Marriott Vacations Worldwide Reports First Quarter 2013 Financial Results
ORLANDO, Fla. – April 25, 2013 – Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported first quarter 2013 financial results and updated certain earnings guidance for the full year 2013.
First Quarter 2013 highlights include:
- Adjusted EBITDA (earnings before non-consumer financing interest expense, income taxes, depreciation and amortization), as adjusted for organizational and separation related costs in connection with the company’s spin-off from Marriott International, Inc. (the “Spin-Off”) and other activity, totaled $39 million, a $10 million increase from the first quarter of 2012, on an adjusted basis.
- North America segment contract sales increased 7 percent to $143 million; volume per guest (VPG) increased 11 percent year-over-year to $3,266.
- Adjusted development margin increased to 17.7 percent in the first quarter of 2013 from 12.1 percent in the first quarter of 2012; North America adjusted development margin increased to 18.8 percent in the first quarter of 2013 from 15.3 percent in the first quarter of 2012.
- Adjusted fully diluted earnings per share (EPS) in the first quarter were $0.54 compared to $0.27 in the first quarter of 2012.
First quarter 2013 net income totaled $18 million, or $0.50 per diluted share, compared to net income of $9 million, or $0.24 per diluted share, in the first quarter of 2012. Development margin, as reported, increased to 15.8 percent in the first quarter of 2013 from 9.2 percent in the first quarter of 2012.
First quarter 2013 adjusted net income totaled $19 million, a $9 million increase from $10 million of adjusted net income in the first quarter of 2012. First quarter 2013 adjusted results exclude $1 million of pre-tax charges related to organizational and separation related efforts and $1 million for severance charges in the Europe segment, partially offset by a $1 million reversal of a previously established accrual for a legal settlement based upon an agreement to settle the matter. First quarter 2012 adjusted results exclude $2 million related to organizational and separation related efforts. In addition, adjusted development margin for both periods is adjusted, as appropriate, for the impact of revenue reportability.
Non-GAAP financial measures, such as Adjusted EBITDA as adjusted, adjusted net income and adjusted development margin are reconciled in the Press Release Schedules that follow. Adjustments are shown and described in further detail on schedules A-1 through A-10.
“We generated strong first quarter growth in adjusted EBITDA, as adjusted, which was up 34 percent, driven by continued VPG improvement and development margin expansion in our key North America segment,” said Stephen P. Weisz, president and chief executive officer. “Our top-line results benefitted from higher pricing and improved closing efficiency during the quarter. In addition, lower product cost and leveraging our fixed marketing and sales expenses drove another quarter of strong development margin performance. As a result, we now expect to achieve full year 2013 adjusted company development margin of 17 to 18 percent.”
First Quarter 2013 Results
For the first quarter, which ended March 22, 2013, total revenues were $389 million, including $91 million in cost reimbursements. Total revenues increased $13 million from the first quarter of 2012 reflecting higher revenues from the sale of vacation ownership products, rental revenues, resort management and other services revenues and cost reimbursements. These increases were partially offset by lower financing revenues from lower interest income on a declining vacation ownership notes receivable portfolio.
Total company contract sales were $156 million, a 2 percent increase from $154 million in the first quarter of 2012, driven by a 7 percent increase in contract sales in the North America segment, partially offset by lower contract sales in the Europe and Asia Pacific segments.
Development margin was $22 million, a $10 million increase from the first quarter of 2012. This increase was driven by higher total company contract sales, higher revenue reportability year-over-year, lower cost of vacation ownership products and lower marketing and sales expenses as a percentage of revenue.
Development margin increased 6.6 percentage points to 15.8 percent in the first quarter of 2013 from 9.2 percent in the prior year quarter. After adjusting for the impact of revenue reportability, primarily in the North America segment, and other charges, adjusted development margin increased 5.6 percentage points to 17.7 percent in the first quarter of 2013 from 12.1 percent in the first quarter of 2012. The impact of revenue reportability and other charges is illustrated on schedules A-6 and A-7.
Rental revenues totaled $63 million, a 13 percent increase from the first quarter of 2012, reflecting a 19 percent increase in transient keys rented on 9 percent more keys available to rent due to our expectation of more owners electing to bank their points for usage the following year. Rental revenue net of expenses was $7 million, $1 million less than the first quarter of 2012, primarily reflecting the timing of rental expenses associated with owners banking their usage year-over-year.
Resort management and other services revenues totaled $56 million, a 2 percent increase over the first quarter of 2012, and resort management and other services revenues, net of expenses improved $4 million, a 35 percent increase over the first quarter of 2012. Results reflected higher annual fees in connection with the company’s Marriott Vacation Club Destinations program, higher management fees, and improvements in ancillary operations.
Adjusted EBITDA, as adjusted for organizational and separation related costs and other charges, was $39 million in the first quarter of 2013, an increase of $10 million from Adjusted EBITDA, as adjusted, of $29 million in the first quarter of 2012.
Effective December 29, 2012, the company combined the reporting of the financial results of its former Luxury segment with the North America segment based upon its scaling back of separate development activity and the aggregation of future marketing and sales of both upscale tier and luxury tier inventory. Existing service standards and on-site management remain unaffected by our reporting changes. Prior year amounts have been recast for consistency with current year’s presentation.
Total North America contract sales increased $9 million, or 7 percent, to $143 million in the first quarter of 2013. VPG increased 11 percent to $3,266 in the first quarter of 2013 from $2,942 in the first quarter of 2012, driven by higher pricing and improved closing efficiency.
First quarter 2013 North America segment financial results increased $8 million to $78 million from $70 million in segment financial results in the first quarter of 2012. The increase was driven by $9 million of higher development margin and $4 million of higher resort management and other services revenues, net of expenses. These increases were partially offset by $3 million of lower financing revenues from a declining notes receivable portfolio and $2 million of lower rental revenues net of expenses. Revenues from the sale of vacation ownership products increased $12 million to $126 million in the first quarter, driven mainly by the $9 million increase in contract sales and $3 million of higher year-over-year revenue reportability. Development margin was $22 million, a $9 million increase from the first quarter of 2012. This increase was driven by higher contract sales, higher revenue reportability year-over-year and lower cost of vacation ownership products. Results for the first quarter of 2013 included $5 million of favorable product cost true-up activity as compared to $2 million in the first quarter of 2012.
Development margin increased to 17.3 percent in the first quarter of 2013 as compared to 11.7 percent in the prior year quarter. Excluding the impact of revenue reportability, adjusted development margin increased to 18.8 percent in the first quarter of 2013 from 15.3 percent in the first quarter of 2012. The impact of revenue reportability is illustrated on schedule A-7.
Asia Pacific contract sales declined $4 million to $9 million in the first quarter of 2013. Total revenues declined $3 million to $15 million. Segment financial results, however, increased $2 million to $3 million in the first quarter of 2013 from the first quarter of 2012 reflecting improved margin as a result of the shutdown of two under-performing off-site sales centers in the fourth quarter of 2012.
As the Europe segment continues to sell through its remaining inventory, first quarter 2013 contract sales declined $3 million to $4 million. Europe segment financial results were break-even, in line with the first quarter of 2012. After adjusting for severance charges, adjusted segment financial results for Europe were $1 million in the first quarter of 2013, a $1 million increase from 2012, reflecting lower expenses year-over-year.
Organizational and Separation Plan
During the first quarter of 2013, $2 million of costs were incurred in connection with the company’s continued organizational and separation related efforts, of which approximately $1 million were capitalized during the quarter. Total future spending for these efforts is expected to be approximately $20 million to $25 million, with costs being incurred through 2014.
These costs primarily relate to establishing the company’s own information technology systems and services, independent accounts payable functions and reorganization of existing human resources and information technology organizations to support the company’s standalone public company needs. Once completed, these efforts are expected to generate approximately $15 million to $20 million of annualized savings, of which approximately $1 million are reflected in the company’s first quarter 2013 financial results.
Balance Sheet and Liquidity
On March 22, 2013, cash and cash equivalents totaled $119 million. Since the end of 2012, real estate inventory balances declined $8 million to $866 million, including $454 million of finished goods, $145 million of work-in-process and $267 million of land and infrastructure. The company had $726 million in debt outstanding at the end of the first quarter of 2013, an increase of $8 million from year-end 2012, including $682 million in non-recourse securitized notes, of which $110 million has been drawn down under our warehouse credit facility, and $40 million of mandatorily redeemable preferred stock of a subsidiary. As of March 22, 2013, the company had $194 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit and had $89 million of vacation ownership notes receivable eligible for securitization.
As a result of positive trends experienced to date in 2013, the company is updating its guidance for full year 2013 for Adjusted EBITDA, as adjusted, Adjusted net income, Adjusted company development margin and Adjusted fully diluted earnings per share as follows:
Adjusted EBITDA, as adjusted
$155 million to $165 million
$150 million to $165 million
Adjusted Net Income
$69 million to $75 million
$66 million to $74 million
Adjusted company development margin
17.0 percent to 18.0 percent
16.5 percent to 17.5 percent
Adjusted fully diluted earnings per share
$1.87 to $2.03
$1.77 to $2.00
The company is also reaffirming the following guidance for full year 2013 as previously provided on February 21, 2013:
- Gross contract sales growth of 0 percent to 5 percent
- North America contract sales growth of 5 percent to 10 percent
Schedules A-1 through A-13 reconcile non-GAAP financial measures to net income of $60 million to $66 million and development margin of 16.5 percent to 17.5 percent, in each case on an as reported basis.
First Quarter 2013 Earnings Conference Call
The company will hold a conference call at 10:00 a.m. EDT today to discuss these results. Participants may access the call by dialing (866) 225-8754 or (480) 629-9818 for international callers. A live webcast of the call will also be available in the Investor Relations section of the company’s website at www.marriottvacationsworldwide.com.
An audio replay of the conference call will be available for seven days and can be accessed at (800) 406-7325 or (303) 590-3030 for international callers. The replay passcode is 4610022. The webcast will also be available on the company’s website.
About Marriott Vacations Worldwide Corporation
Marriott Vacations Worldwide Corporation is a leading global pure-play vacation ownership company. In late 2011, Marriott Vacations Worldwide was established as an independent, public company focusing primarily on vacation ownership experiences. Since entering the industry in 1984 as part of Marriott International, Inc., the company earned its position as a leader and innovator in vacation ownership products. The company preserves high standards of excellence in serving its customers, investors and associates while maintaining a long-term relationship with Marriott International. Marriott Vacations Worldwide offers a diverse portfolio of quality products, programs and management expertise with more than 60 resorts and more than 420,000 Owners and Members. Its brands include: Marriott Vacation Club, The Ritz-Carlton Destination Club and Grand Residences by Marriott. For more information, please visit www.marriottvacationsworldwide.com.
Note on forward-looking statements: This press release and accompanying schedules contain “forward-looking statements” within the meaning of federal securities laws, including statements about earnings trends, organizational and separation related efforts, estimates, and assumptions, and similar statements concerning anticipated future events and expectations that are not historical facts. We caution 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 our 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 presentation. These statements are made as of April 25, 2013 and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
Press Release Schedules Follow