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Marriott Vacations Worldwide Reports Second Quarter 2015 Financial Results

ORLANDO, Fla. – July 23, 2015 – Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported second quarter 2015 financial results and provided updated guidance for the full year 2015.

Second quarter 2015 highlights:

Second quarter 2015 net income was $34.0 million, or $1.05 diluted EPS, compared to net income of $35.3 million, or $1.00 diluted EPS, in the second quarter of 2014. Company development margin was 21.3 percent and North America development margin was 23.6 percent in the second quarter of 2015.

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-19 of the Financial Schedules that follow.

“We’re pleased with our solid second quarter financial results, delivering nearly $58 million of Adjusted EBITDA,” said Stephen P. Weisz, president and chief executive officer. “Our North America contract sales grew 3.4 percent on continued growth in tour volumes and slightly higher VPG and our company development margin remained in line with our full year expectations. With a strong first half of the year behind us, we are reaffirming Adjusted EBITDA guidance of $222 million to $232 million for full year 2015.”

Second Quarter 2015 Results

Company Results

Total company contract sales were $165.9 million, $1.3 million higher than the second quarter of last year. The increase was driven by $5.0 million of higher contract sales in the company’s North America segment and $0.7 million of higher contract sales in the company’s Asia Pacific segment, partially offset by $4.3 million of lower contract sales in the company’s Europe segment.

Adjusted development margin was $32.3 million, a $4.4 million decrease from the second quarter of 2014. Adjusted development margin percentage was 21.0 percent in the second quarter of 2015 compared to 24.2 percent in the second quarter of 2014. Development margin was $33.1 million, a $3.8 million decrease from the second quarter of 2014. Development margin percentage was 21.3 percent in the second quarter of 2015 compared to 24.2 percent in the second quarter of 2014.

Rental revenues totaled $72.6 million, a $10.8 million increase from the second quarter of 2014, reflecting a 4 percent increase in transient rate and a 6 percent increase in transient keys rented. Rental revenues, net of expenses, were $10.8 million, a $4.0 million increase from the second quarter of 2014.

Resort management and other services revenues totaled $74.1 million, a $0.8 million decrease from the second quarter of 2014. Resort management and other services revenues, net of expenses, were $28.6 million, a $2.1 million, or 8 percent, increase over the second quarter of 2014.

Financing revenues totaled $28.3 million, a $1.5 million decrease from the second quarter of 2014. Financing revenues, net of expenses and consumer financing interest expense, were $17.0 million, a $1.7 million decrease from the second quarter of 2014.

Adjusted EBITDA was $57.7 million in the second quarter of 2015, a $1.0 million, or 1.7 percent, increase from $56.7 million in the second quarter of 2014.

Segment Results

North America

VPG increased 0.6 percent to $3,404 in the second quarter of 2015 from $3,383 in the second quarter of 2014, driven by improved closing efficiency and higher pricing, offset partially by fewer points purchased per contract. North America contract sales were $150.6 million in the second quarter of 2015, an increase of $5.0 million, or 3.4 percent, over the prior year period.

Second quarter 2015 North America segment financial results were $104.6 million, an increase of $2.9 million from the second quarter of 2014. The increase was driven primarily by $8.2 million of higher gains mainly associated with the disposition of the company’s property in Kauai, Hawaii, $4.2 million of higher rental revenues net of expenses, $2.1 million of higher resort management and other services revenues net of expenses and $0.8 million related to an impairment charge in the prior year period. These increases were offset partially by $7.5 million of lower litigation settlements due mainly to the settlement of a dispute with a former service provider in the prior year period, $2.0 million of lower development margin, $2.0 million from the reversal of a charge in the prior year period related to the company’s interest in an equity method investment in a joint venture project and $1.5 million of lower financing revenues.

Adjusted development margin was $32.3 million, a $3.0 million decrease from the prior year quarter. Adjusted development margin percentage was 23.0 percent in the second quarter of 2015 compared to 26.3 percent in the second quarter of 2014. Development margin was $33.5 million, a $2.0 million decrease from the second quarter of 2014. Development margin percentage was 23.6 percent in the second quarter of 2015 compared to 26.3 percent in the prior year quarter.

Asia Pacific

Total contract sales in the segment were $8.0 million, an increase of $0.7 million in the second quarter of 2015.  Segment financial results were a loss of $0.1 million, a $1.5 million decrease from the second quarter of 2014, reflecting $1.3 million of transaction costs associated with the company’s future new resort and sales distribution in Australia.

Europe

Second quarter 2015 contract sales were $7.3 million, a decrease of $4.3 million from the second quarter of 2014. Segment financial results were $3.0 million, a $2.2 million decrease from the second quarter of 2014 due to lower development margin from lower contract sales.

Share Repurchase Program

In total for 2015, through the end of the second quarter, the company repurchased approximately $66.2 million of its common stock.

Balance Sheet and Liquidity

On June 19, 2015, cash and cash equivalents totaled $250.9 million. Since the beginning of the year, real estate inventory balances declined $69.1 million to $699.1 million, including $335.3 million of finished goods and $363.8 million of land and infrastructure. The company had $568.1 million in gross debt outstanding at the end of the second quarter of 2015, a decrease of $143.3 million from year-end 2014, consisting primarily of $564.7 million in gross non-recourse securitized notes. In addition, $40.0 million of gross mandatorily redeemable preferred stock of a subsidiary of the company was outstanding at the end of the second quarter of 2015.

As of June 19, 2015, the company had approximately $197 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit, and approximately $207 million of gross vacation ownership notes receivable eligible for securitization into its warehouse credit facility.

Outlook

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

Current Guidance

Previous Guidance

Adjusted free cash flow

$175 million to $200 million

$145 million to $170 million

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

Current Guidance

Adjusted EBITDA

$222 million to $232 million

Company contract sales growth (excluding residential)

5 percent to 8 percent

Adjusted company development margin

21 percent to 22 percent

Adjusted net income

$108 million to $114 million

Adjusted fully diluted earnings per share

$3.29 to $3.48

Pages A-1 through A-19 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 $114 million to $121 million; fully diluted EPS of $3.49 to $3.70; company development margin of 21.1 percent to 22.1 percent; and net cash provided by operating activities of $170 million to $185 million.

Second Quarter 2015 Earnings Conference Call

The company will hold a conference call at 10:00 a.m. EST today to discuss these results and the updated guidance for full year 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 13613029. 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 60 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 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 July 23, 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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