Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Marriott Vacations Worldwide First Quarter 2012 Earnings Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, Thursday, May 3, 2012, at 10:00 a.m. Eastern Time. I will now turn the conference over to Mr. Jeff Hansen, Vice President, Investor Relations. Please go ahead, sir.

Thank you, Ron. And welcome to the Marriott Vacations Worldwide's First Quarter 2012 Earnings Conference Call. I am joined today by Steve Weisz, President and CEO; and John Geller, Executive Vice President and CFO. I do need to remind everyone that many of our comments today are not historical facts and are considered forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties as described in our SEC filings, which could cause future results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the press release that we issued this morning, along with our comments on this call, are effective only today, May 3, 2012, and will not be updated as actual events unfold. Throughout the call, we will make references to non-GAAP financial information. You can find a reconciliation of non-GAAP financial measures referred to in our remarks and the schedules attached to our press release as well as the Investor Relations page on our website at www.mvwc.com. I will now turn it over to Steve Weisz, President and CEO of Marriott Vacations Worldwide.

Thanks, Jeff. Good morning, everyone, and thank you for joining our First Quarter 2012 Earnings Call. This morning, I'll provide an overview of our first quarter results and an update on the operational initiatives we are executing. I'll then turn the call over to John to review our financial results in more detail. We'll then open the call for your questions. This was our first full quarter as an independent company, and we are very pleased with the exceptional results of both our top line contract sales and margin initiatives. In North America, 18% growth in both volume per guest, or VPG, and contract sales underscored solid marketing and sales execution. We also made significant progress toward reducing our marketing and sales costs and are well on our way to meet or exceed our target of 12% development margin for the year, which is 300 basis points or roughly 30% higher than our 2011 adjusted margins. This demonstrates the leverage in our business model and the progress we have made on our strategic goal of improving our development margins. First quarter year-over-year development margins also improved after adjusting for revenue reportability, which John will speak to shortly. On our last earnings call, we discussed some sales initiatives including new purchase minimums and price increases we were testing within our North American points product, Marriott Vacation Club Destinations, that had impacted our fourth quarter performance. With the insights of these initiatives provided, we made some adjustments which proved very successful in driving 18% contract sales growth in North America in the first quarter. For the company, total gross contract sales increased 6% to $154 million during the first quarter, reflecting the strength in North America, partially offset by some softness in our other segments which we anticipated given the current economic…

Thank you, Steve, and good morning. The first quarter of 2012 is evidence we are making important strides toward achieving the goals we laid out prior to becoming a public company. As Steve mentioned, we are on track to improve our development margin by 300 basis points for the year. We plan to achieve this by leveraging our marketing and sales cost structure through growing North America contract sales and VPG, each of which grew by 18% in the first quarter, and by our continued focus on reducing our overall cost structure. In addition, we have made significant progress in improving the results of our rental business and expect to see continued upside compared to previous years. Finally, we continue growing cash flow streams, like our annual club dues, in addition to our already established solid management fee stream. This morning, I will provide more granularity into our development margin, including the impact of revenue reportability, and discuss our rental, resort management and financing businesses as well as our segment results. Lastly, I will provide an update on our liquidity. Starting with development margin. We have made solid progress this quarter. While this may not be easily understood from the face of our financial statements, recognize that the first quarters of both 2011 and 2012 were impacted by revenue reportability. You may recall reportability is generally an issue of when, not if, we recognize the revenue. And with the strong growth in first quarter contract sales, certain revenue for contracts that were in rescission periods was deferred at the end of the quarter. While this affects quarter-to-quarter earnings and related margins because of the impact of seasonality on contract sales, over of the course of the year, we will get the benefit from the impact of this deferred revenue as…

[Operator Instructions] Your first question comes from Eli Hackel from Goldman Sachs.

Just had a few questions, I'll just say them all upfront here. Obviously, a big increase in North America VPG and gross contract sales. Can you just talk about a few things there related to, obviously, the margins there but more on the marketing side and the cost of goods side. What are the things that you learned maybe more specifically from 4Q to 1Q where you had a big swing there that allowed for the growth in North America contract sales and the margins there, the big jump there? And the other thing on that is, what does that mean just in terms of going forward? Obviously, you kept gross contract sales the same at 4% to 8%, really strong in North America in the quarter. As you look out to the balance of the year, are you expecting North America to kind of be above your prior guide, or your prior thoughts for maybe Luxury, Europe, Asia a little bit below? And then finally, just on the land sales, you mentioned you're making progress there. Where -- can you just tell us where you are in terms of timing? Have you hired brokers to sell all the land you expect to sell? And then maybe, are there initial thoughts in terms of -- you've given $150 million to $200 million of expected proceeds. Is pricing coming in better or worse than you originally thought?

Okay, Eli, this is Steve. I'll try to tackle these as best I can. On the sales front, as I mentioned and we talked about even at the "end of the year" call, we had done a number of things in the fourth quarter in terms of looking at the minimum number of points that needed to be purchased in terms of looking at a fairly substantial price increase, et cetera. And as a result of all that, our sales team was able to take the learnings from those kind of, I'll call them, experiments or tests that we did in the fourth quarter. And we refined our sales process to the point where we believe that what we saw in the first quarter was really the result of taking those great learnings, which arguably cost us a little bit in the fourth quarter. But we were able to take those great learnings and apply them consistently across the system. And I believe, as far as going forward, certainly, those learnings are not going to be lost to us. We will continue to -- as we always do, every time we make a sale, we learn something more. But we believe that those things are things that will probably have a lot of traction for the balance of the year. So we feel very good about that. As far as the -- I'm sorry, I was going to -- let me deal with the land thing very quickly. Yes, we've hired brokers. On most of the parcels that we have, we've already gotten some expressions of interest. A little early to tell about what the price point and contract terms would be on some of those things. As obviously as some of those things start to materialize and become more firm, we'll be happy to share them with you as that happens. But at this point in time, we don't see anything that would cause us to feel any less optimistic about the $150 million to $200 million number that we have been using in the past. And I'm sorry, your question about the balance of the year, could you restate that for me, please?

Sure, Steve. So just -- obviously, the growth was very strong in the first quarter, up 18%. And assuming that there wasn't really any pulling forward of demand from the second quarter, maybe what that just means in terms of North America growth for the balance of the year. I mean, you're only guiding 4% to 8%. Obviously, Europe, Luxury and Asia, not doing that growth rate, but just given the strength of the first quarter, I was curious on your thoughts about North America for the balance of the year, just given that you're keeping that 4% to 8% range.

Yes. Well, clearly, we were very encouraged by what we saw in North America in the first quarter. One thing, we had probably a little better set of easier comps in the first quarter of '12 over '11, not dramatic but something that did give us a little boost there in terms of the percentage increase. As we've -- as I've said in my comments, the -- I was trying to say, "Hey, listen, we think we'll probably going to come in closer to the top end of our guidance than in the bottom end." I mean, that's factoring in what we've seen in North America and what we kind of believe what North America will look like going forward. We do have the drag, as you pointed out, of what's going on in Luxury, Europe, and not quite the performance we've been looking for in Asia, although we expect that to pick up. So I think you kind of -- when you do the arithmetic, blending all those things together and mixing it, that's where you see hopefully us coming in closer to the top end of the 4% to 8%, not towards the bottom end of the 4% to 8%.

[Operator Instructions] Your next question comes from Bob LaFleur from Cantor Fitzgerald.

So you got about $1 billion worth -- $926 million worth of inventory on the balance sheet. Can you talk a little bit longer term about inventory and where new inventory is going to come from, some of the things you're looking at whether it's joint ventures, greenfield developments, acquisitions, that sort of thing? Just want to understand what the long-term inventory plan is.

Yes, clearly one of the things that -- this is Steve, Bob. Clearly, one of the things that we have and will have for some time is the ability to add additional phases to our existing resorts where the infrastructure is in place, all the central facilities, buildings, sales centers, all those things are in place so you're literally stamping out units in new buildings. Having said that, if the right opportunities were to present themselves to us in terms of JVs or opportunities that are a little less capital intensive, we would certainly look at that. One of the advantages of having the real estate where we can develop phases is that, if we have a nice drop in product, in a project, in a place we -- where we might not have inventory today and put a new pin on the map, we can certainly push back the phasing of some of the existing resorts and, in fact, inject a new piece along the way. But we're going to look very carefully at all of those things. But we've got several years worth of buildable inventory already available to us and we think that, from a cash flow standpoint, it will look very attractive.

What's -- when you look at the buildout of the existing resorts, how much more incremental revenue -- or I'm sorry, inventory could you build as sort of your existing footprint without having to buy more dirt? Just ballpark just to get a sense of the order of magnitude.

I don't have the right -- I don't know the exact number here. Maybe John does, but it's several thousand there.

Yes, I think, Bob, it was, let's call it, $2 billion of additional investment in existing developments. That would probably equate to $6 billion to $7 billion of contract sales, give or take, so that gives you -- as Steve spoke to, we have a pretty long runway in terms of developing what we have. But clearly, that's a balance against delivering the right customer experience too on the sales side and making sure that we also are growing our portfolio and the experiences we provide to our customers.

Okay. And if I could ask one more question on a completely unrelated topic. Could you sort of walk us through the Marriott rewards liability you have, sort of what the mechanics of that are burning off and, next, sort of how it flows through your P&L? I think it's just an area that there's some, still, confusion about.

Sure. In terms of the liability that's on our books, that's already flown through the P&L historically. At the date of -- we'll give you a little bit of history here, hopefully not too much. But when we were part of Marriott and we issued Marriott rewards points, we actually paid for those Marriott rewards points when those points were redeemed by the customers, so hence the liability. So we would -- as we issue those, it would accrue a liability. As the points were redeemed by the customers, we would pay that to -- in that rewards program. And that's different how -- than how hotel owners and franchisees pay: They pay as they go. So post-spin, what we do is we pay as we go. So that expense hitting the current P&L from Marriott rewards is actually hitting as we go and there's no additional liability that's accruing. From a cash flow perspective, that liability essentially was frozen at the date of the spin or year end. And so it still works down the same way it did historically, so as those points are redeemed, you'll see that liability come down over time. And contractually, at the end of a, I think, 5-year or 4-year period, that we have to clean up and pay off the remaining balance after factoring in some breakage things like that. So you'll continue to see that liability. So [indiscernible] it came down about $10 million in the quarter. You'll continue to see that burn down through for the year and over the next 4 years...

Is -- that $10 million reduction, would -- does that flow through the income statement, or was that just an adjustment to the cash flow statement?

Net cash flow. So yes, the liability coming down that is the liability that was existed at the date of the spin. Going forward, we're paying as we go for new point issuances. Remember, the liability that's on our books is for points, Marriott rewards points, that were issued previously.

[Operator Instructions] There are no further questions at this time. Please continue.

Well, thank you for your questions. And I trust you've heard that we are pleased with the momentum we've generated so far in 2012, and we look forward to reporting our progress on future calls. Thank you for your participation in our call today and your continued interest in Marriott Vacations Worldwide. And finally, to everyone on the call and your families, enjoy your next vacation. Thank you.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.