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Item 1. Financial Statements

2022-08-09 compared with 2022-05-09 · 368 added, 234 removed, 890 unchanged (40% of the section changed)

3 unchanged sentences

(In millions, except per share amounts)

Three Months Ended

March 31, 2022 March 31, 2021

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Sale of vacation ownership products $ 425 $ 296 $ 735 $ 459

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Management and exchange 102 126 229 243

Rental 87 81 168 163

Financing 23 21 44 42

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Royalty fee 29 27 56 52

Impairment — 5 — 5

Cost reimbursements 324 274 640 529

TOTAL EXPENSES 957 870 1,868 1,609

Gains and other income, net 4 6

Gains (losses) and other income (expense), net 37 ( 2 ) 41 4

Interest expense ( 30 ) ( 44 ) ( 57 ) ( 87 )

Transaction and integration costs ( 37 ) ( 29 ) ( 65 ) ( 48 )

Other 1 1 1 1

INCOME (LOSS) BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS 178 35 268 ( 1 )

(Provision for) benefit from income taxes ( 32 ) 11

Provision for income taxes ( 43 ) ( 27 ) ( 75 ) ( 16 )

NET INCOME (LOSS) 135 8 193 ( 17 )

Net income attributable to noncontrolling interests — ( 3 )

Net loss (income) attributable to noncontrolling interests 1 ( 2 ) 1 ( 5 )

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 136 $ 6 $ 194 $ ( 22 )

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(In millions)

Three Months Ended

March 31, 2022 March 31, 2021

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

NET INCOME (LOSS) $ 135 $ 8 $ 193 $ ( 17 )

Foreign currency translation adjustments ( 2 ) 4 2 1

Reclassification of foreign currency translation adjustments realized upon disposition of entities ( 10 ) — ( 10 ) —

Derivative instrument adjustment, net of tax 7 3 23 9

OTHER COMPREHENSIVE GAIN, NET OF TAX 20 3

Net income attributable to noncontrolling interests — ( 3 )

OTHER COMPREHENSIVE (LOSS) GAIN, NET OF TAX ( 5 ) 7 15 10

Net loss (income) attributable to noncontrolling interests 1 ( 2 ) 1 ( 5 )

Other comprehensive income attributable to noncontrolling interests — — — —

COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS — ( 3 )

COMPREHENSIVE LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS 1 ( 2 ) 1 ( 5 )

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 131 $ 13 $ 209 $ ( 12 )

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(In millions, except share and per share data)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Cash and cash equivalents $ 324 $ 342

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(In millions)

Three Months Ended

March 31, 2022 March 31, 2021

Six Months Ended

June 30, 2022 June 30, 2021

OPERATING ACTIVITIES

Net income (loss) $ 193 $ ( 17 )

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

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

Depreciation and amortization of intangibles 65 77

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Share-based compensation 20 22

Impairment charges — 5

Gains and other income, net ( 47 ) ( 1 )

Deferred income taxes 29 36

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Other, net 1 9

Net cash, cash equivalents and restricted cash provided by (used in) operating activities 129 ( 60 )

Net cash, cash equivalents and restricted cash provided by operating activities 218 148

INVESTING ACTIVITIES

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

Proceeds from disposition of subsidiaries, net of cash and restricted cash transferred 93 —

Capital expenditures for property and equipment (excluding inventory) ( 23 ) ( 11 )

Issuance of note receivable to VIE ( 47 ) —

Purchase of company owned life insurance ( 11 ) ( 8 )

Dispositions, net 3 —

Net cash, cash equivalents and restricted cash used in investing activities ( 10 ) ( 8 )

Other, net 3 —

Net cash, cash equivalents and restricted cash provided by (used in) investing activities 15 ( 176 )

See Notes to Interim Consolidated Financial Statements

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(In millions)

Three Months Ended

March 31, 2022 March 31, 2021

Six Months Ended

June 30, 2022 June 30, 2021

FINANCING ACTIVITIES

16 unchanged sentences

SUPPLEMENTAL DISCLOSURES

Non-cash transfer from property and equipment to inventory $ 2 $ 3

Non-cash transfer from inventory to property and equipment 31 2

Non-cash transfer of other assets to property and equipment 13 22

Non-cash issuance of debt in connection with asset acquisition $ 11 $ —

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

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

Non-cash transfer from inventory to property and equipment 45 3

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

Non-cash transfer of other assets to property and equipment 15 22

Non-cash reduction of debt associated with bifurcation of conversion feature on the 2022 Convertible Notes 5 —

Non-cash adjustment to additional paid-in capital for 2022 Convertible Note Hedges 6 —

Interest paid, net of amounts capitalized 69 89

Income tax refunds, net of income taxes paid ( 7 ) ( 30 )

Income taxes paid, net of refunds (income tax refunds, net of income taxes paid) 33 ( 27 )

See Notes to Interim Consolidated Financial Statements

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75.7 BALANCE AT MARCH 31, 2022 1 ( 1,474 ) 3,945 4 338 2,814 10 2,824

— Net income (loss) — — — — 136 136 ( 1 ) 135

— Foreign currency translation adjustments — — — ( 2 ) — ( 2 ) — ( 2 )

— Reclassification of foreign currency translation adjustments realized upon disposition of entities — — — ( 10 ) — ( 10 ) — ( 10 )

— Derivative instrument adjustment — — — 7 — 7 — 7

— Adjustment for 2022 Convertible Note Hedges — — 6 — — 6 — 6

— Share-based compensation plans — 1 12 — — 13 — 13

— Repurchase of common stock — ( 193 ) — — — ( 193 ) — ( 193 )

— Deconsolidation of certain Consolidated Property Owners' Associations — — — — — — ( 8 ) ( 8 )

— Dividends — — — — ( 26 ) ( 26 ) — ( 26 )

75.7 BALANCE AT JUNE 30, 2022 $ 1 $ ( 1,666 ) $ 3,963 $ ( 1 ) $ 448 $ 2,745 $ 1 $ 2,746

See Notes to Interim Consolidated Financial Statements

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In millions)

Issued Common

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

— Net income — — — — 6 6 2 8

— Welk Acquisition — 55 193 — — 248 — 248

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

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

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

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

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

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

See Notes to Interim Consolidated Financial Statements

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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 $ 3 million in Gains (losses) and other income (expense), net on our Income Statement for each of the three and six months ended June 30, 2022, and deconsolidated $ 110 million of assets, inclusive of $ 48 million of restricted cash, and $ 99 million of liabilities, for a decrease in Noncontrolling interests of $ 8 million during the first half of 2022.

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”).

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

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

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

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

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

In our opinion, our Financial Statements reflect all normal and recurring adjustments necessary to present fairly our financial position, the results of our operations, and cash flows for the periods presented.

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

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

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

Disposition of VRI Americas

Our Financial Statements reflect the disposition of the Vacation Resorts International (“VRI”) and Trading Places International (“TPI”) businesses (together the “VRI Americas” business) on April 29, 2022.

See Footnote 3 “Acquisitions and Dispositions” for more information on the disposition of VRI Americas.

SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING STANDARDS

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In the first quarter of 2022, we adopted accounting standards update (“ASU”) 2020-06, using the modified retrospective method.

Under ASU 2020-06, we no longer separate our convertible notes into liability and equity components,

and we are required to calculate the impact of our convertible notes on diluted earnings per share using the “if-converted” method, regardless of intent to settle or partially settle the debt in cash.

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.

Upon adoption of ASU 2020-06, our convertible notes were no longer separated into liability and equity components, and we are required to calculate the impact of our convertible notes on diluted earnings per share using the “if-converted” method, regardless of intent to settle or partially settle the debt in cash.

Under the “if-converted” method, diluted earnings per share is generally calculated assuming that all of our convertible notes are 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 reduces our reported diluted earnings per share.

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The adoption of ASU 2020-06 on January 1, 2022 resulted 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.

The remaining debt issuance costs will continue to be amortized over the term of our convertible notes.

The remaining debt issuance costs will continue to be amortized over the respective terms of our convertible notes.

The prior period consolidated financial statements have not been retrospectively restated and continue to be reported under the accounting standards in effect for those periods.

See Footnote 13 “Debt” for further information on accounting for the 2022 Convertible Notes and the 2022 Convertible Note Hedges (as defined in Footnote 13 “Debt”), subsequent to the adoption of ASU 2020-06.

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

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In the first quarter of 2022, we adopted ASU 2021-08, which amended 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.

The adoption of ASU 2021-08 on January 1, 2022 did not have a material impact on our financial statements and disclosure.

The adoption of ASU 2021-08 on January 1, 2022 did not have a material impact on our financial statements and disclosures.

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

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This update was effective upon issuance and issuers may generally elect to adopt the optional expedients and exceptions over time through December 31, 2022.

As of March 31, 2022, the interest rate applicable to borrowings under our existing Term Loan (as defined in Footnote 13 “Debt”) and Warehouse Credit Facility (as defined in Footnote 12 “Securitized Debt”) generally continue to reference LIBOR, as do certain interest rate swaps and collars.

These instruments have not yet discontinued the use of LIBOR.

As of June 30, 2022, the interest rates applicable to borrowings under our existing Term Loan (as defined in Footnote 13 “Debt”) and Warehouse Credit Facility (as defined in Footnote 12 “Securitized Debt”) generally continued to reference LIBOR, as did certain interest rate swaps and collars.

Subsequent to June 30, 2022, we amended the terms of our Warehouse Credit Facility to, among other things, reference SOFR (as defined in Footnote 12 “Securitized Debt”) rather than LIBOR.

Our Term Loan and certain interest rate swaps and collars 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 remaining existing debt instruments, we will determine a replacement rate for LIBOR.

We have not adopted any of the optional expedients or exceptions as of March 31, 2022, but will continue to evaluate their adoption during the effective period as circumstances evolve.

We have not adopted any of the optional expedients or exceptions as of June 30, 2022, but will continue to evaluate their adoption during the effective period as circumstances evolve.

Accounting Standards Update 2022-02 – “ Financial Instruments – Credit Losses (Topic 326) - Troubled Debt Restructurings and Vintage Disclosures ” (“ASU 2022-02”)

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however, we do not expect adoption to have a material effect on our financial statements or disclosures other than disclosure changes related to vintage disclosures for financing receivables.

ACQUISITIONS AND DISPOSITIONS

Welk Acquisition

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We accounted for the Welk Acquisition as a business combination, which required 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, 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.

The values attributed to Vacation ownership notes receivable, Inventory, Property and equipment, Intangible assets, and Securitized debt from VIEs were 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 was based on Level 2 inputs in accordance with ASC 820.

During the first quarter of 2022, we finalized our allocation of the purchase price to the acquired assets and liabilities.

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Pro Forma Results of Operations

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

The following unaudited pro forma information presents the combined results of operations of Marriott Vacations Worldwide and Legacy-Welk as if we had completed the Welk Acquisition on December 31, 2019, the last day of our 2019 fiscal year, but using 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 Welk Acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations.

There were no Welk Acquisition-related costs included in the unaudited pro forma results below for the three months ended March 31, 2021.

Three Months Ended

($ in millions, except per share data) March 31, 2021

There were no Welk Acquisition-related costs included in the unaudited pro forma results below for the six months ended June 30, 2021.

Six Months Ended

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

Revenues $ 1,785

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Diluted $ ( 0.24 )

Welk Results of Operations

The following table presents the results of Welk operations included in our Income Statement for the three months ended March 31, 2022.

($ in millions) Three Months Ended March 31, 2022

Legacy-Welk Results of Operations

The following table presents the results of Legacy-Welk operations included in our Income Statement for the three months and six months ended June 30, 2022 and June 30, 2021.

Three Months Ended Six Months Ended

($ in millions) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Revenue $ 56 $ 48 $ 107 $ 48

Net income $ 5 $ 5 $ 12 $ 5

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Further, we reclassified $ 13 million of previous deposits associated with the project from Other assets to Property and equipment.

On April 29, 2022, we disposed of VRI Americas for proceeds of $ 55 million, net of cash and restricted cash transferred to the buyer of $ 12 million, after determining that this business was not a core component of our future growth strategy and operating model.

The results of VRI Americas are included in our Exchange and Third-Party Management segment through the date of the sale.

The net carrying value of VRI Americas as of the date of the disposition was $ 51 million, including $ 25 million of goodwill and $ 20 million of intangible assets.

As a result of the disposition, we recorded a gain of $ 16 million in Gains (losses) and other income (expense), net on our Income Statements for the three and six months ended June 30, 2022.

Additionally, on June 28, 2022, we disposed of entities that owned and operated a Vacation Ownership segment hotel in Puerto Vallarta, Mexico, for proceeds of $ 38 million, net of cash and restricted cash transferred to the buyer of $ 3 million, consistent with our development strategy to dispose of non-strategic assets.

The net carrying value of the business disposed of as of the date of the disposition, excluding the cumulative translation adjustment, was $ 18 million, substantially all of which was property and equipment.

As a result of this disposition, we recorded a gain of $ 33 million in Gains (losses) and other income (expense), net on our Income Statements for the three and six months ended June 30, 2022, which included the realization of cumulative foreign currency translation gains of $ 10 million associated with the disposition of these entities .

REVENUE AND RECEIVABLES

Sources of Revenue by Segment

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

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

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

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Total Revenues $ 1,091 $ 74 $ ( 1 ) $ 1,164

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

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

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Total Revenues $ 883 $ 86 $ 10 $ 979

Six Months Ended June 30, 2022

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

Sale of vacation ownership products $ 735 $ — $ — $ 735

Ancillary revenues 120 2 — 122

Management fee revenues 83 21 ( 4 ) 100

Exchange and other services revenues 63 99 41 203

Management and exchange 266 122 37 425

Rental 251 22 — 273

Cost reimbursements 652 14 ( 26 ) 640

Revenue from contracts with customers 1,904 158 11 2,073

Financing 143 — — 143

Total Revenues $ 2,047 $ 158 $ 11 $ 2,216

Six Months Ended June 30, 2021

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

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

Ancillary revenues 80 1 — 81

Management fee revenues 77 14 ( 11 ) 80

Exchange and other services revenues 60 105 87 252

Management and exchange 217 120 76 413

Rental 187 23 — 210

Cost reimbursements 554 29 ( 54 ) 529

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

Financing 127 — — 127

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

Timing of Revenue from Contracts with Customers by Segment

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

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

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

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Revenue from contracts with customers $ 1,019 $ 74 $ ( 1 ) $ 1,092

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

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

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

Six Months Ended June 30, 2022

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

Services transferred over time $ 1,041 $ 72 $ 11 $ 1,124

Goods or services transferred at a point in time 863 86 — 949

Revenue from contracts with customers $ 1,904 $ 158 $ 11 $ 2,073

Six Months Ended June 30, 2021

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

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

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

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

Sale of Vacation Ownership Products

Revenue recognized during the first quarter of 2022 due to changes in our estimates of variable consideration for performance obligations that were satisfied in prior periods was $ 1 million.

Revenue declined during the second quarter and first half of 2022 by $ 3 million and $ 5 million, respectively, due to changes in our estimates of variable consideration for performance obligations that were satisfied in prior periods.

Receivables from Contracts with Customers, Contract Assets, & Contract Liabilities

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

We had no contract assets at either March 31, 2022 or December 31, 2021.

($ in millions) At March 31, 2022 At December 31, 2021

We had no contract assets at either June 30, 2022 or December 31, 2021.

($ in millions) At June 30, 2022 At December 31, 2021

Receivables from Contracts with Customers

Accounts receivable $ 140 $ 172

Accounts receivable, net $ 118 $ 172

Vacation ownership notes receivable, net 2,075 2,045

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Deferred revenue 372 453

Revenue recognized during the first quarter of 2022 that was included in our contract liabilities balance at December 31, 2021 was $ 126 million.

Revenue recognized during the second quarter and first half of 2022 that was included in our contract liabilities balance at December 31, 2021 was $ 117 million and $ 243 million, respectively.

Remaining Performance Obligations

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

At March 31, 2022, approximately 86 % of this amount is expected to be recognized as revenue over the next two years .

At June 30, 2022, approximately 87 % of this amount is expected to be recognized as revenue over the next two years .

Accounts Receivable

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

($ in millions) At March 31, 2022 At December 31, 2021

Receivables from contracts with customers $ 140 $ 172

($ in millions) At June 30, 2022 At December 31, 2021

Receivables from contracts with customers, net $ 118 $ 172

Note receivable from variable interest entity (1)

Interest receivable 15 14

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Employee tax credit receivable 17 19

_________________________

(1) See Footnote 16 “Variable Interest Entities” for additional information on the loan extended to a VIE during the second quarter of 2022 when we amended our commitment to purchase a property located in Waikiki, Hawaii.

Our provision for income taxes is calculated using an estimated annual effective tax rate, based upon expected annual income, less losses in certain jurisdictions, permanent items, statutory rates and planned tax strategies in the various jurisdictions in which we operate.

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

Our interim effective tax rate was 35.6 % and 29.8 % for the three months ended March 31, 2022 and March 31, 2021, respectively.

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

Our interim effective tax rate was 24.3 % and 75.4 % for the three months ended June 30, 2022 and June 30, 2021, respectively.

Our interim effective tax rate was 28.1 % and ( 1,737.7 %) for the six months ended June 30, 2022 and June 30, 2021, respectively.

The change in the effective tax rate for both the three and six months ended June 30, 2022 is predominately attributable to an increase in pre-tax income.

Unrecognized Tax Benefits

The following table summarizes the activity related to our unrecognized tax benefits (excluding interest and penalties) during the three months ended March 31, 2022.

The following table summarizes the activity related to our unrecognized tax benefits (excluding interest and penalties) during the six months ended June 30, 2022.

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

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Increases related to tax positions taken during a prior period 2

Balance at March 31, 2022

The total amount of gross interest and penalties accrued was $ 45 million at March 31, 2022 and $ 42 million at December 31, 2021.

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

Balance at June 30, 2022

The total amount of gross interest and penalties accrued was $ 47 million at June 30, 2022 and $ 42 million at December 31, 2021.

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.

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Certain of our returns are being audited in various jurisdictions for tax years 2007 through 2020.

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

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

VACATION OWNERSHIP NOTES RECEIVABLE

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

($ in millions) Originated Acquired Total Originated Acquired Total

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

Three Months Ended

($ in millions) March 31, 2022 March 31, 2021

Three Months Ended Six Months Ended

($ in millions) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Interest income associated with vacation ownership notes receivable — securitized $ 60 $ 57 $ 119 $ 105

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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 March 31, 2022.

The following table shows future contractual principal payments, net of reserves, and interest rates for our acquired vacation ownership notes receivable at June 30, 2022.

Acquired Vacation Ownership Notes Receivable

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Thereafter 10 92 102

Balance at March 31, 2022 $ 18 $ 316 $ 334

Balance at June 30, 2022 $ 22 $ 269 $ 291

Weighted average stated interest rate 13.9 % 14.2 % 14.1 %

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

Securitizations ( 1 ) 1 —

Clean-up call 1 ( 1 ) —

Write-offs ( 29 ) — ( 29 )

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(Decrease) increase in vacation ownership notes receivable reserve ( 14 ) 14 —

Balance at March 31, 2022 $ 46 $ 20 $ 66

Balance at June 30, 2022 $ 36 $ 23 $ 59

_________________________

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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 March 31, 2022.

The following table shows future principal payments, net of reserves, and interest rates for our originated vacation ownership notes receivable at June 30, 2022.

Originated Vacation Ownership Notes Receivable

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Thereafter 232 787 1,019

Balance at March 31, 2022 $ 351 $ 1,345 $ 1,696

Balance at June 30, 2022 $ 394 $ 1,390 $ 1,784

Weighted average stated interest rate 12.7 % 13.0 % 12.9 %

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Securitizations ( 55 ) 55 —

Clean-up call 15 ( 15 ) —

Write-offs ( 58 ) — ( 58 )

Defaulted vacation ownership notes receivable repurchase activity (1)

Balance at March 31, 2022 $ 193 $ 150 $ 343

Balance at June 30, 2022 $ 183 $ 158 $ 341

_________________________

(1) Reflects the change attributable to the transfer of the reserve from the non-securitized vacation ownership notes receivable reserve to the securitized vacation ownership notes receivable reserve, when MVW 2021-2 LLC purchased the remaining vacation ownership notes receivable that were securitized during the fourth quarter of 2021, and when we securitized vacation ownership notes receivable under our Warehouse Credit Facility (as defined in Footnote 12 “Securitized Debt”) during the first quarter of 2022.

(1) Reflects the change attributable to the transfer of the reserve from the securitized vacation ownership notes receivable reserve to the non-securitized vacation ownership notes receivable reserve when we voluntarily repurchase securitized vacation ownership notes receivable.

Credit Quality of Vacation Ownership Notes Receivable

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 6.71 % as of March 31, 2022, and 6.74 % as of December 31, 2021.

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 March 31, 2022 and December 31, 2021.

Credit Quality of 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 6.81 % as of June 30, 2022, and 6.74 % as of December 31, 2021.

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 March 31, 2022 $ 84 $ 9 $ 93

Investment in vacation ownership notes receivable on non-accrual status at June 30, 2022 $ 75 $ 6 $ 81

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

The following table shows the aging of the recorded investment in principal, before reserves, in Legacy-MVW vacation ownership notes receivable as of March 31, 2022 and December 31, 2021.

The following table shows the aging of the recorded investment in principal, before reserves, in Legacy-MVW vacation ownership notes receivable as of June 30, 2022 and December 31, 2021.

Legacy-MVW Vacation Ownership Notes Receivable

As of March 31, 2022

As of June 30, 2022

As of December 31, 2021

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Total vacation ownership notes receivable $ 271 $ 1,083 $ 1,354 $ 274 $ 1,055 $ 1,329

The following table details the origination year of our Legacy-MVW vacation ownership notes receivable as of March 31, 2022.

The following table details the origination year of our Legacy-MVW vacation ownership notes receivable as of June 30, 2022.

Legacy-MVW Vacation Ownership Notes Receivable

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$ 271 $ 1,083 $ 1,354

Legacy-ILG and Legacy-Welk Vacation Ownership Notes Receivable

At March 31, 2022 and December 31, 2021, the weighted average FICO score within our consolidated Legacy-ILG and Legacy-Welk vacation ownership notes receivable pools was 708 and 707 , 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 17.14 % as of March 31, 2022 and 17.33 % as of December 31, 2021.

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 both March 31, 2022 and December 31, 2021.

Credit Quality of Legacy-ILG and Legacy-Welk Vacation Ownership Notes Receivable

At June 30, 2022 and December 31, 2021, the weighted average FICO score within our consolidated Legacy-ILG and Legacy-Welk vacation ownership notes receivable pools was 709 and 707 , 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 16.85 % as of June 30, 2022 and 17.33 % as of December 31, 2021.

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 $ 5 million as of June 30, 2022 and $ 4 million as of December 31, 2021.

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.

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($ in millions) Non-Securitized Securitized Total

Investment in vacation ownership notes receivable on non-accrual status at March 31, 2022 $ 115 $ 9 $ 124

Investment in vacation ownership notes receivable on non-accrual status at June 30, 2022 $ 95 $ 9 $ 104

Investment in vacation ownership notes receivable on non-accrual status at December 31, 2021 $ 114 $ 10 $ 124

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 March 31, 2022 and December 31, 2021.

The following table shows the aging of the recorded investment in principal, before reserves, in Legacy-ILG and Legacy-Welk vacation ownership notes receivable as of June 30, 2022 and December 31, 2021.

Legacy-ILG and Legacy-Welk Vacation Ownership Notes Receivable

As of March 31, 2022

As of June 30, 2022

As of December 31, 2021

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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 March 31, 2022

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

Westin $ 48 $ 30 $ 3 $ 7 $ 88

Sheraton 49 43 7 19 118

Hyatt 7 5 1 — 13

Welk 102 71 1 2 176

Other 1 1 — 2 4

$ 207 $ 150 $ 12 $ 30 $ 399

Acquired Vacation Ownership Notes Receivable as of December 31, 2021

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

Acquired Vacation Ownership Notes Receivable

As of June 30, 2022 As of December 31, 2021

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

Westin $ 42 $ 26 $ 2 $ 6 $ 76 $ 52 $ 32 $ 3 $ 8 $ 95

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$ 185 $ 131 $ 10 $ 24 $ 350 $ 231 $ 165 $ 13 $ 35 $ 444

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 March 31, 2022.

The following tables detail the origination year of our Legacy-ILG and Legacy-Welk acquired vacation ownership notes receivable by brand and FICO score as of June 30, 2022.

Acquired Vacation Ownership Notes Receivable 2018 & Prior

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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 March 31, 2022

Originated Vacation Ownership Notes Receivable as of June 30, 2022

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

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$ 366 $ 198 $ 29 $ 81 $ 674

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 March 31, 2022.

The following tables detail the origination year of our Legacy-ILG and Legacy-Welk originated vacation ownership notes receivable by brand and FICO score as of June 30, 2022.

Originated Vacation Ownership Notes Receivable - Westin

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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, deposits included in Other assets, Accounts payable, Advance deposits, and Accrued liabilities, all of which had fair values approximating their carrying amounts due to the short maturities and liquidity of these instruments.

At March 31, 2022 At December 31, 2021

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

At June 30, 2022 At December 31, 2021

($ in millions) Carrying

Value Carrying

Vacation ownership notes receivable $ 2,030 $ 2,091 $ 2,045 $ 2,102

Vacation ownership notes receivable, net $ 2,075 $ 2,160 $ 2,045 $ 2,102

Other assets 71 71 76 76

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_________________________

(1) Prior period amounts have not been adjusted due to our adoption of ASU 2020-06 under the modified retrospective method.

(1) Prior period amounts have not been adjusted to reflect our adoption of ASU 2020-06 under the modified retrospective method.

See Footnote 2 “Significant Accounting Policies and Recent Accounting Standards” for information on our adoption of ASU 2020-06.

Vacation Ownership Notes Receivable

At March 31, 2022 At December 31, 2021

At June 30, 2022 At December 31, 2021

($ in millions) Carrying

Value Carrying

Vacation ownership notes receivable

Vacation ownership notes receivable, net

Securitized $ 1,659 $ 1,736 $ 1,662 $ 1,712

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Due to factors that impact the general marketability of our vacation ownership notes receivable that have not been securitized, as well as current market conditions, we bifurcate our non-securitized vacation ownership notes receivable at each balance sheet date into those eligible and not eligible for securitization using criteria applicable to current securitization transactions in the ABS market.

Generally, vacation ownership notes receivable are considered not eligible for securitization if any of the following attributes are present:

Generally, vacation ownership notes receivable are considered not eligible

for securitization if any of the following attributes are present:

(1) payments are greater than 30 days past due;

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or (3) the collateral is located in Asia or Europe.

In some cases, eligibility may also be determined based on

the credit score of the borrower, the remaining term of the loans and other similar factors that may reflect investor demand in a securitization transaction or the cost to effectively securitize the vacation ownership notes receivable.

In some cases, eligibility may also be determined based on the credit score of the borrower, the remaining term of the loans and other similar factors that may reflect investor demand in a securitization transaction or the cost to effectively securitize the vacation ownership notes receivable.

The table above shows the bifurcation of our vacation ownership notes receivable that have not been securitized into those eligible and not eligible for securitization based upon the aforementioned eligibility criteria.

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Convertible Notes

We estimate the fair value of our 2022 Convertible Notes and 2026 Convertible Notes (each as defined in Footnote 13 “Debt” and referred to collectively as our “convertible notes”) using quoted market prices as of the last trading day for the quarter;

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

however these notes have only a limited trading history and volume, and as such this fair value estimate is not necessarily indicative of the value at which the 2026 Convertible Notes could be retired or transferred.

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The difference between the carrying value and the fair value is primarily attributed to the underlying conversion feature and the spread between the conversion price and the market value of the shares underlying the 2026 Convertible notes.

Prior to June 2022, we estimated the fair value of the 2022 Convertible Notes (as defined in Footnote 13 “Debt”) using the same approach as the aforementioned 2026 Convertible Notes.

In June 2022, the fair value of the 2022 Convertible Notes was calculated using the “with and without” approach (Level 2) based upon comparable debt yields.

Non-Interest Bearing Note Payable

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

ASU 2020-06 was applicable to our convertible notes outstanding as of adoption and requires us to calculate the impact of our convertible notes on diluted earnings per share using the “if-converted” method, regardless of our intent to settle or partially settle the debt in cash.

ASU 2020-06 is applicable to our convertible notes outstanding as of adoption and requires us to calculate the impact of our convertible notes on diluted earnings per share using the “if-converted” method, regardless of our intent to settle or partially settle the debt in cash.

Under the “if-converted” method, shares issuable upon conversion of our convertible notes are assumed to be converted into common stock at the beginning of the period, to the extent dilutive.

Earnings per share for the three months ended March 31, 2021 have not been retrospectively restated and continue to be reported under the accounting standards in effect for that period.

We issued notice of our intent to settle the 2022 Convertible Notes in cash, which became irrevocable on June 15, 2022, and as a result, we suspended the use of the “if-converted” method for the 2022 Convertible Notes at that time, as there was no longer a share settlement option.

Earnings per share for the three and six months ended June 30, 2021 have not been retrospectively restated and continue to be reported under the accounting standards in effect for that period.

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

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

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

Three Months Ended

(in millions, except per share amounts) March 31, 2022 (1)

March 31, 2021

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

Three Months Ended Six Months Ended

(in millions, except per share amounts) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

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

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Basic earnings (loss) per share $ 3.30 $ 0.15 $ 4.64 $ ( 0.52 )

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

Three Months Ended Six Months Ended

(in millions, except per share amounts) June 30, 2022 (1)

June 30, 2021 (1)

June 30, 2022 (1)

June 30, 2021 (1)

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

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2022 Convertible Notes ($ 230 million of principal) (3)

1.3 0.2 1.4 —

2026 Convertible Notes ($ 575 million of principal)

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_______________________________

(1) The computation of diluted earnings per share attributable to common shareholders excludes approximately 300,000 shares of common stock, the maximum number of shares issuable as of March 31, 2022, 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) For the first quarter of 2021, the following potentially dilutive securities were excluded from the above calculation of diluted net loss per share attributable to common shareholders during the periods presented, as the effects of including these securities would have been anti-dilutive.

Three Months Ended

(in millions) March 31, 2021

(1) The computations of diluted earnings per share attributable to common shareholders exclude approximately 293,000 and 299,000 shares of common stock, the maximum number of shares issuable as of June 30, 2022 and June 30, 2021, 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) For the first half of 2021, 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.

Six Months Ended

(in millions) June 30, 2021

Employee SARs 0.2

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2022 Convertible Notes ($ 230 million of principal)

In accordance with the applicable accounting guidance for calculating earnings per share, for the first quarter of 2022, we excluded from our calculation of diluted earnings per share 126,169 shares underlying stock appreciation rights (“SARs”) that may settle in shares of common stock because the exercise price of $ 173.88 of such SARs was greater than the average market price for the applicable period.

(3) We had the option to settle the 2022 Convertible Notes in cash, stock, or a combination of the two.

Therefore, from the beginning of the period through the date on which our notice of our intent to settle the 2022 Convertible Notes in cash became irrevocable, we included shares in the denominator of the diluted earnings per share calculation, applying the “if-converted” method.

For the period from June 15, 2022 through June 30, 2022, we excluded the related shares from the denominator of the diluted earnings per share calculation.

In accordance with the applicable accounting guidance for calculating earnings per share, for the second quarter of 2022, we excluded from our calculation of diluted earnings per share 252,314 shares underlying stock appreciation rights (“SARs”) that may settle in shares of common stock because the exercise prices of such SARs, which ranged from $ 143.38 to $ 173.88 , were greater than the average market price of our common stock for the applicable period.

For the first half of 2022, we excluded from our calculation of diluted earnings per share 199,813 shares underlying SARs that may settle in shares of common stock because the exercise prices of such SARs, which ranged from $ 159.27 to $ 173.88 , were greater than the average market price of our common stock for the applicable period.

For the second quarter of 2021, we excluded from our calculation of diluted earnings per share 127,857 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 of our common stock for the applicable period.

The following table shows the composition of our inventory balances:

($ in millions) At March 31, 2022 At December 31, 2021

($ in millions) At June 30, 2022 At December 31, 2021

Real estate inventory (1)

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

Product cost true-up activity relating to vacation ownership products increased carrying values of inventory by $ 7 million during the first quarter of 2022 and by $ 1 million during the first quarter of 2021.

In addition to the above, at March 31, 2022 and December 31, 2021, we had $ 496 million and $ 460 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.

Product cost true-up activity relating to vacation ownership products increased carrying values of inventory by $ 10 million during the first half of 2022 and by $ 1 million during the first half of 2021.

In addition to the above, at June 30, 2022 and December 31, 2021, we had $ 506 million and $ 460 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.

GOODWILL AND INTANGIBLES

The following table details the carrying amount of our goodwill at March 31, 2022 and December 31, 2021, and reflects goodwill attributed to the ILG Acquisition and the Welk Acquisition.

The following table details the carrying amount of our goodwill at June 30, 2022 and December 31, 2021, and reflects goodwill attributed to the ILG Acquisition and the Welk Acquisition.

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

1 unchanged sentence

Measurement period adjustments ( 8 ) — ( 8 )

Balance at March 31, 2022 $ 2,770 $ 372 $ 3,142

Disposition of VRI Americas — ( 25 ) ( 25 )

Balance at June 30, 2022 $ 2,770 $ 347 $ 3,117

Intangible Assets

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

($ in millions) At March 31, 2022 At December 31, 2021

($ in millions) At June 30, 2022 At December 31, 2021

Definite-lived intangible assets

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Commitments and Letters of Credit

As of March 31, 2022, we had the following commitments outstanding:

As of June 30, 2022, we had the following commitments outstanding:

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

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• We have commitments to acquire inventory from our managed owners’ associations in the remainder of 2022 for $ 30 million.

Surety bonds issued as of March 31, 2022 totaled $ 120 million, the majority of which were requested by federal, state, or local governments in connection with our operations.

As of March 31, 2022, we had $ 2 million of letters of credit outstanding under our Revolving Corporate Credit Facility (as defined in Footnote 13 “Debt”).

In addition, as of March 31, 2022, we had $ 2 million in letters of credit outstanding related to and in lieu of reserves required for several vacation ownership notes receivable securitization transactions outstanding.

Surety bonds issued as of June 30, 2022 totaled $ 127 million, the majority of which were requested by federal, state, or local governments in connection with our operations.

As of June 30, 2022, we had $ 1 million of letters of credit outstanding under our Revolving Corporate Credit Facility (as defined in Footnote 13 “Debt”).

In addition, as of June 30, 2022, we had $ 2 million in letters of credit outstanding related to and in lieu of reserves required for several vacation ownership notes receivable securitization transactions outstanding.

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

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

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

At March 31, 2022, our maximum exposure under fixed dollar guarantees was $ 8 million, of which $ 1 million, $ 2 million, $ 2 million, $ 1 million, $ 1 million, and $ 1 million relate to the remainder of 2022, 2023, 2024, 2025, 2026, and thereafter, respectively.

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

At June 30, 2022, our maximum exposure under fixed dollar guarantees was $ 8 million, of which $ 1 million, $ 2 million, $ 2 million, $ 1 million, $ 1 million, and $ 1 million relate to the remainder of 2022, 2023, 2024, 2025, 2026, and thereafter, respectively.

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, in lieu of maintenance fees for unsold inventory.

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or 2) written notification of termination by either party.

At March 31, 2022, our expected commitment for the remainder of 2022 is $ 10 million, which will ultimately be recorded as a component of rental expense on our income statement.

At June 30, 2022, our expected commitment for the remainder of 2022 is $ 5 million, which will ultimately be recorded as a component of rental expense on our income statement.

Loss Contingencies

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

($ in millions) At March 31, 2022 At December 31, 2021

($ in millions) At June 30, 2022 At December 31, 2021

Vacation ownership notes receivable securitizations, gross (1)

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Unamortized debt discount and issuance costs ( 22 ) ( 21 )

Warehouse Credit Facility, gross 101 —

Unamortized debt issuance costs (2)

$ 1,846 $ 1,856

_________________________

(1) Interest rates as of March 31, 2022 range from 1.5 % to 4.4 %, with a weighted average interest rate of 2.3 %.

(2) Excludes $ 2 million of unamortized debt issuance costs as of December 31, 2021, as no cash borrowings were outstanding on the Warehouse Credit Facility at that time.

(1) Interest rates as of June 30, 2022 range from 1.5 % to 4.6 %, with a weighted average interest rate of 2.7 %.

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

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

The following table shows scheduled future principal payments for our securitized debt as of March 31, 2022.

The following table shows scheduled future principal payments for our securitized debt as of June 30, 2022.

Vacation Ownership

Notes Receivable Securitizations Warehouse Credit

Facility Total

Notes Receivable Securitizations

($ in millions)

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2022, remaining $ 90

2023 182 5 187

2024 185 93 278

2025 185 — 185

2026 183 — 183

Thereafter 1,027

$ 1,698 $ 101 $ 1,799

Vacation Ownership Notes Receivable Securitizations

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

During the first quarter of 2022, and as of March 31, 2022, we had 14 securitized vacation ownership notes receivable pools outstanding, none of which were out of compliance with their respective established parameters.

During the second quarter of 2022, and as of June 30, 2022, we had 14 securitized vacation ownership notes receivable pools outstanding, none of which were out of compliance with their respective established parameters.

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 2022, we completed the securitization of a pool of $ 383 million of vacation ownership notes receivable.

Approximately $ 342 million of the vacation ownership notes receivable were purchased by MVW 2022-1 LLC (the “2022-1 LLC”) during the second quarter of 2022, and as of June 30, 2022, the 2022-1 LLC held $ 40 million of the proceeds, which was released as the remaining vacation ownership notes receivable were purchased subsequent to June 30, 2022.

In connection with the securitization, investors purchased $ 375 million in vacation ownership loan backed notes issued by the 2022-1 LLC in a private placement.

The 2022-1 LLC issued four classes of vacation ownership loan backed notes:

$ 220 million of Class A Notes, $ 77 million of Class B Notes, $ 48 million of Class C Notes, and $ 30 million of Class D Notes.

The Class A Notes have an interest rate of 4.15 %, the Class B Notes have an interest rate of 4.40 %, the Class C Notes have an interest rate of 5.23 %, and the Class D Notes have an interest rate of 7.35 %, for an overall weighted average interest rate of 4.59 %.

Of the $ 375 million in proceeds from the transaction, approximately $ 98 million was used to repay all outstanding amounts previously drawn under our Warehouse Credit Facility (as defined below), approximately $ 7 million was used to pay transaction expenses and fund required reserves, and the remaining $ 176 million will be used for general corporate purposes.

In connection with this securitization, we redeemed the remaining vacation ownership loan backed notes issued in a prior securitization transaction for approximately $ 38 million.

The majority of the loans acquired through the redemption were purchased by the 2022-1 LLC.

Subsequent to the end of the second quarter of 2022, the 2022-1 LLC purchased the remaining $ 41 million of vacation ownership notes receivable and $ 40 million was released from restricted cash.

Warehouse Credit Facility

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Net proceeds were $ 101 million due to the funding of reserve accounts of $ 1 million.

As of June 30, 2022, there were no cash borrowings outstanding under our Warehouse Credit Facility.

Subsequent to the end of the second quarter of 2022, we amended certain agreements associated with our Warehouse Credit Facility (the “Warehouse Amendment”).

The Warehouse Amendment increased the borrowing capacity of the existing facility from $ 350 million to $ 425 million and extended the revolving period from April 21, 2023 to July 28, 2024.

The Warehouse Amendment also modified the interest rate applicable to most borrowings under the Warehouse Credit Facility.

The Warehouse Credit Facility now uses a U.S.

Treasury overnight financing rate (Secured Overnight Financing Rate or “SOFR”) plus a 0.10 % adjustment (“Adjusted SOFR”) replacing 1-month LIBOR as its benchmark interest rate.

As part of the Warehouse Amendment, the credit spread remained at 135 basis points over Adjusted SOFR.

The Warehouse Amendment made no other material changes to the Warehouse Credit Facility.

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

($ in millions) At March 31, 2022 At December 31, 2021

($ in millions) At June 30, 2022 At December 31, 2021

Senior Secured Notes

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$ 2,748 $ 2,631

The following table shows scheduled future principal payments for our debt, excluding finance leases, as of March 31, 2022.

The following table shows scheduled principal payments for our debt, excluding finance leases, as of June 30, 2022.

($ in millions) 2025

Loan 2022 Convertible Notes 2026 Convertible Notes Non-Interest Bearing Note Payable Total

Payments Year

Year Payments

2022, remaining $ — $ — $ — $ — $ 230 $ — $ — $ 230

6 unchanged sentences

Our senior notes include:

• $ 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”), of which $ 250 million of principal was outstanding as of March 31, 2022.

• $ 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”).

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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 bears interest at LIBOR plus 1.75 %, and a revolving credit facility (the “Revolving Corporate Credit Facility”) that includes a letter of credit sub-facility of $ 75 million.

During the first quarter of 2022, we entered into an amendment to the Revolving Corporate Credit Facility (the “Amendment”), which increased the borrowing capacity of the existing revolving credit facility from $ 600 million to $ 750 million and extended the maturity date from August 31, 2023 to March 31, 2027.

The Amendment modified the interest rate applicable to borrowings under the Revolving Corporate Credit Facility to reference the Secured Overnight Financing Rate (“SOFR”) and to be based on “Adjusted Term SOFR,” which is calculated as Term SOFR (as defined in the Amendment), plus a 0.10 % adjustment, subject to a 0.00 % floor.

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 bears interest at LIBOR plus 1.75 %, and a revolving credit facility (the “Revolving Corporate Credit Facility”) which includes a letter of credit sub-facility of $ 75 million.

During the first quarter of 2022, we entered into an amendment to the Revolving Corporate Credit Facility (the “Revolver Amendment”), which increased the borrowing capacity of the existing revolving credit facility from $ 600 million to $ 750 million and extended the maturity date from August 31, 2023 to March 31, 2027.

The Revolver Amendment modified the interest rate applicable to borrowings under the Revolving Corporate Credit Facility to reference SOFR and to be based on “Adjusted Term SOFR,” which is calculated as Term SOFR (as defined in the Revolver Amendment), plus a 0.10 % adjustment, subject to a 0.00 % floor.

Interest rates for other select non-U.S.

1 unchanged sentence

The applicable margins with respect to the Revolving Corporate Credit Facility were amended to be based on leverage-based measures instead of credit ratings-based measures.

The Amendment made no other material changes to the Corporate Credit Facility.

The Revolver Amendment made no other material changes to the Corporate Credit Facility.

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 March 31, 2022 and December 31, 2021.

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

The following table reflects the activity in accumulated other comprehensive loss related to our derivative instruments during the first quarters of 2022 and 2021.

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 assets on our Balance Sheet as of June 30, 2022 and in Other liabilities on our Balance Sheet as of December 31, 2021.

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

The following table reflects the activity in accumulated other comprehensive income or loss related to our derivative instruments during the first half of 2022 and 2021.

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

3 unchanged sentences

Derivative instrument adjustment balance, March 31 ( 2 ) ( 33 )

Other comprehensive gain before reclassifications 7 3

Derivative instrument adjustment balance, June 30 $ 5 $ ( 30 )

Convertible Notes

2 unchanged sentences

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

The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes, and was subject to adjustment as of March 31, 2022 to 6.8402 shares of common stock per $1,000 principal amount of 2022 Convertible Notes (equivalent to a conversion price of $ 146.19 per share of our common stock), as a result of the dividends we declared since issuance of the 2022 Convertible Notes that were greater than the quarterly dividend we paid 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.

As of March 31, 2022, the effective interest rate was 2.19 %.

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

($ in millions) At March 31, 2022 At December 31, 2021

Liability component

Principal amount $ 230 $ 230

Unamortized debt discount (1)

Unamortized debt issuance costs ( 1 ) ( 1 )

Net carrying amount of the liability component $ 229 $ 224

Carrying amount of equity component, net of issuance costs (1)

The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes, and was subject to adjustment as of June 30, 2022 to 6.8540 shares of common stock per $1,000 principal amount of 2022 Convertible Notes (equivalent to a conversion price of $ 145.90 per share of our common stock), as a result of the dividends we declared since issuance of the 2022 Convertible Notes that were greater than the quarterly dividend we paid when the 2022 Convertible Notes were issued.

As of June 30, 2022, the effective interest rate was 10.85 %.

The following table reflects the activity related to our 2022 Convertible Notes during the first half of 2022.

($ in millions) Principal Amount Unamortized Debt Discount Unamortized Debt Issuance Costs Debt, net Carrying Amount of Equity Component, net of Issuance Costs

At December 31, 2021 $ 230 $ ( 5 ) $ ( 1 ) $ 224 $ 33

Adoption of ASU 2020-06 (1)

— 5 — 5 ( 33 )

(1) As a result of the adoption of ASU 2020-06 during the first quarter of 2022, we no longer account for the liability and equity components of the convertible notes separately, and we reclassified the conversion feature related to the 2022 Convertible Notes from equity to liabilities.

Prior period amounts have not been adjusted due to our adoption of ASU 2020-06 under the modified retrospective method.

At January 1, 2022 230 — ( 1 ) 229 —

Amortization of debt issuance costs — — 1 1 —

Fair value of conversion option transferred to other liabilities (2)

— ( 5 ) — ( 5 ) —

At June 30, 2022 $ 230 $ ( 5 ) $ — $ 225 $ —

________________________

(1) As a result of the adoption of ASU 2020-06 during the first quarter of 2022, we no longer accounted for the liability and equity components of the convertible notes separately, and we reclassified the conversion feature related to the 2022 Convertible Notes from equity to liabilities.

Prior period amounts have not been adjusted to reflect our adoption of ASU 2020-06 under the modified retrospective method.

See Footnote 2 “Significant Accounting Policies and Recent Accounting Standards” for information on our adoption of ASU 2020-06.

(2) We issued notice of our intent to settle the 2022 Convertible Notes in cash, which became irrevocable on June 15, 2022, and as a result, our previous exception to derivative accounting no longer applied and we were required to fair value the conversion feature on the 2022 Convertible Notes at that time.

The fair value of the conversion feature of $ 5 million was recorded as a debt discount and a corresponding increase to Other liabilities on our balance sheet.

Subsequent changes to the fair value of the conversion feature will be recorded on our income statement.

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

Three Months Ended

($ in millions) March 31, 2022 March 31, 2021

Three Months Ended Six Months Ended

($ in millions) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Contractual interest expense $ 1 $ 1 $ 2 $ 2

Amortization of debt discount — 2 — 4

Amortization of debt issuance costs 1 — 1 —

$ 2 $ 3 $ 3 $ 6

2022 Convertible Note Hedges and Warrants

1 unchanged sentence

convertible note hedge transactions with respect to our common stock (“2022 Convertible Note Hedges”), covering a total of approximately 1.6 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 1.6 million shares of our common stock.

As of March 31, 2022, the strike prices of the 2022 Convertible Note Hedges and the 2022 Warrants were subject to adjustment to approximately $ 148.29 and $ 176.80 , respectively, and no 2022 Convertible Note Hedges or 2022 Warrants have been exercised.

As of June 30, 2022, the strike prices of the 2022 Convertible Note Hedges and the 2022 Warrants were subject to adjustment to approximately $ 147.99 and $ 176.45 , respectively, and no 2022 Convertible Note Hedges or 2022 Warrants have been exercised.

The 2022 Note Hedges are required to follow the same settlement provisions as the 2022 Convertible Notes.

As such, upon issuance of the irrevocable notice of our intent to settle the 2022 Convertible Notes in cash, our previous exception to the derivative accounting for the 2022 Convertible Note Hedges no longer applied and we were required to fair value the 2022 Convertible Note Hedges at that time.

The fair value of the 2022 Convertible Note Hedges of $ 6 million was estimated using the Black-Scholes model based on historical and implied volatility and the U.S.

Treasury risk-free rate (Level 2 inputs) and recorded in Other assets and Additional paid-in capital on our balance sheet.

Subsequent changes to the fair value of the 2022 Convertible Note Hedges will be recorded on our income statement.

2026 Convertible Notes

1 unchanged sentence

The 2026 Convertible Notes mature on January 15, 2026, unless repurchased or converted in accordance with their terms prior to that date.

The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes, and was subject to adjustment as of March 31, 2022 to 5.9122 shares of common stock per $1,000 principal amount of 2026 Convertible Notes (equivalent to a conversion price of $ 169.14 per share of our common stock), as a result of the dividends we declared since issuance of the 2026 Convertible Notes that were greater than the quarterly dividend we paid when the 2026 Convertible Notes were issued.

The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes, and was subject to adjustment as of June 30, 2022 to 5.9395 shares of common stock per $1,000 principal amount of 2026 Convertible Notes (equivalent to a conversion price of $ 168.36 per share of our common stock), as a result of the dividends we declared since issuance of the 2026 Convertible Notes that were greater than the quarterly dividend we paid when the 2026 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.

As of March 31, 2022, the effective interest rate was 0.55 %.

As of June 30, 2022, the effective interest rate was 0.55 %.

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

($ in millions) At March 31, 2022 At December 31, 2021

($ in millions) At June 30, 2022 At December 31, 2021

Liability component

6 unchanged sentences

(1) As a result of adoption of ASU 2020-06 during the first quarter of 2022, we no longer account for the liability and equity components of the convertible notes separately, and we reclassified the conversion feature related to the 2026 Convertible Notes from equity to liabilities.

Prior period amounts have not been adjusted due to our adoption of ASU 2020-06 under the modified retrospective method.

Prior period amounts have not been adjusted to reflect our adoption of ASU 2020-06 under the modified retrospective method.

See Footnote 2 “Significant Accounting Policies and Recent Accounting Standards” for information on our adoption of ASU 2020-06.

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

Three Months Ended

($ in millions) March 31, 2022 March 31, 2021

Three Months Ended Six Months Ended

($ in millions) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

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

Amortization of debt issuance costs — 1 1 1

$ — $ 6 $ 1 $ 11

2026 Convertible Note Hedges and Warrants

1 unchanged sentence

convertible note hedge transactions with respect to our common stock (“2026 Convertible Note Hedges”), covering a total of approximately 3.4 million shares of our common stock, and warrant transactions (“2026 Warrants”), whereby we sold to the counterparties to the 2026 Convertible Note Hedges, warrants to acquire approximately 3.4 million shares of our common stock.

As of March 31, 2022, the strike prices of the 2026 Convertible Note Hedges and the 2026 Warrants were subject to adjustment to approximately $ 169.14 and $ 211.43 , respectively, and no 2026 Convertible Note Hedges or 2026 Warrants have been exercised.

As of June 30, 2022, the strike prices of the 2026 Convertible Note Hedges and the 2026 Warrants were subject to adjustment to approximately $ 168.36 and $ 210.45 , respectively, and no 2026 Convertible Note Hedges or 2026 Warrants have been exercised.

Security and Guarantees

3 unchanged sentences

During the first quarter of 2022, we issued a non-interest bearing note payable in connection with the acquisition of vacation ownership units located in Bali, Indonesia.

See Footnote 3 “Acquisitions” for additional information on this transaction.

See Footnote 3 “Acquisitions and Dispositions” for additional information on this transaction.

SHAREHOLDERS’ EQUITY

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

At March 31, 2022, there were 75,721,548 shares of Marriott Vacations Worldwide common stock issued, of which 41,750,172 shares were outstanding and 33,971,376 shares were held as treasury stock.

At June 30, 2022, there were 75,741,585 shares of Marriott Vacations Worldwide common stock issued, of which 40,364,584 shares were outstanding and 35,377,001 shares were held as treasury stock.

At December 31, 2021, there were 75,519,049 shares of Marriott Vacations Worldwide common stock issued, of which 42,283,378 shares were outstanding and 33,235,671 shares were held as treasury stock.

Marriott Vacations Worldwide has 2,000,000 authorized shares of preferred stock, par value of $ 0.01 per share, none of which were issued or outstanding as of March 31, 2022 or December 31, 2021.

Marriott Vacations Worldwide has 2,000,000 authorized shares of preferred stock, par value of $ 0.01 per share, none of which were issued or outstanding as of June 30, 2022 or December 31, 2021.

Share Repurchase Program

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

From time to time, with the approval of our Board of Directors, we may undertake programs to purchase our own shares (each, a “Share Repurchase Program” and collectively, the “Share Repurchase Programs”).

During the third quarter of 2021, our Board of Directors authorized us to purchase shares of our common stock under a Share Repurchase Program for an aggregate purchase price not to exceed $ 250 million, prior to December 31, 2022.

During the first quarter of 2022, our Board of Directors authorized the purchase of up to an additional $ 300 million of our common stock under this program, as well as the extension of the term of this program to March 31, 2023.

As of June 30, 2022, approximately $ 160 million remained available for share repurchases under the Share Repurchase Program.

Subsequent to the end of the second quarter of 2022, our Board of Directors authorized the repurchase of up to an additional $ 500 million of our common stock, as well as the extension of the term of the Share Repurchase Program to June 30, 2023.

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 or more plans pursuant to the provisions of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

During the first quarter of 2022, 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 term of our existing share repurchase program to March 31, 2023.

As of March 31, 2022, $ 353 million remained available for repurchase under the share repurchase program approved by the Board of Directors.

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

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

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

The following table summarizes share repurchase activity under our Share Repurchase Programs:

2 unchanged sentences

As of December 31, 2021 17,681,395 $ 1,418 $ 80.17

For the first quarter of 2022 764,824 119 $ 156.50

As of March 31, 2022 18,446,219 $ 1,537 $ 83.34

We declared cash dividends to holders of common stock during the quarter ended March 31, 2022 as follows.

For the first half of 2022 2,187,336 312 $ 143.02

As of June 30, 2022 19,868,731 $ 1,730 $ 87.09

We declared cash dividends to holders of common stock during the first half of 2022 as follows.

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

2 unchanged sentences

February 18, 2022 March 3, 2022 March 17, 2022 $ 0.62

May 12, 2022 May 26, 2022 June 9, 2022 $ 0.62

Noncontrolling Interests - Owners’ Associations

1 unchanged sentence

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

Noncontrolling interests of $ 10 million as of both March 31, 2022 and December 31, 2021 are included on our Balance Sheets as a component of equity.

Noncontrolling interests of $ 1 million and $ 10 million, as of June 30, 2022 and December 31, 2021, respectively, are included on our Balance Sheets as a component of equity.

SHARE-BASED COMPENSATION

3 unchanged sentences

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

As of March 31, 2022, approximately 1.0 million shares were available for grants under the MVW Equity Plan.

As of June 30, 2022, approximately 1.0 million shares were available for grants under the MVW Equity Plan.

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

Three Months Ended

($ in millions) March 31, 2022 March 31, 2021

Three Months Ended Six Months Ended

($ in millions) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Service-based RSUs $ 10 $ 9 $ 17 $ 15

Performance-based RSUs 1 2 1 3

$ 12 $ 14 $ 20 $ 22

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

($ in millions) At March 31, 2022 At December 31, 2021

($ in millions) At June 30, 2022 At December 31, 2021

Service-based RSUs $ 42 $ 33

1 unchanged sentence

Restricted Stock Units

We granted 165,392 service-based RSUs, which are subject to time-based vesting conditions, with a weighted average grant-date fair value of $ 153.25 , to our employees and non-employee directors during the first quarter of 2022.

During the first quarter of 2022, we also granted performance-based RSUs, which are subject to performance-based vesting conditions, to members of management.

A maximum of 135,012 RSUs may be earned under the performance-based RSU awards granted during the first quarter of 2022.

We granted 177,951 service-based RSUs, which are subject to time-based vesting conditions, with a weighted average grant-date fair value of $ 152.18 , to our employees and non-employee directors during the first half of 2022.

During the first half of 2022, we also granted performance-based RSUs, which are subject to performance-based vesting conditions, to members of management.

A maximum of 135,012 RSUs may be earned under the performance-based RSU awards granted during the first half of 2022.

Stock Appreciation Rights

We granted 77,037 SARs, with a weighted average grant-date fair value of $ 59.68 and a weighted average exercise price of $ 159.27 , to members of management during the first quarter of 2022.

We granted 77,037 SARs, with a weighted average grant-date fair value of $ 59.68 and a weighted average exercise price of $ 159.27 , to members of management during the first half of 2022.

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

4 unchanged sentences

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

The following table outlines the assumptions used to estimate the fair value of grants during the first quarter of 2022:

The following table outlines the assumptions used to estimate the fair value of grants during the first half of 2022:

Expected volatility 42.86 %

5 unchanged sentences

We periodically securitize, without recourse, through bankruptcy remote special purpose entities, notes receivable originated in connection with the sale of vacation ownership products.

These vacation ownership notes receivable securitizations provide funding for us and transfer the economic risks and substantially all the benefits of the consumer loans we originate to third parties.

These vacation ownership notes receivable securitizations provide liquidity for general corporate purposes.

In a vacation ownership notes receivable securitization, various classes of debt securities issued by a special purpose entity are generally collateralized by a single tranche of transferred assets, which consist of vacation ownership notes receivable.

4 unchanged sentences

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

The following table shows consolidated assets, which are collateral for the obligations of these VIEs, and consolidated liabilities included on our Balance Sheet at March 31, 2022:

The following table shows consolidated assets, which are collateral for the obligations of these VIEs, and consolidated liabilities included on our Balance Sheet at June 30, 2022:

($ in millions) Vacation Ownership

11 unchanged sentences

Total $ 1,870 $ — $ 1,870

The following table shows the interest income and expense recognized as a result of our involvement with these VIEs during the first quarter of 2022:

The following table shows the interest income and expense recognized as a result of our involvement with these VIEs during the second quarter of 2022:

($ in millions) Vacation Ownership

5 unchanged sentences

Debt issuance cost amortization $ 2 $ — $ 2

The following table shows the interest income and expense recognized as a result of our involvement with these VIEs during the first half of 2022:

($ in millions) Vacation Ownership

Notes Receivable

Securitizations Warehouse

Credit Facility Total

Interest income $ 116 $ 3 $ 119

Interest expense to investors $ 21 $ 1 $ 22

Debt issuance cost amortization $ 4 $ 1 $ 5

Administrative expenses $ 1 $ — $ 1

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

Three Months Ended

($ in millions) March 31, 2022 March 31, 2021

Six Months Ended

($ in millions) June 30, 2022 June 30, 2021

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

Principal receipts 280 286

5 unchanged sentences

Voluntary repurchases of defaulted vacation ownership notes receivable ( 46 ) ( 58 )

Voluntary clean-up call ( 39 ) ( 72 )

Interest to investors ( 21 ) ( 22 )

Funding of restricted cash ( 96 ) ( 109 )

Total ( 501 ) ( 551 )

Net Cash Flows $ 379 $ 372

_________________________

(1) Relates to the release of funds when MVW 2021-2 LLC purchased the remaining vacation ownership notes receivable that were securitized during the fourth quarter of 2021.

Under the terms of our vacation ownership notes receivable securitizations, we have the right to substitute loans for, or repurchase, defaulted loans at our option, subject to certain limitations.

1 unchanged sentence

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

Three Months Ended

($ in millions) March 31, 2022 March 31, 2021

Six Months Ended

($ in millions) June 30, 2022 June 30, 2021

Proceeds from vacation ownership notes receivable securitizations $ 102 $ —

1 unchanged sentence

Interest receipts 3 —

Reserve release 1 —

Cash Outflows

Principal to investors ( 3 ) —

Repayment of Warehouse Credit Facility ( 98 ) —

Interest to investors ( 1 ) ( 1 )

Funding of restricted cash ( 1 ) —

2 unchanged sentences

Other Variable Interest Entities

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

The property is held by a VIE for which we are not the primary beneficiary.

We have a commitment to purchase a property located in Waikiki, Hawaii which is held by a VIE for which we are not the primary beneficiary.

Accordingly, we have not consolidated the VIE.

As of March 31, 2022, our Balance Sheet reflected $ 1 million in Accounts Receivable, including a note receivable of less than $ 1 million.

We believe that our maximum exposure to loss as a result of our involvement with this VIE is approximately $ 1 million as of March 31, 2022.

Subsequent to the end of the first quarter of 2022, we extended a loan to the VIE for $ 47 million and amended the terms of this commitment.

As a result of the amended commitment, if we are unable to negotiate a capital efficient inventory arrangement under which a third party will purchase the property and agree to resell it to us at a later date, we are committed to purchase the property, in its then current form, for $ 80 million in the fourth quarter of 2022, unless it has been sold to another party.

During the second quarter of 2022, we extended a loan to the VIE for $ 47 million and amended the terms of this commitment.

If we are unable to negotiate a capital efficient inventory arrangement under which a third party will develop the property and agree to resell it to us at a later date, we are committed to purchase the property, in its then current form, for $ 80 million in the fourth quarter of 2022, unless it has been sold to another party.

The loan extended to the VIE is due in full upon the earlier of sale of the property, including a sale to us, or an amendment and restatement of our purchase commitment.

In the latter case, the existing loan of $ 47 million would be repaid to us as part of that revised purchase commitment on the part of MVW.

In the latter case, the existing loan of $ 47 million would be repaid to us as part of that revised purchase commitment.

As of June 30, 2022, our Balance Sheet reflected $ 48 million in Accounts Receivable, including the note receivable of $ 47 million.

We believe that our maximum exposure to loss as a result of our involvement with this VIE is approximately $ 48 million as of June 30, 2022.

Deferred Compensation Plan

2 unchanged sentences

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

At March 31, 2022, the value of the assets held in the rabbi trust was $ 74 million, which is included in the Other line within assets on our Balance Sheets.

At June 30, 2022, the value of the assets held in the rabbi trust was $ 71 million, which is included in the Other line within assets on our Balance Sheets.

BUSINESS SEGMENTS

11 unchanged sentences

• 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 (“TPI”), Vacation Resorts International (“VRI”), and Aqua-Aston.

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.

We provide these services through Interval International and Aqua-Aston.

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.

VRI Americas was part of the Exchange & Third-Party Management segment through the date of sale in April 2022.

See Footnote 3 “Acquisitions and Dispositions” for more information on the disposition of VRI Americas.

Our CODM evaluates the performance of our segments based primarily on the results of the segment without allocating corporate expenses or income taxes.

6 unchanged sentences

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

Three Months Ended

($ in millions) March 31, 2022 March 31, 2021

Three Months Ended Six Months Ended

($ in millions) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Vacation Ownership $ 1,091 $ 883 $ 2,047 $ 1,544

4 unchanged sentences

Adjusted EBITDA and Reconciliation to Net Income or Loss Attributable to Common Shareholders

Three Months Ended

($ in millions) March 31, 2022 March 31, 2021

Three Months Ended Six Months Ended

($ in millions) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Adjusted EBITDA Vacation Ownership $ 274 $ 182 $ 473 $ 250

3 unchanged sentences

Interest expense ( 30 ) ( 44 ) ( 57 ) ( 87 )

Tax (provision) benefit ( 32 ) 11

Tax provision ( 43 ) ( 27 ) ( 75 ) ( 16 )

Depreciation and amortization ( 32 ) ( 36 ) ( 65 ) ( 77 )

2 unchanged sentences

Net income (loss) attributable to common shareholders $ 136 $ 6 $ 194 $ ( 22 )

($ in millions) At March 31, 2022 At December 31, 2021

($ in millions) At June 30, 2022 At December 31, 2021

Vacation Ownership $ 7,969 $ 7,897

3 unchanged sentences

$ 9,340 $ 9,613

We conduct business globally, and our operations outside the United States represented approximately 11 % and 9 % of our revenues, excluding cost reimbursements, for the three months ended March 31, 2022 and March 31, 2021, respectively .

SUBSEQUENT EVENT

In April 2022, we disposed of the VRI and TPI after determining that these businesses did not meet our future growth strategy and operating model, for net proceeds of approximately $ 60 million.

Both of these businesses are components of our Exchange and Third-Party Management segment.

We conduct business globally, and our operations outside the United States represented approximately 11 % and 10 % of our revenues, excluding cost reimbursements, for the three months ended June 30, 2022 and June 30, 2021, respectively, and 11 % and 9 % of our revenues, excluding cost reimbursements, for the six months ended June 30, 2022 and June 30, 2021, respectively.

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

What changed 10-Q

Item 1. Financial Statements