What changed in this filing

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Item 1. Financial Statements

2021-11-08 compared with 2021-08-04 · 282 added, 233 removed, 1054 unchanged (33% of the section changed)

3 unchanged sentences

(In millions, except per share amounts)

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Sale of vacation ownership products $ 330 $ 98 $ 789 $ 409

12 unchanged sentences

Litigation charges 2 2 8 4

Restructuring — 20 — 20

Royalty fee 26 23 78 72

2 unchanged sentences

TOTAL EXPENSES 896 673 2,505 2,254

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

Losses and other expense, net ( 31 ) — ( 27 ) ( 42 )

Interest expense ( 41 ) ( 37 ) ( 128 ) ( 112 )

14 unchanged sentences

(In millions)

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

NET INCOME (LOSS) $ 11 $ ( 58 ) $ ( 6 ) $ ( 225 )

1 unchanged sentence

Derivative instrument adjustment, net of tax 3 3 12 ( 22 )

OTHER COMPREHENSIVE GAIN (LOSS), NET OF TAX 7 2 10 ( 39 )

OTHER COMPREHENSIVE (LOSS) GAIN, NET OF TAX ( 1 ) 8 9 ( 31 )

Net income attributable to noncontrolling interests ( 1 ) ( 4 ) ( 6 ) ( 13 )

6 unchanged sentences

(In millions, except share and per share data)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Cash and cash equivalents $ 448 $ 524

42 unchanged sentences

(In millions)

Six Months Ended

June 30, 2021 June 30, 2020

Nine Months Ended

September 30, 2021 September 30, 2020

OPERATING ACTIVITIES

21 unchanged sentences

Other, net 3 ( 6 )

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

Net cash, cash equivalents and restricted cash provided by operating activities 303 158

INVESTING ACTIVITIES

2 unchanged sentences

Purchase of company owned life insurance ( 11 ) ( 3 )

Dispositions, net — 15

Net cash, cash equivalents and restricted cash used in investing activities ( 187 ) ( 24 )

3 unchanged sentences

(In millions)

Six Months Ended

June 30, 2021 June 30, 2020

Nine Months Ended

September 30, 2021 September 30, 2020

FINANCING ACTIVITIES

6 unchanged sentences

Finance lease payment ( 2 ) ( 10 )

Debt issuance costs ( 15 ) ( 9 )

Payment of debt issuance costs ( 17 ) ( 14 )

Repurchase of common stock ( 4 ) ( 82 )

1 unchanged sentence

Payment of withholding taxes on vesting of restricted stock units ( 17 ) ( 14 )

Net cash, cash equivalents and restricted cash provided by financing activities 716 320

Net cash, cash equivalents and restricted cash (used in) provided by financing activities ( 225 ) 195

Effect of changes in exchange rates on cash, cash equivalents and restricted cash ( 1 ) ( 2 )

7 unchanged sentences

Non-cash issuance of treasury stock for employee stock purchase plan 3 1

Dividends payable 23 —

Interest paid, net of amounts capitalized 136 140

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

Income tax refunds, net of income taxes paid ( 19 ) ( 48 )

See Notes to Interim Consolidated Financial Statements

24 unchanged sentences

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

— Net income — — — — 10 10 1 11

— Foreign currency translation adjustments — — — ( 4 ) — ( 4 ) — ( 4 )

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

— Share-based compensation plans — — 8 — — 8 — 8

— Repurchase of common stock — ( 4 ) — — — ( 4 ) — ( 4 )

— Dividends — — — — ( 23 ) ( 23 ) — ( 23 )

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

75.5 BALANCE AT SEPTEMBER 30, 2021 $ 1 $ ( 1,282 ) $ 4,056 $ ( 39 ) $ 237 $ 2,973 $ 31 $ 3,004

See Notes to Interim Consolidated Financial Statements

20 unchanged sentences

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

— Net (loss) income — — — — ( 62 ) ( 62 ) 4 ( 58 )

— Foreign currency translation adjustments — — — 5 — 5 — 5

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

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

75.3 BALANCE AT SEPTEMBER 30, 2020 $ 1 $ ( 1,334 ) $ 3,749 $ ( 67 ) $ 309 $ 2,658 $ 25 $ 2,683

See Notes to Interim Consolidated Financial Statements

7 unchanged sentences

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

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

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

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

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.

Pursuant to a change in control of certain consolidated property owners’ associations, we recorded a non-cash loss of $ 1 million in Losses and other expense, net on our Income Statement for the nine months ended September 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 three quarters of 2021.

See our Interim Consolidated Statements of Shareholders’ 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.

1 unchanged sentence

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes.

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.

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, 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 the ongoing efforts to mitigate it, has made it more challenging to make these estimates.

8 unchanged sentences

(“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.

The Financial Statements in this report include Welk’s results of operations for the second and third quarters of 2021 and reflect the financial position of our combined company at September 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.

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This update may be applied retrospectively or on a modified retrospective basis with the cumulative effect recognized as an adjustment to the opening balance of retained earnings on the date of adoption.

Additionally, this update provides for a one-time irrevocable election by entities to apply the fair value option in accordance with ASC Topic 825-10, “ Financial Instruments - Overall, ” for any liability-classified convertible securities, with the difference between the carrying amount and the fair value recorded as a cumulative-effect adjustment to opening retained earnings as of the beginning of the period of adoption.

We expect to adopt ASU 2020-06 on January 1, 2022, and continue to evaluate the impact that adoption of this update will have on our financial statements and disclosures.

In accordance with ASU 2020-06, we will be required to calculate diluted earnings per share under the “if-converted” method.

We expect to adopt ASU 2020-06 on January 1, 2022 using the modified retrospective method.

Any transactions that may be settled prior to adoption will not be impacted by the update.

The impacts of the adoption for any remaining instruments will be recorded in its cumulative effect in the opening balance of retained earnings and the conversion feature related to our convertible notes will be reclassified from equity to liabilities.

In addition, we will eliminate the related equity adjustment associated with the deferred tax liability.

Upon adoption, we will also be required to calculate the impact of the convertible notes on diluted earnings per share under the “if-converted” method.

Under the “if-converted” method, diluted earnings per share would generally be calculated assuming that all of our convertible notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be anti-dilutive.

The application of the “if-converted” method may reduce our reported diluted earnings per share.

The application of the “if-converted” method is expected to reduce our reported diluted earnings per share.

Accounting Standards Update 2021-08 - “ Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”)

In October 2021, the FASB issued ASU 2021-08, which requires application of ASC 606, Revenue from Contracts with Customers, to recognize and measure contract assets and liabilities from contracts with customers acquired in a business combination.

ASU 2021-08 creates an exception to the general recognition and measurement principle in ASC 805 and will result in recognition of contract assets and contract liabilities consistent with those recorded by the acquiree immediately before the acquisition date.

The guidance eliminates the complexity of determining the fair value of contract liabilities and may result in higher balances for contract liabilities acquired in a business combination, resulting in more post-combination revenue and a higher amount of goodwill being recognized by the acquirer.

This update is effective for fiscal years beginning after December 15, 2022 and interim periods therein, with early adoption permitted.

We expect to adopt ASU 2021-08 on a prospective basis in fiscal year 2022, and do not expect the adoption to have a material impact on our Financial Statements or disclosures.

ACQUISITIONS AND DISPOSITIONS

1 unchanged sentence

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.

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

The following table presents the fair value of each type of consideration transferred at the Welk Acquisition Date at September 30, 2021.

(in millions, except per share amounts)

8 unchanged sentences

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 values attributed to Vacation ownership notes receivable, Inventory, Property and equipment, Intangible assets, Deferred taxes and Securitized debt from VIEs are based on preliminary valuations prepared using 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 2 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.

We are in the process of finalizing our valuations in accordance with the authoritative guidance by continuing our evaluation of the underlying inputs and assumptions that are being utilized in the valuations.

Our evaluation of Welk’s historical tax positions remains ongoing.

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)

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 as previously reported at June 30, 2021 and as adjusted at September 30, 2021.

During the third quarter of 2021, we refined our valuation models related to certain acquired assets and liabilities as follows:

($ in millions) April 1, 2021

(as reported at

June 30, 2021) Adjustments April 1, 2021

(as adjusted at September 30, 2021)

Vacation ownership notes receivable, net (1)

$ 240 $ 14 $ 254

Inventory (2)

Property and equipment 151 ( 40 ) 111

2 unchanged sentences

Deferred taxes ( 41 ) ( 4 ) ( 45 )

Debt ( 189 ) — ( 189 )

Securitized debt ( 184 ) — ( 184 )

2 unchanged sentences

299 ( 30 ) 269

$ 405 $ — $ 405

_________________________

(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.

3 unchanged sentences

Vacation ownership notes receivable, net $ 254

(2) Inventory consists of completed unsold VOIs.

We valued inventory using an income approach, which includes significant Level 3 assumptions, such as estimates of future income growth, marketing and sales costs and discount rates.

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

(4) 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

2 unchanged sentences

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

There were no Welk acquisition-related costs included in the unaudited pro forma results below for the nine months ended September 30, 2021, and $ 18 million included for the nine months ended September 30, 2020.

Nine Months Ended

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

Revenues $ 2,837 $ 2,246

Net loss $ ( 4 ) $ ( 189 )

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

LOSS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

Net income (loss) $ 6 $ ( 251 )

Net income (loss) attributable to common shareholders $ — $ ( 264 )

EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

Basic $ 0.01 $ ( 6.40 )

1 unchanged sentence

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

The following table presents the results of Welk operations included in our Income Statement for the three and nine months ended September 30, 2021.

($ in millions) Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021

Revenue $ 53 $ 101

Net income $ 10 $ 16

13 unchanged sentences

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 half of 2021 or the first half of 2020.

During the third quarter of 2020, we recorded a loss of $ 5 million in the Losses and other expense, net line on our Income Statement for the three and nine months ended September 30, 2020 relating to the redemption of our interest in a joint venture in our Exchange & Third-Party Management segment which was consolidated under the voting interest model.

We received nominal cash proceeds and a note receivable which we measured at a fair value of $ 1 million using Level 3 inputs.

Additionally, during the third quarter of 2020, we disposed of excess Vacation Ownership segment land parcels in Orlando, Florida and Steamboat Springs, Colorado for combined proceeds of $ 15 million, as part of our strategic decision to reduce holdings in markets where we have excess supply.

We recorded a combined net gain of $ 6 million in the Losses and other expense, net line on our Income Statement for the three and nine months ended September 30, 2020 relating to these transactions.

REVENUE AND RECEIVABLES

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

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

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

9 unchanged sentences

Total Revenues $ 974 $ 77 $ 1 $ 1,052

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

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

9 unchanged sentences

Total Revenues $ 571 $ 71 $ 7 $ 649

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

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

9 unchanged sentences

Total Revenues $ 2,518 $ 249 $ 23 $ 2,790

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

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

11 unchanged sentences

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

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

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

2 unchanged sentences

Revenue from contracts with customers $ 905 $ 77 $ 1 $ 983

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

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

2 unchanged sentences

Revenue from contracts with customers $ 507 $ 71 $ 7 $ 585

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

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

2 unchanged sentences

Revenue from contracts with customers $ 2,322 $ 249 $ 23 $ 2,594

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

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

3 unchanged sentences

Sale of Vacation Ownership Products

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.

Revenues were reduced during the third quarter and first three quarters of 2021 by $ 1 million and $ 9 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 June 30, 2021 or December 31, 2020.

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

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

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

Receivables from Contracts with Customers

5 unchanged sentences

Deferred revenue 540 488

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.

Revenue recognized during the third quarter and first three quarters of 2021 that was included in our contract liabilities balance at December 31, 2020 was $ 133 million and $ 336 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 June 30, 2021, approximately 84 percent of this amount is expected to be recognized as revenue over the next two years .

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

Accounts Receivable

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

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

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

Receivables from contracts with customers $ 140 $ 150

5 unchanged sentences

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

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.

Our interim effective tax rate was 81.5 percent and 19.8 percent for the three months ended September 30, 2021 and September 30, 2020, respectively.

The change in the effective tax rate is predominately attributable to an increase in pre-tax income and an increase in the reserve for uncertain tax benefits.

Our interim effective tax rate was 110.6 percent and 28.7 percent for the nine months ended September 30, 2021 and September 30, 2020, respectively.

The change in the effective tax rate is predominately attributable to an increase in pre-tax income and an increase in the reserve for uncertain tax benefits.

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 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.

As of September 30, 2021, we evaluated the income tax provisions of the above mentioned acts and have determined there to be minimal effect on either the September 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 six months ended June 30, 2021.

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

These unrecognized tax benefits relate to uncertain income tax positions, which would affect the effective tax rate if recognized.

($ in millions) Unrecognized Tax Benefits

Balance at December 31, 2020 $ 14

Increases related to tax positions taken during a prior period 12

Increases related to tax positions taken during the current period 1

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.

Decreases as a result of a lapse of the applicable statute of limitations ( 1 )

Balance at September 30, 2021

The total amount of gross interest and penalties accrued was $ 38 million at September 30, 2021 and $ 25 million at December 31, 2020.

We anticipate $ 14 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.

2 unchanged sentences

Certain of our returns are being audited in various jurisdictions for tax years 2007 through 2019.

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

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

VACATION OWNERSHIP NOTES RECEIVABLE

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

June 30, 2021 December 31, 2020

September 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 Six Months Ended

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

Three Months Ended Nine Months Ended

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

Interest income associated with vacation ownership notes receivable — securitized $ 55 $ 59 $ 160 $ 186

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

During the first three quarters of 2021, there were no additional increases to our vacation ownership notes receivable reserves attributed 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 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.

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

Acquired Vacation Ownership Notes Receivable

2 unchanged sentences

Thereafter 16 166 182

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

Balance at September 30, 2021 $ 29 $ 389 $ 418

Weighted average stated interest rate 13.7 % 14.1 % 14.1 %

13 unchanged sentences

(Decrease) increase in vacation ownership notes receivable reserve ( 6 ) 6 —

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

Balance at September 30, 2021 $ 50 $ 26 $ 76

_________________________

2 unchanged sentences

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.

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

Originated Vacation Ownership Notes Receivable

6 unchanged sentences

Thereafter 335 600 935

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

Balance at September 30, 2021 $ 511 $ 1,097 $ 1,608

Weighted average stated interest rate 12.8 % 12.8 % 12.8 %

12 unchanged sentences

Defaulted vacation ownership notes receivable repurchase activity (1)

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

Balance at September 30, 2021 $ 219 $ 113 $ 332

_________________________

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 6.59 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.

For both Legacy-MVW non-securitized and securitized vacation ownership notes receivable, we estimated average remaining default rates of 6.67 percent as of September 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 both September 30, 2021 and 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 June 30, 2021 $ 102 $ 6 $ 108

Investment in vacation ownership notes receivable on non-accrual status at September 30, 2021 $ 98 $ 7 $ 105

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 June 30, 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 September 30, 2021 and December 31, 2020.

Legacy-MVW Vacation Ownership Notes Receivable

As of June 30, 2021

As of September 30, 2021

As of December 31, 2020

6 unchanged sentences

Total vacation ownership notes receivable $ 393 $ 925 $ 1,318 $ 339 $ 1,050 $ 1,389

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

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

Legacy-MVW Vacation Ownership Notes Receivable

9 unchanged sentences

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.

At September 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 707 and 708 , respectively, based upon the outstanding vacation ownership notes receivable balance at the 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 17.13 percent as of September 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 September 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.

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

resident borrowers.

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.

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($ in millions) Non-Securitized Securitized Total

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 September 30, 2021 $ 116 $ 8 $ 124

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 and Legacy-Welk vacation ownership notes receivable as of June 30, 2021 and 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 September 30, 2021 and December 31, 2020.

Legacy-ILG and Legacy-Welk Vacation Ownership Notes Receivable

As of June 30, 2021

As of September 30, 2021

As of December 31, 2020

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Total vacation ownership notes receivable $ 416 $ 700 $ 1,116 $ 240 $ 581 $ 821

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 June 30, 2021

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

Acquired Vacation Ownership Notes Receivable as of September 30, 2021

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

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$ 176 $ 131 $ 18 $ 44 $ 369

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.

resident borrowers.

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 September 30, 2021.

Acquired Vacation Ownership Notes Receivable - Westin

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$ 40 $ 25 $ 37 $ 57 $ 44 $ 16 $ 219

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 June 30, 2021

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

Originated Vacation Ownership Notes Receivable as of September 30, 2021

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

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$ 231 $ 132 $ 22 $ 66 $ 451

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.

resident borrowers.

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 September 30, 2021.

Originated Vacation Ownership Notes Receivable - Westin

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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 June 30, 2021 At December 31, 2020

At September 30, 2021 At December 31, 2020

($ in millions) Carrying

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Vacation Ownership Notes Receivable

At June 30, 2021 At December 31, 2020

At September 30, 2021 At December 31, 2020

($ in millions) Carrying

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We estimate the fair value of our Term Loan (as defined in Footnote 13 “Debt”) using quotes from securities dealers 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 the Term Loan could be retired or transferred.

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

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

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

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.

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

As no conversion premium existed as of September 30, 2020, there was no potential dilutive impact from our 2022 Convertible Notes for the third quarter or first three quarters of 2020.

Additionally, as no conversion premium existed for our 2026 Convertible Notes (as defined in Footnote 13 “Debt”) as of September 30, 2021, there was no potential dilutive impact from our 2026 Convertible Notes for the third quarter or first three quarters of 2021.

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.

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See Footnote 13 “Debt” for further information on our convertible notes.

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 Six Months Ended

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

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

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

Three Months Ended Nine Months Ended

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

September 30, 2020 September 30, 2021 September 30, 2020

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

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

Net income (loss) attributable to common shareholders $ 10 $ ( 62 ) $ ( 12 ) $ ( 238 )

Shares for basic earnings (loss) per share 42.9 41.2 42.4 41.3

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

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

Net income (loss) attributable to common shareholders $ 10 $ ( 62 ) $ ( 12 ) $ ( 238 )

Shares for basic earnings (loss) per share 42.9 41.2 42.4 41.3

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2022 Convertible Notes 0.1 — — —

2026 Convertible Notes — — — —

Shares for diluted earnings (loss) per share 43.7 41.2 42.4 41.3

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_______________________________

(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

(1) The computation of diluted earnings per share attributable to common shareholders excludes approximately 298,000 shares of common stock, the maximum number of shares issuable as of September 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 three quarters of 2021 and the third quarter and the first three quarters 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 the effects of including these securities would have been anti-dilutive.

Three Months Ended Nine Months Ended

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

Employee stock options and SARs 0.1 0.2 0.2

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2022 Convertible Notes — 0.1 —

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.

In accordance with the applicable accounting guidance for calculating earnings per share, for the third quarter of 2021, we excluded from our calculation of diluted earnings per share 127,008 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 the applicable period.

The following table shows the composition of our inventory balances:

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

Finished goods (1)

Work-in-progress — —

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

Real estate inventory (1)

_________________________

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

(1) Represents completed inventory that is registered for sale as vacation ownership interests and vacation ownership 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 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.

Product cost true-up activity relating to vacation ownership products increased carrying values of inventory by $ 6 million during the first three quarters of 2021 and by $ 4 million during the first three quarters of 2020.

In addition to the above, at September 30, 2021 and December 31, 2020, we had $ 465 million and $ 162 million, respectively, of completed vacation ownership units which are classified as a component of Property and equipment, net 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 September 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 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

The following table details the carrying amount of our goodwill at September 30, 2021 and December 31, 2020, and reflects goodwill attributed to the ILG Acquisition and the Welk Acquisition.

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

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

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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.

Measurement period adjustments ( 30 ) — ( 30 )

Balance at September 30, 2021 $ 2,714 $ 372 $ 3,086

Q1 2021, Q2 2021, and Q3 2021

We periodically monitor for indicators of impairment of our goodwill and none were identified during the third quarter or first three quarters of 2021.

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

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.

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

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

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

Definite-lived intangible assets

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$ 1,007 $ 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.

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 segment, 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 June 30, 2021, we had the following commitments outstanding:

As of September 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 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.

Our aggregate commitment under these contracts was $ 87 million, of which we expect $ 14 million, $ 40 million, $ 21 million, $ 6 million, $ 5 million and $ 1 million will be paid in the remainder of 2021, 2022, 2023, 2024, 2025, and thereafter, respectively.

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

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

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

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

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.

We expect to complete the acquisition in 2022 and to make the remaining payments of $ 23 million in 2022 with respect to these units, when specific construction milestones are completed.

Surety bonds issued as of September 30, 2021 totaled $ 123 million, the majority of which were requested by federal, state, or local governments in connection with our operations.

As of September 30, 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 September 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 June 30, 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.

Certain of our rental management agreements in our Exchange & Third-Party Management segment provide for owners of properties we manage to receive specified percentages or guaranteed amounts of the rental revenue generated under our management.

We estimate the cash outflow associated with completing the phases of our existing portfolio of vacation ownership projects currently under development will be approximately $ 2 million, of which $ 1 million is included within liabilities on our Balance Sheet at September 30, 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 in 2022.

Certain of our rental management agreements in our Exchange & Third-Party Management segment provide for owners of properties we manage to receive specified percentages of rental revenue or guaranteed amounts generated under our management.

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 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.

At September 30, 2021, our maximum exposure under fixed dollar guarantees was $ 12 million, of which $ 1 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.

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.

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or 2) upon our written notification of termination.

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

At September 30, 2021, our expected commitment for the remainder of 2021 is $ 3 million.

Loss Contingencies

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District Court for the District of Colorado against us and certain third parties, alleging that their fractional interests were devalued by the affiliation of the RCC Aspen Highlands and other Ritz-Carlton Clubs with our points-based Marriott Vacation Club Destinations (“MVCD”) program.

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

A trial is scheduled to begin in January 2022.

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

In September 2021, the District Court granted our motion for summary judgment and dismissed the case.

In October 2021, the plaintiffs appealed the ruling.

Subsequently, the parties have agreed in principle to the dismissal of plaintiffs’ appeal in exchange for a dismissal of our claim for attorneys’ fees and expenses.

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

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

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.

Regis Residence Club, 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.

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

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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.

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

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

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

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

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

Vacation ownership notes receivable securitizations, gross (1)

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_________________________

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

(1) Interest rates as of September 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 June 30, 2021.

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

Vacation Ownership

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

During the 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.

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

As of September 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.

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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.

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

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

As of September 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 June 30, 2021 At December 31, 2020

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

Senior Secured Notes

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$ 2,795 $ 2,680

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

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

($ in millions) 2025

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• $ 500 million aggregate principal amount of 6.125 % Senior Secured Notes due 2025 issued in the second quarter of 2020 with a maturity date of September 15, 2025 (the “2025 Notes”).

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

• $ 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

Issuance and Redemption of Senior 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 used these proceeds in July 2021 to redeem, prior to maturity, $ 500 million of the $ 750 million aggregate principal amount of 6.500 % Senior Unsecured Notes due 2026 issued in the third quarter of 2018 with a maturity date of September 15, 2026 (the “2026 Notes”) 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.

As noted above, in July 2021, we redeemed, prior to maturity, $ 500 million aggregate principal amount of the 2026 Notes pursuant to a redemption notice issued in June 2021 and the terms of the indenture governing the 2026 Notes.

Additionally, in September 2021, we issued a redemption notice and redeemed, prior to maturity, the remaining $ 250 million aggregate principal amount of the 2026 Notes pursuant to the terms of the indenture governing the 2026 Notes.

In connection with the redemptions that occurred during the third quarter of 2021, we incurred charges of $ 36 million, inclusive of a redemption premium and the write-off of unamortized debt issuance costs, which was recorded in the Losses and other expense, net line on our Income Statement for the three and nine months ended September 30, 2021.

During the third quarter of 2021, we delivered a redemption notice of $ 250 million aggregate principal amount of the 2025 Notes pursuant to the terms of the indenture governing the 2025 Notes.

Subsequent to the end of the third quarter of 2021, we redeemed, prior to maturity, $ 250 million aggregate principal amount of the 2025 Notes.

In connection with this redemption, we expect to incur charges of approximately $ 19 million, inclusive of a redemption premium and the write-off of unamortized debt issuance costs, which will be recorded in the fourth quarter of 2021.

Corporate Credit Facility

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The initial suspension period included in the Waiver was up to four quarters, however in February 2021, we further amended the agreement governing our Corporate Credit Facility to extend the suspension period included in the Waiver through the end of 2021.

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

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

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.

The Waiver prohibited us from making certain restricted payments, including share repurchases and dividends.

On September 9, 2021, we elected to terminate the Waiver.

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 June 30, 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 and second quarters of 2021 and 2020:

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 three quarters of 2021 and 2020.

There were no reclassifications to the Income Statement for any of the periods presented below.

($ in millions) 2021 2020

1 unchanged sentence

Other comprehensive gain (loss) before reclassifications 6 ( 24 )

Reclassification to Income Statement — —

Net other comprehensive income (loss) 6 ( 24 )

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 )

Other comprehensive gain before reclassifications 3 3

Derivative instrument adjustment balance, September 30 $ ( 27 ) $ ( 43 )

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 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.

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 September 30, 2021 to 6.8201 shares of common stock per $ 1,000 principal amount of 2022 Convertible Notes (equivalent to a conversion price of $ 146.63 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 June 30, 2021, the effective interest rate was 4.73 % and the remaining discount amortization period was 1.2 years.

As of September 30, 2021, the effective interest rate was 4.73 % and the remaining discount amortization period was one year .

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

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

($ in millions) At September 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 Six Months Ended

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

Three Months Ended Nine Months Ended

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

Contractual interest expense $ 1 $ 1 $ 3 $ 3

Amortization of debt discount 1 1 5 5

Amortization of debt issuance costs — — 1 1

$ 2 $ 2 $ 9 $ 9

2 unchanged sentences

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 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.

As of September 30, 2021, the strike prices of the 2022 Convertible Note Hedges and the 2022 Warrants were subject to adjustment to approximately $ 148.73 and $ 177.33 , respectively, and no 2022 Convertible Note Hedges or 2022 Warrants have been exercised.

2026 Convertible Notes

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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 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).

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 September 30, 2021 to 5.8685 shares of common stock per $1,000 principal amount of 2026 Convertible Notes (equivalent to a conversion price of $ 170.40 per share of our common stock), as a result of the dividends that have been declared since issuance.

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.

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The 2026 Convertible Notes will be effectively subordinated to any of our existing and future secured debt to the extent of the value of the assets securing such debt, including the guarantees of borrowings outstanding under the Corporate Credit Facility and our 2025 Notes.

The 2026 Convertible Notes will be structurally subordinated to any existing and future indebtedness and any other liabilities and obligations of any of our subsidiaries that are not guarantors of the 2026 Convertible Notes.

Convertible Notes.

The guarantees will be the Guarantors’ general senior unsecured obligations and will rank equally in right of payment with all of the Guarantors’ existing and future senior indebtedness, and senior in right of payment to all of the Guarantors’ future subordinated debt.

6 unchanged sentences

The resulting debt discount is amortized as interest expense.

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

As of September 30, 2021, the effective interest rate was 4.96 % and the remaining debt discount amortization period was 4.3 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.

1 unchanged sentence

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

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

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

Liability component

5 unchanged sentences

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

Three Months Ended Nine Months Ended

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

Amortization of debt discount $ 6 $ — $ 16 $ —

3 unchanged sentences

In connection with the offering of the 2026 Convertible Notes, we entered into privately-negotiated convertible note hedge transactions with respect to our common stock with certain counterparties (the “2026 Convertible Note Hedges”), covering a total of 3.4 million shares of our common stock at a cost of $ 100 million.

The 2026 Convertible Note Hedges are subject to anti-dilution provisions substantially similar to those of the 2026 Convertible Notes, have a strike price that initially corresponds to the initial conversion price of the 2026 Convertible Notes, are exercisable by us upon any conversion under the 2026 Convertible Notes, and expire when the 2026 Convertible Notes mature.

The 2026 Convertible Note Hedges are subject to anti-dilution provisions substantially similar to those of the 2026 Convertible Notes, have a strike price that initially corresponded to the initial conversion price of the 2026 Convertible Notes, are exercisable by us upon any conversion under the 2026 Convertible Notes, and expire when the 2026 Convertible Notes mature.

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.

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

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

As of September 30, 2021, the strike prices of the 2026 Convertible Note Hedges and the 2026 Warrants were subject to adjustment to approximately $ 170.40 and $ 213.00 , respectively, and 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, 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.

In addition, the Corporate Credit Facility, the 2026 Convertible Notes, the 2025 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 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 September 30, 2021, there were 75,491,621 shares of Marriott Vacations Worldwide common stock issued, of which 42,715,459 shares were outstanding and 32,776,162 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 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, and Board approval.

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 September 30, 2021 or December 31, 2020.

Share Repurchase Program

During the third quarter of 2021, our Board of Directors authorized a share repurchase program under which we may purchase shares of our common stock for an aggregate purchase price not to exceed $ 250 million, prior to December 31, 2022.

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

The specific timing, amount and other terms of the repurchases will depend on market conditions, corporate and regulatory requirements and other factors.

Acquired shares of our common stock are held as treasury shares carried at cost in our Financial Statements.

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

The following table summarizes share repurchase activity under our share repurchase programs:

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

Paid per Share

As of December 31, 2020 17,188,885 $ 1,340 $ 77.95

For the first three quarters of 2021 29,035 4 $ 154.84

As of September 30, 2021 17,217,920 $ 1,344 $ 78.08

As of September 30, 2021, $ 246 million remained available for repurchase under the authorization approved by the Board of Directors in the third quarter of 2021.

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

We declared cash dividends to holders of common stock during the quarter ended September 30, 2021 as follows.

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

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

Declaration Date Shareholder Record Date Distribution Date Dividend per Share

September 10, 2021 September 23, 2021 October 7, 2021 $ 0.54

Noncontrolling Interests - Property Owners’ Associations

We consolidate certain property owners’ associations.

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.

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

Noncontrolling interests of $ 31 million as of both September 30, 2021 and December 31, 2020 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 June 30, 2021, approximately 1.5 million shares were available for grants under the MVW Equity Plan.

As of September 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 Six Months Ended

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

Three Months Ended Nine Months Ended

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

Service-based RSUs $ 8 $ 5 $ 23 $ 16

3 unchanged sentences

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

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

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

Service-based RSUs $ 32 $ 27

1 unchanged sentence

Restricted Stock Units

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.

We granted 171,625 service-based RSUs, which are subject to time-based vesting conditions, with a weighted average grant-date fair value of $ 169.19 , to our employees and non-employee directors during the first three quarters 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 half 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 three quarters 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 half of 2021:

The following table outlines the assumptions used to estimate the fair value of grants during the first three quarters 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 June 30, 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 September 30, 2021:

($ in millions) Vacation Ownership

3 unchanged sentences

Consolidated Assets

Vacation ownership notes receivable, net of reserves $ 1,645 $ — $ 1,645

Vacation ownership notes receivable, net $ 1,486 $ — $ 1,486

Interest receivable 10 — 10

5 unchanged sentences

Total $ 1,613 $ — $ 1,613

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:

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

($ in millions) Vacation Ownership

6 unchanged sentences

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:

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

($ in millions) Vacation Ownership

7 unchanged sentences

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

Six Months Ended

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

Nine Months Ended

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

Net proceeds from vacation ownership notes receivable securitizations $ 421 $ 371

14 unchanged sentences

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

Six Months Ended

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

Nine Months Ended

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

Proceeds from vacation ownership notes receivable securitizations $ — $ 315

1 unchanged sentence

Interest receipts — 17

Reserve release — 2

Cash Outflows

1 unchanged sentence

Voluntary repurchases of defaulted vacation ownership notes receivable — ( 3 )

Repayment of Warehouse Credit Facility — ( 300 )

Interest to investors ( 1 ) ( 4 )

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 June 30, 2021 are committed to make payments for the operating property as follows:

We expect to acquire the operating property over time and as of September 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 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.

As of September 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 September 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 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.

As of September 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 September 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 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.

At September 30, 2021, the value of the assets held in the rabbi trust was $ 70 million, which is included in the Other line within assets on our Balance Sheets.

BUSINESS SEGMENTS

17 unchanged sentences

We do not allocate corporate interest expense or indirect general and administrative expenses to our segments.

We include interest income specific to segment activities within the appropriate segment.

We include interest income specific to segment activities within the appropriate

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.

3 unchanged sentences

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

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 Six Months Ended

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

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

Three Months Ended Nine Months Ended

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

Vacation Ownership $ 974 $ 571 $ 2,518 $ 1,884

3 unchanged sentences

$ 1,052 $ 649 $ 2,790 $ 2,139

Adjusted EBITDA and Reconciliation to Net Loss Attributable to Common Shareholders

Three Months Ended Six Months Ended

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

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

Three Months Ended Nine Months Ended

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

Adjusted EBITDA Vacation Ownership $ 215 $ 28 $ 465 $ 156

8 unchanged sentences

Net income (loss) attributable to common shareholders $ 10 $ ( 62 ) $ ( 12 ) $ ( 238 )

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

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

Vacation Ownership $ 7,750 $ 6,859

3 unchanged sentences

$ 9,543 $ 8,898

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.

We conduct business globally, and our operations outside the United States represented approximately 10 percent and 8 percent of our revenues, excluding cost reimbursements, for the three months ended September 30, 2021 and September 30, 2020, respectively, and 10 percent of our revenues, excluding cost reimbursements, for each of the nine months ended September 30, 2021 and September 30, 2020.

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