What changed in this filing

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Item 1. Financial Statements

2024-11-04 compared with 2024-07-31 · 94 added, 57 removed, 357 unchanged (30% of the section changed)

3 unchanged sentences

(in millions, except per share amounts)

Three Months Ended Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Three Months Ended Nine Months Ended

September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Base management fees $ 312 $ 306 $ 955 $ 917

12 unchanged sentences

General, administrative, and other 276 239 785 681

Merger-related charges and other 8 38 16 39

Restructuring and merger-related charges

Reimbursed expenses 4,681 4,238 13,827 12,740

15 unchanged sentences

(in millions)

Three Months Ended Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Three Months Ended Nine Months Ended

September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Net income $ 584 $ 752 $ 1,920 $ 2,235

Other comprehensive (loss) income

Other comprehensive income (loss)

Foreign currency translation adjustments 209 ( 139 ) ( 62 ) ( 132 )

Other adjustments, net of tax ( 18 ) 6 ( 5 ) 12

Total other comprehensive (loss) income, net of tax ( 111 ) ( 69 ) ( 258 ) 13

Total other comprehensive income (loss), net of tax 191 ( 133 ) ( 67 ) ( 120 )

Comprehensive income $ 775 $ 619 $ 1,853 $ 2,115

3 unchanged sentences

(in millions)

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Current assets

39 unchanged sentences

(in millions)

Six Months Ended

June 30, 2024 June 30, 2023

Nine Months Ended

September 30, 2024 September 30, 2023

OPERATING ACTIVITIES

6 unchanged sentences

Contract acquisition costs ( 256 ) ( 134 )

Merger-related charges and other 15 32

Restructuring and merger-related charges 24 42

Working capital changes ( 162 ) ( 141 )

20 unchanged sentences

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period (1)

(1) The 2024 amounts include beginning restricted cash of $ 28 million at December 31, 2023, and ending restricted cash of $ 21 million at June 30, 2024, which we present in the “Prepaid expenses and other” and “Other noncurrent assets” captions of our Balance Sheets.

(1) The 2024 amounts include beginning restricted cash of $ 28 million at December 31, 2023, and ending restricted cash of $ 22 million at September 30, 2024, which we present in the “Prepaid expenses and other” and “Other noncurrent assets” captions of our Balance Sheets.

See Notes to Condensed Consolidated Financial Statements.

13 unchanged sentences

Accordingly, ultimate results could differ from those estimates.

The accompanying Financial Statements reflect all normal and recurring adjustments necessary to present fairly our financial position as of June 30, 2024 and December 31, 2023, the results of our operations for the three and six months ended June 30, 2024 and June 30, 2023, and cash flows for the six months ended June 30, 2024 and June 30, 2023.

The accompanying Financial Statements reflect all normal and recurring adjustments necessary to present fairly our financial position as of September 30, 2024 and December 31, 2023, the results of our operations for the three and nine months ended September 30, 2024 and September 30, 2023, and cash flows for the nine months ended September 30, 2024 and September 30, 2023.

Interim results may not be indicative of fiscal year performance because of seasonal and short-term variations.

2 unchanged sentences

The table below illustrates the reconciliation of the earnings and number of shares used in our calculations of basic and diluted earnings per share, the latter of which uses the treasury stock method to calculate the dilutive effect of the Company’s potential common stock:

Three Months Ended Six Months Ended

(in millions, except per share amounts) June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Three Months Ended Nine Months Ended

(in millions, except per share amounts) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Computation of Basic Earnings Per Share

10 unchanged sentences

STOCK-BASED COMPENSATION

We granted 0.8 million restricted stock units (“RSUs”) during the 2024 first half to certain officers and employees, and those units vest generally over four years in equal annual installments commencing one year after the grant date.

We also granted 0.1 million performance-based RSUs (“PSUs”) in the 2024 first half to certain executives, which are earned subject to continued employment and the satisfaction of certain performance and market conditions based on the degree of achievement of pre-established targets for 2026 adjusted EBITDA performance and relative total stockholder return over the 2024 to 2026 performance period.

RSUs, including PSUs, granted in the 2024 first half had a weighted average grant-date fair value of $ 226 per unit.

We recorded stock-based compensation expense for RSUs and PSUs of $ 49 million in the 2024 second quarter, $ 49 million in the 2023 second quarter, $ 94 million in the 2024 first half, and $ 82 million in the 2023 first half.

Deferred compensation costs for unvested awards for RSUs and PSUs totaled $ 272 million at June 30, 2024 and $ 171 million at December 31, 2023.

Our effective tax rate increased to 25.8 percent for the 2024 second quarter compared to 24.7 percent for the 2023 second quarter, primarily due to a shift in earnings to jurisdictions with higher tax rates.

Our effective tax rate increased to 24.4 percent for the 2024 first half compared to 18.0 percent for the 2023 first half, primarily due to the prior year release of tax reserves and a shift in earnings to jurisdictions with higher tax rates.

We paid cash for income taxes, net of refunds, of $ 433 million in the 2024 first half and $ 406 million in the 2023 first half.

We granted 0.8 million restricted stock units (“RSUs”) during the 2024 first three quarters to certain officers and employees, and those units vest generally over four years in equal annual installments commencing one year after the grant date.

We also granted 0.1 million performance-based RSUs (“PSUs”) in the 2024 first three quarters to certain executives, which are earned subject to continued employment and the satisfaction of certain performance and market conditions based on the degree of achievement of pre-established targets for 2026 adjusted EBITDA performance and relative total stockholder return over the 2024 to 2026 performance period.

RSUs, including PSUs, granted in the 2024 first three quarters had a weighted average grant-date fair value of $ 226 per unit.

We recorded stock-based compensation expense for RSUs and PSUs of $ 54 million in the 2024 third quarter, $ 47 million in the 2023 third quarter, $ 148 million in the 2024 first three quarters, and $ 129 million in the 2023 first three quarters.

Deferred compensation costs for unvested awards for RSUs and PSUs totaled $ 224 million at September 30, 2024 and $ 171 million at December 31, 2023.

Our effective tax rate increased to 25.7 percent for the 2024 third quarter compared to 23.9 percent for the 2023 third quarter, primarily due to a shift in earnings to jurisdictions with higher tax rates.

Our effective tax rate increased to 24.8 percent for the 2024 first three quarters compared to 20.1 percent for the 2023 first three quarters, primarily due to the prior year release of tax reserves and a shift in earnings to jurisdictions with higher tax rates.

We paid cash for income taxes, net of refunds, of $ 729 million in the 2024 first three quarters and $ 669 million in the 2023 first three quarters.

COMMITMENTS AND CONTINGENCIES

We present the maximum potential amount of our future guarantee fundings and the carrying amount of our liability for our debt service, operating profit, and other guarantees (excluding contingent purchase obligations) for which we are the primary obligor at June 30, 2024 in the following table:

(in millions)

10 unchanged sentences

The closing is expected to occur in the 2024 fourth quarter.

We account for the put option as a guarantee, and our recorded liability (reflected in the “Accrued expenses and other” caption of our Balance Sheets) was $ 300 million at June 30, 2024 and December 31, 2023.

We account for the put option as a guarantee, and our recorded liability (reflected in the “Accrued expenses and other” caption of our Balance Sheets) was $ 300 million at September 30, 2024 and December 31, 2023.

Starwood Data Security Incident

2 unchanged sentences

Working with leading security experts, we determined that there was unauthorized access to the Starwood network since 2014 and that an unauthorized party had copied information from the Starwood reservations database and taken steps towards removing it.

We discontinued use of t he Starwood reservations database for business operations at the end of 2018 .

We discontinued use of the Starwood reservations database for business operations at the end of 2018.

Litigation, Claims, and Government Investigations

13 unchanged sentences

We promptly petitioned the Fourth Circuit, seeking leave to appeal that ruling.

The Fourth Circuit granted that petition on January 18, 2024, but has not yet set a date for oral argument.

The Fourth Circuit granted that petition on January 18, 2024, oral argument was held on November 1, 2024, and we await a decision.

A case brought by the City of Chicago (which is consolidated in the MDL proceeding) also remains pending.

4 unchanged sentences

state and foreign governmental authorities made inquiries, opened investigations, or requested information and/or documents related to the Data Security Incident and related matters.

Most of these matters have been resolved, are expected to be resolved in the near future, or no longer appear to be active.

We believe we have reached a resolution with the Federal Trade Commission, and we are continuing to progress in our discussions with the Attorney General offices from 49 states and the District of Columbia.

Based on this progress, we believe it is probable that we will incur losses, and as of June 30, 2024, we have an accrual for an estimated loss contingency, which is not material to our Financial Statements.

While we believe it is reasonably possible that we may incur losses in excess of the amounts recorded associated with the above described MDL proceedings and unresolved regulatory investigations related to the Data Security Incident, it is not possible to reasonably estimate the amount of such losses or range of loss that might result from adverse judgments, settlements, fines, penalties or other resolution of these proceedings and investigations based on:

Most of these matters have been resolved or no longer appear to be active.

In October 2024, we reached final resolutions with the Federal Trade Commission and the Attorney General offices from 49 states and the District of Columbia (the “AG Offices”).

Among other terms, the resolution with the AG Offices includes a $ 52 million monetary payment, which we have fully accrued for as of September 30, 2024, and which is not material to our Financial Statements.

We do not expect the terms of these resolutions to have a material impact on our current or ongoing operations.

While we believe it is reasonably possible that we may incur losses in excess of the amounts recorded associated with the above described MDL proceedings and unresolved regulatory investigations related to the Data Security Incident, it is not possible to reasonably estimate the amount of such losses or range of loss in excess of the amounts recorded that might result from adverse judgments, settlements, fines, penalties or other resolution of these proceedings and investigations based on:

(1) in the case of the above described MDL proceedings, the current stage of these proceedings, the absence of specificity as to alleged damages, the uncertainty as to the certification of a class or classes and the size of any certified class, and the lack of resolution of significant factual and legal issues, and (2) uncertainty regarding unresolved inquiries, investigations, or requests for information and/or documents.

Other Legal Proceedings

During the 2024 third quarter, we recorded certain expenses related to settled and ongoing claims brought against the Company regarding the use of copyrighted music.

These amounts are not material to our Financial Statements.

While we believe it is reasonably possible that we may incur losses in excess of the amounts already recorded for the unresolved claims, we are currently unable to reasonably estimate the amount of losses or range of

loss in excess of the amounts recorded.

At this time, we do not expect these claims or resolutions to have a material impact on the Company’s financial position or operations.

LONG-TERM DEBT

We provide detail on our long-term debt balances, net of discounts, premiums, and debt issuance costs, in the following table as of June 30, 2024 and year-end 2023:

(in millions) June 30, 2024 December 31, 2023

We provide detail on our long-term debt balances, net of discounts, premiums, and debt issuance costs, in the following table as of September 30, 2024 and year-end 2023:

(in millions) September 30, 2024 December 31, 2023

Senior Notes:

35 unchanged sentences

(effective interest rate of 5.6 %)

Series PP Notes, interest rate of 4.8 %, face amount of $ 500 , maturing March 15, 2030

(effective interest rate of 5.0 %)

Series QQ Notes, interest rate of 5.4 %, face amount of $ 1,000 , maturing March 15, 2035

(effective interest rate of 5.5 %)

Commercial paper 769 1,421

4 unchanged sentences

$ 12,671 $ 11,320

We paid cash for interest, net of amounts capitalized, of $ 303 million in the 2024 first half and $ 196 million in the 2023 first half.

We paid cash for interest, net of amounts capitalized, of $ 350 million in the 2024 first three quarters and $ 266 million in the 2023 first three quarters.

In August 2024, we issued $ 500 million aggregate principal amount of 4.800 percent Series PP Notes due March 15, 2030 (the “Series PP Notes”) and $ 1.0 billion aggregate principal amount of 5.350 percent Series QQ

Notes due March 15, 2035 (the “Series QQ Notes”).

We will pay interest on the Series PP Notes and Series QQ Notes in March and September of each year, commencing in March 2025.

Net proceeds from the offering of the Series PP Notes and Series QQ Notes were approximately $ 1.480 billion, after deducting the underwriting discount and expenses, and were made available for general corporate purposes, including working capital, capital expenditures, acquisitions, stock repurchases, or repayment of outstanding indebtedness.

In February 2024, we issued $ 500 million aggregate principal amount of 4.875 percent Series NN Notes due May 15, 2029 (the “Series NN Notes”) and $ 1.0 billion aggregate principal amount of 5.300 percent Series OO Notes due May 15, 2034 (the “Series OO Notes”).

We pay interest on the Series NN Notes and Series OO Notes in May and November of each year.

We received net proceeds of approximately $ 1.468 billion from the offering of the Series NN Notes and Series OO Notes, after deducting the underwriting discount and expenses, which were made available for general corporate purposes, including working capital, capital expenditures, acquisitions, stock repurchases, or repayment of outstanding indebtedness.

Net proceeds from the offering of the Series NN Notes and Series OO Notes were approximately $ 1.468 billion, after deducting the underwriting discount and expenses, and were made available for general corporate purposes, including working capital, capital expenditures, acquisitions, stock repurchases, or repayment of outstanding indebtedness.

We are party to a $ 4.5 billion multicurrency revolving credit agreement (as amended, the “Credit Facility”).

7 unchanged sentences

We present the carrying amounts and the fair values of noncurrent financial assets and liabilities that qualify as financial instruments in the following table:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(in millions) Carrying Amount Fair Value Carrying Amount Fair Value

8 unchanged sentences

ACCUMULATED OTHER COMPREHENSIVE LOSS AND STOCKHOLDERS’ DEFICIT

The following tables detail the accumulated other comprehensive loss activity for the 2024 first half and 2023 first half:

The following tables detail the accumulated other comprehensive loss activity for the 2024 first three quarters and 2023 first three quarters:

(in millions) Foreign Currency Translation Adjustments Other Adjustments Accumulated Other Comprehensive Loss

Balance at year-end 2023 $ ( 654 ) $ 7 $ ( 647 )

Other comprehensive (loss) income before reclassifications (1)

Other comprehensive loss before reclassifications

( 62 ) ( 2 ) ( 64 )

Reclassification adjustments — ( 3 ) ( 3 )

Net other comprehensive (loss) income

Net other comprehensive loss

( 62 ) ( 5 ) ( 67 )

Balance at June 30, 2024 $ ( 925 ) $ 20 $ ( 905 )

Balance at September 30, 2024 $ ( 716 ) $ 2 $ ( 714 )

(in millions) Foreign Currency Translation Adjustments Other Adjustments Accumulated Other Comprehensive Loss

1 unchanged sentence

$ ( 740 ) $ 11 $ ( 729 )

Other comprehensive income before reclassifications (1)

Other comprehensive (loss) income before reclassifications

( 129 ) 11 ( 118 )

Reclassification adjustments ( 3 ) 1 ( 2 )

Net other comprehensive income

Balance at June 30, 2023 $ ( 733 ) $ 17 $ ( 716 )

(1) Other comprehensive (loss) income before reclassifications for foreign currency translation adjustments includes intra-entity foreign currency transactions that are of a long-term investment nature, which resulted in gains of $ 21 million for the 2024 first half and losses of $ 14 million for the 2023 first half.

The following tables detail the changes in common shares outstanding and stockholders’ deficit for the 2024 first half and 2023 first half:

Net other comprehensive (loss) income

( 132 ) 12 ( 120 )

Balance at September 30, 2023 $ ( 872 ) $ 23 $ ( 849 )

The following tables detail the changes in common shares outstanding and stockholders’ deficit for the 2024 first three quarters and 2023 first three quarters:

(in millions, except per share amounts)

18 unchanged sentences

$ ( 2,091 ) $ 5 $ 6,030 $ 15,844 $ ( 23,065 ) $ ( 905 )

— Net income 584 — — 584 — —

— Other comprehensive income 191 — — — — 191

— Dividends ($ 0.63 per share)

( 177 ) — — ( 177 ) — —

0.2 Stock-based compensation plans 101 — 95 — 6 —

( 4.5 ) Purchase of treasury stock ( 1,029 ) — — — ( 1,029 ) —

278.6 Balance at September 30, 2024

$ ( 2,421 ) $ 5 $ 6,125 $ 16,251 $ ( 24,088 ) $ ( 714 )

Common Shares Outstanding

18 unchanged sentences

$ ( 224 ) $ 5 $ 5,952 $ 13,544 $ ( 19,009 ) $ ( 716 )

— Net income 752 — — 752 — —

— Other comprehensive loss ( 133 ) — — — — ( 133 )

— Dividends ($ 0.52 per share)

( 154 ) — — ( 154 ) — —

0.4 Stock-based compensation plans 56 — 44 — 12 —

( 4.8 ) Purchase of treasury stock ( 958 ) — — — ( 958 ) —

295.2 Balance at September 30, 2023

$ ( 661 ) $ 5 $ 5,996 $ 14,142 $ ( 19,955 ) $ ( 849 )

CONTRACTS WITH CUSTOMERS

Our current and noncurrent liability for guest loyalty program increased by $ 319 million, to $ 7,325 million at June 30, 2024, from $ 7,006 million at December 31, 2023, primarily reflecting an increase in points earned by members.

The increase was partially offset by $ 1,645 million of revenue recognized in the 2024 first half, that was deferred as of December 31, 2023.

Our allowance for credit losses was $ 207 million at June 30, 2024 and $ 197 million at December 31, 2023.

Our current and noncurrent liability for guest loyalty program increased by $ 365 million, to $ 7,371 million at September 30, 2024, from $ 7,006 million at December 31, 2023, primarily reflecting an increase in points earned by members.

The increase was partially offset by $ 2,410 million of revenue recognized in the 2024 first three quarters, that was deferred as of December 31, 2023.

Our allowance for credit losses was $ 207 million at September 30, 2024 and $ 197 million at December 31, 2023.

BUSINESS SEGMENTS

2 unchanged sentences

Our Caribbean & Latin America (“CALA”) operating segment does not meet the applicable accounting criteria for separate disclosure as a reportable business segment, and as such, we include its results in “Unallocated corporate and other.” We revised the prior period amounts shown in the tables below to conform to our current presentation.

We evaluate the performance of our operating segments using “segment profits,” which is based largely on the results of the segment without allocating corporate expenses, income taxes, indirect general, administrative, and other expenses, or merger-related charges and other expenses.

We assign gains and losses, equity in earnings or losses, and direct general, administrative, and other expenses to each of our segments.

“Unallocated corporate and other” includes a portion of our revenues (such as fees we receive from our credit card programs and vacation ownership licensing agreements), revenues and expenses for our Loyalty Program, general, administrative, and other expenses, merger-related charges and other expenses, equity in earnings or losses, and other gains or losses that we do not allocate to our segments, as well as results of our CALA operating segment.

“Unallocated corporate and other” includes a portion of our revenues (such as fees we receive from our credit card programs and vacation ownership licensing agreements), revenues and expenses for our Loyalty Program, general, administrative, and other expenses, certain restructuring and merger-related charges, equity in earnings or losses, and other gains or losses that we do not allocate to our segments, as well as results of our CALA operating segment.

Our CODM monitors assets for the consolidated Company but does not use assets by operating segment when assessing performance or making operating segment resource allocations.

Segment Revenues

The following tables present our revenues disaggregated by segment and major revenue stream for the 2024 second quarter, 2023 second quarter, 2024 first half, and 2023 first half:

Three Months Ended June 30, 2024

The following tables present our revenues disaggregated by segment and major revenue stream for the 2024 third quarter, 2023 third quarter, 2024 first three quarters, and 2023 first three quarters:

Three Months Ended September 30, 2024

(in millions) U.S.

9 unchanged sentences

Total revenues

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

(in millions) U.S.

8 unchanged sentences

Total revenues

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

(in millions) U.S.

8 unchanged sentences

Total revenues

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

(in millions) U.S.

9 unchanged sentences

Segment Profits

Three Months Ended Six Months Ended

(in millions) June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Three Months Ended Nine Months Ended

(in millions) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

& Canada $ 617 $ 707 $ 2,029 $ 2,120

7 unchanged sentences

Net income $ 584 $ 752 $ 1,920 $ 2,235

RESTRUCTURING CHARGES

Earlier this year, we launched a comprehensive initiative to enhance our effectiveness and efficiency across the Company.

In connection with these efforts, in the 2024 third quarter, we recorded an immaterial amount of charges for voluntary retirement benefits relating to our above-property organization in the “Restructuring and merger-related charges” and “Reimbursed expenses” captions of our Income Statements.

We anticipate total charges of approximately $ 100 million for employee termination benefits relating to our above-property organization.

We expect to substantially complete this initiative by the end of the 2025 first quarter and expect the above-described charges to be recorded primarily in the 2024 fourth quarter.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements