Marriott Vacations Worldwide Corporation. June 3, 2014

Transcription

1 Marriott Vacations Worldwide Corporation June 3, 2014

2 Forward-Looking Statements This presentation contains forward-looking statements within the meaning of federal securities laws, including statements about earnings trends, 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 materiallyfromthoseexpressedinorimpliedinthis presentation. These statements are made as of June 3, 2014 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. Throughout this presentation we report certain financial measures, each identified with a double asterisk ( ** ), that are not prescribed or authorized by United States generally accepted accounting principles ( GAAP ). We discuss our reasons for reporting these non-gaap measures and reconcile each to the most directly comparable GAAP measure in materials available on the investor page of our website at ir.mvwc.com. 1

3 Introduction Stephen P. Weisz President and Chief Executive Officer John E. Geller, Jr. Executive Vice President and Chief Financial Officer Jeff Hansen Vice President, Investor Relations 2

4 Investment highlights Industry leader with established brands Experienced management team and distinguished board of directors Favorable long-term industry dynamics Diversified revenue streams Strong cash flow upside from built inventory and land Optimized capital structure with financial flexibility 3 3

5 Who We Are and What We Do Who we are: Marriott Vacations Worldwide Corporation ( VAC ) is an industry leader in the upscale and luxury vacation ownership segments Approximately 420,000 owners Over 60 global vacation and resort destinations What we do: Sell vacation ownership products Rent vacation ownership inventory Finance consumer purchases of vacation ownership products Manage resorts and provide services for owners and members Revenues are derived from diverse sources and nearly half are recurring Mission Statement: Deliver Unforgettable Experiences That Make Vacation Dreams Come True! 4

6 Long history of success Over $100 million in annual vacation ownership sales 50,000 owners Over $500 million in annual vacation ownership sales Introduction of Asia points product 60 resorts Announced spin-off from Marriott International ,000 owners 40 resorts 400,000 owners 3 resorts 20 resorts 200,000 owners; Asia expansion Introduction of North America points-based product 5 5

7 Cumulative intervals sold (in millions) Favorable industry dynamics $16 8 $14 7 $12 $10 $8 $6 $4 $2 6 $11 $10 $10 $9 $8 $7 $7 $6 $6 $7 $6 $5 $4 $4 $3 $3 $2 $2 $0 $0 $0 $1 $1 $1 $1 $1 $1 $1 $1 $1 $1 $1 $1 $1 $2 $ $0 $0 $ Total annual sales ($ in billions) Total annual sales Cumulative intervals sold 6 The size of the target demographic market and current number of vacation owners would imply an 8% penetration rate with potential for meaningful upside Source: ARDA Source: ARDA

8 Economics of a timeshare consumer Year 1 Year 20 Initial sale Initial sale Financing income Rentals Incremental business opportunities Additional purchases Financing income Referrals Club dues Stable recurring revenue base Management fee On-site spending Note: Case study of hypothetical consumer that finances their purchase through VAC. 7 7

9 Capital efficient points product ($ in millions) Optimization for sale $800 $700 $600 $500 $400 $300 $200 $100 $ Consumers buy the system rather than location Broader appeal Ability to sell indefinitely at all galleries Streamlined sales and marketing process Real estate inventory spending Cost of sales 8 DRAFT 8

10 Strategic Initiatives Growth: New Timeshare Properties / Sales Distributions New Timeshare Business Opportunities Improve Development Margin: Marketing and Sales Cost of Vacation Ownership Products Sell Excess Land and Luxury Inventory Rationalize Organizational Structure and Costs 9

11 Diversified Revenue Sources 2012 Revenues** 2013 Revenues** Sale of Vacation Ownership Products 49% Resort Management and Other Services 21% Rentals 17% Financing 12% Sale of Vacation Ownership Products 48% Resort Management and Other Services 20% Rentals 20% Financing 11% Other 1% Other 1% $1,286 Million** $1,344 Million** ** 2012 and 2013 revenues exclude cost reimbursements of $362 million and $385 million, respectively, and sale of vacation ownership products revenues are adjusted for the impact of Europe rescission adjustments. See non-gaap financial measures. NOTE: We now report in resort management and other services certain external exchange company results previously included in other and have recast prior year presentation for consistency. 10

12 Improving Margins** 2012 Margin ($)** 2013 Margin ($)** Sale of Vacation Ownership Products* $98M Resort Management and Other Services* $65M Sale of Sale of Vacation Vacation Ownership Ownership Resort Products* Products Management $132M and Other 49% Services 20% Resort Management and Other Services* $78M Other* $6M Rental* $0M Financing* $84M $253 Million** Rental 17% Financing 12% Other* $6M Rental* $11M Financing* $85M $312 Million** * All margin dollars represent revenues, net of related expenses, and are adjusted for certain charges and Europe rescission adjustments. In addition, financing margin is net of consumer financing interest expense. See non-gaap financial measures. ** Margins are as of year end and exclude G&A allocations. See non-gaap financial measures. NOTE: We now report in resort management and other services certain external exchange company results previously included in other and have recast prior year presentation for consistency. 11

13 Improving Development Margins 100% Adjusted development margin 1, ** 19.8% 17.7% 19.8% 21.8% 18.8% 22.0% 1% pt margin improvement = ~$7M in Development margin % of adjusted sale of vacation ownership products revenues** 80% 60% 40% 20% 31.7% 31.1% 48.5% 51.2% 32.3% 31.6% 32.1% 31.6% 47.9% 46.6% 49.1% 46.4% 0% 2013 Q Q Q Q Total Company North America Adjusted marketing and sales expenses** Adjusted cost of vacation ownership products expenses** Adjusted Development margin** Margins continue to improve despite investment in first time buyer tours. 1 Development margin represents sale of vacation ownership products revenues, net of expenses (sale of vacation ownership products revenues less the cost of vacation ownership products expenses and marketing and sales expenses) divided by sale of vacation ownership products revenues. ** See Non-GAAP financial measures for adjustments to Development margin. 12

14 Resort Management and Other Services revenues net of expenses ($ in millions) $300 $250 $200 Resort Management and Other Services revenues $265 $271 Increasing management and exchange fees; improving margins ($ in millions) $80 $60 Resort Management and Other Services revenues net of expenses $65 $78 $150 $40 $100 $50 $59 $60 $20 $16 $18 $ Q Q $ Q Q Management fees increased from $67 million in 2012 to $70 million in Exchange fee increased from $22 million in 2012 to $26 million in NOTE: We now report in resort management and other services certain external exchange company results previously included in other and have recast prior year presentation for consistency. In addition, 2012 revenues net of expenses is adjusted for certain charges See non-gaap financial measures. 13

15 Rental revenues net of expenses Rental revenues Improving rental margins Rental revenues net of expenses ($ in millions) $300 $250 $200 $150 $100 $50 $0 $262 $225 $63 $ Q Q ($ in millions) $15 $12 $11 $9 $7 $7 $6 $3 $0 $ Q Q Transient keys rented increased 14% and average transient rate increased over 9% from 2012 to

16 Financing revenues net of financing expenses and consumer financing interest expense ($ in millions) $180 $150 $120 $151 $141 Profits stabilizing $90 $84 $85 $60 $30 $33 $31 $20 $19 $ Q Q Financing revenue Financing revenue, net of financing expenses and consumer financing interest expense** - see Non-GAAP Financial Measures. Consumer financing interest expense decreased from $41 million in 2012 to $31 million in Profits stabilize when vacation ownership receivables originated outpace vacation ownership receivables collected. 15

17 Share Repurchase Program In the 2013 fourth quarter, MVW began returning capital to shareholders through a discretionary share repurchase program MVW s Board of Directors authorized a share repurchase program under which MVW may purchase up to 3,500,000 shares (~10% of its common stock) prior to March 28, The specific timing, amount and other terms of the repurchases are dependent on market conditions, corporate and regulatory requirements and other factors. Through April 28, 2014, MVW has repurchased nearly 1.5 million shares of its common stock for a total repurchase amount of $75 million. 16

18 Strategic Initiatives Growth: New Timeshare Properties / Sales Distributions New Timeshare Business Opportunities Improve Development Margin: Marketing and Sales Cost of Vacation Ownership Products Sell Excess Land and Luxury Inventory Rationalize Organizational Structure and Costs 17

19 Thank you for your interest in Marriott Vacations Worldwide 18

20 Appendix 19

21 Non-GAAP Financial Measures In this presentation we report certain financial measures that are not prescribed or authorized by United States generally accepted accounting principles ( GAAP ). We discuss our reasons for reporting these non-gaap financial measures below, and 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 and Adjusted Development Margin, that (1) exclude certain charges incurred in the 12 weeks ended March 28, 2014 and March 22, 2013, the 53 weeks ended January 3, 2014 and the 52 weeks ended December 28, 2012, (2) exclude the gain on the disposition of a golf course and related assets in the 12 weeks ended March 28, 2014 and the 52 weeks ended December 28, 2012, and (3) exclude adjustments related to the extension of rescission periods in our Europe segment ( Europe Rescission Adjustments ) in the 12 weeks ended March 22, 2013, the 53 weeks ended January 3, 2014 and the 52 weeks ended December 28, 2012, because these non-gaap financial measures allow for period-over-period comparisons of our on-going core operations before the impact of certain charges, gains and Europe Rescission Adjustments. These adjustments are itemized below and on the following pages. These non-gaap financial measures also facilitate our comparison of results from our on-going core operations before certain charges, gains and Europe Rescission Adjustments with results from other vacation ownership companies. Certain Charges - 12 weeks ended March 28, In our Statement of Operations for the 12 weeks ended March 28, 2014, we recorded $3 million of pre-tax charges, which included a $2 million increase in our accrual for remaining costs we expect to incur in connection with our interest in an equity method investment in a joint venture project in our North America segment recorded under the "Impairment charge on equity investment" caption and $1 million of organizational and separation related costs recorded under the "Organizational and separation related" caption. Certain Charges - 12 weeks ended March 22, In our Statement of Operations for the 12 weeks ended March 22, 2013, we recorded $1 million of pre-tax charges, which included $1 million of organizational and separation related costs recorded under the "Organizational and separation related" caption and $1 million of severance costs in our Europe segment recorded under the "Marketing and sales" caption, partially offset by a $1 million reversal of a previously recorded litigation settlement related to a project in our North America segment, based upon an agreement to settle the matter for an amount less than our accrual, recorded under the "Litigation settlement" caption. Certain Charges - 53 weeks ended January 3, In our Statement of Operations for the 53 weeks ended January 3, 2014, we recorded $20 million of pre-tax charges, which included $12 million of organizational and separation related costs recorded under the "Organizational and separation related" caption, an $8 million increase in our accrual for remaining costs we expect to incur in connection with our interest in an equity method investment in a joint venture project in our North America segment recorded under the "Impairment (charges) reversals on equity investment" caption, $5 million for a litigation settlement in our Europe segment recorded under the "Litigation settlement" caption, $2 million of severance costs in our Europe segment recorded under the "Marketing and sales" caption, and a $1 million pre-tax non-cash impairment charge related to a leased golf course at a project in our Europe segment recorded under the "Impairment" caption, partially offset by a $7 million gain for cash received in payment of fully reserved receivables in connection with an equity method investment in a joint venture project in our North America segment recorded under the "Impairment (charges) reversals on equity investment" caption, and a $1 million reversal of a previously recorded litigation settlement related to a project in our North America segment, based upon an agreement to settle the matter for an amount less than our accrual, recorded under the "Litigation settlement" caption. 20

22 Non-GAAP Financial Measures Certain Charges - 52 weeks ended December 28, In our Statement of Operations for the 52 weeks ended December 28, 2012, we recorded $62 million of pre-tax charges, which included $41 million for litigation settlement charges in our North America segment recorded under the "Litigation settlement" caption, $16 million of organizational and separation related costs recorded under the "Organizational and separation related" caption, $4 million related to closing off-site sales locations in our Asia Pacific segment recorded under the "Marketing and sales" caption, $1 million of severance in our Europe segment recorded under the "Marketing and sales" caption, $1 million of severance in our North America segment recorded under the "Marketing and sales" caption, and $1 million of costs associated with removing the Ritz-Carlton brand from one of our properties in our North America segment recorded under the "Resort management and other services" caption, partially offset by the reversal of $2 million of a previously recorded impairment charge recorded in our North America segment under the "Impairment reversals on equity investment" caption related to an equity investment in a joint venture project because the actual costs incurred to suspend our marketing and sales operations at the project were lower than previously estimated. Gain on the disposition of a golf course and related assets: 12 weeks ended March 28, In our Statement of Operations for the 12 weeks ended March 28, 2014, we recorded a net $1 million gain associated with the sale of a golf course and adjacent undeveloped land in our North America segment under the "Gains and other income" caption. 52 weeks ended December 28, In our Statements of Operations for the 52 weeks ended December 28, 2012, we recorded a net $8 million gain associated with the sale of the golf course, clubhouse and spa formerly known as The Ritz-Carlton Golf Club and Spa, Jupiter in our North America segment under the "Gains and other income" caption. Europe Rescission Adjustments. In the second quarter of 2013, during the course of an internal review of certain sales documentation processes related to the sale of certain vacation ownership interests in properties associated with our Europe segment, we determined that the documentation we provided for certain sales of vacation ownership products was not strictly compliant. As a result, in accordance with applicable European regulation, the period of time during which purchasers of such interests may rescind their purchases was extended. We record revenues from the sale of vacation ownership products once the rescission period has ended. Originally, we recorded revenues from these sales of vacation ownership products based on the rescission periods in effect assuming compliant documentation had been provided to the purchasers, rather than the extended periods. As a result, we recognized revenue in incorrect periods between fiscal years 2010 and 2013 and misstated revenues in our previously filed consolidated financial statements. We provided compliant documentation to purchasers for whom the extended rescission period had not yet expired. As compliant documentation was subsequently provided as part of the corrective actions we took, the extended rescission period for most of the purchases at issue ended during the second quarter of To better reflect our on-going core operations and allow for period-over-period comparisons, we have excluded the impact associated with the extended rescission periods in our adjusted financial measures for each period presented. 12 weeks ended March 22, In our Statement of Operations for the 12 weeks ended March 22, 2013, we recorded Europe Rescission Adjustments of $1 million, which included a $1 million pre-tax increase in Sale of vacation ownership products revenues. 53 weeks ended January 3, In our Statement of Operations for the 53 weeks ended January 3, 2014, we recorded after-tax Europe Rescission Adjustments of $10 million, which included a $21 million pre-tax increase in Sale of vacation ownership products revenues, pre-tax increases of $7 million and $2 million in Cost of vacation ownership products expense and Marketing and sales expense, respectively, associated with the change in revenues from the Sale of vacation ownership products, and a $2 million increase in the Provision for income taxes associated with the change in Income before income taxes. 52 weeks ended December 28, In our Statement of Operations for the 52 weeks ended December 28, 2012, we recorded after-tax Europe Rescission Adjustments of $6 million, which included a $9 million pre-tax decrease in Sale of vacation ownership products revenues, and pre-tax decreases of $2 million and $1 million in Cost of vacation ownership products expense and Marketing and sales expense, respectively, associated with the change in revenues from the Sale of vacation ownership products. 21

23 Non-GAAP Financial Measures 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 includes adjustments for certain charges and Europe Rescission Adjustments 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, certain charges and Europe Rescission Adjustments to our Development Margin. Total Revenues Excluding Cost Reimbursements and Europe Rescission Adjustments. 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. As 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 total revenues excluding cost reimbursements to be a meaningful metric as it represents that portion of revenue that impacts net income attributable to us. In addition, we adjust total revenues excluding cost reimbursements to exclude Europe Rescission Adjustments to better allow for period-over-period comparisons of our on-going core operations before the impact of such adjustments, and to facilitate our comparison of results from our on-going core operations before such adjustments with results from other vacation ownership companies. (In millions) Total revenues $ 1,750 $ 1,639 Less: cost reimbursements (385) (362) Total revenues excluding cost reimbursements** 1,365 1,277 Europe rescission adjustments (21) 9 Total revenues excluding cost reimbursements and Europe rescission adjustments** $ 1,344 $ 1,286 ** Denotes non-gaap financial measures. NOTE: We have restated 2012 Sale of vacation ownership products revenues to correct prior period misstatements. Financing Revenue, Net of Financing Expenses and Consumer Financing Interest Expense. Financing revenue, net of financing expenses and consumer financing interest expense includes interest income earned on vacation ownership notes receivable as well as fees earned from servicing the existing loan portfolio, net of direct costs to support the financing, servicing and securitization processes, as well as consumer financing interest expense. We believe it is a meaningful measure as it highlights the overall profitability of our financing business. (In millions) Q Q Financing revenue $ 141 $ 151 $ 31 $ 33 Less: financing expenses (25) (26) (5) (5) Less: consumer financing interest expense (31) (41) (7) (8) Financing revenue, net of financing expenses and consumer financing interest expense** $ 85 $ 84 $ 19 $ 20 ** Denotes non-gaap financial measures. 22

24 Non-GAAP Financial Measures Q and Q Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses) CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS (In millions) 12 Weeks Ended 12 Weeks Ended March 28, 2014 March 22, 2013 Contract sales Vacation ownership $ 156 $ 156 Residential products 6 - Total contract sales Revenue recognition adjustments: Reportability 1 (4) (3) Europe rescission adjustment 2-1 Sales Reserve 3 (8) (9) Other 4 (5) (4) Sale of vacation ownership products $ 145 $ Adjustment for lack of required downpayment or contract sales in rescission period. 2 Adjustment to eliminate the impact of extended rescission periods in our Europe segment. 3 Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve. 4 Adjustment represents sales incentives for plus points that will ultimately be recognized upon usage or expiration as rental revenues rather than revenues from the Sale of vacation ownership products. CONSOLIDATED ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES) (In millions) Revenue Revenue As Reported Recognition As Adjusted As Reported Europe Recognition As Adjusted 12 Weeks Ended Certain Reportability 12 Weeks Ended 12 Weeks Ended Certain Rescission Reportability 12 Weeks Ended March 28, 2014 Charges Adjustment March 28, 2014 ** March 22, 2013 Charges Adjustment Adjustment March 22, 2013 ** Sale of vacation ownership products $ 145 $ - $ 4 $ 149 $ 141 $ - $ (1) $ 3 $ 143 Less: Cost of vacation ownership products Marketing and sales (1) Development margin $ 27 $ - $ 3 $ 30 $ 23 $ 1 $ (1) $ 2 $ 25 Development margin percentage % 19.8% 15.8% 17.7% ** Denotes non-gaap financial measures. 1 Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars. NOTE: We have restated 2013 first quarter Sale of vacation ownership products, Development margin and Development margin percentage to correct prior period misstatements. 23

25 Non-GAAP Financial Measures Q and Q North America Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses) NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS (In millions) 12 Weeks Ended 12 Weeks Ended March 28, 2014 March 22, 2013 Contract sales Vacation ownership $ 140 $ 143 Residential products 6 - Total contract sales Revenue recognition adjustments: Reportability 1 (4) (5) Sales Reserve 2 (6) (8) Other 3 (5) (4) Sale of vacation ownership products $ 131 $ Adjustment for lack of required downpayment or contract sales in rescission period. 2 Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve. 3 Adjustment represents sales incentives for plus points that will ultimately be recognized upon usage or expiration as rental revenues rather than revenues from the Sale of vacation ownership products. NORTH AMERICA ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES) (In millions) Revenue Revenue As Reported Recognition As Adjusted As Reported Recognition As Adjusted 12 Weeks Ended Other Reportability 12 Weeks Ended 12 Weeks Ended Other Reportability 12 Weeks Ended March 28, 2014 Charges Adjustment March 28, 2014 ** March 22, 2013 Charges Adjustment March 22, 2013 ** Sale of vacation ownership products $ 131 $ - $ 4 $ 135 $ 126 $ - $ 5 $ 131 Less: Cost of vacation ownership products Marketing and sales Development margin $ 27 $ - $ 3 $ 30 $ 22 $ - $ 3 $ 25 Development margin percentage % 22.0% 17.3% 18.8% ** Denotes non-gaap financial measures. 1 Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars. 24

26 Non-GAAP Financial Measures 2013 and 2012 Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses) CONSOLIDATED CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS (In millions) 53 Weeks Ended 52 Weeks Ended January 3, 2014 December 28, 2012 Contract sales Vacation ownership $ 679 $ 687 Residential products 15 1 Total contract sales Revenue recognition adjustments: Reportability 1 9 (6) Europe rescission adjustment 2 21 (9) Sales Reserve 3 (36) (42) Other 4 (16) (13) Sale of vacation ownership products $ 672 $ Adjustment for lack of required downpayment or contract sales in rescission period. 2 Adjustment to eliminate the impact of extended rescission periods in our Europe segment. 3 Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve. 4 Adjustment represents sales incentives for plus points that will ultimately be recognized upon usage or expiration as rental revenues rather than revenues from the Sale of vacation ownership products. CONSOLIDATED ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES) (In millions) Revenue Revenue As Reported Europe Recognition As Adjusted As Reported Europe Recognition As Adjusted 53 Weeks Ended Certain Rescission Reportability 53 Weeks Ended 52 Weeks Ended Certain Rescission Reportability 52 Weeks Ended January 3, 2014 Charges Adjustment Adjustment January 3, 2014 ** December 28, 2012 Charges Adjustment Adjustment December 28, 2012 ** Sale of vacation ownership products $ 672 $ - $ (21) $ (9) $ 642 $ 618 $ - $ 9 $ 6 $ 633 Less: Cost of vacation ownership products (7) (3) Marketing and sales 316 (2) (2) (1) (6) Development margin $ 142 $ 2 $ (12) $ (5) $ 127 $ 86 $ 6 $ 6 $ 4 $ 102 Development margin percentage % 19.8% 14.0% 16.1% ** Denotes non-gaap financial measures. 1 Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars. NOTE: We have restated 2012 Sale of vacation ownership products, Cost of vacation ownership products, Marketing and sales, and Development margin to correct prior period misstatements. 25

27 Non-GAAP Financial Measures 2013 and 2012 North America Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses) NORTH AMERICA CONTRACT SALES TO SALE OF VACATION OWNERSHIP PRODUCTS (In millions) 53 Weeks Ended 52 Weeks Ended January 3, 2014 December 28, 2012 Contract sales Vacation ownership $ 608 $ 582 Residential products 15 1 Total contract sales Revenue recognition adjustments: Reportability 1 5 (4) Sales Reserve 2 (29) (34) Other 3 (16) (13) Sale of vacation ownership products $ 583 $ Adjustment for lack of required downpayment or contract sales in rescission period. 2 Represents allowance for bad debts for our financed vacation ownership product sales, which we also refer to as sales reserve. 3 Adjustment represents sales incentives for plus points that will ultimately be recognized upon usage or expiration as rental revenues rather than revenues from the Sale of vacation ownership products. NORTH AMERICA ADJUSTED DEVELOPMENT MARGIN (ADJUSTED SALE OF VACATION OWNERSHIP PRODUCTS NET OF EXPENSES) (In millions) Revenue Revenue As Reported Recognition As Adjusted As Reported Recognition As Adjusted 53 Weeks Ended Other Reportability 53 Weeks Ended 52 Weeks Ended Other Reportability 52 Weeks Ended January 3, 2014 Charges Adjustment January 3, 2014 ** December 28, 2012 Charges Adjustment December 28, 2012 ** Sale of vacation ownership products $ 583 $ - $ (5) $ 578 $ 532 $ - $ 4 $ 536 Less: Cost of vacation ownership products (2) Marketing and sales (1) Development margin $ 129 $ - $ (3) $ 126 $ 96 $ 1 $ 3 $ 100 Development margin percentage % 21.8% 18.2% 18.6% ** Denotes non-gaap financial measures. 1 Development margin percentage represents Development margin divided by Sale of vacation ownership products. Development margin percentage is calculated using whole dollars. NOTE: We combined the financial results of the former Luxury segment with the North America segment beginning with the first quarter of 2013 and have recast prior year presentation for consistency. 26

28 Non-GAAP Financial Measures Q and Q Adjusted Net Income (In millions) As Reported As Adjusted As Reported Europe As Adjusted 12 Weeks Ended Certain 12 Weeks Ended 12 Weeks Ended Certain Rescission 12 Weeks Ended March 28, 2014 Charges March 28, 2014 ** March 22, 2013 Charges Adjustment March 22, 2013 ** Revenues Sale of vacation ownership products $ 145 $ - $ 145 $ 141 $ - $ (1) $ 140 Resort management and other services Financing Rental Other Cost reimbursements Total revenues (1) 389 Expens es Cost of vacation ownership products Marketing and sales (1) - 73 Resort management and other services Financing Rental Other General and administrative Organizational and separation related 1 (1) - 1 (1) - - Litigation settlement (1) Consumer financing interest Royalty fee Cost reimbursements Total expenses 367 (1) (1) Gains and other income 1 (1) Interest expense (2) - (2) (3) - - (3) Impairment charge on equity investment (2) Income before income taxes (1) 30 Provision for income taxes (13) (1) (14) (11) - - (11) Net income $ 19 $ 1 $ 20 $ 19 $ 1 $ (1) $ 19 As Reported As Reported 12 Weeks Ended 12 Weeks Ended Contract Sales March 28, 2014 March 22, 2013 Vacation ownership $ 156 $ 156 Residential products 6 - Total contract sales $ 162 $ 156 ** Denotes non-gaap financial measures. NOTE: We have restated 2013 first quarter Sale of vacation ownership products revenue, Income before income taxes, Net income, Earnings per share - Basic, and Earnings per share - Diluted to correct prior period misstatements. Earnings per share - Basic and Earnings per share - Diluted are calculated using whole dollars. We now report in Resort management and other services certain external exchange company results previously included in Other and have recast prior year presentation for consistency. 27

29 Non-GAAP Financial Measures 2013 and 2012 Adjusted Net Income (In millions) As Reported Europe As Adjusted As Reported Europe As Adjusted 53 Weeks Ended Certain Rescission 53 Weeks Ended 52 Weeks Ended Certain Rescission 52 Weeks Ended January 3, 2014 Charges Adjustment January 3, 2014 ** December 28, 2012 Charges Adjustment December 28, 2012 ** Revenues Sale of vacation ownership products $ 672 $ - $ (21) $ 651 $ 618 $ - $ 9 $ 627 Resort management and other services Financing Rental Other Cost reimbursements Total revenues 1,750 - (21) 1,729 1, ,648 Expens es Cost of vacation ownership products (7) Marketing and sales 316 (2) (2) (6) Resort management and other services (1) Financing Rental Other General and administrative Organizational and separation related 12 (12) (16) - - Litigation settlement 4 (4) (41) - - Consumer financing interest Royalty fee Impairment 1 (1) Cost reimbursements Total expenses 1,606 (19) (9) 1,578 1,603 (64) 3 1,542 Gains and other income (8) - 1 Equity in earnings Interest expense Impairment reversals on equity investment (1) (2) - - Income before income taxes (12) Provision for income taxes (51) (5) 2 (54) (24) (20) - (44) Net income $ 80 $ 15 $ (10) $ 85 $ 7 $ 34 $ 6 $ 47 As Reported As Reported 53 Weeks Ended 52 Weeks Ended Contract Sales January 3, 2014 December 28, 2012 Vacation ownership $ 679 $ 687 Residential products 15 1 Total contract sales $ 694 $ 688 ** Denotes non-gaap financial measures. NOTE: We have restated 2012 Sale of vacation ownership products revenue, Cost of vacation ownership products and Marketing and sales expenses, Income before income taxes, Provision for income taxes, Net income, Earnings per share - Basic, and Earnings per share - Diluted to correct prior period misstatements. We now report in Resort management and other services certain external exchange company results previously included in Other and have recast prior year presentation for consistency. 28