What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-05 compared with 2020-08-05 · 384 added, 323 removed, 673 unchanged (51% of the section changed)

2 unchanged sentences

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.

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competitive conditions;

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.

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, our Quarterly Report on Form 10-Q filed on May 22, 2020, and our Quarterly Report on Form 10-Q filed August 5, 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.

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.

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, our Quarterly Report on Form 10-Q filed on August 5, 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.

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

As a result of the COVID-19 pandemic, on September 10, 2020, the Company approved a workforce reduction plan, which is currently expected to impact approximately 3,000 associates.

In connection with this plan, the Company estimates that it will incur approximately $25 to $30 million in restructuring and related charges primarily related to employee severance and benefit costs, including a portion that is included in cost reimbursements.

Significant Accounting Policies Used in Describing Results of Operations

16 unchanged sentences

For each project, we expense real estate inventory costs in the same proportion as the revenue recognized.

Consistent with the applicable accounting guidance, to the extent there is a change in the estimated sales revenues or inventory costs for the project in a period, a non-cash adjustment is recorded on our income statements to true-up costs in that period to those that would have been recorded historically if the revised estimates had been used.

costs in that period to those that would have been recorded historically if the revised estimates had been used.

These true-ups, which we refer to as product cost true-up activity, can have a positive or negative impact on our income statements.

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We also receive annual membership fees, club dues and certain transaction-based fees from members, owners and other third parties.

Management and exchange expenses include costs to operate the food and beverage outlets and other ancillary operations and to provide overall customer support services, including reservations, and certain transaction-based expenses relating to external exchange service providers.

Management and exchange expenses include costs to operate food and beverage outlets and other ancillary operations and to provide overall customer support services, including reservations, and certain transaction-based expenses relating to external exchange service providers.

In our Vacation Ownership segment and Consolidated Property Owners’ Associations, we refer to these activities as “Resort Management and Other Services.”

2 unchanged sentences

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

Six Months Ended

June 30, 2020 June 30, 2019

Nine Months Ended

September 30, 2020 September 30, 2019

Average FICO score 731 736

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

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.

Financing propensity was 43 percent in the third quarter of 2020 and 66 percent in the third quarter of 2019;

the lower financing propensity in the third quarter of 2020 is due primarily to 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 cash purchase incentives to continue at the same level going forward.

In the event of a default, we generally have the right to foreclose on or revoke the underlying VOI.

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

Six Months Ended

June 30, 2020 June 30, 2019

Nine Months Ended

September 30, 2020 September 30, 2019

Historical default rates 4.9% 3.2%

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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:

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A “key” is the lowest increment for reporting occupancy statistics based upon the mix of non-lock-off and lock-off villas.

Lock-off villas represent two keys and non-lock-off villas represent one key.

Lock-off villas typically represent two keys and non-lock-off villas represent one key.

The “transient keys” metric represents the blended mix of inventory available for rent and includes all of the combined inventory configurations available in our resort system.

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• Contract sales from the sale of vacation ownership products;

• Total contract sales include contract sales from the sale of vacation ownership products including joint ventures

• Total contract sales include contract sales from the sale of vacation ownership products including joint ventures, and

• Consolidated contract sales exclude contract sales from the sale of vacation ownership products for non-consolidated joint ventures

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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;

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Consolidated Results

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Sale of vacation ownership products $ 98 $ 341 $ 409 $ 975

12 unchanged sentences

Litigation charges 2 3 4 5

Restructuring 20 — 20 —

Royalty fee 23 27 72 79

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TOTAL EXPENSES 673 996 2,254 2,839

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

(Losses) gains and other (expense) income, net — (5) (42) 5

Interest expense (37) (31) (112) (100)

7 unchanged sentences

Operating Statistics

2020 Second Quarter

2020 Third Quarter

Three Months Ended

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

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

Vacation Ownership

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

2020 First Half

Six Months Ended

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

2020 First Three Quarters

Nine Months Ended

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

Vacation Ownership

8 unchanged sentences

(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.

2020 Third Quarter

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

Three Months Ended

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

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

Vacation Ownership $ 571 $ 940 $ (369) (39%)

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Total Revenues $ 649 $ 1,066 $ (417) (39%)

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

2020 First Three Quarters

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

Nine Months Ended

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

Vacation Ownership $ 1,884 $ 2,769 $ (885) (32%)

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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 Second Quarter

2020 Third Quarter

Three Months Ended Change

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

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

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

Net loss attributable to common shareholders $ (62) $ (9) $ (53)

Interest expense 37 31 6

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Adjusted EBITDA $ 35 $ 190 $ (155)

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

Certain items for the third quarter of 2020 consisted of $20 million of restructuring costs, $11 million of ILG acquisition-related costs, a $5 million loss and other expense related to the disposition of a formerly consolidated subsidiary, $2 million of purchase price adjustments, $2 million of litigation charges, $2 million of asset impairment charges, and $1 million of foreign currency translation losses, partially offset by $6 million of gains and other income related to the disposition of excess land parcels in Orlando, Florida and Steamboat Springs, Colorado and $4 million related to the change in accrual for health and welfare costs for furloughed associates.

Certain items for the third quarter of 2019 consisted of $73 million of asset impairment charges, $33 million of acquisition charges (including $32 million of ILG acquisition-related costs and $1 million of other acquisition costs), $5 million of losses and other expense, $3 million of litigation charges, and $2 million of purchase price adjustments.

2020 First Three Quarters

Nine Months Ended Change

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

Net (loss) income attributable to common shareholders $ (238) $ 64 $ (302)

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Adjusted EBITDA $ 163 $ 551 $ (388)

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.

Certain items for the first three quarters of 2020 consisted of $98 million of impairment charges, $44 million of ILG acquisition-related costs, $44 million of other charges (including $37 million related to the net sales reserve adjustment and $7 million related to an accrual for the health and welfare costs for furloughed associates), $42 million of losses and other expense, $20 million of restructuring costs, $4 million of purchase accounting adjustments, $4 million related to the charge for VAT penalties and interest (see offset included in indemnification below), $4 million of litigation charges, and $3 million of transaction costs related to our asset light inventory arrangements.

The $42 million of losses and other expense included $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), $25 million related to foreign currency translation, and a $5 million loss related to the disposition of a formerly consolidated subsidiary, partially offset by $6 million of gains and other income related to the disposition of excess land parcels in Orlando, Florida and Steamboat Springs, Colorado, a $6 million receivable related to indemnification from Marriott International for certain VAT charges, $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, and $1 million of miscellaneous gains and other income.

The reduction in share-based compensation expense in the first three quarters 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 program.

Certain items for the first three quarters of 2019 consisted of $99 million of asset impairment charges, $95 million of acquisition costs (including $94 million of ILG acquisition-related costs and $1 million of other acquisition costs), $7 million of purchase price adjustments, $5 million of litigation charges, and $1 million of other severance costs, partially offset by $5 million of miscellaneous gains and other income.

Segment Adjusted EBITDA

2020 Second Quarter

2020 Third Quarter

Three Months Ended

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

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

Vacation Ownership $ 28 $ 195 $ (167)

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Adjusted EBITDA $ 35 $ 190 $ (155)

2020 First Half

Six Months Ended

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

2020 First Three Quarters

Nine Months Ended

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

Vacation Ownership $ 156 $ 570 $ (414)

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Vacation Ownership

2020 Second Quarter

2020 Third Quarter

Three Months Ended

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

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

Segment adjusted EBITDA $ 28 $ 195 $ (167)

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Segment financial results $ (1) $ 100 $ (101)

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

Certain items in the Vacation Ownership segment for the third quarter of 2020 consisted of $11 million of restructuring costs, $2 million of litigation charges, a $1 million asset impairment charge, and $1 million of purchase accounting adjustments, partially offset by $6 million of gains and other income related to the disposition of excess land parcels in Orlando, Florida and Steamboat Springs, Colorado.

Certain items in the Vacation Ownership segment for the third quarter of 2019 consisted of $73 million of asset impairment charges, $2 million of purchase accounting adjustments, $2 million of litigation charges, and $1 million of acquisition costs, partially offset by $1 million of gains and other income.

2020 First Three Quarters

Nine Months Ended Change

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

Segment adjusted EBITDA $ 156 $ 570 $ (414)

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Segment financial results $ 46 $ 412 $ (366)

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.

Certain items in the Vacation Ownership segment for the first three quarters of 2020 consisted of $37 million related to the net sales reserve adjustment, $11 million of restructuring costs, $6 million of asset impairment charges, $4 million of litigation charges, $3 million related to transaction costs associated with our asset light inventory arrangements, and $3 million of purchase accounting adjustments, partially offset by $12 million of gains and other income, including $6 million of gains and other income related to the disposition of excess land parcels in Orlando, Florida and Steamboat Springs, Colorado and $4 million related to net insurance proceeds from the final settlement of Legacy-MVW business interruption insurance claims arising from a prior year hurricane.

Certain items in the Vacation Ownership segment for the first three quarters of 2019 consisted of $99 million of asset impairment charges, $7 million of purchase accounting adjustments, $4 million of litigation charges, and $1 million of acquisition costs, partially offset by $9 million of gains and other income.

Exchange & Third-Party Management

2020 Second Quarter

2020 Third Quarter

Three Months Ended

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

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

Segment adjusted EBITDA $ 31 $ 45 $ (14)

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Segment financial results $ 16 $ 34 $ (18)

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

Certain items in the Exchange & Third-Party Management segment for the third quarter of 2020 consisted of a $5 million loss and other expense related to the disposition of a formerly consolidated subsidiary, $3 million of restructuring costs, $1 million of purchase accounting adjustments, and $1 million of asset impairment charges.

Certain items in the Exchange & Third-Party Management segment for the third quarter of 2019 consisted of $1 million of gains and other income.

2020 First Three Quarters

Nine Months Ended

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

Segment adjusted EBITDA $ 91 $ 145 $ (54)

3 unchanged sentences

Segment financial results $ (25) $ 107 $ (132)

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.

Certain items in the Exchange & Third-Party Management segment for the first three quarters of 2020 consisted of $92 million of impairment charges (primarily Goodwill and Indefinite-Lived Intangibles as discussed further in Footnote 10 “Goodwill and Intangibles” of the Financial Statements), a $5 million loss and other expense related to the disposition of a formerly consolidated subsidiary, $3 million of restructuring costs, and $1 million of purchase accounting adjustments.

Certain items in the Exchange & Third-Party Management segment for the first three quarters of 2019 consisted of $1 million of purchase accounting adjustments, offset by $1 million of gains and other income.

Business Segments

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Vacation Ownership

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Sale of vacation ownership products $ 98 $ 341 $ 409 $ 975

11 unchanged sentences

Litigation charges 2 2 4 4

Restructuring 11 — 11 —

Royalty fee 23 27 72 79

2 unchanged sentences

TOTAL EXPENSES 578 840 1,847 2,366

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

Gains and other income, net 6 1 12 9

Other — 1 (3) 1

SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS (1) 102 46 413

Net loss attributable to noncontrolling interests — — — 1

Net income attributable to noncontrolling interests — (2) — (1)

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (1) $ 100 $ 46 $ 412

Contract Sales

2020 Second Quarter

2020 Third Quarter

Three Months Ended

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

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

Total consolidated contract sales $ 140 $ 390 $ (250) (64%)

1 unchanged sentence

Total contract sales $ 141 $ 401 $ (260) (65%)

2020 First Half

Six Months Ended

June 30, 2020 June 30, 2019 Change % Change

2020 First Three Quarters

Nine Months Ended

September 30, 2020 September 30, 2019 Change % Change

Total consolidated contract sales $ 476 $ 1,130 $ (654) (58%)

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Sale of Vacation Ownership Products

2020 Second Quarter

2020 Third Quarter

Three Months Ended

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

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

Total contract sales $ 141 $ 401 $ (260) (65%)

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Sales reserve (10) (33) 23

(18) (17) (1)

Sale of vacation ownership products $ 98 $ 341 $ (243) (71%)

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(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

Sale of vacation ownership products decreased $243 million due to $244 million of lower contract sales volumes and a $16 million favorable change in revenue reportability, partially offset by $23 million of lower sales reserve activity.

Lower contract sales performance was primarily due to the impact of the COVID-19 pandemic.

In March 2020, all of our sales centers were closed in response to the pandemic.

We began opening sales centers throughout the second and third quarters and, by the end of the third quarter, with the exception of our sales centers in Hawaii that remain closed as a result of government restrictions, only a handful of our smaller and key urban sales centers remain unopened.

Revenue reportability was negative in the third quarter of 2020 as a result of contract sales late in the third quarter of 2020 that will be recognized as revenue in the fourth quarter.

However, given the low sales volumes in June 2020 due to the impact of the COVID-19 pandemic, we did not benefit from the shift of revenues from sales late in the second quarter into the third quarter.

The lower sales reserve recorded in the third quarter of 2020 reflects the lower overall contract sales in the quarter.

2020 First Three Quarters

Nine Months Ended

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

Total contract sales $ 486 $ 1,164 $ (678) (58%)

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(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 were primarily due to by the response to the COVID-19 pandemic.

Sale of vacation ownership products decreased $566 million due to $640 million of lower contract sales volumes and $11 million of higher sales reserve activity, partially offset by an $88 million favorable change in revenue reportability.

The lower contract sales performance as well as the higher sales reserve activity were primarily due to 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 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.

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.

In the second quarter of 2020, only eight of our sales centers were open and, by the end of the third quarter, with the exception of our sales centers in Hawaii that remain closed as a result of government restrictions, only a handful of our smaller and key urban sales centers remain unopened.

The higher sales reserve recorded in the first three quarters of 2020 reflects an estimate of future default activity to the extent our vacation ownership 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 three quarters 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.

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

However, it was not fully offset by the shift of revenues from sales late in the third quarter into the fourth quarter, given the low sales volumes in September 2020 due to the impact of the COVID-19 pandemic.

Development Margin

2020 Second Quarter

2020 Third Quarter

Three Months Ended

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

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

Sale of vacation ownership products $ 98 $ 341 $ (243) (71%)

3 unchanged sentences

Development margin decreased $89 million year-over-year.

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

The change in margin reflected $82 million of lower sales volumes and lower marketing and sales spending due to the impact of the COVID-19 pandemic and $10 million of unfavorable

revenue reportability year over year, partially offset by $3 million of favorable product cost true-up activity as compared to the prior year period.

2020 First Three Quarters

Nine Months Ended

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

Sale of vacation ownership products $ 409 $ 975 $ (566) (58%)

3 unchanged sentences

Development margin decreased $197 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.

The change in margin reflected $217 million of lower sales volumes and lower marketing and sales spending due to the impact 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 $61 million of favorable revenue reportability compared to the first three quarters of 2019 and $14 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 three quarters of 2019.

Resort Management and Other Services Revenues, Expenses and Margin

2020 Second Quarter

2020 Third Quarter

Three Months Ended

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

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

Management fee revenues $ 37 $ 35 $ 2 4%

5 unchanged sentences

Resort management and other services margin percentage 67.2% 51.8% 15.4 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

Resort management and other services revenues reflected lower ancillary revenues, including revenues from food and beverage and golf offerings, as a result of resort and ancillary outlet closings due to the COVID-19 pandemic, 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 resort management and other services revenues partially offset by lower ancillary expenses as a result of the lower ancillary revenues mentioned above.

2020 First Three Quarters

Nine Months Ended

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

Management fee revenues $ 113 $ 108 $ 5 4%

5 unchanged sentences

Resort management and other services margin percentage 60.8% 52.8% 8.0 pts

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.

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.

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

Rental Revenues, Expenses and Margin

2020 Second Quarter

2020 Third Quarter

Three Months Ended

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

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

Rental revenues $ 46 $ 122 $ (76) (62%)

3 unchanged sentences

Three Months Ended

June 30, 2020 June 30, 2019 Change % Change

September 30, 2020 September 30, 2019 Change % Change

Transient keys rented (1)

4 unchanged sentences

(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 and a decline in average transient rate resulting from the COVID-19 pandemic.

The decline in rental margin resulted from a decline in keys rented and a decline in average transient rate due to 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

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

2020 First Three Quarters

Nine Months Ended

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

Rental revenues $ 180 $ 384 $ (204) (53%)

2 unchanged sentences

Rental margin percentage NM 25.9%

Six Months Ended

June 30, 2020 June 30, 2019 Change % Change

Nine Months Ended

September 30, 2020 September 30, 2019 Change % Change

Transient keys rented (1)

4 unchanged sentences

(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.

The decline in rental margin resulted from a decline in keys rented due to 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.

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 continue to increase from current levels.

Financing Revenues, Expenses and Margin

2020 Second Quarter

2020 Third Quarter

Three Months Ended

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

Interest income $ 67 $ 65 $ 2 2%

Other financing revenues 2 3 (1) (45%)

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

Financing revenues 64 71 (7) (9%)

3 unchanged sentences

Financing propensity 42.9% 66.1%

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 decreased due to a $170 million decrease in the average net vacation ownership notes receivable balance resulting from the continued pay-down of the existing vacation ownership notes receivable portfolio without a corresponding increase from new loan originations.

Financing expenses decreased due to lower salaries and wages associated with the furlough and reduced work week programs implemented as a result of the COVID-19 pandemic.

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

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

2020 First Three Quarters

Nine Months Ended

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

Financing revenues 204 206 (2) (1%)

3 unchanged sentences

Financing propensity 51.0% 63.4%

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.

Financing revenues decreased due to higher plus point finance incentive costs in the first nine months related to financing incentive programs we offered prior to the COVID-19 pandemic.

The higher financing expenses included $16 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 Second Quarter

2020 Third Quarter

Three Months Ended

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

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

Litigation charges $ 2 $ 2 $ — (27%)

2020 First Half

Six Months Ended

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

2020 First Three Quarters

Nine Months Ended

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

Litigation charges $ 4 $ 4 $ — (5%)

2020 Second Quarter

2020 Third Quarter

Three Months Ended

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

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

Royalty fee $ 23 $ 27 $ (4) (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 expense declined in the third quarter of 2020 as a result of lower contract closings due to the lower contract sales compared to the prior year quarter.

2020 First Three Quarters

Nine Months Ended

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

Royalty fee $ 72 $ 79 $ (7) (10%)

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.

Royalty fee expense declined in the first three quarters of 2020 as a result of lower contract closings due to the lower contract sales compared to the prior year comparable period.

Depreciation and Amortization

2020 Second Quarter

2020 Third Quarter

Three Months Ended

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

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

Depreciation and amortization $ 18 $ 16 $ 2 8%

2020 First Half

Six Months Ended

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

2020 First Three Quarters

Nine Months Ended

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

Depreciation and amortization $ 54 $ 50 $ 4 6%

2020 Second Quarter

2020 Third Quarter

Three Months Ended

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

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

Impairment $ 1 $ 73 $ (72) (98%)

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

During the third 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 Three Quarters

Nine Months Ended

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

Impairment $ 6 $ 99 $ (93) (94%)

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.

During the first three quarters of 2020, we recorded a non-cash impairment of $6 million related to our Asia Pacific inventory as a result of the COVID-19 pandemic.

During the first three quarters 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 which the book value of the assets to be sold exceeded the sales price.

This contract was subsequently terminated.

As a result of the ILG Acquisition, we performed a comprehensive review to evaluate the strategic fit of the land holdings and operating hotels in our Vacation Ownership segment.

During the third quarter of 2019, we completed our evaluation and identified several assets for disposition.

As a result of the change in our development strategy, we recorded a non-cash impairment charge of $72 million during the third quarter of 2019.

We also recorded a non-cash impairment of $1 million related to an ancillary asset located at a Vacation Ownership segment property in Europe.

Cost Reimbursements

2020 Second Quarter

2020 Third Quarter

Three Months Ended

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

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

Cost reimbursements $ 281 $ 286 $ (5) (1%)

2020 First Half

Six Months Ended

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

2020 First Three Quarters

Nine Months Ended

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

Cost reimbursements $ 824 $ 835 $ (11) (1%)

Gains / Losses and Other Income / Expense

2020 Second Quarter

2020 Third Quarter

Three Months Ended

($ 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

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

Gains and other income, net $ 6 $ 1 $ 5 936%

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.

In the third quarter of 2020, we recorded $6 million of gains and other income related to the disposition of excess land parcels in Orlando, Florida and Steamboat Springs, Colorado.

2020 First Three Quarters

Nine Months Ended

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

Gains and other income, net $ 12 $ 9 $ 3 30%

In the first three quarters of 2020, we recorded $12 million of gains and other income including $6 million of gains and other income related to the disposition of excess land parcels in Orlando, Florida and Steamboat Springs, Colorado and $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 three quarters 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.

Exchange & Third-Party Management

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Management and exchange $ 49 $ 74 $ 160 $ 232

8 unchanged sentences

Depreciation and amortization 5 12 14 36

Restructuring 3 — 3 —

Impairment 1 — 92 —

1 unchanged sentence

TOTAL EXPENSES 50 78 256 245

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

(Losses) gains and other (expense) income, net (5) 1 (5) 1

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 16 $ 34 $ (25) $ 107

Management and Exchange Margin

2020 Second Quarter

2020 Third Quarter

Three Months Ended

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

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

Management and exchange revenue $ 49 $ 74 $ (25) (33%)

2 unchanged sentences

Management and exchange margin percentage 53.0% 66.8% (13.8 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

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

In addition, Aqua-Aston was negatively impacted by travel restrictions that significantly impacted the majority of their properties in Hawaii.

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

While exchange revenues were down in the quarter, exchange transactions increased 1 percent as compared to the prior year quarter reflecting customers’ more recent desire to travel and pent up demand.

More than 90 percent of Interval International’s affiliated resorts had reopened as of the end of the third quarter (compared to the second quarter when nearly 1,300 resorts were either closed or not taking reservations).

2020 First Three Quarters

Nine Months Ended

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

Management and exchange revenue $ 160 $ 232 $ (72) (30%)

2 unchanged sentences

Management and exchange margin percentage 57.2% 66.9% (9.7 pts)

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

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

In addition, Aqua-Aston was negatively impacted by travel restrictions that significantly impacted the majority of their properties in Hawaii.

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

While exchange revenues were down in the first nine months, exchange transactions increased 1 percent in the third quarter as compared to the prior year quarter reflecting customers’ more recent desire to travel and pent up demand.

More than 90 percent of Interval International’s affiliated resorts had reopened as of the end of the third quarter.

Rental Revenues, Expenses and Margin

2020 Second Quarter

2020 Third Quarter

Three Months Ended

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

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

Rental revenues $ 10 $ 14 $ (4) (28%)

2 unchanged sentences

Rental margin percentage 78.1% 54.9% 23.2 pts

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 cancellations and resort closures in response to the COVID-19 pandemic.

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

The decline in rental revenue reflected lower Getaways program transactions and lower average Getaways program transaction fees driven by supply challenges in certain markets and fewer bookings into purchased inventory as well as cancellations and resort closures in response to the COVID-19 pandemic.

The decline in rental margin reflected 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 Three Quarters

Nine Months Ended

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

Rental revenues $ 29 $ 48 $ (19) (41%)

2 unchanged sentences

Rental margin percentage 72.8% 53.4% 19.4 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

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

2020 Third Quarter

Three Months Ended

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

Impairment $ 1 $ — $ 1 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.

2020 First Three Quarters

Nine Months Ended

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

Impairment $ 92 $ — $ 92 NM

During the first three quarters of 2020, we recorded a non-cash impairment charge of $92 million primarily 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.

Gains / Losses and Other Income / Expense

2020 Third Quarter

Three Months Ended

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

(Losses) gains and other (expense) income, net $ (5) $ 1 $ (6) NM

In the third quarter of 2020, we recorded a $5 million loss and other expense related to the disposition of a previously consolidated subsidiary.

2020 First Three Quarters

Nine Months Ended

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

(Losses) gains and other (expense) income, net $ (5) $ 1 $ (6) NM

In the third quarter of 2020, we recorded a $5 million loss and other expense related to the disposition of a previously consolidated subsidiary.

Corporate and Other

1 unchanged sentence

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Resort management and other services $ 45 $ 44 $ 121 $ 107

Rental — (1) — —

Financing — — — —

Cost reimbursements (38) (28) (102) (84)

4 unchanged sentences

Depreciation and amortization 7 5 25 20

Litigation charges — 1 — 1

Restructuring 6 — 6 —

Cost reimbursements (38) (28) (102) (84)

TOTAL EXPENSES 45 78 151 228

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

Losses and other expense, net (1) (7) (49) (5)

Interest expense (37) (31) (112) (100)

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 Six Months Ended

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

Three Months Ended Nine Months Ended

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

Resort management and other services $ 45 $ 44 $ 121 $ 107

10 unchanged sentences

General and Administrative

2020 Second Quarter

2020 Third Quarter

Three Months Ended

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

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

General and administrative $ 32 $ 57 $ (25) (42%)

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 expenses decreased $25 million due to $13 million of savings related to synergy efforts and lower costs associated with the furlough and reduced work week programs, $3 million related to lower bonus expense, a $5 million credit related to the incentive under the CARES Act for companies to continue paying associates' benefit costs while they are not working, and $4 million of lower net overall spending across the business on technology, travel, training and other costs that we have deferred due to the COVID-19 pandemic.

2020 First Three Quarters

Nine Months Ended

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

General and administrative $ 121 $ 188 $ (67) (36%)

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.

General and administrative expenses decreased $67 million due to $24 million of savings related to synergy efforts and lower costs associated with the furlough and reduced work week programs, $21 million related to lower bonus expense, an $11 million credit related to the incentive under the CARES Act for companies to continue paying associates' benefit costs while they are not working, and $18 million of lower net 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 a $7 million accrual for health and welfare costs for furloughed associates.

Depreciation and Amortization

2020 Second Quarter

2020 Third Quarter

Three Months Ended

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

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

Depreciation and amortization $ 7 $ 5 $ 2 30%

2020 First Half

Six Months Ended

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

2020 First Three Quarters

Nine Months Ended

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

Depreciation and amortization $ 25 $ 20 $ 5 24%

Gains / Losses and Other Income / Expense

2020 Second Quarter

2020 Third Quarter

Three Months Ended

($ 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.

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

Losses and other expense, net $ (1) $ (7) $ 6 87%

In the third quarter of 2020, we recorded a loss of $1 million driven mainly by foreign currency translation.

2020 First Three Quarters

Nine Months Ended

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

Losses and other expense, net $ (49) $ (5) $ (44) 840%

In the first three quarters of 2020, we recorded a loss of $49 million, including $32 million for the true-up to 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) and $24 million related to foreign currency translation, partially offset by $6 million of other income related to an indemnification from Marriott International for VAT penalties and interest.

Interest Expense

2020 Second Quarter

2020 Third Quarter

Three Months Ended

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

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

Interest expense $ (37) $ (31) $ (6) (22%)

2020 First Half

Six Months Ended

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

2020 First Three Quarters

Nine Months Ended

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

Interest expense $ (112) $ (100) $ (12) (13%)

ILG Acquisition-Related Costs

2020 Second Quarter

2020 Third Quarter

Three Months Ended

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

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

ILG acquisition-related costs $ (11) $ (32) $ 21 64%

2020 First Half

Six Months Ended

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

2020 First Three Quarters

Nine Months Ended

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

ILG acquisition-related costs $ (44) $ (94) $ 50 53%

4 unchanged sentences

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

2020 Second Quarter

2020 Third Quarter

Three Months Ended

($ 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.

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

Benefit (provision) for income taxes $ 14 $ (10) $ 24 248%

The change in the Benefit (provision) for income taxes is predominately attributable to benefits of the CARES Act and a pre-tax loss for the three months ended September 30, 2020 compared to pre-tax income for the three months ended September 30, 2019.

2020 First Three Quarters

Nine Months Ended

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

Benefit (provision) for income taxes $ 91 $ (50) $ 141 281%

The increase in the Benefit (provision) 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 Losses and other expense, net), and benefits of the CARES Act.

Noncontrolling Interest

2020 Second Quarter

2020 Third Quarter

Three Months Ended

($ 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

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

Net income attributable to noncontrolling interests $ (4) $ — $ (4) (1,483%)

2020 First Three Quarters

Nine Months Ended

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

Net income attributable to noncontrolling interests $ (13) $ (1) $ (12) (877%)

Recent Accounting Pronouncements

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Liquidity and Capital Resources

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.

Typically, our capital needs are supported by cash on hand ($660 million at the end of the third 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 temporarily increase the borrowing capacity by approximately $181 million, bringing the total capacity to approximately $531 million.

During the third quarter of 2020, we terminated the additional $181 million capacity of the Warehouse Credit Facility.

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.

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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%;

◦ 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;

We took 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.

Measures currently in place include:

◦ Reducing executive and senior leadership team salaries;

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

As of the end of the third quarter, approximately 45% of our associates remain on furlough or have a reduced work week or reduced pay.

◦ 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.

◦ Approving a workforce reduction plan, which is currently expected to impact approximately 3,000 associates.

We began reopening our sales centers and allowing rentals / transient occupancy at our vacation ownership resorts in the second quarter of 2020 and have continued to do so to date.

We believe these actions will enable us to generate additional revenue as we continue throughout 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.

At September 30, 2020, we had $4.5 billion of total gross debt outstanding, which included $1.8 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 our Corporate Credit Facility, $500 million of senior secured notes, $230 million of Convertible Notes and $9 million related to finance lease obligations.

At September 30, 2020, we had $751 million of completed real estate inventory on hand.

In addition, we had $173 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.

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

Six Months Ended

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

Nine Months Ended

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

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

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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 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 the first three quarters of 2020, we had $158 million of cash inflows for operating activities, compared to $180 million in the first three quarters 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 lower operational expenses combined with lower sales and rentals deposits due to the COVID-19 pandemic, partially offset by lower inventory spending and higher collections 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

Six Months Ended

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

Nine Months Ended

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

Inventory spending $ (88) $ (201)

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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 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.

Our spending for real estate inventory in the first three quarters 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 efficient strategy to limit our up-front capital investment and purchase finished inventory closer to the time it is needed for sale.

See Footnote 11 “Contingencies and Commitments” to our Financial Statements for additional information regarding our remaining commitments.

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

Given the impact of the COVID-19 pandemic, we significantly reduced our planned inventory spending beginning in the second quarter of 2020.

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.

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

Six Months Ended

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

Nine Months Ended

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

Vacation ownership notes receivable collections — non-securitized $ 180 $ 134

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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 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.

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

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

Financing propensity declined to 51 percent for the first three quarters of 2020 compared to 63 percent for the first three quarters of 2019 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.

Cash from Investing Activities

Six Months Ended

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

Nine Months Ended

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

Capital expenditures for property and equipment (excluding inventory) $ (36) $ (32)

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Purchase of company owned life insurance (3) (5)

Dispositions, net 15 —

Net cash, cash equivalents and restricted cash (used in) provided by investing activities $ (24) $ 1

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

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 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.

In the first three quarters of 2020, capital expenditures for property and equipment of $36 million included $33 million to support business operations (including $21 million for ancillary and other operations assets and $12 million for sales locations) and $3 million for technology spending.

Given the impact of the COVID-19 pandemic, we significantly reduced our planned spending for property and equipment beginning with the second quarter of 2020.

In the first three quarters of 2019, capital expenditures for property and equipment of $32 million included $19 million to support business operations (including $9 million for ancillary and other operations assets and $10 million for sales locations) and $13 million for technology spending.

Proceeds from Collection of Notes Receivable

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.

During the first three quarters 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.

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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.

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

We paid $3 million to acquire these policies during the first three quarters of 2020 and $5 million during the first three quarters of 2019.

Dispositions, net

Dispositions of $15 million during the first three quarters of 2020 related to the disposition of excess land parcels in Orlando, Florida and Steamboat Springs, Colorado as part of our strategic decision to reduce holdings in markets where we have excess supply.

See discussion included in Footnote 3 “Acquisitions and Dispositions” to our Financial Statements for additional information.

We did not have any significant dispositions of property and assets during the first three quarters of 2019.

Cash from Financing Activities

Six Months Ended

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

Nine Months Ended

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

Borrowings from securitization transactions $ 690 $ 631

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Payment of withholding taxes on vesting of restricted stock units (14) (11)

Other, net — 1

Net cash, cash equivalents and restricted cash provided by (used in) financing activities $ 195 $ (290)

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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 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.

As of September 30, 2020, $62 million of gross vacation ownership notes receivable were eligible for securitization.

During the first three quarters 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.

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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.

During the third quarter of 2020, we completed the securitization of a pool of $383 million of vacation ownership notes receivable.

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

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

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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.

Of the $375 million in proceeds from the transaction, $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 remainder will be used for general corporate purposes.

During the second quarter 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.

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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.

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

The carrying amount of the vacation ownership notes receivable securitized was $213 million.

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Net proceeds were $180 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 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.

During the first three quarters 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 three quarters of 2020 and had no amounts outstanding as of September 30, 2020.

During the first three quarters of 2020, we also repaid $7 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.

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

During the first three quarters of 2019, we borrowed $495 million under our Revolving Corporate Credit Facility to facilitate the funding of our short-term working capital needs, $270 million of which was repaid during the first three quarters of 2019, and we had $225 million outstanding as of September 30, 2019.

During the first three quarters of 2019, we also repaid $7 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 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.

During the first three quarters 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 $3 million related to our finance lease obligations for technology and business operations equipment.

During the first three quarters of 2019, in conjunction with the acquisition of the 78 completed vacation ownership units at our Marriott Vacation Club Pulse, San Francisco property, we acquired the accompanying sales gallery for $10 million.

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.

During the first three quarters of 2020, we paid $14 million of debt issuance costs, which included $7 million associated with the 2025 Notes, $5 million associated with the 2020-1 vacation ownership notes receivable securitization, $1 million associated with the Waiver and $1 million associated with the amendment of our Warehouse Credit Facility.

During the first three quarters of 2019, we paid $11 million of debt issuance costs, which included $6 million associated with the 2019-1 vacation ownership notes receivable securitization and $5 million associated with the issuance of the 2028 Notes on October 1, 2019, subsequent to the third quarter of 2019.

Repayment of Other Debt

During the first three quarters of 2019, we paid the remaining balance of $31 million on the non-interest bearing note payable related to the acquisition of 112 completed vacation ownership units located on the Big Island of Hawaii in 2017.

Share Repurchase Program

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

For the first half of 2020 769,935 82 106.60

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

For the first three quarters of 2020 769,935 82 106.60

As of September 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.

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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:

We distributed cash dividends to holders of common stock during the first three quarters of 2020 as follows:

Declaration Date Shareholder Record Date Distribution Date Dividend per Share

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Supplemental Guarantor Information

The 2026 Notes are guaranteed by MVWC, Marriott Ownership Resorts, Inc.

The 2026 Notes and 2028 Notes are guaranteed by MVWC, Marriott Ownership Resorts, Inc.

(“MORI”), and certain other subsidiaries whose voting securities are wholly owned directly or indirectly by MORI (such subsidiaries collectively, the “Senior Notes Guarantors”).

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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 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.

The following tables present consolidating financial information as of September 30, 2020 and for the nine months ended September 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 June 30, 2020

As of September 30, 2020

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

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Total liabilities and equity $ 2,907 $ 5,574 $ 4,890 $ 2,786 $ (7,146) $ 9,011

As of December 31, 2019

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

($ in millions) MVWC MORI

Cash and cash equivalents $ — $ 84 $ 65 $ 138 $ — $ 287

Restricted cash — 21 57 336 — 414

Accounts receivable, net 73 77 81 96 (4) 323

Vacation ownership notes receivable, net — 149 255 1,829 — 2,233

Inventory — 295 440 124 — 859

Property and equipment — 213 259 246 — 718

Goodwill — — 2,892 — — 2,892

Intangibles, net — — 966 61 — 1,027

Investments in subsidiaries 3,193 4,729 — — (7,922) —

Other 39 91 232 134 (35) 461

Total assets $ 3,305 $ 5,659 $ 5,247 $ 2,964 $ (7,961) $ 9,214

Accounts payable $ 66 $ 92 $ 117 $ 12 $ (1) $ 286

Advance deposits — 75 88 24 — 187

Accrued liabilities 4 104 195 106 (12) 397

Deferred revenue — 5 92 337 (1) 433

Payroll and benefits liability 5 97 62 22 — 186

Deferred compensation liability — 93 16 1 — 110

Securitized debt, net — — — 1,871 — 1,871

Debt, net 207 2,002 7 — — 2,216

Other 4 36 138 19 — 197

Deferred taxes — 108 162 30 — 300

MVW shareholders' equity 3,019 3,047 4,370 530 (7,947) 3,019

Noncontrolling interests — — — 12 — 12

Total liabilities and equity $ 3,305 $ 5,659 $ 5,247 $ 2,964 $ (7,961) $ 9,214

Condensed Consolidating Statements of Income

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

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

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Contractual Obligations and Off-Balance Sheet Arrangements

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

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

Payments Due by Period

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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