ORLANDO, FL (April 30, 2014) — Marriott Vacations Worldwide Corporation (NYSE: VAC) yesterday reported first quarter 2014 financial results.
Highlights for the first quarter of 2014 include:
- Adjusted EBITDA totaled $40 million, an increase of $1 million year-over-year.
- Company adjusted development margin was 19.8 percent and North America adjusted development margin was 22.0 percent, an increase of 210 and 320 basis points, respectively, year-over-year.
- North America volume per guest (VPG) increased 6.5 percent year-over-year to $3,477.
- Adjusted fully diluted earnings per share (EPS) were $0.56 compared to $0.54 in the first quarter of 2013.
In the first quarter of 2014, the company repurchased 734,141 shares of its common stock under its share repurchase program for approximately $37 million. Through April 28, 2014, the company has repurchased a total of nearly 1.5 million shares for a total of $75 million since the launch of the program in the fourth quarter of 2013.
First quarter 2014 net income totaled $19 million, or $0.54 per diluted share, compared to net income of $19 million, or $0.51 per diluted share, in the first quarter of 2013. Company development margin increased to 18.5 percent in the first quarter of 2014 from 15.8 percent in the first quarter of 2013; North America development margin for the first quarter increased to 20.7 percent from 17.3 percent last year.
First quarter 2014 adjusted net income totaled $20 million, a $1 million increase compared to the first quarter of 2013. First quarter 2014 adjusted net income reflects the exclusion of a $2 million charge in connection with the company’s interest in an equity method investment in a joint venture project in its North America segment, $1 million of organizational and separation related costs and $1 million related to a gain from the sale of a golf course and adjacent undeveloped land. First quarter 2013 adjusted net income reflects the exclusion of $1 million of organizational and separation related costs, $1 million of severance in the company’s Europe segment, $1 million for a litigation settlement accrual reversal and $1 million related to the impact of extended rescission periods in the company’s Europe segment. In addition, adjusted development margin for both periods is adjusted for the impact of revenue reportability.
Non-GAAP financial measures, such as adjusted EBITDA, adjusted net income, adjusted earnings per share, 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-13. The company now reports consumer financing interest expense separately from all other interest expense. As a result, adjusted EBITDA as used in this release is equivalent to the non-GAAP financial measure adjusted EBITDA, as adjusted, presented prior to the third quarter of 2013.
“With another quarter of improving development margins and strong VPG growth, 2014 is off to a solid start,” said Stephen P. Weisz, president and chief executive officer. “In our North America segment, adjusted development margin improved to 22 percent, and total company adjusted development margin improved to 19.8 percent. Given our first quarter performance and our expectations for the balance of the year, we are reaffirming our adjusted EBITDA guidance for 2014.”
First Quarter 2014 Results
Total company contract sales were $162 million, a $6 million increase from $156 million in the first quarter of 2013, driven mainly by $5 million of higher contract sales in the company’s Europe segment, and $3 million of higher contract sales in the company’s North America segment, offset by $2 million of lower contract sales in the company’s Asia Pacific segment.
Development margin was $27 million, a $4 million increase from the first quarter of 2013. Development margin percentage increased 2.7 percentage points to 18.5 percent in the first quarter of 2014 from 15.8 percent in the first quarter of 2013. Adjusted development margin was $30 million, a $5 million increase from the first quarter of 2013. Adjusted development margin percentage increased 2.1 percentage points to 19.8 percent in the first quarter of 2014 from 17.7 percent in the first quarter of 2013. The adjustments are illustrated on schedule A-6.
Rental revenues totaled $64 million, a $1 million increase from the first quarter of 2013. These results reflect a 2 percent increase in transient keys rented as well as a 1 percent increase in average transient rate. Rental revenues, net of expenses, were $7 million, flat to the first quarter of 2013.
Resort management and other services revenues totaled $60 million, a $1 million increase from the first quarter of 2013. Resort management and other services revenues, net of expenses were $18 million, a $2 million increase over the first quarter of 2013.
Adjusted EBITDA was $40 million in the first quarter of 2014, a $1 million increase from $39 million in the first quarter of 2013.
VPG increased 6.5 percent to $3,477 in the first quarter of 2014 from $3,266 in the first quarter of 2013, driven by higher pricing and improved closing efficiency. Total North America contract sales were $146 million in the first quarter of 2014, an increase of $3 million over the prior year period. Contract sales in the quarter included $6 million of residential sales, $6 million higher than the prior year period.
First quarter 2014 North America segment financial results increased 2 percent, or $2 million, to $80 million. The increase was primarily driven by$5 million of higher development margin, $2 million of higher resort management and other services revenues net of expenses, and $1 million of higher rental revenues net of expenses. These increases were partially offset by $2 million of lower financing revenues, a $2 million charge in connection with the company’s interest in an equity method investment in a joint venture project in its North America segment and $1 million of higher royalty fees. First quarter 2013 also benefitted from a $1 million litigation settlement accrual reversal.
Development margin was $27 million, a $5 million increase from the first quarter of 2013. Development margin percentage increased to 20.7 percent in the first quarter of 2014 as compared to 17.3 percent in the prior year quarter. Excluding the impact of revenue reportability, adjusted development margin was $30 million, a $5 million increase from the prior year quarter. Adjusted development margin percentage increased to 22.0 percent in the first quarter of 2014 from 18.8 percent in the first quarter of 2013. The impact of revenue reportability is illustrated on schedule A-7.
Asia Pacific contract sales declined $2 million to $7 million in the first quarter of 2014. Segment financial results were $1 million, $2 million lower than the first quarter of 2013.
First quarter 2014 contract sales improved $5 million to $9 million. Segment financial results were $1 million, in line with the first quarter of 2013.
Organizational and Separation Plan
During the first quarter of 2014, the company incurred $1 million of costs in connection with its continued organizational and separation related efforts. Remaining spending for these efforts of approximately $5 million to $7 million is expected to be incurred by the end of 2014.
These costs primarily relate to establishing the company’s own information technology systems and services, independent accounts payable functions and the reorganization of existing human resources and information technology organizations to support the company’s stand-alone public company needs. Once completed, these efforts are expected to generate approximately $15 million to $20 million of annualized savings, of which approximately $11 million has been realized cumulatively to date, including $1 million reflected in the company’s 2014 financial results.
Share Repurchase Program
During the first quarter of 2014, the company repurchased 734,141 shares of its common stock at an average price of $50.97 per share for a total repurchase amount of approximately $37 million. Through April 28, 2014, the company has repurchased a total of nearly 1.5 million shares for a total purchase amount of $75 million since the launch of the program on October 20, 2013.
Balance Sheet and Liquidity
On March 28, 2014, cash and cash equivalents totaled $159 million. Since the end of 2013, real estate inventory balances declined $20 million to$844 million, including $379 million of finished goods, $124 million of work-in-process and $341 million of land and infrastructure. The company had $597 million in debt outstanding at the end of the first quarter of 2014, a decrease of $81 million from year-end 2013, including $593 millionin non-recourse securitized notes. In addition, $40 million of mandatorily redeemable preferred stock of a subsidiary of the company was outstanding at the end of the first quarter of 2014.
As of March 28, 2014, the company had $197 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit and had approximately $145 million of vacation ownership notes receivable eligible for securitization.
For the full year 2014, the company is increasing the low end of its adjusted free cash flow guidance and increasing its adjusted fully diluted earnings per share guidance, as reflected in the chart below.
|Current Guidance||Previous Guidance|
|Adjusted free cash flow||$145 million to $160 million||$135 million to $160 million|
|Adjusted fully diluted earnings per share||$2.42 to $2.68||$2.41 to $2.67|
The company is also reaffirming the following guidance for full year 2014 as previously provided on February 27, 2014:
|Adjusted EBITDA||$185 million to $200 million|
|Adjusted net income||$87 million to $96 million|
|Adjusted company development margin||20.0 percent to 21.0 percent|
|Adjusted North America development margin||22.0 percent to 23.0 percent|
|Company contract sales growth (excluding residential)||5 percent to 8 percent|
|North America contract sales growth (excluding residential)||4 percent to 7 percent|
Schedules A-1 through A-13 reconcile the non-GAAP financial measures set forth above to the following full year 2014 expected GAAP results: reported net income of $83 million to $92 million; reported company development margin of 19.5 percent to 20.5 percent; reported North Americadevelopment margin of 21.8 percent to 22.8 percent; and net cash provided by operating activities of $175 million to $185 million.
First Quarter 2014 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 (877) 941-6010 or (480) 629-9643 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 4679876. 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 Worldwidewas established as an independent, public company focusing primarily on vacation ownership experiences. Since entering the industry in 1984 as part of Marriott International, Inc., the company earned its position as a leader and innovator in vacation ownership products. The company preserves high standards of excellence in serving its customers, investors and associates while maintaining a long-term relationship with Marriott International. Marriott Vacations Worldwide offers a diverse portfolio of quality products, programs and management expertise with more than 60 resorts and approximately 420,000 Owners and Members. Its brands include: Marriott Vacation Club, The Ritz-Carlton Destination Club and Grand Residences by Marriott. For more information, please visit www.marriottvacationsworldwide.com.
Note on forward-looking statements: This press release and accompanying schedules contain “forward-looking statements” within the meaning of federal securities laws, including statements about future operating results, organizational and separation related efforts, estimates, and assumptions, and similar statements concerning anticipated future events and expectations that are not historical facts. The company cautions you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including volatility in the economy and the credit markets, supply and demand changes for vacation ownership and residential products, competitive conditions; the availability of capital to finance growth, and other matters referred to under the heading “Risk Factors” contained in the company’s most recent Annual Report on Form 10-K filed with the U.S Securities and Exchange Commission (the “SEC”) and in subsequent SEC filings, any of which could cause actual results to differ materially from those expressed in or implied in this press release. These statements are made as of March 28, 2014and 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.
PRESS RELEASE SOURCE: Marriott Vacations Worldwide Corporation