What changed in this filing

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Item 1. Financial Statements

2022-11-04 compared with 2022-08-09 · 334 added, 293 removed, 965 unchanged (39% of the section changed)

3 unchanged sentences

(In millions, except per share amounts)

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Sale of vacation ownership products $ 444 $ 330 $ 1,179 $ 789

16 unchanged sentences

TOTAL EXPENSES 1,012 896 2,880 2,505

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

(Losses) gains and other (expense) income, net ( 2 ) ( 31 ) 39 ( 27 )

Interest expense ( 34 ) ( 41 ) ( 91 ) ( 128 )

1 unchanged sentence

Other ( 1 ) 1 — 2

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

INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS 169 58 437 57

Provision for income taxes ( 59 ) ( 47 ) ( 134 ) ( 63 )

NET INCOME (LOSS) 110 11 303 ( 6 )

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

Net income attributable to noncontrolling interests ( 1 ) ( 1 ) — ( 6 )

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 109 $ 10 $ 303 $ ( 12 )

7 unchanged sentences

(In millions)

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

NET INCOME (LOSS) $ 110 $ 11 $ 303 $ ( 6 )

2 unchanged sentences

Derivative instrument adjustment, net of tax 8 3 31 12

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

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

OTHER COMPREHENSIVE GAIN (LOSS), NET OF TAX 7 ( 1 ) 22 9

Net income attributable to noncontrolling interests ( 1 ) ( 1 ) — ( 6 )

Other comprehensive income attributable to noncontrolling interests — — — —

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

COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS ( 1 ) ( 1 ) — ( 6 )

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 116 $ 9 $ 325 $ ( 3 )

3 unchanged sentences

(In millions, except share and per share data)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Cash and cash equivalents $ 294 $ 342

Restricted cash (including $ 67 and $ 139 from VIEs, respectively)

Accounts receivable, net (including $ 12 and $ 12 from VIEs, respectively)

Accounts and contracts receivable, net (including $ 12 and $ 12 from VIEs, respectively)

Vacation ownership notes receivable, net (including $ 1,662 and $ 1,662 from VIEs, respectively)

39 unchanged sentences

(In millions)

Six Months Ended

June 30, 2022 June 30, 2021

Nine Months Ended

September 30, 2022 September 30, 2021

OPERATING ACTIVITIES

9 unchanged sentences

Net change in assets and liabilities:

Accounts receivable 59 60

Accounts and contracts receivable 6 54

Vacation ownership notes receivable originations ( 728 ) ( 545 )

16 unchanged sentences

Issuance of note receivable to VIE ( 47 ) —

Proceeds from collection of note receivable from VIE 47 —

Purchase of company owned life insurance ( 14 ) ( 11 )

5 unchanged sentences

(In millions)

Six Months Ended

June 30, 2022 June 30, 2021

Nine Months Ended

September 30, 2022 September 30, 2021

FINANCING ACTIVITIES

10 unchanged sentences

Payment of withholding taxes on vesting of restricted stock units ( 23 ) ( 17 )

Net cash, cash equivalents and restricted cash (used in) provided by financing activities ( 428 ) 716

Net cash, cash equivalents and restricted cash used in financing activities ( 685 ) ( 225 )

Effect of changes in exchange rates on cash, cash equivalents and restricted cash ( 4 ) ( 1 )

9 unchanged sentences

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 —

Dividends payable 24 23

Interest paid, net of amounts capitalized 104 136

29 unchanged sentences

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

— Net income — — — — 109 109 1 110

— Foreign currency translation adjustments — — — ( 1 ) — ( 1 ) — ( 1 )

— Derivative instrument adjustment — — — 8 — 8 — 8

— Tax effect on equity, convertible notes — — ( 1 ) — — ( 1 ) — ( 1 )

— Share-based compensation plans — — 5 — — 5 — 5

— Repurchase of common stock — ( 216 ) — — — ( 216 ) — ( 216 )

— Dividends — — — — ( 24 ) ( 24 ) — ( 24 )

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

75.7 BALANCE AT SEPTEMBER 30, 2022 $ 1 $ ( 1,882 ) $ 3,968 $ 6 $ 533 $ 2,626 $ 2 $ 2,628

See Notes to Interim Consolidated Financial Statements

24 unchanged sentences

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

— Net income — — — — 10 10 1 11

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

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

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

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

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

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

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

See Notes to Interim Consolidated Financial Statements

9 unchanged sentences

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.

Pursuant to a change in control of certain consolidated owners’ associations during the second quarter of 2022, we recorded non-cash losses of $ 3 million in (Losses) gains and other (expense) income, net on our Income Statement for the nine months ended September 30, 2022 and deconsolidated $ 110 million of assets, inclusive of $ 48 million of restricted cash, and $ 99 million of liabilities, resulting in a decrease in Noncontrolling interests of $ 8 million during the first three quarters 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.

2 unchanged sentences

Such estimates include, but are not limited to, revenue recognition, allocations of the purchase price paid in business combinations, cost of vacation ownership products, inventory valuation, goodwill and intangibles valuation, 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 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.

The uncertainties created by the COVID-19 pandemic, macroeconomic inflationary pressures, and the uncertainty of the success of ongoing efforts to mitigate the effects of the COVID-19 pandemic and inflationary pressures in the general macroeconomic environment, 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.

Interim results may not be indicative of fiscal year performance because of, among other reasons, the impact of the COVID-19 pandemic and seasonal and short-term variations.

Interim results may not be indicative of fiscal year performance because of, among other reasons, the impact of the COVID-19 pandemic, inflationary pressures, general macroeconomic conditions, rising interest rates, and seasonal and short-term variations.

These Financial Statements have not been audited.

9 unchanged sentences

SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING STANDARDS

Launch of Abound by Marriott Vacations

In the third quarter of 2022, in connection with the affiliation of the Marriott-, Sheraton-, and Westin-branded vacation ownership products through Abound by Marriott Vacations, we modified our business practices and the terms of our Marriott-branded vacation ownership interest (“VOI”) sales contracts to be consistent with the existing terms of our Sheraton- and Westin-branded VOI sales contracts.

As a result of these modifications, control of Marriott-branded vacation ownership products is now transferred to the customer upon expiration of the statutory rescission period, consistent with the current method for Sheraton- and Westin-branded vacation ownership products, resulting in earlier revenue recognition than the historical timing for Marriott-branded VOIs.

Marriott-branded VOI sales contracts executed prior to these modifications will continue to be accounted for with transfer of control of the VOI occurring at closing, as described in our 2021 Annual Report.

In addition, in the third quarter of 2022, we combined and aligned our accounting methodology to calculate our estimates for the reserve on vacation ownership notes receivable for these brands, as we expect our future customers to represent a blend of the historical Marriott-, Sheraton- and Westin-brand customers.

We now use the origination of vacation ownership notes receivable by the combined Marriott-, Sheraton-, and Westin-brands (“Combined Marriott”) and the FICO scores of the customer as the primary credit quality indicators, 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.

See Footnote 6 “Vacation Ownership Notes Receivable” for further information.

New Accounting Standards

13 unchanged sentences

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

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 disclosures.

In the first quarter of 2022, we adopted ASU 2021-08, which amended ASC 805 to require entities to apply ASC 606, Revenue from Contracts with Customers , 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 or 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.

3 unchanged sentences

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 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.

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

During the third quarter of 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.

1 unchanged sentence

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 June 30, 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 September 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”)

45 unchanged sentences

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

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

Six Months Ended

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

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

Nine Months Ended

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

Revenues $ 2,837

Net loss $ ( 4 )

Net income $ 7

Net loss attributable to common shareholders $ ( 1 )

3 unchanged sentences

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

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

Three Months Ended Nine Months Ended

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

Revenue $ 67 $ 53 $ 174 $ 101

8 unchanged sentences

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.

As a result of the disposition, we recorded a gain of $ 1 million and $ 17 million in (Losses) gains and other (expense) income, net on our Income Statements for the three and nine months ended September 30, 2022, respectively.

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 .

As a result of this disposition, we recorded a gain of $ 33 million in (Losses) gains and other (expense) income, net on our Income Statements for the nine months ended September 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

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

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

9 unchanged sentences

Total Revenues $ 1,182 $ 71 $ ( 1 ) $ 1,252

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

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

9 unchanged sentences

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

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

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

9 unchanged sentences

Total Revenues $ 3,229 $ 229 $ 10 $ 3,468

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

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

11 unchanged sentences

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

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

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

2 unchanged sentences

Revenue from contracts with customers $ 1,108 $ 71 $ ( 1 ) $ 1,178

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

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

2 unchanged sentences

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

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

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

2 unchanged sentences

Revenue from contracts with customers $ 3,012 $ 229 $ 10 $ 3,251

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

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

3 unchanged sentences

Sale of Vacation Ownership Products

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.

Revenue declined during the third quarter and first three quarters of 2022 by $ 22 million and $ 27 million, respectively, due to changes in our estimates of variable consideration for performance obligations that were satisfied in prior periods.

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

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

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

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

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

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

Receivables from Contracts with Customers

Accounts receivable, net $ 118 $ 172

Accounts and contracts receivable, net $ 154 $ 172

Vacation ownership notes receivable, net 2,142 2,045

3 unchanged sentences

Deferred revenue 346 453

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.

Revenue recognized during the third quarter and first three quarters of 2022 that was included in our contract liabilities balance at December 31, 2021 was $ 93 million and $ 336 million, respectively.

Remaining Performance Obligations

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

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

Accounts Receivable

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

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

Accounts and Contracts Receivable

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

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

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

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

Receivables from contracts with customers, net $ 154 $ 172

Note receivable from variable interest entity (1)

Interest receivable 15 14

2 unchanged sentences

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 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.

Our interim effective tax rate was 34.7 % and 81.5 % for the three months ended September 30, 2022 and September 30, 2021, respectively.

Our interim effective tax rate was 30.6 % and 110.6 % for the nine months ended September 30, 2022 and September 30, 2021, respectively.

The change in the effective tax rate for both the three and nine months ended September 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 six months ended June 30, 2022.

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

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

3 unchanged sentences

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.

Balance at September 30, 2022

The total amount of gross interest and penalties accrued was $ 51 million at September 30, 2022 and $ 42 million at December 31, 2021.

We anticipate $ 15 million of unrecognized tax benefits, including interest and penalties, to be indemnified pursuant to a Tax Matters Agreement dated May 11, 2016 by and among Starwood Hotels & Resorts Worldwide, Inc., Vistana Signature Experiences, Inc., and Interval Leisure Group, Inc., and consequently have recorded a corresponding indemnification asset.

5 unchanged sentences

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

($ in millions) Originated Acquired Total Originated Acquired Total

11 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Interest income associated with vacation ownership notes receivable — securitized $ 60 $ 55 $ 179 $ 160

1 unchanged sentence

Total interest income associated with vacation ownership notes receivable $ 71 $ 68 $ 209 $ 190

Credit Quality Indicators - Vacation Ownership Notes Receivable

Third Quarter of 2022

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

In 2020, we recorded an additional $ 69 million of reserve on vacation ownership notes receivable attributed to the elevated default rates expected as a result of the COVID-19 pandemic.

At that time, we allocated $ 59 million of the reserve to our originated vacation ownership notes receivable reserve and $ 10 million to our acquired vacation ownership notes receivable reserve.

Given the uncertainty as to which vacation ownership notes receivable (originated or acquired) would default, from 2020 through the second quarter of 2022 we assessed the sufficiency of our reserves for all vacation ownership notes receivable in total.

In the third quarter of 2022, in connection with the stabilization of default rates and the alignment and combination of the reserves for Marriott-, Sheraton-, and Westin-brands (see Footnote 2 “Significant Accounting Policies and Recent Accounting Standards”), we recorded a reversal of credit loss expense for the acquired vacation ownership notes receivable of $ 19 million in Financing expense and an increase in the reserve for our originated vacation ownership notes receivable of $ 21 million, which was recorded as a reduction of sales of vacation ownership products revenues.

In the third quarter of 2022, in connection with the use of FICO scores of the customer as a primary credit quality indicator for all brands (see Footnote 2 “Significant Accounting Policies and Recent Accounting Standards”), the weighted average FICO score within our consolidated vacation ownership notes receivable pool was 720 at September 30, 2022, based upon the FICO score of the borrower at the time of origination.

Prior to Third Quarter of 2022

Prior to the third quarter of 2022, we used the aging of the vacation ownership notes receivable as the primary credit quality indicator for Legacy-MVW vacation ownership notes receivable, and FICO score by brand as the primary credit quality indicator for the Sheraton, Westin, Hyatt and Welk vacation ownership notes receivable.

At December 31, 2021, the weighted average FICO score within our consolidated Legacy-ILG and Legacy-Welk vacation ownership notes receivable pools was 707 , based upon the FICO score of the borrower at the time of origination.

Acquired Vacation Ownership Notes Receivable

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

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

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

Acquired Vacation Ownership Notes Receivable

2 unchanged sentences

Thereafter 17 84 101

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

Balance at September 30, 2022 $ 34 $ 241 $ 275

Weighted average stated interest rate 13.9 % 14.2 % 14.1 %

12 unchanged sentences

(Decrease) increase in vacation ownership notes receivable reserve ( 37 ) 18 ( 19 )

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

Balance at September 30, 2022 $ 14 $ 21 $ 35

_________________________

(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.

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

Acquired Vacation Ownership Notes Receivable as of September 30, 2022

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

Combined Marriott $ 77 $ 55 $ 7 $ 19 $ 158

Hyatt 6 3 1 — 10

Welk 83 57 1 1 142

$ 166 $ 115 $ 9 $ 20 $ 310

Acquired Vacation Ownership Notes Receivable as of December 31, 2021

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

Westin 52 32 3 8 95

Sheraton 54 48 8 23 133

Hyatt 8 6 1 — 15

Welk 115 79 1 2 197

Other 2 — — 2 4

$ 231 $ 165 $ 13 $ 35 $ 444

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

Acquired Vacation Ownership Notes Receivable - Combined Marriott

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

700 + $ — $ — $ — $ 77 $ 77

600 - 699 — — — 55 55

< 600 — — — 7 7

No Score — — — 19 19

$ — $ — $ — $ 158 $ 158

Acquired Vacation Ownership Notes Receivable - Hyatt

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

700 + $ — $ — $ — $ 6 $ 6

600 - 699 — — — 3 3

< 600 — — — 1 1

No Score — — — — —

$ — $ — $ — $ 10 $ 10

Acquired Vacation Ownership Notes Receivable - Welk

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

700 + $ 6 $ 18 $ 22 $ 37 $ 83

600 - 699 3 10 15 29 57

< 600 1 — — — 1

No Score — — — 1 1

$ 10 $ 28 $ 37 $ 67 $ 142

Originated Vacation Ownership Notes Receivable

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 June 30, 2022.

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

Originated Vacation Ownership Notes Receivable

6 unchanged sentences

Thereafter 283 856 1,139

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

Balance at September 30, 2022 $ 446 $ 1,421 $ 1,867

Weighted average stated interest rate 12.8 % 13.0 % 13.0 %

12 unchanged sentences

Defaulted vacation ownership notes receivable repurchase activity (1)

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

Balance at September 30, 2022 $ 179 $ 192 $ 371

_________________________

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.

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 June 30, 2022 and 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.

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

Legacy-MVW Vacation Ownership Notes Receivable

($ in millions) Non-Securitized Securitized Total

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 June 30, 2022 and December 31, 2021.

Legacy-MVW Vacation Ownership Notes Receivable

As of June 30, 2022

As of December 31, 2021

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

31 – 90 days past due $ 6 $ 19 $ 25 $ 6 $ 20 $ 26

91 – 150 days past due 3 6 9 4 8 12

Greater than 150 days past due 72 — 72 84 — 84

Total past due 81 25 106 94 28 122

Current 190 1,058 1,248 180 1,027 1,207

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 June 30, 2022.

Legacy-MVW Vacation Ownership Notes Receivable

($ in millions) Non-Securitized Securitized Total

Year of Origination

2022 $ 124 $ 112 $ 236

2021 31 339 370

2020 18 135 153

2019 37 205 242

2018 23 130 153

2017 & Prior 38 162 200

$ 271 $ 1,083 $ 1,354

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.

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

resident borrowers.

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

Legacy-ILG and Legacy-Welk Vacation Ownership Notes Receivable

($ in millions) Non-Securitized Securitized Total

Investment in vacation ownership notes receivable on non-accrual status at 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 June 30, 2022 and December 31, 2021.

Legacy-ILG and Legacy-Welk Vacation Ownership Notes Receivable

As of June 30, 2022

As of December 31, 2021

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

31 – 90 days past due $ 9 $ 20 $ 29 $ 16 $ 24 $ 40

91 – 120 days past due 4 5 9 4 6 10

Greater than 120 days past due 91 4 95 110 4 114

Total past due 104 29 133 130 34 164

Current 259 728 987 219 735 954

Total vacation ownership notes receivable $ 363 $ 757 $ 1,120 $ 349 $ 769 $ 1,118

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 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

Sheraton 43 37 6 15 101 54 48 8 23 133

Hyatt 6 4 1 — 11 8 6 1 — 15

Welk 93 63 1 2 159 115 79 1 2 197

Other 1 1 — 1 3 2 — — 2 4

$ 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 June 30, 2022.

Acquired Vacation Ownership Notes Receivable 2018 & Prior

($ in millions) Westin Sheraton Hyatt & Other Total

700 + $ 42 $ 43 $ 7 $ 92

600 - 699 26 37 5 68

< 600 2 6 1 9

No Score 6 15 1 22

$ 76 $ 101 $ 14 $ 191

Acquired Vacation Ownership Notes Receivable - Welk

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

700 + $ 7 $ 20 $ 24 $ 42 $ 93

600 - 699 4 12 16 31 63

< 600 — 1 — — 1

No Score — — 1 1 2

$ 11 $ 33 $ 41 $ 74 $ 159

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 June 30, 2022

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

Originated Vacation Ownership Notes Receivable as of September 30, 2022

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

Westin $ 155 $ 73 $ 8 $ 44 $ 280

Sheraton 146 104 20 41 311

Combined Marriott $ 1,153 $ 538 $ 56 $ 280 $ 2,027

Hyatt 28 13 1 1 43

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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 June 30, 2022.

Originated Vacation Ownership Notes Receivable - Westin

($ in millions) 2022 2021 2020 2019 2018 Total

_________________________

600 - 699 15 27 9 18 4 73

< 600 2 3 1 2 — 8

No Score 25 7 4 7 1 44

$ 81 $ 93 $ 33 $ 61 $ 12 $ 280

Originated Vacation Ownership Notes Receivable - Sheraton

($ in millions) 2022 2021 2020 2019 2018 Total

(1) Balances as of December 31, 2021 exclude $ 1,329 million of Marriott branded vacation ownership notes receivable as the change in credit quality indicator occurred during the third quarter of 2022.

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

Originated Vacation Ownership Notes Receivable - Combined Marriott

($ in millions) 2022 2021 2020 2019 2018 2017 & Prior Total

700 + $ 361 $ 327 $ 111 $ 175 $ 91 $ 88 $ 1,153

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Originated Vacation Ownership Notes Receivable - Hyatt

($ in millions) 2022 2021 2020 2019 2018 Total

($ in millions) 2022 2021 2020 2019 2018 2017 & Prior Total

700 + $ 14 $ 7 $ 2 $ 4 $ 1 $ — $ 28

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Originated Vacation Ownership Notes Receivable - Welk

($ in millions) 2022 2021 2020 2019 2018 Total

($ in millions) 2022 2021 2020 2019 2018 2017 & Prior Total

700 + $ 77 $ 40 $ — $ — $ — $ — $ 117

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$ 108 $ 60 $ — $ — $ — $ — $ 168

Vacation Ownership Notes Receivable on Non-Accrual Status

For both non-securitized and securitized vacation ownership notes receivable, we estimated average remaining default rates of 11.66 % as of September 30, 2022 and 11.75 % 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 $ 12 million as of September 30, 2022 and $ 10 million as of December 31, 2021.

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

Vacation Ownership Notes Receivable

($ in millions) Non-Securitized Securitized Total

Investment in vacation ownership notes receivable on non-accrual status at September 30, 2022

$ 153 $ 20 $ 173

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

$ 202 $ 18 $ 220

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

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

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

31 – 90 days past due $ 15 $ 43 $ 58 $ 22 $ 44 $ 66

91 – 120 days past due 4 11 15 7 10 17

Greater than 120 days past due 149 9 158 195 8 203

Total past due 168 63 231 224 62 286

Current 505 1,812 2,317 399 1,762 2,161

Total vacation ownership notes receivable $ 673 $ 1,875 $ 2,548 $ 623 $ 1,824 $ 2,447

FINANCIAL INSTRUMENTS

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

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

The table excludes Cash and cash equivalents, Restricted cash, Accounts and contracts 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 September 30, 2022 At December 31, 2021

($ in millions) Carrying

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Term Loan, net ( 778 ) ( 743 ) ( 776 ) ( 784 )

Revolving Corporate Credit Facility, net ( 225 ) ( 230 ) — —

2022 Convertible Notes, net (1)

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Vacation Ownership Notes Receivable

At June 30, 2022 At December 31, 2021

At September 30, 2022 At December 31, 2021

($ in millions) Carrying

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

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:

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:

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

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

Revolving Corporate Credit Facility

We estimate that the gross carrying value of our Revolving Corporate Credit Facility (as defined in Footnote 13 “Debt”) approximates fair value as the contractual interest rate is variable plus an applicable margin.

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

Convertible Notes

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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.

The 2022 Convertible Notes (as defined in Footnote 13 “Debt”) matured on September 15, 2022, and were repaid in full during the third quarter of 2022.

See Footnote 13 “Debt” for further information on the 2022 Convertible Notes.

Non-Interest Bearing Note Payable

The carrying value of our non-interest bearing note payable issued in connection with the acquisition of vacation ownership units located in Bali, Indonesia approximates fair value, because the imputed interest rate used to discount this note payable is consistent with current market rates.

The carrying value of our non-interest bearing note payable issued in connection with the acquisition of vacation ownership units located in Bali, Indonesia approximates fair value.

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

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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.

Earnings per share for the three and nine months ended September 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.

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

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

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

The 2022 Convertible Notes and the 2022 Convertible Note Hedges (as defined in Footnote 13 “Debt”) matured on September 15, 2022, however the 2022 Warrants (as defined in Footnote 13 “Debt”) remained outstanding as of September 30, 2022.

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 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

Three Months Ended Nine Months Ended

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

Net income (loss) attributable to common shareholders $ 109 $ 10 $ 303 $ ( 12 )

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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

Three Months Ended Nine Months Ended

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

September 30, 2021 (1)

September 30, 2022 (1)

September 30, 2021 (1)

Net income (loss) attributable to common shareholders $ 109 $ 10 $ 303 $ ( 12 )

Add back of interest expense related to convertible notes subsequent to the adoption of ASU 2020-06, net of tax 1 — 4 —

Numerator used to calculate diluted EPS $ 138 $ 6 $ 197 $ ( 22 )

Numerator used to calculate diluted earnings (loss) per share $ 110 $ 10 $ 307 $ ( 12 )

Shares for basic earnings (loss) per share 39.5 42.9 41.1 42.4

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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 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

(1) The computations of diluted earnings per share attributable to common shareholders exclude approximately 293,000 and 298,000 shares of common stock, the maximum number of shares issuable as of September 30, 2022 and September 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 three quarters 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 period presented, as the effects of including these securities would have been anti-dilutive.

Nine Months Ended

(in millions) September 30, 2021

Employee SARs 0.2

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(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.

Therefore, from the beginning of 2022, 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 the maturity date of September 15, 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 third 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 three quarters 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 third quarter of 2021, we excluded from our calculation of diluted earnings per share 127,008 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 June 30, 2022 At December 31, 2021

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

Real estate inventory (1)

_________________________

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

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

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 $ 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.

Product cost true-up activity relating to vacation ownership products increased carrying values of inventory by $ 15 million during the first three quarters of 2022 and by $ 6 million during the first three quarters of 2021.

In addition to the above, at September 30, 2022 and December 31, 2021, we had $ 441 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 June 30, 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 September 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

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Disposition of VRI Americas — ( 25 ) ( 25 )

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

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

Intangible Assets

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

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

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

Definite-lived intangible assets

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Commitments and Letters of Credit

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

As of September 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 $ 22 million.

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.

Surety bonds issued as of September 30, 2022 totaled $ 129 million, the majority of which were requested by federal, state, or local governments in connection with our operations.

As of September 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 September 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.

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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.

At September 30, 2022, our maximum exposure under fixed dollar guarantees was $ 7 million, of which $ 2 million, $ 2 million, $ 1 million, $ 1 million, and $ 1 million relate to 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 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.

At September 30, 2022, our expected commitment for the remainder of 2022 is $ 2 million, which will ultimately be recorded as a component of rental expense on our income statement.

Loss Contingencies

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The plaintiffs are seeking unspecified damages, disgorgement of profits, fees and costs.

In August 2022, the District Court denied plaintiffs’ motion for class certification.

In September 2022, the U.S.

Court of Appeals for the Third Circuit denied plaintiffs’ petition for leave to appeal the District Court’s order denying class certification.

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

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Leases That Have Not Yet Commenced

During 2020, we entered into a finance lease arrangement, which was then amended in 2021, for our new global headquarters office building, which is being constructed in Orlando, Florida.

During 2020, we entered into a finance lease arrangement, which was amended in 2021, for our new global headquarters office building, which is being constructed in Orlando, Florida.

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

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

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

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

Vacation ownership notes receivable securitizations, gross (1)

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Unamortized debt discount and issuance costs ( 19 ) ( 21 )

Warehouse Credit Facility, gross (2)

Unamortized debt issuance costs (3)

$ 1,809 $ 1,856

_________________________

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

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

(2) Effective interest rate as of September 30, 2022 was 3.9 %.

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

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 June 30, 2022.

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

Vacation Ownership

Notes Receivable Securitizations

Notes Receivable Securitizations Warehouse Credit

Facility Total

($ in millions)

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2022, remaining $ 43 $ 1 $ 44

2023 174 6 180

2024 179 7 186

2025 179 118 297

2026 180 — 180

Thereafter 943 — 943

$ 1,698 $ 132 $ 1,830

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 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.

During the third quarter of 2022, and as of September 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.

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

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

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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.

On November 3, 2022, subsequent to the end of the third quarter of 2022, we completed the securitization of a pool of $ 286 million of vacation ownership notes receivable.

In connection with the securitization, $ 280 million in vacation ownership loan backed notes were issued by MVW 2022-2 LLC (the “2022-2 LLC”) in a private placement.

Four classes of vacation ownership loan backed notes were issued by the 2022-2 LLC:

$ 181 million of Class A Notes, $ 45 million of Class B Notes, $ 32 million of Class C Notes, and $ 22 million of Class D Notes.

The Class A Notes have an interest rate of 6.11 %, the Class B Notes have an interest rate of 6.55 %, the Class C Notes have an interest rate of 7.62 %, and the Class D Notes have an interest rate of 9.00 %, for an overall weighted average interest rate of 6.58 %.

The weighted average interest rate of the first three classes of notes sold to third parties was 6.37 %.

Investors purchased $ 258 million of the vacation ownership loan backed notes issued by the 2022-2 LLC on November 3, 2022, comprised of the Class A Notes, the Class B Notes, and the Class C Notes, and we retained the $ 22 million of Class D Notes.

Of the $ 259 million in proceeds from the transaction, approximately $ 129 million was used to repay all outstanding amounts previously drawn under our Warehouse Credit Facility (as defined below), approximately $ 6 million was used to pay transaction expenses and fund required reserves, and the remaining $ 124 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 $ 22 million.

The majority of the loans acquired through the redemption were purchased by the 2022-2 LLC.

Warehouse Credit Facility

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

Our warehouse credit facility (the “Warehouse Credit Facility”) allows for the securitization of vacation ownership notes receivable on a revolving non-recourse basis.

During the first quarter of 2022, we securitized vacation ownership notes receivable under our Warehouse Credit Facility.

2 unchanged sentences

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”).

During the third 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.

4 unchanged sentences

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

During the third quarter of 2022, we securitized vacation ownership notes receivable under our Warehouse Credit Facility.

The carrying amount of the vacation ownership notes receivable securitized was $ 159 million.

The average advance rate was 83 %, which resulted in gross proceeds of $ 132 million.

Net proceeds were $ 132 million due to the funding of reserve accounts of less than $ 1 million.

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

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

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

Senior Secured Notes

9 unchanged sentences

Unamortized debt discount and issuance costs ( 6 ) ( 8 )

Revolving Corporate Credit Facility (1)

Unamortized debt issuance costs (2)

Convertible Notes

6 unchanged sentences

$ 2,749 $ 2,631

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

_________________________

(1) Effective interest rate as of September 30, 2022 was 7.0 %.

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

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

($ in millions) 2025

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

Loan Revolving Corporate Credit Facility 2026 Convertible Notes Non-Interest Bearing Note Payable Total

Year Payments

7 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 June 30, 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”).

8 unchanged sentences

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

During the third quarter of 2022, we borrowed $ 380 million under our Revolving Corporate Credit Facility, $ 230 million of which was used to repay the 2022 Convertible Notes (as defined and discussed further below).

As of September 30, 2022, $ 230 million of principal was outstanding and all other amounts borrowed under the Revolving Corporate Credit Facility had been repaid.

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 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.

Both the interest rate swaps and the interest rate collar have been designated and qualify as cash flow hedges of interest rate risk and are recorded in Other assets on our Balance Sheet as of September 30, 2022 and in Other liabilities on our Balance Sheet as of December 31, 2021.

We characterize payments we make or receive 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 three quarters of 2022 and 2021.

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

5 unchanged sentences

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

Other comprehensive gain before reclassifications 8 3

Derivative instrument adjustment balance, September 30 $ 13 $ ( 27 )

Convertible Notes

2022 Convertible Notes

During 2017, we issued $ 230 million of aggregate principal amount of convertible senior notes (the “2022 Convertible Notes”) that bear interest at a rate of 1.50 %, payable in cash semi-annually.

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

The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes, and was subject to adjustment as of 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.

During 2017, we issued $ 230 million aggregate principal amount of 1.50 % convertible senior notes for which interest was payable semi-annually (the “2022 Convertible Notes”).

The 2022 Convertible Notes matured at par on September 15, 2022, at which time they were settled in cash and the remaining discount and deferred financing costs were fully amortized.

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

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

3 unchanged sentences

At January 1, 2022 230 — ( 1 ) 229 —

Amortization of debt issuance costs — — 1 1 —

Amortization — — 1 1 —

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

1 unchanged sentence

At June 30, 2022 230 ( 5 ) — 225 —

Amortization — 5 — 5 —

Repayment upon maturity ( 230 ) — — ( 230 ) —

At September 30, 2022 $ — $ — $ — $ — $ —

________________________

4 unchanged sentences

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.

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

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Contractual interest expense $ 1 $ 1 $ 3 $ 3

4 unchanged sentences

In connection with the offering of the 2022 Convertible Notes, we concurrently entered into the following privately-negotiated separate transactions:

convertible note hedge transactions with respect to our common stock (“2022 Convertible Note Hedges”), 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 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.

convertible note hedge transactions with respect to our common stock (“2022 Convertible Note Hedges”), covering 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.

The 2022 Note Hedges were 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.

The 2022 Convertible Note Hedges expired upon the maturity of the 2022 Convertible Notes, and none were exercised.

The 2022 Warrants expire in ratable portions on a series of expiration dates over the 60 scheduled trading day period commencing on December 15, 2022.

As of September 30, 2022, the strike price of the 2022 Warrants was subject to adjustment to approximately $ 176.11 , as a result of the dividends we declared since the issuance of the 2022 Warrants that were greater than the quarterly dividend we paid when the 2022 Warrants were issued.

As of September 30, 2022, no 2022 Warrants have been exercised.

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 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.

The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes, and was subject to adjustment as of September 30, 2022 to 5.9657 shares of common stock per $1,000 principal amount of 2026 Convertible Notes (equivalent to a conversion price of $ 167.62 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 June 30, 2022, the effective interest rate was 0.55 %.

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

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

Liability component

9 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

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

4 unchanged sentences

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 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.

As of September 30, 2022, the strike prices of the 2026 Convertible Note Hedges and the 2026 Warrants were subject to adjustment to approximately $ 167.62 and $ 209.53 , respectively, and no 2026 Convertible Note Hedges or 2026 Warrants have been exercised.

Security and Guarantees

1 unchanged sentence

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

Non-Interest Bearing Note Payable

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 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 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 September 30, 2022, there were 75,744,121 shares of Marriott Vacations Worldwide common stock issued, of which 38,707,674 shares were outstanding and 37,036,447 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 June 30, 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 September 30, 2022 or December 31, 2021.

Share Repurchase Program

2 unchanged sentences

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.

During the third quarter of 2022, our Board of Directors authorized the purchase of up to an additional $ 500 million of our common stock under this program, as well as the extension of the term of this program to June 30, 2023.

As of September 30, 2022, approximately $ 444 million remained available for share repurchases under the Share Repurchase Program.

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.

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.

In connection with the current 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.

4 unchanged sentences

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

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.

For the first three quarters of 2022 3,852,726 528 $ 137.16

As of September 30, 2022 21,534,121 $ 1,946 $ 90.37

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

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

3 unchanged sentences

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

September 8, 2022 September 22, 2022 October 6, 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 $ 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.

Noncontrolling interests of $ 2 million and $ 10 million, as of September 30, 2022 and December 31, 2021, respectively, are included on our Balance Sheets as a component of equity.

SHARE-BASED COMPENSATION

1 unchanged sentence

Under the MVW Equity Plan, we are authorized to award:

(1) restricted stock units (“RSUs”) of our common stock, (2) stock appreciation rights (“SARs”) relating to our common stock, and (3) stock options to purchase our common stock.

(1) restricted stock and restricted stock units (“RSUs”) of our common stock, (2) stock appreciation rights (“SARs”) relating to our common stock, and (3) stock options to purchase our common stock.

A total of 1.8 million shares are authorized for issuance pursuant to 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.

As of September 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 Six Months Ended

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

Three Months Ended Nine Months Ended

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

Service-based RSUs $ 7 $ 8 $ 24 $ 23

2 unchanged sentences

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

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

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

Service-based RSUs $ 34 $ 33

1 unchanged sentence

Restricted Stock Units

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.

We granted 179,505 service-based RSUs, which are subject to time-based vesting conditions, with a weighted average grant-date fair value of $ 152.06 , to our employees and non-employee directors during the first three quarters of 2022.

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

A maximum of 129,280 RSUs may be earned under the performance-based RSU awards granted during the first three quarters 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 half 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 three quarters 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 half of 2022:

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

Expected volatility 42.86 %

12 unchanged sentences

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

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

($ in millions) Vacation Ownership

11 unchanged sentences

Total $ 1,700 $ 132 $ 1,832

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:

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

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

($ in millions) Vacation Ownership

7 unchanged sentences

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

Six Months Ended

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

Nine Months Ended

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

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

14 unchanged sentences

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

Six Months Ended

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

Nine Months Ended

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

Proceeds from vacation ownership notes receivable securitizations $ 234 $ —

10 unchanged sentences

Other Variable Interest Entities

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.

We have a commitment to purchase a property located in Waikiki, Hawaii.

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

We do not control the decisions that most significantly impact the economic performance of the entity during construction.

Further, our purchase commitment is contingent upon the property being redeveloped to our brand standards.

Accordingly, we have not consolidated the VIE.

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.

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.

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

During the third quarter of 2022, we further amended the terms of our prior commitment at which time the bridge loan was fully repaid.

We expect to acquire the property over time and as of September 30, 2022, we expect to make payments for the property as follows:

$ 112 million in 2024, $ 81 million in 2025 and $ 41 million in 2026.

As of September 30, 2022, our Balance Sheet reflected $ 1 million in Accounts Receivable, including a note receivable of approximately $ 1 million, $ 1 million in Property and Equipment, and $ 2 million in Accrued Liabilities.

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

At September 30, 2022, the value of the assets held in the rabbi trust was $ 68 million, which is included in the Other line within assets on our Balance Sheets.

BUSINESS SEGMENTS

23 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 Six Months Ended

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

Three Months Ended Nine Months Ended

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

Vacation Ownership $ 1,182 $ 974 $ 3,229 $ 2,518

4 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Adjusted EBITDA Vacation Ownership $ 299 $ 215 $ 772 $ 465

8 unchanged sentences

Net income (loss) attributable to common shareholders $ 109 $ 10 $ 303 $ ( 12 )

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

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

Vacation Ownership $ 7,947 $ 7,897

3 unchanged sentences

$ 9,237 $ 9,613

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.

We conduct business globally, and our operations outside the United States represented approximately 12 % and 10 % of our revenues, excluding cost reimbursements, for the three months ended September 30, 2022 and September 30, 2021, respectively, and 12 % and 10 % of our revenues, excluding cost reimbursements, for the nine months ended September 30, 2022 and September 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