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Marriott Vacations Worldwide Reports Fourth Quarter and Full Year 2014 Financial Results and 2015 Outlook

ORLANDO, Fla. – February 26, 2015 – Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported fourth quarter and full year 2014 financial results and provided its outlook for 2015. Due to the company’s reporting calendar, fourth quarter and full year 2013 financial results included the impact of an additional week compared to 2014.

Fourth quarter 2014 highlights:

Fourth quarter 2014 net income was $1 million, or $0.01 diluted earnings per share, compared to net income of $6 million, or $0.15 diluted earnings per share, in the fourth quarter of 2013. Company development margin was 19.8 percent and North America development margin was 22.6 percent in the fourth quarter of 2014 compared to 23.3 percent and 26.0 percent, respectively, in the fourth quarter of 2013.

Full year 2014 highlights:

Full year 2014 net income totaled $81 million, or $2.33 diluted earnings per share, compared to reported net income of $80 million in 2013, or $2.18 diluted earnings per share. Company development margin in 2014 was 20.9 percent compared to 21.2 percent in 2013. North America development margin was 23.4 percent in 2014 compared to 22.1 percent in the prior year. Net cash provided by operating activities was $291 million for 2014.

Non-GAAP financial measures, such as adjusted EBITDA, adjusted net income, adjusted earnings per share, adjusted development margin and adjusted free cash flow are reconciled and adjustments are shown and described in further detail on pages A-1 through A-20 of the Financial Schedules that follow.

2015 Outlook highlights:

Pages A-1 through A-20 of the Financial Schedules reconcile the non-GAAP financial measures set forth above to the following full year 2015 expected GAAP results: net income of $111 million to $117 million; fully diluted EPS of $3.31 to $3.49; company development margin of 20.8 percent to 21.8 percent; and net cash provided by operating activities of $107 million to $123 million.

“2014 was a great year for Marriott Vacations Worldwide, with adjusted EBITDA of $200 million, adjusted free cash flow of nearly $300 million and over $210 million of capital returned to our shareholders. In addition, we delivered development margin of over 20 percent and disposed of more than $80 million of excess land and inventory,” said Stephen P. Weisz, president and chief executive officer. “With progress toward adding new destinations and sales distributions while delivering strong free cash flow, I am very excited about what the future holds for Marriott Vacations Worldwide in 2015 and beyond.”

Fourth Quarter 2014 Results

Company Results

Total company contract sales were $215 million, a $2 million, or 1 percent, increase from $213 million in the fourth quarter of 2013. Excluding the impact of the extra week in 2013, total company contract sales increased $14 million, or 7 percent, driven by $18 million, or 10 percent, of higher vacation ownership contract sales in the company’s North America segment, partially offset by $4 million of lower residential contract sales in the company’s North America segment.

Adjusted development margin was $44 million, a $1 million decrease from the fourth quarter of 2013 primarily because the prior year period benefited from $4 million of higher favorable product cost true-up activity. Adjusted development margin percentage was 21.4 percent in the fourth quarter of 2014 compared to 22.9 percent in the fourth quarter of 2013. Development margin was $39 million, an $8 million decrease from the fourth quarter of 2013. Development margin percentage was 19.8 percent in the fourth quarter of 2014 compared to 23.3 percent in the fourth quarter of 2013.

Rental revenues totaled $73 million, a $4 million increase from the fourth quarter of 2013, reflecting a 7 percent increase in transient rate. Rental revenues, net of expenses, were $1 million, a $14 million increase from the fourth quarter of 2013.

Resort management and other services revenues totaled $89 million, unchanged from the fourth quarter of 2013. Resort management and other services revenues, net of expenses, were $31 million, a $5 million, or 18 percent, increase over the fourth quarter of 2013.

Financing revenues totaled $39 million, a $5 million decrease from the fourth quarter of 2013. Financing revenues, net of expenses and consumer financing interest expense, were $23 million, a $3 million decrease from the fourth quarter of 2013.

Adjusted EBITDA was $49 million in the fourth quarter of 2014, an $11 million, or 28 percent, increase from $38 million in the fourth quarter of 2013.

Segment Results

North America

VPG increased 5 percent to $3,255 in the fourth quarter of 2014 from $3,103 in the fourth quarter of 2013, driven mainly by an increase in the average number of points purchased per contract and higher pricing. North America vacation ownership contract sales were $186 million in the fourth quarter of 2014, an increase of $7 million, or 4 percent, over the prior year period. Excluding the impact of the extra week in 2013, North America contract sales increased $18 million, or 10 percent, from the fourth quarter of 2013.  

Fourth quarter 2014 North America segment financial results were $83 million, a decrease of $10 million from the fourth quarter of 2013. The decrease was primarily driven by a $24 million non-cash charge related to the disposition of partially developed land, an operating golf course, spa and clubhouse and related facilities at its former resort in Abaco, Bahamas and settlement of related litigation, $6 million of lower development margin and $5 million of lower financing revenues. These decreases were offset partially by $15 million of higher rental revenues net of expenses, $5 million of higher resort management and other services revenues net of expenses and a $3 million gain related to the disposition of property in Kauai, Hawaii.  

Adjusted development margin was $43 million, a $1 million decrease from the prior year quarter, as the prior year period benefited from favorable product cost true-up activity. Adjusted development margin percentage was 23.5 percent in the fourth quarter of 2014 compared to 25.4 percent in the fourth quarter of 2013. Development margin was $40 million, a $6 million decrease from the fourth quarter of 2013. Development margin percentage was 22.6 percent in the fourth quarter of 2014 compared to 26.0 percent in the prior year quarter.

Asia Pacific

Asia Pacific contract sales decreased $1 million to $12 million in the fourth quarter of 2014, and were unchanged after adjusting for the additional week in 2013. Segment financial results were $4 million, a $1 million increase from the fourth quarter of 2013.

Europe

Fourth quarter 2014 contract sales were $14 million, unchanged from the fourth quarter of 2013. Segment financial results were $3 million, a $4 million increase from the fourth quarter of 2013 due primarily to a $5 million litigation settlement in the fourth quarter of 2013.

Full Year 2014 Results

For the full year, total company contract sales were $713 million, up $19 million, or 3 percent, from $694 million in 2013. Excluding the impact of the extra week in 2013, total company contract sales increased $29 million, or 4 percent, driven by $20 million, or 3 percent, of higher contract sales in the company’s North America segment on a 6 percent increase in VPG to $3,386, and $11 million of higher contract sales in the company’s Europe segment. These increases were partially offset by $3 million of lower contract sales in the company’s Asia Pacific segment. Full year 2014 adjusted development margin increased to 22.0 percent in 2014 from 19.8 percent in 2013.

Adjusted EBITDA in 2014 totaled $200 million, at the high end of the company’s guidance range of $190 million to $200 million, and $25 million higher than 2013. Full year 2014 adjusted free cash flow increased $109 million over 2013 to $284 million compared to the company’s guidance range of $230 million to $245 million.  Adjusted net income in 2014 totaled $101 million compared to the company’s guidance range of $93 million to $99 million, an increase of $16 million over 2013. Full year 2014 adjusted fully diluted EPS was $2.93 compared to the company’s guidance range of $2.67 to $2.84, and $0.62 higher than 2013.

Share Repurchase Program

During the fourth quarter of 2014, the company repurchased 1,033,705 shares of its common stock at an average price of $66.21 per share for a total of over $68.4 million.

Balance Sheet and Liquidity

On January 2, 2015, cash and cash equivalents totaled $347 million. Since the beginning of the year, real estate inventory balances declined $96 million to $768 million, including $413 million of finished goods and $355 million of land and infrastructure. The company had $711 million in debt outstanding at the end of the fourth quarter of 2014, an increase of $33 million from year-end 2013, consisting primarily of $708 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 2014.

In October, the company completed a securitization of $250 million of vacation ownership notes receivable 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 January 2, 2015, the company had $197 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit and approximately $25 million of gross vacation ownership notes receivable eligible for securitization.

Outlook

The company is providing the following guidance for the full year 2015:

Adjusted EBITDA

$215 million to $225 million

Adjusted fully diluted earnings per share

$3.16 to $3.35

Adjusted net income

$106 million to $112 million

Company contract sales growth (excluding residential)

4 percent to 7 percent

Adjusted company development margin

21 percent to 22 percent

Adjusted free cash flow

$135 million to $160 million

Pages A-1 through A-20 of the Financial Schedules reconcile the non-GAAP financial measures set forth above to the following full year 2015 expected GAAP results: net income of $111 million to $117 million; fully diluted EPS of $3.31 to $3.49; company development margin of 20.8 percent to 21.8 percent; and net cash provided by operating activities of $107 million to $123 million.

Fourth Quarter and Full Year 2014 Earnings Conference Call

The company will hold a conference call at 10:00 a.m. EST today to discuss these results as well as its outlook for 2015. 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 13599388. The webcast will also be available on the company’s website.

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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 58 resorts and approximately 415,000 Owners and Members. 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 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 February 26, 2015 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

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