Second 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?$48 million, a?$20 million?increase from the second quarter of 2012, on an adjusted basis.
- North America?segment volume per guest (VPG) increased 8 percent year-over-year to?$3,211.
- Adjusted development margin increased to 17.1 percent in the second quarter of 2013 from 12.8 percent in the second quarter of 2012;North America?adjusted development margin increased to 19.5 percent in the second quarter of 2013 from 16.8 percent in the second quarter of 2012.
- Adjusted fully diluted earnings per share (EPS) in the second quarter were?$0.73?compared to?$0.33?in the second quarter of 2012.
Second quarter 2013 net income totaled?$30 million, or?$0.85?per diluted share, compared to net income of?$5 million, or?$0.15?per diluted share, in the second quarter of 2012. Development margin increased to 23.1 percent in the second quarter of 2013 from 9.3 percent in the second quarter of 2012.
Second quarter 2013 adjusted net income totaled?$27 million, a?$16 million?increase from?$11 million?of adjusted net income in the second quarter of 2012. Second quarter 2013 adjusted net income reflects a reduction of?$5 million?of pre-tax income that resulted from the exclusion of?$9 million?of pre-tax income related to the impact of extended rescission periods in the company?s?Europe?segment, partially offset by the exclusion of$2 million?of organizational and separation related costs,?$2 million?of severance costs and an impairment charge in the company?s?Europe?segment and a nominal net impact related to a joint venture project that was previously included in the company?s former Luxury segment. Second quarter 2012 adjusted net income reflects an increase of?$8 million?of pre-tax income that resulted from the exclusion of?$4 million?of charges related to organizational and separation related costs, a?$3 million?decrease in pre-tax income related to the impact of extended rescission periods in the company?s?Europe?segment, charges of?$2 million?in connection with litigation settlements related to the company?s project in?San Francisco?and?$1 million?of severance costs, partially offset by?$2 million?of impairment reversal related to a joint venture project that was previously included in the company?s former Luxury segment. 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, including those relating to the impact of extended rescission periods in the company?s?Europesegment, are shown and described in further detail on schedules A-1 through A-20.
?Our second quarter continued our trend of strong adjusted EBITDA growth, driven by improved adjusted development margin and better results in our rental and resort management businesses,? said?Stephen P. Weisz, president and chief executive officer. ?More efficient marketing and sales spending was integral to our improvement as we continue to leverage our fixed costs and drive higher development margin. We have increased our adjusted free cash flow guidance by?$65 million, driven primarily by lower projected cash income taxes, and, given the positive trends in our business year-to-date, we now expect our adjusted EBITDA to be at the high end of our full year guidance range for 2013.?
Second Quarter 2013 Results
Total company contract sales were?$157 million, an?$11 million, or 7 percent, decrease from?$168 million?in the second quarter of 2012, driven mainly by?$10 million?of lower contract sales in the company?s?Europe?and?Asia Pacific?segments.
For the second quarter ended?June 14, 2013, total revenues from the sale of vacation ownership products, excluding?$17 million?related to the impact of extended rescission periods in the company?s?Europe?segment, were?$152 million.
Development margin, excluding?$9 million?related to the impact of extended rescission periods in the company?s?Europe?segment, was?$29 million, a?$13 million?increase from the second quarter of 2012.? This increase was driven by higher reportability year-over-year and lower cost of vacation ownership products and marketing and sales expenses. Reported development margin was?$38 million, a?$25 million?increase from the second quarter of 2012.
Adjusted development margin percentage increased 4.3 percentage points to 17.1 percent in the second quarter of 2013 from 12.8 percent in the second quarter of 2012. The impact of these adjustments is illustrated on schedules A-10?through A-13. Reported development margin increased 13.8 percentage points to 23.1 percent in the second quarter of 2013 from 9.3 percent in the second quarter of 2012.
Rental revenues totaled?$65 million, an?$11 million, or 18 percent, increase from the second quarter of 2012, reflecting an 11 percent increase in transient keys rented as well as a 7 percent increase in average transient rate driven by stronger consumer demand and a favorable mix of available inventory. Rental revenues net of expenses, were?$9 million,?$7 million?higher than the second quarter of 2012.
Resort management and other services revenues totaled?$61 million, a decrease of less than?$1 million?from the second quarter of 2012. Revenues were impacted by the disposition of a golf course and related assets at one of the company?s?Ritz-Carlton?branded projects late in 2012. Resort management and other services revenues, net of expenses improved?$3 million, a 23 percent increase over the second quarter of 2012. Results reflected higher annual fees in connection with the company?s?Marriott Vacation Club Destinations?program and improvements in ancillary operations driven by the disposition of a golf course and related assets at one of the company?s?Ritz-Carlton?branded projects late in 2012.
Adjusted EBITDA, as adjusted for the impact of extended rescission periods in the company?s?Europe?segment, organizational and separation related costs, and other adjustments, was?$48 million?in the second quarter of 2013, a?$20 million?increase from Adjusted EBITDA, as adjusted, of$28 million?in the second quarter of 2012.
Segment Results
Effective?December 29, 2012, the company combined the reporting of the financial results of its former Luxury segment with the?North Americasegment based upon its decision to scale back separate development activity and to aggregate future marketing and sales of inventory in the upscale and luxury tiers. Existing service standards and on-site management remain unaffected by these reporting changes. Prior year amounts have been recast for consistency with current year?s presentation.
North America
VPG increased 8 percent to?$3,211?in the second quarter of 2013 from?$2,968?in the second quarter of 2012, driven by higher pricing and improved closing efficiency. Total?North America?contract sales were?$142 million?in the second quarter of 2013, roughly flat to the prior year, due to fewer sales tours quarter over quarter.
Second quarter 2013 North America segment financial results increased 25 percent, or?$17 million, to?$84 million. The increase was driven by?$10 million?of higher development margin,?$7 million?of higher rental revenues net of expenses,?$3 million?of higher resort management and other services revenues net of expenses and?$1 million?of higher other revenues net of expenses. These increases were partially offset by?$3 million?of lower financing revenues and?$1 million?of higher royalty fees.
Revenues from the sale of vacation ownership products increased?$13 million?to?$136 million?in the second quarter, driven mainly by?$11 million?of higher year-over-year revenue reportability. Development margin was?$28 million, a?$10 million?increase from the second quarter of 2012. This increase was driven by higher revenue reportability year-over-year and lower cost of vacation ownership products and marketing and sales expenses, offset partially by the slightly lower contract sales.
Development margin percentage increased to 20.8 percent in the second quarter of 2013 as compared to 14.7 percent in the prior year quarter. Excluding the impact of revenue reportability, adjusted development margin percentage increased to 19.5 percent in the second quarter of 2013 from 16.8 percent in the second quarter of 2012. The impact of revenue reportability is illustrated on schedule A-12.
Asia Pacific
Asia Pacific?contract sales declined?$7 million?to?$8 million?in the second quarter of 2013 and total revenues declined?$5 million?to?$16 million, both reflecting the impact of the closure of two under-performing off-site sales centers in the fourth quarter of 2012. Segment financial results were?$2 million, remaining flat when compared to the second quarter of 2012.
Europe
As the?Europe?segment continues to sell through its remaining inventory, second quarter 2013 contract sales declined?$3 million?to?$7 million.Europe?segment financial results, excluding?$9 million?related to the impact of extended rescission periods, were?$2 million, up?$2 million?from break-even results in the second quarter of 2012, after adjusting for the?$3 million?impact related to extended rescission periods in the prior year comparable period. These results reflect?$2 million?of higher development margin and?$1 million?of higher rental revenues net of expenses, offset partially by a?$1 million?impairment charge related to a leased golf course at one of the company?s projects in?Spain. Reported segment financial results were?$11 million, up?$14 million?from a loss of?$3 million?in the second quarter of 2012.
Organizational and Separation Plan
During the second quarter of 2013, the company incurred?$3 million?of costs in connection with its continued organizational and separation related efforts, of which approximately?$1 million?was capitalized during the quarter. Total future spending for these efforts is expected to be approximately?$16 million?to?$21 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?$2 million?are reflected in the company?s year-to-date 2013 financial results.
Balance Sheet and Liquidity
On?June 14, 2013, cash and cash equivalents totaled?$104 million. Since the end of 2012, real estate inventory balances declined?$19 million?to$862 million, including?$425 million?of finished goods,?$168 million?of work-in-process and?$269 million?of land and infrastructure. The company had?$687 million?in debt outstanding at the end of the second quarter of 2013, a decrease of?$31 million?from year-end 2012, including?$643 million?in non-recourse securitized notes, of which?$104 million?has been drawn down under the company?s warehouse credit facility, and?$40 million?of mandatorily redeemable preferred stock of a subsidiary. As of?June 14, 2013, the company had?$196 million?in available capacity under its revolving credit facility after taking into account outstanding letters of credit and had?$124 million?of vacation ownership notes receivable eligible for securitization.
Outlook
For the full year 2013, the Company is increasing its adjusted free cash flow, as adjusted, guidance as a result of lower projected cash income taxes and improved consumer financing activity. In addition, as a result of lower effective income tax rates, primarily in international tax jurisdictions, the Company is increasing its adjusted net income and adjusted fully diluted earnings per share guidance for the full year.
| Current Guidance | Previous Guidance | |
| Adjusted free cash flow, as adjusted | $120 million?to?$135 million | $55 million?to?$70 million |
| Adjusted net income, as adjusted | $72 million?to?$78 million | $69 million?to?$75 million |
| Adjusted fully diluted earnings per share | $1.94?to?$2.10 | $1.87?to?$2.03 |
The Company is also reaffirming the following guidance for full year 2013 as previously provided on?April 25, 2013:
| Gross contract sales growth | 0 percent to 5 percent |
| North America?contract sales growth | 5 percent to 10 percent |
| Adjusted EBITDA, as adjusted | $155 million?to?$165 million |
| Adjusted company development margin | 17.0 percent to 18.0 percent |
Schedules A-1 through A-20 reconcile the non-GAAP financial measures set forth above to the company?s expected full year 2013 net income of$71 million?to?$77 million?and development margin of 17.5 percent to 18.5 percent, in each case on an as reported basis.
Second 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 (877) 941-0844 or (480) 629-9835 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 4625312.?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?July 18, 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.
SOURCE: Marriott Vacations Worldwide
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