(ORLANDO, Fla., Oct. 17, 2014) — Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported third quarter 2014 financial results and provided updated guidance for the full year 2014. In addition, the company announced that its Board of Directors has authorized a cash dividend program under which it intends to pay a regular quarterly dividend and the repurchase of up to an additional 3.4 million shares, or approximately 10 percent, of its outstanding common stock, under its share repurchase program.
Highlights for the third quarter of 2014 include:
- Adjusted EBITDA totaled $54 million, an increase of $4 million, or 8 percent, year-over-year.
- Company adjusted development margin was 22.6 percent and North America adjusted development margin was 25.5 percent, an increase of 230 and 330 basis points, respectively, year-over-year.
- North America volume per guest (VPG) increased 6.9 percent year-over-year to $3,477.
- Adjusted fully diluted earnings per share (EPS) increased 12.5 percent to $0.81 compared to $0.72 in the third quarter of 2013.
- Through October 15, 2014, the company has repurchased nearly 3.4 million of the 3.5 million shares of its common stock under its initial authorization from October 2013 for a total of $186 million.
- In October 2014, the company completed a securitization of $250 million of vacation ownership notes receivable at a blended borrowing rate of 2.29 percent, generating gross proceeds of $240 million.
Third quarter 2014 net income totaled $25 million, or $0.75 per diluted share, compared to net income of $25 million, or $0.67 per diluted share, in the third quarter of 2013. Company development margin increased to 21.5 percent in the third quarter of 2014 from 21.1 percent in the third quarter of 2013; North America development margin for the third quarter increased to 24.4 percent from 22.7 percent last year. Non-GAAP financial measures, such as adjusted EBITDA, adjusted net income, adjusted earnings per share and adjusted development margin, are reconciled and adjustments are shown and described in further detail on pages A-1 through A-20 of the Financial Schedules that follow.
“We had a strong third quarter, with solid performance in adjusted EBITDA and development margin, and another exceptional quarter of VPG growth,” said Stephen P. Weisz, president and chief executive officer. “With our strong cash position and cash flow outlook, I am pleased to announce that our Board of Directors has approved a quarterly dividend, our first as a public company. This is a significant milestone for Marriott Vacations Worldwide and demonstrates our confidence in our business model. In less than a year, we have repurchased $186 million of common stock under our share repurchase program, virtually exhausting the Board’s original repurchase authorization. Underscoring our commitment to a balanced capital allocation strategy, our Board has also authorized the repurchase of up to an additional 3.4 million shares, representing approximately 10 percent of the company’s outstanding common stock. We believe our capital allocation strategy gives us financial flexibility to pursue our growth objectives and continue to drive long-term shareholder value.”
Third Quarter 2014 Results
Total company contract sales were $172 million, a $4 million increase from $168 million in the third quarter of 2013, driven by $3 million of higher vacation ownership contract sales in the company’s North America segment, $2 million of higher contract sales in the company’s Europe segment and $1 million of higher contract sales in the company’s Asia Pacific segment, partially offset by $2 million of lower residential contract sales in the company’s North America segment.
Adjusted development margin was $35 million, a $3 million increase from the third quarter of 2013. Adjusted development margin percentage increased 2.3 percentage points to 22.6 percent in the third quarter of 2014 from 20.3 percent in the third quarter of 2013. The adjustments are illustrated on page A-10 of the Financial Schedules. Development margin was $33 million, a $1 million decrease from the third quarter of 2013, as the prior year period benefited from the impact of extended rescission periods in the company’s Europe segment and favorable revenue reportability. Development margin percentage increased slightly to 21.5 percent in the third quarter of 2014 from 21.1 percent in the third quarter of 2013.
Rental revenues totaled $65 million, unchanged compared to the third quarter of 2013. These results reflect a 3 percent increase in transient keys rented offset by nearly $2 million of lower plus points revenue. Rental revenues, net of expenses, were $11 million, a $3 million, or 28 percent, increase from the third quarter of 2013.
Resort management and other services revenues totaled $67 million, a $2 million increase from the third quarter of 2013. Resort management and other services revenues, net of expenses, were $23 million, a $3 million, or 15 percent, increase over the third quarter of 2013.
Adjusted EBITDA was $54 million in the third quarter of 2014, a $4 million, or 8 percent, increase from $50 million in the third quarter of 2013.
VPG increased 6.9 percent to $3,477 in the third quarter of 2014 from $3,252 in the third quarter of 2013, driven mainly by an increase in the average number of points purchased per contract, higher pricing and a modest improvement in closing efficiency. North America vacation ownership contract sales were $148 million in the third quarter of 2014, an increase of $3 million over the prior year period.
Third quarter 2014 North America segment financial results were $86 million, a decrease of $1 million from the third quarter of 2013. The decrease was primarily driven by a $3 million accrual related to a litigation settlement and $2 million of lower financing revenues, offset partially by $4 million of higher resort management and other services revenues net of expenses.
Development margin was $33 million, unchanged compared to the third quarter of 2013. Development margin percentage increased to 24.4 percent in the third quarter of 2014 as compared to 22.7 percent in the prior year quarter. Excluding the impact of revenue reportability, adjusted development margin was $35 million, a $3 million increase from the prior year quarter. Adjusted development margin percentage increased to 25.5 percent in the third quarter of 2014 from 22.2 percent in the third quarter of 2013. The impact of revenue reportability is illustrated on page A-12 of the Financial Schedules.
Asia Pacific contract sales increased $1 million to $8 million in the third quarter of 2014. Segment financial results were $1 million, an increase of$1 million from the third quarter of 2013.
Third quarter 2014 contract sales improved $2 million to $11 million. Segment financial results were $6 million, $1 million below the third quarter of 2013. Adjusting for the $1 million impact related to extended rescission periods in the prior year, segment financial results were flat compared to the prior year quarter.
Organizational and Separation Plan
During the third quarter of 2014, the company incurred $3 million of costs in connection with its organizational and separation related efforts, of which $2 million was capitalized during the quarter. Remaining spending for these efforts of approximately $7 million to $9 million is expected to be incurred by the end of 2015. Once completed, these efforts are expected to generate over $15 million of annualized savings, of which approximately $13 million has been realized cumulatively to date.
Return of Capital
On October 14, 2014, the company’s Board of Directors authorized a cash dividend program under which it intends to pay a regular quarterly dividend, and declared a quarterly dividend of $0.25 per share payable on November 12, 2014 to shareholders of record as of October 28, 2014. In addition, the Board of Directors authorized the company to repurchase up to 3.4 million additional shares of its common stock under its share repurchase program through March 25, 2016.
Any future dividend payments will be subject to Board approval. The specific timing, amount and other terms of the repurchases will continue to depend on market conditions, corporate and regulatory requirements and other factors.
During the third quarter of 2014, the company repurchased 787,796 shares of its common stock at an average price of $58.02 per share for a total of nearly $46 million under its share repurchase program. Since the launch of the program on October 20, 2013 through October 15, 2014, the company has repurchased nearly 3.4 million shares of the 3.5 million shares originally authorized.
Balance Sheet and Liquidity
On September 12, 2014, cash and cash equivalents totaled $146 million. Since the end of 2013, real estate inventory balances declined $70 million to $794 million, including $446 million of finished goods and $348 million of land and infrastructure. The company had $538 million in debt outstanding at the end of the third quarter of 2014, a decrease of $140 million from year-end 2013, including $534 million in 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 third quarter of 2014.
In October the company completed a securitization of $250 million of vacation ownership loans at a weighted average interest rate of 2.29 percent and an advance rate of 96 percent. This transaction generated approximately $240 million of gross cash proceeds. Net cash proceeds to the company after transaction costs and cash reserves were $236 million, which are available for general corporate purposes.
As of September 12, 2014, the company had $197 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit.
For the full year 2014, the company is updating guidance as reflected in the chart below.
|Current Guidance||Previous Guidance|
|Adjusted free cash flow||$230 million to $245 million||$190 million to $205 million|
|Adjusted fully diluted earnings per share||$2.67 to $2.84||$2.64 to $2.82|
The company is also reaffirming the following guidance for full year 2014 as previously provided on July 24, 2014:
|Adjusted EBITDA||$190 million to $200 million|
|Adjusted net income||$93 million to $99 million|
|Adjusted development margin:|
|Company||21.0 percent to 22.0 percent|
|North America||23.0 percent to 24.0 percent|
|Contract sales growth (excluding residential):|
|Company||1 percent to 3 percent|
|North America||flat to 2 percent|
Pages A-1 through A-20 of the Financial Schedules reconcile the non-GAAP financial measures set forth above to the following full year 2014 expected GAAP results: reported net income of $93 million to $99 million; reported company development margin of 20.7 percent to 21.7 percent; reported North America development margin of 22.8 percent to 23.8 percent; and net cash provided by operating activities of $216 million to$228 million.
Third 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) 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 13591642. 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 59 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, future dividend payments, 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 SECfilings, 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 October 16, 2014 and the company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
PRESS RELEASE SOURCE: Marriott Vacations Worldwide Corporation