What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-04 compared with 2021-05-07 · 402 added, 204 removed, 885 unchanged (41% of the section changed)

3 unchanged sentences

(In millions, except per share amounts)

Three Months Ended

March 31, 2021 March 31, 2020

Three Months Ended Six Months Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Sale of vacation ownership products $ 296 $ 53 $ 459 $ 311

7 unchanged sentences

Management and exchange 126 85 243 236

Rental 81 73 163 171

Financing 21 23 42 61

6 unchanged sentences

TOTAL EXPENSES 870 521 1,609 1,581

Gains (losses) and other income (expense), net 6 ( 56 )

(Losses) gains and other (expense) income, net ( 2 ) 14 4 ( 42 )

Interest expense ( 44 ) ( 42 ) ( 87 ) ( 75 )

Transaction costs ( 19 ) ( 24 )

LOSS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS ( 36 ) ( 163 )

Benefit from income taxes 11 58

NET LOSS ( 25 ) ( 105 )

Transaction and integration costs ( 29 ) ( 12 ) ( 48 ) ( 36 )

Other 1 — 1 —

INCOME (LOSS) BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS 35 ( 81 ) ( 1 ) ( 244 )

(Provision for) benefit from income taxes ( 27 ) 19 ( 16 ) 77

NET INCOME (LOSS) 8 ( 62 ) ( 17 ) ( 167 )

Net income attributable to noncontrolling interests ( 2 ) ( 8 ) ( 5 ) ( 9 )

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ ( 28 ) $ ( 106 )

LOSS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 6 $ ( 70 ) $ ( 22 ) $ ( 176 )

EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

Basic $ 0.15 $ ( 1.68 ) $ ( 0.52 ) $ ( 4.25 )

5 unchanged sentences

(In millions)

Three Months Ended

March 31, 2021 March 31, 2020

NET LOSS $ ( 25 ) $ ( 105 )

Three Months Ended Six Months Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

NET INCOME (LOSS) $ 8 $ ( 62 ) $ ( 17 ) $ ( 167 )

Foreign currency translation adjustments 4 3 1 ( 14 )

4 unchanged sentences

COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS ( 2 ) ( 8 ) ( 5 ) ( 9 )

COMPREHENSIVE LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ ( 25 ) $ ( 147 )

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 13 $ ( 68 ) $ ( 12 ) $ ( 215 )

See Notes to the Interim Consolidated Financial Statements

2 unchanged sentences

(In millions, except share and per share data)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Cash and cash equivalents $ 1,312 $ 524

42 unchanged sentences

(In millions)

Three Months Ended

March 31, 2021 March 31, 2020

Six Months Ended

June 30, 2021 June 30, 2020

OPERATING ACTIVITIES

12 unchanged sentences

Inventory 14 ( 5 )

Purchase of vacation ownership units for future transfer to inventory ( 99 ) ( 61 )

Other assets ( 66 ) ( 5 )

5 unchanged sentences

Deconsolidation of certain Consolidated Property Owners' Associations ( 87 ) —

Purchase of vacation ownership units for future transfer to inventory ( 99 ) ( 61 )

Other, net 8 ( 9 )

Net cash, cash equivalents and restricted cash used in operating activities ( 60 ) ( 122 )

Net cash, cash equivalents and restricted cash provided by (used in) operating activities 148 ( 73 )

INVESTING ACTIVITIES

Acquisition of a business, net of cash and restricted cash acquired ( 157 ) —

Capital expenditures for property and equipment (excluding inventory) ( 11 ) ( 34 )

5 unchanged sentences

(In millions)

Three Months Ended

March 31, 2021 March 31, 2020

Six Months Ended

June 30, 2021 June 30, 2020

FINANCING ACTIVITIES

16 unchanged sentences

SUPPLEMENTAL DISCLOSURES

Non-cash issuance of treasury stock in connection with Welk Acquisition $ 248 $ —

Non-cash transfer from property and equipment to inventory 2 —

2 unchanged sentences

Interest paid, net of amounts capitalized 89 84

Income taxes paid, net of refunds ( 30 ) 4

(Income tax refunds) income taxes paid, net of refunds ( 27 ) 12

See Notes to Interim Consolidated Financial Statements

11 unchanged sentences

0.2 Share-based compensation plans — — ( 4 ) — — ( 4 ) — ( 4 )

— Dividends — — — — — — — —

— Equity component of convertible notes, net of issuance costs — — 117 — — 117 — 117

1 unchanged sentence

— Issuance of warrants — — 70 — — 70 — 70

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

— Deconsolidation of certain Consolidated Property Owners' Associations — — — — — — ( 5 ) ( 5 )

75.5 BALANCE AT MARCH 31, 2021 1 ( 1,334 ) 3,843 ( 45 ) 244 2,709 29 2,738

— Net income — — — — 6 6 2 8

— Welk Acquisition — 55 193 — — 248 — 248

— Foreign currency translation adjustments — — — 4 — 4 — 4

— Derivative instrument adjustment — — — 3 — 3 — 3

— Share-based compensation plans — 1 9 — — 10 — 10

— Deconsolidation of certain Consolidated Property Owners' Associations — — — — — — ( 1 ) ( 1 )

— Employee stock plan issuance — — 2 — — 2 — 2

75.5 BALANCE AT JUNE 30, 2021 $ 1 $ ( 1,278 ) $ 4,047 $ ( 38 ) $ 250 $ 2,982 $ 30 $ 3,012

See Notes to Interim Consolidated Financial Statements

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In millions)

Issued Common

1 unchanged sentence

Stock Additional

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

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

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

6 unchanged sentences

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

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

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

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

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

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

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

See Notes to Interim Consolidated Financial Statements

9 unchanged sentences

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

Pursuant to a change in control of certain consolidated property owners’ associations, we recorded a non-cash loss of less than $ 1 million in Gains (losses) and other income (expense), net on our Income Statement for the three months ended March 31, 2021, and deconsolidated $ 76 million of assets, inclusive of $ 71 million of restricted cash and $ 71 million of liabilities, for a decrease in Noncontrolling interests of $ 5 million during the first quarter of 2021.

See our Interim Consolidated Statement of Shareholder’s Equity for the three months ended March 31, 2021 for further information.

Pursuant to a change in control of certain consolidated property owners’ associations, we recorded a non-cash loss of $ 1 million in (Losses) gains and other (expense) income, net on our Income Statement for each of the three and six months ended June 30, 2021, and deconsolidated $ 88 million of assets, inclusive of $ 87 million of restricted cash and $ 83 million of liabilities, for a decrease in Noncontrolling interests of $ 6 million during the first half of 2021.

See our Interim Consolidated Statement of Shareholder’s Equity for further information.

We continue to act as manager for these property owners’ associations pursuant to existing management contracts and retain membership interests via our ownership of vacation ownership interests.

2 unchanged sentences

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

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

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

Accordingly, ultimate results could differ from our estimates, and such differences may be material.

4 unchanged sentences

Although we believe our footnote disclosures are adequate to make the information presented not misleading, the Financial Statements in this report should be read in conjunction with the consolidated financial statements and notes thereto in our 2020 Annual Report.

Acquisition of Welk

On April 1, 2021, we completed the acquisition of Welk Hospitality Group, Inc.

(“Welk”) through a series of transactions (the “Welk Acquisition”), after which Welk became our indirect wholly-owned subsidiary.

The Financial Statements in this report include Welk’s results of operations for the three months ended June 30, 2021 and reflect the financial position of our combined company at June 30, 2021.

We refer to Welk’s business and brands that we acquired as “Legacy-Welk.” See Footnote 3 “Acquisitions and Dispositions” for more information on the Welk Acquisition.

Reclassifications

22 unchanged sentences

ACQUISITIONS AND DISPOSITIONS

Planned Acquisition

On January 26, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) under which we agreed to acquire, in a series of transactions, Welk Hospitality Group, Inc.

(“Welk”), one of the largest independent timeshare companies in North America, in a cash and stock transaction.

On April 1, 2021, subsequent to the end of the first quarter of 2021, we completed the acquisition of Welk for consideration of $ 485 million, including approximately 1.4 million shares of our common stock.

Our Balance Sheet at March 31, 2021 reflects $ 152 million within Restricted cash for funds held by a third party in advance of the closing of the acquisition of Welk.

Welk Acquisition

On April 1, 2021 (the “Welk Acquisition Date”), we completed the Welk Acquisition for consideration of $ 405 million, including approximately 1.4 million shares of our common stock.

Welk was one of the largest independent timeshare companies in North America.

The following table presents the fair value of each type of consideration transferred at the Welk Acquisition Date.

(in millions, except per share amounts)

Equivalent shares of Marriott Vacations Worldwide common stock issued 1.4

Marriott Vacations Worldwide common stock price per share as of Welk Acquisition Date $ 174.18

Fair value of Marriott Vacations Worldwide common stock issued 248

Cash consideration to Welk, net of cash and restricted cash acquired of $ 48 million

Total consideration transferred, net of cash and restricted cash acquired $ 405

Preliminary Fair Values of Assets Acquired and Liabilities Assumed

We accounted for the Welk Acquisition as a business combination, which requires us to record the assets acquired and liabilities assumed at fair value as of the Welk Acquisition Date.

The amounts recorded are preliminary in nature and are subject to adjustment as additional information is obtained about the facts and circumstances that existed as of the Welk Acquisition Date.

We continue to evaluate the underlying inputs and assumptions used in our valuation for all assets acquired and liabilities assumed.

The values attributed to Vacation ownership notes receivable, Intangible assets, and Securitized debt from VIEs are based on preliminary valuations prepared based on Level 3 inputs and assumptions in accordance with ASC Topic 820, “ Fair Value Measurements ” (“ASC 820”).

The value attributed to Debt is based on Level 1 inputs in accordance with ASC 820.

For the remaining assets acquired and liabilities assumed, we are in the process of preparing preliminary valuations in accordance with the authoritative guidance.

We also continue to evaluate the underlying inputs and assumptions that are being utilized in the valuations.

Accordingly, these preliminary estimates are subject to change during the measurement period, which is up to one year from the Welk Acquisition Date, as permitted under GAAP.

Any potential adjustments could be material in relation to the values presented in the table below.

The following table presents our preliminary estimates of the fair value of the assets that we acquired and the liabilities that we assumed in connection with the business combination.

($ in millions)

Vacation ownership notes receivable, net (1)

Property and equipment 151

Intangible assets (2)

Other assets 19

Deferred taxes ( 41 )

Securitized debt ( 184 )

Other liabilities ( 67 )

Net assets acquired 106

_________________________

(1) Vacation ownership notes receivable, net have been determined to constitute purchased credit deteriorated assets under the provisions of ASC Topic 326, “ Financial Instruments - Credit Losses ,” due to the impact of the COVID-19 pandemic on Welk and the greater vacation ownership industry as a whole, and have been accounted for as such.

($ in millions)

Vacation ownership notes receivable $ 291

Allowance for credit losses ( 51 )

Vacation ownership notes receivable, net $ 240

(2) Intangible assets consist of management contracts with an estimated 20 year useful life.

(3) Goodwill is calculated as total consideration transferred, net of cash acquired, less identified net assets acquired and it represents the value that we expect to obtain from growth opportunities from our combined operations, and is not deductible for tax purposes.

See Footnote 10 “Goodwill and Intangibles” for additional information on our goodwill.

Pro Forma Results of Operations

The following unaudited pro forma information presents the combined results of operations of Marriott Vacations Worldwide and Welk as if we had completed the Welk Acquisition on December 31, 2019, the last day of our 2019 fiscal year, but using our preliminary estimates of the fair values of assets and liabilities as of the Welk Acquisition Date.

As required by GAAP, these unaudited pro forma results do not reflect any synergies from operating efficiencies.

Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the Welk Acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations.

There were no Welk acquisition-related costs included in the unaudited pro forma results below for the six months ended June 30, 2021, and $ 17 million included for the six months ended June 30, 2020.

Six Months Ended

($ in millions, except per share data) June 30, 2021 June 30, 2020

Revenues $ 1,785 $ 1,560

Net loss $ ( 4 ) $ ( 189 )

Net loss attributable to common shareholders $ ( 9 ) $ ( 198 )

LOSS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

Basic $ 0.21 $ ( 4.79 )

Diluted $ 0.21 $ ( 4.79 )

Welk Results of Operations

The following table presents the results of Welk operations included in our Income Statement from the Welk Acquisition Date through the end of the second quarter of 2021.

($ in millions) April 1, 2021 to

June 30, 2021

Net income $ 5

Other Acquisitions

During the first quarter of 2021, we acquired 24 completed vacation ownership units and an operations building located at our Marriott Vacation Club at Los Suenos resort in Costa Rica for $ 14 million.

4 unchanged sentences

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

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

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

San Francisco, California

2 unchanged sentences

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

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

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

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

We made no significant dispositions during either the first quarter of 2021 or the first quarter of 2020.

We made no significant dispositions during either the first half of 2021 or the first half of 2020.

REVENUE AND RECEIVABLES

1 unchanged sentence

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

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

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

9 unchanged sentences

Total Revenues $ 883 $ 86 $ 10 $ 979

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

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

9 unchanged sentences

Total Revenues $ 405 $ 58 $ 17 $ 480

Six Months Ended June 30, 2021

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

Sale of vacation ownership products $ 459 $ — $ — $ 459

Ancillary revenues 80 1 — 81

Management fee revenues 77 14 ( 11 ) 80

Exchange and other services revenues 60 105 87 252

Management and exchange 217 120 76 413

Rental 187 23 — 210

Cost reimbursements 554 29 ( 54 ) 529

Revenue from contracts with customers 1,417 172 22 1,611

Financing 127 — — 127

Total Revenues $ 1,544 $ 172 $ 22 $ 1,738

Six Months Ended June 30, 2020

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

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

Ancillary revenues 52 1 — 53

Management fee revenues 76 10 ( 9 ) 77

Exchange and other services revenues 57 100 85 242

Management and exchange 185 111 76 372

Rental 134 19 — 153

Cost reimbursements 543 33 ( 64 ) 512

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

Financing 140 2 — 142

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

Timing of Revenue from Contracts with Customers by Segment

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

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

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

2 unchanged sentences

Revenue from contracts with customers $ 815 $ 86 $ 10 $ 911

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

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

2 unchanged sentences

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

Six Months Ended June 30, 2021

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

Services transferred over time $ 871 $ 80 $ 22 $ 973

Goods or services transferred at a point in time 546 92 — 638

Revenue from contracts with customers $ 1,417 $ 172 $ 22 $ 1,611

Six Months Ended June 30, 2020

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

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

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

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

Sale of Vacation Ownership Products

Revenues were reduced during the first quarter of 2021 by $ 5 million due to changes in our estimates of variable consideration for performance obligations that were satisfied in prior periods.

Revenues were reduced during the second quarter and first half of 2021 by $ 3 million and $ 8 million, respectively, due to changes in our estimates of variable consideration for performance obligations that were satisfied in prior periods.

Receivables from Contracts with Customers, Contract Assets & Contract Liabilities

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

We had no contract assets at either March 31, 2021 or December 31, 2020.

($ in millions) At March 31, 2021 At December 31, 2020

We had no contract assets at either June 30, 2021 or December 31, 2020.

($ in millions) At June 30, 2021 At December 31, 2020

Receivables from Contracts with Customers

5 unchanged sentences

Deferred revenue 474 488

Revenue recognized during the first quarter of 2021 that was included in our contract liabilities balance at December 31, 2020 was $ 114 million.

Revenue recognized during the second quarter and first half of 2021 that was included in our contract liabilities balance at December 31, 2020 was $ 89 million and $ 203 million, respectively.

Remaining Performance Obligations

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

At March 31, 2021, approximately 80 percent of this amount is expected to be recognized as revenue over the next two years .

At June 30, 2021, approximately 84 percent of this amount is expected to be recognized as revenue over the next two years .

Accounts Receivable

1 unchanged sentence

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

($ in millions) At March 31, 2021 At December 31, 2020

($ in millions) At June 30, 2021 At December 31, 2020

Receivables from contracts with customers $ 108 $ 150

5 unchanged sentences

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

Our interim effective tax rate was 29.8 percent and 35.4 percent for the three months ended March 31, 2021 and March 31, 2020, respectively.

The decrease in the effective tax rate is predominately attributable to a decrease in pre-tax loss and a release in provisions on uncertain tax benefits included in the three months ended March 31, 2020.

Our interim effective tax rate was 75.4 percent and 23.3 percent for the three months ended June 30, 2021 and June 30, 2020, respectively.

The change in the effective tax rate is predominately attributable to an increase in pre-tax income.

Our interim effective tax rate was ( 1,737.7 ) percent and 31.4 percent for the six months ended June 30, 2021 and June 30, 2020, respectively.

The change in the effective tax rate is predominately attributable to a decrease in pre-tax loss and a release in the reserve for uncertain tax benefits included in the six months ended June 30, 2020.

Tax Law Update

We have considered the income tax accounting and disclosure implications of the relief provided by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), enacted in March 2020, and the Consolidated Appropriations Act, 2021, enacted in December 2020.

As of March 31, 2021, we evaluated the income tax provisions of the above mentioned acts and have determined there to be minimal effect on either the March 31, 2021 tax rate or the computation of the estimated effective tax rate for the year ended December 31, 2021.

As of June 30, 2021, we evaluated the income tax provisions of the above mentioned acts and have determined there to be minimal effect on either the June 30, 2021 tax rate or the computation of the estimated effective tax rate for the year ended December 31, 2021.

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

Unrecognized Tax Benefits

The following table summarizes the activity related to our unrecognized tax benefits (excluding interest and penalties) during the three months ended March 31, 2021.

The following table summarizes the activity related to our unrecognized tax benefits (excluding interest and penalties) during the six months ended June 30, 2021.

($ in millions) Unrecognized Tax Benefits

1 unchanged sentence

Increases related to tax positions taken during the current period 1

Balance at March 31, 2021 $ 15

The total unrecognized tax benefits related to uncertain income tax positions, which would affect the effective tax rate if recognized, was $ 15 million at March 31, 2021 and $ 14 million at December 31, 2020.

The total amount of gross interest and penalties accrued was $ 28 million at March 31, 2021 and $ 25 million at December 31, 2020.

Balance at June 30, 2021

The total unrecognized tax benefits related to uncertain income tax positions, which would affect the effective tax rate if recognized, was $ 15 million at June 30, 2021 and $ 14 million at December 31, 2020.

The total amount of gross interest and penalties accrued was $ 29 million at June 30, 2021 and $ 25 million at December 31, 2020.

We anticipate $ 4 million of unrecognized tax benefits, including interest and penalties, to be indemnified pursuant to a Tax Matters Agreement dated May 11, 2016 by and among Starwood Hotels & Resorts Worldwide, Inc., Vistana Signature Experiences, Inc., and Interval Leisure Group, Inc., and consequently have recorded a corresponding indemnification asset.

5 unchanged sentences

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

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

($ in millions) Originated Acquired Total Originated Acquired Total

11 unchanged sentences

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

Three Months Ended

($ in millions) March 31, 2021 March 31, 2020

Three Months Ended Six Months Ended

($ in millions) June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Interest income associated with vacation ownership notes receivable — securitized $ 57 $ 64 $ 105 $ 127

4 unchanged sentences

In the fourth quarter of 2020, we increased our vacation ownership notes receivable reserve by an additional $ 17 million due to higher than previously expected default activity.

During the first quarter of 2021, there were no additional increases to our vacation ownership notes receivable reserves due to the COVID-19 pandemic.

During the first half of 2021, there were no additional increases to our vacation ownership notes receivable reserves due to the COVID-19 pandemic.

Acquired Vacation Ownership Notes Receivable

Acquired vacation ownership notes receivable represent vacation ownership notes receivable acquired as part of the ILG Acquisition.

The following table shows future contractual principal payments and interest rates for our non-securitized and securitized acquired vacation ownership notes receivable at March 31, 2021.

Acquired vacation ownership notes receivable represent vacation ownership notes receivable acquired as part of the ILG Acquisition and the Welk Acquisition.

The following table shows future contractual principal payments, net of reserves, and interest rates for our acquired non-securitized and securitized vacation ownership notes receivable at June 30, 2021.

Acquired Vacation Ownership Notes Receivable

2 unchanged sentences

Thereafter 19 178 197

Balance at March 31, 2021 $ 40 $ 245 $ 285

Balance at June 30, 2021 $ 37 $ 425 $ 462

Weighted average stated interest rate 13.8 % 14.1 % 14.1 %

6 unchanged sentences

Balance at December 31, 2020 $ 39 $ 21 $ 60

Securitizations ( 6 ) 6 —

Clean-up call 3 ( 3 ) —

Write-offs ( 22 ) — ( 22 )

1 unchanged sentence

Defaulted vacation ownership notes receivable repurchase activity (1)

Initial allowance for credit losses for Legacy-Welk vacation ownership notes receivable 26 25 51

(Decrease) increase in vacation ownership notes receivable reserve ( 14 ) 11 ( 3 )

Balance at March 31, 2021 $ 39 $ 18 $ 57

Balance at June 30, 2021 $ 53 $ 43 $ 96

_________________________

1 unchanged sentence

Originated Vacation Ownership Notes Receivable

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

The following table shows future principal payments, net of reserves and interest rates for our originated non-securitized and securitized originated vacation ownership notes receivable at March 31, 2021.

Originated vacation ownership notes receivable represent vacation ownership notes receivable originated by Legacy-ILG and Legacy-Welk subsequent to each respective acquisition date and all Legacy-MVW vacation ownership notes receivable.

The following table shows future principal payments, net of reserves, and interest rates for our originated non-securitized and securitized originated vacation ownership notes receivable at June 30, 2021.

Originated Vacation Ownership Notes Receivable

6 unchanged sentences

Thereafter 175 656 831

Balance at March 31, 2021 $ 391 $ 1,093 $ 1,484

Balance at June 30, 2021 $ 309 $ 1,220 $ 1,529

Weighted average stated interest rate 12.6 % 12.8 % 12.8 %

8 unchanged sentences

Increase in vacation ownership notes receivable reserve 23 19 42

Securitizations ( 29 ) 29 —

Clean-up call 3 ( 3 ) —

Write-offs ( 30 ) — ( 30 )

Defaulted vacation ownership notes receivable repurchase activity (1)

Balance at March 31, 2021 $ 203 $ 105 $ 308

Balance at June 30, 2021 $ 201 $ 121 $ 322

_________________________

2 unchanged sentences

Legacy-MVW Vacation Ownership Notes Receivable

For both Legacy-MVW non-securitized and securitized vacation ownership notes receivable, we estimated average remaining default rates of 6.58 percent as of March 31, 2021, and 6.74 percent as of December 31, 2020.

A 0.5 percentage point increase in the estimated default rate would have resulted in an increase in the related vacation ownership notes receivable reserve of $ 6 million as of March 31, 2021, and $ 6 million as of December 31, 2020.

For both Legacy-MVW non-securitized and securitized vacation ownership notes receivable, we estimated average remaining default rates of 6.59 percent as of June 30, 2021, and 6.74 percent as of December 31, 2020.

A 0.5 percentage point increase in the estimated default rate would have resulted in an increase in the related vacation ownership notes receivable reserve of $ 6 million as of June 30, 2021, and $ 6 million as of December 31, 2020.

We use the aging of the vacation ownership notes receivable as the primary credit quality indicator for our Legacy-MVW vacation ownership notes receivable, as historical performance indicates that there is a relationship between the default behavior of borrowers and the age of the receivable associated with the vacation ownership interest.

2 unchanged sentences

($ in millions) Non-Securitized Securitized Total

Investment in vacation ownership notes receivable on non-accrual status at March 31, 2021 $ 100 $ 11 $ 111

Investment in vacation ownership notes receivable on non-accrual status at June 30, 2021 $ 102 $ 6 $ 108

Investment in vacation ownership notes receivable on non-accrual status at December 31, 2020 $ 100 $ 14 $ 114

The following table shows the aging of the recorded investment in principal, before reserves, in Legacy-MVW vacation ownership notes receivable as of March 31, 2021 and December 31, 2020.

The following table shows the aging of the recorded investment in principal, before reserves, in Legacy-MVW vacation ownership notes receivable as of June 30, 2021 and December 31, 2020.

Legacy-MVW Vacation Ownership Notes Receivable

As of March 31, 2021 As of December 31, 2020

As of June 30, 2021

As of December 31, 2020

($ in millions) Non-Securitized Securitized Total Non-Securitized Securitized Total

5 unchanged sentences

Total vacation ownership notes receivable $ 287 $ 1,028 $ 1,315 $ 339 $ 1,050 $ 1,389

The following table details the origination year of our Legacy-MVW vacation ownership notes receivable as of March 31, 2021.

The following table details the origination year of our Legacy-MVW vacation ownership notes receivable as of June 30, 2021.

Legacy-MVW Vacation Ownership Notes Receivable

8 unchanged sentences

$ 287 $ 1,028 $ 1,315

Legacy-ILG Vacation Ownership Notes Receivable

At March 31, 2021 and December 31, 2020, the weighted average FICO score within our consolidated Legacy-ILG vacation ownership notes receivable pools was 708 and 708 , respectively, based upon the outstanding vacation ownership notes receivable balance at time of origination.

The average estimated rate for all future defaults for our Legacy-ILG consolidated outstanding pool of vacation ownership notes receivable was 14.62 percent as of March 31, 2021 and 14.63 percent as of December 31, 2020.

A 0.5 percentage point increase in the estimated default rate on the Legacy-ILG vacation ownership notes receivable would have resulted in an increase in the related vacation ownership notes receivable reserve of $ 3 million as of March 31, 2021, and $ 3 million as of December 31, 2020.

We use the origination of the vacation ownership notes receivable by brand (Westin, Sheraton, Hyatt) and the FICO scores of the customer as the primary credit quality indicators for our Legacy-ILG vacation ownership notes receivable, as historical performance indicates that there is a relationship between the default behavior of borrowers and the brand associated with the vacation ownership interest they have acquired, supplemented by the FICO scores of the customers.

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

Legacy-ILG Vacation Ownership Notes Receivable

Legacy-ILG and Legacy-Welk Vacation Ownership Notes Receivable

At June 30, 2021 and December 31, 2020, the weighted average FICO score within our consolidated Legacy-ILG and Legacy-Welk vacation ownership notes receivable pools was 706 and 708 , respectively, based upon the outstanding vacation ownership notes receivable balance at time of origination.

The average estimated rate for all future defaults for our Legacy-ILG and Legacy-Welk consolidated outstanding pool of vacation ownership notes receivable was 16.33 percent as of June 30, 2021 and 14.63 percent as of December 31, 2020.

A 0.5 percentage point increase in the estimated default rate on the Legacy-ILG and Legacy-Welk vacation ownership notes receivable would have resulted in an increase in the related vacation ownership notes receivable reserve of $ 4 million as of June 30, 2021, and $ 3 million as of December 31, 2020.

We use the origination of the vacation ownership notes receivable by brand (Westin, Sheraton, Hyatt, Welk) and the FICO scores of the customer as the primary credit quality indicators for our Legacy-ILG and Legacy-Welk vacation ownership notes receivable, as historical performance indicates that there is a relationship between the default behavior of borrowers and the brand associated with the vacation ownership interest they have acquired, supplemented by the FICO scores of the customers.

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

Legacy-ILG and Legacy-Welk Vacation Ownership Notes Receivable

($ in millions) Non-Securitized Securitized Total

Investment in vacation ownership notes receivable on non-accrual status at March 31, 2021 $ 118 $ 8 $ 126

Investment in vacation ownership notes receivable on non-accrual status at June 30, 2021 $ 124 $ 8 $ 132

Investment in vacation ownership notes receivable on non-accrual status at December 31, 2020 $ 109 $ 12 $ 121

The following table shows the aging of the recorded investment in principal, before reserves, in Legacy-ILG vacation ownership notes receivable as of March 31, 2021 and December 31, 2020.

Legacy-ILG Vacation Ownership Notes Receivable

As of March 31, 2021 As of December 31, 2020

The following table shows the aging of the recorded investment in principal, before reserves, in Legacy-ILG and Legacy-Welk vacation ownership notes receivable as of June 30, 2021 and December 31, 2020.

Legacy-ILG and Legacy-Welk Vacation Ownership Notes Receivable

As of June 30, 2021

As of December 31, 2020

($ in millions) Non-Securitized Securitized Total Non-Securitized Securitized Total

5 unchanged sentences

Total vacation ownership notes receivable $ 313 $ 781 $ 1,094 $ 240 $ 581 $ 821

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

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

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

resident borrowers.

Acquired Vacation Ownership Notes Receivable as of March 31, 2021

Acquired Vacation Ownership Notes Receivable as of June 30, 2021

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

2 unchanged sentences

Hyatt 10 7 1 1 19

Welk 147 101 1 3 252

Other 2 — — 2 4

7 unchanged sentences

$ 176 $ 131 $ 18 $ 44 $ 369

The following table details the origination year of our Legacy-ILG acquired vacation ownership notes receivable by brand and FICO score as of March 31, 2021.

The following tables detail the origination year of our Legacy-ILG and Legacy-Welk acquired vacation ownership notes receivable by brand and FICO score as of June 30, 2021.

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

21 unchanged sentences

$ — $ — $ — $ 4 $ 4 $ 15 $ 23

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

Acquired Vacation Ownership Notes Receivable - Welk

($ in millions) 2021 2020 2019 2018 2017 2016 & Prior Total

700 + $ 13 $ 32 $ 37 $ 24 $ 16 $ 25 $ 147

600 - 699 7 19 27 16 12 20 101

< 600 — 1 — — — — 1

No Score — — 1 1 — 1 3

$ 20 $ 52 $ 65 $ 41 $ 28 $ 46 $ 252

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

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

resident borrowers.

Originated Vacation Ownership Notes Receivable as of March 31, 2021

Originated Vacation Ownership Notes Receivable as of June 30, 2021

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

2 unchanged sentences

Hyatt 19 9 — — 28

Welk 27 11 — — 38

$ 285 $ 157 $ 25 $ 69 $ 536

5 unchanged sentences

$ 231 $ 132 $ 22 $ 66 $ 451

The following tables detail the origination year of our Legacy-ILG originated vacation ownership notes receivable by brand and FICO score as of March 31, 2021.

The following tables detail the origination year of our Legacy-ILG and Legacy-Welk originated vacation ownership notes receivable by brand and FICO score as of June 30, 2021.

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

21 unchanged sentences

$ 7 $ 6 $ 12 $ 3 $ — $ — $ 28

Originated Vacation Ownership Notes Receivable - Welk

($ in millions) 2021 2020 2019 2018 2017 2016 & Prior Total

700 + $ 27 $ — $ — $ — $ — $ — $ 27

600 - 699 11 — — — — — 11

< 600 — — — — — — —

No Score — — — — — — —

$ 38 $ — $ — $ — $ — $ — $ 38

FINANCIAL INSTRUMENTS

3 unchanged sentences

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

At March 31, 2021 At December 31, 2020

At June 30, 2021 At December 31, 2020

($ in millions) Carrying

7 unchanged sentences

2028 Notes, net ( 346 ) ( 359 ) ( 346 ) ( 359 )

2029 Notes, net ( 493 ) ( 507 ) — —

Term Loan, net ( 775 ) ( 772 ) ( 873 ) ( 864 )

3 unchanged sentences

Vacation Ownership Notes Receivable

At March 31, 2021 At December 31, 2020

At June 30, 2021 At December 31, 2020

($ in millions) Carrying

23 unchanged sentences

The carrying value of the COLI policies is equal to their cash surrender value (Level 2 inputs).

In addition, we have investments in marketable securities of $ 6 million that are marked to market as trading securities using quoted market prices (Level 1 inputs).

Securitized Debt

4 unchanged sentences

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

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

We estimate the fair value of our 2025 Notes, 2026 Notes, 2028 Notes, and 2029 Notes (each as defined in Footnote 13 “Debt”) using quoted market prices as of the last trading day for the quarter;

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

15 unchanged sentences

Therefore, we include only the shares that may be issued with respect to any conversion premium in total dilutive weighted average shares outstanding, which we calculate using the treasury stock method based upon an average price per share for the quarter.

As of March 31, 2021, a conversion premium existed for our 2022 Convertible Notes (as defined in Footnote 13 “Debt”).

As no conversion premium existed as of March 31, 2020, there was no potential dilutive impact from our 2022 Convertible Notes for the first quarter of 2020.

Additionally, as no conversion premium existed for our 2026 Convertible Notes (as defined in Footnote 13 “Debt”) as of March 31, 2021, there was no potential dilutive impact from our 2026 Convertible Notes for the first quarter of 2021.

As of June 30, 2021, a conversion premium existed for our 2022 Convertible Notes and our 2026 Convertible Notes (both as defined in Footnote 13 “Debt”).

As no conversion premium existed as of June 30, 2020, there was no potential dilutive impact from our 2022 Convertible Notes for the second quarter or first half of 2020.

The shares issuable on exercise of the warrants sold in connection with the issuance of our convertible notes will not impact the total dilutive weighted average shares outstanding unless and until the price of our common stock exceeds the respective strike price.

3 unchanged sentences

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

Three Months Ended

(in millions, except per share amounts) March 31, 2021 March 31, 2020

Computation of Basic Loss Per Share Attributable to Common Shareholders

Net loss attributable to common shareholders $ ( 28 ) $ ( 106 )

Shares for basic loss per share 41.4 41.5

Basic loss per share $ ( 0.68 ) $ ( 2.56 )

Computation of Diluted Loss Per Share Attributable to Common Shareholders

Net loss attributable to common shareholders $ ( 28 ) $ ( 106 )

Shares for basic loss per share 41.4 41.5

Three Months Ended Six Months Ended

(in millions, except per share amounts) June 30, 2021 (1)

June 30, 2020 June 30, 2021 June 30, 2020

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

Net earnings (loss) attributable to common shareholders $ 6 $ ( 70 ) $ ( 22 ) $ ( 176 )

Shares for basic earnings (loss) per share 42.9 41.2 42.1 41.4

Basic earnings (loss) per share $ 0.15 $ ( 1.68 ) $ ( 0.52 ) $ ( 4.25 )

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

Net earnings (loss) attributable to common shareholders $ 6 $ ( 70 ) $ ( 22 ) $ ( 176 )

Shares for basic earnings (loss) per share 42.9 41.2 42.1 41.4

Effect of dilutive shares outstanding (2)

Shares for diluted loss per share 41.4 41.5

Diluted loss per share $ ( 0.68 ) $ ( 2.56 )

Employee stock options and SARs 0.2 — — —

Restricted stock units 0.5 — — —

2022 Convertible Notes 0.2 — — —

2026 Convertible Notes — — — —

Shares for diluted earnings (loss) per share 43.8 41.2 42.1 41.4

Diluted earnings (loss) per share $ 0.15 $ ( 1.68 ) $ ( 0.52 ) $ ( 4.25 )

_______________________________

(1) The following potentially dilutive securities were excluded from the above calculation of diluted net loss per share attributable to common shareholders during the periods presented, as there was a net loss attributable to common shareholders and as such, the effects of including these securities would have been anti-dilutive.

Three Months Ended

(in millions) March 31, 2021 March 31, 2020

(1) The computations of diluted earnings per share attributable to common shareholders exclude approximately 299,000 shares of common stock, the maximum number of shares issuable as of June 30, 2021, upon the vesting of certain performance-based awards because the performance condition required to be met for the shares subject to such awards to vest were not achieved by the end of the reporting period.

(2) For the first half of 2021, as well as the second quarter and the first half of 2020, the following potentially dilutive securities were excluded from the above calculation of diluted net loss per share attributable to common

shareholders during the periods presented, as there was a net loss attributable to common shareholders and as such, the effects of including these securities would have been anti-dilutive.

Three Months Ended Six Months Ended

(in millions) June 30, 2020 June 30, 2021 June 30, 2020

Employee stock options and SARs 0.1 0.2 0.1

1 unchanged sentence

2022 Convertible Notes — 0.2 —

2026 Convertible Notes — — —

In accordance with the applicable accounting guidance for calculating earnings per share, for the second quarter of 2021, we excluded from our calculation of diluted earnings per share 127,857 shares underlying stock appreciation rights (“SARs”) that may settle in shares of common stock because the exercise price of $ 173.88 of such SARs was greater than the average market price for each of the applicable periods.

The following table shows the composition of our inventory balances:

($ in millions) At March 31, 2021 At December 31, 2020

($ in millions) At June 30, 2021 At December 31, 2020

Finished goods (1)

2 unchanged sentences

_________________________

(1) Represents completed inventory that is registered for sale as vacation ownership interests and inventory expected to be acquired pursuant to estimated future foreclosures.

(1) Represents completed inventory that is registered for sale as vacation ownership interests and inventory expected to be reacquired pursuant to estimated future foreclosures.

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

Product cost true-up activity relating to vacation ownership products increased carrying values of inventory by $ 1 million during the first quarter of 2021 and by $ 8 million during the first quarter of 2020.

In addition to the above, at March 31, 2021 and December 31, 2020, we had $ 291 million and $ 162 million, respectively, of completed vacation ownership units which are classified as a component of Property and equipment until the time at which they are legally registered for sale as vacation ownership products.

We also have $ 24 million and $ 43 million of deposits on future purchases of inventory at March 31, 2021 and December 31, 2020, respectively, which are included in the Other assets line on our Balance Sheets.

Product cost true-up activity relating to vacation ownership products increased carrying values of inventory by $ 1 million during the first half of 2021 and by $ 3 million during the first half of 2020.

In addition to the above, at June 30, 2021 and December 31, 2020, we had $ 383 million and $ 162 million, respectively, of completed vacation ownership units which are classified as a component of Property and equipment until the time at which they are legally registered for sale as vacation ownership products.

We also have $ 24 million and $ 43 million of deposits on future purchases of inventory at June 30, 2021 and December 31, 2020, respectively, which are included in the Other assets line on our Balance Sheets.

GOODWILL AND INTANGIBLES

The following table details the carrying amount of our goodwill at March 31, 2021 and December 31, 2020, and reflects goodwill attributed to the ILG Acquisition, which was allocated to our Vacation Ownership and our Exchange & Third-party Management reporting units.

The following table details the carrying amount of our goodwill at June 30, 2021 and December 31, 2020, and reflects goodwill attributed to the ILG Acquisition, which was allocated to our Vacation Ownership and our Exchange & Third-Party Management reporting units, and the Welk Acquisition, which was allocated to our Vacation Ownership reporting unit.

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

Balance at December 31, 2020 $ 2,445 $ 372 $ 2,817

Impairment — — —

Foreign exchange adjustments — — —

Balance at March 31, 2021 $ 2,445 $ 372 $ 2,817

We performed a qualitative analysis of the impact of recent events, including business and industry specific considerations, on the fair value of our reporting units as of the end of the first quarter of 2021 and determined that an interim quantitative impairment test was not required for either of our reporting units.

While the goodwill of our reporting units was not impaired as of the first quarter of 2021, we cannot assure you that goodwill will not be impaired in future periods.

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

During the first quarter of 2020, we recognized a non-cash impairment charge of $ 73 million in the Impairment line on our Income Statement for the three months ended March 31, 2020, related to the Exchange & Third-Party Management reporting unit, which was primarily driven by the change in expected future operating results as a result of the impact of the COVID-19 pandemic.

Welk Acquisition 299 — 299

Balance at June 30, 2021 $ 2,744 $ 372 $ 3,116

Q1 2021 and Q2 2021

We performed a qualitative analysis of the impact of recent events, including business and industry specific considerations, on the fair value of our reporting units and determined that interim quantitative impairment tests were not required for either of our reporting units for each of the first two quarters of 2021.

While the goodwill of our reporting units was not impaired as of the first and second quarters of 2021, we cannot assure you that goodwill will not be impaired in future periods.

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

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

Intangible Assets

The following table details the composition of our intangible asset balances:

($ in millions) At March 31, 2021 At December 31, 2020

($ in millions) At June 30, 2021 At December 31, 2020

Definite-lived intangible assets

4 unchanged sentences

Trade names 64 64

During the first quarter of 2020, we recognized a non-cash impairment charge of $ 18 million in the Impairment line on our Income Statement for the three months ended March 31, 2020, related to the indefinite-lived intangible assets in our Exchange & Third-Party Management reporting unit.

The impairment charge was primarily attributed to the impact of the COVID-19 pandemic.

$ 1,017 $ 952

We recognized a non-cash impairment charge of $ 18 million in the Impairment line on our Income Statement during the first quarter of 2020 related to the indefinite-lived intangible assets in our Exchange & Third-Party Management reporting unit, which was primarily attributed to the decline in estimated near-term revenues and related recovery of long-term revenues as a result of the impact of the COVID-19 pandemic.

CONTINGENCIES AND COMMITMENTS

Commitments and Letters of Credit

As of March 31, 2021, we had the following commitments outstanding:

As of June 30, 2021, we had the following commitments outstanding:

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

Our aggregate commitments under these contracts were $ 92 million, of which we expect $ 28 million, $ 35 million, $ 20 million, $ 6 million, and $ 3 million will be paid in the remainder of 2021, 2022, 2023, 2024, and 2025 and thereafter, respectively.

Our aggregate commitment under these contracts was $ 88 million, of which we expect $ 22 million, $ 39 million, $ 19 million, $ 5 million, and $ 3 million will be paid in the remainder of 2021, 2022, 2023, 2024, and 2025, respectively.

• We have various commitments to acquire real estate for use in our Vacation Ownership segment via our involvement with VIEs.

3 unchanged sentences

$ 21 million in late 2021 and $ 2 million in 2022.

Surety bonds issued as of March 31, 2021 totaled $ 85 million, the majority of which were requested by federal, state, or local governments in connection with our operations.

As of March 31, 2021, we had $ 2 million of letters of credit outstanding under our Revolving Corporate Credit Facility (as defined in Footnote 13 “Debt”).

In addition, as of March 31, 2021, we had $ 2 million in letters of credit outstanding related to and in lieu of reserves required for several vacation ownership notes receivable securitization transactions outstanding.

Surety bonds issued as of June 30, 2021 totaled $ 121 million, the majority of which were requested by federal, state, or local governments in connection with our operations.

As of June 30, 2021, we had $ 3 million of letters of credit outstanding under our Revolving Corporate Credit Facility (as defined in Footnote 13 “Debt”).

In addition, as of June 30, 2021, we had $ 2 million in letters of credit outstanding related to and in lieu of reserves required for several vacation ownership notes receivable securitization transactions outstanding.

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

We estimate the cash outflow associated with completing the phases of our existing portfolio of vacation ownership projects currently under development will be approximately $ 3 million, of which $ 1 million is included within liabilities on our Balance Sheet at March 31, 2021.

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

1 unchanged sentence

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

At March 31, 2021, our maximum exposure under fixed dollar guarantees was $ 15 million, of which $ 4 million, $ 4 million, $ 2 million, $ 2 million, $ 1 million and $ 2 million relate to the remainder of 2021, 2022, 2023, 2024, 2025 and thereafter, respectively.

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

As a result, owner distributions made under such agreements will be paid on a net operating income basis, rather than as guaranteed amounts, until such time as force majeure event conditions abate.

At June 30, 2021, our maximum exposure under fixed dollar guarantees was $ 13 million, of which $ 3 million, $ 3 million, $ 2 million, $ 2 million, $ 1 million, and $ 2 million relate to the remainder of 2021, 2022, 2023, 2024, 2025, and thereafter, respectively.

We have a commitment to a property owners’ association that we manage to pay for any shortfall between the actual expenses incurred by the property owners’ association and the income received by the property owners’ association.

The agreement will terminate on the earlier of:

1) sale of 80% of the total ownership interests;

or 2) upon our written notification of termination.

At June 30, 2021, our expected commitment for the remainder of 2021 is $ 8 million.

Loss Contingencies

11 unchanged sentences

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

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

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

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

10 unchanged sentences

District Court for the District of Colorado.

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

disgorgement of profits, fees and costs.

In November 2020, the District Court granted our motion to dismiss and dismissed the case.

9 unchanged sentences

We have accrued for other claims and lawsuits, but the amount accrued is not material individually or in the aggregate.

For matters not requiring accrual, we do not believe that the ultimate outcome of such matters, individually and in the aggregate, will materially harm our financial position, cash flows, or overall trends in results of operations based on information currently available.

However, legal proceedings are inherently uncertain, and while we believe that our accruals are adequate and that we have valid defenses to the claims asserted, unfavorable rulings could occur that could, individually or in the aggregate, have a material adverse effect on our business, financial condition, or operating results.

For matters not requiring accrual, we do not believe that the ultimate outcome of such matters, individually or in the aggregate, will materially harm our financial position, cash flows, or overall trends in results of operations based on information currently available.

However, legal proceedings are inherently uncertain, and while we believe that our accruals are adequate and/or we have valid defenses to the claims asserted, unfavorable rulings could occur that could, individually or in the aggregate, have a material adverse effect on our business, financial condition, or operating results.

Leases That Have Not Yet Commenced

During the first quarter of 2020, we entered into a finance lease arrangement for our new global headquarters in Orlando, Florida.

The new office building is currently expected to be completed in 2023, at which time the lease term will commence and a right-of-use asset and corresponding liability will be recorded on our balance sheet.

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

During 2020, in response to the COVID-19 pandemic and our ongoing evaluation of future space needs, we entered into a standstill arrangement with the developer/lessor, which expires in June 2021.

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

During 2020, in response to the COVID-19 pandemic and our ongoing evaluation of future space needs, we entered into a standstill arrangement with the developer/lessor, which expired in June 2021.

During the second quarter of 2021, we amended our lease agreement with the developer/lessor and expect the new office building to be completed in 2023.

Upon commencement of the lease term, a right-of-use asset and corresponding liability will be recorded on our balance sheet.

SECURITIZED DEBT

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

($ in millions) At March 31, 2021 At December 31, 2020

($ in millions) At June 30, 2021 At December 31, 2020

Vacation ownership notes receivable securitizations, gross (1)

3 unchanged sentences

_________________________

(1) Interest rates as of March 31, 2021 range from 2.3 % to 4.4 %, with a weighted average interest rate of 2.8 %

(1) Interest rates as of June 30, 2021 range from 1.5 % to 4.4 %, with a weighted average interest rate of 2.5 %

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

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

The following table shows scheduled future principal payments for our securitized debt as of March 31, 2021.

The following table shows scheduled future principal payments for our securitized debt as of June 30, 2021.

Vacation Ownership

7 unchanged sentences

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

During the first quarter of 2021, and as of March 31, 2021, no securitized vacation ownership notes receivable pools were out of compliance with their respective established parameters.

As of March 31, 2021, we had 12 securitized vacation ownership notes receivable pools outstanding.

During the second quarter of 2021, and as of June 30, 2021, no securitized vacation ownership notes receivable pools were out of compliance with their respective established parameters.

As of June 30, 2021, we had 13 securitized vacation ownership notes receivable pools outstanding.

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

During the second quarter of 2021, we completed the securitization of a pool of $ 434 million of vacation ownership notes receivable.

In connection with the securitization, investors purchased in a private placement $ 425 million in vacation ownership loan backed notes from MVW 2021-1W LLC (the “2021-1W LLC”).

Four classes of vacation ownership loan backed notes were issued by the 2021-1W LLC:

$ 207 million of Class A Notes, $ 107 million of Class B Notes, $ 80 million of Class C Notes, and $ 31 million of Class D Notes.

The Class A Notes have an interest rate of 1.14 percent, the Class B Notes have an interest rate of 1.44 percent, the Class C Notes have an interest rate of 1.94 percent, and the Class D Notes have an interest rate of 3.17 percent, for an overall weighted average interest rate of 1.52 percent.

Of the $ 425 million in proceeds from the transaction, $ 8 million was used to pay transaction expenses and fund required reserves, and the remainder will be used for general corporate purposes.

In connection with the 2021-1W securitization, we redeemed certain remaining vacation ownership notes receivable securitizations from 2014 and 2015, as well as certain vacation ownership notes receivable securitizations acquired as part of the Welk Acquisition.

Warehouse Credit Facility

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

Subsequent to the end of the first quarter of 2021, we amended certain agreements associated with this facility, and as a result, the revolving period was extended from December 20, 2021 to April 21, 2023 and the interest rate increased from primarily LIBOR plus 1.1 % to primarily LIBOR plus 1.35 %.

During the second quarter of 2021, we amended certain agreements associated with this facility, and as a result, the revolving period was extended from December 20, 2021 to April 21, 2023 and the interest rate increased from primarily LIBOR plus 1.1 % to primarily LIBOR plus 1.35 %.

Our borrowing capacity was not modified by these amendments.

The amended facility expands our ability to monetize vacation ownership notes receivable loans originated by Welk, which was acquired subsequent to the end of the first quarter of 2021.

The amended facility expands our ability to monetize vacation ownership notes receivable loans originated by Welk.

The other terms are substantially similar to those in effect prior to the execution of the amendments.

As of June 30, 2021, there were no cash borrowings outstanding under our Warehouse Credit Facility.

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

($ in millions) At March 31, 2021 At December 31, 2020

($ in millions) At June 30, 2021 At December 31, 2020

Senior Secured Notes

6 unchanged sentences

Unamortized debt discount and issuance costs ( 4 ) ( 4 )

2029 Notes 500 —

Unamortized debt discount and issuance costs ( 7 ) —

Corporate Credit Facility

8 unchanged sentences

$ 3,528 $ 2,680

The following table shows scheduled future principal payments for our debt, excluding finance leases, as of March 31, 2021.

The following table shows scheduled future principal payments for our debt, excluding finance leases, as of June 30, 2021.

($ in millions) 2025

12 unchanged sentences

• $ 350 million aggregate principal amount of 4.750 % Senior Unsecured Notes due 2028 issued in the fourth quarter of 2019 with a maturity date of January 15, 2028 (the “2028 Notes”).

• $ 500 million aggregate principal amount of 4.500 % Senior Unsecured Notes due 2029 issued in the second quarter of 2021 with a maturity date of June 15, 2029 (the “2029 Notes”).

Issuance of Senior Unsecured Notes

The 2029 Notes were issued under an indenture dated June 21, 2021 with The Bank of New York Mellon Trust Company, N.A., as trustee.

We received net proceeds of $ 493 million from the offering, after deducting the underwriting fees and transaction expenses.

We intend to use these proceeds to redeem a portion of the 2026 Notes and pay transaction expenses and fees in connection with the transaction.

We will pay interest on the 2029 Notes on June 15 and December 15 of each year, commencing on December 15, 2021.

We may redeem some or all of the 2029 Notes prior to maturity under the terms provided in the indenture.

During the second quarter of 2021, we delivered a redemption notice of $ 500 million aggregate principal amount of the issued and outstanding 2026 Notes pursuant to the terms of the indenture governing the 2026 Notes.

On July 7, 2021, subsequent to the end of the second quarter of 2021, we redeemed, prior to maturity, $ 500 million aggregate principal amount of the 2026 Notes.

In connection with this redemption, we expect to incur total charges of approximately $ 26 million, inclusive of a redemption premium and the write-off of unamortized debt issuance costs, which will be recorded in the third quarter of 2021.

Corporate Credit Facility

7 unchanged sentences

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

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

While we are currently evaluating whether to terminate the Waiver early, if we are not in compliance with the leverage covenant at the end of the suspension period, we will seek to negotiate with our lenders to amend such covenant, as needed.

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

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

Both the interest rate swaps and the interest rate collar have been designated and qualify as cash flow hedges of interest rate risk and recorded in Other liabilities on our Balance Sheet as of March 31, 2021 and December 31, 2020.

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

The following table reflects the activity in accumulated other comprehensive loss related to our derivative instruments during the first quarters of 2021 and 2020:

The following table reflects the activity in accumulated other comprehensive loss related to our derivative instruments during the first and second quarters of 2021 and 2020:

($ in millions) 2021 2020

4 unchanged sentences

Derivative instrument adjustment balance, March 31 ( 33 ) ( 45 )

Other comprehensive gain (loss) before reclassifications 3 ( 1 )

Reclassification to Income Statement — —

Net other comprehensive income (loss) 3 ( 1 )

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

Convertible Notes

2 unchanged sentences

The 2022 Convertible Notes mature on September 15, 2022, unless repurchased or converted in accordance with their terms prior to that date.

The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes, and was subject to adjustment as of March 31, 2021 to 6.8115 shares of common stock per $1,000 principal amount of 2022 Convertible Notes (equivalent to a conversion price of approximately $ 146.81 per share of our common stock), as a result of the dividends that have been declared since issuance that were greater than the quarterly dividend when the 2022 Convertible Notes were issued.

The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes, and was subject to adjustment as of June 30, 2021 to 6.8115 shares of common stock per $1,000 principal amount of 2022 Convertible Notes (equivalent to a conversion price of $ 146.81 per share of our common stock), as a result of the dividends that have been declared since issuance that were greater than the quarterly dividend when the 2022 Convertible Notes were issued.

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

It is our intent to settle conversions of the 2022 Convertible Notes through combination settlement, which contemplates repayment in cash of the principal amount and repayment in shares of our common stock of any excess of the conversion value over the principal amount.

As of March 31, 2021, the effective interest rate was 4.73 % and the remaining discount amortization period was 1.5 years.

As of June 30, 2021, the effective interest rate was 4.73 % and the remaining discount amortization period was 1.2 years.

The following table shows the net carrying value of the 2022 Convertible Notes.

($ in millions) At March 31, 2021 At December 31, 2020

($ in millions) At June 30, 2021 At December 31, 2020

Liability component

5 unchanged sentences

The following table shows interest expense information related to the 2022 Convertible Notes.

Three Months Ended

($ in millions) March 31, 2021 March 31, 2020

Three Months Ended Six Months Ended

($ in millions) June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Contractual interest expense $ 1 $ 1 $ 2 $ 2

Amortization of debt discount 2 2 4 4

$ 3 $ 3 $ 6 $ 6

2022 Convertible Note Hedges and Warrants

1 unchanged sentence

convertible note hedge transactions with respect to our common stock (“2022 Convertible Note Hedges”), covering a total of approximately 1.5 million shares of our common stock, and warrant transactions (“2022 Warrants”), whereby we sold to the counterparties to the 2022 Convertible Note Hedges warrants to acquire approximately 1.5 million shares of our common stock.

As of March 31, 2021, the strike prices of the 2022 Convertible Note Hedges and the 2022 Warrants were subject to adjustment to approximately $ 148.61 and $ 177.19 , respectively, and no 2022 Convertible Note Hedges or 2022 Warrants have been exercised.

As of June 30, 2021, the strike prices of the 2022 Convertible Note Hedges and the

2022 Warrants were subject to adjustment to approximately $ 148.91 and $ 177.55 , respectively, and no 2022 Convertible Note Hedges or 2022 Warrants have been exercised.

2026 Convertible Notes

During the first quarter of 2021, we issued $ 575 million aggregate principal amount of 0.00 % Convertible Senior Notes due 2026 (the “2026 Convertible Notes”).

The 2026 Convertible Notes are governed by an indenture dated February 2, 2021 (the Indenture) between the Company, Marriott Ownership Resorts, Inc.

The 2026 Convertible Notes are governed by an indenture dated February 2, 2021 (the Indenture) among the Company, Marriott Ownership Resorts, Inc.

and the other guarantors party thereto (the “Guarantors”) and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”).

2 unchanged sentences

On or after October 15, 2025, and prior to the close of business on the second scheduled trading day immediately preceding the stated maturity date of the 2026 Convertible Notes, holders may convert their 2026 Convertible Notes at their option.

The 2026 Convertible Notes are convertible at a rate of 5.8476 shares of common stock per $1,000 principal amount of 2026 Convertible Notes (equivalent to an initial conversion price of $ 171.01 per share of our common stock) as of March 31, 2021.

The conversion rate is subject to adjustment for certain events as described in the Indenture.

The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes, and was subject to adjustment as of June 30, 2021 to 5.8476 shares of common stock per $1,000 principal amount of 2026 Convertible Notes (equivalent to a conversion price of $ 171.01 per share of our common stock).

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

20 unchanged sentences

The resulting debt discount is amortized as interest expense.

As of March 31, 2021, the effective interest rate was 4.96 % and the remaining debt discount amortization period was 4.8 years.

As of June 30, 2021, the effective interest rate was 4.96 % and the remaining debt discount amortization period was 4.5 years.

We had debt issuance costs, including initial purchasers’ discount to underwriters, of $ 15 million related to the 2026 Convertible Notes, which were allocated to the liability and equity components based on their relative values.

Issuance costs attributable to the liability component are amortized to interest expense over the term of the 2026 Convertible Notes, and issuance costs attributable to the equity component are included along with the equity component in shareholders’ equity.

During the first quarter of 2021, our interest expense related to the 2026 Convertible Notes was $ 5 million, all of which related to the amortization of the debt discount.

The following table shows the net carrying value of the 2026 Convertible Notes at March 31, 2021:

($ in millions) At March 31, 2021

The following table shows the net carrying value of the 2026 Convertible Notes.

($ in millions) At June 30, 2021 At December 31, 2020

Liability component

4 unchanged sentences

Carrying amount of equity component, net of issuance costs $ 117 $ —

The following table shows interest expense information related to the 2026 Convertible Notes.

Three Months Ended Six Months Ended

($ in millions) June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Amortization of debt discount $ 5 $ — $ 10 $ —

Amortization of debt issuance costs 1 — 1 —

$ 6 $ — $ 11 $ —

2026 Convertible Note Hedges and Warrants

2 unchanged sentences

The cost of the 2026 Convertible Note Hedges is expected to be tax deductible as an original issue discount over the life of the 2026 Convertible Notes, as the 2026 Convertible Notes and the 2026 Convertible Note Hedges represent an integrated debt instrument for tax purposes.

The cost of the 2026 Convertible Note Hedges was recorded as a reduction of Additional paid-in capital on our Balance Sheet as of March 31, 2021.

The cost of the 2026 Convertible Note Hedges was recorded as a reduction of Additional paid-in capital on our Balance Sheet.

Concurrently with the entry into the 2026 Convertible Note Hedges, we separately entered into privately-negotiated warrant transactions (the “2026 Warrants”), whereby we sold to the counterparties to the 2026 Convertible Note Hedges warrants to acquire, collectively, subject to anti-dilution adjustments, approximately 3.4 million shares of our common stock at an initial strike price of $ 213.76 per share.

We received aggregate proceeds of $ 70 million from the sale of the 2026 Warrants to the counterparties.

The proceeds from the issuance of the 2026 Warrants were recorded as an increase to Additional paid-in capital on our Balance Sheet as of March 31, 2021.

Taken together, the 2026 Convertible Note Hedges and the 2026 Warrants are generally expected to reduce the potential dilution to our common stock (or, in the event the conversion of the 2026 Convertible Notes is settled in cash, to reduce our cash payment obligation) in the event that at the time of conversion our stock price exceeds the conversion price under the 2026 Convertible Notes and to effectively increase the overall conversion price to the Company from $ 171.01 per share to $ 213.76 per share.

The proceeds from the issuance of the 2026 Warrants were recorded as an increase to Additional paid-in capital on our Balance Sheet.

share to $ 213.76 per share.

The 2026 Warrants will expire in ratable portions on a series of expiration dates commencing on April 15, 2026.

1 unchanged sentence

Holders of any such instrument have no rights with respect to the other instruments.

As of March 31, 2021, no 2026 Convertible Notes or 2026 Warrants have been exercised.

As of June 30, 2021, no 2026 Convertible Notes or 2026 Warrants have been exercised.

Security and Guarantees

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

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

In addition, the Corporate Credit Facility, the 2026 Convertible Notes, the 2025 Notes, the 2026 Notes, the 2028 Notes, and the 2029 Notes are guaranteed by MVWC and certain of our direct and indirect, existing and future, domestic subsidiaries, excluding bankruptcy remote special purpose subsidiaries.

SHAREHOLDERS’ EQUITY

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

At March 31, 2021, there were 75,454,906 shares of Marriott Vacations Worldwide common stock issued, of which 41,272,628 shares were outstanding and 34,182,278 shares were held as treasury stock.

At June 30, 2021, there were 75,457,876 shares of Marriott Vacations Worldwide common stock issued, of which 42,706,710 shares were outstanding and 32,751,166 shares were held as treasury stock.

At December 31, 2020, there were 75,279,061 shares of Marriott Vacations Worldwide common stock issued, of which 41,094,248 shares were outstanding and 34,184,813 shares were held as treasury stock.

Marriott Vacations Worldwide has 2,000,000 authorized shares of preferred stock, par value of $ 0.01 per share, none of which were issued or outstanding as of March 31, 2021 or December 31, 2020.

Marriott Vacations Worldwide has 2,000,000 authorized shares of preferred stock, par value of $ 0.01 per share, none of which were issued or outstanding as of June 30, 2021 or December 31, 2020.

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

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

Any future dividend payments will be subject to both the restrictions imposed under the Waiver and other agreements covering our debt, and Board approval.

There can be no assurance that we will pay dividends in the future.

Noncontrolling Interests - Property Owners’ Associations

We consolidate certain property owners’ associations.

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

Noncontrolling interests of $ 29 million and $ 31 million, as of March 31, 2021 and December 31, 2020, respectively, are included on our Balance Sheets as a component of equity.

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

Noncontrolling interests of $ 30 million and $ 31 million, as of June 30, 2021 and December 31, 2020, respectively, are included on our Balance Sheets as a component of equity.

SHARE-BASED COMPENSATION

3 unchanged sentences

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

As of March 31, 2021, approximately 1.5 million shares were available for grants under the MVW Equity Plan.

As of June 30, 2021, approximately 1.5 million shares were available for grants under the MVW Equity Plan.

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

Three Months Ended

($ in millions) March 31, 2021 March 31, 2020

Three Months Ended Six Months Ended

($ in millions) June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Service-based RSUs $ 9 $ 7 $ 15 $ 11

1 unchanged sentence

ILG Acquisition Converted RSUs — — — 1

$ 14 $ 9 $ 22 $ 13

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

($ in millions) At March 31, 2021 At December 31, 2020

($ in millions) At June 30, 2021 At December 31, 2020

Service-based RSUs $ 40 $ 27

1 unchanged sentence

Restricted Stock Units

We granted 161,392 service-based RSUs, which are subject to time-based vesting conditions, with a weighted average grant-date fair value of $ 169.17 , to our employees and non-employee directors during the first quarter of 2021.

We granted 170,550 service-based RSUs, which are subject to time-based vesting conditions, with a weighted average grant-date fair value of $ 169.31 , to our employees and non-employee directors during the first half of 2021.

Stock Appreciation Rights

We granted 127,857 SARs, with a weighted average grant-date fair value of $ 70.66 and a weighted average exercise price of $ 173.88 , to members of management during the first quarter of 2021.

We granted 127,857 SARs, with a weighted average grant-date fair value of $ 70.66 and a weighted average exercise price of $ 173.88 , to members of management during the first half of 2021.

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

4 unchanged sentences

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

The following table outlines the assumptions used to estimate the fair value of grants during the first quarter of 2021:

The following table outlines the assumptions used to estimate the fair value of grants during the first half of 2021:

Expected volatility 48.35 %

12 unchanged sentences

There is no noncontrolling interest balance related to these entities and the creditors of these entities do not have general recourse to us.

The following table shows consolidated assets, which are collateral for the obligations of these VIEs, and consolidated liabilities included on our Balance Sheet at March 31, 2021:

The following table shows consolidated assets, which are collateral for the obligations of these VIEs, and consolidated liabilities included on our Balance Sheet at June 30, 2021:

($ in millions) Vacation Ownership

11 unchanged sentences

Total $ 1,796 $ — $ 1,796

The following table shows the interest income and expense recognized as a result of our involvement with these VIEs during the first quarter of 2021:

The following table shows the interest income and expense recognized as a result of our involvement with these VIEs during the second quarter of 2021:

($ in millions) Vacation Ownership

5 unchanged sentences

Debt issuance cost amortization $ 2 $ — $ 2

Administrative expenses $ 1 $ — $ 1

The following table shows the interest income and expense recognized as a result of our involvement with these VIEs during the first half of 2021:

($ in millions) Vacation Ownership

Notes Receivable

Securitizations Warehouse

Credit Facility Total

Interest income $ 105 $ — $ 105

Interest expense to investors $ 22 $ 1 $ 23

Debt issuance cost amortization $ 3 $ 1 $ 4

Administrative expenses $ 1 $ — $ 1

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

Three Months Ended

($ in millions) March 31, 2021 March 31, 2020

Six Months Ended

($ in millions) June 30, 2021 June 30, 2020

Net proceeds from vacation ownership notes receivable securitizations $ 421 $ —

Principal receipts 286 232

Interest receipts 108 107

Reserve release 108 —

Total 923 339

2 unchanged sentences

Voluntary repurchases of defaulted vacation ownership notes receivable ( 58 ) ( 35 )

Voluntary clean-up call ( 72 ) —

Interest to investors ( 22 ) ( 25 )

Funding of restricted cash ( 109 ) —

Total ( 551 ) ( 298 )

3 unchanged sentences

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

Three Months Ended

($ in millions) March 31, 2021 March 31, 2020

Six Months Ended

($ in millions) June 30, 2021 June 30, 2020

Proceeds from vacation ownership notes receivable securitizations $ — $ 315

3 unchanged sentences

Principal to investors — ( 27 )

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

Interest to investors ( 1 ) ( 3 )

4 unchanged sentences

We have a commitment to purchase an operating property located in San Francisco, California, that we currently manage as Marriott Vacation Club Pulse, San Francisco.

We expect to acquire the operating property over time and as of March 31, 2021 are committed to make payments for the operating property as follows:

We expect to acquire the operating property over time and as of June 30, 2021 are committed to make payments for the operating property as follows:

$ 25 million in 2022 and $ 32 million in 2023.

3 unchanged sentences

Accordingly, we have not consolidated the VIE.

As of March 31, 2021, our Balance Sheet reflected $ 2 million in Accounts Receivable, including a note receivable of less than $ 1 million, and $ 10 million in Other assets for a deposit related to the future acquisition of a portion of this property.

We believe that our maximum exposure to loss as a result of our involvement with this VIE is approximately $ 12 million as of March 31, 2021.

As of June 30, 2021, our Balance Sheet reflected $ 2 million in Accounts Receivable, including a note receivable of less than $ 1 million, and $ 10 million in Other assets for a deposit related to the future acquisition of a portion of this property.

We believe that our maximum exposure to loss as a result of our involvement with this VIE is approximately $ 12 million as of June 30, 2021.

We have a commitment to purchase a property located in Waikiki, Hawaii, which was assigned to a third party during 2020.

2 unchanged sentences

Accordingly, we have not consolidated the VIE.

As of March 31, 2021, our Balance Sheet reflected $ 1 million in Accounts Receivable, including a note receivable of less than $ 1 million.

We believe that our maximum exposure to loss as a result of our involvement with this VIE is approximately $ 1 million as of March 31, 2021.

As of June 30, 2021, our Balance Sheet reflected $ 1 million in Accounts Receivable, including a note receivable of less than $ 1 million.

We believe that our maximum exposure to loss as a result of our involvement with this VIE is approximately $ 1 million as of June 30, 2021.

Deferred Compensation Plan

2 unchanged sentences

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

At March 31, 2021, the value of the assets held in the rabbi trust was $ 56 million, which is included in the Other line within assets on our Balance Sheets.

At June 30, 2021, the value of the assets held in the rabbi trust was $ 67 million, which is included in the Other line within assets on our Balance Sheets.

BUSINESS SEGMENTS

5 unchanged sentences

Regis brand for specified fractional ownership resorts.

In addition, as part of the Welk Acquisition, we acquired a short-term license to use the Welk brand in connection with the continued operations of that business.

MVW intends to rebrand all Welk resorts as Hyatt-branded resorts once it has obtained all necessary approvals.

Our Vacation Ownership segment generates most of its revenues from four primary sources:

10 unchanged sentences

We allocate depreciation, other gains and losses, equity in earnings or losses from our joint ventures and noncontrolling interest to each of our segments as appropriate.

Corporate and other represents that portion of our results that are not allocable to our segments, including those relating to property owners’ associations consolidated under the voting interest

model, as our CODM does not use this information to make operating segment resource allocations.

Corporate and other represents that portion of our results that are not allocable to our segments, including those relating to property owners’ associations consolidated under the voting interest model, as our CODM does not use this information to make operating segment resource allocations.

Prior year segment information has been reclassified to conform to the current reportable segment presentation.

2 unchanged sentences

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

Three Months Ended

($ in millions) March 31, 2021 March 31, 2020

Three Months Ended Six Months Ended

($ in millions) June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Vacation Ownership $ 883 $ 405 $ 1,544 $ 1,313

4 unchanged sentences

Adjusted EBITDA and Reconciliation to Net Loss Attributable to Common Shareholders

Three Months Ended

($ in millions) March 31, 2021 March 31, 2020

Three Months Ended Six Months Ended

($ in millions) June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Adjusted EBITDA Vacation Ownership $ 182 $ ( 19 ) $ 250 $ 128

3 unchanged sentences

Interest expense ( 44 ) ( 42 ) ( 87 ) ( 75 )

Tax benefit 11 58

Tax (provision) benefit ( 27 ) 19 ( 16 ) 77

Depreciation and amortization ( 36 ) ( 31 ) ( 77 ) ( 63 )

1 unchanged sentence

Certain items ( 37 ) 3 ( 53 ) ( 230 )

Net loss attributable to common shareholders $ ( 28 ) $ ( 106 )

($ in millions) At March 31, 2021 At December 31, 2020

Net income (loss) attributable to common shareholders $ 6 $ ( 70 ) $ ( 22 ) $ ( 176 )

($ in millions) At June 30, 2021 At December 31, 2020

Vacation Ownership $ 7,805 $ 6,859

3 unchanged sentences

$ 10,414 $ 8,898

We conduct business globally, and our operations outside the United States represented approximately 9 percent and 12 percent of our revenues, excluding cost reimbursements, for the three months ended March 31, 2021 and March 31, 2020, respectively .

We conduct business globally, and our operations outside the United States represented approximately 10 percent and 7 percent of our revenues, excluding cost reimbursements, for the three months ended June 30, 2021 and June 30, 2020, respectively, and 9 percent and 11 percent of our revenues, excluding cost reimbursements, for the six months ended June 30, 2021 and June 30, 2020, respectively.

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

What changed 10-Q

Item 1. Financial Statements