ORLANDO, Fla., Feb. 26, 2020 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported fourth quarter and full year 2019 financial results and provided guidance for the full year 2020.

In addition to a discussion of the fourth quarter reported results presented in accordance with United States generally accepted accounting principles ("GAAP"), to provide a more meaningful year-over-year comparison of financial results, the company is also providing full year 2018 financial information in the financial schedules that follow that combine the reported 2018 financial results of the company with the financial results for the first eight months of 2018 for the brands and businesses acquired by the company in its acquisition of ILG, Inc. ("ILG") in September 2018, conformed to the current year presentation.

Fourth Quarter 2019 Results

• Consolidated vacation ownership contract sales increased 10% to $394 million driven by 9% VPG growth.
• Net income attributable to common shareholders was $74 million, or $1.71 per fully diluted share ("EPS"), compared to net income attributable to common shareholders of $44 million, or $0.91 per fully diluted share, in the fourth quarter of 2018.
• Adjusted net income attributable to common shareholders increased 47% to $105 million and Adjusted fully diluted EPS increased 63% to $2.43.
• Adjusted EBITDA increased 15% to $207 million in the fourth quarter of 2019.
• The company estimates that Hurricane Dorian (the "Hurricane") negatively impacted its fourth quarter Adjusted EBITDA by $3 million.
• The company completed a $90 million note securitization in the fourth quarter, consisting primarily of Asia-Pacific notes, generating proceeds of $65 million.
• The company also closed on the sale of excess parcels in Cancun, Mexico and Avon, Colorado for proceeds of $62 million as part of its strategic decision to reduce holdings in markets where it has excess supply.
• The company finalized a long-term license agreement with Hyatt.
• The company repurchased nearly 1.1 million shares of its common stock for $123 million at an average price per share of $115.48.

Full Year 2019 Results

• Consolidated vacation ownership contract sales increased 42% to $1.5 billion.
• On a combined basis, assuming the acquisition of ILG occurred at the beginning of 2018, consolidated vacation ownership contract sales increased 6.4%. After adjusting for an estimated $7 million adverse impact from the Hurricane, sales would have increased 7%.
• Net income attributable to common shareholders was $138 million, or $3.09 per fully diluted share, compared to net income attributable to common shareholders of $55 million, or $1.61 per fully diluted share, in 2018.
• Adjusted net income attributable to common shareholders increased 74% to $348 million and Adjusted fully diluted EPS increased 33% to $7.81.
• Adjusted EBITDA increased 81% to $758 million for the full year 2019.
• On a combined basis, Adjusted EBITDA increased 14% and would have increased 16% excluding VRI Europe, which was disposed of in the fourth quarter of 2018.
• The company generated net cash provided by operating activities of $382 million and adjusted free cash flow of $464 million.
• The company repurchased 4.7 million shares of its common stock for $465 million, at an average price per share of $98.24. In addition, the company paid dividends of $81 million in 2019.

"I am very pleased with how we ended the year, growing contract sales by 10% in the fourth quarter and Adjusted EBITDA by 15%, once again illustrating the strength and resilience of our business model. We grew VPG by 9% in the fourth quarter, including 12% growth at our Legacy-ILG sales centers, as we continue to narrow the gap with Legacy-MVW," said Stephen P. Weisz, president and chief executive officer. "The ILG integration continues to go well and we expect to achieve at least $95 million of run-rate synergies by the end of 2020, well on our way towards achieving at least $125 million in run-rate savings by the end of 2021. As a result, 2020 is shaping up to be another great year for Marriott Vacations Worldwide, with estimated contract sales growth of 7% to 11% and Adjusted EBITDA growth of 8% to 13%."

Fourth Quarter 2019 Segment Results

Vacation Ownership

Vacation Ownership revenues excluding cost reimbursements increased 9% in the fourth quarter driven by a 10% increase in consolidated vacation ownership contract sales. Vacation Ownership segment financial results were $213 million for the fourth quarter of 2019. Segment Adjusted EBITDA increased 15% to $226 million in the fourth quarter and margin improved 150 basis points, excluding cost reimbursements.

Exchange & Third-Party Management

Exchange & Third-Party Management revenues totaled $103 million in the fourth quarter of 2019. Interval International average revenue per member increased 3% compared to the prior year to $38.38 and active members totaled 1.7 million at the end of the year.

Exchange & Third-Party Management segment financial results and Adjusted EBITDA were $37 million and $50 million, respectively, in the fourth quarter of 2019. Segment Adjusted EBITDA decreased 9% compared to the prior year after adjusting 2018 to exclude VRI Europe.

Corporate and Other

Corporate and Other results, which consist primarily of general and administrative costs, improved $6 million in the fourth quarter of 2019 as a result of synergy savings and lower compensation related expenses, partially offset by normal inflationary cost increases.

Balance Sheet and Liquidity

On December 31, 2019, cash and cash equivalents totaled $287 million. Real estate inventory balances decreased $6 million to $846 million during the year. The inventory balance at the end of the year included $777 million of finished goods and $69 million of work-in-progress. The company had $4.1 billion in debt outstanding, net of unamortized debt issuance costs, at the end of the year, an increase of $0.3 billion from year-end 2018. This debt included $2.2 billion of corporate debt and $1.9 billion of non-recourse debt related to its securitized notes receivable.

As of December 31, 2019, the company's debt to Adjusted EBITDA ratio was 2.4x, as described further in the Financial Schedules that follow.

As of December 31, 2019, the company had approximately $567 million in available capacity under its $600 million revolving corporate credit facility, after taking into account outstanding letters of credit, as well as approximately $188 million of gross vacation ownership notes receivable eligible for securitization under its warehouse credit facility.

In the fourth quarter, the company established a new warehouse facility with a capacity of $350 million, replacing its previous facility which had a capacity of $250 million. The new facility expands the company's ability to monetize loans previously precluded under its prior facility to include loans originated by its acquired Sheraton Vacation Club, Westin Vacation Club, and Hyatt Residence Club brands.

The company completed a $90 million note securitization in the fourth quarter, primarily consisting of Asia-Pacific notes and other loans that typically would not be included in the company's securitization transactions, generating proceeds of $65 million.

The company also closed on the sale of excess parcels in Cancun, Mexico and Avon, Colorado for proceeds of $62 million as part of its strategic decision to reduce holdings in markets where it has excess supply. The company reported a net combined gain of $19 million, which is excluded from its 2019 Adjusted EBITDA, and cash proceeds are excluded from its Adjusted Free Cash Flow.

2020 Outlook

The Financial Schedules that follow reconcile the non-GAAP financial measures set forth below to the following full year 2020 expected GAAP results for the company. The Company's 2020 guidance does not include any additional impact from the coronavirus, or any other viral or pandemic incidents, that could have a material impact on travel demand.

The company is providing guidance as reflected in the chart below for the full year 2020:

The 2020 expected GAAP results and guidance above include an estimate of the impact of future spending associated with on-going integration efforts resulting from the acquisition of ILG.

Non-GAAP Financial Information

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 in the Financial Schedules that follow.

Fourth Quarter 2019 Earnings Conference Call

The company will hold a conference call on February 27, 2020 at 8:30 a.m. ET to discuss these results and the guidance for full year 2020. 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 30 days and can be accessed at (877)-660-6853 or (201)-612-7415 for international callers. The conference ID for the recording is 13698385. The webcast will also be available on the company's website.

About Marriott Vacations Worldwide Corporation

Marriott Vacations Worldwide Corporation is a leading global vacation company that offers vacation ownership, exchange, rental and resort and property management, along with related businesses, products and services. The company has a diverse portfolio that includes seven vacation ownership brands. It also includes exchange networks and membership programs, as well as management of other resorts and lodging properties. As a leader and innovator in the vacation industry, the company upholds the highest standards of excellence in serving its customers, investors and associates while maintaining exclusive, long-term relationships with Marriott International, Inc. and Hyatt Hotels Corporation for the development, sales and marketing of vacation ownership products and services. 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 and synergies, the ILG integration, 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 exchange 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, 2020 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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MARRIOTT VACATIONS WORLDWIDE CORPORATIONNON-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 GAAP. We discuss our reasons for reporting these non-GAAP financial measures below, and the financial schedules included herein 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 attributable to common shareholders, 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 Attributable to Common Shareholders

We evaluate non-GAAP financial measures, including Adjusted Pretax Income, Adjusted Net Income Attributable to Common Shareholders, Adjusted EBITDA and Adjusted Development Margin, that exclude certain items in the quarters and fiscal years ended December 31, 2019 and December 31, 2018, 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 and Fiscal Year Ended December 31, 2019

Certain items for the quarter ended December 31, 2019, consisted of $24 million of ILG acquisition-related costs, $10 million of purchase price adjustments, and $2 million of litigation charges, partially offset by $11 million of gains and other income.

Certain items for the fiscal year ended December 31, 2019, consisted of $119 million of acquisition costs (including $118 million of ILG acquisition-related costs and $1 million of other acquisition costs), $99 million of asset impairment charges, $17 million of purchase price adjustments, $7 million of litigation charges, and $1 million of other severance costs, partially offset by $16 million of miscellaneous gains and other income.

Certain items - Quarter and Fiscal Year Ended December 31, 2018

Certain items for the quarter ended December 31, 2018, consisted of $30 million of ILG acquisition-related costs (including $1 million of share-based compensation expense), $19 million of purchase accounting adjustments (of which $6 million impacted adjusted EBITDA), $13 million of litigation charges, $4 million of losses and other expense, and $1 million of costs associated with the then anticipated capital efficient acquisition of an operating property in New York, partially offset by $29 million of net insurance proceeds related to the settlement of Legacy-MVW business interruption insurance claims arising from Hurricanes Irma and Maria.

Certain items for the fiscal year ended December 31, 2018, consisted of $135 million of ILG acquisition-related costs (including $8 million of share-based compensation expense), $46 million of litigation charges, $24 million of unfavorable purchase accounting adjustments (of which $6 million impacted adjusted EBITDA), $8 million of losses and other expense and $4 million of costs associated with the then anticipated capital efficient acquisitions of operating properties in San Francisco, California and New York, partially offset by $29 million of net insurance proceeds related to the settlement of Legacy-MVW business interruption insurance claims arising from Hurricanes Irma and Maria.

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 attributable to common shareholders above. We evaluate Adjusted Development Margin, and believe it provides useful information to our investors, 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.

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Adjusted Earnings Before Interest Expense, Taxes, Depreciation and Amortization ("Adjusted EBITDA")

We define Adjusted EBITDA as earnings, or net income attributable to common shareholders, before interest expense (excluding consumer financing interest expense associated with term loan securitization transactions), provision for income taxes, depreciation, amortization, certain items (as itemized in the discussion of Adjusted Net Income Attributable to Common Shareholders above), and share-based compensation expense. For purposes of our Adjusted EBITDA calculation, we do not adjust for consumer financing interest expense associated with term loan securitization transactions because we consider it to be an operating expense of our business. We consider Adjusted EBITDA to be an indicator of operating performance, which we use to measure our ability to service debt, fund capital expenditures and expand our business. We also use Adjusted EBITDA, as do analysts, lenders, investors and others, because this measure excludes 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. Adjusted EBITDA excludes 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. Our Adjusted EBITDA also excludes 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. We evaluate Adjusted EBITDA, and believe it provides useful information to our investors, as an indicator of operating performance because it allows for period-over-period comparisons of our on-going core operations before the impact of these items, and it facilitates 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 acquisition, 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.

Combined Financial Information

The unaudited combined financial information presented herein combines Legacy-MVW and Legacy-ILG results of operation for the year ended December 31, 2018, and is presented to facilitate comparisons with our results following the acquisition of ILG. We evaluate the combined financial information, and believe it provides useful information to investors, because it provides for a more meaningful comparison of our results following the acquisition of ILG with the results of the combined businesses for the prior year comparable period. The combined financial information for the year ended December 31, 2018 was derived by combining the reported MVW financial information for the year ended December 31, 2018 included in MVW's Annual Report on Form 10-K filed with the SEC on March 1, 2019, which included results of operations for Legacy-ILG for September through December 2018, with the Legacy-ILG financial information for the quarters ended March 31 and June 30, 2018 included in MVW's Quarterly Reports on Form 8-K filed with the SEC on May 7, 2019 and August 1, 2019, respectively, and the Legacy-ILG financial information for July and August 2018 included in ILG's internal management records. Prior to combining the Legacy-ILG financial information, Legacy ILG's financial results were reclassified to conform with MVW's current financial statement presentation. The combined financial information is provided for informational purposes only and is not intended to represent or to be indicative of the actual results of operations that the combined MVW and ILG business would have reported had the ILG acquisition been completed prior to the beginning of fiscal year 2018 and should not be taken as being indicative of future combined results of operations. The actual results may differ significantly from those reflected in the combined financial information.

Debt to Adjusted EBITDA Ratio

We calculate debt to adjusted EBITDA ratio by dividing net debt by adjusted EBITDA, where net debt represents gross debt less gross notes eligible for securitization at the end of such period at an estimated 80 to 85 percent advance rate and cash and cash equivalents other than an estimated $150 million for working capital requirements, and adjusted EBITDA represents the last twelve months of adjusted EBITDA, plus an additional $76 million of additional cost synergies ($125 million in total).

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Vacation Ownership Adjusted EBITDA Margin

We calculate vacation ownership adjusted EBITDA margin by dividing combined vacation ownership adjusted EBITDA by combined vacation ownership revenues excluding reimbursed costs. Cost reimbursements revenue includes direct and indirect costs that property owners' associations and joint ventures we participate in reimburse to us, and relates, predominantly, to payroll costs where we are the employer. Because we record cost reimbursements based upon costs incurred with no added markup, this revenue and related expense has no impact on net income attributable to us because cost reimbursements revenue net of reimbursed costs expense is zero. We consider vacation ownership Adjusted EBITDA margin to be a meaningful measure, and believe it provides useful information to investors, because it represents our Adjusted EBITDA margin on that portion of revenue that impacts adjusted EBITDA attributable to us.

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