |
2,085 |
|||||||||||
| Marketing and sales |
5,313 |
4,868 |
9,199 |
10,289 |
|||||||||||
| Resort management and other services |
5,748 |
5,724 |
9,841 |
10,315 |
|||||||||||
| Rental |
3,669 |
3,913 |
6,585 |
6,964 |
|||||||||||
| Royalty fee |
118 |
88 |
167 |
164 |
|||||||||||
| Cost reimbursements |
7,983 |
7,789 |
15,461 |
15,375 |
|||||||||||
| Total expenses |
24,099 |
23,615 |
43,812 |
45,192 |
|||||||||||
| Gains and other income |
- |
- |
- |
4 |
|||||||||||
| Segment financial results |
$ 2,157 |
$ 3,006 |
$ 2,543 |
$ 3,020 |
|||||||||||
| Segment financial results |
$ 2,157 |
$ 3,006 |
$ 2,543 |
$ 3,020 |
|||||||||||
| Less certain items: |
|||||||||||||||
| Gains and other income |
- |
- |
- |
(4) |
|||||||||||
| Certain items |
- |
- |
- |
(4) |
|||||||||||
| Adjusted segment financial results ** |
$ 2,157 |
$ 3,006 |
$ 2,543 |
$ 3,016 |
|||||||||||
| 12 Weeks Ended |
24 Weeks Ended |
||||||||||||||
| June 17, 2016 |
June 19, 2015 |
June 17, 2016 |
June 19, 2015 |
||||||||||||
| Contract Sales |
|||||||||||||||
| Vacation ownership |
$ 9,938 |
$ 7,341 |
$ 14,356 |
$ 12,639 |
|||||||||||
| Total contract sales |
$ 9,938 |
$ 7,341 |
$ 14,356 |
$ 12,639 |
|||||||||||
| ** Denotes non-GAAP financial measures. Please see pages A-10 and A-11 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
| A-6 |
|||||||||||||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
|||||||||||||||
| CORPORATE AND OTHER |
|||||||||||||||
| 12 Weeks and 24 Weeks Ended June 17, 2016 and June 19, 2015 |
|||||||||||||||
| (In thousands) |
|||||||||||||||
| 12 Weeks Ended |
24 Weeks Ended |
||||||||||||||
| June 17, 2016 |
June 19, 2015 |
June 17, 2016 |
June 19, 2015 |
||||||||||||
| Expenses |
|||||||||||||||
| Cost of vacation ownership products |
$ 1,808 |
$ 1,249 |
$ 3,763 |
$ 2,862 |
|||||||||||
| Financing |
4,864 |
6,085 |
9,493 |
10,990 |
|||||||||||
| General and administrative |
24,588 |
22,892 |
49,885 |
45,669 |
|||||||||||
| Organizational and separation related |
- |
(14) |
- |
39 |
|||||||||||
| Litigation settlement |
- |
134 |
- |
134 |
|||||||||||
| Consumer financing interest |
5,117 |
5,248 |
10,479 |
11,269 |
|||||||||||
| Royalty fee |
11,475 |
11,507 |
22,951 |
23,014 |
|||||||||||
| Total expenses |
47,852 |
47,101 |
96,571 |
93,977 |
|||||||||||
| Losses and other expense |
(151) |
- |
(151) |
- |
|||||||||||
| Interest expense |
(2,087) |
(3,009) |
(4,069) |
(5,983) |
|||||||||||
| Other |
(157) |
- |
(211) |
- |
|||||||||||
| Financial results |
$ (50,247) |
$ (50,110) |
$ (101,002) |
$ (99,960) |
|||||||||||
| Financial results |
$ (50,247) |
$ (50,110) |
$ (101,002) |
$ (99,960) |
|||||||||||
| Less certain items: |
|||||||||||||||
| Transaction costs |
157 |
- |
211 |
- |
|||||||||||
| Litigation settlement |
- |
134 |
- |
134 |
|||||||||||
| Losses and other expense |
151 |
- |
151 |
- |
|||||||||||
| Organizational and separation related |
- |
(14) |
- |
39 |
|||||||||||
| Certain items |
308 |
120 |
362 |
173 |
|||||||||||
| Adjusted financial results ** |
$ (49,939) |
$ (49,990) |
$ (100,640) |
$ (99,787) |
|||||||||||
| ** Denotes non-GAAP financial measures. Please see pages A-10 and A-11 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
| A-7 MARRIOTT VACATIONS WORLDWIDE CORPORATION |
||||||||||||||||||
| CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS |
||||||||||||||||||
| (In thousands) |
||||||||||||||||||
| 12 Weeks Ended |
24 Weeks Ended |
|||||||||||||||||
| June 17, 2016 |
June 19, 2015 |
June 17, 2016 |
June 19, 2015 |
|||||||||||||||
| Contract sales |
||||||||||||||||||
| Vacation ownership |
$ 165,992 |
$ 165,938 |
$ 319,486 |
$ 335,888 |
||||||||||||||
| Residential products |
- |
- |
- |
28,420 |
||||||||||||||
| Total contract sales |
165,992 |
165,938 |
319,486 |
364,308 |
||||||||||||||
| Revenue recognition adjustments: |
||||||||||||||||||
| Reportability1 |
1,179 |
1,440 |
1,965 |
(73) |
||||||||||||||
| Sales Reserve 2 |
(11,352) |
(7,179) |
(19,575) |
(15,546) |
||||||||||||||
| Other 3 |
(9,369) |
(4,829) |
(17,057) |
(9,413) |
||||||||||||||
| Sale of vacation ownership products |
$ 146,450 |
$ 155,370 |
$ 284,819 |
$ 339,276 |
||||||||||||||
| 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 (In thousands) |
||||||||||||||||
| 12 Weeks Ended |
24 Weeks Ended |
|||||||||||||||
| June 17, 2016 |
June 19, 2015 |
June 17, 2016 |
June 19, 2015 |
|||||||||||||
| Sale of vacation ownership products |
$ 146,450 |
$ 155,370 |
$ 284,819 |
$ 339,276 |
||||||||||||
| Less: |
||||||||||||||||
| Cost of vacation ownership products |
33,753 |
45,119 |
69,370 |
110,081 |
||||||||||||
| Marketing and sales |
78,919 |
77,137 |
157,331 |
157,132 |
||||||||||||
| Development margin |
33,778 |
33,114 |
58,118 |
72,063 |
||||||||||||
| Certain items 1 |
- |
- |
- |
(5,915) |
||||||||||||
| Revenue recognition reportability adjustment |
(726) |
(819) |
(1,326) |
27 |
||||||||||||
| Adjusted development margin** |
$ 33,052 |
$ 32,295 |
$ 56,792 |
$ 66,175 |
||||||||||||
| Development margin percentage 2 |
23.1% |
21.3% |
20.4% |
21.2% |
||||||||||||
| Adjusted development margin percentage |
22.8% |
21.0% |
20.1% |
21.3% |
||||||||||||
| ** Denotes non-GAAP financial measures. Please see pages A-10 and A-11 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
| 1 Certain items adjustment in the 24 weeks ended June 19, 2015, represents $5.9 million of development margin from the disposition of units in Macau as whole ownership residential units rather than through our Marriott Vacation Club, Asia Pacific points program. |
| 2 Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars. |
| A-8 |
||||||||||||||||||||
| NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS |
||||||||||||||||||||
| (In thousands) |
||||||||||||||||||||
| 12 Weeks Ended |
24 Weeks Ended |
|||||||||||||||||||
| June 17, 2016 |
June 19, 2015 |
June 17, 2016 |
June 19, 2015 |
|||||||||||||||||
| Contract sales |
||||||||||||||||||||
| Vacation ownership |
$ 145,600 |
$ 150,605 |
$ 285,250 |
$ 306,598 |
||||||||||||||||
| Total contract sales |
145,600 |
150,605 |
285,250 |
306,598 |
||||||||||||||||
| Revenue recognition adjustments: |
||||||||||||||||||||
| Reportability1 |
3,783 |
1,942 |
3,871 |
(1,502) |
||||||||||||||||
| Sales Reserve 2 |
(7,631) |
(5,651) |
(15,037) |
(11,985) |
||||||||||||||||
| Other 3 |
(9,279) |
(4,748) |
(16,927) |
(9,235) |
||||||||||||||||
| Sale of vacation ownership products |
$ 132,473 |
$ 142,148 |
$ 257,157 |
$ 283,876 |
||||||||||||||||
| 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 |
|||||||||||||||
| 12 Weeks Ended |
24 Weeks Ended |
||||||||||||||
| June 17, 2016 |
June 19, 2015 |
June 17, 2016 |
June 19, 2015 |
||||||||||||
| Sale of vacation ownership products |
$ 132,473 |
$ 142,148 |
$ 257,157 |
$ 283,876 |
|||||||||||
| Less: |
|||||||||||||||
| Cost of vacation ownership products |
29,080 |
40,834 |
59,742 |
81,335 |
|||||||||||
| Marketing and sales |
66,911 |
67,837 |
135,226 |
136,854 |
|||||||||||
| Development margin |
36,482 |
33,477 |
62,189 |
65,687 |
|||||||||||
| Certain items |
- |
- |
- |
- |
|||||||||||
| Revenue recognition reportability adjustment |
(2,417) |
(1,207) |
(2,473) |
933 |
|||||||||||
| Adjusted development margin** |
$ 34,065 |
$ 32,270 |
$ 59,716 |
66,620 |
|||||||||||
| Development margin percentage1 |
27.5% |
23.6% |
24.2% |
23.1% |
|||||||||||
| Adjusted development margin percentage |
26.5% |
23.0% |
23.6% |
23.3% |
|||||||||||
| ** Denotes non-GAAP financial measures. Please see pages A-10 and A-11 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-9 (In millions, except per share amounts) 2016 ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE - DILUTED OUTLOOK |
|||||||
| Fiscal Year |
Fiscal Year |
||||||
| Net income |
$ 130 |
$ 140 |
|||||
| Adjustments to reconcile Net income to Adjusted net income |
|||||||
| Certain items1 |
5 |
5 |
|||||
| Gain on dispositions 2 |
(11) |
(11) |
|||||
| Provision for income taxes on adjustments to net income |
2 |
2 |
|||||
| Adjusted net income** |
$ 126 |
$ 136 |
|||||
| Earnings per share - Diluted 3 |
$ 4.57 |
$ 4.92 |
|||||
| Adjusted earnings per share - Diluted**, 3 |
$ 4.43 |
$ 4.78 |
|||||
| Diluted shares3 |
28.5 |
28.5 |
|||||
| 1 Certain items adjustment primarily includes approximately $5 million of non-capitalizable transaction costs. |
||||||||||||||||
| 2 Gain on dispositions adjustment includes the net impact to pre-tax income associated with dispositions in the North America segment and Asia Pacific segment. |
||||||||||||||||
| 3 Earnings per share - Diluted, Adjusted earnings per share - Diluted, and Diluted shares outlook includes the impact of share repurchase activity only through July 21, 2016. |
||||||||||||||||
| 2016 ADJUSTED EBITDA OUTLOOK |
|||||||
| Fiscal Year |
Fiscal Year |
||||||
| Net income |
$ 130 |
$ 140 |
|||||
| Interest expense1 |
9 |
9 |
|||||
| Tax provision |
91 |
96 |
|||||
| Depreciation and amortization |
22 |
22 |
|||||
| EBITDA ** |
252 |
267 |
|||||
| Non-cash share-based compensation 2 |
15 |
15 |
|||||
| Certain items 3and Gain on dispositions4 |
(6) |
(6) |
|||||
| Adjusted EBITDA** |
$ 261 |
$ 276 |
|||||
| 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-10 and A-11 for additional information. |
| 3 Certain items adjustment primarily includes approximately $5 million of non-capitalizable transaction costs. |
| 4 Gain on dispositions adjustment includes the net impact to pre-tax income associated with dispositions in the North America segment and Asia Pacific segment. |
| 2016 ADJUSTED FREE CASH FLOW OUTLOOK |
|||||||
| Fiscal Year |
Fiscal Year |
||||||
| Net cash provided by operating activities |
$ 136 |
$ 146 |
|||||
| Capital expenditures for property and equipment (excluding inventory): |
|||||||
| New sales centers 1 |
(20) |
(18) |
|||||
| Other |
(24) |
(22) |
|||||
| Decrease in restricted cash |
(5) |
(5) |
|||||
| Borrowings from securitization transactions |
375 |
377 |
|||||
| Repayment of debt related to securitizations |
(320) |
(318) |
|||||
| Free cash flow** |
142 |
160 |
|||||
| Adjustments: |
|||||||
| Net change in borrowings available from the securitization of eligible vacation ownership notes receivable through the warehouse credit facility 2 |
(7) |
(5) |
|||||
| Adjusted free cash flow** |
$ 135 |
$ 155 |
|||||
| 1 Represents the incremental investment in new sales centers. |
| 2 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. |
| ** Denotes non-GAAP financial measures. Please see pages A-10 and A-11 for additional information about our reasons for providing these alternative financial measures and limitations on their use. |
| A-10 |
||||||||||||||
| 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 and 24 weeks ended June 17, 2016 and June 19, 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 and 24 weeks ended June 17, 2016. In our Statement of Income for the 12 weeks ended June 17, 2016, we recorded $8.3 million of net pre-tax charges, which included $10.7 million of gains and other income, $2.0 million of transaction costs associated with acquisitions, and $0.4 million of losses (including $0.2 million of depreciation) from the operations of the property we acquired in Australia in 2015 that we sold in the second quarter of 2016. In our Statement of Income for the 24 weeks ended June 17, 2016, we recorded $6.2 million of net pre-tax charges, which included $10.7 million of gains and other income, $4.6 million of transaction costs associated with acquisitions, $0.2 million of losses (including $0.5 million of depreciation) from the operations of the property we acquired in Australia in 2015 that we sold in the second quarter of 2016, and a $0.3 million reversal of litigation expense. |
||||||||||||||
| Certain items - 12 weeks and 24 weeks ended June 19, 2015. In our Statement of Income for the 12 weeks ended June 19, 2015, we recorded $7.2 million of net pre-tax items, which included $8.6 million of gains and other income, $1.3 million of transaction costs associated with acquisitions, $0.1 million of organizational and separation related costs and less than $0.1 million of litigation expense. In our Statement of Income for the 24 weeks ended June 19, 2015, we recorded $14.1 million of net pre-tax items, which included $9.5 million of gains and other income, $5.9 million of development profit from the disposition of units in Macau as whole ownership residential units rather than through our Marriott Vacation Club, Asia Pacific points program, $1.3 million of transaction costs associated with acquisitions, $0.3 million of organizational and separation related costs, and a $0.2 million reversal of litigation expense. |
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| 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-11 |
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
| NON-GAAP FINANCIAL MEASURES |
| Earnings Before Interest Expense, Taxes, Depreciation and Amortization ("EBITDA") and Adjusted 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 and Adjusted EBITDA calculations, we do not adjust for consumer financing interest expense because the associated debt is secured by vacation ownership notes receivable that have been sold to bankruptcy remote special purpose entities and is generally non-recourse to us. Further, we consider consumer financing interest expense to be an operating expense of our business. We consider EBITDA and Adjusted EBITDA to be indicators of operating performance, which we use to measure our ability to service debt, fund capital expenditures and expand our business. We also use EBITDA and Adjusted EBITDA, as do analysts, lenders, investors and others, because these measures exclude 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 and Adjusted EBITDA also exclude 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 reflects additional adjustments for certain items, as itemized in the discussion of Adjusted Net Income above, including, beginning with the first quarter of 2016, the exclusion of 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 the excluded 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. |
| Free Cash Flow and Adjusted Free Cash Flow. We evaluate Free Cash Flow and Adjusted Free Cash Flow as liquidity measures that provide 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, which cash can be used for strategic opportunities, including acquisitions and strengthening the balance sheet. Adjusted Free Cash Flow, which reflects additional adjustments to Free Cash Flow for the impact of organizational and separation related, litigation, and other cash charges, allows for period-over-period comparisons of the cash generated by our business before the impact of these items. Analysis of Free Cash Flow and Adjusted Free Cash Flow also facilitates management's comparison of our results with our competitors' results. |
| A-12 |
|||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
|||||
| CONSOLIDATED BALANCE SHEETS |
|||||
| (In thousands, except share and per share data) |
|||||
| (unaudited) |
|||||
| June 17, 2016 |
January 1, 2016 |
||||
| ASSETS |
|||||
| Cash and cash equivalents |
$ 97,418 |
$ 177,061 |
|||
| Restricted cash (including $39,395 and $26,884 from VIEs, respectively) |
68,340 |
71,451 |
|||
| Accounts and contracts receivable, net (including $4,112 and $4,893 from VIEs, respectively) |
142,864 |
131,850 |
|||
| Vacation ownership notes receivable, net (including $679,185 and $669,179 from VIEs, respectively) |
903,747 |
920,631 |
|||
| Inventory |
702,377 |
669,243 |
|||
| Property and equipment |
228,848 |
288,803 |
|||
| Other |
109,960 |
140,679 |
|||
| Total Assets |
$ 2,253,554 |
$ 2,399,718 |
|||
| LIABILITIES AND EQUITY |
|||||
| Accounts payable |
$ 74,484 |
$ 139,120 |
|||
| Advance deposits |
80,876 |
69,064 |
|||
| Accrued liabilities (including $1,401 and $669 from VIEs, respectively) |
132,733 |
164,791 |
|||
| Deferred revenue |
30,600 |
35,276 |
|||
| Payroll and benefits liability |
75,309 |
104,331 |
|||
| Liability for Marriott Rewards customer loyalty program |
- |
35 |
|||
| Deferred compensation liability |
57,567 |
51,031 |
|||
| Mandatorily redeemable preferred stock of consolidated subsidiary, net |
39,068 |
38,989 |
|||
| Debt, net (including $691,845 and $684,604 from VIEs, respectively) |
733,828 |
678,793 |
|||
| Other |
56,248 |
32,945 |
|||
| Deferred taxes |
126,093 |
109,076 |
|||
| Total Liabilities |
1,406,806 |
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; 36,620,686 and 36,393,800 shares issued, respectively |
|||||
| 366 |
364 |
||||
| Treasury stock - at cost; 9,640,473 and 6,844,256 shares, respectively |
(593,052) |
(429,990) |
|||
| Additional paid-in capital |
1,139,366 |
1,150,731 |
|||
| Accumulated other comprehensive income |
12,735 |
11,381 |
|||
| Retained earnings |
287,333 |
243,781 |
|||
| Total Equity |
846,748 |
976,267 |
|||
| Total Liabilities and Equity |
$ 2,253,554 |
$ 2,399,718 |
|||
| The abbreviation VIEs above means Variable Interest Entities |
|||||
| A-13 |
|||||
| MARRIOTT VACATIONS WORLDWIDE CORPORATION |
|||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||
| (In thousands) |
|||||
| (Unaudited) |
|||||
|
24 weeks ended |
|||||
| June 17, 2016 |
June 19, 2015 |
||||
| OPERATING ACTIVITIES |
|||||
| Net income |
$60,717 |
$68,095 |
|||
| Adjustments to reconcile net income to net cash provided by operating activities: |
|||||
| Depreciation |
10,177 |
8,558 |
|||
| Amortization of debt issuance costs |
2,559 |
2,506 |
|||
| Provision for loan losses |
19,591 |
15,662 |
|||
| Share-based compensation |
6,856 |
6,588 |
|||
| Employee stock purchase plan |
307 |
- |
|||
| Deferred income taxes |
15,792 |
17,850 |
|||
| Gain on disposal of property and equipment, net |
(10,675) |
(9,512) |
|||
| Non-cash reversal of litigation expense |
(303) |
(262) |
|||
| Net change in assets and liabilities: |
|||||
| Accounts and contracts receivable |
(11,084) |
(6,068) |
|||
| Notes receivable originations |
(124,318) |
(112,060) |
|||
| Notes receivable collections |
120,548 |
132,397 |
|||
| Inventory |
(13,924) |
68,629 |
|||
| Purchase of operating hotels for future conversion to inventory |
- |
(46,614) |
|||
| Other assets |
26,111 |
8,154 |
|||
| Accounts payable, advance deposits and accrued liabilities |
(78,190) |
(66,223) |
|||
| Deferred revenue |
(4,805) |
(5,955) |
|||
| Payroll and benefit liabilities |
(27,313) |
(18,382) |
|||
| Liability for Marriott Rewards customer loyalty program |
(36) |
(9,345) |
|||
| Deferred compensation liability |
6,536 |
4,858 |
|||
| Other liabilities |
20,348 |
18,013 |
|||
| Other, net |
2,184 |
1,776 |
|||
| Net cash provided by operating activities |
21,078 |
78,665 |
|||
| INVESTING ACTIVITIES |
|||||
| Capital expenditures for property and equipment (excluding inventory) |
(15,142) |
(15,718) |
|||
| Decrease in restricted cash |
2,969 |
43,758 |
|||
| Dispositions, net |
69,738 |
20,346 |
|||
| Net cash provided by investing activities |
57,565 |
48,386 |
|||
| FINANCING ACTIVITIES |
|||||
| Borrowings from securitization transactions |
91,281 |
- |
|||
| Repayment of debt related to securitization transactions |
(84,040) |
(143,374) |
|||
| Borrowings on Revolving Corporate Credit Facility |
85,000 |
- |
|||
| Repayment of Revolving Corporate Credit Facility |
(40,000) |
- |
|||
| Proceeds from vacation ownership inventory arrangement |
- |
5,375 |
|||
| Debt issuance costs |
(231) |
(30) |
|||
| Repurchase of common stock |
(163,359) |
(66,237) |
|||
| Accelerated stock repurchase forward contract |
(14,470) |
- |
|||
| Payment of dividends |
(26,067) |
(8,085) |
|||
| Payment of withholding taxes on vesting of restricted stock units |
(3,876) |
(9,353) |
|||
| Other |
572 |
201 |
|||
| Net cash used in financing activities |
(155,190) |
(221,503) |
|||
| Effect of changes in exchange rates on cash and cash equivalents |
(3,096) |
(1,157) |
|||
| DECREASE IN CASH AND CASH EQUIVALENTS |
(79,643) |
(95,609) |
|||
| CASH AND CASH EQUIVALENTS, beginning of period |
177,061 |
346,515 |
|||
| CASH AND CASH EQUIVALENTS, end of period |
$97,418 |
$250,906 |
|||
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SOURCE Marriott Vacations Worldwide
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