EX-99.1 2 a2018q1pressreleaseschedul.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1


mvwbannerforpressrelease.jpg
Jeff Hansen
Investor Relations
Marriott Vacations Worldwide Corporation
407.206.6149
Jeff.Hansen@mvwc.com
Ed Kinney
Corporate Communications
Marriott Vacations Worldwide Corporation
407.206.6278
Ed.Kinney@mvwc.com

Marriott Vacations Worldwide Reports First Quarter Financial Results
ORLANDO, Fla. – May 3, 2018 – Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported first quarter financial results and reaffirmed its guidance for the full year 2018.
The company adopted Accounting Standards Update 2014-09, “Revenue from Contracts with Customers,” as amended, at the beginning of 2018. With this adoption, the company also restated its 2017 reported financial results and has provided a reconciliation to its previously reported financial results.
First Quarter 2018 Results:
•
Net income was $36 million, or $1.32 fully diluted earnings per share (“EPS”), compared to net income of $28 million, or $1.00 fully diluted EPS, in the first quarter of 2017.
•
Adjusted net income was $38 million, compared to adjusted net income of $28 million in the first quarter of 2017, an increase of 35 percent. Adjusted fully diluted EPS was $1.39, compared to adjusted fully diluted EPS of $1.01 in the first quarter of 2017, an increase of 38 percent.
•
Adjusted EBITDA totaled $63 million, an increase of $9 million, or 17 percent, year-over-year.
•
Total company vacation ownership contract sales were $204 million, an increase of $4 million, or 2 percent, compared to the prior year period. North America vacation ownership contract sales were $187 million, an increase of $4 million, or 2 percent, compared to the prior year period.
•
The company estimates that the 2017 hurricanes negatively impacted contract sales by more than $6 million in the first quarter. In addition, the company changed its financial reporting calendar at the beginning of 2017, and as a result, the prior year first quarter had two additional days of sales. Excluding both impacts, we estimate that total company and North America vacation ownership contract sales would have grown 6 percent and 7 percent, respectively, over the prior year period.
•
North America VPG totaled $3,728, a 1 percent increase from the first quarter of 2017. North America tours increased 3 percent year-over-year.
•
Development margin was $22 million, flat to the first quarter of 2017. Development margin percentage was 12.9 percent compared to 13.8 percent in the prior year quarter.
•
Total company adjusted development margin percentage, which excludes the impact of revenue reportability and other charges, was 16.4 percent in the first quarter of 2018 compared to 18.4 percent in the first quarter of 2017.


Marriott Vacations Worldwide Reports First Quarter Financial Results / 2

◦
North America adjusted development margin percentage, which excludes the impact of revenue reportability and other charges, was 19.9 percent in the first quarter of 2018 compared to 21.2 percent in the first quarter of 2017.
•
Rental revenues totaled $74 million, a $7 million, or 10 percent, increase from the first quarter of 2017. Rental revenues net of expenses were $18 million, a $4 million, or 31 percent, increase from the first quarter of 2017.
•
Resort management and other services revenues totaled $70 million, a $3 million, or 4 percent, increase from the first quarter of 2017. Resort management and other services revenues, net of expenses, totaled $32 million, a $2 million, or 8 percent, increase from the first quarter of 2017.
•
Financing revenues totaled $35 million, a $3 million, or 10 percent, increase from the first quarter of 2017. Financing revenues, net of expenses and consumer financing interest expense, were $25 million, a $2 million, or 11 percent, increase from the first quarter of 2017.
•
During the first quarter of 2018, the company returned $23 million to its shareholders through quarterly cash dividends and the repurchase of its common stock.

“I am very pleased with our start to 2018. In the first quarter, despite the lingering impact of the 2017 hurricanes, contract sales increased 2 percent and adjusted EBITDA grew 17 percent, as our business continues to grow from the ramp-up of our new locations as well as from marketing programs that continue to grow our tour flow,” said Stephen P. Weisz, president and chief executive officer. “Our first quarter performance was in line with our expectations, giving us confidence we can achieve our 2018 full year guidance, including contract sales growth of 7 to 12 percent, net income of $182 million to $193 million, and adjusted EBITDA of $310 million to $325 million.”
Non-GAAP financial measures, such as adjusted net income, adjusted EBITDA, adjusted fully diluted earnings per share, adjusted free cash flow, and adjusted development margin are reconciled and adjustments are shown and described in further detail on pages A-1 through A-17 of the Financial Schedules that follow.

Balance Sheet and Liquidity
On March 31, 2018, cash and cash equivalents totaled $324 million. Since the beginning of the year, real estate inventory balances decreased $2 million to $722 million, including $372 million of finished goods and $350 million of land and infrastructure. The company had $1 billion in debt outstanding, net of unamortized debt issuance costs, at the end of the first quarter, an increase of $83 million from year-end 2017, consisting primarily of $750 million of debt related to our securitized notes receivable and $194 million of convertible notes.
As of March 31, 2018, the company had approximately $244 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit, and approximately $267 million of gross vacation ownership notes receivable eligible for securitization.

Impact of Accounting Changes
The company adopted Accounting Standards Update 2014-09, “Revenue from Contracts with Customers (Topic 606),” which, as amended, created ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”), also referred to as the new “Revenue Standard,” on a retrospective basis, at the beginning of 2018, and as a result, recognition of revenue from the sale of vacation ownership products that is deemed collectible is deferred from the point in time at which the statutory rescission period expires to closing, when control of the vacation ownership product is transferred to the customer. In addition, the company aligned its assessment of collectibility of the transaction price for sales of vacation ownership products with its credit granting policies. The company elected the practical expedient to expense all marketing and sales costs as they are incurred. Its consolidated cost reimbursements revenues and expenses increased significantly, as all costs reimbursed to it by property owners’ associations are now reported on a gross basis. In connection with the adoption of the new Revenue Standard, the company also reclassified certain revenues and expenses.


Marriott Vacations Worldwide Reports First Quarter Financial Results / 3

Summary Restated 2017 Financial Results Reflecting the Impact of Adopting the new Revenue Standard
The retrospective adoption of the new Revenue Standard resulted in the following restated quarterly financial results for 2017 for net income and adjusted EBITDA as highlighted below. Net income and adjusted EBITDA are reconciled to the quarterly 2017 reported results on pages A-10 through A-14 of the Financial Schedules.

 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 2017
$ in millions
Reported
Adjusted
 
Reported
Adjusted
 
Reported
Adjusted
 
Reported
Adjusted
Net income
$33.7
$27.9
 
$44.3
$48.2
 
$40.8
$47.0
 
$108.0
$112.2
Adjusted EBITDA
$62.1
$53.6
 
$77.9
$83.6
 
$74.0
$84.8
 
$66.1
$72.0
Outlook
The company is reaffirming guidance for the full year 2018 on the non-GAAP financial measures provided below. Pages A-1 through A-17 of the Financial Schedules reconcile the non-GAAP financial measures set forth below to the following full year 2018 expected GAAP results:
Net income
$182 million
to
$193 million
Fully diluted EPS
$6.61
to
$7.01
Net cash provided by operating activities
$180 million
to
$205 million
 
 
 
 
Adjusted net income
$184 million
to
$195 million
Adjusted fully diluted EPS
$6.69
to
$7.09
Adjusted EBITDA
$310 million
to
$325 million
Adjusted free cash flow
$185 million
to
$215 million
Contract sales growth
7 percent
to
12 percent
First Quarter 2018 Earnings Conference Call
The company will hold a conference call at 10:00 a.m. ET today to discuss these results and the guidance for full year 2018. 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 13678402. 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 65 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


Marriott Vacations Worldwide Reports First Quarter Financial Results / 4

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 May 3, 2018 and the company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Financial Schedules Follow










MARRIOTT VACATIONS WORLDWIDE CORPORATION
FINANCIAL SCHEDULES
QUARTER 1, 2018
TABLE OF CONTENTS
 
Consolidated Statements of Income
A-1
Adjusted Net Income, Adjusted Earnings Per Share - Diluted, EBITDA and Adjusted EBITDA
A-2
North America Segment Financial Results
A-3
Asia Pacific Segment Financial Results
A-4
Europe Segment Financial Results
A-5
Corporate and Other Financial Results
A-6
Consolidated Contract Sales to Sale of Vacation Ownership Products and Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses)
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)
A-8
2018 Outlook - Adjusted Net Income, Adjusted Earnings Per Share - Diluted, Adjusted EBITDA and Adjusted Free Cash Flow
A-9
ASC 606 Adjustments - Full Year 2017
A-10
ASC 606 Adjustments - First Quarter 2017
A-11
ASC 606 Adjustments - Second Quarter 2017
A-12
ASC 606 Adjustments - Third Quarter 2017
A-13
ASC 606 Adjustments - Fourth Quarter 2017
A-14
ASC 606 Adjustments - Consolidated Adjusted Development Margin
A-15
Non-GAAP Financial Measures
A-16
Consolidated Balance Sheets
A-18
Consolidated Statements of Cash Flows
A-19
NOTE: Contract sales consist of the total amount of vacation ownership product sales under contract signed during the period where we have received a down payment of at least ten percent of the contract price, reduced by actual rescissions during the period, inclusive of contracts associated with sales of vacation ownership products on behalf of third parties, which we refer to as “resales contract sales”.



A-1

MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
REVENUES
 
 
 
Sale of vacation ownership products
$
174,789

 
$
163,877

Resort management and other services
70,180

 
67,419

Financing
35,482

 
32,111

Rental
74,210

 
67,679

Cost reimbursements
216,188

 
197,214

TOTAL REVENUES
570,849

 
528,300

EXPENSES
 
 
 
Cost of vacation ownership products
46,363

 
43,771

Marketing and sales
105,934

 
97,498

Resort management and other services
37,778

 
37,471

Financing
4,248

 
4,017

Rental
55,899

 
53,708

General and administrative
29,435

 
27,539

Litigation settlement
(103
)
 
—

Consumer financing interest
6,606

 
5,938

Royalty fee
14,824

 
16,070

Cost reimbursements
216,188

 
197,214

TOTAL EXPENSES
517,172

 
483,226

Gains (losses) and other income (expense), net
446

 
(59
)
Interest expense
(4,317
)
 
(781
)
Other
(3,116
)
 
(369
)
INCOME BEFORE INCOME TAXES
46,690

 
43,865

Provision for income taxes
(10,709
)
 
(15,975
)
NET INCOME
$
35,981

 
$
27,890

 
 
 
 
Earnings per share - Basic
$
1.35

 
$
1.02

Earnings per share - Diluted
$
1.32

 
$
1.00

 
 
 
 
Basic Shares
26,685

 
27,251

Diluted Shares
27,306

 
27,900

 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
Contract sales
$
203,661

 
$
199,618

NOTE: Earnings per share - Basic and Earnings per share - Diluted are calculated using whole dollars.

A-2

MARRIOTT VACATIONS WORLDWIDE CORPORATION
(In thousands, except per share amounts)
ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE - DILUTED
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
Net income
$
35,981

 
$
27,890

Less certain items:
 
 
 
Acquisition costs
3,160

 
412

Litigation settlement
(103
)
 
—

(Gains) losses and other (income) expense, net
(446
)
 
59

Certain items before provision for income taxes
2,611

 
471

Provision for income taxes on certain items
(629
)
 
(173
)
Adjusted net income **
$
37,963

 
$
28,188

Earnings per share - Diluted
$
1.32

 
$
1.00

Adjusted earnings per share - Diluted **
$
1.39

 
$
1.01

Diluted Shares
27,306

 
27,900

EBITDA AND ADJUSTED EBITDA
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
Net income
$
35,981

 
$
27,890

Interest expense 1
4,317

 
781

Tax provision
10,709

 
15,975

Depreciation and amortization
5,601

 
5,191

EBITDA **
56,608

 
49,837

Non-cash share-based compensation
3,601

 
3,276

Certain items before provision for income taxes 
2,611

 
471

Adjusted EBITDA **
$
62,820

 
$
53,584

**
Denotes non-GAAP financial measures. Please see pages A-16 and A-17 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1
Interest expense excludes consumer financing interest expense.



A-3

MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA SEGMENT
(In thousands)
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
REVENUES
 
 
 
Sale of vacation ownership products
$
160,696

 
$
151,709

Resort management and other services
63,531

 
62,073

Financing
33,529

 
30,239

Rental
68,075

 
62,485

Cost reimbursements
202,626

 
181,566

TOTAL REVENUES
528,457

 
488,072

EXPENSES
 
 
 
Cost of vacation ownership products
40,985

 
38,923

Marketing and sales
93,383

 
87,422

Resort management and other services
32,283

 
32,969

Rental
47,183

 
46,054

Litigation settlement
(211
)
 
—

Royalty fee
1,837

 
2,690

Cost reimbursements
202,626

 
181,566

TOTAL EXPENSES
418,086

 
389,624

Losses and other expense, net
(14
)
 
(34
)
Other
(2,451
)
 
51

SEGMENT FINANCIAL RESULTS
$
107,906

 
$
98,465

 
 
 
 
SEGMENT FINANCIAL RESULTS
$
107,906

 
$
98,465

Less certain items:
 
 
 
Acquisition costs
2,500

 
—

Litigation settlement
(211
)
 
—

Losses and other expense, net
14

 
34

Certain items
2,303

 
34

ADJUSTED SEGMENT FINANCIAL RESULTS **
$
110,209

 
$
98,499

 
 
 
 
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
Contract sales
$
187,144

 
$
183,220


**
Denotes non-GAAP financial measures. Please see pages A-16 and A-17 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
(In thousands)
 
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
REVENUES
 
 
 
Sale of vacation ownership products
$
11,246

 
$
9,155

Resort management and other services
1,313

 
942

Financing
1,214

 
1,123

Rental
3,325

 
2,904

Cost reimbursements
1,766

 
1,110

TOTAL REVENUES
18,864

 
15,234

EXPENSES
 
 
 
Cost of vacation ownership products
3,146

 
2,058

Marketing and sales
8,637

 
6,763

Resort management and other services
1,111

 
872

Rental
5,026

 
4,326

Royalty fee
253

 
228

Cost reimbursements
1,766

 
1,110

TOTAL EXPENSES
19,939

 
15,357

Losses and other expense, net
—

 
(20
)
Other
(5
)
 
(8
)
SEGMENT FINANCIAL RESULTS
$
(1,080
)
 
$
(151
)
 
 
 
 
SEGMENT FINANCIAL RESULTS
$
(1,080
)
 
$
(151
)
Less certain items:
 
 
 
Losses and other expense, net
—

 
20

Certain items
—

 
20

ADJUSTED SEGMENT FINANCIAL RESULTS **
$
(1,080
)
 
$
(131
)
 
 
 
 
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
Contract sales
$
12,343

 
$
11,948

 
**
Denotes non-GAAP financial measures. Please see pages A-16 and A-17 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
(In thousands)
 
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
REVENUES
 
 
 
Sale of vacation ownership products
$
2,847

 
$
3,013

Resort management and other services
5,336

 
4,404

Financing
739

 
749

Rental
2,810

 
2,290

Cost reimbursements
11,796

 
14,538

TOTAL REVENUES
23,528

 
24,994

EXPENSES
 
 
 
Cost of vacation ownership products
410

 
555

Marketing and sales
3,914

 
3,313

Resort management and other services
4,384

 
3,630

Rental
3,690

 
3,328

Litigation settlement
108

 
—

Royalty fee
40

 
46

Cost reimbursements
11,796

 
14,538

TOTAL EXPENSES
24,342

 
25,410

SEGMENT FINANCIAL RESULTS
$
(814
)
 
$
(416
)
 
 
 
 
SEGMENT FINANCIAL RESULTS
$
(814
)
 
$
(416
)
Less certain items:
 
 
 
Litigation settlement
108

 
—

Certain items
108

 
—

ADJUSTED SEGMENT FINANCIAL RESULTS **
$
(706
)
 
$
(416
)
 
 
 
 
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
Contract sales
$
4,174

 
$
4,450

 
**
Denotes non-GAAP financial measures. Please see pages A-16 and A-17 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
(In thousands)
 
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
EXPENSES
 
 
 
Cost of vacation ownership products
$
1,822

 
$
2,235

Financing
4,248

 
4,017

General and administrative
29,435

 
27,539

Consumer financing interest
6,606

 
5,938

Royalty fee
12,694

 
13,106

TOTAL EXPENSES
54,805

 
52,835

Gains (losses) and other income (expense), net
460

 
(5
)
Interest expense
(4,317
)
 
(781
)
Other
(660
)
 
(412
)
TOTAL FINANCIAL RESULTS
$
(59,322
)
 
$
(54,033
)
 
 
 
 
TOTAL FINANCIAL RESULTS
$
(59,322
)
 
$
(54,033
)
Less certain items:
 
 
 
Acquisition costs
660

 
412

(Gains) losses and other (income) expense, net
(460
)
 
5

Certain items
200

 
417

ADJUSTED FINANCIAL RESULTS **
$
(59,122
)
 
$
(53,616
)
 
**
Denotes non-GAAP financial measures. Please see pages A-16 and A-17 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)
 
 
Three Months Ended
($ in thousands)
March 31, 2018
 
March 31, 2017
Contract sales
$
203,661

 
$
199,618

Less resales contract sales
(7,540
)
 
(5,784
)
Contract sales, net of resales
196,121

 
193,834

Plus:
 
 
 
Settlement revenue 1
3,514

 
3,339

Resales revenue 1
2,207

 
1,585

Revenue recognition adjustments:
 
 
 
Reportability
(11,509
)
 
(14,148
)
Sales reserve
(8,875
)
 
(12,723
)
Other 2
(6,669
)
 
(8,010
)
Sale of vacation ownership products
$
174,789

 
$
163,877


1
Previously included in Resort management and other services revenue prior to the adoption of the new Revenue Standard.
2
Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue and other adjustments to Sale of vacation ownership products revenue.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED ADJUSTED DEVELOPMENT MARGIN
(ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)
(In thousands)
 
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
Sale of vacation ownership products
$
174,789

 
$
163,877

Less:
 
 
 
Cost of vacation ownership products
46,363

 
43,771

Marketing and sales
105,934

 
97,498

Development margin
22,492

 
22,608

Revenue recognition reportability adjustment
7,948

 
9,806

Adjusted development margin **
$
30,440

 
$
32,414

Development margin percentage 1
12.9%
 
13.8%
Adjusted development margin percentage
16.4%
 
18.4%

**
Denotes non-GAAP financial measures. Please see pages A-16 and A-17 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.

A-8

MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS
(In thousands)
 
 
Three Months Ended
($ in thousands)
March 31, 2018
 
March 31, 2017
Contract sales
$
187,144

 
$
183,220

Less resales contract sales
(7,212
)
 
(5,784
)
Contract sales, net of resales
179,932

 
177,436

Plus:
 
 
 
Settlement revenue 1
3,492

 
3,287

Resales revenue 1
2,130

 
1,585

Revenue recognition adjustments:
 
 
 
Reportability
(10,904
)
 
(13,599
)
Sales reserve
(7,974
)
 
(9,767
)
Other 2
(5,980
)
 
(7,233
)
Sale of vacation ownership products
$
160,696

 
$
151,709

1
Previously included in Resort management and other services revenue prior to the adoption of the new Revenue Standard.
2
Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue and other adjustments to Sale of vacation ownership products revenue.
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NORTH AMERICA ADJUSTED DEVELOPMENT MARGIN
(ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES)
(In thousands)
 
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
Sale of vacation ownership products
$
160,696

 
$
151,709

Less:
 
 
 
Cost of vacation ownership products
40,985

 
38,923

Marketing and sales
93,383

 
87,422

Development margin
26,328

 
25,364

Revenue recognition reportability adjustment
7,527

 
9,410

Adjusted development margin **
$
33,855

 
$
34,774

Development margin percentage 1
16.4%
 
16.7%
Adjusted development margin percentage
19.9%
 
21.2%
 
**
Denotes non-GAAP financial measures. Please see pages A-16 and A-17 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.

A-9

MARRIOTT VACATIONS WORLDWIDE CORPORATION
2018 ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE - DILUTED OUTLOOK
(In millions, except per share amounts)

 
Fiscal Year
2018 (low)
 
Fiscal Year
2018 (high)
Net income
$
182

 
$
193

Adjustments to reconcile Net income to Adjusted net income
 
 
 
Certain items 1
3

 
3

Provision for income taxes on adjustments to net income
(1
)
 
(1
)
Adjusted net income **
$
184

 
$
195

Earnings per share - Diluted 2
$
6.61

 
$
7.01

Adjusted earnings per share - Diluted **, 2
$
6.69

 
$
7.09

Diluted shares 2
27.5

 
27.5

1
Certain items adjustment includes $3 million of acquisition costs.
2
Earnings per share - Diluted, Adjusted earnings per share - Diluted, and Diluted shares outlook includes the impact of share repurchase activity only through May 1, 2018.

2018 ADJUSTED EBITDA OUTLOOK
 
Fiscal Year
2018 (low)
 
Fiscal Year
2018 (high)
Net income
$
182

 
$
193

Interest expense 1
17

 
17

Tax provision
65

 
69

Depreciation and amortization
26

 
26

EBITDA **
290

 
305

Non-cash share-based compensation
17

 
17

Certain items 2 
3

 
3

Adjusted EBITDA **
$
310

 
$
325

1
Interest expense excludes consumer financing interest expense.
2
Certain items adjustment includes $3 million of acquisition costs.

2018 ADJUSTED FREE CASH FLOW OUTLOOK
 
Fiscal Year
2018 (low)
 
Fiscal Year
2018 (high)
Net cash provided by operating activities
$
180

 
$
205

Capital expenditures for property and equipment (excluding inventory):
 
 
 
New sales centers 1
(10
)
 
(10
)
Other
(27
)
 
(32
)
Borrowings from securitization transactions
360

 
380

Repayment of debt related to securitizations
(280
)
 
(290
)
Free cash flow **
223

 
253

Adjustments:
 
 
 
Net change in borrowings available from the securitization of eligible vacation ownership notes receivable through the warehouse credit facility 2
—

 
(2
)
Inventory / other payments associated with capital efficient inventory arrangements
(38
)
 
(40
)
Change in restricted cash
—

 
4

Adjusted free cash flow **
$
185

 
$
215

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 2017 and 2018 year ends.
**
Denotes non-GAAP financial measures. Please see pages A-16 and A-17 for additional information about our reasons for providing these alternative financial measures and limitations on their use.

A-10

MARRIOTT VACATIONS WORLDWIDE CORPORATION
ASC 606 ADJUSTMENTS - FULL YEAR 2017
(In thousands)

 
2017
As Reported
 
Adjustments
 
2017
As Adjusted
 
 
REVENUES
 
 
 
 
 
Sale of vacation ownership products
$
727,940

 
$
29,498

 
$
757,438

Resort management and other services
306,196

 
(27,358
)
 
278,838

Financing
134,906

 
—

 
134,906

Rental
322,902

 
(60,863
)
 
262,039

Cost reimbursements
460,001

 
289,601

 
749,602

TOTAL REVENUES
1,951,945

 
230,878

 
2,182,823

EXPENSES
 
 
 
 
 
Cost of vacation ownership products
177,813

 
17,034

 
194,847

Marketing and sales
408,715

 
(13,825
)
 
394,890

Resort management and other services
172,137

 
(17,913
)
 
154,224

Financing
17,951

 
—

 
17,951

Rental
281,352

 
(57,970
)
 
223,382

General and administrative
110,225

 
—

 
110,225

Litigation settlement
4,231

 
—

 
4,231

Consumer financing interest
25,217

 
—

 
25,217

Royalty fee
63,021

 
—

 
63,021

Cost reimbursements
460,001

 
289,601

 
749,602

TOTAL EXPENSES
1,720,663

 
216,927

 
1,937,590

Gains and other income, net
5,772

 
—

 
5,772

Interest expense
(9,572
)
 
—

 
(9,572
)
Other
(1,599
)
 
—

 
(1,599
)
INCOME BEFORE INCOME TAXES
225,883

 
13,951

 
239,834

Benefit (provision) for income taxes
895

 
(5,405
)
 
(4,510
)
NET INCOME
$
226,778

 
$
8,546

 
$
235,324

 
 
 
 
 
 
NET INCOME
$
226,778

 
$
8,546

 
$
235,324

Interest expense 1
9,572

 
—

 
9,572

Tax (benefit) provision
(895
)
 
5,405

 
4,510

Depreciation and amortization
21,494

 
—

 
21,494

EBITDA **
256,949

 
13,951

 
270,900

Non-cash share-based compensation
16,286

 
—

 
16,286

Certain items before income taxes
6,805

 
—

 
6,805

ADJUSTED EBITDA **
$
280,040

 
$
13,951

 
$
293,991


**
Denotes non-GAAP financial measures. Please see pages A-16 and A-17 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1
Interest expense excludes consumer financing interest expense.


A-11

MARRIOTT VACATIONS WORLDWIDE CORPORATION
ASC 606 ADJUSTMENTS - FIRST QUARTER 2017
(In thousands)

 
Q1 2017
As Reported
 
Adjustments
 
Q1 2017
As Adjusted
 
 
REVENUES
 
 
 
 
 
Sale of vacation ownership products
$
172,155

 
$
(8,278
)
 
$
163,877

Resort management and other services
72,964

 
(5,545
)
 
67,419

Financing
32,111

 
—

 
32,111

Rental
85,256

 
(17,577
)
 
67,679

Cost reimbursements
123,633

 
73,581

 
197,214

TOTAL REVENUES
486,119

 
42,181

 
528,300

EXPENSES
 
 
 
 
 
Cost of vacation ownership products
42,620

 
1,151

 
43,771

Marketing and sales
100,661

 
(3,163
)
 
97,498

Resort management and other services
41,645

 
(4,174
)
 
37,471

Financing
4,017

 
—

 
4,017

Rental
70,432

 
(16,724
)
 
53,708

General and administrative
27,539

 
—

 
27,539

Consumer financing interest
5,938

 
—

 
5,938

Royalty fee
16,070

 
—

 
16,070

Cost reimbursements
123,633

 
73,581

 
197,214

TOTAL EXPENSES
432,555

 
50,671

 
483,226

Losses and other expense, net
(59
)
 
—

 
(59
)
Interest expense
(781
)
 
—

 
(781
)
Other
(369
)
 
—

 
(369
)
INCOME BEFORE INCOME TAXES
52,355

 
(8,490
)
 
43,865

Provision for income taxes
(18,655
)
 
2,680

 
(15,975
)
NET INCOME
$
33,700

 
$
(5,810
)
 
$
27,890

 
 
 
 
 
 
NET INCOME
$
33,700

 
$
(5,810
)
 
$
27,890

Interest expense 1
781

 
—

 
781

Tax provision
18,655

 
(2,680
)
 
15,975

Depreciation and amortization
5,191

 
—

 
5,191

EBITDA **
58,327

 
(8,490
)
 
49,837

Non-cash share-based compensation
3,276

 
—

 
3,276

Certain items before income taxes
471

 
—

 
471

ADJUSTED EBITDA **
$
62,074

 
$
(8,490
)
 
$
53,584


**
Denotes non-GAAP financial measures. Please see pages A-16 and A-17 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1
Interest expense excludes consumer financing interest expense.

A-12

MARRIOTT VACATIONS WORLDWIDE CORPORATION
ASC 606 ADJUSTMENTS - SECOND QUARTER 2017
(In thousands)

 
Q2 2017
As Reported
 
Adjustments
 
Q2 2017
As Adjusted
 
 
REVENUES
 
 
 
 
 
Sale of vacation ownership products
$
191,010

 
$
10,846

 
$
201,856

Resort management and other services
79,158

 
(7,218
)
 
71,940

Financing
32,530

 
—

 
32,530

Rental
84,188

 
(14,898
)
 
69,290

Cost reimbursements
110,734

 
76,086

 
186,820

TOTAL REVENUES
497,620

 
64,816

 
562,436

EXPENSES
 
 
 
 
 
Cost of vacation ownership products
46,143

 
4,882

 
51,025

Marketing and sales
104,029

 
(4,861
)
 
99,168

Resort management and other services
44,008

 
(4,595
)
 
39,413

Financing
3,449

 
—

 
3,449

Rental
70,163

 
(12,407
)
 
57,756

General and administrative
29,534

 
—

 
29,534

Litigation settlement
183

 
—

 
183

Consumer financing interest
5,654

 
—

 
5,654

Royalty fee
16,307

 
—

 
16,307

Cost reimbursements
110,734

 
76,086

 
186,820

TOTAL EXPENSES
430,204

 
59,105

 
489,309

Losses and other expense, net
(166
)
 
—

 
(166
)
Interest expense
(1,757
)
 
—

 
(1,757
)
Other
(100
)
 
—

 
(100
)
INCOME BEFORE INCOME TAXES
65,393

 
5,711

 
71,104

Provision for income taxes
(21,117
)
 
(1,801
)
 
(22,918
)
NET INCOME
$
44,276

 
$
3,910

 
$
48,186

 
 
 
 
 
 
NET INCOME
$
44,276

 
$
3,910

 
$
48,186

Interest expense 1
1,757

 
—

 
1,757

Tax provision
21,117

 
1,801

 
22,918

Depreciation and amortization
5,001

 
—

 
5,001

EBITDA **
72,151

 
5,711

 
77,862

Non-cash share-based compensation
5,175

 
—

 
5,175

Certain items before income taxes
548

 
—

 
548

ADJUSTED EBITDA **
$
77,874

 
$
5,711

 
$
83,585


**
Denotes non-GAAP financial measures. Please see pages A-16 and A-17 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1
Interest expense excludes consumer financing interest expense.


A-13

MARRIOTT VACATIONS WORLDWIDE CORPORATION
ASC 606 ADJUSTMENTS - THIRD QUARTER 2017
(In thousands)

 
Q3 2017
As Reported
 
Adjustments
 
Q3 2017
As Adjusted
 
 
REVENUES
 
 
 
 
 
Sale of vacation ownership products
$
180,522

 
$
2,886

 
$
183,408

Resort management and other services
76,882

 
(7,044
)
 
69,838

Financing
34,685

 
—

 
34,685

Rental
81,177

 
(14,896
)
 
66,281

Cost reimbursements
113,724

 
62,745

 
176,469

TOTAL REVENUES
486,990

 
43,691

 
530,681

EXPENSES
 
 
 
 
 
Cost of vacation ownership products
42,826

 
2,996

 
45,822

Marketing and sales
100,527

 
(4,687
)
 
95,840

Resort management and other services
44,696

 
(4,535
)
 
40,161

Financing
5,062

 
—

 
5,062

Rental
71,048

 
(23,654
)
 
47,394

General and administrative
26,666

 
—

 
26,666

Litigation settlement
2,033

 
—

 
2,033

Consumer financing interest
6,498

 
—

 
6,498

Royalty fee
15,220

 
—

 
15,220

Cost reimbursements
113,724

 
62,745

 
176,469

TOTAL EXPENSES
428,300

 
32,865

 
461,165

Gains and other income, net
6,977

 
—

 
6,977

Interest expense
(2,642
)
 
—

 
(2,642
)
Other
104

 
—

 
104

INCOME BEFORE INCOME TAXES
63,129

 
10,826

 
73,955

Provision for income taxes
(22,367
)
 
(4,571
)
 
(26,938
)
NET INCOME
$
40,762

 
$
6,255

 
$
47,017

 
 
 
 
 
 
NET INCOME
$
40,762

 
$
6,255

 
$
47,017

Interest expense 1
2,642

 
—

 
2,642

Tax provision
22,367

 
4,571

 
26,938

Depreciation and amortization
5,610

 
—

 
5,610

EBITDA **
71,381

 
10,826

 
82,207

Non-cash share-based compensation
3,898

 
—

 
3,898

Certain items before income taxes
(1,327
)
 
—

 
(1,327
)
ADJUSTED EBITDA **
$
73,952

 
$
10,826

 
$
84,778


**
Denotes non-GAAP financial measures. Please see pages A-16 and A-17 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1
Interest expense excludes consumer financing interest expense.


A-14

MARRIOTT VACATIONS WORLDWIDE CORPORATION
ASC 606 ADJUSTMENTS - FOURTH QUARTER 2017
(In thousands)

 
Q4 2017
As Reported
 
Adjustments
 
Q4 2017
As Adjusted
 
 
REVENUES
 
 
 
 
 
Sale of vacation ownership products
$
184,253

 
$
24,044

 
$
208,297

Resort management and other services
77,192

 
(7,551
)
 
69,641

Financing
35,580

 
—

 
35,580

Rental
72,281

 
(13,492
)
 
58,789

Cost reimbursements
111,910

 
77,189

 
189,099

TOTAL REVENUES
481,216

 
80,190

 
561,406

EXPENSES
 
 
 
 
 
Cost of vacation ownership products
46,224

 
8,005

 
54,229

Marketing and sales
103,498

 
(1,114
)
 
102,384

Resort management and other services
41,788

 
(4,609
)
 
37,179

Financing
5,423

 
—

 
5,423

Rental
69,709

 
(5,185
)
 
64,524

General and administrative
26,486

 
—

 
26,486

Litigation settlement
2,015

 
—

 
2,015

Consumer financing interest
7,127

 
—

 
7,127

Royalty fee
15,424

 
—

 
15,424

Cost reimbursements
111,910

 
77,189

 
189,099

TOTAL EXPENSES
429,604

 
74,286

 
503,890

Losses and other expense, net
(980
)
 
—

 
(980
)
Interest expense
(4,392
)
 
—

 
(4,392
)
Other
(1,234
)
 
—

 
(1,234
)
INCOME BEFORE INCOME TAXES
45,006

 
5,904

 
50,910

Benefit for income taxes
63,034

 
(1,713
)
 
61,321

NET INCOME
$
108,040

 
$
4,191

 
$
112,231

 
 
 
 
 
 
NET INCOME
$
108,040

 
$
4,191

 
$
112,231

Interest expense 1
4,392

 
—

 
4,392

Tax benefit
(63,034
)
 
1,713

 
(61,321
)
Depreciation and amortization
5,692

 
—

 
5,692

EBITDA **
55,090

 
5,904

 
60,994

Non-cash share-based compensation
3,937

 
—

 
3,937

Certain items before income taxes
7,113

 
—

 
7,113

ADJUSTED EBITDA **
$
66,140

 
$
5,904

 
$
72,044


**
Denotes non-GAAP financial measures. Please see pages A-16 and A-17 for additional information about our reasons for providing these alternative financial measures and limitations on their use.
1
Interest expense excludes consumer financing interest expense.


A-15

MARRIOTT VACATIONS WORLDWIDE CORPORATION
ASC 606 ADJUSTMENTS - CONSOLIDATED ADJUSTED DEVELOPMENT MARGIN
(In thousands)

 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 2017
 
2017
Sale of vacation ownership products
$
163,877

 
$
201,856

 
$
183,408

 
$
208,297

 
$
757,438

Less:
 
 
 
 
 
 
 
 
 
Cost of vacation ownership products
43,771

 
51,025

 
45,822

 
54,229

 
194,847

Marketing and sales
97,498

 
99,168

 
95,840

 
102,384

 
394,890

Development margin
22,608

 
51,663

 
41,746

 
51,684

 
167,701

Revenue recognition reportability adjustment
9,806

 
(6,858
)
 
(805
)
 
(16,059
)
 
(13,916
)
Certain items
—

 
—

 
1,754

 
1,160

 
2,914

Adjusted development margin **
$32,414
 
$44,805
 
$42,695
 
$36,785
 
$156,699
Development margin percentage 1
13.8%
 
25.6%
 
22.8%
 
24.8%
 
22.1%
Adjusted development margin percentage
18.4%
 
23.2%
 
23.4%
 
19.6%
 
21.2%

**
Denotes non-GAAP financial measures. Please see pages A-16 and A-17 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.


A-16

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 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 quarters ended March 31, 2018 and March 31, 2017, 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 - Quarter Ended March 31, 2018
In our Statement of Income for the quarter ended March 31, 2018, we recorded $2.6 million of net pre-tax items, which included $3.2 million of acquisition costs, including $2.5 million of acquisition costs associated with the anticipated future capital efficient acquisition of the operating property in San Francisco, California and $0.7 million of other acquisition costs, partially offset by a $0.5 million favorable true up of previously recorded costs associated with Hurricane Irma and Hurricane Maria (recorded in gains and other income) and a $0.1 million true up of previously recorded litigation settlement expenses.
Certain items - Quarter Ended March 31, 2017
In our Statement of Income for the quarter ended March 31, 2017, we recorded $0.5 million of net pre-tax items, which included $0.4 million of acquisition costs and $0.1 million of losses and other expense.
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 may include 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.

A-17

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, and excludes 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-18

MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
 
 
March 31, 2018
 
December 31, 2017
ASSETS
 
 
 
Cash and cash equivalents
$
323,831

 
$
409,059

Restricted cash (including $34,987 and $32,321 from VIEs, respectively)
61,298

 
81,553

Accounts receivable, net (including $4,816 and $5,639 from VIEs, respectively)
63,038

 
91,659

Vacation ownership notes receivable, net (including $725,835 and $814,011 from VIEs, respectively)
1,132,783

 
1,114,552

Inventory
726,969

 
728,379

Property and equipment
251,264

 
252,727

Other (including $22,497 and $13,708 from VIEs, respectively)
200,768

 
166,653

TOTAL ASSETS
$
2,759,951

 
$
2,844,582

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Accounts payable
$
79,959

 
$
145,405

Advance deposits
96,647

 
84,087

Accrued liabilities (including $616 and $701 from VIEs, respectively)
121,975

 
119,810

Deferred revenue
114,243

 
69,058

Payroll and benefits liability
81,425

 
111,885

Deferred compensation liability
79,201

 
74,851

Debt, net (including $758,791 and $845,131 from VIEs, respectively)
1,012,350

 
1,095,213

Other
11,372

 
13,471

Deferred taxes
96,549

 
89,987

TOTAL LIABILITIES
1,693,721

 
1,803,767

Preferred stock — $0.01 par value; 2,000,000 shares authorized; none issued or outstanding
—

 
—

Common stock — $0.01 par value; 100,000,000 shares authorized; 36,976,481 and 36,861,843 shares issued, respectively
370

 
369

Treasury stock — at cost; 10,411,960 and 10,400,547 shares, respectively
(695,944
)
 
(694,233
)
Additional paid-in capital
1,184,106

 
1,188,538

Accumulated other comprehensive income
22,989

 
16,745

Retained earnings
554,709

 
529,396

TOTAL EQUITY
1,066,230

 
1,040,815

TOTAL LIABILITIES AND EQUITY
$
2,759,951

 
$
2,844,582

The abbreviation VIEs above means Variable Interest Entities.

A-19

MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
OPERATING ACTIVITIES
 
 
 
Net income
$
35,981

 
$
27,890

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation
5,601

 
5,191

Amortization of debt discount and issuance costs
3,936

 
1,386

Vacation ownership notes receivable reserve
8,875

 
12,714

Share-based compensation
3,601

 
3,276

Deferred income taxes
6,714

 
3,039

Net change in assets and liabilities:
 
 
 
Accounts receivable
29,203

 
34,195

Vacation ownership notes receivable originations
(105,378
)
 
(112,640
)
Vacation ownership notes receivable collections
78,999

 
76,068

Inventory
1,417

 
19,801

Other assets
(24,724
)
 
(26,704
)
Accounts payable, advance deposits and accrued liabilities
(42,132
)
 
(27,657
)
Deferred revenue
45,163

 
38,771

Payroll and benefit liabilities
(30,650
)
 
(14,500
)
Deferred compensation liability
4,351

 
4,147

Other liabilities
(785
)
 
(197
)
Other, net
3,082

 
924

Net cash provided by operating activities
23,254

 
45,704

INVESTING ACTIVITIES
 
 
 
Capital expenditures for property and equipment (excluding inventory)
(2,763
)
 
(5,055
)
Purchase of company owned life insurance
(9,000
)
 
(8,200
)
Dispositions, net
—

 
1

Net cash used in investing activities
(11,763
)
 
(13,254
)
FINANCING ACTIVITIES
 
 
 
Repayment of debt related to securitization transactions
(86,341
)
 
(54,340
)
Debt issuance costs
(976
)
 
(1,219
)
Repurchase of common stock
(1,882
)
 
—

Payment of dividends
(21,255
)
 
(19,010
)
Payment of withholding taxes on vesting of restricted stock units
(8,261
)
 
(6,644
)
Other, net
15

 
(16
)
Net cash used in financing activities
(118,700
)
 
(81,229
)
Effect of changes in exchange rates on cash, cash equivalents and restricted cash
1,726

 
1,551

Decrease in cash, cash equivalents, and restricted cash
(105,483
)
 
(47,228
)
Cash, cash equivalents and restricted cash, beginning of period
490,612

 
213,102

Cash, cash equivalents and restricted cash, end of period
$
385,129

 
$
165,874