What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-08-05 compared with 2020-05-22 · 511 added, 322 removed, 485 unchanged (63% of the section changed)

1 unchanged sentence

Forward-Looking Statements

We make forward-looking statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report on Form 10-Q based on our management’s beliefs and assumptions and on information currently available to our management.

We make forward-looking statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report on Form 10-Q based on our management’s beliefs and assumptions and on information currently available to our management.

Forward-looking statements include, among other things, the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, the effects of competition, and the ongoing effect of the COVID-19 pandemic and actions we or others may take in response to the pandemic, including, among others, reductions in planned spending for inventory and property and equipment for the rest of 2020.

Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” “may,” “might,” “should,” “could” or the negative of these terms or similar expressions.

The Company cautions you that these statements are not guarantees and are subject to numerous risks and uncertainties, such as:

the effects of the COVID-19 pandemic outbreak, including reduced demand for vacation ownership and exchange products and services, volatility in the international and national economy and credit markets, worker absenteeism, quarantines or other travel or health-related restrictions;

the length and severity of the COVID-19 pandemic outbreak;

the pace of recovery following the COVID-19 pandemic outbreak;

the effects of the COVID-19 pandemic, including reduced demand for vacation ownership and exchange products and services, volatility in the international and national economy and credit markets, worker absenteeism, quarantines or other travel or health-related restrictions;

the length and severity of the COVID-19 pandemic;

the pace of recovery following the COVID-19 pandemic;

competitive conditions;

the availability of capital to finance growth, and other matters referred to under the heading “Risk Factors” contained herein and also in the our most recent Annual Report on Form 10-K filed and on our Current Report on Form 8-K filed May 6, 2020 with the U.S.

the availability of capital to finance growth, and other matters referred to under the heading “Risk Factors” contained herein and also in our most recent Annual Report on Form 10-K filed March 2, 2020, our Current Report on Form 8-K filed May 6, 2020 and our Quarterly Report on Form 10-Q filed on May 22, 2020, in each case with the U.S.

Securities and Exchange Commission (the “SEC”), any of which could cause actual results to differ materially from those expressed in or implied in this press release.

The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

The risk factors discussed in “Risk Factors” in our most recent Annual Report on Form 10-K, our Current Report on Form 8-K filed May 6, 2020 and which may be discussed in subsequent Quarterly Reports on Form 10-Q or other filings with the SEC, could cause our results to differ materially from those expressed in forward-looking statements.

We do not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

The risk factors discussed in “Risk Factors” in our most recent Annual Report on Form 10-K filed March 2, 2020, our Current Report on Form 8-K filed May 6, 2020, our Quarterly Report on Form 10-Q filed May 22, 2020 and which may be discussed in subsequent Quarterly Reports on Form 10-Q or other filings with the SEC could cause our results to differ materially from those expressed in forward-looking statements.

There may be other risks and uncertainties that we cannot predict at this time or that we currently do not expect will have a material adverse effect on our financial position, results of operations or cash flows.

7 unchanged sentences

Vacation Ownership and Exchange & Third-Party Management.

In 2018, we completed the ILG Acquisition and oftentimes refer to our business associated with the brands that existed prior to the ILG Acquisition as “Legacy-MVW” and to ILG’s business and brands that we acquired as “Legacy-ILG.”

Our Vacation Ownership segment includes seven vacation ownership brands licensed under exclusive, long-term relationships with Marriott International and Hyatt Hotels Corporation.

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.

5 unchanged sentences

Our Exchange & Third-Party Management segment includes exchange networks and membership programs, as well as management of resorts and lodging properties.

We provide these services through a variety of brands including Interval International, Trading Places International, Vacation Resorts International, and Aqua-Aston.

We provide these services through a variety of brands including Interval International, Trading Places International (“TPI”), Vacation Resorts International (“VRI”), and Aqua-Aston.

Exchange & Third-Party Management revenue generally is fee-based and derived from membership, exchange and rental transactions, property and association management, and other related products and services.

Corporate and other represents that portion of our results that are not allocable to our segments, including those relating to property owners’ associations consolidated under the voting interest model (“Consolidated Property Owners’ Associations”).

COVID-19 pandemic

COVID-19 Pandemic Update

The COVID-19 pandemic (as discussed further in Footnote 1 “Basis of Presentation” of the Financial Statements) has caused significant disruptions in international and U.S.

economies and markets.

We discuss the COVID-19 pandemic and its potential future implications in this report;

however, the COVID-19 pandemic is an evolving and challenging situation and its impact on our business in the future remains uncertain.

We discuss the COVID-19 pandemic and its current and potential future implications in this report;

however, the COVID-19 pandemic is evolving and its potential impact on our business in the future remains uncertain.

Significant Accounting Policies Used in Describing Results of Operations

29 unchanged sentences

citizens or residents who financed a vacation ownership purchase was as follows:

Three Months Ended

March 31, 2020

March 31, 2019

Six Months Ended

June 30, 2020 June 30, 2019

Average FICO score 737 739

7 unchanged sentences

We do not include resales contract sales in the financing propensity calculation.

Financing propensity was 62 percent in the first quarter of 2019 and 57 percent in the first quarter of 2020 .

Financing propensity was 62 percent in the second quarter of 2019 and 37 percent in the second quarter of 2020 as a result of the various sales programs that incented cash purchases over financed purchases in the quarter, in response to the COVID-19 pandemic.

We do not expect these incentives to continue at the same level going forward.

We expect to continue to offer financing incentive programs and that interest income will continue to increase as new originations of vacation ownership notes receivable outpace the decline in principal of existing vacation ownership notes receivable.

3 unchanged sentences

Historical default rates, which represent defaults as a percentage of each year’s beginning gross vacation ownership notes receivable balance, were as follows:

Three Months Ended

March 31, 2020

March 31, 2019

Six Months Ended

June 30, 2020 June 30, 2019

Historical default rates 2.9% 2.1%

3 unchanged sentences

We generate revenue from rentals of inventory that we hold for sale as interests in our vacation ownership programs, inventory that we control because our owners have elected alternative usage options permitted under our vacation ownership programs and rentals of owned-hotel properties.

We also recognize rental revenue from the utilization of plus points under the MVCD program when the points are redeemed for rental stays at one of our resorts or in other third-party offerings.

We also recognize rental revenue from the utilization of plus points under our points-based Marriott Vacation Club Destinations program when the points are redeemed for rental stays at one of our resorts or in other third-party offerings.

We obtain rental inventory from unsold inventory and inventory we control because owners have elected alternative usage options offered through our vacation ownership programs.

1 unchanged sentence

The rental activity associated with discounted vacation packages requiring a tour (“preview stays”) is not included in transient rental metrics, and because the majority of these preview stays are sourced directly or indirectly from unsold inventory, the associated revenues and expenses are reported net in Marketing and sales expense.

In our Exchange & Third-Party Management segment, we offer vacation rental opportunities to members of the Interval International Network and certain other membership programs.

The offering of Getaways allows us to monetize excess availability of resort accommodations within the applicable exchange network.

Resort accommodations available as Getaways typically result from seasonal oversupply or underutilized space, as well as resort accommodations we source specifically for Getaways.

In our Exchange & Third-Party Management segment, we offer vacation rental opportunities at managed properties through VRI, TPI, and Aqua-Aston Hospitality.

We also offer vacation rental offers knows as Getaways to members of the Interval International Network and certain other membership programs.

The offering of Getaways allows us to monetize excess availability of resort accommodations within the applicable exchange network, as well as provide additional vacation opportunities to members.

Resort accommodations available as Getaways typically result from seasonal oversupply or underutilized space in the applicable exchange program, as well as resort accommodations specifically sourced for the Getaway program.

Rental expenses include:

18 unchanged sentences

Interest Expense

Interest expense consists of all interest expense other than consumer financing interest expense, which is included with Financing expense.

Interest expense consists of all interest expense other than consumer financing interest expense, which is included within Financing expense.

We measure operating performance using the following key metrics:

5 unchanged sentences

We believe that this operating metric is valuable in evaluating the effectiveness of the sales process as it combines the impact of average contract price with the number of touring guests who make a purchase;

◦ For the second quarter of 2020, as a result of the COVID-19 pandemic, VPG is not a meaningful measure of our operating performance given that the majority of the sales in the quarter were from our enhanced phone sales program (which do not count as a tour in our VPG calculation) and there were limited site-based tours due to sales center closures.

• Average revenue per member, which we calculate by dividing membership fee revenue, transaction revenue and other member revenue for the Interval International network by the monthly weighted average number of Interval International network active members during the applicable period;

1 unchanged sentence

Consolidated Results

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

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

Operating Statistics

2020 First Quarter

2020 Second Quarter

Three Months Ended

(Contract sales $ in millions)

March 31, 2020

March 31, 2019

(Contract sales $ in millions) June 30, 2020 June 30, 2019 Change % Change

Vacation Ownership

3 unchanged sentences

Total active members at end of period (000's) (1)

1,571 1,691 (120) (7%)

Average revenue per member (1)

$ 30.17 $ 43.23 $ (13.06) (30%)

_______________

(1) Only includes members of the Interval International exchange network.

2020 First Quarter

The following table presents our revenues for the first quarter of 2020 compared to the first quarter of 2019 .

2020 First Half

Six Months Ended

(Contract sales $ in millions) June 30, 2020 June 30, 2019 Change % Change

Vacation Ownership

Total contract sales $ 345 $ 763 $ (418) (55%)

Consolidated contract sales $ 336 $ 740 $ (404) (55%)

Exchange & Third-Party Management

Total active members at end of period (000's) (1)

1,571 1,691 (120) (7%)

Average revenue per member (1)

$ 71.74 $ 89.38 $ (17.64) (20%)

_______________

(1) Only includes members of the Interval International exchange network.

2020 Second Quarter

The following table presents our revenues for the second quarter of 2020 compared to the second quarter of 2019.

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

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

Vacation Ownership $ 405 $ 924 $ (519) (56%)

3 unchanged sentences

Total Revenues $ 480 $ 1,043 $ (563) (54%)

2020 First Half

The following table presents our revenues for the first half of 2020 compared to the first half of 2019.

Six Months Ended

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

Vacation Ownership $ 1,313 $ 1,829 $ (516) (28%)

Exchange & Third-Party Management 165 240 (75) (31%)

Total Segment Revenues 1,478 2,069 (591) (29%)

Consolidated Property Owners’ Associations 12 8 4 79%

Total Revenues $ 1,490 $ 2,077 $ (587) (28%)

Earnings Before Interest Expense, Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted EBITDA

EBITDA, a financial measure that is not prescribed by GAAP, is defined as earnings, or 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.

Adjusted EBITDA reflects additional adjustments for certain items described below, and excludes share-based compensation expense to address considerable variability among companies in recording compensation expense because companies use share-based payment awards differently, both in the type and quantity of awards granted.

We evaluate Adjusted EBITDA as an indicator of operating performance because it allows for period-over-period comparisons of our on-going core operations before the impact of the excluded items.

Together, EBITDA and Adjusted EBITDA facilitate our comparison of results from our on-going core operations before the impact of these items with results from other vacation ownership companies, and we believe this makes these figures helpful for investors.

For purposes of our EBITDA and Adjusted EBITDA calculations, we do not adjust for consumer financing interest expense because we consider it to be an operating expense of our business.

7 unchanged sentences

These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.

We evaluate Adjusted EBITDA as an indicator of operating performance because it allows for period-over-period comparisons of our on-going core operations before the impact of the excluded items.

Together, EBITDA and Adjusted EBITDA facilitate our comparison of results from our on-going core operations before the impact of these items with results from other vacation ownership companies.

EBITDA and Adjusted EBITDA have limitations and should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.

1 unchanged sentence

The table below shows our EBITDA and Adjusted EBITDA calculation and reconciles these measures with Net (loss) income attributable to common shareholders, which is the most directly comparable GAAP financial measure.

2020 First Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

2020 Second Quarter

Three Months Ended Change

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

Net (loss) income attributable to common shareholders $ (70) $ 49 $ (119)

2 unchanged sentences

Depreciation and amortization 31 36 (5)

EBITDA (16) 145 (161)

Share-based compensation expense 9 11 (2)

1 unchanged sentence

Adjusted EBITDA $ (10) $ 195 $ (205)

Certain items for the first quarter of 2020 consisted of $95 million of impairment charges, $24 million of acquisition costs (including $21 million of ILG acquisition-related costs and $3 million of other acquisition costs), $56 million of losses and other expenses, $54 million of other charges, $2 million of purchase price adjustments, and $2 million of litigation charges.

The $56 million of losses and other expenses includes $32 million related to foreign currency translation and $33 million related to a true-up to a Marriott International indemnification receivable upon settlement (true-up to the offsetting accrual is included in the provision for income taxes line), partially offset by a $6 million receivable related to an indemnification from Marriott International for VAT charges and $3 million related to insurance proceeds).

The $54 million of other charges includes $37 million related to the net sales reserve adjustment due primarily to the impact of the COVID-19 pandemic , $11 million related to an accrual for certain health and welfare costs for furloughed associates, and $6 million related to VAT charges (see offset from indemnification above).

The reduction in share-based compensation expense in the first quarter of 2020 includes a $4 million true-up for projected expense associated with the Company’s performance based share awards based upon the projected impact of the COVID-19 pandemic on financial metrics for the programs.

Certain items for the first quarter of 2019 consisted of $26 million of ILG acquisition-related costs, $26 million of impairment charges, $1 million of purchase price adjustments, $1 million of litigation charges, and $1 million of other severance costs, partially offset by $8 million of gains and other income.

Certain items for the second quarter of 2020 consisted of $2 million related to the charge for VAT interest (the true-up to the offsetting charge is included in the Interest expense line) and $14 million of gains and other income (including $8 million related to foreign currency translation, $1 million related to a true-up to a Marriott International indemnification receivable upon settlement (the true-up to the offsetting accrual is included in the Benefit (provision) for income taxes line), $4 million related to net insurance proceeds from the final settlement of Legacy-MVW business interruption insurance claims arising from a prior year hurricane, and $1 million related to miscellaneous gains and other income), partially offset by $12 million of ILG acquisition-related costs and $1 million related to an asset impairment charge.

Certain items for the second quarter of 2019 consisted of $36 million of ILG acquisition-related costs, $4 million of purchase price adjustments and $1 million of litigation charges, partially offset by $2 million of gains and other income.

2020 First Half

Six Months Ended Change

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

Net (loss) income attributable to common shareholders $ (176) $ 73 $ (249)

Interest expense 75 69 6

Tax (benefit) provision (77) 40 (117)

Depreciation and amortization 63 73 (10)

EBITDA (115) 255 (370)

Share-based compensation expense 13 20 (7)

Certain items 230 86 144

Adjusted EBITDA $ 128 $ 361 $ (233)

Certain items for the first half of 2020 consisted of $33 million of ILG acquisition-related costs, $2 million of litigation charges, $42 million of losses and other expense (including $24 million related to foreign currency translation and $32 million related to a true-up to a Marriott International indemnification receivable upon settlement (the true-up to the offsetting accrual is included in the Benefit (provision) for income taxes line), partially offset by $4 million related to net insurance proceeds from the final settlement of Legacy-MVW business interruption insurance claims arising from a prior year hurricane, $3 million related to other insurance proceeds, $6 million related to an indemnification receivable from Marriott International for certain VAT charges, and $1 million related to miscellaneous gains and other income), $96 million of impairment charges, $2 million of purchase accounting adjustments, $3 million related to transaction costs related to our asset light inventory arrangements, $48 million of other charges (including $37 million related to the net sales reserve adjustment and $11 million related to an accrual for the health and welfare costs for furloughed associates), and $4 million related to the charge for VAT penalties and interest (see offset included in indemnification above).

The reduction in share-based compensation expense in the first half of 2020 includes a $4 million true-up for projected expense associated with our performance based share awards based upon the projected impact of the COVID-19 pandemic on financial metrics for the programs.

Certain items for the first half of 2019 consisted of $62 million of ILG acquisition-related costs, $26 million of asset impairments, $5 million of purchase accounting adjustments, $2 million of litigation charges and $1 million of other severance costs, partially offset by $10 million of gains and other income.

Segment Adjusted EBITDA

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

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

Vacation Ownership $ (19) $ 203 $ (222)

4 unchanged sentences

Adjusted EBITDA $ (10) $ 195 $ (205)

2020 First Half

Six Months Ended

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

Vacation Ownership $ 128 $ 375 $ (247)

Exchange & Third-Party Management 60 100 (40)

Segment adjusted EBITDA 188 475 (287)

General and administrative (64) (117) 53

Consolidated property owners’ associations 4 3 1

Adjusted EBITDA $ 128 $ 361 $ (233)

The following tables present Adjusted EBITDA for our reportable segments reconciled to segment financial results.

Vacation Ownership

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

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

Segment adjusted EBITDA $ (19) $ 203 $ (222)

3 unchanged sentences

Segment financial results $ (34) $ 178 $ (212)

Certain items in the Vacation Ownership segment for the first quarter of 2020 consisted of $37 million related to the net sales reserve adjustment due primarily to the impact of the COVID-19 pandemic , $3 million of transaction costs associated with our asset light inventory arrangements, $4 million of impairment charges, $2 million of purchase accounting adjustments, and $2 million of litigation charges, partially offset by $1 million of gains and other income.

Certain items in the Vacation Ownership segment for the first quarter of 2019 consisted of $26 million of impairment charges, $1 million of purchase price adjustments, and $1 million of litigation charges, partially offset by $9 million of gains and other income.

Certain items in the Vacation Ownership segment for the second quarter of 2020 consisted of $5 million of gains and other income, partially offset by a $1 million asset impairment charge.

Certain items in the Vacation Ownership segment for the second quarter of 2019 consisted of $4 million of purchase accounting adjustments, $1 million of litigation charges and $1 million of losses and other expense.

2020 First Half

Six Months Ended Change

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

Segment adjusted EBITDA $ 128 $ 375 $ (247)

Depreciation and amortization (36) (34) (2)

Share-based compensation expense (2) (4) 2

Certain items (43) (25) (18)

Segment financial results $ 47 $ 312 $ (265)

Certain items in the Vacation Ownership segment for the first half of 2020 consisted of $2 million of litigation charges, $3 million related to transaction costs associated with our asset light inventory arrangements, $5 million of asset impairment charges, $37 million related to the net sales reserve adjustment due primarily to the impact of the COVID-19 pandemic, and $2 million of purchase accounting adjustments, partially offset by $6 million of gains and other income.

Certain items in the Vacation Ownership segment for the first half of 2019 consisted of $26 million of asset impairment charges, $5 million of purchase accounting adjustments and $2 million of litigation charges, partially offset by $8 million of gains and other income.

Exchange & Third-Party Management

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

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

Segment adjusted EBITDA $ 19 $ 46 $ (27)

3 unchanged sentences

Segment financial results $ 14 $ 33 $ (19)

Certain items in the Exchange & Third-Party Management segment for the first quarter of 2020 consisted primarily of $91 million of impairment charges related to Goodwill and certain trademarks resulting from the impact of the COVID-19 pandemic.

Certain items in the Exchange & Third-Party Management segment for the second quarter of 2020 consisted of $1 million of losses and other expense.

2020 First Half

Six Months Ended

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

Segment adjusted EBITDA $ 60 $ 100 $ (40)

Depreciation and amortization (9) (24) 15

Non-cash share-based compensation expense (1) (2) 1

Certain items (91) (1) (90)

Segment financial results $ (41) $ 73 $ (114)

Certain items in the Exchange & Third-Party Management segment for the first half of 2020 consisted of $91 million of impairment charges related to the decrease in the fair value of Goodwill and certain trademarks resulting from the impact of the COVID-19 pandemic.

See Footnote 10 “Goodwill and Intangibles” to our Financial Statements for additional information.

Certain items in the Exchange & Third-Party Management segment for the first half of 2019 consisted of $1 million of purchase accounting adjustments.

Business Segments

3 unchanged sentences

Vacation Ownership

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

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

Resort management and other services 73 124 185 249

Rental 12 133 134 262

Financing 69 68 140 135

Cost reimbursements 198 258 543 549

3 unchanged sentences

Resort management and other services 22 54 78 117

Rental 87 102 194 187

Financing 23 20 60 42

Depreciation and amortization 18 17 36 34

Litigation charges — 1 2 2

Royalty fee 23 26 49 52

Impairment 1 — 5 26

Cost reimbursements 198 258 543 549

TOTAL EXPENSES 444 745 1,269 1,526

Gains and other income, net

Gains (losses) and other income (expense), net 5 (1) 6 8

Other — — (3) —

SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS (34) 178 47 311

2 unchanged sentences

Contract Sales

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

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

Total consolidated contract sales $ 30 $ 386 $ (356) (92%)

1 unchanged sentence

Total contract sales $ 30 $ 398 $ (368) (93%)

2020 First Half

Six Months Ended

June 30, 2020 June 30, 2019 Change % Change

Total consolidated contract sales $ 336 $ 740 $ (404) (55%)

Joint venture contract sales 9 23 (14) (59%)

Total contract sales $ 345 $ 763 $ (418) (55%)

Sale of Vacation Ownership Products

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

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

Total contract sales $ 30 $ 398 $ (368) (93%)

10 unchanged sentences

(1) Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue and other adjustments to Sale of vacation ownership products revenue.

Sale of vacation ownership products decreased $288 million due to $349 million of lower contract sales volumes, partially offset by a $40 million favorable change in revenue reportability and $18 million of lower sales reserve activity.

Lower contract sales performance was primarily due to the closure in March 2020 of all of our sales centers in response to the COVID-19 pandemic.

In the second quarter of 2020, only eight of our sales centers were open.

Since the end of the second quarter, we have re-opened 34 additional sales centers and, as a result, expect contract sales to increase from levels as of the end of the second quarter.

Revenue reportability was significantly positive in the second quarter of 2020 as a result of contract sales late in the first quarter of 2020 that we recognized as revenue in the second quarter.

However, it was not offset by the shift of revenues from sales late in the second quarter into the third quarter, given the low sales volumes in June 2020 resulting from the response to the COVID-19 pandemic.

The lower sales reserve recorded in the second quarter of 2020 reflects the lower overall contract sales in the quarter, offset partially by higher projected default activity, primarily in our Legacy-ILG brands.

2020 First Half

Six Months Ended

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

Total contract sales $ 345 $ 763 $ (418) (55%)

Less resales contract sales (8) (16) 8

Less joint venture contract sales (9) (23) 14

Consolidated contract sales, net of resales 328 724 (396)

Settlement revenue 8 12 (4)

Resales revenue 5 7 (2)

Revenue recognition adjustments:

Reportability 66 (38) 104

Sales reserve (80) (46) (34)

Sale of vacation ownership products $ 311 $ 634 $ (323) (51%)

_______________

(1) Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue and other adjustments to Sale of vacation ownership products revenue.

Sale of vacation ownership products decreased $323 million due to $396 million of lower contract sales volumes and $34 million of higher sales reserve activity, partially offset by a $104 million favorable change in revenue reportability.

The lower contract sales performance as well as the higher sales reserve activity is driven primarily from the impact of the COVID-19 pandemic.

The lower contract sales performance as well as the higher sales reserve activity were primarily due to by the response to the COVID-19 pandemic.

Contract sales and VPG as of March 13, 2020 were 10 percent and 11 percent higher, respectively, than the same period during the first quarter of 2019.

However, as the virus continued to spread throughout the United States and, as we began closing our sales centers during the second half of March, contract sales volumes declined significantly.

The higher sales reserve recorded in the first quarter of 2020 reflects an estimate of future default activity to the extent our notes receivable portfolio performs similar to how it performed during the financial crisis of 2009 and 2010.

We expect to continue to evaluate this estimate against actual activity as we proceed throughout the year.

While revenue reportability is typically negative in the first quarter of a particular year, revenue reportability was significantly positive in the first quarter of 2020 .

The first quarter of 2020 benefited from the contract sales from late in the fourth quarter of 2019 that were recognized as revenue in 2020.

However, it was not impacted by an offsetting shift of revenues into the second quarter, given the low sales volumes in March 2020 resulting from the impact of the COVID-19 pandemic.

However, as the virus continued to spread throughout the United States and as we began closing our sales centers during the second half of March, contract sales volumes declined significantly through the end of the second quarter.

In the second quarter of 2020, only eight of our sales centers were open.

Since the end of the second quarter, we have re-opened 34 additional sales centers and expect contract sales to increase from levels as of the end of the second quarter.

The higher sales reserve recorded in the first half of 2020 reflects an estimate of future default activity to the extent our notes receivable portfolio performs similar to how it performed during the financial crisis of 2009 and 2010, offset partially by the lower contract sales in the first half of 2020.

We will continue to evaluate our estimate of future default activity and compare it to actual activity as we proceed throughout the year and may adjust our sales reserve based on changes in actual default activity and other factors.

Revenue reportability was significantly positive in the first half of 2020 as a result of contract sales late in the fourth quarter of 2019 that we recognized as revenue in 2020.

Development Margin

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

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

Sale of vacation ownership products $ 53 $ 341 $ (288) (84%)

2 unchanged sentences

Development margin $ (19) $ 74 $ (93) (125%)

Development margin percentage

Development margin decreased $93 million year-over-year.

The change in margin reflected $52 million related to higher sales reserve activity due primarily to higher estimated defaults projected due to the impact of the COVID-19 pandemic ($42 million) and $34 million due to lower sales volumes and less efficient marketing and sales spending due to the inability to leverage fixed costs also resulting from the COVID-19 pandemic.

These declines were partially offset by $46 million due to favorable revenue reportability compared to the first quarter of 2019 and $25 million from lower product costs, primarily from the lower revenue resulting from the sales reserve adjustment ($15 million) as well as from a favorable mix of products being sold and the timing of reacquired inventory costs compared to the first quarter of 2019 .

The decrease in the development margin percentage reflected a 15 percentage point decline due to higher sales reserve activity (revenue impact net of related product costs) and a 9 percentage point decline due to less efficient marketing and sales spending due to the inability to leverage fixed costs with the lower sales volumes resulting from the COVID-19 pandemic.

These declines were partially offset by 14 percentage points due to favorable revenue reportability compared to the first quarter of 2019 and 6 percentage points from lower product costs.

The change in margin reflected $111 million of lower sales volumes and less efficient marketing and sales spending due to the inability to leverage fixed costs (as a result of the

COVID-19 pandemic), $5 million of unfavorable product cost true-up activity, and $3 million related to higher sales reserve activity in the quarter.

These declines were partially offset by $26 million of favorable revenue reportability year-over-year.

2020 First Half

Six Months Ended

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

Sale of vacation ownership products $ 311 $ 634 $ (323) (51%)

Cost of vacation ownership products (83) (169) 86 51%

Marketing and sales (219) (348) 129 37%

Development margin $ 9 $ 117 $ (108) (92%)

Development margin decreased $108 million year-over-year.

The change in margin reflected $135 million of lower sales volumes and less efficient marketing and sales spending due to the inability to leverage fixed costs as a result of the COVID-19 pandemic and $55 million of higher sales reserve activity due primarily to higher estimated defaults as a result of the COVID-19 pandemic.

These declines were partially offset by $71 million of favorable revenue reportability compared to the first half of 2019 and $11 million of lower product costs, primarily due to lower revenue as a result of the sales reserve adjustment as well as a favorable mix of inventory being sold compared to the first half of 2019.

Resort Management and Other Services Revenues, Expenses and Margin

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

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

Management fee revenues $ 38 $ 37 $ 1 4%

4 unchanged sentences

Resort management and other services margin $ 51 $ 70 $ (19) (28%)

Resort management and other services margin percentage

Resort management and other services revenues reflected lower ancillary revenues, including revenues from food and beverage and golf offerings, and lower other revenues earned in conjunction with our exchange programs, all as a result of the impact of the COVID-19 pandemic in the quarter.

Resort management and other services margin percentage 69.5% 56.9% 12.6 pts

Resort management and other services revenues reflected lower ancillary revenues, including revenues from food and beverage and golf offerings, as a result of the impact of the COVID-19 pandemic.

These declines were partially offset by higher management fees resulting from the cumulative increase in the number of vacation ownership products sold and higher operating costs across the system.

The decrease in resort management and other services margin reflected the decrease in ancillary revenues partially offset by lower ancillary expenses as a result of the lower ancillary revenues mentioned above.

2020 First Half

Six Months Ended

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

Management fee revenues $ 76 $ 73 $ 3 4%

Ancillary revenues 52 114 (62) (55%)

Other management and exchange revenues 57 62 (5) (7%)

Resort management and other services revenues 185 249 (64) (26%)

Resort management and other services expenses (78) (117) 39 33%

Resort management and other services margin $ 107 $ 132 $ (25) (19%)

Resort management and other services margin percentage 58.0% 53.2% 4.8 pts

These declines were partially offset by higher management fees resulting from the cumulative increase in the number of vacation ownership products sold and higher operating costs across the system.

The decrease in the resort management and other services margin reflected the decrease in revenues partially offset by lower ancillary expenses as a result of the lower ancillary revenues mentioned above.

Rental Revenues, Expenses and Margin

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

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

Rental revenues $ 12 $ 133 $ (121) (91%)

1 unchanged sentence

Rental margin $ (75) $ 31 $ (106) (340%)

Rental margin percentage

Rental margin percentage NM 23.6%

Three Months Ended

March 31, 2020

March 31, 2019

June 30, 2020 June 30, 2019 Change % Change

Transient keys rented (1)

44,985 619,212 (574,227) (93%)

Average transient key rate $ 191.61 $ 224.76 $ (33.15) (15%)

Resort occupancy

Resort occupancy 24.5% 88.6% (64.1 pts)

_________________________

1 unchanged sentence

The decline in rental margin resulted from a decline in keys rented and a decline in average transient rate resulting from the COVID-19 pandemic.

In response to quickly evolving travel restrictions and restrictions on business operations, beginning March 25, 2020, we closed our resorts for rental guests with stays at our branded North America vacation ownership resorts.

In late May, as many government restrictions were beginning to be relaxed, we began reopening resorts to rental guests.

Since the end of the second quarter, we have reopened more resorts to rental guests and expect rental revenues to increase from current levels.

2020 First Half

Six Months Ended

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

Rental revenues $ 134 $ 262 $ (128) (49%)

Rental expenses (194) (187) (7) (4%)

Rental margin $ (60) $ 75 $ (135) (180%)

Rental margin percentage NM 28.8%

Six Months Ended

June 30, 2020 June 30, 2019 Change % Change

Transient keys rented (1)

578,655 1,230,966 (652,311) (53%)

Average transient key rate $ 238.68 $ 234.71 $ 3.97 2%

Resort occupancy 52.4% 88.6% (36.2 pts)

_________________________

(1) Transient keys rented exclude those occupied through the use of plus points and preview stays.

The decline in rental margin resulted from a decline in keys rented resulting from the COVID-19 pandemic.

Rental margin as of the end of February 2020 was nearly $4 million higher than the comparable period of 2019.

In late May, as many government restrictions were

beginning to be relaxed, we began reopening resorts to rental guests.

Since the end of the second quarter, we have reopened more resorts to rental guests and expect rental revenues to increase from current levels.

Financing Revenues, Expenses and Margin

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

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

Interest income $ 67 $ 65 $ 2 2%

5 unchanged sentences

Financing propensity 37.3% 61.9%

Financing margin increased due to higher financing revenues resulting from a $273 million increase in the average gross vacation ownership notes receivable balance, offset by slightly higher financing expenses (including $10 million related to the higher reserve on the acquired vacation ownership notes receivable related to the COVID-19 pandemic as well as timing of technology related spending) and slightly higher consumer financing interest expense resulting from higher overall securitized debt balances .

Financing expenses increased due to a higher s ales reserve for our acquired Legacy ILG notes and slightly higher technology spend year over year, partially offset by lower salaries and wages associated with the furlough and reduced work week programs in the current year quarter implemented as a result of the pandemic.

The lower financing propensity in the second quarter of 2020 reflected the impact of the sales programs that incented cash purchases over financed purchases in the quarter.

2020 First Half

Six Months Ended

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

Interest income $ 136 $ 130 $ 6 4%

Other financing revenues 4 5 (1) (27%)

Financing revenues 140 135 5 3%

Financing expenses (31) (14) (17) (116%)

Consumer financing interest expense (29) (28) (1) (4%)

Financing margin $ 80 $ 93 $ (13) (15%)

Financing propensity 53.6% 61.9%

Financing revenues increased due to a $177 million increase in the average gross vacation ownership notes receivable balance.

The higher financing expenses including $11 million related to the higher reserve on the acquired vacation ownership notes receivable balance due primarily to higher estimated defaults as result of the COVID-19 pandemic and higher technology related costs year over year, partially offset by lower salaries and wages associated with the furlough and reduced work week programs in the current year.

Higher consumer financing interest expense resulted from higher overall securitized debt balances .

Litigation Charges

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

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

Litigation charges $ — $ 1 $ (1) (19%)

2020 First Quarter

2020 First Half

Six Months Ended

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

Litigation charges $ 2 $ 2 $ — 18%

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

Royalty fee expense remained flat in the first quarter of 2020 as the amount of closings, in dollars, was similar to the prior year quarter.

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

Royalty fee $ 23 $ 26 $ (3) (15%)

Royalty fee expense declined in the second quarter of 2020 as a result of lower contract closings due to the lower contract sales compared to the prior year quarter.

2020 First Half

Six Months Ended

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

Royalty fee $ 49 $ 52 $ (3) (7%)

Royalty fee expense remained flat in the first half of 2020 as the amount of contract closings, in dollars, was similar to the prior year comparable period.

Depreciation and Amortization

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

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

Depreciation and amortization $ 18 $ 17 $ 1 2%

2020 First Quarter

2020 First Half

Six Months Ended

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

Depreciation and amortization $ 36 $ 34 $ 2 6%

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

During the first quarter of 2020, we recorded a non-cash impairment of $4 million related to our Asia Pacific inventory product resulting from the impact of the COVID-19 pandemic.

During the first quarter of 2019, we recorded a non-cash impairment of $26 million as a result of entering into a contract to sell land and land improvements associated with a future phase of an existing resort located in Orlando, Florida, which was for $10 million , and was less than the carrying value of the land and land improvements.

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

Impairment $ 1 $ — $ 1 9,827%

During the second quarter of 2020, we recorded a non-cash impairment of $1 million related to our Asia Pacific inventory as a result of the COVID-19 pandemic.

2020 First Half

Six Months Ended

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

Impairment $ 5 $ 26 $ (21) (82%)

During the first half of 2020, we recorded a non-cash impairment of $5 million related to our Asia Pacific inventory as a result of the COVID-19 pandemic.

During the first half of 2019, we recorded a non-cash impairment of $26 million as a result of entering into a contract to sell land and land improvements associated with a future phase of an existing resort located in Orlando, Florida, for $10 million, which was less than the carrying value of the land and land improvements.

The impairment was primarily attributable to the fact that the book value of the assets to be sold exceeded the sales price because the book value included allocations of common costs incurred when we built the infrastructure for the resort, including future phases.

Cost Reimbursements

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

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

Cost reimbursements $ 198 $ 258 $ (60) (23%)

2020 First Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

In the first quarter of 2020 , we incurred $3 million of other expenses associated with our capital efficient inventory arrangements.

2020 First Half

Six Months Ended

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

Cost reimbursements $ 543 $ 549 $ (6) (1%)

Gains / Losses and Other Income / Expense

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

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

Gains (losses) and other income (expense), net $ 5 $ (1) $ 6 (3,174%)

In the second quarter of 2020, we recorded $5 million of gains and other income including $4 million of net insurance proceeds related to the settlement of Legacy-MVW business interruption insurance claims arising from a prior year hurricane.

2020 First Half

Six Months Ended

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

Gains and other income, net $ 6 $ 8 $ (2) (28%)

In the first quarter of 2019, we recorded $9 million of gains and other income related to net insurance proceeds related to the settlement of Legacy-MVW business interruption insurance claims arising from prior year hurricanes.

Noncontrolling Interest

2020 First Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

Net loss attributable to noncontrolling interests

In the first half of 2020, we recorded $6 million of gains and other income including $4 million of net insurance proceeds related to the settlement of Legacy-MVW business interruption insurance claims arising from a prior year hurricane.

In the first half of 2019, we recorded $9 million of gains and other income related to net insurance proceeds from the settlement of Legacy-MVW business interruption insurance claims arising from prior year hurricanes, partially offset by $1 million of miscellaneous losses and other expense.

Exchange & Third-Party Management

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

Management and exchange $ 39 $ 76 $ 111 $ 158

Rental 6 17 19 34

Financing 1 1 2 2

Cost reimbursements 12 22 33 46

2 unchanged sentences

Management and exchange 18 26 45 52

Rental 1 9 6 17

Financing — 1 1 1

Depreciation and amortization 4 12 9 24

Impairment — — 91 0

Cost reimbursements 12 22 33 46

TOTAL EXPENSES 43 83 206 167

Gains and other income, net

Losses and other expense, net (1) — — —

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 14 $ 33 $ (41) $ 73

Management and Exchange Margin

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

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

Management and exchange revenue $ 39 $ 76 $ (37) (48%)

1 unchanged sentence

Management and exchange margin $ 21 $ 50 $ (29) (58%)

Management and exchange margin percentage

The decline in management and exchange margin reflects lower exchange activity and lower average exchange transaction fees primarily driven by the impact of the COVID-19 pandemic.

Management and exchange margin percentage 52.9% 65.0% (12.1 pts)

The decline in management and exchange revenue and margin reflects lower exchange activity and lower average exchange transaction fees primarily due to the closure of a large number of resorts, and the fact that additional resorts stopped taking reservations, in response to COVID-19 pandemic.

Lower management and exchange expense reflects lower costs associated with the furlough and reduced work week programs and lower print and postage costs.

2020 First Half

Six Months Ended

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

Management and exchange revenue $ 111 $ 158 $ (47) (30%)

Management and exchange expense (45) (52) 7 13%

Management and exchange margin $ 66 $ 106 $ (40) (38%)

Management and exchange margin percentage 59.1% 66.9% (7.8 pts)

Lower management and exchange expense reflects lower costs associated with the furlough and reduced work week programs and lower print and postage costs.

Rental Revenues, Expenses and Margin

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

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

Rental revenues $ 6 $ 17 $ (11) (66%)

1 unchanged sentence

Rental margin $ 5 $ 8 $ (3) (51%)

Rental margin percentage

The decline in rental revenue reflects lower Getaway program transactions and lower average Getaway program transaction fees driven by supply challenges in certain markets and fewer bookings into purchased inventory as well as the impact of the COVID-19 pandemic.

The decline in rental margin reflects the declines in rental revenue offset by a reduction in space procurement costs resulting from the fewer bookings into purchased inventory and adjustments for cancellations and from resorts unavailable due to the COVID-19 pandemic.

2020 First Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

During the first quarter of 2020, we recorded a non-cash impairment charge of $91 million related to Goodwill and certain trademarks resulting from the impact of the COVID-19 pandemic.

Rental margin percentage 78.7% 54.9% 23.8 pts

The decline in rental margin reflects the declines in rental revenue, partially offset by a reduction in space procurement costs resulting from fewer bookings into purchased inventory and adjustments for cancellations and resorts closing for rental stays in response to the COVID-19 pandemic.

2020 First Half

Six Months Ended

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

Rental revenues $ 19 $ 34 $ (15) (46%)

Rental expenses (6) (17) 11 66%

Rental margin $ 13 $ 17 $ (4) (28%)

Rental margin percentage 69.9% 52.8% 17.1 pts

The decline in rental revenue reflects lower Getaway program transactions and lower average Getaway program transaction fees as a result of resort closures in response to the COVID-19 pandemic.

2020 First Half

Six Months Ended

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

Impairment $ 91 $ — $ 91 NM

During the first quarter of 2020, we recorded a non-cash impairment charge of $91 million related to a decrease in the fair value of Goodwill and certain trademarks resulting from the impact of the COVID-19 pandemic.

See Footnote 10 “Goodwill and Intangibles” to our Financial Statements for additional information.

2 unchanged sentences

In addition, Corporate and Other includes the revenues and expenses from the Consolidated Property Owners’ Associations.

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

Resort management and other services $ 33 $ 31 $ 76 $ 63

Rental — — — 1

Cost reimbursements (16) (28) (64) (56)

1 unchanged sentence

Resort management and other services 37 43 92 87

Rental (15) (14) (29) (27)

General and administrative 19 64 89 131

2 unchanged sentences

TOTAL EXPENSES 34 72 106 150

Losses and other expense, net

Gains (losses) and other income (expense), net 10 3 (48) 2

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

7 unchanged sentences

The following table illustrates the impact of the Consolidated Property Owners’ Associations of the acquired Legacy-ILG vacation ownership properties under the voting interest model, which represents the portion related to individual or third-party VOI owners.

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

Resort management and other services $ 33 $ 31 $ 76 $ 63

Rental — — — 1

Cost reimbursements (16) (28) (64) (56)

1 unchanged sentence

Resort management and other services 37 43 92 87

Rental (15) (14) (29) (27)

Cost reimbursements (16) (28) (64) (56)

4 unchanged sentences

General and Administrative

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

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

General and administrative $ 19 $ 64 $ (45) (72%)

General and administrative expenses increased $3 million due to an accrual for health and welfare costs for furloughed employees ($11 million) and higher VAT charges ($6 million which is expected to be indemnified by Marriott International), offset partially by synergy and other cost savings.

General and administrative expenses decreased $45 million due to $14 million of savings related to synergy efforts and lower costs associated with the furlough and reduced work week programs, $10 million related to lower bonus expense, a $6 million credit related to the incentive under the CARES Act for companies to continue paying associates' benefit costs while they are not working, and $15 million of lower overall spending across the business on technology, travel, training and other costs that we have deferred due to the COVID-19 pandemic.

2020 First Half

Six Months Ended

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

General and administrative $ 89 $ 131 $ (42) (33%)

General and administrative expenses decreased $42 million due to $16 million of savings related to synergy efforts and lower costs associated with the furlough and reduced work week programs, $18 million related to lower bonus expense, a $6 million credit related to the incentive under the CARES Act for companies to continue paying associates' benefit costs while they are not working, and $17 million of lower overall spending across the business on technology, travel, training and other costs that we have deferred due to the COVID-19 pandemic, partially offset by an $11 million accrual for health and welfare costs for furloughed associates, higher VAT charges ($4 million of which is expected to be indemnified by Marriott International), and other inflationary costs increases.

Depreciation and Amortization

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

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

Depreciation and amortization $ 9 $ 7 $ 2 31%

2020 First Half

Six Months Ended

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

Depreciation and amortization $ 18 $ 15 $ 3 22%

Gains / Losses and Other Income / Expense

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

Losses and other expense, net

In the first quarter of 2020 , we recorded $31 million related to foreign currency translation and $33 million related to a true-up to an indemnification receivable from Marriott International, Inc.

related to settlement with a taxing authority (true-up to the offsetting accrual is included in the Benefit (provision) for income taxes line), offset partially by a $6 million payment related to an indemnification from Marriott International, Inc.

for VAT penalties and interest.

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

Gains and other income, net $ 10 $ 3 $ 7 NM

In the second quarter of 2020, we recorded a gain of $9 million related to foreign currency translation and other income of $1 million for the true-up of an indemnification receivable from Marriott International as a result of the settlement of the indemnified liability with a taxing authority (the true-up to the offsetting accrual is included in the Benefit (provision) for income taxes line).

2020 First Half

Six Months Ended

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

(Losses) gains and other (expense) income, net $ (48) $ 2 $ (50) NM

In the first half of 2020, we recorded a loss of $22 million related to foreign currency translation and $32 million of other expense for the true-up to an indemnification receivable from Marriott International as a result of the settlement of the indemnifed liability with a taxing authority (the true-up to the offsetting accrual is included in the Benefit (provision) for income taxes line), partially offset by $6 million of other income related to an indemnification from Marriott International for VAT penalties and interest.

Interest Expense

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

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

Interest expense $ (42) $ (35) $ (7) (21%)

2020 First Half

Six Months Ended

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

Interest expense $ (75) $ (69) $ (6) (8%)

ILG Acquisition-Related Costs

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

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

ILG acquisition-related costs $ (12) $ (36) $ 24 67%

2020 First Half

Six Months Ended

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

ILG acquisition-related costs $ (33) $ (62) $ 29 47%

ILG acquisition-related costs include transaction costs, employee termination costs and integration costs.

2 unchanged sentences

Acquisition and integration costs primarily represent integration employee salaries and share-based compensation, fees paid to change management consultants and technology-related costs.

2020 First Quarter

As a result of the COVID-19 pandemic, we have scaled back spending on integration efforts.

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

Benefit (provision) for income taxes

is recorded in (Losses) gains and other (expense) income, net), and a change in our projected mix of earnings in international jurisdictions with differing tax rates and jurisdictions where valuation allowances are recorded.

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

Benefit (provision) for income taxes $ 19 $ (25) $ 44 NM

The change in the provision for income taxes 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.

2020 First Half

Six Months Ended

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

Benefit (provision) for income taxes $ 77 $ (40) $ 117 NM

The increase in the benefit for income taxes is predominately attributable to a pre-tax loss, a reduction in uncertain tax benefits predominately related to a settlement with a taxing authority (for which an offset of $32 million relating to an indemnification asset from Marriott International is recorded in Gains (losses) and other income (expense), net), and a change in our projected mix of earnings in international jurisdictions with differing tax rates and jurisdictions where valuation allowances are recorded.

Noncontrolling Interest

2020 First Quarter

2020 Second Quarter

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

Net income attributable to noncontrolling interests

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

Net income attributable to noncontrolling interests $ (8) $ — $ (8) NM

2020 First Half

Six Months Ended

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

Net income attributable to noncontrolling interests $ (9) $ (1) $ (8) NM

Recent Accounting Pronouncements

1 unchanged sentence

Liquidity and Capital Resources

Typically, our capital needs are supported by cash on hand ( $651 million at the end of the first quarter of 2020 ), cash generated from operations, our ability to raise capital through securitizations in the ABS market and, to the extent necessary, funds available under the Warehouse Credit Facility and the Revolving 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.

Typically, our capital needs are supported by cash on hand ($566 million at the end of the second quarter of 2020), cash generated from operations, our ability to raise capital through securitizations in the ABS market and, to the extent necessary, funds available under the Warehouse Credit Facility and the Revolving Corporate Credit Facility with a borrowing capacity of $600 million.

As a precautionary measure to provide additional liquidity for a sustained period, during the second quarter of 2020, we issued $500 million in aggregate principal amount of senior secured notes and we amended our Warehouse Credit Facility to increase the borrowing capacity by approximately $181 million, bringing the total capacity to approximately $531 million, of which $308 million was outstanding as of the end of the second quarter.

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

We also entered into the Waiver to suspend the requirement to comply with the leverage covenant in our Revolving Corporate Credit Facility for up to four quarters, commencing with the fiscal quarter ending June 30, 2020.

See Footnote 13 “Debt” to our Financial Statements for further information on the Waiver.

In addition, during the second quarter of 2020, we repaid $596 million, the entire amount outstanding at March 31, 2020, on the Revolving Corporate Credit Facility.

We took these proactive measures to help increase our liquidity position and preserve financial flexibility in light of the impact on global markets resulting from the COVID-19 pandemic.

Further, we significantly reduced cash spending by:

◦ Reducing executive leadership team salaries by 50%;

◦ Furloughing approximately 65% of our associates and reducing work weeks by roughly 25%, on average, for our remaining associates;

◦ Early in the second quarter, furloughing approximately 65% of our associates and reducing work weeks by roughly 25%, on average, for our remaining associates.

As of the end of July 2020, 40% of our associates are still on furlough and 16% of our remaining associates have a reduced work week or reduced pay.

Of the associates who have returned from furlough, 80% are in the resort operations area.

◦ Deferring merit increases and 401(k) match contributions;

◦ Deferring inventory and other investments by up to $240 million and substantially reducing other operating costs;

◦ Temporarily suspending share repurchases and dividends.

We anticipate that, even if sales center closures and limited transient rentals were to persist, our cash position will provide us with adequate liquidity to fund our operations and debt service payments through 2021.

We have no corporate debt maturities until September 2022 and are currently in compliance with all debt covenants.

At March 31, 2020 , we had $4.7 billion of total gross debt outstanding, which included $1.9 billion of non-recourse debt associated with vacation ownership notes receivable securitizations, $1.1 billion of senior unsecured notes, $1.5 billion on our Corporate Credit Facility, $230 million of Convertible Notes and $9 million related to financed lease obligations.

At the end of the first quarter of 2020 , we had $762 million of real estate inventory on hand, comprised of $741 million of finished goods and $21 million of work in progress.

◦ Deferring inventory and other investments, substantially reducing other operating costs, and temporarily suspending share repurchases and dividends, all of which is expected to save up to $300 million of cash in 2020.

We began reopening our sales centers and allowing rentals / transient occupancy at our vacation ownership resorts in the second quarter of 2020 and expect to continue doing so through the remainder of 2020.

We believe these actions will enable us to generate additional revenue in the third quarter of 2020 compared to the second quarter of 2020.

However, even if we are required to close sales centers and limit rentals / transient occupancy at our resorts again, we believe we have adequate liquidity to fund our operations and debt service payments through at least 2021.

At June 30, 2020, we had $4.6 billion of total gross debt outstanding, which included $1.9 billion of non-recourse debt associated with vacation ownership notes receivable securitizations, $1.1 billion of senior unsecured notes, $0.9 billion of debt under Corporate Credit Facility, $500 million of senior secured notes, $230 million of Convertible Notes and $10 million related to financed lease obligations.

At June 30, 2020, we had $760 million of real estate inventory on hand, comprised of $750 million of finished goods and $10 million of work in progress.

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

Subsequent to the first quarter of 2020, we issued $500 million aggregate principal amount of senior secured notes and we amended our warehouse credit facility to increase the borrowing capacity by approximately $181 million , bringing the total capacity to approximately $531 million .

We also entered into a waiver (the “Waiver”) to suspend 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.

In addition, in May 2020, we repaid $596 million, the entire amount outstanding at March 31, 2020, on the Revolving Corporate Credit Facility.

The following table summarizes the changes in cash, cash equivalents and restricted cash:

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

Six Months Ended

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

Cash, cash equivalents and restricted cash provided by (used in):

10 unchanged sentences

In addition, our cash from operations varies due to the timing of our owners’ repayment of vacation ownership notes receivable, the closing or recording of sales contracts for vacation ownership products, financing propensity and cash outlays for inventory acquisition and development.

In the first quarter of 2020 , we had $122 million of cash outflows for operating activities, while we generated $28 million in the first quarter of 2019 .

Excluding the impact of changes in net income (loss) and adjustments for non-cash items, the change in cash flows from operations reflected higher inventory spending and timing of maintenance fee payments on unsold inventory, partially offset by higher collections due to an increasing portfolio of outstanding vacation ownership notes receivable and lower payments on employee benefit programs.

In addition to net income (loss) and adjustments for non-cash items, the following operating activities are key drivers of our cash flow from operating activities:

In the first half of 2020, we had $73 million of cash outflows for operating activities, compared to cash inflows of $56 million in the first half of 2019.

Excluding the impact of changes in net (loss) income and adjustments for non-cash items, the change in cash flows from operations reflected higher inventory spending combined with lower sales and rentals deposits due to the COVID-19 pandemic, partially offset by higher collections due to an increasing portfolio of outstanding vacation ownership notes receivable.

In addition to net (loss) income and adjustments for non-cash items, the following operating activities are key drivers of our cash flow from operating activities:

Inventory Spending (In Excess of) Less Than Cost of Sales

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

Six Months Ended

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

Inventory spending $ (69) $ (67)

7 unchanged sentences

We believe our points-based programs enable us to align our inventory acquisitions with the pace of sales of vacation ownership products.

We selectively pursue growth opportunities in our Vacation Ownership segment by targeting high-quality inventory that allows us to add desirable new destinations to our systems with new on-site sales locations through transactions that limit our up-front capital investment and allow us to purchase finished inventory closer to the time it is needed for sale.

As part of our long-term strategy, we selectively pursue growth opportunities in our Vacation Ownership segment by targeting high-quality inventory that allows us to add desirable new destinations to our systems with new on-site sales locations through transactions that limit our up-front capital investment and allow us to purchase finished inventory closer to the time it is needed for sale.

These capital efficient deal structures may consist of the development of new inventory, or the conversion of previously built units by third parties, just prior to sale.

We measure our real estate inventory capital efficiency by comparing the cash outflow for real estate inventory spending (a cash item) to the amount of real estate inventory costs charged to expense on our Income Statements related to sale of vacation ownership products (a non-cash item).

Our spending for real estate inventory in the first quarter of 2020 was higher than the amount of real estate inventory costs given the timing of payments to satisfy our remaining commitments to purchase vacation ownership units.

Our spending for real estate inventory in the first half of 2020 was higher than the amount of real estate inventory costs given the timing of payments to satisfy our remaining commitments to purchase vacation ownership units.

We entered into these commitments in prior periods as part of our capital efficiency strategy to limit our up-front capital investment and purchase finished inventory closer to the time it is needed for sale.

2 unchanged sentences

Through our existing vacation ownership interest repurchase program, we proactively buy back previously sold vacation ownership interests at lower costs than would be required to develop new inventory.

By repurchasing inventory in desirable locations, we expect to be able to stabilize the future cost of vacation ownership products.

By repurchasing inventory, we expect to be able to stabilize the future cost of vacation ownership products.

However, given the impact of the COVID-19 pandemic, we have temporarily discontinued the majority of this repurchase activity.

Vacation Ownership Notes Receivable Collections Less Than Originations

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

Vacation Ownership Notes Receivable Collections In Excess of (Less Than) Originations

Six Months Ended

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

Vacation ownership notes receivable collections — non-securitized $ 113 $ 88

1 unchanged sentence

Vacation ownership notes receivable originations (197) (423)

Vacation ownership notes receivable collections less than originations

Vacation ownership notes receivable collections in excess of (less than) originations $ 137 $ (114)

Vacation ownership notes receivable collections include principal from non-securitized and securitized vacation ownership notes receivable.

Vacation ownership notes receivable collections increased during the first quarter of 2020 , as compared to the first quarter of 2019 , due to an increase in the portfolio of outstanding vacation ownership notes receivable.

Vacation ownership notes receivable originations in the first quarter of 2020 decreased due to lower sales in the latter half of March 2020 due to the COVID-19 pandemic combined with a lower financing propensity.

Financing propensity also declined to 57 percent for the first quarter of 2020 compared to 62 percent for the first quarter of 2019 .

Vacation ownership notes receivable collections increased during the first half of 2020, as compared to the first half of 2019, due to an increase in the portfolio of outstanding vacation ownership notes receivable.

Vacation ownership notes receivable originations in the first half of 2020 decreased due to lower sales in the first half of 2020 due to the COVID-19 pandemic and a lower financing propensity.

Financing propensity declined to 54 percent for the first half of 2020 compared to 62 percent for the first half of 2019.

Cash from Investing Activities

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

Six Months Ended

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

Capital expenditures for property and equipment (excluding inventory) $ (34) $ (19)

5 unchanged sentences

Additionally, it includes spending related to maintenance of buildings and equipment used in common areas at some of our resorts.

In the first quarter of 2020 , capital expenditures for property and equipment of $17 million included $14 million to support business operations (including $9 million for ancillary and other operations assets and $5 million for sales locations) and $3 million for technology spending.

In the first half of 2020, capital expenditures for property and equipment of $34 million included $30 million to support business operations (including $20 million for ancillary and other operations assets and $10 million for sales locations) and $4 million for technology spending.

Given the impact of the COVID-19 pandemic, we expect to significantly reduce our planned spending for property and equipment for the remainder of 2020.

In the first quarter of 2019 , capital expenditures for property and equipment of $10 million included $4 million to support business operations (including $1 million for ancillary and other operations assets and $3 million for sales locations) and $6 million for technology spending.

In the first half of 2019, capital expenditures for property and equipment of $19 million included $7 million to support business operations (including $4 million for ancillary and other operations assets and $3 million for sales locations) and $12 million for technology spending.

Proceeds from Collection of Notes Receivable

During the first quarter of 2019 , we collected $23 million of notes receivable related to the disposition of our interest in VRI Europe in the fourth quarter of 2018.

During the first half of 2019, we collected $23 million of notes receivable related to the disposition of our interest in VRI Europe in the fourth quarter of 2018.

In addition, we collected a $15 million note receivable acquired in the ILG Acquisition.

1 unchanged sentence

To support our ability to meet a portion of our obligations under the Marriott Vacations Worldwide Corporation Deferred Compensation Plan (the “Deferred Compensation Plan”), we acquired company owned insurance policies on the lives of certain participants in the Deferred Compensation Plan, the proceeds of which are intended to be aligned with the investment alternatives elected by plan participants.

During the first quarter of 2020 , we paid $4 million to acquire these policies as compared to $1 million during the first quarter of 2019 .

We paid $4 million to acquire these policies during each of the first half of 2020 and the first half of 2019.

Cash from Financing Activities

Three Months Ended

($ in millions)

March 31, 2020

March 31, 2019

Six Months Ended

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

Borrowings from securitization transactions $ 315 $ 574

3 unchanged sentences

Finance lease payment (8) —

Debt issuance costs (9) (6)

Repurchase of common stock (82) (215)

4 unchanged sentences

We reflect proceeds from securitizations of vacation ownership notes receivable, including draw downs on the Warehouse Credit Facility, as “Borrowings from securitization transactions.” We reflect repayments of bonds associated with vacation ownership notes receivable securitizations and repayments on the Warehouse Credit Facility (including vacation ownership notes receivable repurchases) as “Repayment of debt related to securitization transactions.”

As of March 31, 2020 , $98 million of gross vacation ownership notes receivable were eligible for securitization.

During the first 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 $240 million .

The average advance rate was 84 percent , which resulted in gross proceeds of $202 million .

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

During the first quarter of 2019, we securitized vacation ownership notes receivable under our Warehouse Credit Facility.

As of June 30, 2020, $47 million of gross vacation ownership notes receivable were eligible for securitization.

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

The total carrying amount of the vacation ownership notes receivable securitized was $372 million.

The average advance rate was 85 percent, which resulted in total gross proceeds of $315 million.

Total net proceeds were $313 million due to the funding of reserve accounts of $2 million.

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, $7 million was used to pay transaction expenses and fund required reserves, and the remaining $53 million will be used for general corporate purposes.

During the first half of 2019, we completed the securitization of a pool of $459 million of vacation ownership notes receivable.

In connection with the securitization, investors purchased $450 million in vacation ownership loan backed notes from the 2019-1 LLC in a private placement.

Three classes of vacation ownership loan backed notes were issued by the 2019-1 LLC:

$350 million of Class A Notes, $67 million of Class B Notes and $33 million of Class C Notes.

The Class A Notes have an interest rate of 2.89 percent, the Class B Notes have an interest rate of 3.00 percent and the Class C Notes have an interest rate of 3.33 percent, for an overall weighted average interest rate of 2.94 percent.

We also securitized vacation ownership notes receivable under our Warehouse Credit Facility.

The carrying amount of the vacation ownership notes receivable securitized was $146 million.

1 unchanged sentence

Net proceeds were $123 million due to the funding of reserve accounts of $1 million.

A portion of the proceeds from the securitization were used to repay the advance received on the Warehouse Credit Facility and there were no amounts outstanding as of June 30, 2019.

Proceeds from / Repayments of Debt

Borrowings from / Repayment of Corporate Credit Facility

During the first quarter of 2020 , we borrowed $666 million under our Revolving Corporate Credit Facility to facilitate the funding of our short-term working capital needs and to increase our cash position and preserve financial flexibility in light of the impact on global markets resulting from the COVID-19 pandemic.

We repaid $100 million during the quarter and had $596 million outstanding as of March 31, 2020 , which we repaid in full subsequent to the first quarter of 2020.

During the first quarter of 2019, we borrowed $125 million under our Revolving Corporate Credit Facility to facilitate the funding of our short-term working capital needs, $50 million of which was repaid during the quarter, leaving $75 million outstanding as of March 31, 2019.

During the first quarter of 2019, we also repaid $2 million of the amount outstanding under the Term Loan, which is part of our Corporate Credit Facility.

During the first half of 2020, we borrowed an additional $666 million under our Revolving Corporate Credit Facility to facilitate the funding of our short-term working capital needs and to increase our cash position and preserve financial flexibility in light of the impact on global markets resulting from the COVID-19 pandemic.

We later repaid $696 million during the first half of 2020 and had no amounts outstanding as of June 30, 2020.

During the first half of 2020, we also repaid $5 million of the amount outstanding under the Term Loan, which is part of our Corporate Credit Facility.

In the second quarter of 2020, we issued the 2025 Notes, as discussed in Footnote 13 “Debt” to our Financial Statements.

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

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

During the first half of 2019, we borrowed $310 million under our Revolving Corporate Credit Facility to facilitate the funding of our short-term working capital needs, $230 million of which was repaid during the first half of 2019 and $80 million of which was outstanding as of June 30, 2019.

During the first half of 2019, we also repaid $5 million of the amount outstanding under the Term Loan.

See Footnote 13 “Debt” to our Financial Statements for additional information regarding our Corporate Credit Facility that includes our Revolving Corporate Credit Facility and the Term Loan.

Finance Lease Payment

During the first quarter of 2020, in conjunction with the acquisition of the 57 completed vacation ownership units at our Marriott Vacation Club Pulse, New York City property, we made finance lease payments of $7 million related to the purchase of the accompanying ancillary and office space.

During the first half of 2020, in conjunction with the acquisition of the 57 completed vacation ownership units at our Marriott Vacation Club Pulse, New York City property, we made finance lease payments of $7 million related to the purchase of the accompanying ancillary and office space.

Additionally, we paid $1 million related to our financed lease obligations for technology and business operations equipment.

Debt Issuance Costs

During the first half of 2020, we paid $9 million of debt issuance costs, which included $7 million associated with the 2025 Notes, $1 million associated with the Waiver and $1 million associated with the amendment of our Warehouse Credit Facility.

During the first half of 2019, we paid $6 million of debt issuance costs associated with the 2019-1 vacation ownership notes receivable securitization.

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

See Footnote 14 “Shareholders' Equity” to our Financial Statements for further information related to our share repurchase program.

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

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

We distributed 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

December 9, 2019

December 23, 2019

January 6, 2020

February 14, 2020

February 27, 2020

March 12, 2020

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

We distributed 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

December 9, 2019 December 23, 2019 January 6, 2020 $0.54

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

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

In addition, our Corporate Credit Facility and the indentures governing our senior notes contain restrictions on our ability to pay dividends.

Future dividend payments will also be subject to the restrictions associated with the Waiver to the Corporate Credit Facility and will be subject to Board of Directors’ approval, which will depend on our financial condition, results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice and other business considerations that our Board of Directors considers relevant.

Future dividend payments will also be subject to both the restrictions imposed under the Waiver and Board approval, which will depend on our financial condition, results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice and other business considerations that our Board of Directors considers relevant.

The payment of certain cash dividends may also result in an adjustment to the conversion rate of the Convertible Notes in a manner adverse to us.

5 unchanged sentences

The guarantees of the Senior Notes Guarantors are subject to release in limited circumstances only upon the occurrence of certain customary conditions.

The following tables present consolidating financial information as of March 31, 2020 and for the three months ended March 31, 2020 for MVWC and MORI on a stand-alone basis (collectively, the “Issuers”), the Senior Notes Guarantors, the combined non-guarantor subsidiaries of MVW and MVW on a consolidated basis.

The following tables present consolidating financial information as of June 30, 2020 and for the six months ended June 30, 2020 for MVWC and MORI on a stand-alone basis (collectively, the “Issuers”), the Senior Notes Guarantors, the combined non-guarantor subsidiaries of MVW and MVW on a consolidated basis.

Condensed Consolidating Balance Sheet

As of March 31, 2020

Senior Notes Guarantors

Non-Guarantor Subsidiaries

Total Eliminations

MVW Consolidated

($ in millions)

As of June 30, 2020

Issuers Senior Notes Guarantors Non-Guarantor Subsidiaries Total Eliminations MVW Consolidated

($ in millions) MVWC MORI

Cash and cash equivalents $ 65 $ 320 $ 84 $ 97 $ — $ 566

2 unchanged sentences

Vacation ownership notes receivable, net — 66 81 1,867 — 2,014

Inventory — 308 370 93 — 771

Property and equipment — 223 362 250 — 835

Goodwill — — 2,817 — — 2,817

Intangibles, net — — 920 57 — 977

Investments in subsidiaries 2,732 4,462 — — (7,194) —

Other 41 93 256 146 (27) 509

Total assets $ 2,932 $ 5,531 $ 4,971 $ 2,913 $ (7,230) $ 9,117

Accounts payable $ 21 $ 43 $ 41 $ 38 $ 8 $ 151

5 unchanged sentences

Securitized debt, net — — — 1,887 — 1,887

Debt, net 211 2,466 1 2 — 2,680

Other — 46 117 22 — 185

Deferred taxes — 133 135 21 — 289

2 unchanged sentences

Total liabilities and equity $ 2,932 $ 5,531 $ 4,971 $ 2,913 $ (7,230) $ 9,117

Condensed Consolidating Statement of Income

Three Months Ended March 31, 2020

Senior Notes Guarantors

Non-Guarantor Subsidiaries

Total Eliminations

MVW Consolidated

($ in millions)

Condensed Consolidating Statements of Income

Six Months Ended June 30, 2020

Issuers Senior Notes Guarantors Non-Guarantor Subsidiaries Total Eliminations MVW Consolidated

($ in millions) MVWC MORI

Revenues $ — $ 186 $ 926 $ 393 $ (15) $ 1,490

Expenses (10) (341) (1,063) (335) 15 (1,734)

Benefit (provision) for income taxes 1 28 50 (2) — 77

Equity in net (loss) income of subsidiaries (167) (23) — — 190 —

Net (loss) income

Net income (loss) (176) (150) (87) 56 190 (167)

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

Net (loss) income attributable to common shareholders

Net income (loss) attributable to common shareholders $ (176) $ (150) $ (87) $ 47 $ 190 $ (176)

Contractual Obligations and Off-Balance Sheet Arrangements

The following table summarizes our contractual obligations as of March 31, 2020 :

The following table summarizes our contractual obligations as of June 30, 2020:

Payments Due by Period

($ in millions)

($ in millions) Total Remainder

of 2020 Years

2021 - 2022 Years

2023 - 2024 Thereafter

Contractual Obligations

$ 5,655 $ 207 $ 1,000 $ 952 $ 3,496

Purchase obligations (2)

418 35 337 46 —

Operating lease obligations 250 15 47 37 151

16 unchanged sentences

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 2. Management’s Discussion and Analysis