What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-04 compared with 2021-05-07 · 481 added, 179 removed, 548 unchanged (55% of the section changed)

4 unchanged sentences

our possible or assumed future results of operations;

business strategies, such as our plans to increase focus on sales to first-time buyers;

business strategies, such as our plans to continue to increase focus on sales to first-time buyers;

financing plans;

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potential growth opportunities;

potential operating performance improvements, including expectations that contract sales and rental occupancies will continue to improve throughout 2021;

potential operating performance improvements, including expectations that contract sales and rental occupancies will continue to improve throughout 2021 and that interest income will begin to increase in the remainder of 2021;

the effects of competition;

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

The Company cautions you that these statements are not guarantees of future performance and are subject to numerous and evolving risks and uncertainties that we may not be able to predict or assess, such as:

We caution you that these statements are not guarantees of future performance and are subject to numerous and evolving risks and uncertainties that we may not be able to predict or assess, such as:

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

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the impact of the availability and distribution of effective vaccines on the demand for travel and consumer confidence;

the effectiveness of available vaccines against variants of the virus, including the Delta variant;

the pace of recovery following the COVID-19 pandemic or as effective treatments or vaccines become widely available;

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the availability of capital to finance growth;

the effects of steps we have taken and may continue to take to reduce operating costs and/or enhance health and cleanliness protocol at our resorts due to the COVID-19 pandemic;

the effects of steps we have taken and may continue to take to reduce operating costs and/or enhance health and cleanliness protocols at our resorts due to the COVID-19 pandemic;

political or social strife, and other matters referred to under the heading “Risk Factors” contained herein and also in our most recent Annual Report on Form 10-K, and which may be discussed in our periodic filings with the U.S.

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Regis brand for specified fractional ownership resorts.

In addition, as part of our acquisition of Welk Hospitality Group, Inc.

(“Welk”) through a series of transactions (the “Welk Acquisition”), we acquired a short-term license to use the Welk brand in connection with the continued operations of that business.

We intend to rebrand all Welk resorts as Hyatt-branded resorts once we obtain all necessary approvals.

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

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

Acquisition of Welk

On April 1, 2021, we completed 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.”

COVID-19 Pandemic Update

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economies and markets.

At this time, our businesses continue to ramp up, with the majority of our sales centers, resorts, and other properties having reopened.

While our contract sales and financial results remain below pre-pandemic levels, we have continued to experience significant sequential improvement each quarter as we progressed through 2020 and into 2021.

We expect that sequential improvement to continue across our businesses as we move throughout 2021.

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

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We recognize revenues from the sale of vacation ownership products (“VOIs”) when control of the vacation ownership product is transferred to the customer and the transaction price is deemed collectible.

Based upon the different terms of the contracts with the customer and business practices, control of the vacation ownership product is transferred to the customer at closing for Legacy-MVW transactions and upon expiration of the statutory rescission period for Legacy-ILG transactions.

Based upon the different terms of the contracts with the customer and business practices, control of the vacation ownership product is transferred to the customer at closing for Legacy-MVW and Legacy-Welk transactions and upon expiration of the statutory rescission period for Legacy-ILG transactions.

Sales of vacation ownership products may be made for cash or we may provide financing.

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Contract sales consist of the total amount of vacation ownership product sales under contract signed during the period where we have generally received a down payment of at least ten percent of the contract price, reduced by actual rescissions during the period, inclusive of contracts associated with sales of vacation ownership products on behalf of third-parties, which we refer to as “resales contract sales.” In circumstances where a customer applies any or all of their existing ownership interests as part of the purchase price for additional interests, we include only the incremental value purchased as contract sales.

Contract sales differ from revenues from the sale of vacation ownership products that we report on our income statements due to the requirements for revenue recognition described above.

Contract sales differ from revenues from the sale of vacation ownership products that we report on our income statements due to the

requirements for revenue recognition described above.

We consider contract sales to be an important operating measure because it reflects the pace of sales in our business.

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

Three Months Ended

March 31, 2021 March 31, 2020

Six Months Ended

June 30, 2021 June 30, 2020

Average FICO score 733 737

The typical financing agreement provides for monthly payments of principal and interest with the principal balance of the loan fully amortizing over the term of the related vacation ownership note receivable, which is generally ten years.

Included within our vacation ownership notes receivable are originated vacation ownership notes receivable and vacation ownership notes receivable acquired in connection with the ILG Acquisition.

Included within our vacation ownership notes receivable are originated vacation ownership notes receivable and vacation ownership notes receivable acquired in connection with the ILG Acquisition and the Welk Acquisition.

The interest income earned from the originated vacation ownership financing arrangements is earned on an accrual basis on the principal balance outstanding over the contractual life of the arrangement and is recorded as Financing revenues on our Income Statements.

Financing revenues also include fees earned from servicing the existing vacation ownership notes receivable portfolio.

Financing expenses include costs in support of the financing, servicing and securitization processes and changes in expected credit losses related to acquired vacation ownership notes receivable.

Financing expenses include costs to support the financing, servicing and securitization processes and changes in expected credit losses related to acquired vacation ownership notes receivable.

The amount of interest income earned in a period depends on the amount of outstanding vacation ownership notes receivable, which, for originated vacation ownership notes receivable, is impacted positively by the origination of new vacation ownership notes receivable and negatively by principal collections.

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

Financing propensity was 46 percent in the first quarter of 2021 and 57 percent in the first quarter of 2020;

the lower financing propensity in the first quarter of 2021 is due to a higher percentage of sales during this period to existing owners, who tend to have a lower financing propensity.

Going forward, we expect to shift back to an increased focus on sales to first-time buyers, which should increase propensity and increase interest income as new originations of vacation ownership notes receivable outpace the decline in principal of existing vacation ownership notes receivable.

Financing propensity was 52 percent in the second quarter of 2021 and 37 percent in the second quarter of 2020;

the higher financing propensity in the second quarter of 2021 is due to a higher percentage of sales during this period to first-time-buyers, who tend to have a higher financing propensity.

Going forward, we expect to continue to shift back to an increased focus on sales to first-time buyers, which should further increase propensity and increase interest income as new originations of vacation ownership notes receivable outpace the decline in principal of existing vacation ownership notes receivable.

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

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

Three Months Ended

March 31, 2021 March 31, 2020

Six Months Ended

June 30, 2021 June 30, 2020

Historical default rates 2.4% 2.9%

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

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

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

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

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Rental expenses include:

• Maintenance fees on unsold inventory;

• Maintenance and other fees on unsold inventory;

• Costs to provide alternative usage options, including Marriott Bonvoy points, World of Hyatt points and offerings available as part of third-party offerings, for owners who elect to exchange their inventory;

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

Transaction Costs

Transaction costs represent costs related to the acquisitions of ILG and Welk, primarily for financial advisory, legal, and other professional service fees, as well as certain tax related accruals.

Transaction costs also include charges for employee retention, severance and other termination related benefits, fees paid to change management consultants and technology-related costs related to the integration and transformation of ILG and Welk.

Transaction and Integration Costs

Transaction and integration costs represent costs related to the acquisitions of ILG and Welk, primarily for financial advisory, legal, and other professional service fees, as well as certain tax related accruals.

Transaction and integration costs also include charges for employee retention, severance and other termination related benefits, fees paid to change management consultants and technology-related costs related to the integration and transformation of ILG and Welk.

We measure operating performance using the following key metrics:

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Consolidated Results

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

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

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Management and exchange 126 85 243 236

Rental 81 73 163 171

Financing 21 23 42 61

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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)

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

Operating Statistics

2021 First Quarter

2021 Second Quarter

Three Months Ended

(Contract sales $ in millions) March 31, 2021 March 31, 2020 Change % Change

(Contract sales $ in millions) June 30, 2021 June 30, 2020 Change % Change

Vacation Ownership

Total contract sales $ 372 $ 30 $ 342 NM

Consolidated contract sales $ 362 $ 30 $ 332 NM

Joint venture contract sales $ 10 $ — $ 10 NM

Exchange & Third-Party Management

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

1,321 1,571 (250) (16%)

Average revenue per member (1)

$ 46.36 $ 30.17 $ 16.19 54%

_______________

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

NM Not meaningful

2021 First Half

Six Months Ended

(Contract sales $ in millions) June 30, 2021 June 30, 2020 Change % Change

Vacation Ownership

Total contract sales $ 604 $ 345 $ 259 75%

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

2021 First Quarter

The following table presents our revenues for the first quarter of 2021 compared to the first quarter of 2020.

2021 Second Quarter

The following table presents our revenues for the second quarter of 2021 compared to the second quarter of 2020.

Three Months Ended

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

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

Vacation Ownership $ 883 $ 405 $ 478 118%

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Total Revenues $ 979 $ 480 $ 499 104%

2021 First Half

The following table presents our revenues for the first half of 2021 compared to the first half of 2020.

Six Months Ended

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

Vacation Ownership $ 1,544 $ 1,313 $ 231 18%

Exchange & Third-Party Management 172 165 7 5%

Total Segment Revenues 1,716 1,478 238 16%

Consolidated Property Owners’ Associations 22 12 10 75%

Total Revenues $ 1,738 $ 1,490 $ 248 17%

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

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In addition, other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than we do or may not calculate them at all, limiting their usefulness as comparative measures.

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

2021 First Quarter

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

2021 Second Quarter

Three Months Ended Change

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

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

Net income (loss) attributable to common shareholders $ 6 $ (70) $ 76 109%

Interest expense 44 42 2 6%

Provision for (benefit from) income taxes 27 (19) 46 NM

Depreciation and amortization 36 31 5 15%

EBITDA 113 (16) 129 NM

Share-based compensation expense 14 9 5 41%

Certain items 37 (3) 40 NM

Adjusted EBITDA $ 164 $ (10) $ 174 NM

Certain items for the second quarter of 2021 consisted of $29 million of transaction and integration costs (including $25 million of ILG acquisition and integration related costs and $3 million of Welk acquisition related costs), $5 million of impairment charges, $3 million of litigation charges, $2 million of purchase accounting adjustments, and $2 million of losses and other expense, partially offset by $2 million to eliminate the impact of consolidating certain property owners’ associations, and $2 million of activity related to the accrual for health and welfare costs for furloughed associates.

Certain items for the second quarter of 2020 consisted of $14 million of gains and other income and $2 million related to VAT charges, partially offset by $12 million of transaction and integration costs and $1 million of asset impairment charges.

2021 First Half

Six Months Ended Change

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

Net loss attributable to common shareholders $ (22) $ (176) $ 154 88%

Interest expense 87 75 12 16%

Benefit from income taxes (11) (58) 47 81%

Provision for (benefit from) income taxes 16 (77) 93 NM

Depreciation and amortization 77 63 14 22%

EBITDA 45 (99) 144 146%

EBITDA 158 (115) 273 NM

Share-based compensation expense 22 13 9 68%

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Adjusted EBITDA $ 233 $ 128 $ 105 82%

Certain items for the first quarter of 2021 consisted of $19 million of transaction costs (including $17 million of ILG acquisition and integration related costs and $2 million of Welk acquisition related costs) and $3 million of litigation charges, partially offset by $4 million of foreign currency translation gains, and $2 million of miscellaneous gains and other income.

Certain items for the first quarter of 2020 consisted of $95 million of asset impairment charges, $56 million of losses and other expense, $54 million of other charges, $24 million of transaction costs, $2 million of purchase price adjustments, and $2 million of litigation charges.

The $54 million of other charges included $37 million related to a net sales reserve adjustment due primarily to the impact of the COVID-19 pandemic, $11 million related to an accrual for certain health and welfare costs for furloughed associates, and $6 million related to VAT charges.

Certain items for the first half of 2021 consisted of $48 million of transaction and integration costs (including $42 million of ILG acquisition and integration related costs and $5 million of Welk acquisition related costs), $6 million of litigation charges, $5 million of impairment charges, and $2 million of purchase accounting adjustments, partially offset by $4 million of gains and other income (including $6 million of foreign currency translation gains, partially offset by $2 million of tax related charges), $2 million to eliminate the impact of consolidating certain property owners’ associations, and $2 million of activity related to the accrual for health and welfare costs for furloughed associates.

Certain items for the first half of 2020 consisted of $96 million of asset impairment charges, $48 million of other charges (including $37 million related to the net sales reserve adjustment and $11 million related to an accrual for the health and welfare costs for furloughed associates), $42 million of losses and other expense, $36 million of transaction and integration costs (including $33 million of ILG acquisition and integration related costs and $3 million of transaction costs related to our asset light inventory arrangements), $4 million related to VAT charges, $2 million of purchase accounting adjustments, and $2 million of litigation charges.

Segment Adjusted EBITDA

2021 First Quarter

2021 Second Quarter

Three Months Ended

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

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

Vacation Ownership $ 182 $ (19) $ 201 NM

Exchange & Third-Party Management 37 19 18 94%

Segment adjusted EBITDA 219 — 219 NM

General and administrative (56) (13) (43) NM

Consolidated property owners’ associations 1 3 (2) NM

Adjusted EBITDA $ 164 $ (10) $ 174 NM

2021 First Half

Six Months Ended

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

Vacation Ownership $ 250 $ 128 $ 122 94%

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General and administrative (95) (64) (31) (49%)

Consolidated property owners’ associations — 1 (1) (116%)

Consolidated property owners’ associations — 4 (4) NM

Adjusted EBITDA $ 233 $ 128 $ 105 82%

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Vacation Ownership

2021 First Quarter

2021 Second Quarter

Three Months Ended

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

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

Segment adjusted EBITDA $ 182 $ (19) $ 201 NM

Depreciation and amortization (23) (20) (3) (17%)

Share-based compensation expense (2) (1) (1) (5%)

Certain items (6) 4 (10) NM

Segment financial results $ 151 $ (36) $ 187 NM

Certain items in the Vacation Ownership segment for the second quarter of 2021 consisted of $3 million of litigation charges, $2 million of purchase accounting adjustments and $1 million of transaction and integration costs.

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

2021 First Half

Six Months Ended

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

Segment adjusted EBITDA $ 250 $ 128 $ 122 94%

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Certain items (10) (43) 33 76%

Segment financial results $ 44 $ 78 $ (34) (45%)

Certain items in the Vacation Ownership segment for the first quarter of 2021 consisted of $3 million of litigation charges and $1 million of restructuring costs.

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

Segment financial results $ 195 $ 42 $ 153 NM

Certain items in the Vacation Ownership segment for the first half of 2021 consisted primarily of $6 million of litigation charges, $2 million of purchase accounting adjustments, $1 million of transaction and integration costs, and $1 million of restructuring costs.

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

Exchange & Third-Party Management

2021 First Quarter

2021 Second Quarter

Three Months Ended

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

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

Segment adjusted EBITDA $ 37 $ 19 $ 18 94%

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Segment financial results $ 27 $ 11 $ 16 177%

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

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

2021 First Half

Six Months Ended

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

Segment adjusted EBITDA $ 78 $ 60 $ 18 31%

Depreciation and amortization (29) (16) (13) (69%)

Share-based compensation expense (1) (1) — 11%

Certain items — (91) 91 100%

Segment financial results $ 48 $ (48) $ 96 199%

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

Business Segments

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Vacation Ownership

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

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

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Gains and other income, net — 5 — 6

Transaction costs — (3)

Transaction and integration costs (1) — (1) (3)

Other 1 — 1 —

SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS 151 (36) 195 42

Net income attributable to noncontrolling interests — — — —

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 151 $ (36) $ 195 $ 42

Contract Sales

2021 First Quarter

2021 Second Quarter

Three Months Ended

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

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

Total consolidated contract sales $ 362 $ 30 $ 332 NM

Joint venture contract sales 10 — 10 NM

Total contract sales $ 372 $ 30 $ 342 NM

2021 First Half

Six Months Ended

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

Total consolidated contract sales $ 588 $ 336 $ 252 75%

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Sale of Vacation Ownership Products

2021 First Quarter

2021 Second Quarter

Three Months Ended

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

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

Total contract sales $ 372 $ 30 $ 342 NM

Less resales contract sales (7) (1) (6)

Less joint venture contract sales (10) — (10)

Consolidated contract sales, net of resales 355 29 326

Settlement revenue 8 2 6

Resales revenue 1 1 —

Revenue recognition adjustments:

Reportability (17) 32 (49)

Sales reserve (28) (9) (19)

(23) (2) (21)

Sale of vacation ownership products $ 296 $ 53 $ 243 459%

_______________

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

Sale of vacation ownership products increased $243 million due primarily to $326 million of higher consolidated contract sales volume, net of resales (including $31 million from the acquisition of Welk), partially offset by a $49 million unfavorable change in revenue reportability, $21 million of higher sales incentives issued and $19 million of higher sales reserve activity (higher sales incentives and higher sales reserve activity were both driven by the higher contract sales volumes year-over-year).

The higher contract sales performance reflects the continued ramp-up of the business subsequent to the initial impact of the COVID-19 pandemic late in the prior year first quarter, as well as the inclusion of Welk in the second quarter of 2021.

With the reopening of many of our sales centers throughout 2020 and during the first half of 2021, our contract sales volumes have continued to improve on a sequential basis each quarter and we expect that improvement to continue through the remainder of 2021.

Revenue reportability was negative in the second quarter of 2021.

While we benefited from contract sales in the first quarter of 2021 being recognized as revenue in the second quarter of 2021 given the increasing contract sales volumes due to reopening of our sales centers and our continued ramp-up of the business subsequent to the initial impact of the COVID-19 pandemic, we saw a higher shift of contract sales late in the second quarter of 2021 into the third quarter for revenue recognition.

In contrast, revenue reportability was significantly positive in the second quarter of 2020.

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

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

2021 First Half

Six Months Ended

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

Total contract sales $ 604 $ 345 $ 259 75%

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

Sale of vacation ownership products decreased $95 million due primarily to $78 million of lower consolidated contract sales volume net of resales and a $70 million unfavorable change in revenue reportability, partially offset by $57 million of lower sales reserve activity .

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

However, with the reopening of many of our sales centers throughout 2020 and so far in 2021, our contract sales volumes have continued to improve on a sequential basis each quarter and we expect that improvement to continue through the remainder of 2021.

Revenue reportability was negative in the first quarter of 2021.

While we benefited from contract sales in the fourth quarter of 2020 being recognized as revenue in the first quarter of 2021, given the increasing sales volumes due to our recovery from the COVID-19 pandemic, we saw a higher shift of contract sales late in the first quarter of 2021 into the second quarter for revenue recognition.

In contrast, revenue reportability was significantly positive in the first quarter of 2020.

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

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

The lower sales reserve recorded in the first quarter of 2021 reflects the prior year increase made to the sales reserve to take into account higher expected default and delinquency activity as a result of the COVID-19 pandemic .

Sale of vacation ownership products increased $148 million due primarily to $248 million of higher consolidated contract sales volume, net of resales (including $31 million from the acquisition of Welk) and $38 million of lower sales reserve activity, offset partially by a $119 million unfavorable change in revenue reportability, and $22 million of higher sales incentives issued (higher sales incentives issued were driven by the higher contract sales volumes year-over-year).

The higher contract sales performance reflect the continued ramp-up of the business subsequent to the initial impact of the COVID-19 pandemic late in the prior year first quarter.

The lower sales reserve recorded in the first half of 2021 reflects the prior year increase made in the sales reserve to take into account higher expected default and delinquency activity as a result of the COVID-19 pandemic.

Revenue reportability was negative in the first half of 2021.

While we benefited from contract sales in the fourth quarter of 2020 being recognized as revenue in the first half of 2021, given the increasing contract sales volumes due to the reopening of our sales centers as our business continued to ramp-up throughout the first half of 2021, we saw a higher shift of contract sales late in the second quarter of 2021 into the third quarter for revenue recognition.

In contrast, revenue reportability was significantly positive in the first half of 2020.

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

Development Profit

2021 First Quarter

2021 Second Quarter

Three Months Ended

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

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

Sale of vacation ownership products $ 296 $ 53 $ 243 459%

2 unchanged sentences

Development profit $ 65 $ (19) $ 84 459%

Development profit decreased $14 million year-over-year.

The change reflected $49 million of unfavorable revenue reportability compared to the first quarter of 2021, $7 million of lower product cost related mainly to more favorable product cost true-up activity in the prior year first quarter, and $3 million related to lower sales volumes as compared to the prior year period.

These declines were partially offset by $25 million related to lower marketing and sales spending and $20 million related to lower sales reserve activity.

Development profit increased $84 million year-over-year.

The change reflected $38 million from the benefit of higher contract sales volumes and lower marketing and sales spending, $55 million related to lower sales reserve activity, and $5 million of favorable product cost due mainly to the sale of lower cost inventory, partially offset by $14 million of unfavorable revenue reportability year-over-year.

2021 First Half

Six Months Ended

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

Sale of vacation ownership products $ 459 $ 311 $ 148 48%

Cost of vacation ownership products (107) (83) (24) (28%)

Marketing and sales (273) (219) (54) (25%)

Development profit $ 79 $ 9 $ 70 761%

Development profit increased $70 million year-over-year.

The change reflected $61 million from the benefit of higher contract sales volumes and lower marketing and sales spending and $75 million related to lower sales reserve activity, partially offset by $63 million of unfavorable revenue reportability year-over-year, and $3 million of unfavorable product cost due mainly to the sale of lower cost inventory.

Resort Management and Other Services Revenues, Expenses and Profit

2021 First Quarter

2021 Second Quarter

Three Months Ended

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

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

Management fee revenues $ 39 $ 38 $ 1 5%

Ancillary revenues 52 6 46 NM

Other management and exchange revenues 32 29 3 5%

Resort management and other services revenues 123 73 50 68%

Resort management and other services expenses (46) (22) (24) (107%)

Resort management and other services profit $ 77 $ 51 $ 26 51%

Resort management and other services profit margin 62.4% 69.5% (7.1 pts)

Resort management and other services revenues reflected higher ancillary revenues, including revenues from food and beverage and golf offerings, as a result of the continued ramp-up of the business subsequent to the initial impact of the COVID-19 pandemic late in the prior year first quarter, as well as $8 million of revenues from the acquisition of Welk.

Resort occupancies have continued to increase throughout 2021 as an increasing number of resorts that were closed at the start of the COVID-19 pandemic have reopened.

We expect this trend to continue throughout the remainder of 2021.

The increase in resort management and other services profit reflected the higher ancillary expenses as a result of the higher ancillary revenues mentioned above.

2021 First Half

Six Months Ended

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

Management fee revenues $ 77 $ 76 $ 1 2%

Ancillary revenues 80 52 28 54%

4 unchanged sentences

Resort management and other services profit margin 62.7% 58.0% 4.7 pts

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

While resort occupancies have continued to increase as an increasing number of resorts that were closed at the start of the COVID-19 pandemic have reopened, given the ongoing effects of the pandemic, ancillary activity remains below prior year levels.

The increase in resort management and other services profit reflected the decrease in resort management and other services revenues partially offset by lower ancillary expenses as a result of the lower ancillary revenues mentioned above, as well as lower customer services expenses compared to the prior year period.

Resort occupancies have continued to increase throughout 2021 as an increasing number of resorts that were closed at the start of the COVID-19 pandemic have reopened.

We expect this trend to continue throughout the remainder of 2021.

The increase in resort management and other services profit reflected the higher ancillary expenses as a result of the higher ancillary revenues mentioned above.

Rental Revenues, Expenses and Profit

2021 First Quarter

2021 Second Quarter

Three Months Ended

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

Rental revenues $ 77 $ 122 $ (45) (37%)

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

Rental revenues $ 110 $ 12 $ 98 NM

Rental expenses (95) (87) (8) (9%)

2 unchanged sentences

Three Months Ended

March 31, 2021 March 31, 2020 Change % Change

June 30, 2021 June 30, 2020 Change % Change

Transient keys rented (1)

547,041 44,985 502,056 NM

Average transient key rate $ 230.67 $ 191.61 $ 39.06 20%

Resort occupancy 85.0% 24.5% 60.5 pts

_________________________

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

The improvement in rental profit resulted from an increase in keys rented and average transient rate due to the continued ramp-up of the business subsequent to the initial impact of the COVID-19 pandemic late in the prior year first quarter and higher plus point revenue as COVID-19-related restrictions continued to ease.

These increases were partially offset by higher inventory carrying costs (due to low sales volumes as a result of the COVID-19 pandemic, the acquisition of new inventory in the first quarter of 2021, and higher utilization of third-party vacation offerings for owners who elect to exchange their inventory).

As the majority of the governmental restrictions in response to the pandemic that caused rental activity to decline, such as travel restrictions and quarantine requirements, either were lifted by the end of the first quarter of 2021 or shortly thereafter, we expect rental occupancies to continue to increase throughout 2021.

2021 First Half

Six Months Ended

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

Rental revenues $ 187 $ 134 $ 53 39%

Rental expenses (191) (194) 3 1%

Rental profit $ (4) $ (60) $ 56 92%

Rental profit margin NM NM

Six Months Ended

June 30, 2021 June 30, 2020 Change % Change

Transient keys rented (1)

932,786 578,655 354,131 61%

Average transient key rate $ 229.99 $ 238.68 $ (8.69) (4%)

2 unchanged sentences

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

The decline in rental profit resulted from a decline in keys rented and a decline in average transient rate due to the COVID-19 pandemic and higher inventory carry costs due to low sales volumes in the first quarter of 2020 and into the first quarter of 2021, as well as the acquisition of new inventory in the first quarter of 2021.

The improvement in rental profit resulted from an increase in keys rented due to the continued ramp-up of the business subsequent to the initial impact of the COVID-19 pandemic late in the prior year first quarter and higher plus point revenue as COVID-19-related restrictions continued to ease.

These increases were partially offset by a slightly lower transient rate as well as higher inventory carrying costs (due to low sales volumes as a result of the COVID-19 pandemic, the acquisition of new inventory in the first quarter of 2021, and higher utilization of third-party vacation offerings for owners who elect to exchange their inventory).

Financing Revenues, Expenses and Profit

2021 First Quarter

2021 Second Quarter

Three Months Ended

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

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

Financing revenues 68 69 (1) (1%)

3 unchanged sentences

Financing propensity 52% 37%

Financing revenues decreased due to a $206 million decrease in the average net vacation ownership notes receivable balance resulting from the continued pay-down of the existing vacation ownership notes receivable portfolio without a corresponding increase from new loan originations ($11 million), offset partially by higher interest income from the acquisition of Welk ($10 million).

As contract sales volumes continue to grow throughout 2021, we expect that this growth should begin to more than offset the normal decline from loan payment activity, which would cause interest income to begin to increase again.

Financing expenses decreased due to lower bad debt expense associated with acquired vacation ownership notes receivable and favorable lien fee income in the current year quarter, offset partially by $1 million of higher costs from the acquisition of Welk.

Lower consumer financing interest expense resulted from the continued pay-down of securitized debt balances, offset partially by $1 million of costs from the acquisition of Welk.

The higher financing propensity reflects a higher mix of sales to first time buyers, who tend to have a higher financing propensity.

The low propensity in the prior year reflected the impact of sales programs that incented cash purchases during the initial periods of the COVID-19 pandemic.

Going forward, we expect to continue to shift back to an increased focus on sales to first-time buyers, which should increase propensity (60 percent or higher) and increase interest income as and when new originations of vacation ownership notes receivable outpace the decline in principal of existing vacation ownership notes receivable.

2021 First Half

Six Months Ended

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

Financing revenues 127 140 (13) (9%)

Financing expenses (16) (31) 15 47%

Consumer financing interest expense (26) (29) 3 10%

Financing profit $ 85 $ 80 $ 5 6%

Financing propensity 49% 54%

Financing revenues decreased due to a $269 million decrease in the average net vacation ownership notes receivable balance resulting from the continued pay-down of the existing vacation ownership notes receivable portfolio without a corresponding increase from new loan originations.

Financing expenses decreased due to lower bad debt expense associated with acquired vacation ownership notes receivable in the current year quarter and the benefit of synergy savings and lower salaries and wages associated with the furlough, reduced work week and workforce reduction programs implemented as a result of the COVID-19 pandemic.

Lower consumer financing interest expense resulted from the continued pay-down of securitized debt balances.

The lower financing propensity in the first quarter of 2021 is due to a higher percentage of sales during this period to existing owners, who tend to have a lower financing propensity.

Going forward, we expect to shift back to an increased focus on first-time buyers, which should increase propensity and increase interest income as new originations of vacation ownership notes receivable outpace the decline in principal of existing vacation ownership notes receivable.

2021 First Quarter

Financing expenses decreased due to $14 million of lower bad debt expense associated with acquired vacation ownership notes receivable in the prior year quarter and lower credit card fees and other expenses, offset partially by $1 million of higher costs from the acquisition of Welk.

Lower consumer financing interest expense resulted from the continued pay-down of securitized debt balances, partially offset by $1 million of costs from the acquisition of Welk.

The lower financing propensity in the first half of 2021 is due to a higher percentage of sales during this period to existing owners, who tend to have a lower financing propensity.

2021 Second Quarter

Three Months Ended

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

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

Royalty fee $ 27 $ 23 $ 4 19%

Royalty fee expense declined in the first quarter of 2021 as a result of lower contract closings compared to the prior year quarter.

Exchange & Third-Party Management

Royalty fee expense increased in the second quarter of 2021 as a result of higher contract closings compared to the prior year quarter.

2021 First Half

Six Months Ended

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

Royalty fee $ 52 $ 49 $ 3 6%

Royalty fee expense increased in the first half of 2021 as a result of higher contract closings compared to the prior year period.

Litigation Charges

2021 Second Quarter

Three Months Ended

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

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

Litigation charges $ 3 $ — $ 3 NM

During the second quarter of 2021, we incurred $3 million of litigation charges related primarily to projects in Europe.

No litigation charges were recorded for the second quarter of 2020.

2021 First Half

Six Months Ended

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

Litigation charges $ 6 $ 2 $ 4 NM

During the first half of 2021 and first half of 2020, we incurred $6 million and $2 million, respectively, of litigation charges related primarily to projects in Europe.

2021 Second Quarter

Three Months Ended

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

Impairment $ — $ 1 $ (1) NM

No asset impairment charges were recorded for the second quarter of 2021.

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

2021 First Half

Six Months Ended

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

Impairment $ — $ 5 $ (5) NM

No asset impairment charges were recorded for the first half of 2021.

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

Gains and Other Income

2021 Second Quarter

Three Months Ended

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

Gains and other income, net $ — $ 5 $ (5) NM

No gains and other income were recorded for the second quarter of 2021.

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

2021 First Half

Six Months Ended

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

Gains and other income, net $ — $ 6 $ (6) NM

No gains and other income were recorded for the first half of 2021.During the first half of 2020, we recorded $6 million of gains and other income, including $4 million of net insurance proceeds related to the settlement of Legacy-MVW business interruption insurance claims arising from a prior year hurricane.

Exchange & Third-Party Management

Three Months Ended Six Months Ended

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

Management and exchange $ 60 $ 39 $ 120 $ 111

Rental 11 6 23 19

Financing — 1 — 2

2 unchanged sentences

Management and exchange 35 26 66 66

Rental — 1 — 6

Financing — — — 1

3 unchanged sentences

TOTAL EXPENSES 59 46 124 213

Gains and other income, net — 1

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

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 27 $ 11 $ 48 $ (48)

Management and Exchange Profit

2021 First Quarter

2021 Second Quarter

Three Months Ended

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

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

Management and exchange revenue $ 60 $ 39 $ 21 55%

2 unchanged sentences

Management and exchange profit margin 42.2% 33.8% 8.4 pts

The decline in management and exchange revenue and profit reflected lower management fees and membership revenue due primarily to the ongoing impact of the COVID-19 pandemic.

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

These declines were partially offset by higher exchange activity and average exchange transaction fees at Interval International, reflecting customers’ more recent desire to travel and pent up demand, as well as lower management and exchange expense which reflected lower costs associated with the furlough, reduced work week and workforce reduction programs, and lower marketing and sales, print and postage costs.

Exchange transactions increased 17 percent year-over-year.

The increase in management and exchange revenue and profit reflected higher management fees and exchange revenue due to the continued ramp-up of the business subsequent to the initial impact of the COVID-19 pandemic late in the prior year first quarter.

These increases were partially offset by lower membership revenue as a result of lower renewal activity, driven by a decline in active members, and higher costs to support the increased volumes.

For Interval International, exchange transactions and average exchange fee increased 13 percent and 22 percent, respectively, over the prior year period.

2021 First Half

Six Months Ended

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

Management and exchange revenue $ 120 $ 111 $ 9 9%

Management and exchange expense (66) (66) — —%

Management and exchange profit $ 54 $ 45 $ 9 22%

Management and exchange profit margin 45.1% 40.3% 4.8%

These increases were partially offset by lower membership revenue as a result of lower renewal activity, driven by a decline in active members.

For Interval International, exchange transactions and average exchange fee increased 15 percent and 3 percent, respectively, over the prior year period.

Rental Revenues, Expenses and Profit

2021 First Quarter

2021 Second Quarter

Three Months Ended

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

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

Rental revenues $ 11 $ 6 $ 5 87%

2 unchanged sentences

Rental profit margin 100.1% 78.7% 21.4 pts

The increase in rental profit reflected a 26 percent increase in Getaway program transactions reflecting customers’ desire to travel and pent up demand and the benefit of cost savings initiatives.

Late in the first quarter of 2021, we also introduced Getaway rentals of less than seven nights, providing members more opportunities to use their membership in ways that better fit their lifestyle.

The increase in rental profit reflected a 132 percent increase in Getaway program transactions and a 21 percent increase in average fee, reflecting customers’ desire to travel and pent-up demand due to COVID-19-related restrictions.

Late in the first quarter of 2021, we also introduced Getaway rentals of less than seven nights, providing members more opportunities to use their membership in ways that better fit their lifestyles.

2021 First Half

Six Months Ended

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

Rental revenues $ 23 $ 19 $ 4 24%

Rental expenses — (6) 6 100%

Rental profit $ 23 $ 13 $ 10 78%

Rental profit margin 100.1% 69.9% 30.2%

The increase in rental profit reflected a 64 percent increase in Getaway program transactions and a 7 percent increase in average fee, reflecting customers’ desire to travel and pent up-demand due to COVID-19-related restrictions.

Late in the first quarter of 2021, we also introduced Getaway rentals of less than seven nights, providing members more opportunities to use their membership in ways that better fit their lifestyles.

Depreciation and Amortization

2021 First Quarter

2021 Second Quarter

Three Months Ended

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

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

Depreciation and amortization $ 9 $ 7 $ 2 12%

2021 First Half

Six Months Ended

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

Depreciation and amortization $ 29 $ 16 $ 13 69%

Increase in depreciation expense relates to a true-up made to accelerate depreciation on a technology asset.

2021 First Half

Six Months Ended

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

Impairment $ — $ 91 $ (91) NM

No asset impairment charges were recorded for the first half of 2021.

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

Corporate and Other

Corporate and Other consists of results that are not allocable to our segments, including company-wide general and administrative costs, corporate interest expense, transaction costs and benefit from income taxes.

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

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

Resort management and other services $ 37 $ 33 $ 76 $ 76

6 unchanged sentences

Restructuring — — (1) —

Impairment 5 — 5 —

Cost reimbursements (27) (16) (54) (64)

TOTAL EXPENSES 79 29 136 94

Gains (losses) and other income (expense), net 6 (58)

(Losses) gains and other (expense) income, net (2) 10 4 (48)

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

Transaction costs (19) (21)

Transaction and integration costs (28) (12) (47) (33)

FINANCIAL RESULTS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS (143) (56) (244) (238)

Benefit from income taxes 11 58

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

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

2 unchanged sentences

The following table illustrates the impact of certain Consolidated Property Owners’ Associations under the relevant accounting guidance, which represents the portion related to individual or third-party VOI owners.

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

Resort management and other services $ 37 $ 33 $ 76 $ 76

5 unchanged sentences

TOTAL EXPENSES 4 6 14 (1)

Gains and other income, net 2 —

Losses and other expense, net (2) — — —

FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS 4 11 8 13

Benefit for income taxes (1) — (1) —

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

FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 1 $ 3 $ 2 $ 4

Pursuant to a change in control of certain consolidated property owners’ associations, we recorded a non-cash loss of less than $1 million, which is recorded in Gains (losses) and other income (expense), net on our Income Statement for the three months ended March 31, 2021.

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, respectively.

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.

General and Administrative

2021 First Quarter

2021 Second Quarter

Three Months Ended

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

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

General and administrative $ 66 $ 19 $ 47 255%

General and administrative expenses decreased $24 million due to $25 million of savings related to synergy efforts and lower costs associated with the furlough, reduced work week and workforce reduction programs, $6 million of lower net overall spending across the business on technology, travel, training and other costs that we have deferred due to the COVID-19 pandemic, and a $2 million credit related to incentives under the CARES Act for companies to continue paying associates' benefit costs while they are not working, partially offset by $9 million of higher bonus expense.

General and administrative expenses increased $47 million due to $19 million of higher salary and wages costs as the prior year quarter benefited from savings related to the furlough, reduced work week and workforce reduction programs implemented in response to the impact of the COVID-19 pandemic, $14 million related to higher bonus expense, $9 million of higher spending as operations continued to ramp-up subsequent to the initial impact of the COVID-19 pandemic (including $2 million related to the acquisition of Welk), and a $5 million decrease in credits related to incentives under the CARES Act for companies who continued paying associates' benefit costs while they were not working as a result of the COVID-19 pandemic.

2021 First Half

Six Months Ended

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

General and administrative $ 112 $ 89 $ 23 26%

General and administrative expenses increased $23 million due to $10 million of higher salary and wages costs as the prior year period benefited from savings related to the furlough, reduced work week and workforce reduction programs implemented in response to the impact of the COVID-19 pandemic, $23 million related to higher bonus expense, and a $3 million decrease in credits related to incentives under the CARES Act for companies who continued paying associates' benefit costs while they were not working as a result of the COVID-19 pandemic.

These increases were partially offset by $12 million of lower costs as the prior year period included an accrual for health and welfare costs for furloughed associates and $1 million of lower net overall spending (lower technology-related spending year-over-year, partially offset by the impact of operations ramping up subsequent to the initial impact of the COVID-19 pandemic, as well as $2 million related to the acquisition of Welk).

2021 Second Quarter

Three Months Ended

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

Impairment $ 5 $ — $ 5 NM

2021 First Half

Six Months Ended

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

Impairment $ 5 $ — $ 5 NM

During the second quarter of 2021, we recorded a non-cash impairment of $5 million related to an equity method investment.

No asset impairment charges were recorded for the first half of 2020.

Gains / Losses and Other Income / Expense

2021 First Quarter

2021 Second Quarter

Three Months Ended

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

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

(Losses) gains and other (expense) income, net $ (2) $ 10 $ (12) (116%)

In the second quarter of 2021, we recorded a tax related charge of $2 million.

In the second quarter of 2020, we recorded gains and other income of $10 million, including a gain of $9 million related to foreign currency translation and other income of $1 million for the true-up of an indemnification receivable from Marriott International as a result of the settlement of an indemnified liability with a taxing authority.

2021 First Half

Six Months Ended

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

Gains (losses) and other income (expense), net $ 4 $ (48) $ 52 108%

In the first quarter of 2021, we recorded a gain of $6 million driven mainly by foreign currency translation.

In the first quarter of 2020, we recorded a loss of $58 million, including $33 million for the true-up to an indemnification receivable from Marriott International as a result of the settlement of an indemnified liability with a taxing authority (the true-up to the offsetting accrual is included in the Benefit from income taxes line) and $31 million related to foreign currency translation, offset partially by $6 million of other income related to an indemnification from Marriott International for VAT penalties and interest.

In the first half of 2021, we recorded a gain of $4 million driven mainly by foreign currency translation ($6 million) partially offset by a tax related charge ($2 million).

In the first half of 2020, we recorded losses and other expenses of $48 million, including $32 million for the true-up of an indemnification receivable from Marriott International as a result of the settlement of an indemnified liability with a taxing authority (the true-up to the offsetting accrual is included in the (Provision for) benefit from income taxes line) and $22 million related to foreign currency translation, partially offset by $6 million of other income related to an indemnification payment from Marriott International for VAT penalties and interest.

Interest Expense

2021 First Quarter

2021 Second Quarter

Three Months Ended

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

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

Interest expense $ (44) $ (42) $ (2) (6%)

Interest expense increased $10 million, including $8 million of higher interest expense associated with the 2025 Notes that were issued in the second quarter of 2020 and $5 million higher non-cash interest expense associated with the 2026 Convertible Notes that were issued in the first quarter of 2021;

partially offset by $3 million of lower interest expense associated with various other debt facilities.

Transaction Costs

2021 First Quarter

Interest expense increased $2 million, including $6 million of higher interest expense associated with the 2026 Convertible Notes issued in the second quarter of 2021 and $4 million of higher expense associated with the 2025 Notes issued in the second quarter of 2020.

These increases were partially offset by a $4 million decrease in expenses associated with draw downs on the Warehouse Credit Facility and Revolving Corporate Credit Facility, a $1 million decrease in expense associated with the Term Loan due to partial pay-down of the Term Loan in 2021, and other decreases in expenses associated with various other debt facilities.

2021 First Half

Six Months Ended

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

Interest expense $ (87) $ (75) $ (12) (16%)

Interest expense increased $12 million, including $11 million of higher interest expense associated with the 2026 Convertible Notes issued in the second quarter of 2021 and $12 million of higher expense associated with the 2025 Notes issued in the second quarter of 2020.

These increases were partially offset by a $5 million decrease in expenses associated with draw downs on the Warehouse Credit Facility and Revolving Corporate Credit Facility, a $3 million decrease in expense associated with the Term Loan due to partial pay-down of the Term Loan in 2021, and other decreases in expenses associated with various other debt facilities.

Transaction and Integration Costs

2021 Second Quarter

Three Months Ended

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

Transaction costs $ (19) $ (21) $ 2 10%

In the first quarter of 2021, Transaction costs included $17 million of ILG acquisition and integration related costs and $2 million of costs associated with the acquisition of Welk Resorts that was completed subsequent to the end of the quarter.

In the first quarter of 2020, Transaction costs included $21 million of ILG acquisition-related costs.

2021 First Quarter

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

Transaction and integration costs $ (28) $ (12) $ (16) (139%)

In the second quarter of 2021, Transaction and integration costs included $25 million of ILG acquisition and integration related costs and $3 million of costs associated with the acquisition of Welk.

In the second quarter of 2020, Transaction and integration costs included $12 million of ILG acquisition-related costs.

2021 First Half

Six Months Ended

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

Transaction and integration costs $ (47) $ (33) $ (14) (43%)

In the first half of 2021, Transaction and integration costs included $42 million of ILG acquisition and integration related costs and $5 million of costs associated with the acquisition of Welk.

In the first half of 2020, Transaction and integration costs included $33 million of ILG acquisition-related costs.

2021 Second Quarter

Three Months Ended

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

Benefit from income taxes $ 11 $ 58 $ (47) (81%)

The change in the Benefit from income taxes is predominately attributable to a decrease in pre-tax loss and a release in provisions on uncertain tax benefits for the three months ended March 31, 2020.

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

(Provision for) benefit from income taxes $ (27) $ 19 $ (46) NM

The change in the (Provision for) benefit from income taxes is predominately attributable to an increase in pre-tax income.

2021 First Half

Six Months Ended

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

(Provision for) benefit from income taxes $ (16) $ 77 $ (93) NM

The change in the (Provision for) benefit from income taxes is predominately attributable to a decrease in pre-tax loss and a release in reserve for uncertain tax benefits for the six months ended June 30, 2020.

Liquidity and Capital Resources

Typically, our capital needs are supported by cash on hand ($643 million at the end of the first quarter of 2021), cash generated from operations, our ability to raise capital through securitizations in the ABS market, our ability to issue debt and, to the extent necessary, funds available under the Warehouse Credit Facility and the Revolving Corporate Credit Facility with a borrowing capacity of $600 million.

At March 31, 2021, we had $4.6 billion of total gross debt outstanding, which included $1.4 billion of non-recourse debt associated with vacation ownership notes receivable securitizations, $1.1 billion of senior unsecured notes, $0.8 billion of debt under our Corporate Credit Facility, $0.8 billion of convertible notes, $0.5 billion of senior secured notes, and $7 million related to finance lease obligations.

At March 31, 2021, we had $776 million of completed real estate inventory on hand.

Typically, our capital needs are supported by cash on hand ($1.3 billion at the end of the second quarter of 2021), cash generated from operations, our ability to raise capital through securitizations in the ABS market, our ability to issue debt and, to the extent necessary, funds available under the Warehouse Credit Facility and the Revolving Corporate Credit Facility with a borrowing capacity of $600 million.

At June 30, 2021, we had $5.5 billion of total gross debt outstanding, which included $1.8 billion of non-recourse debt associated with vacation ownership notes receivable securitizations, $1.6 billion of senior unsecured notes, $0.8 billion of debt under our Corporate Credit Facility, $0.8 billion of convertible notes, $0.5 billion of senior secured notes, and $9 million related to finance lease obligations.

During the second quarter of 2021, we delivered a redemption notice of $500 million aggregate principal amount of the 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.

At June 30, 2021, we had $824 million of completed real estate inventory on hand.

In addition, we had $383 million of completed vacation ownership units that have been classified as a component of Property and equipment until the time at which they are legally registered and held for sale as vacation ownership products.

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

Three Months Ended

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

Six Months Ended

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

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

10 unchanged sentences

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

In the first quarter of 2021, we had $60 million of cash outflows for operating activities, compared to $122 million in the first quarter of 2020.

Excluding the impact of changes in net loss and adjustments for non-cash items, severance and benefit payments related to cost management activities, and higher inventory spending, partially offset by higher operational expense accruals and higher sales and rental deposits due to the partial recovery from the COVID-19 pandemic.

In the first half of 2021, we had $148 million of cash inflows from operating activities, compared to $73 million of cash outflows in the first half of 2020.

Excluding the impact of changes in net loss and adjustments for non-cash items, cash flow increased as a result of higher operational expense accruals, higher sales and rental deposits due to the continued ramp-up of the business, and higher collections of vacation ownership notes receivable, partially offset by severance and benefit payments related to cost management activities and higher inventory spending.

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

Inventory Spending In Excess of Cost of Sales

Three Months Ended

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

Six Months Ended

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

Inventory spending $ (77) $ (69)

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

Our spending for real estate inventory in the first quarter of 2021 was higher than the amount of real estate inventory costs given the timing of payments to satisfy our remaining commitments to purchase vacation ownership units and the slowdown in sales pace as a result of the COVID-19 pandemic.

Our spending for real estate inventory in the first half of 2021 was higher than the amount of real estate inventory costs given the timing of payments to satisfy our remaining commitments to purchase vacation ownership units and the slowdown in sales pace as a result of the COVID-19 pandemic.

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

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

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

Vacation Ownership Notes Receivable Collections In Excess of Originations

Three Months Ended

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

Six Months Ended

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

Vacation ownership notes receivable collections — non-securitized $ 110 $ 113

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

Vacation ownership notes receivable collections decreased during the first quarter of 2021, as compared to the first quarter of 2020, due to a decrease in the portfolio of outstanding vacation ownership notes receivable.

Vacation ownership notes receivable originations in the first quarter of 2021 decreased due to lower sales in the first quarter of 2021 due to the COVID-19 pandemic and a lower financing propensity.

Financing propensity declined to 46 percent for the first quarter of 2021 compared to 57 percent for the first quarter of 2020 due to a higher percentage of sales during this period to existing owners, who tend to have a lower financing propensity.

Vacation ownership notes receivable collections increased during the first half of 2021, as compared to the first half of 2020, due to an increase in the portfolio of securitized outstanding vacation ownership notes receivable.

Vacation ownership notes receivable originations in the first half of 2021 increased due to higher sales in the first half of 2021 due to the continued ramp-up in the business, partially offset by a lower financing propensity.

Financing propensity declined to 49 percent for the first half of 2021 compared to 54 percent for the first half of 2020 due to a higher percentage of sales during the current period to existing owners, who tend to have a lower financing propensity.

Going forward, we expect to continue to shift back to an increased focus on sales to first-time buyers, which should increase propensity and increase interest income as new originations of vacation ownership notes receivable outpace the decline in principal of existing vacation ownership notes receivable.

Cash from Investing Activities

Three Months Ended

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

Six Months Ended

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

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

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

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Net cash, cash equivalents and restricted cash used in investing activities $ (176) $ (38)

Acquisition of a Business, Net of Cash and Restricted Cash Acquired

Net cash outflows of $157 million in the first half of 2021 were due to the Welk Acquisition.

See Footnote 3 “Acquisitions and Dispositions” to our Financial Statements for more information.

Capital Expenditures for Property and Equipment

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

In the first quarter of 2021, capital expenditures for property and equipment of $7 million included $5 million to support business operations (including $3 million for ancillary and other operations assets and $2 million for sales locations) and $2 million for technology spending.

In the first half of 2021, capital expenditures for property and equipment of $11 million included $8 million to support business operations (including $5 million for ancillary and other operations assets and $3 million for sales locations) and $3 million for technology spending.

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

However, during the first quarter of 2021, we began to add back business critical spending with long term strategic impacts to our operations.

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

However, during the first quarter of 2021, we began to add back business critical spending with expected long term strategic benefits for our operations.

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

Purchase of Company Owned Life Insurance

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

We paid $1 million to acquire these policies during the first quarter of 2021 but we paid $4 million during the first quarter of 2020.

We paid $8 million and $4 million to acquire these policies during the first half of 2021 and the first half of 2020, respectively.

Cash from Financing Activities

Three Months Ended

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

Six Months Ended

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

Borrowings from securitization transactions $ 425 $ 315

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

As of March 31, 2021, $240 million of gross vacation ownership notes receivable were eligible for securitization.

During the first half of 2021, we completed a securitization of vacation ownership notes receivables, issuing $434 million of notes at an overall average weighted interest rate of 1.5% and a 98% gross advance rate, the lowest interest rate ever achieved by a MVW 144A securitization, generating net proceeds of $425 million.

See Footnote 12 "Securitized Debt" to our Financial Statements for additional information regarding this transaction.

As of June 30, 2021, $97 million of gross vacation ownership notes receivable were eligible for securitization.

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

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

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

Proceeds from / Repayments of Debt

Borrowings from / Repayment of Corporate Credit Facility

During the first quarter of 2021, we repaid $100 million of the amount outstanding under the Term Loan, which is part of our Corporate Credit Facility.

We had no borrowings or repayments under our Revolving Corporate Credit Facility during the first quarter of 2021 and also had no amounts outstanding as of March 31, 2021.

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

We later repaid $100 million during the first quarter of 2020 and had $596 million outstanding as of March 31, 2020.

During the first quarter of 2020, we also repaid $2 million of the amount outstanding under the Term Loan.

During the first half of 2021, we repaid $100 million of the amount outstanding under the Term Loan, which is part of our Corporate Credit Facility.

We had no borrowings or repayments under our Revolving Corporate Credit Facility during the first half of 2021 and also had no amounts outstanding as of June 30, 2021.

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

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

During the first half of 2020, we also repaid $5 million of the amount outstanding under the Term Loan.

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

Proceeds from Senior Notes

During the first half of 2021, we issued $500 million of 2029 Notes and used the proceeds in early July to repay $500 million of $750 million of outstanding principal of the 2026 Notes.

During the first half of 2020, we issued $500 million of the 2025 Notes that are pari passu with and secured by the same collateral as our Corporate Credit Facility.

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

See Footnote 13 "Debt" to our Financial Statements for additional information related to these notes.

Proceeds from Convertible Notes

During the first quarter of 2021, we issued $575 million of convertible notes, the 2026 Convertible Notes, as discussed further in Footnote 13 “Debt” to our Financial Statements.

During the first half of 2021, we issued $575 million of 2026 Convertible Notes, as discussed further in Footnote 13 “Debt” to our Financial Statements.

We received net proceeds from the offering of approximately $530 million after adjusting for debt issuance costs, including the discount to the initial purchasers, the cost of the 2026 Convertible Note Hedges, and proceeds from the 2026 Warrants.

We used, or expect to use, the net proceeds from the 2026 Convertible Notes to (i) complete the acquisition of Welk Resorts, (ii) repay a portion of our term loan and (iii) in each case, pay transaction expenses and other fees in connection therewith, and to the extent of any remaining proceeds, for other general corporate purposes.

We used, or expect to use, the net proceeds from the 2026 Convertible Notes to (i) complete the acquisition of Welk, (ii) repay a portion of our term loan and (iii) in each case, pay transaction expenses and other fees in connection therewith, and to the extent of any remaining proceeds, for other general corporate purposes.

Repayment of Debt Assumed from Welk Acquisition

During the first half of 2021, subsequent to the Welk Acquisition, we repaid all outstanding debt obligations, excluding securitized debt, of Welk and its subsidiaries that were assumed as part of the Welk Acquisition.

The total amount of repayments related to these debt obligations was $189 million.

Purchase of Convertible Note Hedges / Proceeds from Issuance of Warrants

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See Footnote 13 “Debt” to our Financial Statements for additional information regarding the issuance of the 2026 Convertible Notes, including the 2026 Convertible Note Hedges and the 2026 Warrants.

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

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

Finance Lease Payment

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

During the first half of 2021, we paid $1 million related to our finance lease obligations for technology and business operations equipment.

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

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

Debt Issuance Costs

During the first quarter of 2021, we paid $2 million of debt issuance costs, which included $1 million associated with the 2026 Convertible Notes and $1 million associated with the extension of the Waiver associated with the Revolving Corporate Credit Facility .

During the first half of 2021, we paid $15 million of debt issuance costs, which included $6 million associated with the 2021 vacation ownership notes receivable securitization, $7 million associated with the 2029 Notes, $1 million associated with the 2026 Convertible Notes, and $1 million associated with the extension of the Waiver associated with the Revolving Corporate Credit Facility.

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

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

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

The following tables present consolidating financial information as of March 31, 2021 and for the three months ended March 31, 2021 for MVWC and MORI on a stand-alone basis (collectively, the “Issuers”), the Senior Notes Guarantors, the combined non-guarantor subsidiaries of MVW, and MVW on a consolidated basis.

The following tables present consolidating financial information as of June 30, 2021 and for the six months ended June 30, 2021 for MVWC and MORI on a stand-alone basis (collectively, the “Issuers”), the Senior Notes Guarantors, the combined non-guarantor subsidiaries of MVW, and MVW on a consolidated basis.

Condensed Consolidating Balance Sheet

As of March 31, 2021

As of June 30, 2021

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

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Condensed Consolidating Statements of Income

Three Months Ended March 31, 2021

Six Months Ended June 30, 2021

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

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Contractual Obligations and Off-Balance Sheet Arrangements

The following table summarizes our contractual obligations as of March 31, 2021:

The following table summarizes our contractual obligations as of June 30, 2021:

Payments Due by Period

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Contractual Obligations

Debt obligations (1)

$ 6,506 $ 191 $ 986 $ 1,993 $ 3,336

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Leases That Have Not Yet Commenced

During the first quarter of 2020, we entered into a finance lease arrangement for a new corporate office building in Orlando, Florida.

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

The new Orlando corporate 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.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis