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Marriott Vacations Worldwide's executive leadership team is taking a 50% salary reduction

DannyTS

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Marriott Vacations Worldwide Corporation Provides Business Update



Company to host a call with institutional investors at 9:00 a.m. ET on March 24, 2020

ORLANDO, Fla., March 24, 2020 /PRNewswire/ -- Marriott Vacations Worldwide (NYSE: VAC) announced today that due to quickly accelerating travel restrictions and restrictions on business operations as a result of the COVID-19 pandemic, the Company has decided to close all of its North America sales centers for two weeks effective March 23, 2020. In addition, beginning March 25, 2020, we are closing our resorts for rental guests with stays at our branded North America vacation ownership resorts for the next 30 days, and are reducing operations and amenities at all of our resorts based on various governmental mandates and advisories.

Marriott Vacations Worldwide Corporation. (PRNewsFoto/Marriott Vacations Worldwide)
"From Singapore to London to Hawaii, the effect on our business is both widespread and profound," said Stephen P. Weisz, president and chief executive officer. "We have a resilient business model with nearly half of our Adjusted EBITDA Contribution coming from recurring revenue streams. While we've never seen anything of this magnitude, we have seen other disruptions in the past and we've been able to manage through them."
As previously announced, the Company started the year off strong, with first quarter consolidated contract sales up 10% through March 13th. In addition, North America resort occupancy was above 80% for the week ended March 16th. Since then, the Company has seen marked declines in occupancy, rentals, and contract sales due to the COVID-19 pandemic. As a result, the Company is taking a number of mitigating actions, including:
  • The Company's executive leadership team is taking a 50% salary reduction.
  • All new hires, with the exception of mission-critical needs, have been frozen.
  • The Company is implementing furloughs and reduced work hours.
  • The Company is deferring its employee 401(k) match.
  • The Company has developed plans that could reduce investment on capital expenditures and inventory by up to $240 million if necessary.
  • The Company has suspended share repurchases under its share repurchase plan.
"We expect that we can make the changes needed so that we can run the business at close to cash flow neutral until the business returns to a more normal level," said Mr. Weisz. "Thanks to the resilience of our business model and the extremely difficult decisions we are making, I firmly believe that we will come through this an even stronger company."
Balance Sheet and Liquidity
As previously announced, as a precautionary measure to ensure adequate liquidity for a sustained period, the Company drew down the remainder of its $600 million Revolving Credit Facility on March 17th to increase its cash position, bringing the Company's current cash balance to $670 million. In addition, the Company had gross vacation ownership notes receivable of nearly $140 million that it expects to be eligible for securitization under its warehouse facility. The Company has suspended all share repurchases for now and will work with its board of directors to make decisions on future dividend payments. In addition, the Company has no corporate debt maturities until September 2022.
 

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Am I misunderstanding this:

Fat Cats are ONLY going to get 50% of their big fat pay, but hourly workers are being laid off(furloughed)?
 

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Am I misunderstanding this:

Fat Cats are ONLY going to get 50% of their big fat pay, but hourly workers are being laid off(furloughed)?
lol, I am not sure what would be fair but I am pretty sure the executives have to work a lot more now given the constantly changing environment. Probably their bonuses will be seriously affected as well. There cannot be true fairness in what is happening. Nobody will be able to fully compensate the corner store owner or the dentist that have no income now. How do you square that with a person that works for the government that still collects 100% of the paycheque for staying home. They will probably get their 1500 dollar cheques as well, it will be their Easter bonus.
 

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lol, I am not sure what would be fair but I am pretty sure the executives have to work a lot more now given the constantly changing environment. Probably their bonuses will be seriously affected as well. There cannot be true fairness in what is happening. Nobody will be able to fully compensate the corner store owner or the dentist that have no income now. How do you square that with a person that works for the government that still collects 100% of the paycheque for staying home. They will probably get their 1500 dollar cheques as well, it will be their Easter bonus.

However, if these Fat Cats did not spend billions buyback shares and huge executives payout, they probably would be fine now without aid. Instead, people will bail them out now, so they can take 50% pay cut this year and continue to receive their packages next years and so on. What a nice deal. Poor dentists and small business owners will probably receive zero % loan that they will still have to pay back in a year or two, which means nothing to small business.
 

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Am I misunderstanding this:

Fat Cats are ONLY going to get 50% of their big fat pay, but hourly workers are being laid off(furloughed)?

The CEO of Marriott Vacations received only 14% of his overall compensation last year in salary, so poor guy is taking a 7% pay cut.
 

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There is nothing fair about what is going on right now. However, VAC needs executives in order to continue operating. It just is what it is. Hopefully, they are doing a good job managing the company. If they're not, please share specific information.
 

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The CEO of Marriott Vacations received only 14% of his overall compensation last year in salary, so poor guy is taking a 7% pay cut.
their overall package probably depends on a number of factors and, with the stock being where it is and with zero chance for the company to earn the same money if any, I highly and respectfully doubt their compensation will be reduced by 7%.
I find myself in the odd position to defend the Marriott executives.
 
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However, if these Fat Cats did not spend billions buyback shares and huge executives payout, they probably would be fine now without aid. Instead, people will bail them out now, so they can take 50% pay cut this year and continue to receive their packages next years and so on. What a nice deal. Poor dentists and small business owners will probably receive zero % loan that they will still have to pay back in a year or two, which means nothing to small business.

Share buybacks are just another way to return capital to shareholders - like dividends - but share buybacks can be dynamically managed (increased or decreased) as market conditions change. By contrast, dividends, once established at a certain level, are incredibly hard to reduce except in extreme circumstances like 2008 or today. When your earnings build cash for your company, you can either return that capital to shareholders, invest it to grow your business, or increase your cash reserves. Cash reserves tend to be "dead money" so you don't want to have more than you realistically need. That was one of the big raps on Apple for a long time - they built too much cash and didn't return it to shareholders. That's when an activist investor forced them to institute a dividend and more aggressive share repurchases.

Any company that would have maintained excess cash balance levels that would allow them to weather a potential multi-month virtual total shutdown of their business like today would have been properly lambasted by their shareholders as being too conservative. Most companies try to maintain reserves that would get them through a typical economic downturn that could be reasonably predicted. The current environment is an "edge case" that no reasonable person could ever predict would happen in any given year. So what should a company reserve for - normal business cycles or should they prepare for an asteroid impact? This isn't an asteroid perhaps, but it's certainly much different than normal business cycles.
 
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JIMinNC

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their overall package probably depends on a number of factors and, with the stock being where it is and with zero chance for the company to earn the same money if any, I highly and respectfully doubt their compensation will be reduced by 7%.
I find myself in the odd position to defend the Marriott executives.

Absolutely. Given that VAC stock is now trading under $55/share (versus $130/share plus in February), I suspect most of executive management's incentive stock options are under water. They are cutting they salary by 50%, but their incentive comp will likely drop even more.
 

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We need to look at the big picture and ask the question. Why, was this decision made?
 

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Share buybacks are just another way to return capital to shareholders - like dividends - but share buybacks can be dynamically managed (increased or decreased) as market conditions change. By contrast, dividends, once established at a certain level, are incredibly hard to reduce except in extreme circumstances like 2008 or today. When your earnings build cash for your company, you can either return that capital to shareholders, invest it to grow your business, or increase your cash reserves. Cash reserves tend to be "dead money" so you don't want to have more than you realistically need. That was one of the big raps on Apple for a long time - they built too much cash and didn't return it to shareholders. That's when an activist investor forced them to institute a dividend and more aggressive share repurchases.

Any company that would have maintained excess cash balance levels that would allow them to weather a potential multi-month virtual total shutdown of their business like today would have been properly lambasted by their shareholders as being too conservative. Most companies try to maintain reserves that would get them through a typical economic downturn that could be reasonably predicted. The current environment is an "edge case" that no reasonable person could ever predict would happen in any given year. So what should a company reserve for - normal business cycles or should they prepare for an asteroid impact? This isn't an asteroid perhaps, but it's certainly much different than normal business cycles.
Probably for optics, they want to show shareholders and owners that they are sharing the pain. Liquidity does not seem to be an issue.
 

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Any company that would have maintained excess cash balance levels that would allow them to weather a potential multi-month virtual total shutdown of their business like today would have been properly lambasted by their shareholders

I think that’s the main reason why we have the problem today. If a corporation can’t even manage to survive few months but had spent billions on their shares buyback, why should people bail them out. It’s just totally wrong.

How about my business that is losing money everyday and had to fire 5 out of 7 employees last week? Who is helping me? No one. They were yelling and cursing at me. Landlord and banks still want to see the checks on time. Yes I have saved enough cash to survive this for many months and even years with minimum operation, but it’s not looking good even I was well prepared for doomsday.
 

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I also feel they have adjusted their budget down to show the actual revenue of the corporation for IRS.
 

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Am I misunderstanding this:

Fat Cats are ONLY going to get 50% of their big fat pay, but hourly workers are being laid off(furloughed)?

Yeah now they are only earning 750 times what the lowest paid worker use to earn before they were laid off vice 1500 times.
 

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If they are closing all their sales centers then they can lay off all Sales Management up to the Senior Executive Level. They have nothing to Manage.
 

pedro47

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I feel something is up and in the new stimulus package because the NBA just announced a similar decision liked Marriott’s. There must be an advantage for large corporations dealing with this for corporate taxes and the IRS.
 
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