What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-01 compared with 2021-03-01 · 559 added, 589 removed, 1438 unchanged (44% of the section changed)

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Management’s Report on Internal Control Over Financial Reporting

Report of Independent Registered Public Accounting Firm - Internal Control Over Financial Reporting

Report of Independent Registered Public Accounting Firm - Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Internal Control Over Financial Reporting

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Financial Statements

Consolidated Statements of Income

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Notes to Consolidated Financial Statements

Basis of Presentation

Summary of Significant Accounting Policies

Restructuring Charges

Acquisitions and Dispositions

Vacation Ownership Notes Receivable

Financial Instruments

Earnings per Share

Property and Equipment

Goodwill and Intangibles

Contingencies and Commitments

Securitized Debt

Shareholders’ Equity

Share-based Compensation

Variable Interest Entities

Business Segments

Quarterly Results (Unaudited)

Subsequent Events

MANAGEMENT’S REPORT ON

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generally accepted accounting principles.

In the second quarter of 2021, the Company completed its acquisition of Welk Hospitality Group, Inc.

The Company is in the process of evaluating Welk’s existing controls and procedures and integrating Welk into its internal control over financial reporting.

In accordance with SEC Staff guidance permitting a company to exclude an acquired business from management’s assessment of the effectiveness of internal control over financial reporting for the year in which the acquisition is completed, the Company has excluded the business acquired from its assessment of the effectiveness of internal control over financial reporting as of December 31, 2021.

The business that the Company acquired represented 9% of the Company’s total assets as of December 31, 2021, and 4% of the Company’s revenues and 11% of the Company’s income before income taxes and noncontrolling interests for the year ended December 31, 2021.

Ernst & Young LLP, the independent registered public accounting firm that audited the Company’s consolidated financial statements included in this report, has issued a report on the effectiveness of the Company’s internal control over financial reporting, a copy of which appears on the next page of this Annual Report on Form 10-K.

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In our opinion, Marriott Vacations Worldwide Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Welk Hospitality Group, Inc.

(Welk), which is included in the 2021 consolidated financial statements of the Company and constituted 9% of total assets, as of December 31, 2021 and 4% and 11% of revenues and income before income taxes and noncontrolling interests, respectively, for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Welk.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the accompanying consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated March 1, 2022 expressed an unqualified opinion thereon.

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Goodwill and Other Indefinite-Lived Intangible Assets

Description of the Matter At December 31, 2020, the Company’s goodwill and other indefinite-lived intangible assets were $2,817 million and $64 million, respectively.

For the year ended December 31, 2020, the Company recorded impairment charges of $73 million and $18 million for goodwill and other indefinite-lived intangible assets, respectively.

As discussed in Note 2 to the consolidated financial statements, goodwill and other indefinite-lived intangible assets are tested for impairment at least annually, or more frequently if events or circumstances indicate a possible impairment.

The Company’s goodwill is tested for impairment at the reporting unit level, and other indefinite-lived intangibles, which include trade names and trademarks, are each tested for impairment at the asset level.

Valuation of Goodwill and Other Indefinite-Lived Intangible Assets

Auditing the Company’s goodwill and certain other indefinite-lived intangible assets impairment tests was complex and highly judgmental due to the significant estimation required to determine the fair value of the reporting units and trade names and trademarks.

In particular, the fair value estimates for the reporting units were sensitive to changes in significant assumptions, which include projections of revenues, expenses, expected future investments and estimated discount rates, while the fair value of the other indefinite-lived intangibles were sensitive to projections of revenues, the estimated discount rate and royalty rate.

These significant assumptions are affected by expectations about future industry performance and market and economic conditions.

Currently, the development of such projections and assumptions involves increased judgment due to the continued effects of the COVID pandemic on the global economy.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill and other indefinite-lived intangible assets impairment review process, including controls over management’s review of the significant assumptions described above.

To test the estimated fair value of the reporting units and other indefinite-lived intangible assets, we performed audit procedures that included, among others, assessing the methodologies used and testing the significant assumptions discussed above and the underlying data used by the Company in its analyses.

We assessed the historical accuracy of the Company’s estimates, compared the significant assumptions used by the Company to historical operating results and cash flows as well as current industry and economic trends and evaluated whether changes in the Company’s business model and other factors would materially affect the significant assumptions.

We also performed sensitivity analyses on certain significant assumptions to evaluate the changes in the fair value of the reporting units and other indefinite-lived intangible assets that would result from changes in the assumptions.

We involved our valuation specialists to assist in the evaluation of the Company’s methodologies and certain significant assumptions, such as the projections of revenue, discount rates and royalty rate.

Cost of Vacation Ownership Products

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Additionally, the determination of the cost of vacation ownership products was sensitive to certain estimates, such as estimated future revenue from sale of vacation ownership products, which are affected by expectations about future market and economic conditions.

Cost of Vacation Ownership Products

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process to determine the cost of vacation ownership products.

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To test the cost of vacation ownership products, we performed audit procedures that included, among others, assessing the methodologies used, evaluating the estimates discussed above and testing the completeness and accuracy of the data used by the Company in the calculations.

For example, we agreed inputs to the calculations to historical data and evaluated the estimates used in the calculations, such as estimated future revenue from sale of vacation ownership products, utilizing historical operating results and relevant market information available.

For example, we agreed inputs to the calculations to historical data and source documentation and evaluated the estimates used in the calculations, such as estimated future revenue from sale of vacation ownership products, utilizing historical operating results and relevant market information available.

We involved real estate subject matter resources on our team because the application of the relative sales value method is unique to companies in the real estate time-sharing industry.

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The estimates of the variable consideration for originated vacation ownership notes receivable and the reserve for credit losses on the acquired vacation ownership notes receivable are based on default rates that are an output of the Company’s static pool analyses and the estimates regarding future defaults.

Auditing the Company’s valuation of originated and acquired vacation ownership notes receivable was challenging because management’s assumptions regarding future defaults are highly subjective and requires significant judgment.

Furthermore, significant audit effort is required as the static pool analyses are complex and contain a significant volume of data.

Auditing the Company’s valuation of originated and acquired vacation ownership notes receivable was challenging because significant audit effort is required as the static pool analyses are complex and contain a significant volume of data.

Furthermore, the valuation of originated and acquired vacation ownership notes receivable was sensitive to management’s assumptions regarding future default rates.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s vacation ownership notes receivable process.

For example, we tested controls over management’s review of the assumptions regarding future defaults and review of the static pool analyses, including the significant inputs to the analyses.

For example, we tested controls over management’s review of the static pool analyses, including the significant inputs to the analyses, and review of the assumption regarding future default rates.

To test the valuation of originated and acquired vacation ownership notes receivable, we performed audit procedures that included, among others, assessing the methodologies used, evaluating the assumptions regarding future defaults as discussed above, and testing the completeness and accuracy of the static pool analyses, including the significant inputs to the analyses.

For example, w e compared the assumptions regarding future defaults to recent trends in performance of the Company’s originated and acquired vacation ownership notes receivables and performed sensitivity analyses on the assumptions.

We also compared inputs to the static pool analysis to historical data.

We involved real estate subject matter resources on our team because of the significant judgment involved in auditing the future defaults assumptions and the static pool analyses are unique to companies in the real estate time-sharing industry.

For example, we agreed inputs to the static pool analyses to historical data and source documentation.

We also compared the assumptions regarding future defaults to the Company’s historical and current default rates by customer class and performed a retrospective review of prior analyses.

We involved real estate subject matter resources on our team because the static pool analyses are unique to companies in the real estate time-sharing industry.

Accounting for the Acquisition of Welk Hospitality Group, Inc.

Description of the Matter As more fully described in Note 3, the Company completed the acquisition of Welk Hospitality Group, Inc.

(“Welk”) in April 2021 for $405 million.

The acquisition was accounted for as a business combination, and as such, the Company measured the acquired assets and liabilities assumed at their acquisition-date fair values.

The Company has finalized the valuations of the acquired assets and liabilities assumed, except for the valuation of certain property and equipment and evaluation of historical tax positions.

Accordingly, these estimates are subject to change during the measurement period.

Auditing the Company’s accounting for the Welk acquisition was challenging due to a high degree of subjectivity and significant audit effort in evaluating the fair value of the intangible assets, inventory and vacation ownership notes receivable.

The fair value of the intangible assets, inventory and vacation ownership notes receivable is sensitive to changes in significant assumptions, such as the discount rates for intangible assets and inventory, and the default rates for vacations ownership notes receivable.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the effectiveness of controls over the recognition and measurement of intangible assets, inventory and vacation ownership notes receivable, including the controls over the valuation methodologies, models and significant inputs and assumptions used in estimating the fair values.

To test the fair values of the intangible assets, inventory and vacation ownership notes receivable, we performed audit procedures that included, among others, evaluating the Company’s methodologies and related assumptions used as well as testing the completeness and accuracy of the underlying data supporting the fair values.

For example, we compared the discount rates utilized for intangible assets and inventory to current industry, market and economic trends, and to assumptions used to value similar assets.

For vacation ownership notes receivable, we compared the default rates to Welk’s historical and current default rates by customer class and tested the historical and current default rates by agreeing information to Welk’s historical data and source documentation.

In addition, we involved valuation specialists to assist in the evaluation of the Company’s methodologies and significant assumptions used in estimating the fair values.

/s/ Ernst & Young LLP

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Interest expense ( 164 ) ( 150 ) ( 132 )

ILG acquisition-related costs ( 62 ) ( 118 ) ( 127 )

Other ( 4 ) 1 ( 4 )

(LOSS) INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS ( 340 ) 225 103

Benefit (provision) for income taxes 84 ( 83 ) ( 51 )

NET (LOSS) INCOME ( 256 ) 142 52

Net (income) loss attributable to noncontrolling interests ( 19 ) ( 4 ) 3

NET (LOSS) INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ ( 275 ) $ 138 $ 55

(LOSS) EARNINGS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

Transaction and integration costs ( 110 ) ( 66 ) ( 118 )

INCOME (LOSS) BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS 127 ( 340 ) 225

(Provision for) benefit from income taxes ( 74 ) 84 ( 83 )

NET INCOME (LOSS) 53 ( 256 ) 142

Net income attributable to noncontrolling interests ( 4 ) ( 19 ) ( 4 )

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 49 $ ( 275 ) $ 138

EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

Basic $ 1.15 $ ( 6.65 ) $ 3.13

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2021 2020 2019

NET (LOSS) INCOME $ ( 256 ) $ 142 $ 52

NET INCOME (LOSS) $ 53 $ ( 256 ) $ 142

Foreign currency translation adjustments 11 6 ( 27 )

Derivative instrument adjustment, net of tax 21 ( 18 ) ( 15 )

OTHER COMPREHENSIVE LOSS, NET OF TAX ( 12 ) ( 42 ) ( 11 )

Net (income) loss attributable to noncontrolling interests ( 19 ) ( 4 ) 3

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX 32 ( 12 ) ( 42 )

Net income attributable to noncontrolling interests ( 4 ) ( 19 ) ( 4 )

Other comprehensive income attributable to noncontrolling interests — — —

COMPREHENSIVE (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS ( 19 ) ( 4 ) 3

COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ ( 287 ) $ 96 $ 44

COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS ( 4 ) ( 19 ) ( 4 )

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 81 $ ( 287 ) $ 96

See Notes to Consolidated Financial Statements

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Additional paid-in capital 4,072 3,760

Accumulated other comprehensive income ( 48 ) ( 36 )

Accumulated other comprehensive loss ( 16 ) ( 48 )

Retained earnings 275 272

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OPERATING ACTIVITIES

Net (loss) income $ ( 256 ) $ 142 $ 52

Adjustments to reconcile net (loss) income to net cash, cash equivalents, and restricted cash provided by operating activities:

Net income (loss) $ 53 $ ( 256 ) $ 142

Adjustments to reconcile net income (loss) to net cash, cash equivalents, and restricted cash provided by operating activities:

Depreciation and amortization of intangibles 146 123 141

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Impairment charges 3 100 99

(Gain) loss on disposal of property and equipment, net ( 4 ) ( 18 ) 1

Gain on disposal of property and equipment, net — ( 4 ) ( 18 )

Deferred income taxes 34 ( 38 ) 5

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Inventory 61 18 65

Purchase of vacation ownership units for future transfer to inventory ( 61 ) ( 20 ) —

Other assets ( 46 ) 44 37

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Other liabilities 27 — 23

Deconsolidation of certain Consolidated Property Owners' Associations ( 168 ) — —

Purchase of vacation ownership units for future transfer to inventory ( 98 ) ( 61 ) ( 20 )

Other, net — — ( 21 )

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

Disposition of subsidiary shares to noncontrolling interest holder — — 40

Proceeds from collection of notes receivable — — 38

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Dispositions, net 3 15 51

Other, net 2 — —

Net cash, cash equivalents, and restricted cash (used in) provided by investing activities ( 213 ) ( 32 ) 37

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Repayments of debt ( 1,339 ) ( 705 ) ( 820 )

Purchase of convertible note hedges ( 100 ) — —

Proceeds from issuance of warrants 70 — —

Payment of debt issuance costs ( 22 ) ( 14 ) ( 20 )

Finance lease payment ( 5 ) ( 11 ) ( 12 )

Debt issuance costs ( 14 ) ( 20 ) ( 34 )

Repurchase of common stock ( 78 ) ( 82 ) ( 465 )

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Other, net — — 1

Net cash, cash equivalents, and restricted cash provided by (used in) by financing activities 23 ( 331 ) 1,433

Net cash, cash equivalents, and restricted cash (used in) provided by financing activities ( 317 ) 23 ( 331 )

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

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Dividends payable $ 23 $ — $ 23

Non-cash issuance of note receivable in connection with disposition to noncontrolling interest — — 23

Non-cash issuance of stock in connection with ILG Acquisition — — 2,505

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

Non-cash transfer from inventory to property and equipment 105 74 —

Non-cash transfer from property and equipment to inventory 2 — 71

Non-cash transfer from other assets to property and equipment 22 — —

Non-cash issuance of treasury stock for employee stock purchase plan 3 2 2

Property acquired via capital lease — — 9

Interest paid, net of amounts capitalized 184 176 167

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(In millions)

Common Stock Issued Common Stock Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive Income Retained Earnings Total MVW Shareholders' Equity Noncontrolling Interests Total Equity

36.9 BALANCE AT YEAR-END 2017 $ — $ ( 694 ) $ 1,189 $ 17 $ 529 $ 1,041 $ — $ 1,041

— Net income (loss) — — — — 55 55 ( 3 ) 52

20.5 ILG Acquisition 1 — 2,408 — — 2,409 29 2,438

— Disposition of subsidiary shares to noncontrolling interest holder — — 72 — — 72 ( 21 ) 51

— Foreign currency translation adjustments — — — ( 5 ) — ( 5 ) — ( 5 )

— Derivative instrument adjustment — — — ( 6 ) — ( 6 ) — ( 6 )

0.2 Amounts related to share-based compensation — — 52 — — 52 — 52

— Repurchase of common stock — ( 96 ) — — — ( 96 ) — ( 96 )

— Dividends — — — — ( 61 ) ( 61 ) — ( 61 )

Common Stock Issued Common Stock Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total MVW Shareholders' Equity Noncontrolling Interests Total Equity

57.6 BALANCE AT YEAR-END 2018 $ 1 $ ( 790 ) $ 3,721 $ 6 $ 523 $ 3,461 $ 5 $ 3,466

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75.3 BALANCE AT YEAR-END 2020 $ 1 $ ( 1,334 ) $ 3,760 $ ( 48 ) $ 272 $ 2,651 $ 31 $ 2,682

— Net income — — — — 49 49 4 53

— Welk Acquisition — 55 193 — — 248 — 248

— Foreign currency translation adjustments — — — 11 — 11 — 11

— Derivative instrument adjustment — — — 21 — 21 — 21

0.2 Amounts related to share-based compensation — 1 29 — — 30 — 30

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

— Purchase of convertible note hedges — — ( 100 ) — — ( 100 ) — ( 100 )

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

— Repurchase of common stock — ( 78 ) — — — ( 78 ) — ( 78 )

— Dividends — — — — ( 46 ) ( 46 ) — ( 46 )

— Employee stock plan issuance — — 3 — — 3 — 3

— Deconsolidation of certain Consolidated Property Owners' Associations — — — — — — ( 25 ) ( 25 )

75.5 BALANCE AT YEAR-END 2021 $ 1 $ ( 1,356 ) $ 4,072 $ ( 16 ) $ 275 $ 2,976 $ 10 $ 2,986

See Notes to Consolidated Financial Statements

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as “Marriott International” and Marriott International’s Marriott Bonvoy customer loyalty program as “Marriott Bonvoy.” We use certain other terms that are defined within these Financial Statements.

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.

The Financial Statements presented herein and discussed below include 100 % 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 income or 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 entities have been eliminated in consolidation.

Pursuant to a change in control of certain consolidated owners’ associations, we recorded a non-cash loss of $ 1 million in (Losses) gains and other (expense) income, net on our Income Statement for the year ended December 31, 2021, and deconsolidated $ 179 million of assets, inclusive of $ 168 million of restricted cash, and $ 155 million of liabilities, for a decrease in Noncontrolling interests of $ 25 million during 2021.

See our Consolidated Statements of Shareholders’ Equity for further information.

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

These Financial Statements reflect our financial position, results of operations, and cash flows as prepared in conformity with United States Generally Accepted Accounting Principles (“GAAP”).

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.

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

Accordingly, ultimate results could differ from these estimated amounts.

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 continuing COVID-19 pandemic (as defined below), and efforts to mitigate it, has made it more challenging to make these estimates.

Accordingly, ultimate results could differ from these estimated amounts, and such differences may be material.

We have reclassified certain prior year amounts to conform with our current year presentation.

COVID-19 Pandemic Update

In March 2020, the World Health Organization declared the coronavirus (COVID-19) outbreak a global pandemic (“COVID-19,” “the COVID-19 pandemic,” “the pandemic,” or “the virus”), and since then the world has been, and continues to be, impacted by this virus.

National, federal, state, and local governments have since implemented various travel restrictions, border closings, restrictions on public gatherings, mandatory quarantines, shelter-in-place mandates and limitations on business operations.

The COVID-19 pandemic had a swift and unexpected adverse impact on the global economic landscape, with an especially significant adverse impact on the travel and hospitality industries.

The results of operations for 2020 include impacts related to the COVID-19 pandemic, which have been significantly adverse for our business.

The COVID-19 pandemic and measures to prevent or slow the spread of the virus impacted our businesses in a number of ways.

In our vacation ownership segment, due to low occupancy rates and based on various governmental mandates and advisories, we closed all of our sales centers and several of our resorts and reduced operations and amenities at our resorts over the course of 2020.

These actions led to a material decrease in contract sales and rental revenues from our vacation ownership business.

In our Exchange & Third-Party Management business, the closures of certain affiliated resorts and managed properties had an adverse impact on our business, and the closure of a large number of resorts, and their decision not to take reservations, during a portion of the year resulted in a decrease in management and exchange revenues.

In response to the evolving situation and in anticipation of continued possible disruptions, we took action to implement various cost saving measures and to preserve liquidity through restructuring our workforce and corporate debt.

See Footnote 3 “Restructuring Charges” for more information about the restructuring charges recorded as a result of the COVID-19 pandemic.

Also see Footnote 17 “Debt” for information on the steps taken to preserve liquidity during these uncertain times.

COVID-19 Pandemic and Restructuring Update

In early 2020, the World Health Organization declared the coronavirus (COVID-19) outbreak a global pandemic (“COVID-19,” “the COVID-19 pandemic,” “the pandemic,” or “the virus”).

The COVID-19 pandemic caused significant disruptions in international and U.S.

economies and markets, and has had an unprecedented impact on the travel and hospitality industries, as well as the Company.

Our results of operations for fiscal year 2021 and 2020 reflect significantly adverse impacts related to the COVID-19 pandemic.

At this time, our businesses continue to recover, and nearly all of our sales centers, resorts, and other properties have reopened, however the COVID-19 pandemic, and any recovery therefrom, continues to evolve and its further potential impacts on our business is the future remain uncertain.

We continue to closely monitor and seek to actively manage the ongoing effects of the COVID-19 pandemic on our business and operations, and to adapt our operations.

We recorded $ 25 million in Restructuring charges on our Income Statement for the year ended December 31, 2020, related to a workforce reduction plan that was adopted as a result of the COVID-19 pandemic.

The balance in our restructuring reserve as of December 31, 2020 was $ 17 million and related solely to employee termination costs.

During the year ended December 31, 2021, we recorded a true up of less than $ 1 million in Restructuring charges on our Income Statement, and our restructuring reserve balance was less than $ 1 million as of December 31, 2021.

Acquisition of Welk

On April 1, 2021 (the “Welk Acquisition Date”), we completed the acquisition of Welk Hospitality Group, Inc.

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

The Financial Statements in this report for fiscal year 2021 include Welk’s results of operations for the last three quarters of 2021, and reflect the financial position of our combined company at December 31, 2021.

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

Acquisition of ILG

On September 1, 2018 (the “Acquisition Date”), we completed the acquisition of ILG, LLC, formerly known as ILG, Inc.

On September 1, 2018 (the “ILG Acquisition Date”), we completed the acquisition of ILG, LLC, formerly known as ILG, Inc.

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

We refer to our business associated with brands that existed prior to the ILG Acquisition as “Legacy-MVW” and to ILG’s business and brands that we acquired as “Legacy-ILG.” See Footnote 4 “Acquisitions and Dispositions” for more information on the ILG Acquisition.

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Customer deposits received for contracts are recorded as Advance deposits on our Balance Sheets until the point in time at which control of the vacation ownership product has transferred to the customer.

Our assessment of collectibility of the transaction price for sales of vacation ownership products is aligned with our credit granting policies for financed contracts.

Our assessment of collectability of the transaction price for sales of vacation ownership products is aligned with our credit granting policies for financed contracts.

In determining the consideration to which we expect to be entitled for financed contracts, we include estimated variable consideration in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.

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Variable consideration which has not been included within the transaction price is presented as a reserve on vacation ownership notes receivable.

Revisions to estimates of variable consideration from the sale of vacation ownership products impact the reserve on vacation ownership notes receivable and can increase or decrease revenue.

Revisions to estimates of variable consideration from the sale of vacation ownership products impact the reserve on originated vacation ownership notes receivable and can increase or decrease revenue.

Revenues were reduced during 2021 by $ 9 million due to changes in our estimates of variable consideration for performance obligations that were satisfied in prior periods.

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We evaluated our business practices, and the underlying risks and rewards associated with vacation ownership products and the respective timing that such risks and rewards are transferred to the customer in determining the point in time at which control of the vacation ownership product is transferred to the customer.

Based upon the different terms of the contracts with the customer and business practices, we transfer control of the vacation ownership product at different times for Legacy-MVW and Legacy-ILG.

We recognize revenue on the sale of Legacy-MVW vacation ownership products at closing.

Based upon the different terms of the contracts with the customer and business practices, we transfer control of the vacation ownership product at different times for our different businesses.

We recognize revenue on the sale of Legacy-MVW and Legacy-Welk vacation ownership products at closing.

We recognize revenue on the sale of Legacy-ILG vacation ownership products upon expiration of the rescission period.

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Management Fee Revenues and Cost Reimbursements Revenues

We provide day-to-day-management services, including housekeeping services, operation of reservation systems, maintenance and certain accounting and administrative services for property owners’ associations, condominium owners and hotels.

We provide day-to-day-management services, including housekeeping services, operation of reservation systems, maintenance and certain accounting and administrative services for owners’ associations, condominium owners and hotels.

We generate revenue from fees we earn for managing vacation ownership resorts, clubs, owners’ associations, condominiums and hotels.

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In addition, we receive reimbursement of costs incurred on behalf of our customers, which consist of actual expenses with no added margin (“cost reimbursements”).

Vacation Ownership segment cost reimbursements revenues exclude amounts that we have paid to the property owners’ associations related to maintenance fees for unsold vacation ownership products, as we have concluded that such payments are consideration payable to a customer.

Vacation Ownership segment cost reimbursements revenues exclude amounts that we have paid to the owners’ associations related to maintenance fees for unsold vacation ownership products, as we have concluded that such payments are consideration payable to a customer.

Management fees are collected over time or upfront depending upon the specific management contract.

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We recognize interest income on an accrual basis.

The contractual terms of the financing agreements require that the contractual level of annual principal payments be sufficient to amortize the loan over a customary period for the vacation ownership product being financed, which is generally ten years.

Generally, payments commence under the financing contracts 30 to 60 days after closing.

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We earn interest income from the financing arrangements on the principal balance outstanding over the life of the arrangement and record that interest income in Financing revenues on our Income Statements.

In addition, we recognize interest income related to our acquired vacation ownership notes receivable using the level yield method.

See Footnote 6 “Vacation Ownership Notes Receivable” for additional information related to the accounting for our acquired vacation ownership notes receivable.

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For certain rental revenues associated with our Exchange & Third-Party Management segment, revenue is recognized when confirmation of the transaction is provided as we concluded we are an agent for these transactions.

We recognize rental revenue from the utilization of plus points issued in connection with the sale of vacation ownership products as described in “ Sale of Vacation Ownership Products ” above.

We recognize rental revenue from the utilization of plus points issued in connection with the sale of vacation ownership products, as described in “ Sale of Vacation Ownership Products ” above, when occupancy has occurred.

We also generate revenues from vacation packages sold to our customers.

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Contract liabilities are recognized as revenue as (or when) we perform under the contract.

See Footnote 5 “Revenue” for additional information related to our receivables, contract assets and contract liabilities.

See Footnote 4 “Revenue and Receivables” for additional information related to our receivables, contract assets and contract liabilities.

Costs Incurred to Sell Vacation Ownership Products

We charge marketing and sales costs we incur to sell vacation ownership products to expense when incurred.

(Loss) Earnings Per Share Attributable to Common Shareholders

Basic (loss) earnings per share attributable to common shareholders is calculated by dividing the (loss) earnings available to common shareholders by the weighted average number of common shares outstanding for the period.

Diluted (loss) earnings per share attributable to common shareholders is calculated to give effect to all potentially dilutive common shares that were outstanding during the reporting period.

Earnings or Loss Per Share Attributable to Common Shareholders

Basic earnings or loss per share attributable to common shareholders is calculated by dividing the earnings or loss available to common shareholders by the weighted average number of common shares outstanding for the period.

Diluted earnings or loss per share attributable to common shareholders is calculated to give effect to all potentially dilutive common shares that were outstanding during the reporting period.

The dilutive effect of outstanding equity-based compensation awards is reflected in diluted earnings per share attributable to common shareholders by application of the treasury stock method.

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Unanticipated events and circumstances may occur which could affect the accuracy or validity of our assumptions, estimates or actual results.

Additionally, when acquiring a company that has recorded deferred revenue in its historical, pre-acquisition financial statements, we are required as part of purchase accounting to re-measure the deferred revenue as of the acquisition date.

Deferred revenue is re-measured to represent solely the cost that relates to the associated legal performance obligation which we assumed as part of the acquisition, plus a normal profit margin representing the level of effort or risk assumed.

Legal performance obligations that simply relate to the passage of time would not result in recognized deferred revenue as there is little to no associated cost.

This purchase accounting treatment typically results in lower amounts of revenue recognized in a reporting period following the acquisition than would have otherwise been recognized on a historical basis.

Variable Interest Entities

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Restricted Cash

Restricted cash primarily consists of cash restricted for use by consolidated property owners’ associations which is designated for resort operations and other specific uses, such as reserves, cash held in a reserve account related to vacation ownership notes receivable securitizations, cash collected for maintenance fees to be remitted to property owners’ associations, and deposits received and held in escrow, primarily associated with the sale of vacation ownership products.

Restricted cash primarily consists of cash restricted for use by consolidated owners’ associations which is designated for resort operations and other specific uses, such as reserves, cash held in a reserve account related to vacation ownership notes receivable securitizations, cash collected for maintenance fees to be remitted to owners’ associations, and deposits received and held in escrow, primarily associated with the sale of vacation ownership products.

Accounts Receivable

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Accounts receivable outstanding longer than the contractual payment terms are considered past due.

We determine our credit loss reserve for accounts receivable by considering a number of factors, including the length of time accounts receivable are past due, previous loss history, our judgment as to the specific customer’s current ability to pay its obligation and the condition of the general economy.

We determine our credit loss reserve for accounts receivable by considering a number of factors, including previous loss history, our judgment as to the specific customer’s current ability to pay its obligation and the condition of the general economy.

We write off accounts receivable when they become uncollectible once we have exhausted all means of collection.

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Any changes in the reserve for credit losses are recorded as Financing expenses on our Income Statements.

In addition, we established a noncredit discount of $ 2 million, which represents the difference between the amortized cost basis and the par value of our acquired vacation ownership notes receivable.

In addition, we established a noncredit discount of $ 2 million, which represented the difference between the amortized cost basis and the par value of our acquired vacation ownership notes receivable at January 1, 2020.

The noncredit discount will be amortized to interest expense over the contractual life of the acquired vacation ownership notes receivable and is recorded as Financing expenses on our Income Statements.

For additional information on our acquired vacation ownership notes receivable, including information on the related reserves and the impact of the COVID-19 pandemic, see Footnote 7 “Vacation Ownership Notes Receivable.”

The vacation ownership notes receivable acquired as part of the Welk Acquisition were recorded at fair value using the purchased credit deteriorated assets provision of the current expected credit loss model, consistent with the principles outlined above.

Originated Vacation Ownership Notes Receivable Reserve

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See “Financing Revenues” above for further information.

Past Due and Defaulted

Although we consider loans to owners to be past due if we do not receive payment within 30 days of the due date, we suspend accrual of interest only on those loans that are over 90 days past due.

For Legacy-MVW vacation ownership notes receivable, we consider loans over 150 days past due to be in default and fully reserve such amounts.

For Legacy-ILG vacation ownership notes receivable we consider loans over 120 days past due to be in default and fully reserve such amounts.

For Legacy-ILG and Legacy-Welk vacation ownership notes receivable, we consider loans over 120 days past due to be in default and fully reserve such amounts.

We apply payments we receive for vacation ownership notes receivable on non-accrual status first to interest, then to principal and any remainder to fees.

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We write off vacation ownership notes receivable against the reserve once we receive title to the vacation ownership products through the foreclosure or deed-in-lieu process or, in certain circumstances, when revocation is complete.

For additional information on our originated vacation ownership notes receivable, including information on the related reserves and the impact of the COVID-19 pandemic, see Footnote 7 “Vacation Ownership Notes Receivable.”

Our inventory consists primarily of completed vacation ownership products and vacation ownership products under construction.

Our inventory consists primarily of completed vacation ownership products.

We carry our inventory at the lower of (1) cost, including costs of improvements and amenities incurred subsequent to acquisition, capitalized interest and real estate taxes plus other costs incurred during construction, or (2) estimated fair value, less costs to sell, which can result in impairment charges and/or recoveries of previous impairments.

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Also, pursuant to the guidance for accounting for real estate time-sharing transactions, we do not reduce inventory for cost of vacation ownership products related to variable consideration which has not been included within the transaction price (accordingly, no adjustment is made when inventory is reacquired upon default of the related receivable).

These standards provide for changes in estimates within the relative sales value calculations to be accounted

for as real estate inventory true-ups, which we refer to as product cost true-up activity, and are recorded in Cost of vacation ownership product expenses on the Income Statements to retrospectively adjust the margin previously recorded subject to those estimates.

These standards provide for changes in estimates within the relative sales value calculations to be accounted for as real estate inventory true-ups, which we refer to as product cost true-up activity, and are recorded in Cost of vacation ownership product expenses on the Income Statements to retrospectively adjust the margin previously recorded subject to those

For 2021, 2020 and 2019, product cost true-up activity relating to vacation ownership products increased carrying values of inventory by $ 10 million, $ 6 million and $ 8 million, respectively.

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Property and equipment includes our sales centers, golf courses, information technology, including internally developed capitalized software, and other assets used in the normal course of business, as well as land held for future vacation ownership product development and undeveloped, and partially developed land parcels that are not part of an approved development plan and do not meet the criteria to be classified as held for sale.

In addition, fully developed vacation ownership interests are classified as property and equipment until they are registered for sale.

In addition, fully developed vacation ownership interests are classified as property and equipment until they are registered and available for sale.

We record property and equipment at cost, including interest and real estate taxes incurred during active development.

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Operating leases include lease arrangements for various land, corporate facilities, real estate and equipment.

We also have a long-term land lease for land underlying an operating hotel.

Corporate facilities leases are for office space, including our corporate headquarters in Orlando, Florida.

Corporate facilities leases are for office space, including our current corporate headquarters in Orlando, Florida.

Other operating leases are primarily for office, off-site sales centers and retail space, as well as various equipment supporting our operations, with varying terms and renewal option periods.

Finance leases include lease arrangements for ancillary and operations space.

We also have a long-term finance lease for land underlying an operating hotel.

In addition, we also lease various equipment supporting our operations and classify these leases as finance leases in accordance with ASC 842.

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If the carrying value of the asset exceeds the fair value, we recognize an impairment loss in the amount of that excess.

We recorded $ 3 million of impairment charges for property and equipment during 2020.

See Footnote 13 “Intangible Assets” for additional information on our intangibles, including the impairment charges recorded during the year ended December 31, 2020.

We perform an annual review for the potential impairment of the carrying value of goodwill in the fourth quarter, or more frequently if events or circumstances indicate a possible impairment.

For purposes of evaluating goodwill for impairment, we have two reporting units, which are also our reportable operating segments.

In evaluating goodwill for impairment, we may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount.

In evaluating goodwill for impairment, we may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount.

If we bypass the qualitative assessment, or if we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then we perform a quantitative impairment test by comparing the fair value of a reporting unit with its carrying amount.

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We base these assumptions on our historical data and experience, third-party appraisals, industry projections, micro and macro general economic condition projections, and our expectations.

See Footnote 12 “Goodwill” for additional information on our goodwill, including the impairment charges recorded during the year ended December 31, 2020.

See Footnote 11 “Goodwill” for additional information on our goodwill.

Convertible Senior Notes

In accounting for the 1.50 % Convertible Senior Notes due 2022 (the “2022 Convertible Notes”), we bifurcated the liability and equity components.

The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature.

The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the 2022 Convertible Notes.

In accounting for the 1.50 % Convertible Senior Notes due 2022 (the “2022 Convertible Notes”) and the 0.00 % Convertible Senior Notes due 2026 (the “2026 Convertible Notes”), referred to collectively as our “convertible notes,” we bifurcated the liability and equity components.

The carrying amount of each liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature.

The carrying amount of each equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the convertible notes.

The excess of the principal amount of the liability over its carrying amount is amortized to interest expense over the term of the convertible notes using the effective interest method.

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Issuance costs attributable to the liability component are amortized to interest expense over the term of the convertible notes, and issuance costs attributable to the equity component are included along with the equity component in additional paid-in capital within shareholders’ equity.

See Footnote 17 “Debt” for more information.

See Footnote 16 “Debt” for more information on our convertible notes and also see Future Adoption of Accounting Standards below for information on the adoption of future accounting standards that will impact the accounting for our convertible notes.

Derivative Instruments

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Contributions are determined based on a specified percentage of salary deferrals by participating employees.

We recognized compensation expense (net of cost reimbursements from property owners’ associations) for our participating employees totaling $ 12 million in 2020, $ 19 million in 2019 and $ 11 million in 2018.

We recognized compensation expense (net of cost reimbursements from owners’ associations) for our participating employees totaling $ 19 million in 2021, $ 12 million in 2020 and $ 19 million in 2019.

Deferred Compensation Plan

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To support our ability to meet a portion of our obligations under the Deferred Compensation Plan, we acquired company owned insurance policies (the “COLI policies”) on the lives of certain participants in the Deferred Compensation Plan, the proceeds of which are intended to be aligned with the investment alternatives elected by plan participants and are payable to a rabbi trust with the Company as grantor.

For both 2020 and 2019, participants were able to select a rate of return based on market-based investment alternatives for up to 100 percent of their contributions and existing balances, with one of those options being a fixed rate of return of 3.5 percent.

For both 2021 and 2020, participants were able to select a rate of return based on market-based investment alternatives for up to 100% of their contributions and existing balances, with one of those options being a fixed rate of return of 3.5 %.

We consolidate the liabilities of the Deferred Compensation Plan and the related assets, which consist of the COLI policies held in the rabbi trust.

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We file tax returns after the close of our fiscal year end and adjust our estimated tax receivable or liability to the actual tax receivable or due per the filed tax returns.

Historically, we have not experienced significant differences between our estimates of provision for income tax and actual amounts incurred.

For purposes of Global Intangible Low-Taxed Income (“GILTI”), we have elected to use the period cost method and therefore have not recorded deferred taxes for basis differences expected to reverse in future periods.

Historically, we have not experienced significant differences between our estimates of provision for income tax and actual amounts incurred, excluding one-time tax method changes approved by the Internal Revenue Service (the “IRS”) after our financial statements were filed.

For purposes of Global Intangible Low-Taxed Income, we have elected to use the period cost method and therefore have not recorded deferred taxes for basis differences expected to reverse in future periods.

For tax positions we have taken, or expect to take, in a tax return we apply a more likely than not threshold, under which we must conclude a tax position is more likely than not to be sustained, assuming that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information, in order to continue to recognize the benefit.

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Additionally, we recognize accrued interest and penalties related to our unrecognized tax benefits as a component of tax expense.

For information about income taxes, deferred tax assets and liabilities, and uncertain tax benefits, see Footnote 6 “Income Taxes.”

New Accounting Standards

Accounting Standards Update 2016-13 – “ Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments ” (“ASU 2016-13”)

In the first quarter of 2020, we adopted Accounting Standards Update (“ASU”) 2016-13, which replaced the incurred loss impairment methodology in then-current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The update was intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

The current expected credit loss model provides that an initial estimate of expected credit losses over the contractual life of the financial instrument is reflected in the allowance for credit losses and any changes to that estimate are recognized as adjustments to the allowance.

ASU 2016-13 did not have a material impact on our financial statements or disclosures upon adoption, primarily as most of our vacation ownership notes receivable are recorded net of an allowance that is calculated in accordance with ASC 606.

Vacation Ownership Notes Receivable

Our originated vacation ownership notes receivable are recorded net of a reserve that is calculated in accordance with ASC 606, so there was no material impact upon adoption of ASU 2016-13.

Our acquired vacation ownership notes receivable have historically been accounted for using the expected cash flow method of recognizing discount accretion based on the expected cash flows of those instruments.

Upon adoption of ASU 2016-13, we established a reserve for credit losses and a corresponding increase in the book value of the acquired vacation ownership notes receivable, resulting in no impact to the recorded balance.

In addition, we recorded a noncredit discount of $ 2 million, which represents the difference between the amortized cost basis and the par value of our acquired vacation ownership notes receivable.

For additional information on our vacation ownership notes receivable, including information on the related reserves, see Footnote 7 “Vacation Ownership Notes Receivable.”

Accounts Receivable

Our Accounts receivable include amounts due from customers, principally credit card receivables, and amounts due from resort developers, members and managed properties.

These amounts are typically due within one year and are presented net of a reserve for credit losses.

Subsequent to our adoption of ASU 2016-13, we estimate expected credit losses for our accounts receivable by considering a number of factors, including previous loss history and the condition of the general economy, as well as any other significant events that may impact the collectibility of the specific accounts receivable.

Accounts receivable also includes interest receivable on vacation ownership notes receivable.

Write-offs of interest receivable are recorded as a reversal of previously recorded interest income.

There was no material impact to our financial statements or disclosures as a result of our adoption of ASU 2016-13 for accounts receivable, and no material change in our reserve for credit losses during 2020.

Accounting Standards Update 2020-09 – “Debt (Topic 470) – Amendments to SEC Paragraphs Pursuant to SEC Release No.

33-10762” (“ASU 2020-09”)

In March 2020, the Securities and Exchange Commission (the “SEC”) issued a final rule which simplifies the disclosure requirements related to registered securities under Rule 3-10 of Regulation S-X (the “SEC Final Rule”).

The SEC Final Rule replaces the requirement for a parent entity to provide detailed disclosures regarding subsidiary issuers and guarantors of registered debt offerings within the footnotes to the consolidated financial statements.

Under the SEC Final Rule, a parent entity is required to present summarized financial information of the issuers’ and guarantors’ balance sheets and statements of operations on a consolidated basis.

It also requires qualitative disclosures with respect to information about guarantors and the terms and conditions of guarantees.

These disclosures may be provided outside the footnotes to a company’s consolidated financial statements.

In October 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-09 to reflect the SEC’s new disclosure rules on guaranteed debt securities offerings.

We early adopted the reporting requirements of the SEC Final Rule as reflected in ASU 2020-09 in the first quarter of 2020 and elected to provide these disclosures within Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Future Adoption of Accounting Standards

Accounting Standards Update 2019-12 – “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes” (“ASU 2019-12”)

In December 2019, the FASB issued ASU 2019-12, which amends and simplifies existing guidance in an effort to reduce the complexity of accounting for income taxes while maintaining or enhancing the helpfulness of information provided to financial statement users.

This update is effective for fiscal years beginning after December 15, 2020, including interim periods therein, with early adoption permitted.

We expect to adopt ASU 2019-12 commencing in fiscal year 2021 and continue to evaluate the impact that adoption of this update will have on our financial statements and disclosures.

We do not anticipate a material change upon adoption.

In the first quarter of 2021, we adopted accounting standards update (“ASU”) 2019-12, which amended and simplified existing guidance in an effort to reduce the complexity of accounting for income taxes while maintaining or enhancing the helpfulness of information provided to financial statement users.

Our adoption of ASU 2019-12 did not have a material impact on our Financial Statements or disclosures.

Future Adoption of Accounting Standards

Accounting Standards Update 2020-04 – “ Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting ” (“ASU 2020-04”)

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This update can be adopted no later than December 1, 2022, with early adoption permitted.

As of December 31, 2021, borrowings under our existing Corporate Credit Facility (as defined in Footnote 16 “Debt”) and Warehouse Credit Facility (as defined in Footnote 15 “Securitized Debt”) generally reference LIBOR, as do certain interest rate swaps and collars.

The instruments have not yet discontinued the use of LIBOR.

To the extent these instruments are amended to reference a different benchmark interest rate, we may elect to utilize the relief available in ASU 2020-04.

When we renew or amend our existing debt instruments, we will determine a replacement rate for LIBOR.

We expect to adopt ASU 2020-04 in fiscal year 2022 and continue to evaluate the impact that adoption of this update will have on our financial statements and disclosures.

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In August 2020, the FASB issued ASU 2020-06, which amends and simplifies existing guidance in an effort to reduce the complexity of accounting for convertible instruments and to provide financial statement users with more meaningful information.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods therein, with early adoption permitted for fiscal years beginning after December 15, 2020.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods therein.

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 are evaluating the impact that ASU 2020-06, including the timing of implementation, 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.

Under the “if-converted” method, diluted earnings per share would generally be calculated assuming that all of the 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.

RESTRUCTURING CHARGES

As a result of the COVID-19 pandemic, in September 2020 a workforce reduction plan was approved, which impacted approximately 3,000 associates beginning in November 2020.

We expect that we will incur approximately $ 30 to $ 35 million in total restructuring and related charges, primarily related to employee severance and benefit costs.

In connection with this plan, we have recorded the following on our Income Statement for the year ended December 31, 2020:

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

Cost reimbursement revenues $ 4 $ 2 $ — $ 6

Cost reimbursement expenses $ ( 4 ) $ ( 2 ) $ — $ ( 6 )

Restructuring $ 15 $ 4 $ 6 $ 25

The following table presents our restructuring reserve activity during the year ended December 31, 2020:

($ in millions) Employee Termination Costs

Balance at December 31, 2019 $ —

Cash Payments ( 8 )

Balance at December 31, 2020 $ 17

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

The impacts of the adoption will be recorded as a 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.

Commencing in the first quarter of 2022, we will 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 is expected to reduce our reported diluted earnings per share.

The adoption of ASU 2020-06 on January 1, 2022 will result in an increase in debt of $ 107 million, a decrease in additional paid-in capital of $ 111 million, and a decrease in deferred taxes of $ 27 million, as well as a cumulative effect adjustment to the opening balance of retained earnings of $ 31 million.

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 amends ASC 805 to require entities to apply ASC 606 to recognize and measure contract assets and contract liabilities from contracts with customers in a business combination.

ASU 2021-08 is effective for public entities for fiscal years beginning after December 15, 2022, including interim periods therein, with early adoption permitted.

ASU 2021-08 shall be applied on a prospective basis to business combinations that occur on or after the adoption date.

We expect to early adopt ASU 2021-08 on January 1, 2022 and we anticipate that the adoption of this ASU will not impact our financial statements and disclosure.

In the event that we complete business combinations in the future, the application of ASU 2021-08 could result in higher acquired deferred revenue.

ACQUISITIONS AND DISPOSITIONS

New York, New York

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

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

See Footnote 20 “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.

San Francisco, California

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

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

During the third quarter of 2019, we acquired 78 completed vacation ownership units and a sales gallery located at our Marriott Vacation Club Pulse, San Francisco resort for $ 58 million.

We accounted for the transaction as an asset acquisition with the purchase price allocated to Inventory ($ 48 million) and Property and equipment ($ 10 million).

Marco Island, Florida

During the fourth quarter of 2018, we acquired 92 completed vacation ownership units for $ 83 million and during the first quarter of 2018, we acquired 20 completed vacation ownership units for $ 24 million.

Both transactions were accounted for as asset acquisitions with all of the purchase price allocated to Inventory.

ILG Acquisition

We completed the acquisition of ILG on September 1, 2018.

The following table presents the fair value of each type of consideration transferred in the ILG Acquisition, as finalized at September 30, 2019.

Welk Acquisition

We completed the Welk Acquisition on April 1, 2021, for consideration of $ 405 million, including approximately 1.4 million shares of our common stock.

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 in the Welk Acquisition at December 31, 2021.

(in millions, except per share amounts)

Equivalent shares of Marriott Vacations Worldwide common stock issued in exchange for ILG outstanding shares 20.5

Marriott Vacations Worldwide common stock price per share as of Acquisition Date $ 119.00

Fair value of Marriott Vacations Worldwide common stock issued in exchange for ILG outstanding shares 2,441

Cash consideration to ILG shareholders, net of cash acquired of $ 154 million

Fair value of ILG equity-based awards attributed to pre-combination service 64

Total consideration transferred, net of cash acquired 4,185

Noncontrolling interests 32

Equivalent shares of Marriott Vacations Worldwide common stock issued 1.4

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

Fair value of Marriott Vacations Worldwide common stock issued 248

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

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

Fair Values of Assets Acquired and Liabilities Assumed

The following table presents the fair values of the assets that we acquired and the liabilities that we assumed on the Acquisition Date.

($ in millions) September 1, 2018

(as finalized)

Vacation ownership notes receivable $ 753

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

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

We have finalized our valuations related to the acquired assets and liabilities of Welk, except for the valuation of certain property and equipment and our evaluation of Welk’s historical tax positions.

Accordingly, these 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 current 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 the end of the third quarter of 2021 and as adjusted at December 31, 2021.

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

($ in millions) April 1, 2021

(as previously reported) Adjustments April 1, 2021

(as adjusted)

Vacation ownership notes receivable, net (1)

$ 254 $ 1 $ 255

Inventory (2)

136 ( 25 ) 111

Property and equipment 111 ( 28 ) 83

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Other assets 19 — 19

Deferred revenue ( 291 )

Deferred taxes ( 45 ) 13 ( 32 )

Securitized debt from VIEs ( 718 )

Debt ( 189 ) — ( 189 )

Securitized debt ( 184 ) — ( 184 )

Other liabilities ( 66 ) ( 27 ) ( 93 )

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$ 405 $ — $ 405

(1) 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 synergies and growth opportunities from our combined operations, and is not deductible for tax purposes.

See Footnote 12 “Goodwill” for additional information on our goodwill.

We valued acquired vacation ownership notes receivables, which consisted of loans to customers who purchased vacation ownership products and chose to finance their purchase, using a discounted cash flow model, under which we calculated a present value of expected future cash flows over the term of the respective vacation ownership notes receivable (Level 3).

We valued acquired inventory, which consisted of completed unsold VOIs and vacation ownership projects under construction, using an income approach, which is primarily based on significant Level 3 assumptions, such as estimates of future income growth, capitalization rates, discount rates and capital expenditure needs of the relevant properties.

We valued acquired property and equipment, which included four owned hotels, using a combination of the income, cost, and market approaches, which are primarily based on significant Level 3 assumptions, such as estimates of future income growth, capitalization rates, discount rates and capital expenditure needs of the hotels.

We valued deferred revenue, primarily related to membership fees, which are deferred and recognized over the terms of the applicable memberships, utilizing Level 3 inputs based on a review of existing deferred revenue balances against legal performance obligations.

We estimated deferred income taxes based on statutory rates in the jurisdictions of the legal entities where the acquired assets and liabilities are recorded.

We valued the senior unsecured notes assumed using a quoted market price, which is considered a Level 2 input as it is observable in the market;

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

The carrying value of the outstanding balance on the revolving credit facility that was acquired, which was extinguished and repaid in full upon completion of the ILG Acquisition, approximated fair value, as the contractual interest rate was variable plus an applicable margin based credit rating (Level 3 input).

We valued assumed securitized debt from VIEs using a discounted cash flow model.

The significant assumptions in our analysis include default rates, prepayment rates, bond interest rates and other structural factors (Level 3 inputs).

The following table presents the fair values ILG’s identified intangible assets and their related estimated useful lives as of the Acquisition Date.

($ in millions) September 1, 2018

(as finalized) Useful Life

Member relationships $ 671 15 to 20

Management contracts 357 15 to 25

Management contracts (1)

35 indefinite

Trade names and trademarks 82 indefinite

_________________________

(1) These management contracts were entirely related to the VRI Europe business, which we disposed of in the fourth quarter of 2018.

The indefinite-lived management contracts, by their terms, continued beyond the then foreseeable horizon.

There were no legal, regulatory, contractual, competitive, economic or other factors which limited the period of time over which these resort management contracts were expected to contribute future cash flows.

We valued member relationships and management contracts using the multi-period excess earnings method, which is a variation of the income approach.

(1) Vacation ownership notes receivable, net has 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 the Welk business and the vacation ownership industry as a whole, and has been accounted for as such.

We valued the vacation ownership notes receivable using an income approach, which includes the following significant Level 3 assumptions:

default rates, prepayment rates, discount rate and fair value of collateral retained upon customer default.

($ in millions)

Vacation ownership notes receivable $ 287

Allowance for credit losses ( 32 )

Vacation ownership notes receivable, net $ 255

(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.

We valued management contracts using the multi-period excess earnings method, which is a variation of the income approach.

This method estimates an intangible asset’s value based on the present value of the incremental after-tax cash flows attributable to the intangible asset.

We valued trade names and trademarks using the relief-from-royalty method, which applies an estimated royalty rate to forecasted future cash flows, discounted to present value.

These valuation approaches utilize Level 3 inputs.

This valuation approach utilizes the following Level 3 inputs:

future income growth, future cost estimates and discount rate.

(4) Goodwill is calculated as total consideration transferred, net of cash acquired, less identified net assets acquired.

It represents the value that we expect to obtain from growth opportunities from our combined operations and is not deductible for tax purposes.

Pro Forma Results of Operations

The following unaudited pro forma information presents the combined results of operations of Marriott Vacations Worldwide and ILG as if we had completed the ILG Acquisition on December 30, 2016, the last day of our 2016 fiscal year, but using our fair values of assets and liabilities as of the Acquisition Date.

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

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

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

The unaudited pro forma results below include $ 54 million of ILG acquisition-related costs.

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 2021, and $ 19 million included for 2020.

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

Revenues $ 3,894 $ 3,011

Net income $ 210

Net income attributable to common shareholders $ 211

EARNINGS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

Net income (loss) $ 67 $ ( 272 )

Net income (loss) attributable to common shareholders $ 66 $ ( 291 )

EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

Basic $ 1.56 $ ( 7.04 )

Diluted $ 1.53 $ ( 7.04 )

During the third quarter of 2020, we recorded a loss of $ 5 million in the (Losses) gains and other (expense) income, net line on our Income Statement for the year ended December 31, 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.

Welk Results of Operations

The following table presents the results of Welk operations included in our Income Statement for 2021.

($ in millions) 2021

Revenue $ 146

Net income $ 17

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

We accounted for the transaction as an asset acquisition with the purchase price allocated to Inventory ($ 13 million) and Property and equipment ($ 1 million).

New York, New York

During 2021, we acquired the remaining 120 completed vacation ownership units located at our Marriott Vacation Club Pulse, New York City property for $ 98 million.

We accounted for the transaction as an asset acquisition with the purchase price allocated to Property and equipment.

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

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

San Francisco, California

During the first quarter of 2021, we acquired 44 completed vacation ownership units at our Marriott Vacation Club Pulse, San Francisco property for $ 34 million.

We accounted for the transaction as an asset acquisition with the purchase price allocated to Inventory ($ 29 million) and Other assets ($ 5 million).

During the fourth quarter of 2021, we completed the purchase of the remaining inventory at our Marriott Vacation Club Pulse, San Francisco property and wrote off the outstanding management fee receivables deemed uncollectible of $ 7 million, which was recorded in the Management and exchange expense line on our Income Statement for the year ended December 31, 2021.

As part of the purchase, we acquired the remaining 78 completed vacation ownership units, as well as an onsite garage, for $ 59 million.

We accounted for the purchase as an asset acquisition with the purchase price allocated to Inventory ($ 41 million) and Property and equipment ($ 18 million).

Further, we reclassified $ 10 million of previous deposits associated with the project from Other assets to Inventory.

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

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

During 2019, we acquired 78 completed vacation ownership units and a sales gallery located at our Marriott Vacation Club Pulse, San Francisco property for $ 58 million.

We accounted for the transaction as an asset acquisition with the purchase price allocated to Inventory ($ 48 million) and Property and equipment ($ 10 million).

We made no significant dispositions in 2021.

During 2020, we recorded a loss of $ 5 million in the (Losses) gains and other (expense) income, net line on our Income Statement for the year ended December 31, 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, as discussed further below.

We recorded a combined net gain of $ 6 million in the (Losses) gains and other (expense) income, net line on our Income Statement for year ended December 31, 2020 relating to these transactions.

Additionally, during 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, as discussed further below.

We recorded a combined net gain of $ 6 million in the (Losses) gains and other (expense) income, net line on our Income Statement for the year ended December 31, 2020 relating to these transactions.

During 2019, we disposed of excess land parcels in Cancun, Mexico and Avon, Colorado for proceeds of $ 62 million, of which $ 8 million is deferred until certain conditions associated with the sale have been met.

We recorded a combined net gain of $ 19 million in the (Losses) gains and other (expense) income, net line on our Income Statement for the year ended December 31, 2019.

2019 Strategy Change

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

A key focus of our comprehensive review was to evaluate opportunities to reduce holdings in markets where we have excess supply so that future inventory spend can be focused on markets that create incremental cost-effective sales locations in areas of high customer demand.

We evaluated each asset in the context of its current and anticipated product form, our inventory needs and our operating strategy.

As a result of the change in our development strategy, in the third quarter of 2019, we recorded a non-cash impairment charge of $ 72 million, of which $ 61 million related to land and land improvements associated with future phases of three existing resorts, primarily attributable to the fact that the book values of these assets include the historical allocations of common costs incurred when we built the infrastructure of these resorts, $ 9 million related to a land parcel held for future development and $ 2 million related to an ancillary business, as the book values of these assets were in excess of the estimated fair values of these assets.

We also reviewed the remainder of the assets identified for disposition and determined that no other impairment charges were necessary.

As a result of the change in our development strategy, in 2019, we recorded a non-cash impairment charge of $ 72 million, of which $ 61 million related to land and land improvements associated with future phases of three existing resorts, $ 9 million related to a land parcel held for future development and $ 2 million related to an ancillary business.

We used a combination of the market and income approaches to estimate the fair value of these assets.

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Under the income approach, we contemplated alternative uses to comply with the highest and best use provisions of ASC 820.

During the fourth quarter of 2019, we disposed of excess land parcels in Cancun, Mexico and Avon, Colorado for proceeds of $ 62 million, of which $ 8 million is deferred until certain conditions associated with the sale have been met, as part of our strategic decision to reduce holdings in markets where we have excess supply.

We recorded a combined net gain of $ 19 million in the (Losses) gains and other (expense) income, net line on our Income Statement for the year ended December 31, 2019.

As part of the ILG Acquisition, we acquired a 75.5 percent interest in VRI Europe Limited (“VRI Europe”), a joint venture comprised of a European vacation ownership resort management business, which was consolidated by MVW under the voting interest model.

During the fourth quarter of 2018, we sold our interest in VRI Europe to an affiliate of the noncontrolling interest holder for our book value of $ 63 million, of which we received $ 40 million in cash in 2018.

In addition, we recorded a receivable of $ 6 million due in 2019 and a note receivable of $ 17 million due in 2020 relating to the transaction, both of which were received in 2019.

REVENUE AND RECEIVABLES

Sources of Revenue by Segment

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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 December 31, 2020, approximately 82 percent of this amount is expected to be recognized as revenue over the next two years .

At December 31, 2021, approximately 87 % of this amount is expected to be recognized as revenue over the next two years .

Accounts Receivable

Accounts receivable is comprised of amounts due from customers, primarily property owners’ associations, resort developers and members, credit card receivables, interest receivables, amounts due from taxing authorities, indemnification assets, and other miscellaneous receivables.

Accounts receivable is comprised of amounts due from customers, primarily owners’ associations, resort developers and members, credit card receivables, interest receivables, amounts due from taxing authorities, indemnification assets, and other miscellaneous receivables.

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

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Income Tax Provision

The following table presents the components of our (losses) earnings before income taxes for the last three fiscal years:

The following table presents the components of our earnings or losses before income taxes for the last three fiscal years:

($ in millions) 2021 2020 2019

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$ 127 $ ( 340 ) $ 225

Our benefit from (provision for) income taxes for the last three years consisted of:

Our (provision for) or benefit from income taxes for the last three years consisted of:

($ in millions) 2021 2020 2019

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( 50 ) 11 ( 36 )

( 45 ) 43 ( 77 )

Deferred – U.S.

Federal ( 36 ) 26 ( 28 )

State 9 17 ( 9 )

( 29 ) 41 ( 6 )

$ ( 74 ) $ 84 $ ( 83 )

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 on March 27, 2020.

As of December 31, 2020, we evaluated the income tax provisions of the CARES Act and have determined there to be a 6.0 percent benefit to the December 31, 2020 tax rate.

We will continue to evaluate the income tax provisions of the CARES Act 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.

Reconciliation of U.S.

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Share-based compensation, net of Section 162(m) limitation 1.9 0.2 0.7

Transaction costs (2)

Other permanent differences (1)

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Impact related to the CARES Act of 2020 — 6.0 —

Impact related to the Tax Cuts and Jobs Act of 2017 — — 1.2

Foreign tax rate changes 0.4 — ( 0.1 )

Tax rate changes ( 3.8 ) 0.4 ( 0.3 )

income (loss) (2)

Foreign tax credits — ( 6.3 ) ( 1.4 )

Tax credits ( 0.9 ) 0.2 ( 6.6 )

Unrecognized tax benefits 17.9 5.2 3.1

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_________________________

(1) The 2018 increase is attributable to non-deductible executive compensation under provisions of the Tax Cuts and Jobs Act of 2017.

(2) Attributed to non-deductible transaction costs incurred as a result of the ILG Acquisition.

(3) The 2020 change is primarily attributable to non-deductible goodwill impairment recorded due to the impact of COVID-19.

For 2019 and 2018, primarily due to non-deductible meal and entertainment expenses and new foreign tax provisions, under provisions of the Tax Cuts and Jobs Act of 2017.

(4) Attributed to the difference between U.S.

(1) The 2021 impact is primarily due to the deduction of foreign taxes paid in the U.S.

The 2020 impact is primarily attributable to non-deductible goodwill impairment recorded due to the impact of COVID-19.

The 2019 impact is primarily due to non-deductible meal and entertainment expenses and new foreign tax provisions, under provisions of the Tax Cuts and Jobs Act of 2017.

(2) The 2021 impact is primarily due to increases in permanent differences in foreign jurisdictions.

The 2020 and 2019 impact is attributable to the difference between U.S.

and foreign income tax rates and other foreign adjustments.

(5) In 2020, primarily attributable to the increase of the valuation allowance on Spanish and Mexican entities and to losses and future deductions in foreign jurisdictions for which a tax benefit has not been recognized through establishment of valuation allowances.

In 2019, primarily attributable to foreign tax credit carryforwards in the branch and treaty baskets and losses and future deductions in foreign jurisdictions for which a tax benefit has not been recognized through establishment of valuation allowances.

In 2018, primarily attributable to losses and future deductions in foreign jurisdictions for which a tax benefit has not been recognized through establishment of valuation allowances.

(3) The 2021 impact is primarily due to new valuation allowances.

The 2020 impact is primarily attributable to the increase of the valuation allowance on certain foreign entities.

The 2019 impact is primarily attributable to foreign tax credit carryforwards in the branch and treaty baskets and losses and future deductions in foreign tax credit carryforwards in the branch and treaty baskets.

For the years ended December 31, 2021, 2020 and 2019, the provision for income taxes included $ 4 million, $ 4 million, and $ 2 million of excess tax benefits resulting from equity incentive plan activities, respectively.

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These holidays expire through 2034.

We are currently completing the purchase price accounting and have established certain non-income tax reserves for the Welk Acquisition, and the reserve will be finalized in 2022.

We finalized our purchase price accounting for the ILG Acquisition during 2019 and established a reserve for non-income tax issues related to Legacy-ILG.

As of December 31, 2020, the balance of this reserve was $ 46 million.

We expect that we will be indemnified for liabilities of $ 8 million in connection with these non-income tax matters pursuant to a Tax Matters Agreement dated May 11, 2016 by and among Starwood Hotels & Resorts Worldwide, Inc.

(“Starwood”), Vistana Signature Experiences, Inc.

(“Vistana”), and Interval Leisure Group, Inc.

(“Interval Leisure Group”), and consequently have recorded a corresponding indemnification asset.

As of December 31, 2021, the balance of the reserve for non-income tax issues related to our acquisitions was $ 66 million.

We expect that we will be indemnified for liabilities of $ 5 million in connection with these non-income tax matters 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.

Deferred Income Taxes

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Valuation allowances are provided when it is considered more likely than not that deferred tax assets will not be realized.

In 2020 we established an additional valuation allowance of $ 12 million on foreign net tax assets.

In 2021 we established an additional valuation allowance of $ 8 million.

We have $ 111 million of foreign net operating loss carryforwards, some of which begin expiring in 2022;

however, a significant portion of these have indefinite carryforward periods.

We have $ 15 million of federal net operating losses and $ 11 million of state net operating loss carryforwards, none of which will expire within the next five years.

We have $ 15 million of federal net operating losses and $ 18 million of state net operating loss carryforwards, of which less than $ 1 million will expire within the next five years.

federal foreign tax credit carryforwards of $ 20 million, federal capital loss carryforwards of $ 2 million, and $ 9 million of state tax credit carryforwards.

As a result of the Tax Cuts and Jobs Act of 2017, distribution of profits from non-U.S.

subsidiaries are not expected to cause a significant incremental U.S.

subsidiaries is not expected to cause a significant incremental U.S.

tax impact in the future.

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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.

The unrecognized tax benefit, including accrued interest and penalties are included in other liabilities on the consolidated balance sheet.

The unrecognized tax benefit, including accrued interest and penalties are included in Other liabilities on our Balance Sheet.

Our income tax returns are subject to examination by relevant tax authorities.

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

Tax Law Update

As of December 31, 2021, we evaluated the income tax provisions of the above mentioned acts and have determined there to be minimal effect on our December 31, 2021 tax rate or the computation of our 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.

VACATION OWNERSHIP NOTES RECEIVABLE

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December 31, 2021 December 31, 2020

($ in millions) Originated Acquired Total Originated Acquired (1)

($ in millions) Originated Acquired Total Originated Acquired Total

Securitized $ 1,308 $ 354 $ 1,662 $ 1,220 $ 273 $ 1,493

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_________________________

(1) Net of impairment of $ 7 million recognized in 2019, prior to the adoption of ASU 2016-13 on January 1, 2020.

(1) Refer to Footnote 7 “Financial Instruments” for discussion of eligibility of our vacation ownership notes receivable for securitization.

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COVID-19 Impact on Vacation Ownership Notes Receivable Reserves

As a result of higher actual and projected default activity related predominantly to the COVID-19 pandemic, we evaluated our vacation ownership notes receivable reserves initially using the 2008/2009 financial crisis as a reference point.

In 2020, as a result of higher actual and projected default activity related predominantly to the COVID-19 pandemic, we evaluated our vacation ownership notes receivable reserve initially using the 2008/2009 financial crisis as a reference point.

As a result, we increased our vacation ownership notes receivable reserves by $ 52 million in the first quarter of 2020.

We monitored actual delinquency and default activity throughout the remainder of 2020.

Taking into account higher than previously expected default activity experienced, we increased our vacation ownership notes receivable reserves by $ 17 million in the fourth quarter of 2020.

Taking into account higher than previously expected default activity experienced, we increased our vacation ownership notes receivable reserve by an additional $ 17 million in the fourth quarter of 2020.

In total, the reserve adjustments made during 2020 were reflected as a $ 59 million reduction to Sale of vacation ownership products, a $ 10 million increase in Financing expenses, and a $ 19 million reduction in Cost of vacation ownership products on our Income Statement for the year ended December 31, 2020.

There were no additional adjustments to our vacation ownership notes receivables reserves due to the COVID-19 pandemic during 2021.

Acquired Vacation Ownership Notes Receivable

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

The following table shows future contractual principal payments, as well as interest rates, for our non-securitized and securitized acquired vacation ownership notes receivable at December 31, 2020.

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 vacation ownership notes receivable at December 31, 2021.

Acquired Vacation Ownership Notes Receivable

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Balance at December 31, 2020 39 21 60

Securitizations ( 9 ) 9 —

Clean-up call 3 ( 3 ) —

Write-offs ( 49 ) — ( 49 )

Recoveries 27 — 27

Defaulted vacation ownership notes receivable repurchase activity (1)

Initial allowance for credit losses for Legacy-Welk vacation ownership notes receivable 11 21 32

(Decrease) increase in vacation ownership notes receivable reserve ( 7 ) 7 —

Balance at December 31, 2021 $ 47 $ 23 $ 70

_________________________

(1) Decrease in securitized vacation ownership notes receivable reserve and increase in non-securitized vacation ownership notes receivable reserve was attributable to the transfer of the reserve when we voluntarily repurchased defaulted securitized vacation ownership notes receivable.

(1) Decrease in securitized vacation ownership notes receivable reserve and increase in non-securitized vacation ownership notes receivable reserve are attributable to the transfer of the reserve when we voluntarily repurchased defaulted securitized vacation ownership notes receivable.

(2) Increase in vacation ownership notes receivable reserve includes $ 10 million ($ 8 million non-securitized and $ 2 million securitized) attributable to the increased reserve as a result of the COVID-19 pandemic.

Originated Vacation Ownership Notes Receivable

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

The following table shows future principal payments, net of reserves, as well as interest rates, for our non-securitized and securitized originated vacation ownership notes receivable at December 31, 2020.

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 vacation ownership notes receivable at December 31, 2021.

Originated Vacation Ownership Notes Receivable

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0.0 % to 20.9 %

For originated vacation ownership notes receivable, we record the difference between the vacation ownership note receivable and the variable consideration included in the transaction price for the sale of the related vacation ownership product as a reserve on our vacation ownership notes receivable.

The following table summarizes the activity related to our originated vacation ownership notes receivable reserve.

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_________________________

(2) Increase in vacation ownership notes receivable reserve includes $ 59 million ($ 32 million non-securitized and $ 27 million securitized) attributable to the increased reserve as a result of the COVID-19 pandemic.

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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 6.74 percent and 7.04 percent as of December 31, 2020 and December 31, 2019, respectively.

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 and $ 8 million as of December 31, 2020 and December 31, 2019, respectively.

For both Legacy-MVW non-securitized and securitized vacation ownership notes receivable, we estimated average remaining default rate of 6.74 % as of both December 31, 2021 and 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 December 31, 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.

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($ in millions) Non-Securitized Securitized Total

Investment in vacation ownership notes receivable on non-accrual status at year-end 2020 $ 100 $ 14 $ 114

Investment in vacation ownership notes receivable on non-accrual status at year-end 2019 $ 43 $ 11 $ 54

Investment in vacation ownership notes receivable on non-accrual status at December 31, 2021 $ 88 $ 8 $ 96

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 December 31, 2021 and December 31, 2020.

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2017 15 96 111

2015 & Before 35 113 148

2016 & Prior 35 109 144

$ 274 $ 1,055 $ 1,329

Legacy-ILG Vacation Ownership Notes Receivable

At December 31, 2020 and December 31, 2019, the weighted average FICO score within our consolidated Legacy-ILG vacation ownership notes receivable pools was 708 and 712 , respectively, based upon the outstanding vacation ownership notes receivable balance at time of origination.

The average estimated rate for all future defaults for our Legacy-ILG consolidated outstanding pool of vacation ownership notes receivable was 14.63 percent as of December 31, 2020, and 12.65 percent as of December 31, 2019.

A 0.5 percentage point increase in the estimated default rate on the Legacy-ILG vacation ownership notes receivable would have resulted in an increase in the related vacation ownership notes receivable reserve of $ 3 million and $ 2 million as of December 31, 2020 and December 31, 2019, respectively.

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

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

Legacy-ILG Vacation Ownership Notes Receivable

Legacy-ILG and Legacy-Welk Vacation Ownership Notes Receivable

At December 31, 2021 and December 31, 2020, the weighted average FICO score within our consolidated Legacy-ILG and Legacy-Welk vacation ownership notes receivable was 707 and 708 , respectively, based upon the FICO score of the borrower 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 17.33 % as of December 31, 2021 and 14.63 % 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 December 31, 2021, and $ 3 million as of December 31, 2020.

We use the origination of the vacation ownership notes receivable by brand (Westin, Sheraton, Hyatt, 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.

Legacy-ILG and Legacy-Welk Vacation Ownership Notes Receivable

($ in millions) Non-Securitized Securitized Total

Investment in vacation ownership notes receivable on non-accrual status at year-end 2020 $ 109 $ 12 $ 121

Investment in vacation ownership notes receivable on non-accrual status at year-end 2019 $ 40 $ 9 $ 49

The following table shows the aging of the recorded investment in principal, before reserves, in Legacy-ILG vacation ownership notes receivable as of December 31, 2020 and December 31, 2019:

Legacy-ILG Vacation Ownership Notes Receivable

Investment in vacation ownership notes receivable on non-accrual status at December 31, 2021 $ 114 $ 10 $ 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 December 31, 2021 and December 31, 2020.

Legacy-ILG and Legacy-Welk Vacation Ownership Notes Receivable

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

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Total vacation ownership notes receivable $ 349 $ 769 $ 1,118 $ 240 $ 581 $ 821

The following tables show the Legacy-ILG 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.

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 December 31, 2021

3 unchanged sentences

Hyatt 8 6 1 — 15

Welk 115 79 1 2 197

Other 2 — — 2 4

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$ 176 $ 131 $ 18 $ 44 $ 369

The following table details the origination year of our Legacy-ILG acquired vacation ownership notes receivable by brand and FICO score as of December 31, 2020 .

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 December 31, 2021 .

Acquired Vacation Ownership Notes Receivable - Westin

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$ — $ — $ — $ 4 $ 15 $ 19

The following tables show the Legacy-ILG 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.

Acquired Vacation Ownership Notes Receivable - Welk

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

700 + $ 9 $ 24 $ 30 $ 20 $ 32 $ 115

600 - 699 5 15 21 13 25 79

< 600 — 1 — — — 1

No Score — — 1 — 1 2

$ 14 $ 40 $ 52 $ 33 $ 58 $ 197

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 December 31, 2021

3 unchanged sentences

Hyatt 22 11 — — 33

Welk 65 27 1 1 94

$ 366 $ 198 $ 29 $ 81 $ 674

5 unchanged sentences

$ 231 $ 132 $ 22 $ 66 $ 451

The following tables detail the origination year of our Legacy-ILG originated vacation ownership notes receivable by brand and FICO score as of December 31, 2020.

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 December 31, 2021.

Originated Vacation Ownership Notes Receivable - Westin

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$ 17 $ 5 $ 9 $ 2 $ — $ 33

Originated Vacation Ownership Notes Receivable - Welk

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

700 + $ 65 $ — $ — $ — $ — $ 65

600 - 699 $ 27 — — — — 27

< 600 $ 1 — — — — 1

No Score $ 1 — — — — 1

$ 94 $ — $ — $ — $ — $ 94

FINANCIAL INSTRUMENTS

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The use of different market assumptions and/or estimation methodologies could have a material effect on the estimated fair value amounts.

The table excludes Cash and cash equivalents, Restricted cash, Accounts receivable, 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.

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 December 31, 2021 At December 31, 2020

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Other assets 76 76 60 60

$ 1,900 $ 1,946 $ 2,278 $ 2,309

Total financial assets $ 2,121 $ 2,178 $ 1,900 $ 1,946

Securitized debt, net $ ( 1,856 ) $ ( 1,900 ) $ ( 1,588 ) $ ( 1,653 )

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2028 Notes, net ( 346 ) ( 362 ) ( 346 ) ( 359 )

2029 Notes, net ( 493 ) ( 505 ) — —

Term Loan, net ( 776 ) ( 784 ) ( 873 ) ( 864 )

Revolving Corporate Credit Facility, net — — ( 27 ) ( 27 )

2022 Convertible notes, net ( 224 ) ( 280 ) ( 215 ) ( 262 )

$ ( 4,260 ) $ ( 4,455 ) $ ( 4,073 ) $ ( 4,279 )

2026 Convertible notes, net ( 461 ) ( 682 ) — —

Total financial liabilities $ ( 4,404 ) $ ( 4,774 ) $ ( 4,260 ) $ ( 4,455 )

Vacation Ownership Notes Receivable

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

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

Securitized Debt

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

2025 Notes, 2026 Notes, and 2028 Notes

We estimate the fair value of our 2025 Notes, 2026 Notes, and 2028 Notes (each as defined in Footnote 17 “Debt”) using quoted market prices as of the last trading day for the quarter;

We estimate the fair value of our 2025 Notes, 2026 Notes, 2028 Notes, and 2029 Notes (each as defined in Footnote 16 “Debt”) using quoted market prices as of the last trading day for the quarter;

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

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We estimate the fair value of our Term Loan (as defined in Footnote 16 “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.

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

Revolving Corporate Credit Facility

We estimate that the fair value of our Revolving Corporate Credit Facility (as defined in Footnote 17 “Debt”) approximates its gross carrying value as the contractual interest rate is variable plus an applicable margin.

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.

Convertible Notes

We estimate the fair value of our 2022 Convertible Notes using quoted market prices as of the last trading day for the quarter;

We estimate the fair value of our 2022 Convertible Notes and 2026 Convertible Notes (referred to collectively as our “convertible notes”) using quoted market prices as of the last trading day for the quarter;

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

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EARNINGS PER SHARE

Basic (loss) earnings per common share attributable to common shareholders is calculated by dividing net (loss) or income attributable to common shareholders by the weighted average number of shares of common stock outstanding during the reporting period.

Basic earnings or loss per common share attributable to common shareholders is calculated by dividing net income or loss attributable to common shareholders by the weighted average number of shares of common stock outstanding during the reporting period.

Treasury stock is excluded from the weighted average number of shares of common stock outstanding.

Diluted earnings per common share attributable to common shareholders is calculated to give effect to all potentially dilutive common shares that were outstanding during the reporting period, except in periods when there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect.

The dilutive effect of outstanding equity-based compensation awards is reflected in diluted earnings per common share applicable to common shareholders by application of the treasury stock method using average market prices during the period.

Our calculation of diluted (loss) earnings per share attributable to common shareholders reflects our intent to settle conversions of the 2022 Convertible Notes through a 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 (the “conversion premium”).

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.

As no conversion premium existed as of December 31, 2020, December 31, 2019, or December 31, 2018, there was no dilutive impact from the 2022 Convertible Notes for 2020, 2019, or 2018.

The shares issuable on exercise of the 2022 Warrants (as defined in Footnote 17 “Debt”) sold in connection with the issuance of the 2022 Convertible Notes will not impact the total dilutive weighted average shares outstanding unless and until the price of our common stock exceeds the strike price.

If and when the price of our common stock exceeds the strike price of the 2022 Warrants, we will include the dilutive effect of the additional shares that may be issued upon exercise of the 2022 Warrants in total dilutive weighted average shares outstanding, which we calculate using the treasury stock method.

The 2022 Convertible Note Hedges purchased in connection with the issuance of the 2022 Convertible Notes are considered to be anti-dilutive and do not impact our calculation of diluted earnings per share attributable to common shareholders for any periods presented herein.

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

Diluted earnings or loss per common share attributable to common shareholders is calculated to give effect to all potentially dilutive common shares that were outstanding during the reporting period, except in periods when there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect.

The dilutive effect of outstanding equity-based compensation awards is reflected in diluted earnings or loss per common share applicable to common shareholders by application of the treasury stock method using average market prices during the period.

Our calculation of diluted earnings or loss per share attributable to common shareholders reflects our intent to settle conversions of our convertible notes through a 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 (the “conversion premium”).

As of December 31, 2021, a conversion premium existed for our 2022 Convertible Notes, which had a dilutive impact on our diluted earnings per share as of December 31, 2021.

No conversion premium for our 2022 Convertible Notes existed as of December 31, 2020 or December 31, 2019, and there was no dilutive impact on our diluted earnings per share as of December 31, 2020 or 2019.

No conversion premium existed for our 2026 Convertible Notes as of December 31, 2021, and there was no dilutive impact on our diluted earnings per share as of December 31, 2021.

The shares issuable on exercise of the warrants sold in connection with the issuance of the 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.

If and when the price of our common stock exceeds the respective strike price of either of the warrants, we will include the dilutive effect of the additional shares that may be issued upon exercise of the warrants in total dilutive weighted average shares outstanding, which we calculate using the treasury stock method.

The convertible note hedges purchased in connection with each issuance of the convertible notes are considered to be anti-dilutive and do not impact our calculation of diluted earnings per share attributable to common shareholders for any periods presented herein.

See Footnote 16 “Debt” for further information on our convertible notes.

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

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

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

Net (loss) income attributable to common shareholders $ ( 275 ) $ 138 $ 55

Shares for basic (loss) earnings per share 41.3 43.9 33.3

Basic (loss) earnings per share $ ( 6.65 ) $ 3.13 $ 1.64

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

Net (loss) income attributable to common shareholders $ ( 275 ) $ 138 $ 55

Shares for basic (loss) earnings per share 41.3 43.9 33.3

2020 2019 (1)

Computation of Basic Earnings or Loss Per Share Attributable to Common Shareholders

Net income (loss) attributable to common shareholders $ 49 $ ( 275 ) $ 138

Shares for basic earnings (loss) per share 42.5 41.3 43.9

Basic earnings (loss) per share $ 1.15 $ ( 6.65 ) $ 3.13

Computation of Diluted Earnings or Loss Per Share Attributable to Common Shareholders

Net income (loss) attributable to common shareholders $ 49 $ ( 275 ) $ 138

Shares for basic earnings (loss) per share 42.5 41.3 43.9

Effect of dilutive shares outstanding (2)

Employee stock options and SARs — 0.3 0.4

Employee SARs 0.2 — 0.3

Restricted stock units 0.5 — 0.3

Shares for diluted (loss) earnings per share 41.3 44.5 34.0

Diluted (loss) earnings per share $ ( 6.65 ) $ 3.09 $ 1.61

2022 Convertible Notes 0.1 — —

Shares for diluted earnings (loss) per share 43.3 41.3 44.5

Diluted earnings (loss) per share $ 1.13 $ ( 6.65 ) $ 3.09

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(1) The computations of diluted earnings per share attributable to common shareholders exclude approximately 166,000 and 345,000 shares of common stock, the maximum number of shares issuable as of December 31, 2021 and December 31, 2019, respectively, upon the vesting of certain performance-based awards, because the performance conditions required to be met for the shares subject to such awards to vest were not achieved by the end of the reporting period.

(2) Amounts exclude all potentially dilutive equity-based compensation awards for periods when there is a net loss attributable to common shareholders.

In accordance with the applicable accounting guidance for calculating earnings per share, for each of the years ended December 31, 2019 and December 31, 2018, we excluded from our calculation of diluted earnings per share 56,649 shares underlying SARs that may settle in shares of common stock because the exercise price of $ 143.38 of such SARs was greater than the average market price for each of the applicable periods.

(2) For 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.

(in millions) 2020

Employee SARs 0.1

Restricted stock units 0.3

In accordance with the applicable accounting guidance for calculating earnings per share, for the year ended December 31, 2021, we excluded from our calculation of diluted earnings per share 126,804 shares underlying 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 period.

For the year ended December 31, 2019, we excluded from our calculation of diluted earnings per share 56,649 shares underlying SARs that may settle in shares of common stock because the exercise price of $ 143.38 of such SARs was greater than the average market price for the period.

The following table shows the composition of our inventory balances:

($ in millions) At Year-End 2021 At Year-End 2020

Finished goods (1)

Work-in-progress — 69

Real estate inventory (1)

_________________________

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

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

We value vacation ownership interests 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.

In addition to the above, at December 31, 2020 and December 31, 2019, we had $ 162 million and $ 55 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 had $ 43 million and $ 38 million of deposits on future purchases of inventory at December 31, 2020 and December 31, 2019, respectively, which are included in the Other assets line on our Balance Sheets.

Additionally, during the year ended December 31, 2020, we recorded $ 6 million of inventory impairments.

In addition to the above, at December 31, 2021 and December 31, 2020, we had $ 460 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 available and legally registered for sale as vacation ownership products.

We also have $ 14 million and $ 43 million of deposits on future purchases of inventory at December 31, 2021 and December 31, 2020, respectively, which are included in the Other assets line on our Balance Sheets.

PROPERTY AND EQUIPMENT

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Accumulated depreciation ( 588 ) ( 461 )

The following table details the carrying amount of our goodwill at December 31, 2020 and December 31, 2019, and reflects goodwill attributed to the ILG Acquisition, which was allocated to our Vacation Ownership and our Exchange & Third-Party Management reporting units.

$ 1,136 $ 791

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

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

Balance at December 31, 2019 $ 2,445 $ 447 $ 2,892

Measurement period adjustments ( 4 ) 66 62

Foreign exchange adjustments 1 1 2

Balance at December 31, 2019 2,445 447 2,892

Impairment — ( 73 ) ( 73 )

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

In connection with the preparation of our Financial Statements for the first quarter of 2020, we initially concluded that it was more likely than not that the fair value of both of our reporting units was below their respective carrying amounts.

The factors that led to this conclusion were related to the COVID-19 pandemic and included:

Welk Acquisition 299 — 299

Measurement period adjustments 34 — 34

Balance at December, 2021 $ 2,778 $ 372 $ 3,150

During the 2021 fourth quarter, we conducted our annual goodwill impairment test, which was a qualitative evaluation, and no impairment charges were recorded.

The estimated fair values of all of our reporting units significantly exceeded their carrying values at the date of their most recent estimated fair value determination.

During 2020, we concluded that it was more likely than not that the fair value of both of our reporting units was below their respective carrying amounts.

The factors that led to this conclusion at that time were related to the COVID-19 pandemic and included:

(i) the substantial decline in our stock price and market capitalization;

(ii) the closure of substantially all of our Vacation Ownership reporting unit sales centers;

(ii) the temporary closure of substantially all of our Vacation Ownership reporting unit sales centers;

(iii) the government stay-at-home orders in place in many of the jurisdictions in which we operate;

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We concluded that there was no impairment of the Vacation Ownership reporting unit as declines in expected future operating results were not substantial enough to cause the fair value of the reporting unit to be below its carrying amount.

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.

Q2 2020 and Q3 2020

In connection with the preparation of our Financial Statements for the second and third quarters of 2020, we concluded that an interim quantitative impairment test was required for our Exchange & Third-Party Management reporting unit because of the impairment charge we recognized for this reporting unit in the first quarter of 2020.

We utilized a combination of the income and market approaches to estimate the fair value of this reporting unit (Level 3) consistent with the methodology used in the first quarter of 2020.

We concluded that there was no further impairment of the Exchange & Third-Party Management reporting unit as of the end of each of the second and third quarters of 2020 from the first quarter of 2020, as future expected operating results had improved slightly in comparison to the projections used in the first quarter, resulting in a fair value of the reporting unit in excess of its carrying amount.

We performed a qualitative analysis of the impact of recent events, including business and industry specific considerations, on the fair value of our Vacation Ownership reporting unit as of the end of each of the second and third quarters of 2020 and determined that an interim quantitative impairment test was not required.

We performed our annual goodwill impairment test as of October 1, 2020 and prepared a quantitative assessment for both the Vacation Ownership and the Exchange & Third-Party Management reporting units.

We utilized a combination of the income and market approaches to estimate the fair value of this reporting unit (Level 3) consistent with the methodology used in the first quarter of 2020.

For each reporting unit, the fair value of the reporting unit was in excess of the carrying value and therefore we concluded there was no further impairment.

Given the continued impact of the COVID-19 pandemic, in connection with the preparation of our Financial Statements for the year ended December 31, 2020, we performed a qualitative analysis of each of our reporting units as of the end of the fourth quarter, considering recent events and determined that interim quantitative impairment tests were not required.

While the goodwill of our reporting units are not impaired at December 31, 2020, we cannot assure you that goodwill will not be impaired in future periods.

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

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

INTANGIBLE ASSETS

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Indefinite-lived intangible assets

Trade names and trademarks 64 82

$ 952 $ 1,027

Trade names 64 64

Definite-Lived Intangible Assets

Definite-lived intangible assets, all of which were acquired as part of the ILG Acquisition, are amortized on a straight-line basis over their estimated useful lives, ranging from 15 to 25 years.

Definite-lived intangible assets, all of which were acquired as part of the ILG and Welk Acquisitions, are amortized on a straight-line basis over their estimated useful lives, ranging from 15 to 25 years.

We recorded amortization expense of $ 61 million in 2021, $ 57 million in 2020, and $ 59 million in 2019 in the Depreciation and amortization line of our Income Statements.

For these assets, we estimate that our aggregate amortization expense will be $ 62 million for each of the next five fiscal years.

Indefinite-Lived Intangibles

Indefinite-Lived Intangible Assets

The following table summarizes the activity related to our indefinite-lived intangible assets, all of which are related to the Exchange & Third-Party Management segment.

($ in millions) Trade Names and Trademarks

($ in millions) Trade Names

Balance at December 31, 2019 $ 82

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Balance at December 31, 2020 64

In connection with the preparation of the financial statements for the first quarter of 2020, we concluded that it was more likely than not that the fair value of our indefinite lived intangibles was below their carrying amounts.

The factors that led to this conclusion were related to the COVID-19 pandemic and included:

(i) the government stay-at-home orders in place in many of the jurisdictions in which we operate;

(ii) the impact of travel restrictions on the hospitality industry;

and (iii) the macroeconomic fallout from the COVID-19 pandemic.

We used the relief of royalty method in calculating the fair value of the trade names and trademarks (Level 3).

We recognized a non-cash impairment charge of $ 18 million in the Impairment line on our Income Statement during the first quarter of 2020, which was primarily attributed to the decline in estimated near-term revenues and related recovery of long-term revenues attributed to the impact of the COVID-19 pandemic.

We performed our annual impairment test of indefinite lived intangible assets as of October 1, 2020 consistent with the methodology used in the first quarter of 2020 and determined that the fair value of our indefinite lived intangibles was above their carrying amounts.

Balance at December 31, 2021 $ 64

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

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

Our aggregate commitments under these contracts were $ 85 million, of which we expect $ 34 million, $ 26 million, $ 16 million, $ 6 million, and $ 3 million will be paid in 2021, 2022, 2023, 2024, and 2025, respectively.

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

Refer to Footnote 20 “Variable Interest Entities” for additional information and our activities relating to the VIEs involved in these transactions.

Our aggregate commitment under these contracts was $ 99 million, of which we expect $ 52 million, $ 28 million, $ 11 million, $ 6 million, and $ 2 million will be paid in 2022, 2023, 2024, 2025, and 2026 and thereafter, respectively.

• We have a commitment to acquire real estate for use in our Vacation Ownership segment via our involvement with a VIE.

Refer to Footnote 19 “Variable Interest Entities” for additional information and our activities relating to the VIE involved in this transaction.

• 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 2021 and $ 2 million in 2022.

We expect to complete the acquisition in 2022 and to make the remaining payments with respect to these units, when specific construction milestones associated with the co-located hotel are completed, as follows:

$ 11 million in 2022, $ 7 million in 2023, and $ 4 million in 2024.

• We have commitments to acquire inventory from our managed owners’ associations in 2022 for $ 66 million.

Surety bonds issued as of December 31, 2021 totaled $ 118 million, the majority of which were requested by federal, state or local governments in connection with our operations.

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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 $ 2 million is included within liabilities on our Balance Sheet at December 31, 2020.

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.

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At December 31, 2021, our maximum exposure under fixed dollar guarantees was $ 10 million, of which $ 3 million, $ 2 million, $ 2 million, $ 1 million, $ 1 million, and $ 1 million relate to 2022, 2023, 2024, 2025, 2026, and thereafter, respectively.

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

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

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

The agreement will terminate on the earlier of:

1) sale of 80 % of the total ownership interests in the owners’ association;

or 2) upon our written notification of termination.

At December 31, 2021, our expected commitment for 2022 is $ 17 million, which will ultimately be recorded as a component of rental expense on our income statement.

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.

The plaintiffs appealed the ruling and in February 2022 dismissed their appeal with prejudice pursuant to a settlement for a non-material amount.

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

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In August 2019, the District Court granted our motion for judgment on the pleadings and dismissed the case.

The plaintiffs have appealed the ruling.

The plaintiffs appealed the ruling, and in December 2021, the U.S.

Court of Appeals for the Eleventh Circuit affirmed the District Court’s judgment in favor of the Company.

In February 2022, the plaintiffs agreed to forego further appeal pursuant to a settlement for a non-material amount.

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.

The plaintiff is seeking unspecified damages, punitive damages and disgorgement of payments under the management and purchase agreements.

In February 2022, the Court granted defendants’ motion to dismiss and granted the plaintiff leave to file an amended complaint within 30 days.

In April 2019, a purported class-action lawsuit was filed by Alan and Marjorie Helman and others against us in the Superior Court of the Virgin Islands, Division of St.

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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.

The plaintiffs have appealed the ruling.

We believe we have meritorious defenses to the claims in each of the above matters and intend to vigorously defend each matter.

The plaintiff appealed the ruling and in November 2021 agreed to dismiss its appeal with prejudice pursuant to a settlement for a non-material amount.

We believe we have meritorious defenses to the claims in each of the above pending matters and intend to vigorously defend each matter.

In the ordinary course of our business, various claims and lawsuits have been filed or are pending against us.

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We have not accrued for any of the pending matters described above and we cannot estimate a range of the potential liability associated with these pending matters, if any, at this time.

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

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

We have accrued for other claims and lawsuits, but the

amount accrued is not material individually or in the aggregate.

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

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

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Finance leases (1)

_________________________

(1) Includes the reclassification of certain lease components from operating lease to finance lease classification, attributable to the amendment of an existing lease.

Leases That Have Not Yet Commenced

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

The new office building is currently expected to be completed in 2024, at which time the lease term will commence and a right-of-use asset and corresponding liability will be recorded on our balance sheet.

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

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

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

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

The initial lease term is approximately 16 years with total lease payments of $ 137 million for the aforementioned period.

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

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

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

SECURITIZED DEBT

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Unamortized debt discount and issuance costs ( 21 ) ( 16 )

Warehouse Credit Facility, gross — 21

Unamortized debt issuance costs (2)

$ 1,856 $ 1,588

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(1) Interest rates as of December 31, 2021 range from 1.5 % to 4.4 %, with a weighted average interest rate of 2.3 %

(2) Excludes $ 1 million of unamortized debt issuance costs as of December 31, 2020, as no cash borrowings were outstanding on the Warehouse Credit Facility at that time

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

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As of December 31, 2021, we had 14 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 below due to prepayments by the vacation ownership notes receivable obligors.

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

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

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

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

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

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

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

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

The Class A Notes have an interest rate of 1.74 percent, the Class B Notes have an interest rate of 2.73 percent, the Class C Notes have an interest rate of 4.21 percent, and the Class D Notes have an interest rate of 7.14 percent, for an overall weighted average interest rate of 2.53 percent.

Of the $ 375 million in proceeds from the transaction, $ 300 million was used to repay all outstanding amounts previously drawn under the Warehouse Credit Facility, as defined below, $ 7 million was used to pay transaction expenses and fund required reserves, and the remainder will be used for general corporate purposes.

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

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

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

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

Approximately $ 376 million of the vacation ownership notes receivable were purchased by the MVW 2021-2 LLC (the “2021-2 LLC”) during the fourth quarter of 2021, and as of December 31, 2021, the 2021-2 LLC held $ 57 million of the proceeds, which was released as the remaining vacation ownership notes receivable were purchased subsequent to December 31, 2021.

In connection with the securitization during the fourth quarter of 2021, investors purchased in a private placement $ 425 million in vacation ownership loan backed notes from the 2021-2 LLC.

Three classes of vacation ownership loan backed notes were issued by the 2021-2 LLC:

$ 265 million of Class A Notes, $ 95 million of Class B Notes, and $ 65 million of Class C Notes.

The Class A Notes have an interest rate of 1.43 %, the Class B Notes have an interest rate of 1.83 %, and the Class C Notes have an interest rate of 2.23 %, for an overall weighted average interest rate of 1.64 %.

Of the $ 425 million in proceeds from the transaction, approximately $ 107 million was used to repay all outstanding amounts previously drawn under our Warehouse Credit Facility (as defined below), approximately $ 8 million was used to pay transaction expenses and fund required reserves, and the remaining $ 204 million will be used for general corporate purposes.

Subsequent to end of 2021, the 2021-2 LLC purchased the remaining $ 58 million of vacation ownership notes receivable and $ 57 million was released from restricted cash.

Warehouse Credit Facility

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

The Warehouse Credit Facility terminates on December 20, 2021, and if not renewed prior to termination, any amounts outstanding thereunder would become due and payable 13 months after termination, at which time all principal and interest collected with respect to the vacation ownership notes receivable held in the Warehouse Credit Facility would be redirected to the lenders to pay down the outstanding debt under the facility.

The Warehouse Credit Facility terminates on April 21, 2023, and if not renewed prior to termination, any amounts outstanding thereunder would become due and payable 13 months after termination, at which time all principal and interest collected with respect to the vacation ownership notes receivable held in the Warehouse Credit Facility would be redirected to the lenders to pay down the outstanding debt under the facility.

The advance rate for vacation ownership notes receivable securitized using the Warehouse Credit Facility varies based on the characteristics of the securitized vacation ownership notes receivable.

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We generally expect to securitize our vacation ownership notes receivable, including any vacation ownership notes receivable held in the Warehouse Credit Facility, in the ABS market at least once per year.

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

During the fourth quarter of 2021, we securitized vacation ownership notes receivable under our Warehouse Credit Facility.

The carrying amount of the vacation ownership notes receivable securitized was $ 126 million.

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

The average advance rate was 85 %, which resulted in gross proceeds of $ 107 million.

Net proceeds were $ 106 million due to the funding of reserve accounts of $ 1 million.

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

The carrying amount of the vacation ownership notes receivable securitized was $ 132 million.

The average advance rate was 86 percent, which resulted in gross proceeds of $ 113 million.

Net proceeds were $ 113 million due to the funding of reserve accounts of less than $ 1 million.

Additionally, during the second quarter of 2020, we amended our Warehouse Credit Facility to increase the borrowing capacity by $ 181 million, to $ 531 million.

As part of this amendment, the interest rate increased from primarily LIBOR plus 1.1 % to primarily LIBOR plus 1.4 %.

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

As of December 31, 2021, there were no cash borrowings outstanding under our Warehouse Credit Facility, as all outstanding amounts were repaid in connection with the fourth quarter of 2021 vacation ownership notes receivable securitization transaction as discussed above.

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

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

2029 Notes 500 —

Unamortized debt discount and issuance costs ( 7 ) —

Corporate Credit Facility

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Unamortized debt discount and issuance costs ( 8 ) ( 11 )

Revolving Corporate Credit Facility — 30

Unamortized debt issuance costs (1)

Convertible Notes

2022 Convertible Notes 230 230

Unamortized debt discount and issuance costs ( 6 ) ( 15 )

2026 Convertible Notes 575 —

Unamortized debt discount and issuance costs ( 114 ) —

Finance Leases 83 8

$ 2,631 $ 2,680

_________________________

(1) Excludes $ 3 million of unamortized debt issuance costs as of December 31, 2020, as no cash borrowings were outstanding on the Revolving Corporate Credit Facility, as defined below, at that time.

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

($ in millions) 2025 Notes 2026 Notes 2028 Notes Term Loan (1)

2022 Convertible Notes Total

($ in millions) 2025 Notes 2028 Notes 2029 Notes Term Loan 2022 Convertible Notes 2026 Convertible Notes Total

Payments Year

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$ 250 $ 350 $ 500 $ 784 $ 230 $ 575 $ 2,689

_________________________

(1) Subsequent to the end of 2020, we elected to repay $ 100 million of the principal of our Term Loan.

Senior Secured Notes

In the second quarter of 2020, we issued $ 500 million aggregate principal amount of 6.125 % Senior Secured Notes due September 15, 2025 (the “2025 Notes”).

Our Senior Notes, as further discussed below, include the following:

• $ 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”).

• $ 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”).

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

We pay interest on the 2025 Notes on May 15 and November 15 of each year, commencing on November 15, 2020.

We pay interest on the 2025 Notes on May 15 and November 15 of each year.

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

We may redeem some or all of the 2025 Notes prior to maturity under the terms provided in the indenture.

Senior Unsecured Notes

Our Senior Unsecured Notes, as further discussed below, include the following:

• $ 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”).

We issued the 2026 Notes under an indenture dated August 23, 2018 with The Bank of New York Mellon Trust, as trustee.

We received net proceeds of $ 742 million from the offering, after deducting the underwriting discount and estimated expenses.

We used these proceeds, together with the borrowings under the Term Loan (defined below) primarily to finance the cash component of the consideration paid in the ILG Acquisition to ILG shareholders, certain fees and expenses we incurred in connection with the ILG Acquisition and working capital.

We pay interest on the 2026 Notes on March 15 and September 15 of each year, commencing on March 15, 2019.

We may redeem some or all of the 2026 Notes prior to maturity under the terms provided in the indenture.

We may redeem some or all of the remaining 2025 Notes prior to maturity under the terms provided in the indenture.

During 2021, we redeemed, prior to maturity, $ 250 million aggregate principal amount of the 2025 Notes pursuant to the terms of the indenture governing the 2025 Notes.

In connection with this redemption, we incurred charges of $ 19 million, inclusive of a redemption premium and the write-off of unamortized debt issuance costs, which was recorded in (Losses) gains and other (expense) income, net line on our Income Statement for the year ended December 31, 2021.

We issued the 2028 Notes under an indenture dated October 1, 2019 with The Bank of New York Mellon Trust, as trustee.

We received net proceeds of $ 346 million from the offering, after deducting the underwriting discount and estimated expenses.

The net proceeds from the 2028 Notes were used (i) to redeem all of the outstanding 5.625 % Senior Unsecured Notes due 2023 assumed in connection with the ILG Acquisition (the “IAC Notes”), (ii) to redeem all of the outstanding 5.625 % Senior Unsecured Notes due 2023 offered in exchange for the IAC Notes during the third quarter of 2018 (the “Exchange Notes”), (iii) to repay a portion of the outstanding borrowings under our Revolving Corporate Credit Facility, (iv) to pay transaction expenses and fees in connection with each of the foregoing and (v) for general corporate purposes.

We pay interest on the 2028 Notes on March 15 and September 15 of each year, commencing on March 15, 2020.

The net proceeds from the 2028 Notes were used (i) to redeem all of the outstanding 5.625 % Senior Unsecured Notes due 2023 assumed in connection with the ILG Acquisition (the “IAC Notes”), (ii) to redeem all of the outstanding 5.625 % Senior Unsecured Notes due 2023 offered in exchange for the IAC Notes during the third quarter of 2018 (the “Exchange Notes”), (iii) to repay a portion of the then outstanding borrowings under our Revolving Corporate Credit Facility, (iv) to pay transaction expenses and fees in connection with each of the foregoing and (v) for general corporate purposes.

We pay interest on the 2028 Notes on March 15 and September 15 of each year.

We may redeem some or all of the 2028 Notes prior to maturity under the terms provided in the indenture.

We issued the 2029 Notes 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 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 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.

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

Additionally, in September 2021, we 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 these redemptions, we incurred charges of $ 36 million, inclusive of a redemption premium and the write-off of unamortized debt issuance costs, which was recorded in (Losses) gains and other (expense) income, net line on our Income Statement for the year ended December 31, 2021.

Corporate Credit Facility

Our corporate credit facility (“Corporate Credit Facility”), which provides support for our business, including ongoing liquidity and letters of credit, includes a $ 900 million term loan facility (the “Term Loan”), which matures on August 31, 2025, and a revolving credit facility with a borrowing capacity of $ 600 million (the “Revolving Corporate Credit Facility”), including a letter of credit sub-facility of $ 75 million, that terminates on August 31, 2023.

The Term Loan bears interest at LIBOR plus 1.75 percent.

Borrowings under the Revolving Corporate Credit Facility generally bear interest at a floating rate plus an applicable margin that varies from 0.50 percent to 2.75 percent depending on the type of loan and our credit rating.

The Term Loan bears interest at LIBOR plus 1.75 %.

Borrowings under the Revolving Corporate Credit Facility generally bear interest at a floating rate plus an applicable margin that varies from 0.50 % to 2.75 % depending on the type of loan and our credit rating.

In addition, we pay a commitment fee on the unused availability under the Revolving Corporate Credit Facility at a rate that varies from 20 to 40 basis points per annum, also depending on our credit rating.

Any amounts borrowed under that facility, as well as obligations with respect to letters of credit issued pursuant to that facility, are secured by a perfected first priority security interest in substantially all of the assets of the borrower under, and guarantors of, that facility (which include Marriott Vacations Worldwide and each 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 May 2020, we entered into a waiver (the “Waiver”) to the agreement that governs our Corporate Credit Facility.

The Waiver, among other things, suspends the requirement to comply with the leverage covenant in the Revolving Corporate Credit Facility, commencing with the fiscal quarter ending June 30, 2020.

The initial suspension period included in the Waiver was up to four quarters, however, in February 2021, subsequent to the end of 2020, 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.

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

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

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

In 2020, we entered into a waiver (the “Waiver”) to the agreement that governs our Corporate Credit Facility, which, among other things, suspended the requirement to comply with the leverage covenant in the Revolving Corporate Credit Facility, commencing with the fiscal quarter ending June 30, 2020.

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.

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 % 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 % 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 % and a floor strike rate of 1.8810 % 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 December 31, 2021 and December 31, 2020.

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The following table reflects the activity in accumulated other comprehensive loss related to our derivative instruments during 2021, 2020 and 2019.

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

($ in millions) 2021 2020 2019

Derivative Instrument Adjustment, Beginning of Year $ ( 39 ) $ ( 21 ) $ ( 6 )

Other comprehensive loss before reclassifications ( 18 ) ( 15 ) ( 6 )

Reclassification to Income Statement — — —

Net other comprehensive loss ( 18 ) ( 15 ) ( 6 )

Other comprehensive gain (loss) before reclassifications 21 ( 18 ) ( 15 )

Derivative Instrument Adjustment, End of Year $ ( 18 ) $ ( 39 ) $ ( 21 )

Convertible Notes

During 2017, we issued an aggregate principal amount of $ 230 million of 2022 Convertible Notes that bear interest at a rate of 1.50 percent, payable in cash semi-annually.

2022 Convertible Notes

During 2017, we issued $ 230 million of 2022 Convertible Notes that bear interest at a rate of 1.50 %, payable in cash semi-annually.

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 December 31, 2020 to 6.8115 shares of common stock per $1,000 principal amount of 2022 Convertible Notes (equivalent to a conversion price of approximately $ 146.81 per share of our common stock), as a result of the $ 0.54 per share quarterly dividends declared during the first quarter of 2020, which was greater than the quarterly dividend when the 2022 Convertible Notes were issued.

There are no financial or operating covenants related to the 2022 Convertible Notes.

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 December 31, 2021 to 6.8282 shares of common stock per $ 1,000 principal amount of 2022 Convertible Notes (equivalent to a conversion price of approximately $ 146.45 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.

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 December 31, 2021, the effective interest rate was 4.73 % and the remaining discount amortization period was less than one year .

Holders may convert their 2022 Convertible Notes prior to June 15, 2022 only under certain circumstances.

We may not redeem the 2022 Convertible Notes prior to their maturity date.

If we undergo a fundamental change, as described in the indenture, subject to certain conditions, holders may require us to repurchase for cash all or any portion of their 2022 Convertible Notes, at a repurchase price equal to 100 percent of the principal amount of the 2022 Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.

If we undergo a fundamental change, as described in the indenture, subject to certain conditions, holders may require us to repurchase for cash all or any portion of their 2022 Convertible Notes, at a repurchase price equal to 100 % of the principal amount of the 2022 Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.

If certain fundamental changes referred to in the indenture as make-whole fundamental changes occur, the conversion rate applicable to the 2022 Convertible Notes may increase.

As of December 31, 2020, the effective interest rate was 4.7 percent and the remaining debt discount amortization period was 1.7 years.

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

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$ 12 $ 11 $ 11

See Footnote 23 “Subsequent Events” for information on convertible notes, convertible note hedges and warrants issued subsequent to the end of 2020.

2022 Convertible Note Hedges and Warrants

In connection with the offering of the 2022 Convertible Notes, we concurrently entered into the following privately-negotiated separate transactions:

convertible note hedge transactions with respect to our common stock (“2022 Convertible Note Hedges”), initially covering a total of approximately 1.55 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 1.55 million shares of our common stock at an initial strike price of $ 176.68 per share.

As of December 31, 2020, no 2022 Convertible Note Hedges or 2022 Warrants have been exercised.

The 2022 Warrants will expire in ratable portions on a series of expiration dates commencing on December 15, 2022.

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 December 31, 2021, the strike prices of the 2022 Convertible Note Hedges and the 2022 Warrants were subject to adjustment to approximately $ 148.55 and $ 177.12 , respectively, and no 2022 Convertible Note Hedges or 2022 Warrants have been exercised.

2026 Convertible Notes

During 2021, we issued $ 575 million aggregate principal amount of 2026 Convertible Notes that bear interest at a rate of 0.00 %.

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

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

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

The 2026 Convertible Notes do not bear regular interest and mature on January 15, 2026, unless earlier repurchased or converted in accordance with their terms prior to that date.

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, and was subject to adjustment as of December 31, 2021 to 5.8884 shares of common stock per $1,000 principal amount of 2026 Convertible Notes (equivalent to a conversion price of $ 169.83 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.

It is our intent to settle conversions of the 2026 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.

Holders may convert their 2026 Convertible Notes prior to October 15, 2025 only under the following circumstances:

• during any calendar quarter commencing after the calendar quarter ending on March 31, 2021 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

• during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of 2026 Convertible Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the common stock and the conversion rate on each such trading day;

• upon the occurrence of specified corporate events as described in the Indenture.

We may not redeem the 2026 Convertible Notes prior to their maturity date, and no sinking fund is provided for them.

If we undergo a fundamental change, as described in the Indenture, subject to certain conditions, holders may require us to repurchase for cash all or any portion of their 2026 Convertible Notes.

The repurchase price as a result of a fundamental change is equal to 100 % of the principal amount of the 2026 Convertible Notes to be repurchased, plus accrued and unpaid special interest, if any, to, but excluding, the repurchase date.

If certain fundamental changes referred to in the Indenture as make-whole fundamental changes occur, the conversion rate applicable to the 2026 Convertible Notes may increase.

The 2026 Convertible Notes are unconditionally guaranteed, on a joint and several basis, by the Guarantors on a senior, unsecured basis.

The 2026 Convertible Notes are our general senior unsecured obligations and rank equally in right of payment with all of our existing and future senior indebtedness, and senior in right of payment to all of our future subordinated debt.

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 are 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.

The guarantees will be the Guarantors’ general senior unsecured obligations and 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.

The guarantees are effectively subordinated to any of the Guarantors’ existing and future secured debt to the extent of the value of the assets securing such debt, including any borrowings outstanding under the Corporate Credit Facility and the 2025 Notes.

The guarantees are 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.

There are no financial or operating covenants related to the 2026 Convertible Notes.

The Indenture contains customary events of default with respect to the 2026 Convertible Notes and provides that upon the occurrence and continuation of certain events of default, the Trustee or the holders of at least 25% in aggregate principal amount of the 2026 Convertible Notes then outstanding may declare all principal of and accrued and any unpaid interest on the 2026 Convertible Notes then outstanding to be immediately due and payable.

In case of certain events of bankruptcy or insolvency involving the Company, all of the principal of and accrued and unpaid interest on the 2026 Convertible Notes will automatically become immediately due and payable.

We separated the 2026 Convertible Notes into liability and equity components and allocated $ 449 million to the liability component and $ 126 million to the equity component.

The resulting debt discount is amortized as interest expense.

As of December 31, 2021, the effective interest rate was 0.00 % and the remaining debt discount amortization period was 4 years.

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

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

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

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

Liability component

Principal amount $ 575 $ —

Unamortized debt discount ( 104 ) —

Unamortized debt issuance costs ( 10 ) —

Net carrying amount of the liability component $ 461 $ —

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

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

($ in millions) 2021 2020 2019

Amortization of debt discount $ 22 $ — $ —

Amortization of debt issuance costs 2 — —

2026 Convertible Note Hedges and Warrants

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 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.

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

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

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

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

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.

The 2026 Convertible Notes, the 2026 Convertible Note Hedges, and the 2026 Warrants are transactions that are separate from each other.

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

As of December 31, 2021, the strike prices of the 2026 Convertible Note Hedges and the 2026 Warrants were subject to adjustment to approximately $ 169.83 and $ 212.28 , respectively, and no 2026 Convertible Note Hedges or 2026 Warrants have been exercised.

Finance Leases

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

In addition, the Corporate Credit Facility, the 2026 Convertible Notes, the 2025 Notes, the 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

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Share Repurchase Program

The following table summarizes the share repurchase activity under our share repurchase program, which expired on December 31, 2020:

($ in millions, except per share amounts) Number of

Repurchased Cost of Shares

Repurchased Average Price

Paid per Share

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

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As of December 31, 2021 17,681,395 $ 1,418 $ 80.17

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, contractual restrictions, 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 of more plans pursuant to the provisions of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

As of December 31, 2021, $ 172 million remained available for repurchase under the authorization approved by the Board of Directors.

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

Subsequent to the end of 2021, our Board of Directors authorized the repurchase of up to an additional $ 300 million of our common stock, as well as the extension of the duration of our existing share repurchase program to March 31, 2023.

We declared cash dividends to holders of common stock during the year ended December 31, 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

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

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

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

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

December 9, 2021 December 23, 2021 January 6, 2022 $ 0.54

Subsequent to the end of 2021, on February 18, 2022, our Board of Directors declared a quarterly dividend of $ 0.62 per share to be paid on March 17, 2022 to shareholders of record as of March 3, 2022.

Noncontrolling Interests

Property Owners’ Associations

We consolidate certain property owners’ associations.

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

Owners’ Associations

We consolidate certain owners’ associations.

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

Noncontrolling interests of $ 10 million and $ 31 million, as of December 31, 2021 and December 31, 2020, respectively, are included on our Balance Sheets as a component of equity.

SHARE-BASED COMPENSATION

The MVW Equity Plan is maintained for the benefit of our officers, directors and employees.

We maintain the MVW Equity Plan for the benefit of our officers, directors and employees.

Under the MVW Equity Plan, we are authorized to award:

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ILG Acquisition Converted RSUs — 2 10

Stock options — — —

$ 51 $ 37 $ 37

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Performance-based RSUs — 6

ILG Acquisition Converted RSUs — 3

Stock options — —

_________________________

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The weighted average grant-date fair value per RSU granted in 2020 and 2019 was $ 95.92 and $ 95.66 , respectively.

The fair value of the RSUs which vested in 2020 was $ 30 million, and included $ 6 million related to RSUs converted from ILG equity-based RSUs to MVW equity-based RSUs in the ILG Acquisition.

The fair value of the RSUs which vested in 2019 was $ 34 million, and included $ 15 million related to RSUs converted in the ILG Acquisition.

The fair value of the RSUs which vested in 2018 was $ 48 million, and included $ 24 million related to RSUs converted in the ILG Acquisition.

The fair value of the RSUs which vested in 2021, 2020, and 2019 was $ 46 million, $ 30 million, and $ 34 million, respectively, and included $ 3 million, $ 6 million, and $ 15 million, respectively, related to RSUs converted from ILG equity-based RSUs to MVW equity-based RSUs in the ILG Acquisition.

Stock Appreciation Rights

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The weighted average grant-date fair value per SAR granted in 2021, 2020, and 2019 was $ 70.66 , $ 29.63 , and $ 28.89 , respectively.

The intrinsic value of SARs which vested in 2020, 2019, and 2018, was $ 4 million, $ 4 million, and less than $ 1 million, respectively.

The intrinsic value of SARs which vested in 2021, 2020, and 2019, was $ 5 million, $ 4 million, and $ 4 million, respectively.

The aggregate intrinsic value of SARs which were exercised in 2021, 2020, and 2019 was $ 14 million, $ 19 million, and $ 11 million, respectively.

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

The expected stock price volatility was calculated based on the average of the historical and implied volatility from our stock price.

The expected stock price volatility was calculated based on the average of the historical and implied volatility of our stock price.

The average expected life was calculated using the simplified method, as we have insufficient historical information to provide a basis for estimating average expected life.

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Expected term (in years) 6.25 6.25 6.25

Stock Options

We may grant non-qualified stock options to employees and non-employee directors at exercise prices or strike prices equal to the market price of our common stock on the date of grant.

There were no outstanding or exercisable stock options held by our employees at year-end 2020 or 2019, and no stock options were granted to our employees in 2020, 2019, or 2018.

At December 31, 2020, approximately 700 stock options were outstanding and exercisable with a weighted average exercise price per option of $ 23.46 and a weighted average remaining life of less than one year .

Employee Stock Purchase Plan

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

As part of the ILG Acquisition, we acquired the variable interests in the entities associated with ILG’s outstanding vacation ownership notes receivable securitization transactions.

As these vacation ownership notes receivable securitizations are similar in nature to the Legacy-MVW vacation ownership notes receivable securitizations, they have been aggregated for disclosure purposes.

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

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We made voluntary repurchases of defaulted vacation ownership notes receivable, net of substitutions, of $ 99 million during 2021, $ 95 million during 2020 and $ 54 million during 2019.

We also made voluntary repurchases, net of substitutions, of $ 383 million, $ 356 million and $ 39 million of other non-defaulted vacation ownership notes receivable during 2020, 2019 and 2018, respectively, to retire previous vacation ownership notes receivable securitizations.

We also made voluntary repurchases of $ 200 million, $ 383 million and $ 356 million of other non-defaulted vacation ownership notes receivable during 2021, 2020 and 2019, respectively, to retire previous vacation ownership notes receivable securitizations.

Our maximum exposure to potential loss relating to the special purpose entities that purchase, sell, and own these vacation ownership notes receivable is the overcollateralization amount (the difference between the loan collateral balance and the balance on the outstanding vacation ownership notes receivable), plus cash reserves and any residual interest in future cash flows from collateral.

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Other Variable Interest Entities

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 December 31, 2020 are committed to make payments for the operating property as follows:

$ 32 million in 2021, $ 24 million in 2022, and $ 32 million in 2023.

See Footnote 4 “Acquisitions and Dispositions” for information on the purchases that occurred during 2020 and 2019.

We are required to purchase the property from the third party developer unless the developer has sold the property to another party.

The property is held by a VIE for which we are not the primary beneficiary as we cannot prevent the VIE from selling the property to another party at a higher price.

Accordingly, we have not consolidated the VIE.

As of December 31, 2020, our Balance Sheet reflected $ 2 million in Accounts Receivable, including a note receivable of less than $ 1 million, and $ 5 million in Other assets for a deposit related to the 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 $ 7 million as of December 31, 2020.

Subsequent to the end of 2020, we fulfilled our outstanding commitment to purchase 44 completed vacation ownership units for $ 34 million.

We accounted for this purchase as an asset acquisition with the purchase price allocated to Inventory ($ 29 million) and Other assets ($ 5 million).

We have a commitment to purchase an operating property located in New York, New York, that we currently manage as Marriott Vacation Club Pulse, New York City.

See Footnote 4 “Acquisitions and Dispositions” for information on the purchase that occurred during 2020.

We are required to purchase the completed property from the third-party developer unless the developer has sold the property to another party.

The property is held by a VIE for which we are not the primary beneficiary as we cannot prevent the VIE from selling the property at a higher price.

Accordingly, we have not consolidated the VIE.

As of December 31, 2020, our Balance Sheet reflected $ 22 million in Other assets for a deposit related to the acquisition of the remainder of this property which was completed in January 2021, and a note receivable of less than $ 1 million that is included in the Accounts receivable line.

We believe that our maximum exposure to loss as a result of our involvement with this VIE is approximately $ 23 million as of December 31, 2020.

Subsequent to the end of 2020, we fulfilled our outstanding commitment to purchase the remaining 120 completed vacation ownership units for $ 98 million.

We accounted for this purchase as an asset acquisition with the purchase price allocated to Property and equipment.

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

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Accordingly, we have not consolidated the VIE.

As of December 31, 2020, our Balance Sheet reflected $ 1 million in Accounts Receivable, including a note receivable of less than $ 1 million.

As of December 31, 2021, our Balance Sheet reflected $ 1 million in Accounts Receivable, including a note receivable of less than $ 1 million, related to this VIE.

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

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We operate in two operating and reportable business segments:

• Vacation Ownership includes a diverse portfolio of resorts that includes seven vacation ownership brands licensed under exclusive, long-term relationships with Marriott International and Hyatt Hotels Corporation.

• Vacation Ownership includes a diverse portfolio of resorts that includes some of the world’s most iconic brands licensed under exclusive, long-term relationships.

We are the exclusive worldwide developer, marketer, seller, and manager of vacation ownership and related products under the Marriott Vacation Club, Grand Residences by Marriott, Sheraton Vacation Club, Westin Vacation Club, and Hyatt Residence Club brands, as well as under Marriott Vacation Club Pulse, an extension to the Marriott Vacation Club brand.

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Regis brand for specified fractional ownership resorts.

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

We intend to rebrand all Welk resorts as Hyatt-branded resorts once all necessary approvals have been obtained.

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

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and renting vacation ownership inventory.

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

• Exchange & Third-Party Management includes exchange networks and membership programs, as well as provision of management services to other resorts and lodging properties.

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

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

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

Our CODM evaluates the performance of our segments based primarily on the results of the segment without allocating corporate expenses or income taxes.

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

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

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

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

Our CODM uses Adjusted EBITDA to evaluate the profitability of our operating segments, and the components of net income attributable to common shareholders excluded from Adjusted EBITDA are not separately evaluated.

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

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

Our CODM uses Adjusted EBITDA to evaluate the profitability of our operating segments, and the components of net income or loss attributable to common shareholders excluded from Adjusted EBITDA are not separately evaluated.

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 income (loss) attributable to common shareholders is presented below.

($ in millions) 2021 2020 2019

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$ 3,890 $ 2,886 $ 4,259

Adjusted EBITDA and Reconciliation to Net Income Attributable to Common Shareholders

Adjusted EBITDA and Reconciliation to Net Income or Loss Attributable to Common Shareholders

($ in millions) 2021 2020 2019

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Interest expense ( 164 ) ( 150 ) ( 132 )

Tax benefit (provision) 84 ( 83 ) ( 51 )

Tax (provision) benefit ( 74 ) 84 ( 83 )

Depreciation and amortization ( 146 ) ( 123 ) ( 141 )

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Certain items ( 173 ) ( 284 ) ( 227 )

Net income attributable to common shareholders $ ( 275 ) $ 138 $ 55

Net income (loss) attributable to common shareholders $ 49 $ ( 275 ) $ 138

Depreciation and Amortization

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Geographic Information

We conduct business globally, and our operations outside the United States represented approximately 10 percent, 11 percent, and 13 percent of our revenues, excluding cost reimbursements, for 2020, 2019, and 2018, respectively.

We conduct business globally, and our operations outside the United States represented approximately 10 %, 10 %, and 11 % of our revenues, excluding cost reimbursements, for 2021, 2020, and 2019, respectively.

Revenues (excluding cost reimbursements)

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All other countries 148 151

QUARTERLY RESULTS (UNAUDITED)

($ in millions, except per share data) First

Quarter Second

Quarter Third

Quarter Fourth

Quarter Fiscal

Revenues $ 1,010 $ 480 $ 649 $ 747 $ 2,886

Expenses $ ( 1,060 ) $ ( 521 ) $ ( 673 ) $ ( 730 ) $ ( 2,984 )

Net loss attributable to common shareholders $ ( 106 ) $ ( 70 ) $ ( 62 ) $ ( 37 ) $ ( 275 )

Loss per share attributable to common shareholders

Basic $ ( 2.56 ) $ ( 1.68 ) $ ( 1.51 ) $ ( 0.88 ) $ ( 6.65 )

Diluted $ ( 2.56 ) $ ( 1.68 ) $ ( 1.51 ) $ ( 0.88 ) $ ( 6.65 )

($ in millions, except per share data) First

Quarter Second

Quarter Third

Quarter Fourth

Quarter Fiscal

Revenues $ 1,034 $ 1,043 $ 1,066 $ 1,116 $ 4,259

Expenses $ ( 943 ) $ ( 900 ) $ ( 996 ) $ ( 962 ) $ ( 3,801 )

Net income (loss) attributable to common shareholders $ 24 $ 49 $ ( 9 ) $ 74 $ 138

Earnings (loss) per share attributable to common shareholders

Basic $ 0.52 $ 1.11 $ ( 0.21 ) $ 1.74 $ 3.13

Diluted $ 0.51 $ 1.10 $ ( 0.21 ) $ 1.71 $ 3.09

$ 1,136 $ 791

(1) The sum of the earnings per share attributable to common shareholders for the four quarters differs from annual earnings per share attributable to common shareholders due to the required method of computing the weighted average shares in interim periods.

SUBSEQUENT EVENTS

Acquisition of Welk Resorts

On January 26, 2021, subsequent to the end of 2020, we entered into a definitive agreement to acquire Welk Resorts, one of the largest independent timeshare companies in North America, for approximately $ 430 million, including approximately 1.4 million shares of our common stock.

The acquisition is expected to close early in the second quarter of 2021.

Issuance of Convertible Notes

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

The 2026 Convertible Notes will not bear regular interest and will mature on January 15, 2026, unless earlier repurchased or converted.

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

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

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.

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

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data