What changed in this filing

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Item 1. Financial Statements

2020-08-05 compared with 2020-05-22 · 562 added, 363 removed, 708 unchanged (57% of the section changed)

3 unchanged sentences

(In millions, except per share amounts)

Three Months Ended

March 31, 2020

March 31, 2019

Three Months Ended Six Months Ended

June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Sale of vacation ownership products $ 53 $ 341 $ 311 $ 634

Management and exchange 145 231 372 470

Rental 18 150 153 297

Financing 70 69 142 137

Cost reimbursements 194 252 512 539

3 unchanged sentences

Management and exchange 77 123 215 256

Rental 73 97 171 177

Financing 23 21 61 43

General and administrative 19 64 89 131

1 unchanged sentence

Litigation charges — 1 2 2

Royalty fee 23 26 49 52

Impairment 1 — 96 26

Cost reimbursements 194 252 512 539

TOTAL EXPENSES 521 900 1,581 1,843

(Losses) gains and other (expense) income, net

Gains (losses) and other income (expense), net 14 2 ( 42 ) 10

Interest expense ( 42 ) ( 35 ) ( 75 ) ( 69 )

ILG acquisition-related costs ( 12 ) ( 36 ) ( 33 ) ( 62 )

Other — — ( 3 ) —

(LOSS) INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS ( 81 ) 74 ( 244 ) 113

4 unchanged sentences

(LOSS) EARNINGS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

Basic $ ( 1.68 ) $ 1.11 $ ( 4.25 ) $ 1.62

Diluted $ ( 1.68 ) $ 1.10 $ ( 4.25 ) $ 1.61

CASH DIVIDENDS DECLARED PER SHARE $ — $ 0.45 $ 0.54 $ 0.90

3 unchanged sentences

(In millions)

Three Months Ended

March 31, 2020

March 31, 2019

Three Months Ended Six Months Ended

June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

NET (LOSS) INCOME $ ( 62 ) $ 49 $ ( 167 ) $ 73

1 unchanged sentence

Derivative instrument adjustment, net of tax ( 1 ) ( 13 ) ( 25 ) ( 16 )

OTHER COMPREHENSIVE LOSS, NET OF TAX

OTHER COMPREHENSIVE GAIN (LOSS), NET OF TAX 2 ( 15 ) ( 39 ) ( 17 )

Net income attributable to noncontrolling interests ( 8 ) — ( 9 ) —

6 unchanged sentences

(In millions, except share and per share data)

Unaudited March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Cash and cash equivalents $ 566 $ 287

2 unchanged sentences

Vacation ownership notes receivable, net (including $ 1,797 and $ 1,750 from VIEs, respectively)

Property and equipment

Inventory 771 859

Property and equipment, net 835 718

Goodwill 2,817 2,892

Intangibles, net 977 1,027

Other (including $ 42 and $ 39 from VIEs, respectively)

TOTAL ASSETS $ 9,117 $ 9,214

LIABILITIES AND EQUITY

6 unchanged sentences

Securitized debt, net (including $ 1,886 and $ 1,871 from VIEs, respectively)

Debt, net 2,680 2,216

Other 185 197

Deferred taxes 289 300

9 unchanged sentences

34,192,119 and 33,438,176 shares, respectively

( 1,334 ) ( 1,253 )

Additional paid-in capital 3,736 3,738

3 unchanged sentences

Noncontrolling interests 21 12

TOTAL EQUITY 2,720 3,031

TOTAL LIABILITIES AND EQUITY $ 9,117 $ 9,214

4 unchanged sentences

(In millions)

Three Months Ended

March 31, 2020

March 31, 2019

Six Months Ended

June 30, 2020 June 30, 2019

OPERATING ACTIVITIES

11 unchanged sentences

Vacation ownership notes receivable collections 334 309

Inventory ( 5 ) 76

Purchase of vacation ownership units for future transfer to inventory ( 61 ) —

Other assets ( 5 ) ( 32 )

Accounts payable, advance deposits and accrued liabilities ( 239 ) ( 129 )

3 unchanged sentences

Other liabilities ( 11 ) —

Other, net ( 9 ) ( 3 )

Net cash, cash equivalents and restricted cash (used in) provided by operating activities ( 73 ) 56

8 unchanged sentences

(In millions)

Three Months Ended

March 31, 2020

March 31, 2019

Six Months Ended

June 30, 2020 June 30, 2019

FINANCING ACTIVITIES

4 unchanged sentences

Finance lease payment ( 8 ) —

Debt issuance costs ( 9 ) ( 6 )

Repurchase of common stock ( 82 ) ( 215 )

1 unchanged sentence

Payment of withholding taxes on vesting of restricted stock units ( 14 ) ( 10 )

Other, net — —

Net cash, cash equivalents and restricted cash provided by (used in) financing activities 320 ( 170 )

13 unchanged sentences

(In millions)

Accumulated Other Comprehensive Loss

Retained Earnings

Total MVW Shareholders' Equity

Noncontrolling Interests

Issued Common

Stock Treasury

Stock Additional

Capital Accumulated Other Comprehensive Loss Retained Earnings Total MVW Shareholders' Equity Noncontrolling Interests Total Equity

75.0 BALANCE AT DECEMBER 31, 2019 $ 1 $ ( 1,253 ) $ 3,738 $ ( 36 ) $ 569 $ 3,019 $ 12 $ 3,031

4 unchanged sentences

— Repurchase of common stock — ( 82 ) — — — ( 82 ) — ( 82 )

Employee stock plan issuance

— Dividends — — — — ( 22 ) ( 22 ) — ( 22 )

75.2 BALANCE AT MARCH 31, 2020 1 ( 1,335 ) 3,729 ( 77 ) 441 2,759 13 2,772

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

Total MVW Shareholders' Equity

Noncontrolling Interests

— Net (loss) income — — — — ( 70 ) ( 70 ) 8 ( 62 )

— Foreign currency translation adjustments — — — 3 — 3 — 3

— Derivative instrument adjustment — — — ( 1 ) — ( 1 ) — ( 1 )

— Share-based compensation plans — — 7 — — 7 — 7

— Employee stock plan issuance — 1 — — — 1 — 1

75.2 BALANCE AT JUNE 30, 2020 $ 1 $ ( 1,334 ) $ 3,736 $ ( 75 ) $ 371 $ 2,699 $ 21 $ 2,720

See Notes to Interim Consolidated Financial Statements

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (CONTINUED)

(In millions)

Issued Common

Stock Treasury

Stock Additional

Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total MVW Shareholders' Equity Noncontrolling Interests Total Equity

57.6 BALANCE AT DECEMBER 31, 2018 $ 1 $ ( 790 ) $ 3,721 $ 6 $ 523 $ 3,461 $ 5 $ 3,466

— Impact of adoption of ASU 2016-02

— — — — ( 8 ) ( 8 ) — ( 8 )

57.6 OPENING BALANCE 2019 1 ( 790 ) 3,721 6 515 3,453 5 3,458

— Net income — — — — 24 24 — 24

— Foreign currency translation adjustments — — — 1 — 1 — 1

2 unchanged sentences

— Repurchase of common stock — ( 106 ) — — — ( 106 ) — ( 106 )

— Dividends — — — — ( 20 ) ( 20 ) — ( 20 )

— Employee stock plan issuance — 1 — — — 1 — 1

57.8 BALANCE AT MARCH 31, 2019 1 ( 895 ) 3,717 4 519 3,346 5 3,351

— Net income — — — — 49 49 — 49

— ILG Acquisition purchase accounting adjustment — — — — — — 1 1

— Foreign currency translation adjustments — — — ( 2 ) — ( 2 ) — ( 2 )

— Derivative instrument adjustment — — — ( 13 ) — ( 13 ) — ( 13 )

— Share-based compensation plans — — 13 — — 13 — 13

— Repurchase of common stock — ( 109 ) — — — ( 109 ) — ( 109 )

— Dividends — — — — ( 20 ) ( 20 ) — ( 20 )

0.1 Employee stock plan issuance — — — — — — — —

57.9 BALANCE AT JUNE 30, 2019 $ 1 $ ( 1,004 ) $ 3,730 $ ( 11 ) $ 548 $ 3,264 $ 6 $ 3,270

See Notes to Interim Consolidated Financial Statements

7 unchanged sentences

The Financial Statements presented herein and discussed below include 100 percent of the assets, liabilities, revenues, expenses and cash flows of Marriott Vacations Worldwide, all entities in which Marriott Vacations Worldwide has a controlling voting interest (“subsidiaries”), and those variable interest entities (“VIEs”) for which Marriott Vacations Worldwide is the primary beneficiary in accordance with consolidation accounting guidance.

References in these Financial Statements to net income attributable to common shareholders and MVW shareholders’ equity do not include noncontrolling interests, which represent the outside ownership of our consolidated non-wholly owned entities and are reported separately.

References in these Financial Statements to net (loss) income attributable to common shareholders and MVW shareholders’ equity do not include noncontrolling interests, which represent the outside ownership of our consolidated non-wholly owned entities and are reported separately.

Intercompany accounts and transactions between consolidated companies have been eliminated in consolidation.

2 unchanged sentences

Such estimates include, but are not limited to, revenue recognition, allocations of the purchase price paid in business combinations, cost of vacation ownership products, inventory valuation, goodwill and intangibles valuation, property and equipment valuation, accounting for acquired vacation ownership notes receivable, vacation ownership notes receivable reserves, income taxes and loss contingencies.

The uncertainty created by the COVID-19 pandemic (defined below), and efforts to contain it, has made such estimates more difficult and subjective.

Accordingly, ultimate results could differ from those estimates.

The uncertainty created by the COVID-19 pandemic (defined below), and efforts to mitigate it, has made it more challenging to make these estimates.

Accordingly, ultimate results could differ materially from our estimates.

In our opinion, our Financial Statements reflect all normal and recurring adjustments necessary to present fairly our financial position, the results of our operations and cash flows for the periods presented.

5 unchanged sentences

See Footnote 2 “Significant Accounting Policies and Recent Accounting Standards” for additional information.

COVID-19 Pandemic

COVID-19 Pandemic Update

In March 2020, the World Health Organization declared the coronavirus (COVID-19) a global pandemic (the “COVID-19 pandemic”).

National, federal, state, and local governments have since implemented various restrictions, border closings, restrictions on public gatherings, quarantining of people who may have been exposed to the virus, shelter-in-place restrictions and limitations on business operations.

The speed with which the effects of the COVID-19 pandemic have changed the U.S.

and global economic landscape, outlook and, in particular, the travel and hospitality industries has been swift and unexpected.

Our business has experienced significant disruptions due to the unprecedented conditions surrounding the COVID-19 pandemic .

In our Vacation Ownership business, in response to quickly accelerating travel restrictions and restrictions on business operations as a result of the COVID-19 pandemic , we have closed all of our sales centers, and, beginning March 25, 2020, we closed our resorts for rental guests with stays at our branded North America vacation ownership resorts.

In addition, based on various governmental mandates and advisories, we have closed many of our resorts, and have reduced operations and amenities at our resorts that remain open.

At this time, we are unable to determine when we will be able to re-open our sales

centers, and the re-opening of our resorts is dependent upon when, and the extent to which, government restrictions are lifted, which cannot be determined at this time.

Additionally, in our Exchange & Third-Party Management business, the closures of certain affiliated resorts and managed properties had a significant impact on our business, and we have implemented certain temporary adjustments to cancellation policies for near-term travel.

We have also implemented furloughs and reduced work hours for our associates and have instituted “work from home” measures for many of our associates.

We are monitoring the situation and will reopen our sales centers as conditions permit;

however, extended or further closures may be required.

This situation is unprecedented and rapidly changing and has unknown duration and severity.

See Footnote 12 “ Securitized Debt ” and Footnote 13 “ Debt ” for discussion of events subsequent to the first quarter of 2020 related to our financial flexibility in light of the impact on global markets resulting from the COVID-19 pandemic.

National, federal, state, and local governments have since implemented various travel restrictions, border closings, restrictions on public gatherings, mandatory quarantines, shelter-in-place mandates and limitations on business operations.

The speed with which the effects of the COVID-19 pandemic have changed the global economic landscape, outlook and, in particular, the travel and hospitality industries, has been swift and unexpected.

The results of operations during the first half of 2020 include impacts related to the COVID-19 pandemic, which have been significantly adverse for our business, and the overall hospitality industry in general.

We began to see an adverse impact on occupancy in our Vacation Ownership business in mid-March 2020, which quickly accelerated later that month and continued into May 2020.

While many of our resorts remained open for owner occupancy throughout April and May, most owners chose to postpone their arrival until a later date, which resulted in low-single-digit overall resort occupancy for the second quarter of 2020.

In addition, in response to quickly evolving travel restrictions and restrictions on business operations,

we closed all of our sales centers, and beginning March 25, 2020, we closed our resorts for rental guests with stays at our branded North America vacation ownership resorts.

Further, due to low occupancy rates and based on various governmental mandates and advisories, we closed several of our resorts, and reduced operations and amenities at our resorts that remained open.

Based on these events and the uncertainty they created, we immediately began to focus on our liquidity, including quickly and substantially enhancing our cash holdings.

In late-March, we drew down the remainder of our $ 600 million Revolving Corporate Credit Facility (as defined in Footnote 13 “Debt”).

We issued senior secured debt in May, which we used to repay amounts outstanding on our Revolving Corporate Credit Facility.

As of June 30, 2020, we had $ 566 million in cash and cash equivalents on hand, and $ 597 million of availability on our Revolving Corporate Credit Facility.

In addition to accessing the capital markets, we believe we have made significant progress in bolstering our liquidity through cost reduction.

These efforts include reducing capital expenditures;

suspending hiring, salary increases and our 2019 401(k) match;

reducing executive and other associate salaries;

implementing furloughs and reduced work weeks for most of our associates;

and modifying vendor and supplier payment terms where possible.

In late-May, as many government restrictions were beginning to be relaxed, owner occupancy at our resorts began to grow and we began reopening resorts to rental guests.

We reopened certain sales centers in June and continued to open additional sales centers in July.

However, based on the resurgence of the virus in many of the locations in which our resorts and sales centers are located, extended or further closures of our sales centers may be required.

In our Exchange & Third-Party Management business, the closures of certain affiliated resorts and managed properties had a significant adverse impact on our business in the second quarter of 2020, with a large number of resorts closed or not taking reservations at the beginning of the quarter, but by the end of June, over half of those resorts had reopened.

However, based on the resurgence of the virus in many of the locations in which these resorts and managed properties are located, further closures may be required.

The COVID-19 pandemic has depressed the demand for vacation rentals due to “stay-at-home” recommendations or requirements, quarantines, and the reluctance of consumers to travel.

During the second quarter of 2020, we continued the temporary adjustments implemented in the first quarter of 2020 to cancellation policies for near-term travel for customers who were unable or unwilling to travel due to the COVID-19 pandemic.

We continue to monitor this unprecedented and rapidly evolving situation, and are unable to predict its duration or severity.

Reclassifications

6 unchanged sentences

The current expected credit loss model provides that an initial estimate of expected credit losses over the contractual life of the financial instrument is reflected in the allowance for credit losses and any changes to that estimate are recognized as adjustments to the allowance.

ASU 2016-13 did not have a material impact upon adoption.

ASU 2016-13 did not have a material impact on our financial statements or disclosures upon adoption.

Vacation Ownership Notes Receivable

3 unchanged sentences

In addition, we recorded a noncredit discount of $ 2 million, which represents the difference between the amortized cost basis and the par value of our acquired vacation ownership notes receivable.

The noncredit discount will be amortized to interest expense over the contractual life of the acquired vacation ownership notes receivable and is recorded as Financing expenses on our Income Statements.

The noncredit discount will be amortized to interest expense over the contractual life of the acquired vacation ownership notes receivable and is recorded as

Financing expenses on our Income Statements.

For additional information on our vacation ownership notes receivable, including information on the related reserves, see Footnote 6 “Vacation Ownership Notes Receivable.”

3 unchanged sentences

Subsequent to our adoption of ASU 2016-13, we estimate expected credit losses for our accounts receivable by considering a number of factors, including previous loss history and the condition of the general economy, as well as any other significant events that may impact the collectibility of the specific accounts receivable.

There was no material impact to our financial statements or disclosures related to adoption of ASU 2016-13 for accounts receivable, and also no material change in our allowance for credit losses during the first quarter of 2020.

Accounts receivable also includes interest receivable on vacation ownership notes receivable.

Write-offs of interest receivable are recorded as a reversal of previously recorded interest income.

There was no material impact to our financial statements or disclosures as a result of our adoption of ASU 2016-13 for accounts receivable, and no material change in our allowance for credit losses during the first half of 2020.

Securities and Exchange Commission (“SEC”) Final Rule Release No.

33-10762, Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities (“SEC Final Rule”)

In March 2020, the SEC issued the SEC Final Rule which simplifies the disclosure requirements related to registered securities under Rule 3-10 of Regulation S-X.

The SEC Final Rule replaces the requirement for a parent entity to provide detailed disclosures regarding guarantors of registered debt offerings within the footnotes to the consolidated financial statements.

Under the SEC Final Rule, a parent entity is required to present summarized financial information of the issuers’ and guarantors’ balance sheets and statements of operations on a consolidated basis.

It also requires qualitative disclosures with respect to information about guarantors and the terms and conditions of guarantees.

These disclosures may be provided outside the footnotes to a company’s consolidated financial statements.

We early adopted the reporting requirements of the SEC Final Rule in the first quarter of 2020 and elected to provide these disclosures within Item 2:

Management’s Discussion and Analysis of Financial Condition and Results of Operations .

Future Adoption of Accounting Standards

2 unchanged sentences

In December 2019, the FASB issued ASU 2019-12, which amends and simplifies existing guidance in an effort to reduce the complexity of accounting for income taxes while maintaining or enhancing the helpfulness of information provided to financial statement users.

This update is effective for fiscal years beginning after December 15, 2020, including interim

periods therein, with early adoption permitted.

This update is effective for fiscal years beginning after December 15, 2020, including interim periods therein, with early adoption permitted.

We expect to adopt ASU 2019-12 commencing in fiscal year 2021 and continue to evaluate the impact that adoption of this update will have on our financial statements and disclosures.

5 unchanged sentences

New York, New York

During the first quarter of 2020, we acquired 57 completed vacation ownership units, as well as office and ancillary space, located at our Marriott Vacation Club Pulse, New York City property for $ 89 million , of which $ 22 million was a prepayment for future tranches and $ 20 million was paid in December 2019.

During the first quarter of 2020, we acquired 57 completed vacation ownership units, as well as office and ancillary space, located at our Marriott Vacation Club Pulse, New York City property for $ 89 million, of which $ 22 million was a prepayment for future tranches of completed vacation ownership units and $ 20 million was paid in December 2019.

We accounted for the transaction as an asset acquisition with the purchase price allocated to Other assets ($ 22 million) and Property and equipment ($ 67 million).

See Footnote 11 “Contingencies and Commitments” for information on our remaining commitment to purchase future inventory and Footnote 16 “Variable Interest Entities” for additional information on this transaction and our activities relating to the VIE involved in this transaction.

San Francisco, California

During the first quarter of 2020, we acquired 34 completed vacation ownership units located at our Marriott Vacation Club Pulse, San Francisco property for $ 26 million , of which $ 5 million was a prepayment for future tranches.

During the first quarter of 2020, we acquired 34 completed vacation ownership units located at our Marriott Vacation Club Pulse, San Francisco property for $ 26 million, of which $ 5 million was a prepayment for future tranches of completed vacation ownership units.

We accounted for the transaction as an asset acquisition with the purchase price allocated to Inventory ($ 18 million), Other assets ($ 5 million), and Property and equipment ($ 3 million).

REVENUE AND RECEIVABLES

Sources of Revenue by Segment

The following tables detail the sources of revenue by segment for the time periods presented.

Three Months Ended March 31, 2020

($ in millions)

Vacation Ownership

Exchange & Third-Party Management

Corporate and Other

Three Months Ended June 30, 2020

($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total

Sale of vacation ownership products $ 53 $ — $ — $ 53

1 unchanged sentence

Management fee revenues 38 — ( 5 ) 33

Other services revenues

Exchange and other services revenues 29 39 38 106

Management and exchange 73 39 33 145

Rental 12 6 — 18

Cost reimbursements 198 12 ( 16 ) 194

Revenue from contracts with customers 336 57 17 410

Financing 69 1 — 70

Total Revenues $ 405 $ 58 $ 17 $ 480

Three Months Ended March 31, 2019

($ in millions)

Vacation Ownership

Exchange & Third-Party Management

Corporate and Other

Three Months Ended June 30, 2019

($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total

Sale of vacation ownership products $ 341 $ — $ — $ 341

1 unchanged sentence

Management fee revenues 37 10 ( 3 ) 44

Other services revenues

Exchange and other services revenues 30 65 34 129

Management and exchange 124 76 31 231

Rental 133 17 — 150

Cost reimbursements 258 22 ( 28 ) 252

Revenue from contracts with customers 856 115 3 974

Financing 68 1 — 69

Total Revenues $ 924 $ 116 $ 3 $ 1,043

Six Months Ended June 30, 2020

($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total

Sale of vacation ownership products $ 311 $ — $ — $ 311

Ancillary revenues 52 1 — 53

Management fee revenues 76 10 ( 9 ) 77

Exchange and other services revenues 57 100 85 242

Management and exchange 185 111 76 372

Rental 134 19 — 153

Cost reimbursements 543 33 ( 64 ) 512

Revenue from contracts with customers 1,173 163 12 1,348

Financing 140 2 — 142

Total Revenues $ 1,313 $ 165 $ 12 $ 1,490

Six Months Ended June 30, 2019

($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total

Sale of vacation ownership products $ 634 $ — $ — $ 634

Ancillary revenues 114 2 — 116

Management fee revenues 73 25 ( 7 ) 91

Exchange and other services revenues 62 131 70 263

Management and exchange 249 158 63 470

Rental 262 34 1 297

Cost reimbursements 549 46 ( 56 ) 539

Revenue from contracts with customers 1,694 238 8 1,940

Financing 135 2 — 137

Total Revenues $ 1,829 $ 240 $ 8 $ 2,077

Timing of Revenue from Contracts with Customers by Segment

The following tables detail the timing of revenue from contracts with customers by segment for the time periods presented.

Three Months Ended March 31, 2020

($ in millions)

Vacation Ownership

Exchange & Third-Party Management

Corporate and Other

Three Months Ended June 30, 2020

($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total

Services transferred over time $ 275 $ 30 $ 17 $ 322

1 unchanged sentence

Revenue from contracts with customers $ 336 $ 57 $ 17 $ 410

Three Months Ended March 31, 2019

($ in millions)

Vacation Ownership

Exchange & Third-Party Management

Corporate and Other

Three Months Ended June 30, 2019

($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total

Services transferred over time $ 455 $ 52 $ 3 $ 510

1 unchanged sentence

Revenue from contracts with customers $ 856 $ 115 $ 3 $ 974

Six Months Ended June 30, 2020

($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total

Services transferred over time $ 805 $ 84 $ 12 $ 901

Goods or services transferred at a point in time 368 79 — 447

Revenue from contracts with customers $ 1,173 $ 163 $ 12 $ 1,348

Six Months Ended June 30, 2019

($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total

Services transferred over time $ 937 $ 110 $ 8 $ 1,055

Goods or services transferred at a point in time 757 128 — 885

Revenue from contracts with customers $ 1,694 $ 238 $ 8 $ 1,940

Sale of Vacation Ownership Products

Revenues were reduced during the first quarter of 2020 by $ 46 million due to changes in our estimate of variable consideration for performance obligations that were satisfied in prior periods.

Receivables, Contract Assets & Contract Liabilities

The following table shows the composition of our receivables and contract liabilities.

We had no contract assets at either March 31, 2020 or December 31, 2019 .

($ in millions)

At March 31, 2020

At December 31, 2019

Revenues were reduced during the second quarter and first half of 2020 by $ 9 million and $ 55 million, respectively, due to changes in our estimates of variable consideration for performance obligations that were satisfied in prior periods.

See Footnote 6 “Vacation Ownership Notes Receivable” for information on increases to our vacation ownership notes receivable reserve attributable to the COVID-19 pandemic.

Receivables from Contracts with Customers, Contract Assets & Contract Liabilities

The following table shows the composition of our receivables from contracts with customers and contract liabilities.

We had no contract assets at either June 30, 2020 or December 31, 2019.

($ in millions) At June 30, 2020 At December 31, 2019

Receivables from Contracts with Customers

Accounts receivable $ 131 $ 166

Vacation ownership notes receivable, net 2,014 2,233

$ 2,145 $ 2,399

Contract Liabilities

1 unchanged sentence

Deferred revenue 470 433

Revenue recognized during the first quarter of 2020 that was included in our contract liabilities balance at December 31, 2019 was $ 117 million .

Revenue recognized during the second quarter and first half of 2020 that was included in our contract liabilities balance at December 31, 2019 was $ 45 million and $ 162 million, respectively.

Remaining Performance Obligations

Our remaining performance obligations represent the expected transaction price allocated to our contracts that we expect to recognize as revenue in future periods when we perform under the contracts.

At March 31, 2020 , approximately 90 percent of this amount is expected to be recognized as revenue over the next two years.

At June 30, 2020, approximately 80 percent of this amount is expected to be recognized as revenue over the next two years .

Accounts Receivable

Accounts receivable is comprised of amounts due from customers, primarily property owners’ associations, resort developers and members, credit card receivables, interest receivables, amounts due from taxing authorities, indemnification assets and other miscellaneous receivables.

The following table shows the composition of our accounts receivable balances:

($ in millions) At June 30, 2020 At December 31, 2019

Receivables from contracts with customers $ 131 $ 166

Interest receivable 15 16

Tax receivable 104 82

Indemnification asset 17 38

Our provision for income taxes is calculated using an estimated annual effective tax rate, based upon expected annual income, less losses in certain jurisdictions, permanent items, statutory rates and planned tax strategies in the various jurisdictions in which we operate.

However, discrete items related to prior year tax items are treated separately.

Our interim effective tax rate was 35.4 percent and 40.4 percent for the three months ended March 31, 2020 and March 31, 2019 , respectively.

The decrease in effective tax rate is predominately attributable to a pre-tax loss and a release in uncertain tax benefits for the three months ended March 31, 2020, and a change in our projected mix of earnings in international jurisdictions with differing tax rates and jurisdictions where valuation allowances are recorded.

Our interim effective tax rate was 23.3 percent and 33.0 percent for the three months ended June 30, 2020 and June 30, 2019, respectively.

The change in the effective tax rate is predominately attributable to a pre-tax loss, and a change in our projected mix of earnings in international jurisdictions with differing tax rates and jurisdictions where valuation allowances are recorded.

Our interim effective tax rate was 31.4 percent and 35.6 percent for the six months ended June 30, 2020 and June 30, 2019, respectively.

The change in the effective tax rate is predominately attributable to a pre-tax loss and a release in uncertain tax benefits for the six months ended June 30, 2020, and a change in our projected mix of earnings in international jurisdictions with differing tax rates and jurisdictions where valuation allowances are recorded.

We have considered the income tax accounting and disclosure implications of the relief provided by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) enacted on March 27, 2020.

As of March 31, 2020, we evaluated the income tax provisions of the CARES Act and have determined there to be no effect on either the March 31, 2020 tax rate or the computation of the estimated effective tax rate for the year ended December 31, 2020.

As of June 30, 2020, we evaluated the income tax provisions of the CARES Act and have determined there to be no effect on either the June 30, 2020 tax rate or the computation of the estimated effective tax rate for the year ended December 31, 2020.

We will continue to evaluate the income tax provisions of the CARES Act and monitor the developments in the jurisdictions where we have significant operations for tax law changes that could have income tax accounting and disclosure implications.

Unrecognized Tax Benefits

The following table summarizes the activity related to our unrecognized tax benefits (excluding interest and penalties) during the three months ended March 31, 2020 .

($ in millions)

Unrecognized Tax Benefits

The following table summarizes the activity related to our unrecognized tax benefits (excluding interest and penalties) during the six months ended June 30, 2020.

($ in millions) Unrecognized Tax Benefits

Balance at December 31, 2019 $ 21

Increases related to tax positions taken during the current period 1

Decreases related to settlements with taxing authorities ( 14 )

Decreases related to tax positions taken during a prior period ( 1 )

Balance at March 31, 2020

The total unrecognized tax benefits related to uncertain income tax positions, which would affect the effective tax rate if recognized, was $ 10 million at March 31, 2020 and $ 21 million at December 31, 2019 .

The total amount of gross interest and penalties accrued was $ 17 million at March 31, 2020 and $ 41 million at December 31, 2019 .

The decrease in our unrecognized tax benefits, including interest and penalties, is offset by a $ 32 million expense to (Losses) gains and other (expense) income, net for amounts previously recorded as indemnified pursuant to a Tax Matters Agreement dated May 11, 2016, (the “Tax

Matters Agreement”) by and among Starwood Hotels & Resorts Worldwide, Inc., Vistana Signature Experiences, Inc., and Interval Leisure Group, Inc.

Balance at June 30, 2020 $ 7

The total unrecognized tax benefits related to uncertain income tax positions, which would affect the effective tax rate if recognized, was $ 7 million at June 30, 2020 and $ 21 million at December 31, 2019.

The total amount of gross interest and penalties accrued was $ 16 million at June 30, 2020 and $ 41 million at December 31, 2019.

The decrease in our unrecognized tax benefits, including interest and penalties, is offset by a $ 30 million expense to (Losses) gains and other (expense) income, net for amounts previously recorded as indemnified pursuant to a Tax Matters Agreement dated May 11, 2016 (the “Tax Matters Agreement”) by and among Starwood Hotels & Resorts Worldwide, Inc., Vistana Signature Experiences, Inc., and Interval Leisure Group, Inc.

We anticipate $ 4 million of unrecognized tax benefits, including interest and penalties, to be indemnified pursuant to the Tax Matters Agreement and consequently have recorded a corresponding indemnification asset.

2 unchanged sentences

Certain of our returns are being audited in various jurisdictions for tax years 2013 through 2018.

We reasonably expect the amount of the unrecognized tax benefits will decrease within the next twelve months as a result of certain agreed upon audit settlements with tax authorities, which would not have an impact on net income.

The amount of the unrecognized tax benefit may increase or decrease within the next twelve months as a result of audits or audit settlements.

VACATION OWNERSHIP NOTES RECEIVABLE

The following table shows the composition of our vacation ownership notes receivable balances, net of reserves.

March 31, 2020

December 31, 2019

($ in millions)

June 30, 2020 December 31, 2019

($ in millions) Originated Acquired Total Originated Acquired Total

Securitized $ 1,463 $ 334 $ 1,797 $ 1,378 $ 372 $ 1,750

Non-securitized

Eligible for securitization (1)

34 1 35 155 10 165

Not eligible for securitization (1)

154 28 182 261 57 318

Subtotal 188 29 217 416 67 483

$ 1,651 $ 363 $ 2,014 $ 1,794 $ 439 $ 2,233

_________________________

(1) Refer to Footnote 7 “Financial Instruments” for a discussion of eligibility of our vacation ownership notes receivable for securitization.

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The following table summarizes interest income associated with vacation ownership notes receivable.

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

Three Months Ended Six Months Ended

($ in millions) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Interest income associated with vacation ownership notes receivable — securitized $ 64 $ 59 $ 127 $ 118

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COVID-19 Impact on Vacation Ownership Notes Receivable Reserves

We evaluated our vacation ownership notes receivable reserves in light of the COVID-19 pandemic, using a reference point of the performance of our vacation ownership notes receivable in response to the 2008/2009 financial crisis.

We evaluated our vacation ownership notes receivable reserves in light of the COVID-19 pandemic, using the performance of our vacation ownership notes receivable in response to the 2008/2009 financial crisis as a reference point.

Using this information, we increased our estimated default rates by approximately 50 percent for a 15 -month period to align with the period over which we experienced increased defaults during the previous recessionary period.

As a result, we increased our vacation ownership notes receivable reserves by $ 52 million in the first quarter.

This was reflected as a $ 42 million reduction to Sale of vacation ownership products, a $ 10 million increase in Financing expenses, and a $ 15 million reduction in Cost of vacation ownership products on our Income Statement for the first quarter of 2020.

As a result, we increased our vacation ownership notes receivable reserves by $ 52 million in the first quarter of 2020.

Acquired Vacation Ownership Notes Receivable

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Acquired Vacation Ownership Notes Receivable Reserve

($ in millions)

Non-Securitized

($ in millions) Non-Securitized Securitized Total

Balance at December 31, 2019, as reported $ — $ — $ —

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Opening Balance at January 1, 2020 29 26 55

Securitizations ( 1 ) 1 —

Write-offs ( 16 ) — ( 16 )

Recoveries 8 — 8

Increase in vacation ownership notes receivable reserve (1)

Balance at March 31, 2020

Balance at June 30, 2020 $ 28 $ 33 $ 61

_________________________

Increase in vacation ownership notes receivable reserve includes $ 10 million ( $ 2 million non-securitized and $ 8 million securitized) attributable to additional reserve resulting from the COVID-19 pandemic .

The following table shows future contractual principal payments, as well as interest rates, for our non-securitized and securitized acquired vacation ownership notes receivable at March 31, 2020 .

(1) Increase in vacation ownership notes receivable reserve includes $ 10 million ($ 2 million non-securitized and $ 8 million securitized) attributable to the increased reserve as a result of the COVID-19 pandemic.

The following table shows future contractual principal payments, as well as interest rates, for our non-securitized and securitized acquired vacation ownership notes receivable at June 30, 2020.

Acquired Vacation Ownership Notes Receivable

($ in millions)

Non-Securitized

($ in millions) Non-Securitized Securitized Total

2020, remaining $ 2 $ 22 $ 24

Balance at March 31, 2020

Thereafter 14 139 153

Balance at June 30, 2020 $ 29 $ 334 $ 363

Weighted average stated interest rate 13.4 % 13.5 % 13.4 %

Range of stated interest rates

3.0% to 17.9%

Range of stated interest rates 3.0 % to 17.9 %

6.0 % to 15.9 %

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Originated vacation ownership notes receivable represent vacation ownership notes receivable originated by Legacy-ILG subsequent to the Acquisition Date and all Legacy-MVW vacation ownership notes receivable.

The following table shows future principal payments, net of reserves, as well as interest rates, for our originated non-securitized and securitized originated vacation ownership notes receivable at March 31, 2020 .

Originated Vacation Ownership Notes Receivable

($ in millions)

Non-Securitized

($ in millions) Non-Securitized Securitized Total

2020, remaining $ 17 $ 69 $ 86

Balance at March 31, 2020

2021 26 141 167

2022 22 145 167

2023 18 148 166

2024 16 150 166

Thereafter 89 810 899

Balance at June 30, 2020 $ 188 $ 1,463 $ 1,651

Weighted average stated interest rate 12.1 % 12.7 % 12.6 %

Range of stated interest rates

0.0% to 18.0%

Range of stated interest rates 0.0 % to 18.0 %

0.0 % to 17.5 %

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Originated Vacation Ownership Notes Receivable Reserve

($ in millions)

Non-Securitized

($ in millions) Non-Securitized Securitized Total

Balance at December 31, 2019 $ 90 $ 114 $ 204

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Securitizations ( 33 ) 33 —

Write-offs ( 25 ) — ( 25 )

Defaulted vacation ownership notes receivable repurchase activity (2)

Balance at March 31, 2020

Balance at June 30, 2020 $ 110 $ 150 $ 260

_________________________

Increase in vacation ownership notes receivable reserve includes $ 42 million ( $ 16 million non-securitized and $ 26 million securitized) attributable to additional reserve resulting from the COVID-19 pandemic .

Decrease in securitized vacation ownership notes receivable reserve and increase in non-securitized vacation ownership notes receivable reserve was attributable to the transfer of the reserve when we voluntarily repurchased defaulted securitized vacation ownership notes receivable.

(1) Increase in vacation ownership notes receivable reserve includes $ 42 million ($ 16 million non-securitized and $ 26 million securitized) attributable to the increased reserve as a result of the COVID-19 pandemic.

(2) Decrease in securitized vacation ownership notes receivable reserve and increase in non-securitized vacation ownership notes receivable reserve were attributable to the transfer of the reserve when we voluntarily repurchased defaulted securitized vacation ownership notes receivable.

Credit Quality of Vacation Ownership Notes Receivable

Legacy-MVW Vacation Ownership Notes Receivable

For both Legacy-MVW non-securitized and securitized vacation ownership notes receivable, we estimated average remaining default rates of 8.89 percent as of March 31, 2020 (includes 1.89 percent attributed to the additional reserve resulting from the COVID-19 pandemic), and 7.04 percent as of December 31, 2019 .

A 0.5 percentage point increase in the estimated default rate would have resulted in an increase in the related vacation ownership notes receivable reserve of $ 8 million as of both March 31, 2020 and December 31, 2019 .

For both Legacy-MVW non-securitized and securitized vacation ownership notes receivable, we estimated average remaining default rates of 8.22 percent as of June 30, 2020 (includes 1.51 percent attributed to the additional expected defaults as a result of the COVID-19 pandemic), and 7.04 percent as of December 31, 2019.

A 0.5 percentage point increase in the estimated default rate would have resulted in an increase in the related vacation ownership notes receivable reserve of $ 7 million as of June 30, 2020, and $ 8 million as of December 31, 2019.

The following table shows our recorded investment in non-accrual Legacy-MVW vacation ownership notes receivable, which are vacation ownership notes receivable that are 90 days or more past due.

Legacy-MVW Vacation Ownership Notes Receivable

($ in millions)

Non-Securitized

Investment in vacation ownership notes receivable on non-accrual status at March 31, 2020

($ in millions) Non-Securitized Securitized Total

Investment in vacation ownership notes receivable on non-accrual status at June 30, 2020 $ 62 $ 19 $ 81

Investment in vacation ownership notes receivable on non-accrual status at December 31, 2019 $ 43 $ 11 $ 54

The following table details the origination year of our Legacy-MVW vacation ownership notes receivable as of March 31, 2020 .

Legacy-MVW Vacation Ownership Notes Receivable

($ in millions)

Non-Securitized

Year of Origination

2015 and Prior

The following table shows the aging of the recorded investment in principal, before reserves, in Legacy-MVW vacation ownership notes receivable as of March 31, 2020 .

The following table shows the aging of the recorded investment in principal, before reserves, in Legacy-MVW vacation ownership notes receivable as of June 30, 2020.

Legacy-MVW Vacation Ownership Notes Receivable

($ in millions)

Non-Securitized

($ in millions) Non-Securitized Securitized Total

31 – 90 days past due $ 7 $ 34 $ 41

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Total past due 69 53 122

Current 137 1,222 1,359

Total vacation ownership notes receivable $ 206 $ 1,275 $ 1,481

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Legacy-MVW Vacation Ownership Notes Receivable

($ in millions)

Non-Securitized

($ in millions) Non-Securitized Securitized Total

31 – 90 days past due $ 7 $ 33 $ 40

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Total past due 50 44 94

Current 222 1,254 1,476

Total vacation ownership notes receivable $ 272 $ 1,298 $ 1,570

The following table details the origination year of our Legacy-MVW vacation ownership notes receivable as of June 30, 2020 .

Legacy-MVW Vacation Ownership Notes Receivable

($ in millions) Non-Securitized Securitized Total

Year of Origination

2020 $ 53 $ 79 $ 132

2019 63 456 519

2018 37 317 354

2017 16 186 202

2015 and Prior 28 150 178

$ 206 $ 1,275 $ 1,481

Legacy-ILG Vacation Ownership Notes Receivable

At March 31, 2020 and December 31, 2019 , the weighted average FICO score within our consolidated Legacy-ILG vacation ownership notes receivable pools was 711 and 712 , respectively, based upon the outstanding vacation ownership notes receivable balance at time of origination.

The average estimated rate for all future defaults for our Legacy-ILG consolidated outstanding pool of vacation ownership notes receivable was 17.00 percent as of March 31, 2020 (includes 3.44 percent attributed to the additional reserve resulting from the COVID-19 pandemic) and 12.65 percent as of December 31, 2019 .

A 0.5 percentage point increase in the estimated default rate on the Legacy-ILG originated vacation ownership notes receivable would have resulted in an increase in the related vacation ownership notes receivable reserve of $ 2 million as of both March 31, 2020 and December 31, 2019 .

At June 30, 2020 and December 31, 2019, the weighted average FICO score within our consolidated Legacy-ILG vacation ownership notes receivable pools was 709 and 712 , respectively, based upon the outstanding vacation ownership notes receivable balance at time of origination.

The average estimated rate for all future defaults for our Legacy-ILG consolidated outstanding pool of vacation ownership notes receivable was 17.07 percent as of June 30, 2020 (includes 2.89 percent attributed to additional expected defaults as a result of the COVID-19 pandemic) and 12.65 percent as of December 31, 2019.

A 0.5 percentage point increase in the estimated default rate on the Legacy-ILG originated vacation ownership notes receivable would have resulted in an increase in the related vacation ownership notes receivable reserve of $ 3 million as of June 30, 2020, and $ 2 million as of December 31, 2019.

The following table shows our recorded investment in non-accrual Legacy-ILG vacation ownership notes receivable, which are vacation ownership notes receivable that are 90 days or more past due.

Legacy-ILG Vacation Ownership Notes Receivable

($ in millions) Non-Securitized Securitized Total

Investment in vacation ownership notes receivable on non-accrual status at June 30, 2020 $ 68 $ 17 $ 85

Investment in vacation ownership notes receivable on non-accrual status at December 31, 2019 $ 40 $ 9 $ 49

The following table shows the aging of the recorded investment in principal, before reserves, in Legacy-ILG vacation ownership notes receivable as of June 30, 2020.

Legacy-ILG Vacation Ownership Notes Receivable

($ in millions) Non-Securitized Securitized Total

31 – 90 days past due $ 8 $ 25 $ 33

91 – 120 days past due 4 9 13

Greater than 120 days past due 64 8 72

Total past due 76 42 118

Current 73 663 736

Total vacation ownership notes receivable $ 149 $ 705 $ 854

The following table shows the aging of the recorded investment in principal, before reserves, in Legacy-ILG vacation ownership notes receivable as of December 31, 2019.

Legacy-ILG Vacation Ownership Notes Receivable

($ in millions) Non-Securitized Securitized Total

31 – 90 days past due $ 11 $ 18 $ 29

91 – 120 days past due 3 6 9

Greater than 120 days past due 37 3 40

Total past due 51 27 78

Current 250 539 789

Total vacation ownership notes receivable $ 301 $ 566 $ 867

The following tables show the Legacy-ILG acquired vacation ownership notes receivable by brand and FICO score, before reserves.

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resident borrowers.

Acquired Vacation Ownership Notes Receivable as of March 31, 2020

($ in millions)

Acquired Vacation Ownership Notes Receivable as of June 30, 2020

($ in millions) 700 + 600 - 699 < 600 No Score Total

Westin $ 98 $ 55 $ 4 $ 13 $ 170

Sheraton 92 82 15 35 224

Hyatt 14 10 1 — 25

Other 3 1 — 2 6

$ 207 $ 148 $ 20 $ 50 $ 425

Acquired Vacation Ownership Notes Receivable as of December 31, 2019

($ in millions)

The following table details the origination year of our Legacy-ILG acquired vacation ownership notes receivable by brand and FICO score as of March 31, 2020 .

($ in millions) 700 + 600 - 699 < 600 No Score Total

Westin $ 103 $ 57 $ 4 $ 13 $ 177

Sheraton 95 83 15 37 230

Hyatt 15 10 1 — 26

Other 3 1 — 2 6

$ 216 $ 151 $ 20 $ 52 $ 439

The following table details the origination year of our Legacy-ILG acquired vacation ownership notes receivable by brand and FICO score as of June 30, 2020 .

Vacation ownership notes receivable with no FICO score primarily relate to non-U.S.

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Acquired Vacation Ownership Notes Receivable - Westin

($ in millions)

($ in millions) 2020 2019 2018 2017 2016 2015 & Prior Total

700 + $ — $ — $ 27 $ 26 $ 16 $ 29 $ 98

600 - 699 — — 12 14 11 18 55

< 600 — — 3 1 — — 4

No Score — — 3 3 2 5 13

$ — $ — $ 45 $ 44 $ 29 $ 52 $ 170

Acquired Vacation Ownership Notes Receivable - Sheraton

($ in millions)

($ in millions) 2020 2019 2018 2017 2016 2015 & Prior Total

700 + $ — $ — $ 26 $ 25 $ 16 $ 25 $ 92

600 - 699 — — 21 21 14 26 82

< 600 — — 9 3 1 2 15

No Score — — 9 10 6 10 35

$ — $ — $ 65 $ 59 $ 37 $ 63 $ 224

Acquired Vacation Ownership Notes Receivable - Hyatt and Other

($ in millions)

The following tables show the Legacy-ILG originated vacation ownership notes receivable by brand and FICO score.

($ in millions) 2020 2019 2018 2017 2016 2015 & Prior Total

700 + $ — $ — $ 3 $ 4 $ 3 $ 7 $ 17

600 - 699 — — 2 2 2 5 11

< 600 — — 1 — — — 1

No Score — — — — — 2 2

$ — $ — $ 6 $ 6 $ 5 $ 14 $ 31

The following tables show the Legacy-ILG originated vacation ownership notes receivable by brand and FICO score, before reserves.

Vacation ownership notes receivable with no FICO score primarily relate to non-U.S.

resident borrowers.

Originated Vacation Ownership Notes Receivable as of March 31, 2020

($ in millions)

Originated Vacation Ownership Notes Receivable as of June 30, 2020

($ in millions) 700 + 600 - 699 < 600 No Score Total

Westin $ 110 $ 50 $ 6 $ 20 $ 186

Sheraton 97 67 14 43 221

Hyatt 15 7 — — 22

$ 222 $ 124 $ 20 $ 63 $ 429

Originated Vacation Ownership Notes Receivable as of December 31, 2019

($ in millions)

The following tables detail the origination year of our Legacy-ILG originated vacation ownership notes receivable by brand and FICO score as of March 31, 2020 .

($ in millions) 700 + 600 - 699 < 600 No Score Total

Westin $ 122 $ 46 $ 5 $ 25 $ 198

Sheraton 97 61 13 37 208

Hyatt 16 6 — — 22

$ 235 $ 113 $ 18 $ 62 $ 428

The following tables detail the origination year of our Legacy-ILG originated vacation ownership notes receivable by brand and FICO score as of June 30, 2020.

Vacation ownership notes receivable with no FICO score primarily relate to non-U.S.

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Originated Vacation Ownership Notes Receivable - Westin

($ in millions)

($ in millions) 2020 2019 2018 2017 2016 2015 & Prior Total

700 + $ 22 $ 72 $ 16 $ — $ — $ — $ 110

600 - 699 7 35 8 — — — 50

< 600 1 4 1 — — — 6

No Score 6 12 2 — — — 20

$ 36 $ 123 $ 27 $ — $ — $ — $ 186

Originated Vacation Ownership Notes Receivable - Sheraton

($ in millions)

($ in millions) 2020 2019 2018 2017 2016 2015 & Prior Total

700 + $ 12 $ 67 $ 18 $ — $ — $ — $ 97

600 - 699 8 46 13 — — — 67

< 600 2 10 2 — — — 14

No Score 9 28 6 — — — 43

$ 31 $ 151 $ 39 $ — $ — $ — $ 221

Originated Vacation Ownership Notes Receivable - Hyatt

($ in millions)

($ in millions) 2020 2019 2018 2017 2016 2015 & Prior Total

700 + $ 3 $ 10 $ 2 $ — $ — $ — $ 15

600 - 699 1 4 2 — — — 7

< 600 — — — — — — —

No Score — — — — — — —

$ 4 $ 14 $ 4 $ — $ — $ — $ 22

FINANCIAL INSTRUMENTS

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The table excludes Cash and cash equivalents, Restricted cash, Accounts receivable, Accounts payable, Advance deposits and Accrued liabilities, all of which had fair values approximating their carrying amounts due to the short maturities and liquidity of these instruments.

At March 31, 2020

At December 31, 2019

($ in millions)

At June 30, 2020 At December 31, 2019

($ in millions) Carrying

Value Carrying

Vacation ownership notes receivable $ 2,014 $ 2,066 $ 2,233 $ 2,264

Other assets 48 48 45 45

Total financial assets $ 2,062 $ 2,114 $ 2,278 $ 2,309

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2026 Notes, net ( 743 ) ( 760 ) ( 742 ) ( 824 )

2028 Notes, net ( 345 ) ( 320 ) ( 345 ) ( 358 )

Term Loan, net ( 878 ) ( 832 ) ( 881 ) ( 899 )

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Vacation Ownership Notes Receivable

At March 31, 2020

At December 31, 2019

($ in millions)

At June 30, 2020 At December 31, 2019

($ in millions) Carrying

Value Carrying

Vacation ownership notes receivable

Securitized $ 1,797 $ 1,841 $ 1,750 $ 1,771

Eligible for securitization 35 43 165 175

1 unchanged sentence

Non-securitized 217 225 483 493

$ 2,014 $ 2,066 $ 2,233 $ 2,264

We estimate the fair value of our vacation ownership notes receivable that have been securitized using a discounted cash flow model.

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We concluded that this fair value measurement should be categorized within Level 3.

2026 Notes and 2028 Notes

We estimate the fair value of our 2026 Notes and 2028 Notes (as defined in Footnote 13 “ Debt ”) using quoted market prices as of the last trading day for the quarter;

2025 Notes, 2026 Notes and 2028 Notes

We estimate the fair value of our 2025 Notes, 2026 Notes and 2028 Notes (each as defined in Footnote 13 “Debt”) using quoted market prices as of the last trading day for the quarter;

however these notes have only a limited trading history and volume, and as such this fair value estimate is not necessarily indicative of the value at which these notes could be retired or transferred.

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Therefore, we include only the shares that may be issued with respect to any conversion premium in total dilutive weighted average shares outstanding, which we calculate using the treasury stock method.

As no conversion premium existed as of March 31, 2020 or March 31, 2019 , there was no dilutive impact from the Convertible Notes for either the first quarter of 2020 or 2019 .

The shares issuable on exercise of the Warrants (as defined in Footnote 13 “ Debt ”) sold in connection with the issuance of the Convertible Notes will not impact the total dilutive weighted average shares outstanding unless and until the price of our common stock exceeds the strike price, which was subject to adjustment during the first quarter of 2020 to $ 175.04 , as described in Footnote 13 “ Debt .” If and when the price of our common stock exceeds the strike price of the Warrants, we will include the dilutive effect of the additional shares that may be issued upon exercise of the Warrants in total dilutive weighted average shares outstanding, which we calculate using the treasury stock method.

As no conversion premium existed as of June 30, 2020 or June 30, 2019, there was no dilutive impact from the Convertible Notes for either the second quarter or first half of 2020 or 2019.

If and when the price of our common stock exceeds the strike price of the Warrants, we will include the dilutive effect of the additional shares that may be issued upon exercise of the Warrants in total dilutive weighted average shares outstanding, which we calculate using the treasury stock method.

The Convertible Note Hedges (as defined in Footnote 13 “Debt”) purchased in connection with the issuance of the Convertible Notes are considered to be anti-dilutive and will not impact our calculation of diluted earnings per share attributable to common shareholders.

The table below illustrates the reconciliation of the earnings and number of shares used in our calculation of basic and diluted (loss) earnings per share attributable to common shareholders.

Three Months Ended

(in millions, except per share amounts)

March 31, 2020

March 31, 2019 (1)

Three Months Ended Six Months Ended

(in millions, except per share amounts) June 30, 2020 June 30, 2019 (1)

June 30, 2020 June 30, 2019 (1)

Computation of Basic (Loss) Earnings Per Share Attributable to Common Shareholders

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_______________________________

The computations of diluted earnings per share attributable to common shareholders exclude approximately 452,000 shares of common stock, the maximum number of shares issuable as of March 31, 2019 , upon the vesting of certain performance-based awards, because the performance conditions required to be met for the shares subject to such awards to vest were not achieved by the end of the reporting period.

In accordance with the applicable accounting guidance for calculating earnings per share, for the first quarter of 2019 , we excluded from our calculation of diluted earnings per share 249,737 shares underlying stock appreciation rights (“SARs”) that may settle in shares of common stock because the exercise prices of such SARs, which ranged from $ 97.53 to $ 143.38 , were greater than the average market price for the applicable period.

(1) The computations of diluted earnings per share attributable to common shareholders exclude approximately 452,000 shares of common stock, the maximum number of shares issuable as of June 30, 2019, upon the vesting of certain performance-based awards, because the performance conditions required to be met for the shares subject to such awards to vest were not achieved by the end of the reporting period.

In accordance with the applicable accounting guidance for calculating earnings per share, for the second quarter of 2019, we excluded from our calculation of diluted earnings per share 167,760 shares underlying stock appreciation rights (“SARs”) that may settle in shares of common stock because the exercise prices of such SARs, which ranged from $ 100.52 to $ 143.38 , were greater than the average market price for the applicable period.

In accordance with the applicable accounting guidance for calculating earnings per share, for the first half of 2019, we excluded from our calculation of diluted earnings per share 249,737 shares underlying SARs that may settle in shares of common stock because the exercise prices of such SARs, which ranged from $ 97.53 to $ 143.38 , were greater than the average market price for the applicable period.

The following table shows the composition of our inventory balances:

($ in millions)

At March 31, 2020

At December 31, 2019

($ in millions) At June 30, 2020 At December 31, 2019

Finished goods (1)

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We value vacation ownership products at the lower of cost or fair market value less costs to sell, in accordance with applicable accounting guidance, and we record operating supplies at the lower of cost (using the first-in, first-out method) or net realizable value.

Product cost true-up activity relating to vacation ownership products increased carrying values of inventory by $ 8 million during the first quarter of 2020 and increased by $ 3 million during the first quarter of 2019 .

Additionally, during the first quarter of 2020, we recorded a $ 4 million impairment to Inventory.

In addition to the above, at March 31, 2020 , we had $ 147 million of completed vacation ownership units which have been classified as a component of Property and equipment until the time at which they are legally registered for sale as vacation ownership products.

We also have $ 39 million and $ 38 million of deposits on future purchases of inventory at March 31, 2020 and December 31, 2019 , respectively, which are included in the Other assets line on our Balance Sheets.

Product cost true-up activity relating to vacation ownership products increased carrying values of inventory by $ 3 million during the first half of 2020 and increased by $ 4 million during the first half of 2019.

Additionally, during the first half of 2020, we recorded a $ 5 million impairment to Inventory.

In addition to the above, at June 30, 2020, we had $ 174 million of completed vacation ownership units which have been classified as a component of Property and equipment until the time at which they are legally registered for sale as vacation ownership products.

We also have $ 42 million and $ 38 million of deposits on future purchases of inventory at June 30, 2020 and December 31, 2019, respectively, which are included in the Other assets line on our Balance Sheets.

GOODWILL AND INTANGIBLES

The following table details the carrying amount of our goodwill at March 31, 2020 and December 31, 2019 , and reflects goodwill attributed to the ILG Acquisition.

($ in millions)

Vacation Ownership Segment

Exchange & Third-Party Management Segment

Total Consolidated

The following table details the carrying amount of our goodwill at June 30, 2020 and December 31, 2019, and reflects goodwill attributed to the ILG Acquisition.

($ in millions) Vacation Ownership Segment Exchange & Third-Party Management Segment Total Consolidated

Balance at December 31, 2019 $ 2,445 $ 447 $ 2,892

Impairment — ( 73 ) ( 73 )

Foreign exchange adjustments — ( 2 ) ( 2 )

Balance at March 31, 2020 2,445 372 2,817

In connection with the preparation of the first quarter 2020 Financial Statements we initially concluded that it was more likely than not that the fair value of both of our reporting units were below their carrying amounts.

Impairment — — —

Foreign exchange adjustments — — —

Balance at June 30, 2020 $ 2,445 $ 372 $ 2,817

In connection with the preparation of our Financial Statements for the first quarter of 2020, we initially concluded that it was more likely than not that the fair value of both of our reporting units was below their respective carrying amounts.

The factors that led to this conclusion were related to the COVID-19 pandemic and included:

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(ii) the closure of substantially all of our Vacation Ownership reporting unit sales centers;

(iii) the governmental stay-at-home orders in place in many of the jurisdictions in which we operate;

(iii) the government stay-at-home orders in place in many of the jurisdictions in which we operate;

(iv) our planned furloughs and reduced work schedule arrangements;

3 unchanged sentences

We concluded that there was no impairment of the Vacation Ownership reporting unit as declines in expected future operating results were not substantial enough to cause the fair value of the reporting unit to be below its carrying amount.

We recognized a non-cash impairment charge of $ 73 million in the Impairment line on our Income Statement during the first quarter of 2020 related to the Exchange & Third-Party Management reporting unit, which was primarily driven by the change in expected future operating results as a result of the near-term and anticipated recovery of the business resulting from the impact of the COVID-19 pandemic.

In connection with the preparation of our Financial Statements for the second quarter of 2020, we concluded that an interim quantitative impairment test was required for our Exchange & Third-Party Management reporting unit because of the impairment charge we recognized for this reporting unit in the first quarter of 2020.

We utilized a combination of the income and market approaches to estimate the fair value of this reporting unit (Level 3) consistent with the methodology used in the first quarter of 2020.

We concluded that there was no further impairment of the Exchange & Third-Party Management reporting unit from the first quarter of 2020, as future expected operating results had improved slightly in comparison to the projections used in the first quarter, resulting in a fair value of the reporting unit in excess of its carrying amount.

We performed a qualitative analysis of the impact of recent events, including business and industry specific considerations, on the fair value of our Vacation Ownership reporting unit and determined that an interim quantitative impairment test was not required.

While the goodwill of our reporting units are not impaired as of the second quarter of 2020, we cannot assure you that goodwill will not be impaired in future periods.

We will continue to monitor the operating results, cash flow forecasts and impact from changes in market conditions, as well as impacts of COVID-19 for these reporting units.

Indefinite-Lived Intangibles

The following table summarizes the activity related to our intangible assets, all of which are related to the Exchange & Third-Party Management segment.

($ in millions)

Trade Names and Trademarks

($ in millions) Trade Names and Trademarks

Balance at December 31, 2019 $ 82

Impairment ( 18 )

Balance at March 31, 2020 64

In connection with the preparation of the first quarter 2020 Financial Statements we concluded that it was more likely than not that the fair value of our indefinite lived intangibles were below their carrying amounts.

Balance at June 30, 2020 $ 64

In connection with the preparation of the Financial Statements for the first quarter of 2020, we concluded that it was more likely than not that the fair value of our indefinite lived intangibles was below their carrying amounts.

The factors that led to this conclusion were related to the COVID-19 pandemic and included:

(i) the governmental stay-at-home orders in place in many of the jurisdictions in which we operate ;

(i) the government stay-at-home orders in place in many of the jurisdictions in which we operate ;

(ii) the impact of travel restrictions on the hospitality industry;

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Commitments and Letters of Credit

As of March 31, 2020 , we had the following commitments outstanding:

As of June 30, 2020, we had the following commitments outstanding:

• We have various contracts for the use of information technology hardware and software that we use in the normal course of business.

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We expect to acquire the remaining units in the property, in their current form, in two transactions during 2021.

See Footnote 3 “ Acquisitions and Dispositions ” for information on the purchase that occurred during the first quarter of 2020 and Footnote 16 “ Variable Interest Entities ” for additional information on this transaction and our activities relating to the variable interest entity involved in this transaction.

See Footnote 3 “Acquisitions and Dispositions” for information on the purchase that occurred during the first quarter of 2020 and Footnote 16 “Variable Interest Entities” for additional information on this transaction and our activities relating to the VIE involved in this transaction.

• We have a remaining commitment to purchase 88 vacation ownership units located in Bali, Indonesia for use in our Vacation Ownership segment, contingent upon completion of construction to agreed-upon standards.

We expect to complete the acquisition in 2021 and to make the remaining payments with respect to these units when specific construction milestones are completed, as follows:

$ 2 million in 2020 and $ 23 million in 2021.

$ 1 million in 2020, $ 21 million in 2021, and $ 2 million in 2022.

• We have a remaining commitment to purchase an operating property that we manage, located in San Francisco, California for $ 88 million.

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$ 32 million in 2021, $ 24 million in 2022, and $ 32 million in 2023.

See Footnote 16 “ Variable Interest Entities ” for additional information on this transaction and our activities relating to the variable interest entity involved in this transaction and Footnote 3 “ Acquisitions and Dispositions ” for information on the purchase that occurred during the first quarter of 2020.

During the first quarter of 2020, we assigned a commitment to purchase a property located in Waikiki, Hawaii to a third-party developer.

If we are unable to negotiate a capital efficient inventory arrangement, we are committed to purchasing the property, in its current form, for $ 98 million in 2021.

See Footnote 16 “ Variable Interest Entities ” for additional information on this transaction and our activities relating to the variable interest entity involved in this transaction.

Surety bonds issued as of March 31, 2020 totaled $ 103 million , the majority of which were requested by federal, state, or local governments in connection with our operations.

As of March 31, 2020 , we had $ 3 million of letters of credit outstanding under our Revolving Corporate Credit Facility (as defined in Footnote 13 “ Debt ”).

In addition, as of March 31, 2020 , we had $ 5 million in letters of credit outstanding related to and in lieu of reserves required for several vacation ownership notes receivable securitization transactions outstanding.

These letters of credit are not issued pursuant to, nor do they impact our borrowing capacity under, the Revolving Credit Facility.

We estimate the cash outflow associated with completing the phases of our existing portfolio of vacation ownership projects currently under development will be approximately $ 7 million , of which $ 4 million is included within liabilities on our Balance Sheet at March 31, 2020 .

See Footnote 16 “Variable Interest Entities” for additional information on this transaction and our activities relating to the VIE involved in this transaction and Footnote 3 “Acquisitions and Dispositions” for information on the purchase that occurred during the first quarter of 2020.

• During the first quarter of 2020, we assigned a commitment to purchase a property located in Waikiki, Hawaii to a third party.

If we are unable to negotiate a capital efficient inventory arrangement, we are committed to purchase the property, in its then current form, for $ 98 million in 2021, unless it has been sold to another party.

See Footnote 16 “Variable Interest Entities” for additional information on this transaction and our activities relating to the VIE involved in this transaction.

Surety bonds issued as of June 30, 2020 totaled $ 72 million, the majority of which were requested by federal, state, or local governments in connection with our operations.

As of June 30, 2020, we had $ 3 million of letters of credit outstanding under our Revolving Corporate Credit Facility (as defined in Footnote 13 “Debt”).

In addition, as of June 30, 2020, we had $ 5 million in letters of credit outstanding related to and in lieu of reserves required for several vacation ownership notes receivable securitization transactions outstanding.

These letters of credit are not issued pursuant to, nor do they impact our borrowing capacity under, the Revolving Corporate Credit Facility.

We estimate the cash outflow associated with completing the phases of our existing portfolio of vacation ownership projects currently under development will be approximately $ 6 million, of which $ 4 million is included within liabilities on our Balance Sheet at June 30, 2020.

This estimate is based on our current development plans, which remain subject to change, and we expect the phases currently under development will be completed by the end of 2021.

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In these cases, the operating expenses for the rental operations are paid from the revenue generated by the rentals, the owners are then paid their contractual percentages or guaranteed amounts, and our vacation rental business either retains the balance (if any) as its fee or makes up the deficit.

At March 31, 2020 , our maximum exposure under fixed dollar guarantees was $ 27 million , of which $ 8 million , $ 9 million , $ 4 million , $ 2 million , $ 1 million and $ 3 million relate to the remainder of 2020, 2021, 2022, 2023, 2024 and thereafter.

At June 30, 2020, our maximum exposure under fixed dollar guarantees was $ 27 million, of which $ 7 million, $ 10 million, $ 4 million, $ 2 million, $ 1 million and $ 3 million relate to the remainder of 2020, 2021, 2022, 2023, 2024 and thereafter, respectively.

Based on the impact of the COVID-19 pandemic on our rental operations, we declared the occurrence of a force majeure event under many of these agreements, generally effective as of April 1, 2020.

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The plaintiffs are seeking compensatory damages, disgorgement, punitive damages, fees and costs.

A trial is scheduled to begin in January 2021.

In May 2016, a purported class-action lawsuit was filed in the U.S.

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District Court for the Southern District of New York against ILG, certain of its subsidiaries, and certain third parties alleging that the sale of less than all interests offered in the fractional offering plan, the amendment of the plan to include additional units, and the rental of unsold fractional interests by the plan’s sponsor breached the relevant agreements and harmed the value of plaintiffs’ fractional interests.

The plaintiffs are seeking compensatory damages, rescission, disgorgement, fees and costs.

On May 21, 2020, the court granted our motion for summary judgment and dismissed the case.

In February 2017, the owners’ association for the St.

Regis NY Club filed a separate suit against ILG and certain of its subsidiaries in the U.S.

District Court for the Southern District of New York, which was amended to add Marriott International and Starwood as additional defendants in March 2017.

The lawsuit was subsequently transferred to the U.S.

District Court for the Middle District of Florida.

The operative complaint alleged that the sponsor of the St.

Regis NY Club (St.

Regis Residence Club, New York, Inc.), the St.

Regis NY Club manager (St.

Regis New York Management, Inc.), and certain affiliated entities, as well as Marriott International and Starwood, breached their fiduciary duties related to sale and rental practices, and further alleged tortious interference with the management agreement, unjust enrichment, and anticompetitive conduct.

The amended complaint also alleged anticompetitive conduct in connection with the renewal of the St.

Regis NY Club management agreement.

The plaintiff sought declaratory relief in connection with the Starpoint conversion program and the exchange program at the St.

Regis NY Club, unspecified damages, and disgorgement of payments under the management and purchase agreements.

In March 2020, the U.S.

District Court for the Middle District of Florida dismissed the case with prejudice.

The plaintiffs sought compensatory damages, rescission, disgorgement, fees and costs.

In May 2020, the court granted our motion for summary judgment and dismissed the case.

The plaintiffs have appealed the ruling.

In February 2019, the owners’ association for the St.

Regis NY Club filed a separate lawsuit in the Supreme Court for the State of New York, New York County, Commercial Division against ILG and several of its subsidiaries and certain third parties.

Regis NY Club filed a lawsuit in the Supreme Court for the State of New York, New York County, Commercial Division against ILG and several of its subsidiaries and certain third parties.

The operative complaint alleges that the defendants breached their fiduciary duties related to sale and rental practices, aided and abetted certain breaches of fiduciary duty, engaged in self-dealing as the sponsor and manager of the club, tortiously interfered with the management agreement, was unjustly enriched, and engaged in anticompetitive conduct.

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The plaintiff is seeking termination of the management agreement with the owners’ association, the annulment of certain amendments to governing documents at HRC Grand Aspen, the removal of fractional interests at HRC Grand Aspen from the HPC Trust Club, unspecified damages, disgorgement of profits, fees and costs.

In July 2020, the District Court granted our motion to dismiss claims against ILG and MVWC.

Certain claims remain pending against other defendants, including certain of our subsidiaries.

We believe we have meritorious defenses to the claims in each of the above matters and intend to vigorously defend each matter.

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The initial lease term is approximately 16 years with total lease payments of $ 129 million for the aforementioned period.

Subsequent to the first quarter of 2020, in response to the COVID-19 pandemic and our ongoing evaluation of future space needs, we entered into a standstill arrangement with the developer/lessor.

During the second quarter of 2020, in response to the COVID-19 pandemic and our ongoing evaluation of future space needs, we entered into a standstill arrangement with the developer/lessor.

The agreement provides for a standstill on certain project spending for several months, extends certain deliverable dates pertaining to the development and lease, and grants MVW a limited termination option in exchange for reimbursement of certain developer soft costs.

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The following table provides detail on our securitized debt, net of unamortized debt discount and issuance costs.

($ in millions)

At March 31, 2020

At December 31, 2019

($ in millions) At June 30, 2020 At December 31, 2019

Vacation ownership notes receivable securitizations, gross (1)

$ 1,578 $ 1,850

Unamortized debt discount and issuance costs ( 15 ) ( 18 )

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$ 1,887 $ 1,871

Interest rates as of March 31, 2020 range from 2.2 % to 4.4 % , with a weighted average interest rate of 2.9 %

Effective interest rate as of March 31, 2020 was 2.3 %

_________________________

(1) Interest rates as of June 30, 2020 range from 2.2 % to 4.4 %, with a weighted average interest rate of 2.9 %

(2) Effective interest rate as of June 30, 2020 was 2.1 %

All of our securitized debt is non-recourse to us.

See Footnote 16 “Variable Interest Entities” for a discussion of the collateral for the non-recourse debt associated with our securitized debt.

The following table shows scheduled future principal payments for our securitized debt as of March 31, 2020 .

The following table shows scheduled future principal payments for our securitized debt as of June 30, 2020.

Vacation Ownership

Notes Receivable Securitizations

Notes Receivable Securitizations Warehouse

Facility Other Total

($ in millions)

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2020, remaining $ 87 $ 9 $ 1 $ 97

2021 173 18 2 193

2022 175 20 2 197

2023 179 261 2 442

2024 176 — 2 178

Thereafter 788 — 9 797

$ 1,578 $ 308 $ 18 $ 1,904

Vacation Ownership Notes Receivable Securitizations

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If a pool of securitized vacation ownership notes receivable fails to perform within the pool’s established parameters (default or delinquency thresholds vary by transaction), transaction provisions effectively redirect the monthly excess spread we would otherwise receive from that pool (attributable to the interests we retained) to accelerate the principal payments to investors (taking into account the subordination of the different tranches to the extent there are multiple tranches) until the performance trigger is cured.

During the first quarter of 2020 , and as of March 31, 2020 , no securitized vacation ownership notes receivable pools were out of compliance with their respective established parameters.

As of March 31, 2020 , we had 12 securitized vacation ownership notes receivable pools outstanding.

During the second quarter and first half of 2020, and as of June 30, 2020, no securitized vacation ownership notes receivable pools were out of compliance with their respective established parameters.

As of June 30, 2020, we had 12 securitized vacation ownership notes receivable pools outstanding.

As the contractual terms of the underlying securitized vacation ownership notes receivable determine the maturities of the non-recourse debt associated with them, actual maturities may occur earlier than shown above due to prepayments by the vacation ownership notes receivable obligors.

Subsequent to the end of the second quarter of 2020, we completed the securitization of a pool of $ 383 million of vacation ownership notes receivable.

Approximately $ 368 million of the vacation ownership notes receivable were purchased on July 22, 2020 by MVW 2020-1 LLC (the “2020-1 LLC”), and all or a portion of the remaining loans may be purchased by the 2020-1 LLC prior to October 1, 2020.

In connection with the securitization, investors purchased $ 375 million in vacation ownership loan backed notes from the 2020-1 LLC in a private placement.

Four classes of vacation ownership loan backed notes were issued by the 2020-1 LLC:

$ 238 million of Class A Notes, $ 72 million of Class B Notes, $ 44 million of Class C Notes, and $ 21 million of Class D Notes.

The Class A Notes have an interest rate of 1.74 percent, the Class B Notes have an interest rate of 2.73 percent, the Class C Notes have an interest rate of 4.21 percent, and the Class D Notes have an interest rate of 7.14 percent, for an overall weighted average interest rate of 2.53 percent.

Of the $ 375 million in proceeds from the transaction, $ 15 million will be held by the 2020-1 LLC until it purchases all or a portion of the remaining loans or, if not used for that purpose, returned to the investors.

In addition, $ 300 million was used to repay all outstanding amounts previously drawn under the Warehouse Credit Facility, as defined below, $ 7 million was used to pay transaction expenses and fund required reserves, and the remaining $ 53 million will be used for general corporate purposes.

Warehouse Credit Facility

Our $ 350 million warehouse credit facility (the “Warehouse Credit Facility”), allows for the securitization of vacation ownership notes receivable on a revolving non-recourse basis through December 20, 2021.

Our warehouse credit facility (the “Warehouse Credit Facility”) allows for the securitization of vacation ownership notes receivable on a revolving non-recourse basis through December 20, 2021.

During the first quarter of 2020, we securitized vacation ownership notes receivable under our Warehouse Credit Facility.

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Net proceeds were $ 201 million due to the funding of reserve accounts of $ 1 million.

Subsequent to the end of the first quarter of 2020, we amended our Warehouse Credit Facility to increase the borrowing capacity by $ 181 million , to $ 531 million .

The revolving period for the existing $ 350 million remains the same and will terminate in December 2021, if not renewed.

During the second quarter of 2020, we amended our Warehouse Credit Facility to increase the borrowing capacity by $ 181 million, to $ 531 million.

The revolving period for the existing $ 350 million remains the same and will terminate in December 2021, if not renewed or terminated earlier.

The revolving period for the additional $ 181 million portion will terminate in March 2021, if not renewed.

As part of this amendment, the interest rate increased from primarily LIBOR plus 1.1 % to primarily LIBOR plus 1.4 %.

During the second quarter of 2020, we securitized vacation ownership notes receivable under our Warehouse Credit Facility.

The carrying amount of the vacation ownership notes receivable securitized was $ 132 million.

The average advance rate was 86 percent, which resulted in gross proceeds of $ 113 million.

Net proceeds were $ 113 million due to the funding of reserve accounts of less than $ 1 million.

The following table provides detail on our debt balances, net of unamortized debt discount and issuance costs.

($ in millions)

At March 31, 2020

At December 31, 2019

($ in millions) At June 30, 2020 At December 31, 2019

Senior Secured Notes

2025 Notes $ 500 $ —

Unamortized debt discount and issuance costs ( 7 ) —

Senior Unsecured Notes

Unamortized debt issuance costs

2026 Notes 750 750

Unamortized debt discount and issuance costs ( 7 ) ( 8 )

2028 Notes 350 350

Unamortized debt discount and issuance costs ( 5 ) ( 5 )

Corporate Credit Facility

Term Loan 889 893

Unamortized debt discount and issuance costs ( 11 ) ( 12 )

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Finance leases 10 14

The following table shows scheduled future principal payments for our debt, excluding finance leases, as of March 31, 2020 .

($ in millions)

Revolving Corporate Credit Facility

Convertible Notes

$ 2,680 $ 2,216

The following table shows scheduled future principal payments for our debt, excluding finance leases, as of June 30, 2020.

($ in millions) 2025 Notes 2026 Notes 2028 Notes Term Loan Convertible Notes Total

Payments Year

2020, remaining $ — $ — $ — $ 4 $ — $ 4

2021 — — — 9 — 9

2022 — — — 9 230 239

2023 — — — 9 — 9

2024 — — — 9 — 9

Thereafter 500 750 350 849 — 2,449

$ 500 $ 750 $ 350 $ 889 $ 230 $ 2,719

Senior Secured Notes

In the second quarter of 2020, we issued $ 500 million aggregate principal amount of 6.125 % Senior Secured Notes due September 15, 2025 (the “2025 Notes”).

The 2025 Notes are pari passu with and secured by the same collateral as our Corporate Credit Facility.

We pay interest on the 2025 Notes on May 15 and November 15 of each year, commencing on November 15, 2020.

We received net proceeds of approximately $ 493 million from the offering of the 2025 Notes, after deducting offering expenses and the underwriting discount, which were used to repay all amounts outstanding at that time on the Revolving Corporate Credit Facility.

Senior Unsecured Notes

Our Senior Unsecured Notes, as further discussed below, include the following:

Our Senior Unsecured Notes include the following:

• $ 750 million aggregate principal amount of 6.500 % Senior Unsecured Notes due 2026 issued in the third quarter of 2018 with a maturity date of September 15, 2026 (the “2026 Notes”);

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In addition, we pay a commitment fee on the unused availability under the Revolving Corporate Credit Facility at a rate that varies from 20 to 40 basis points per annum, also depending on our credit rating.

As of March 31, 2020 , we were in compliance with the applicable financial and operating covenants under the Corporate Credit Facility.

As a precautionary measure to ensure adequate liquidity for a sustained period, we borrowed the remaining $ 386 million under our Revolving Corporate Credit Facility in March 2020 to increase our cash position and preserve financial flexibility in light of the impact on global markets resulting from the COVID-19 pandemic.

As of June 30, 2020, we were in compliance with the applicable financial and operating covenants under the Corporate Credit Facility.

In May 2020, we entered into a waiver (the “Waiver”) to the agreement that governs the Corporate Credit Facility.

The Waiver, among other things, suspends the requirement to comply with the leverage covenant in the Revolving Corporate Credit Facility for up to four quarters, commencing with the fiscal quarter ending June 30, 2020.

During the suspension period, we will be required to maintain monthly minimum liquidity of at least $ 300 million until the later of March 31, 2021 or the end of the suspension period.

We are required to maintain monthly minimum liquidity of at least $ 300 million until the later of March 31, 2021 or the end of the suspension period.

In addition, for the duration of the period during which the waiver of the leverage covenant remains in effect, we are prohibited from making certain restricted payments, including share repurchases and dividends.

Further, subsequent to the first quarter of 2020, we repaid the entire $ 596 million balance that was outstanding on the Revolving Corporate Credit Facility as of March 31, 2020.

If we are not in compliance with the leverage covenant at the end of the suspension period, we will seek to negotiate with our lenders to amend such covenant, as needed.

Prior to 2020, we entered into $ 250 million of interest rate swaps under which we pay a fixed rate of 2.9625 percent and receive a floating interest rate through September 2023 and $ 200 million of interest rate swaps under which we pay a fixed rate of 2.2480 percent and receive a floating interest rate through April 2024, in each case to hedge a portion of our interest rate risk on the Term Loan.

We also entered into a $ 100 million interest rate collar with a cap strike rate of 2.5000 percent and a floor strike rate of 1.8810 percent through April 2024 to further hedge our interest rate risk on the Term Loan.

Both the interest rate swaps and the interest rate collar have been designated and qualify as cash flow hedges of interest rate risk and recorded in Other liabilities on our Balance Sheet as of March 31, 2020 and December 31, 2019 .

We characterize payments we make in connection with these derivative instruments as interest expense and a reclassification of accumulated other comprehensive income for presentation purposes.

The following table reflects the activity in accumulated other comprehensive loss related to our derivative instruments:

Three Months Ended

($ in millions) 2020 2019

March 31, 2020

March 31, 2019

Derivative instrument adjustment balance, beginning of period

Derivative instrument adjustment balance, January 1 $ ( 21 ) $ ( 6 )

Other comprehensive loss before reclassifications ( 24 ) ( 3 )

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Net other comprehensive loss ( 24 ) ( 3 )

Derivative instrument adjustment balance, end of period

Senior Secured Notes

Subsequent to the first quarter of 2020, in May 2020, we issued $ 500 million aggregate principal amount of 6.125 % Senior Secured Notes due September 15, 2025 (the “2025 Notes”).

The 2025 Notes will be pari passu with and secured by the same collateral as our Corporate Credit Facility.

We will pay interest on the 2025 Notes on May 15 and November 15 of each year, commencing on November 15, 2020.

We received net proceeds of approximately $ 494 million from the offering of the 2025 Notes, after deducting fees and expenses related to the offering.

Derivative instrument adjustment balance, March 31 ( 45 ) ( 9 )

Other comprehensive loss before reclassifications ( 1 ) ( 13 )

Reclassification to Income Statement — —

Net other comprehensive loss ( 1 ) ( 13 )

Derivative instrument adjustment balance, June 30 $ ( 46 ) $ ( 22 )

Convertible Notes

During 2017, we issued $ 230 million of aggregate principal amount of convertible senior notes (the “Convertible Notes”) that bear interest at a rate of 1.50 percent, payable in cash semi-annually.

The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes and was subject to adjustment during the first quarter of 2020 to 6.8114 shares of common stock per $1,000 principal amount of Convertible Notes (equivalent to a conversion price of approximately $ 146.81 per share of our common stock) when we declared a quarterly dividend of $ 0.54 per share, which was greater than the quarterly dividend when the Convertible Notes were issued.

The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes.

Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.

It is our intent to settle conversions of the Convertible Notes through combination settlement, which contemplates repayment in cash of the principal amount and repayment in shares of our common stock of any excess of the conversion value over the principal amount.

As of March 31, 2020 , the effective interest rate was 4.7 % and the remaining discount amortization period was 2.5 years .

As of June 30, 2020, the effective interest rate was 4.7 % and the remaining discount amortization period was 2.2 years.

The following table shows the net carrying value of the Convertible Notes.

($ in millions)

At March 31, 2020

At December 31, 2019

($ in millions) At June 30, 2020 At December 31, 2019

Liability component

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The following table shows interest expense information related to the Convertible Notes.

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

Three Months Ended Six Months Ended

($ in millions) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Contractual interest expense $ 1 $ — $ 2 $ 1

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Amortization of debt issuance costs — 1 — 1

$ 3 $ 2 $ 6 $ 5

Convertible Note Hedges and Warrants

In connection with the offering of the Convertible Notes, we concurrently entered into the following privately-negotiated separate transactions:

convertible note hedge transactions with respect to our common stock (“Convertible Note Hedges”), covering a total of approximately 1.55 million shares of our common stock, and warrant transactions (“Warrants”), whereby we sold to the counterparties to the Convertible Note Hedges warrants to acquire approximately 1.55 million shares of our common stock at an initial strike price of $ 176.68 per share.

The strike price was subject to adjustment during the first quarter of 2020 to $ 175.04 per share when we declared a quarterly dividend of $ 0.54 per share.

As of March 31, 2020 , no Convertible Note Hedges or Warrants have been exercised.

Amounts borrowed under the Corporate Credit Facility, as well as obligations with respect to letters of credit issued pursuant to that facility, are secured by a perfected first priority security interest in substantially all of the assets of the borrowers under, and guarantors of, that facility (which include MVWC and certain of our direct and indirect, existing and future, domestic subsidiaries, excluding certain bankruptcy remote special purpose subsidiaries), in each case including inventory, subject to certain exceptions.

In addition, the 2026 Notes and 2028 Notes are guaranteed by MVWC and certain of our direct and indirect, existing and future, domestic subsidiaries, excluding bankruptcy remote special purpose subsidiaries.

convertible note hedge transactions with respect to our common stock (“Convertible Note Hedges”), initially covering a total of approximately 1.55 million shares of our common stock, and warrant transactions (“Warrants”), whereby we sold to the counterparties to the Convertible Note Hedges warrants to acquire approximately 1.55 million shares of our common stock at an initial strike price of $ 176.68 per share.

As of June 30, 2020, no Convertible Note Hedges or Warrants have been exercised.

Security and Guarantees

Amounts borrowed under the Corporate Credit Facility and the 2025 Notes, as well as obligations with respect to letters of credit issued pursuant to the Corporate Credit Facility, are secured by a perfected first priority security interest in substantially all of the assets of the borrowers under, and guarantors of, that facility (which include MVWC and certain of our direct and indirect, existing and future, domestic subsidiaries, excluding certain bankruptcy remote special purpose subsidiaries), in each case including inventory, subject to certain exceptions.

In addition, the Corporate Credit Facility, the 2025 Notes, the 2026 Notes and the 2028 Notes are guaranteed by MVWC and certain of our direct and indirect, existing and future, domestic subsidiaries, excluding bankruptcy remote special purpose subsidiaries.

SHAREHOLDERS’ EQUITY

Marriott Vacations Worldwide has 100,000,000 authorized shares of common stock, par value of $ 0.01 per share.

At March 31, 2020 , there were 75,235,823 shares of Marriott Vacations Worldwide common stock issued, of which 41,039,198 shares were outstanding and 34,196,625 shares were held as treasury stock.

At June 30, 2020, there were 75,249,855 shares of Marriott Vacations Worldwide common stock issued, of which 41,057,736 shares were outstanding and 34,192,119 shares were held as treasury stock.

At December 31, 2019, there were 75,020,272 shares of Marriott Vacations Worldwide common stock issued, of which 41,582,096 shares were outstanding and 33,438,176 shares were held as treasury stock.

Marriott Vacations Worldwide has 2,000,000 authorized shares of preferred stock, par value of $ 0.01 per share, none of which were issued or outstanding as of March 31, 2020 or December 31, 2019 .

Marriott Vacations Worldwide has 2,000,000 authorized shares of preferred stock, par value of $ 0.01 per share, none of which were issued or outstanding as of June 30, 2020 or December 31, 2019.

Share Repurchase Program

The following table summarizes share repurchase activity under our current share repurchase program:

($ in millions, except per share amounts)

Number of Shares Repurchased

Cost of Shares Repurchased

Average Price Paid per Share

($ in millions, except per share amounts) Number of Shares Repurchased Cost of Shares Repurchased Average Price Paid per Share

As of December 31, 2019 16,418,950 $ 1,258 $ 76.60

For the first quarter of 2020

As of March 31, 2020

For the first half of 2020 769,935 82 106.60

As of June 30, 2020 17,188,885 $ 1,340 $ 77.95

On July 30, 2019, our Board of Directors authorized the extension of the duration of our existing share repurchase program to December 31, 2020, as well as the repurchase of up to 4.5 million additional shares of our common stock.

As of March 31, 2020 , our Board of Directors had authorized the repurchase of an aggregate of up to 19.4 million shares of our common stock under the share repurchase program since the initiation of the program in October 2013.

As of June 30, 2020, our Board of Directors had authorized the repurchase of an aggregate of up to 19.4 million shares of our common stock under the share repurchase program since the initiation of the program in October 2013.

Share repurchases may be made through open market purchases, privately negotiated transactions, block transactions, tender offers, accelerated share repurchase agreements or otherwise.

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In connection with the repurchase program, we are authorized to adopt one or more trading plans pursuant to the provisions of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

As of March 31, 2020 , 1.9 million shares remained available for repurchase under the authorization approved by our Board of Directors.

As of June 30, 2020, 1.9 million shares remained available for repurchase under the authorization approved by our Board of Directors.

The authorization for the share repurchase program may be suspended, terminated, increased or decreased by our Board of Directors at any time without prior notice.

Due to the impact of the COVID-19 pandemic, we temporarily suspended repurchasing shares of our common stock.

Any future share repurchases will be subject to the restrictions associated with the Waiver to the Corporate Credit Facility.

We declared cash dividends to holders of common stock during the first quarter of 2020 as follows:

Declaration Date

Shareholder Record Date

Distribution Date

Dividend per Share

February 14, 2020

February 27, 2020

March 12, 2020

Any future share repurchases will be subject to the restrictions imposed under the Waiver.

We declared cash dividends to holders of common stock during the first half of 2020 as follows:

Declaration Date Shareholder Record Date Distribution Date Dividend per Share

February 14, 2020 February 27, 2020 March 12, 2020 $ 0.54

Due to the impact of the COVID-19 pandemic, we temporarily suspended cash dividends.

Any future dividend payments will be subject to the restrictions associated with the Waiver to the Corporate Credit Facility and Board approval, and there can be no assurance that we will pay dividends in the future.

Any future dividend payments will be subject to both the restrictions imposed under the Waiver and Board approval, and there can be no assurance that we will pay dividends in the future.

Noncontrolling Interests

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We consolidate certain property owners’ associations under the voting interest model.

Noncontrolling interests represents the portion of the property owners’ associations related to individual or third-party VOI owners.

Noncontrolling interests of $ 13 million and $ 12 million , as of March 31, 2020 and December 31, 2019 , respectively, are included on our Balance Sheets as a component of equity.

Noncontrolling interests represents the portion of the property owners’ associations related to individual or third-party vacation ownership interest owners.

Noncontrolling interests of $ 21 million and $ 12 million, as of June 30, 2020 and December 31, 2019, respectively, are included on our Balance Sheets as a component of equity.

SHARE-BASED COMPENSATION

We maintain the Marriott Vacations Worldwide Corporation Stock and Cash Incentive Plan (the “MVW Stock Plan”) for the benefit of our officers, directors, and employees.

Under the MVW Stock Plan, we are authorized to award:

During the second quarter of 2020, our shareholders approved the Marriott Vacations Worldwide Corporation 2020 Equity Incentive Plan (the “MVW Equity Plan”), which supersedes both the Marriott Vacations Worldwide Corporation Stock and Cash Incentive Plan and the Interval Leisure Group, Inc.

2013 Stock and Incentive Plan (collectively, the “Prior Plans”).

No new awards will be granted under the Prior Plans and all awards that were granted under the Prior Plans will remain outstanding and continue to be governed by the Prior Plans.

The MVW Equity Plan is maintained for the benefit of our officers, directors, and employees.

Under the MVW Equity Plan, we are authorized to award:

(1) restricted stock units (“RSUs”) of our common stock, (2) SARs relating to our common stock, and (3) stock options to purchase our common stock.

A total of 6 million shares are authorized for issuance pursuant to grants under the MVW Stock Plan.

As of March 31, 2020 , less than 1 million shares were available for grants under the MVW Stock Plan.

As part of the ILG Acquisition, we assumed the Interval Leisure Group, Inc.

2013 Stock and Incentive Plan (the “ILG Stock Plan”) and equity based awards outstanding under the ILG Stock Plan.

As of March 31, 2020 , 1 million shares were available for grants under the ILG Stock Plan to Legacy-ILG employees.

Subsequent to the first quarter of 2020, our shareholders approved the Marriott Vacations Worldwide Corporation 2020 Equity Incentive Plan (the “MVW 2020 Equity Plan”), which supersedes both the MVW Stock Plan and the ILG Stock Plan (collectively, the “Prior Plans”) and no new awards will be granted under the Prior Plans.

All awards that were granted under the Prior Plans will remain outstanding and continue to be governed by the Prior Plans.

Approximately 2 million shares were available for grant under the MVW 2020 Equity Plan as of May 20, 2020.

A total of 1.8 million shares are authorized for issuance pursuant to grants under the MVW Equity Plan.

As of June 30, 2020, approximately 1.8 million shares were available for grants under the MVW Equity Plan.

The following table details our share-based compensation expense related to award grants to our officers, directors, and employees:

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

Three Months Ended Six Months Ended

($ in millions) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Service-based RSUs $ 7 $ 6 $ 11 $ 9

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Stock options — — — —

$ 9 $ 11 $ 13 $ 20

The following table details our deferred compensation costs related to unvested awards:

($ in millions)

At March 31, 2020

At December 31, 2019

($ in millions) At June 30, 2020 At December 31, 2019

Service-based RSUs $ 30 $ 17

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Restricted Stock Units

We granted 248,172 service-based RSUs, which are subject to time-based vesting conditions, with a weighted average grant-date fair value of $ 91.08 , to our employees and non-employee directors during the first quarter of 2020 .

During the first quarter of 2020 , we also granted performance-based RSUs, which are subject to performance-based vesting conditions, to members of management.

A maximum of 177,208 RSUs may be earned under the performance-based RSU awards granted during the first quarter of 2020 .

We granted 268,192 service-based RSUs, which are subject to time-based vesting conditions, with a weighted average grant-date fair value of $ 90.12 , to our employees and non-employee directors during the first half of 2020.

During the first half of 2020, we also granted performance-based RSUs, which are subject to performance-based vesting conditions, to members of management.

A maximum of 177,208 RSUs may be earned under the performance-based RSU awards granted during the first half of 2020.

Stock Appreciation Rights

We granted 116,434 SARs, with a weighted average grant-date fair value of $ 29.63 and a weighted average exercise price of $ 96.82 , to members of management during the first quarter of 2020 .

We granted 116,434 SARs, with a weighted average grant-date fair value of $ 29.63 and a weighted average exercise price of $ 96.82 , to members of management during the first half of 2020.

We use the Black-Scholes model to estimate the fair value of the SARs granted.

4 unchanged sentences

The dividend yield assumption listed below is based on the expectation of future payouts.

The following table outlines the assumptions used to estimate the fair value of grants during the first quarter of 2020 :

The following table outlines the assumptions used to estimate the fair value of grants during the first half of 2020:

Expected volatility 38.81 %

14 unchanged sentences

As these vacation ownership notes receivable securitizations are similar in nature to the Legacy-MVW vacation ownership notes receivable securitizations, they have been aggregated for disclosure purposes.

The following table shows consolidated assets, which are collateral for the obligations of these VIEs, and consolidated liabilities included on our Balance Sheet at March 31, 2020 :

($ in millions)

Vacation Ownership

The following table shows consolidated assets, which are collateral for the obligations of these VIEs, and consolidated liabilities included on our Balance Sheet at June 30, 2020:

($ in millions) Vacation Ownership

Notes Receivable

Securitizations

Credit Facility

Securitizations Warehouse

Credit Facility Total

Consolidated Assets

2 unchanged sentences

Restricted cash 60 13 73

Total $ 1,543 $ 341 $ 1,884

Consolidated Liabilities

1 unchanged sentence

Securitized Debt 1,578 308 1,886

The following table shows the interest income and expense recognized as a result of our involvement with these VIEs during the first quarter of 2020 :

($ in millions)

Vacation Ownership

Total $ 1,580 $ 308 $ 1,888

The following table shows the interest income and expense recognized as a result of our involvement with these VIEs during the second quarter of 2020:

($ in millions) Vacation Ownership

Notes Receivable

Securitizations

Credit Facility

Securitizations Warehouse

Credit Facility Total

Interest income $ 52 $ 12 $ 64

1 unchanged sentence

Debt issuance cost amortization $ 2 $ — $ 2

The following table shows the interest income and expense recognized as a result of our involvement with these VIEs during the first half of 2020:

($ in millions) Vacation Ownership

Notes Receivable

Securitizations Warehouse

Credit Facility Total

Interest income $ 109 $ 18 $ 127

Interest expense to investors $ 26 $ 3 $ 29

Debt issuance cost amortization $ 3 $ 1 $ 4

Administrative expenses $ 1 $ — $ 1

The following table shows cash flows between us and the vacation ownership notes receivable securitization VIEs:

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

Six Months Ended

($ in millions) June 30, 2020 June 30, 2019

Net proceeds from vacation ownership notes receivable securitizations $ — $ 445

Principal receipts 232 237

1 unchanged sentence

Reserve release — 99

Total 339 882

Cash Outflows

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Interest to investors ( 25 ) ( 22 )

Funding of restricted cash — ( 93 )

Total ( 298 ) ( 371 )

Net Cash Flows $ 41 $ 511

Under the terms of our vacation ownership notes receivable securitizations, we have the right to substitute loans for, or repurchase, defaulted loans at our option, subject to certain limitations.

Our maximum exposure to loss relating to the special purpose entities that purchase, sell and own these vacation ownership notes receivable is the overcollateralization amount (the difference between the loan collateral balance and the balance on the outstanding vacation ownership notes receivable), plus cash reserves and any residual interest in future cash flows from collateral.

Our maximum exposure to potential loss relating to the special purpose entities that purchase, sell and own these vacation ownership notes receivable is the overcollateralization amount (the difference between the loan collateral balance and the balance of the outstanding vacation ownership notes receivable), plus cash reserves and any residual interest in future cash flows from collateral.

The following table shows cash flows between us and the Warehouse Credit Facility VIE:

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

Six Months Ended

($ in millions) June 30, 2020 June 30, 2019

Proceeds from vacation ownership notes receivable securitizations $ 315 $ 124

1 unchanged sentence

Interest receipts 14 12

Reserve release — 2

Total 361 150

Cash Outflows

Principal to investors ( 27 ) ( 12 )

Voluntary repurchases of defaulted vacation ownership notes receivable ( 2 ) —

Repayment of Warehouse Credit Facility — ( 228 )

Interest to investors ( 3 ) ( 4 )

Funding of restricted cash ( 1 ) ( 1 )

Total ( 33 ) ( 245 )

Net Cash Flows $ 328 $ ( 95 )

5 unchanged sentences

Accordingly, we have not consolidated the VIE.

As of March 31, 2020 , our Balance Sheet reflected $ 3 million in Accounts Receivable, including a note receivable of less than $ 1 million , and $ 5 million in Other assets for a deposit related to the acquisition of a portion of this property.

We believe that our maximum exposure to loss as a result of our involvement with this VIE is approximately $ 8 million as of March 31, 2020 .

As of June 30, 2020, our Balance Sheet reflected $ 2 million in Accounts Receivable, including a note receivable of less than $ 1 million, and $ 5 million in Other assets for a deposit related to the acquisition of a portion of this property.

We believe that our maximum exposure to loss as a result of our involvement with this VIE is approximately $ 7 million as of June 30, 2020.

We have a commitment to purchase an operating property located in New York, New York, that we currently manage as Marriott Vacation Club Pulse, New York City.

3 unchanged sentences

Accordingly, we have not consolidated the VIE.

As of March 31, 2020 , our Balance Sheet reflected $ 22 million in Other assets for a deposit related to the acquisition of a portion of this property, and a note receivable of less than $ 1 million that is included in the Accounts receivable line.

We believe that our maximum exposure to loss as a result of our involvement with this VIE is approximately $ 23 million as of March 31, 2020 .

As of June 30, 2020, our Balance Sheet reflected $ 22 million in Other assets for a deposit related to the acquisition of a portion of this property, and a note receivable of less than $ 1 million that is included in the Accounts receivable line.

We believe that our maximum exposure to loss as a result of our involvement with this VIE is approximately $ 23 million as of June 30, 2020.

We have a commitment to purchase a property located in Waikiki, Hawaii.

Refer to Footnote 11 “Contingencies and Commitments” for additional information on the commitment.

If we are unable to negotiate a capital efficient inventory arrangement, we are committed to purchasing the property, in its current form.

We are required to purchase the completed property from the third-party developer unless it has been sold to another party.

If we are unable to negotiate a capital efficient inventory arrangement, we are committed to purchase the property, in its then current form, unless it has been sold to another party.

The property is held by a VIE for which we are not the primary beneficiary as we do not control the operations of the VIE.

Accordingly, we have not consolidated the VIE.

As of March 31, 2020 , our Balance Sheet reflected $ 1 million in Accounts Receivable, including a note receivable of less than $ 1 million .

We believe that our maximum exposure to loss as a result of our involvement with this VIE is less than $ 1 million as of March 31, 2020 .

As of June 30, 2020, our Balance Sheet reflected $ 1 million in Accounts Receivable, including a note receivable of less than $ 1 million.

We believe that our maximum exposure to loss as a result of our involvement with this VIE is less than $ 1 million as of June 30, 2020.

Deferred Compensation Plan

2 unchanged sentences

We are considered the primary beneficiary of the rabbi trust because we direct the activities of the trust and are the beneficiary of the trust.

At March 31, 2020 , the value of the assets held in the rabbi trust was $ 36 million , which is included in the Other line within assets on our Balance Sheets.

At June 30, 2020, the value of the assets held in the rabbi trust was $ 42 million, which is included in the Other line within assets on our Balance Sheets.

BUSINESS SEGMENTS

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We are the exclusive worldwide developer, marketer, seller and manager of vacation ownership and related products under the Marriott Vacation Club, Grand Residences by Marriott, Sheraton Vacation Club, Westin Vacation Club and Hyatt Residence Club brands, as well as under Marriott Vacation Club Pulse, an extension to the Marriott Vacation Club brand.

We are also the exclusive worldwide developer, marketer and seller of vacation ownership and related products under The Ritz-Carlton Destination Club brand, we have the non-exclusive right to develop, market and sell whole ownership residential products under The Ritz-Carlton Residences brand and have a license to use the St.

Regis brand for specified fractional ownership resorts.

14 unchanged sentences

Our CODM uses Adjusted EBITDA to evaluate the profitability of our operating segments, and the components of net income attributable to common shareholders excluded from Adjusted EBITDA are not separately evaluated.

Adjusted EBITDA is defined as net income attributable to common shareholders, before interest expense (excluding consumer financing interest expense associated with term loan securitization transactions), income taxes, depreciation and amortization, excluding share-based compensation expense and adjusted for certain items that affect the comparability or our operating performance.

Our reconciliation of the aggregate amount of Adjusted EBITDA for our reportable segments to consolidated net (loss) income attributable to common shareholders is presented below.

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

Three Months Ended Six Months Ended

($ in millions) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Vacation Ownership $ 405 $ 924 $ 1,313 $ 1,829

2 unchanged sentences

Corporate and other 17 3 12 8

$ 480 $ 1,043 $ 1,490 $ 2,077

Adjusted EBITDA and Reconciliation to Net (Loss) Income Attributable to Common Shareholders

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

Three Months Ended Six Months Ended

($ in millions) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Adjusted EBITDA Vacation Ownership $ ( 19 ) $ 203 $ 128 $ 375

8 unchanged sentences

Net (loss) income attributable to common shareholders $ ( 70 ) $ 49 $ ( 176 ) $ 73

($ in millions)

At March 31, 2020

At December 31, 2019

($ in millions) At June 30, 2020 At December 31, 2019

Vacation Ownership $ 7,149 $ 7,345

2 unchanged sentences

Corporate and other 946 707

We conduct business globally, and our operations outside the United States represented approximately 12 percent and 14 percent of our revenues, excluding cost reimbursements, for the three months ended March 31, 2020 and March 31, 2019 , respectively.

$ 9,117 $ 9,214

We conduct business globally, and our operations outside the United States represented approximately 7 percent and 11 percent of our revenues, excluding cost reimbursements, for the three months ended June 30, 2020 and June 30, 2019, respectively, and 11 percent of our revenues, excluding cost reimbursements, for both the six months ended June 30, 2020 and June 30, 2019.

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