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Item 7. Management’s Discussion and Analysis

2023-02-27 compared with 2022-03-01 · 332 added, 432 removed, 454 unchanged (63% of the section changed)

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Forward-Looking Statements

You should read the following discussion of our results of operations and financial condition together with our audited historical consolidated financial statements and accompanying notes that we have included elsewhere in this Annual Report, as well as the discussion in the section of this Annual Report entitled “Business.” This discussion contains forward-looking statements that involve risks and uncertainties.

Financial Statements and Supplementary Data,” and Part I, “Item 1.

Business,” of this Annual Report.

This discussion contains forward-looking statements that involve risks and uncertainties.

The forward-looking statements are not historical facts, but rather are based on our current expectations, estimates, assumptions and projections about our industry, business and future financial results.

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Vacation Ownership and Exchange & Third-Party Management.

Our Vacation Ownership segment includes a diverse portfolio of resorts that includes some of the world’s most iconic brands licensed under exclusive long-term relationships.

We are the exclusive worldwide developer, marketer, seller and manager of vacation ownership and related products under the Marriott Vacation Club, Grand Residences by Marriott, Sheraton Vacation Club, Westin Vacation Club, and Hyatt Residence Club brands, as well as under Marriott Vacation Club Pulse, an extension to the Marriott Vacation Club brand.

We are also the exclusive worldwide developer, marketer and seller of vacation ownership and related products under The Ritz-Carlton Destination Club brand, we have the non-exclusive right to develop, market and sell whole ownership residential products under The Ritz-Carlton Residences brand and we have a license to use the St.

Regis brand for specified fractional ownership resorts.

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

selling vacation ownership products;

managing vacation ownership resorts, clubs and owners’ associations;

financing consumer purchases of vacation ownership products;

and renting vacation ownership inventory.

Our Exchange & Third-Party Management segment includes exchange networks and membership programs, as well as the provision of management services to other resorts and lodging properties.

As of May 2022, we provided these services through our Interval International and Aqua-Aston businesses.

Exchange & Third-Party Management revenue generally is fee-based and derived from membership, exchange and rental transactions, property and association management, and other related products and services.

In April 2022, we disposed of VRI Americas after determining that the business was not a core component of our future growth strategy and operating model.

This business was a component of our Exchange and Third-Party Management segment through the date of the sale.

See Footnote 3 “Acquisitions and Dispositions” to our Financial Statements for further information regarding this disposition.

Corporate and other represents that portion of our results that are not allocable to our segments, including those relating to Consolidated Property Owners’ Associations.

COVID-19 Pandemic Update

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

economies and markets, and has also had an unprecedented impact on the travel industry and the Company.

For further information about COVID-19’s impact on our business, see Part I, Item 1, “Business.”

Integration of Marriott-, Sheraton- and Westin- Branded Vacation Ownership Products

Part of the rationale for our acquisition of ILG in 2018 was to achieve operating efficiencies and business growth by leveraging the brands licensed by Marriott International and its subsidiaries to us and to ILG.

In 2016, Marriott International purchased Starwood Hotels and Resorts Worldwide, Inc., which at the time exclusively licensed the Sheraton and Westin vacation ownership brands to Legacy-ILG.

In August 2022, we launched Abound by Marriott Vacations, a new owner benefit and exchange program which affiliates the Marriott, Sheraton and Westin vacation ownership brands to offer similar benefits to owners of our products under these brands.

Under this program, owners of Marriott-, Sheraton- and Westin-branded VOIs can access over 90 resorts under the Marriott Vacation Club, Sheraton Vacation Club and Westin Vacation Club brands using

a common currency.

The program also harmonizes fee structures and owner benefit levels and allows us to transition most of our Legacy-ILG sales galleries to sell our Marriott Vacation Club Destinations product.

Further, in late 2022, we added certain Sheraton- and Westin- branded VOIs to the Marriott Vacation Club Destinations product.

Acquisition of Welk

On April 1, 2021, we completed the Welk Acquisition, after which Welk became our indirect wholly-owned subsidiary.

In April 2022, we introduced the Hyatt Vacation Club and rebranded Legacy-Welk’s vacation ownership program as the Hyatt Vacation Club Platinum Program, enabling Legacy-Welk sales centers to sell a Hyatt-branded vacation ownership product.

Most Legacy-Welk resorts are now available for rental stays through Hyatt.com.

Significant Accounting Policies Used in Describing Results of Operations

Sale of Vacation Ownership Products

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

Based upon the different terms of the contracts with the customer and business practices, control of the vacation ownership product is transferred to the customer at closing for Marriott- and Welk-branded transactions and upon expiration of the statutory rescission period for Sheraton-, Westin- and Hyatt-branded transactions.

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

Based upon the different terms of our contracts with the customer and business practices, control of the vacation ownership product has historically transferred to the customer at different points in time for each brand of VOIs.

In the third quarter of 2022, we aligned our business practices and contract terms, resulting in the prospective change in the timing of the transfer of control to the customer for Marriott-branded VOIs.

Prior to these changes, control transfer occurred at closing for Marriott-branded vacation ownership products.

Subsequent to this alignment, transfer of control of Marriott-branded vacation ownership products occurs at expiration of the statutory rescission period, consistent with the historical timing of Sheraton-, Westin- and Hyatt- branded transactions.

Marriott-branded VOI sales contracts executed prior to these modifications have been accounted for with transfer of control of the VOI occurring at closing.

Control transfer for Legacy-Welk VOIs continues to occur at closing.

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

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We also provide sales incentives to certain purchasers.

These sales incentives typically include Marriott Bonvoy points, World of Hyatt points or an alternative sales incentive that we refer to as “plus points.” These plus points are redeemable for stays at our resorts or for use in other third-party offerings, generally up to two years from the date of issuance.

These sales incentives typically include Marriott Bonvoy points, World of Hyatt points or an alternative sales incentive that we refer to as “plus points.” Plus points are redeemable for stays at our resorts or for use in other third-party offerings, generally up to two years from the date of issuance.

Typically, sales incentives are only awarded if the sale is closed.

Finally, as more fully described in “ Financing ” below, we record the difference between the vacation ownership note receivable and the consideration to which we expect to be entitled (also known as a vacation ownership notes receivable reserve or a sales reserve) as a reduction of revenues from the sale of vacation ownership products at the time we recognize revenues from a sale.

Finally, as more fully described in “ Financing ” below, we record the difference between the contract receivable or vacation ownership note receivable and the consideration to which we expect to be entitled (also known as a vacation ownership notes receivable reserve or a sales reserve) as a reduction of revenues from the sale of vacation ownership products at the time we recognize revenues from a sale.

We report, on a supplemental basis, contract sales for our Vacation Ownership segment.

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

Contract sales differ from revenues from

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

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

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

Cost of vacation ownership products includes costs to develop and construct our projects (also known as real estate inventory costs), other non-capitalizable costs associated with the overall project development process and settlement expenses associated with the closing process.

Cost of vacation ownership products includes costs to acquire, develop and construct our projects (also known as real estate inventory costs), other non-capitalizable costs associated with the overall project development process and settlement expenses associated with the closing process.

For each project, we expense real estate inventory costs in the same proportion as the revenue recognized.

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We previously used the term Development margin to refer to revenues from the Sale of vacation ownership products less the Cost of vacation ownership products and marketing and sales costs.

In the first quarter of 2021, we began to refer to this financial measure as Development profit.

While the calculation remains unchanged, we believe the revised term better depicts the financial results being presented.

Management and Exchange

Our management and exchange revenues include revenues generated from fees we earn for managing each of our vacation ownership resorts, providing property management, owners’ association management and related services to third-party vacation ownership resorts and fees we earn for providing rental services and related hotel, condominium resort, and owners’ association management services to vacation property owners.

Our management and exchange revenues include revenues generated from fees we earn for managing each of our vacation ownership resorts, providing property management, owners’ association management and related services and fees we earn for providing rental services and related hotel, condominium resort, and owners’ association management services to vacation property owners.

In addition, we earn revenue from ancillary offerings, including food and beverage outlets, golf courses and other retail and service outlets located at our Vacation Ownership resorts.

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

While we adjust interest rates on our financing programs from time to time, such changes are typically not made in lockstep with the timing and magnitude of changes in broader market rates.

We may use incentives to encourage our customers to choose our financing.

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

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We expect to continue offering financing incentive programs in 2023.

We also plan to shift back to our pre-pandemic increased focus on sales to first-time buyers, who are more likely to finance their purchases, which should further increase propensity and increase interest income as new originations of vacation ownership notes receivable outpace the decline in principal of existing vacation ownership notes receivable.

Growing sales to first-time buyers, who are more likely to finance their purchases, remains an integral part of our overall marketing and sales strategy.

Acquired vacation ownership notes receivable are accounted for using the purchased credit deteriorated assets provision of the current expected credit loss model.

The estimates of 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.

The estimates of 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 the estimated value of collateral securing the acquired vacation ownership notes receivable.

See Footnote 6 “Vacation Ownership Notes Receivable” to our Financial Statements for further information regarding the accounting for acquired vacation ownership notes receivable.

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Historical default rates 4.5% 4.3% 6.3%

The increased default rates in 2020 were predominantly due to the impact of the COVID-19 pandemic on the performance of our notes receivable portfolio.

The decrease in default rates in 2021 reflects the performance of our notes receivable portfolio back to pre-pandemic levels.

The increased default rates in 2020 were predominantly due to the impact of the COVID-19 pandemic on the performance of our vacation ownership notes receivable portfolio.

In 2021 and 2022, default rates decreased compared to 2020 and the performance of our notes receivable portfolio returned to pre-pandemic levels.

As a result of the unification of our Marriott-, Sheraton- and Westin- branded vacation ownership products under the Abound by Marriott Vacations program and stabilization of the default rates, in the third quarter of 2022, we combined and aligned our reserve methodology for vacation ownership notes receivable for our Marriott, Sheraton and Westin brands.

See Footnote 6 “Vacation Ownership Notes Receivable” to our Financial Statements for further information.

Financing expenses include consumer financing interest expense, which represents interest expense associated with the securitization of our vacation ownership notes receivable, costs to support the financing, servicing and securitization processes and changes in expected credit losses related to acquired vacation ownership notes receivable.

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In our Vacation Ownership segment, we operate a rental business to provide owner flexibility and to help mitigate carrying costs associated with our inventory.

We generate revenue from rentals of inventory that we hold for sale as interests in our vacation ownership programs, inventory that we control because our owners have elected alternative usage options permitted under our vacation ownership programs and rentals of owned hotel properties.

We also recognize rental revenue from the utilization of plus points under our points-based products when the points are redeemed for rental stays at one of our resorts or other third-party offerings.

We obtain rental inventory from unsold inventory and inventory we control because owners have elected alternative usage options offered through our vacation ownership programs.

For rental revenues associated with vacation ownership products which we own and which are registered and held for sale, to the extent that the revenues from rental are less than costs, revenues are reported net in accordance with ASC Topic 978, “ Real Estate - Time-Sharing Activities ” (“ASC 978”).

For rental revenues associated with vacation ownership products which we own and which are registered and held for sale, to the extent that the revenues from rental are less than costs, revenues are reported net in accordance with Accounting Standards Codification (“ASC”) Topic 978, “ Real Estate - Time-Sharing Activities ” (“ASC 978”).

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

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

In our Exchange & Third-Party Management segment, we offer vacation rental opportunities at managed properties through our Aqua-Aston business, and for the period prior to its disposition in the second quarter of 2022, VRI Americas.

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

The offering of Getaways allows us to monetize excess availability of resort accommodations within the applicable exchange network, as well as provide additional vacation opportunities to members.

Resort accommodations available as Getaways typically result from seasonal oversupply or underutilized space in the applicable exchange program, as well as resort accommodations specifically sourced for the Getaways program.

Getaways allows us to monetize excess availability of resort accommodations within the applicable exchange network, as well as provide additional vacation opportunities to members.

Resort accommodations typically become available as Getaways as a result of seasonal oversupply or underutilized space in the applicable exchange program.

We also source resort accommodations specifically for the Getaways program.

Rental revenues associated with Getaways are reported net of related expenses.

Rental expenses include:

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• Marketing costs and direct operating and related expenses in connection with the rental business (such as housekeeping, labor costs, credit card expenses, and reservation services).

• Costs to secure resort accommodations for use in Getaways.

Rental metrics, including the average daily transient rate or the number of transient keys rented, may not be comparable between periods given fluctuation in available occupancy by location, unit size (such as two bedroom, one bedroom or studio unit), owner use and exchange behavior.

In addition, rental metrics may not correlate with rental revenues due to the requirement to report certain rental revenues net of rental expenses in accordance with ASC 978 (as discussed above).

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Our Vacation Ownership segment units are either “full villas” or “lock-off” villas.

Lock-off villas are units that can be separated into a master unit and a guest room.

Lock-off villas are units that can be separated into a primary unit and a guest room.

Full villas are “non-lock-off” villas because they cannot be separated.

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Cost Reimbursements

Cost reimbursements include direct and indirect costs that are reimbursed to us by customers under management contracts.

All costs reimbursed to us by customers, with the exception of taxes assessed by a governmental authority, are reported on a gross basis.

Cost reimbursements include direct and indirect costs that are reimbursed to us by owners’ associations and customers under management contracts.

All costs reimbursed to us by owners’ associations and customers, with the exception of taxes assessed by a governmental authority, are reported on a gross basis.

We recognize cost reimbursements when we incur the related reimbursable costs.

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Transaction and Integration Costs

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

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

We measure operating performance using the following key metrics:

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

Transaction and integration costs also include costs related to the ILG and Welk Acquisitions, primarily for financial advisory, legal, and other professional service fees, as well as certain tax-related accruals.

We measure operating performance using the key metrics described below:

• Contract sales from the sale of vacation ownership products :

• Total contract sales include contract sales from the sale of vacation ownership products including joint ventures, and

• Total contract sales include contract sales from the sale of vacation ownership products including joint ventures.

• Consolidated contract sales exclude contracts sales from the sale of vacation ownership products for non-consolidated joint ventures.

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

• Development profit margin;

• Volume per guest (“VPG”), which we calculate by dividing consolidated vacation ownership contract sales, excluding fractional sales, telesales, resales, joint venture sales and other sales that are not attributed to a tour at a sales location, by the number of tours at sales locations in a given period (which we refer to as “tour flow”).

• Volume per guest (“VPG”), is calculated by dividing consolidated vacation ownership contract sales, excluding fractional sales, telesales, resales, and other sales that are not attributed to a tour at a sales location, by the number of tours at sales locations in a given period.

We believe that this operating metric is valuable in evaluating the effectiveness of the sales process as it combines the impact of average contract price with the number of touring guests who make a purchase.

• Total active members, which is the number of Interval International network active members at the end of the applicable period;

• Average revenue per member, which we calculate by dividing membership fee revenue, transaction revenue and other member revenue for the Interval International network by the monthly weighted average number of Interval International network active members during the applicable period;

• Total active members is the number of Interval International network active members at the end of the applicable period.

We consider active members to be an important metric because it represents the population of owners eligible to book transactions using the Interval International network.

• Average revenue per member is calculated by dividing membership fee revenue, transaction revenue, rental revenue, and other member revenue for the Interval International network by the monthly weighted average number of Interval International network active members during the applicable period.

We believe this metric is valuable in measuring the overall engagement of our Interval International network active members.

• Segment financial results attributable to common shareholders represents revenues less expenses directly attributable to each applicable reportable business segment (Vacation Ownership and Exchange & Third-Party Management).

We consider this measure to be important in evaluating the performance of our reportable business segments.

See Footnote 20 “Business Segments” to our Financial Statements for further information on our reportable business segments.

NM = Not meaningful.

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TOTAL EXPENSES 3,872 3,440 2,984

(Losses) gains and other (expense) income, net (51) (26) 16

Gains (losses) and other income (expense), net 40 (51) (26)

Interest expense (118) (164) (150)

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Fiscal Years 2022 vs.

2020 2020 vs.

(Contract sales $ in millions) 2021 2020 2019 Change Change

(Contract sales $ in millions) 2022 2021 2020 Change

Vacation Ownership

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Consolidated contract sales $ 1,837 $ 1,374 $ 654 $ 463 34%

Joint venture contract sales $ 37 $ 37 $ 15 $ — (1%)

VPG $ 4,421 $ 4,356 $ 3,767 $ 65 1%

Exchange & Third-Party Management

Total active members at end of period (000's) 1,566 1,296 1,518 270 21%

1,296 1,518 1,670 (222) (15%) (152) (9%)

Average revenue per member $ 157.97 $ 179.48 $ 144.97 $ (21.51) (12%)

$ 179.48 $ 144.97 $ 168.73 $ 34.51 24% $ (23.76) (14%)

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

The following table presents our revenues for 2021, 2020, and 2019.

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

($ in millions) 2022 2021 2020 Change

Vacation Ownership $ 4,342 $ 3,539 $ 2,530 $ 803 23%

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

EBITDA, a financial measure that is not prescribed by GAAP, is defined as earnings, or net income or loss attributable to common shareholders, before interest expense (excluding consumer financing interest expense associated with term loan securitization transactions), income taxes, depreciation and amortization.

Adjusted EBITDA reflects additional adjustments for certain items described below, and excludes share-based compensation expense to address considerable variability among companies in recording compensation expense because companies use share-based payment awards differently, both in the type and quantity of awards granted.

For purposes of our EBITDA and Adjusted EBITDA calculations, we do not adjust for consumer financing interest expense associated with term loan securitization transactions because we consider it to be an operating expense of our business.

We consider Adjusted EBITDA to be an indicator of operating performance, which we use to measure our ability to service debt, fund capital expenditures and expand our business.

EBITDA, a financial measure that is not prescribed by GAAP, is defined as earnings, or net income or loss attributable to common shareholders, before interest expense (excluding consumer financing interest expense associated with term securitization transactions), income taxes, depreciation and amortization.

Adjusted EBITDA reflects additional adjustments for certain items and excludes share-based compensation expense to address considerable variability among companies in recording compensation expense because companies use share-based payment awards differently, both in the type and quantity of awards granted.

For purposes of our EBITDA and Adjusted EBITDA calculations, we do not adjust for consumer financing interest expense associated with term securitization transactions because we consider it to be an operating expense of our business.

We consider Adjusted EBITDA to be an indicator of operating performance, which we use to measure our ability to service debt, fund capital expenditures, expand our business, and return cash to shareholders.

We also use Adjusted EBITDA, as do analysts, lenders, investors, and others, because this measure excludes certain items that can vary widely across different industries or among companies within the same industry.

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The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate.

As a result, effective tax rates and provision for income taxes can vary considerably among companies.

As a result, effective tax rates and provisions for income taxes can vary considerably among companies.

EBITDA and Adjusted EBITDA also exclude depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets.

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We believe Adjusted EBITDA is useful as an indicator of operating performance because it allows for period-over-period comparisons of our on-going core operations before the impact of the excluded items.

Adjusted EBITDA also facilitates comparison by us, analysts, investors, and others, of results from our on-going core operations before the impact of these items with results from other vacation companies.

Adjusted EBITDA also facilitates comparison by us, analysts, investors, and others, of results from our on-going core operations before the impact of these items with results from other companies.

EBITDA and Adjusted EBITDA have limitations and should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.

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Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

Net income (loss) attributable to common shareholders $ 49 $ (275) $ 138 $ 324 NM $ (413) NM

($ in millions) 2022 2021 2020 Change

Net income (loss) attributable to common shareholders $ 391 $ 49 $ (275) $ 342 NM

Interest expense 118 164 150 (46) (28%)

Tax provision (benefit) 74 (84) 83 158 NM (167) NM

Tax provision (benefit) 191 74 (84) 117 159%

Depreciation and amortization 132 146 123 (14) (10%)

EBITDA 433 (86) 494 519 NM (580) NM

EBITDA 832 433 (86) 399 93%

Share-based compensation 39 51 37 (12) (23%)

Certain items 173 284 227 (111) NM 57 25%

Certain items 95 173 284 (78) (46%)

Adjusted EBITDA $ 966 $ 657 $ 235 $ 309 47%

Adjusted EBITDA margin 24% 13% 24% 11 pts (11 pts)

Certain items for 2021 consisted of $110 million of transaction and integration costs (including $93 million of ILG Acquisition and integration related costs, $16 million of Welk Acquisition related costs, and $1 million of other transaction costs), $51 million of losses and other expense (including $55 million related to the early redemption of our 2026 Notes (as defined below) and a portion of our 2025 Notes (as defined below), and $3 million of miscellaneous other losses and other expenses, partially offset by $7 million related to a true-up to a Marriott International indemnification receivable upon settlement (the true-up to the offsetting accrual is included in the (Provision for) benefit from income taxes line)), $10 million of litigation charges, $10 million of purchase accounting adjustments, and $3 million of impairment charges, partially offset by $8 million to eliminate the impact of certain Consolidated Property Owners’ Associations, $2 million of activity related to the accrual for health and welfare costs for furloughed associates, and $1 million of miscellaneous other adjustments.

Certain items for 2020 consisted of $100 million of impairment charges, $62 million of ILG Acquisition-related costs, $57 million of other charges (including $50 million related to the net sales reserve adjustment, $2 million related to an accrual for the health and welfare costs for furloughed associates, $4 million related to the charge for VAT penalties and interest (see offset included in indemnification below) and $1 million of other miscellaneous charges), $26 million of losses and other expense, $25 million of restructuring costs, $4 million of purchase accounting adjustments, $6 million of litigation charges, and $4 million of transaction costs related to our capital efficient inventory arrangements.

The $26 million of losses and other expense included $32 million related to a true-up to a Marriott International indemnification receivable upon settlement (the true-up to the offsetting accrual is included in the Benefit (provision) for income taxes line), $11 million related to foreign currency translation losses, and a $5 million loss related to the disposition of a formerly consolidated subsidiary, partially offset by $6 million of gains and other income related to the disposition of excess land parcels in Orlando, Florida and Steamboat Springs, Colorado, a $6 million receivable related to indemnification from Marriott International for certain VAT charges, $4 million related to net insurance proceeds from the final settlement of Legacy-MVW business interruption insurance claims arising from a prior year hurricane, $3 million related to other insurance proceeds, and $3 million of miscellaneous gains and other income.

Adjusted EBITDA margin 29% 24% 13% 5 pts

In the third quarter of 2022, in connection with the unification of the our Marriott-, Westin-, and Sheraton- branded vacation ownership products under the Abound by Marriott Vacations program, we aligned our business practices and contract terms for the sale of vacation ownership products (the “Contract alignment”), resulting in the prospective acceleration of revenue for the sale of Marriott-branded VOIs.

The Contract alignment increased Net income attributable to common shareholders and Adjusted EBITDA by $34 million and $46 million in 2022, respectively.

In addition, we combined and aligned our reserve methodology for vacation ownership notes receivable for these brands (the “Reserve alignment”), resulting in a $4 million increase in Net income attributable to common shareholders and a $5 million increase in Adjusted EBITDA.

Together, these changes are hereinafter referred to as the “Alignment.” See Footnote 6 “Vacation Ownership Notes Receivable” to our Financial Statements for further information on the Reserve Alignment.

The table below details the components of Certain items for 2022 and 2021.

($ in millions) 2022 2021

ILG integration $ 82 $ 93

Welk acquisition and integration 14 16

I/T transformation 16 —

Other transformation initiatives 10 —

Other transaction costs 3 1

Transaction and integration costs 125 110

Purchase accounting adjustments 11 10

Litigation charges 11 10

Impairment 2 3

Early redemption of senior unsecured notes — 55

Gain on disposition of hotel (33) —

Gain on disposition of VRI Americas (17) —

Foreign currency translation 10 —

Insurance proceeds (6) —

Change in indemnification asset 3 (7)

(Gains) losses and other (income) expense, net (40) 51

Expiration/forfeiture of deposits on pre-acquisition preview packages (6) —

Early termination of VRI management contract (2) —

Eliminate impact of Consolidated Property Owners' Associations — (8)

Change in estimate relating to pre-acquisition contingencies (12) —

Total Certain items $ 95 $ 173

Segment Adjusted EBITDA

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

($ in millions) 2022 2021 2020 Change

Vacation Ownership $ 1,033 $ 699 $ 229 $ 334 48%

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General and administrative (215) (186) (118) (29) (16%)

Consolidated Property Owners' Associations — 5 3 (5) (100%) 2 130%

Consolidated Property Owners' Associations — — 5 — NM

Adjusted EBITDA $ 966 $ 657 $ 235 $ 309 47%

The following tables present Adjusted EBITDA for our reportable segments reconciled to segment financial results.

The following tables present segment financial results for our reportable segments reconciled to Adjusted EBITDA.

Vacation Ownership

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

Segment Adjusted EBITDA $ 699 $ 229 $ 794 $ 470 204% $ (565) (71%)

($ in millions) 2022 2021 2020 Change

Segment financial results $ 961 $ 585 $ 71 $ 376 64%

Depreciation and amortization 92 89 79 3 4%

Share-based compensation 7 6 6 1 21%

Certain items (19) (73) (95) 54 73% 22 22%

Segment financial results $ 585 $ 71 $ 623 $ 514 NM $ (552) (89%)

Certain items in the Vacation Ownership segment for the 2021 consisted primarily of $10 million of purchase accounting adjustments and $9 million of litigation charges.

Certain items in the Vacation Ownership segment for 2020 consisted of $50 million related to the net sales reserve adjustment, $15 million of restructuring costs, $8 million of asset impairment charges, $6 million of litigation charges, $3 million of unfavorable purchase accounting adjustments, and $3 million of transaction costs associated with capital efficient inventory arrangements, partially offset by $12 million of gains and other income.

Certain items (27) 19 73 (46) NM

Segment Adjusted EBITDA $ 1,033 $ 699 $ 229 $ 334 48%

We recognized an additional $51 million of Adjusted EBITDA in the Vacation Ownership segment during 2022 as a result of the Alignment.

The table below details the components of Certain items for the Vacation Ownership segment financial results for 2022 and 2021.

($ in millions) 2022 2021

Transaction and integration costs $ 3 $ 2

Purchase accounting adjustments 11 10

Litigation charges 9 9

Impairment 2 —

Gain on disposition of hotel (33) —

Insurance proceeds (4) —

(Gains) losses and other (income) expense, net (37) (1)

Expiration/forfeiture of deposits on pre-acquisition preview packages (6) —

Change in estimate relating to pre-acquisition contingencies (12) —

Total Certain items $ (27) $ 19

Exchange & Third-Party Management

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

Segment Adjusted EBITDA $ 144 $ 119 $ 183 $ 25 23% $ (64) (36%)

($ in millions) 2022 2021 2020 Change

Segment financial results $ 132 $ 93 $ (14) $ 39 42%

Depreciation and amortization 31 48 32 (17) (36%)

1 unchanged sentence

Certain items (17) 1 99 (18) NM

Segment financial results $ 93 $ (14) $ 129 $ 107 NM $ (143) NM

Certain items in the Exchange & Third-Party Management segment for 2020 consisted of $92 million of asset impairment charges, $4 million of restructuring costs, $2 million of miscellaneous losses and other expense, and $1 million of unfavorable purchase accounting adjustments.

Segment Adjusted EBITDA $ 148 $ 144 $ 119 $ 4 3%

Certain items for the Exchange & Third-Party Management segment for 2022 consisted of $17 million of gains and other income related to the strategic disposition of our VRI Americas business and $2 million of revenue associated with an early termination of a VRI management contract, offset by $2 million of foreign currency translation losses.

Certain items for the Exchange & Third-Party Management segment for 2021 consisted of $1 million of COVID-19 related restructuring costs.

BUSINESS SEGMENTS

27 unchanged sentences

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

($ in millions) 2022 2021 2020 Change

Total consolidated contract sales 1,837 1,374 654 463 34%

3 unchanged sentences

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

($ in millions) 2022 % of Consolidated Contract Sales, Net of Resales 2021 % of Consolidated Contract Sales, Net of Resales 2020 % of Consolidated Contract Sales, Net of Resales Change

Total contract sales $ 1,874 $ 1,411 $ 669 $ 463 33%

12 unchanged sentences

2022 Compared to 2021

Sale of vacation ownership products increased $607 million due primarily to $706 million of higher consolidated contract sales volumes, net of resales, $28 million of lower sales reserve activity, $14 million of higher settlement revenue, and $5 million of higher resales activity, partially offset by a $102 million unfavorable change in revenue reportability and $44 million of higher sales incentives issued (higher settlement revenue and higher sales incentives issued were driven by the higher contract sales volumes year-over-year).

The higher contract sales performance reflects the continued ramp-up of the business following the initial impact of the COVID-19 pandemic which commenced late in the prior year first quarter and resulted in the closure of all of our sales centers, as well as the inclusion of the Welk business beginning in the second quarter of 2021.

As a result of reopening our sales centers throughout 2020 and 2021, as well as the Welk Acquisition, our contract sales volumes have improved on a sequential basis each quarter and we expect that sequential improvement to continue in 2022.

The lower sales reserve reflects the prior year increase to the sales reserve to take into account higher expected default activity as a result of the COVID-19 pandemic.

Revenue reportability was significantly negative in 2021.

While we benefited from contract sales in the fourth quarter of 2020 that we recognized as revenue in 2021, given the increasing contract sales volumes throughout 2021 due to the reopening of our sales centers and continued ramp-up of our business, we saw a higher shift of contract sales in the fourth quarter of 2021 into 2022 for revenue recognition.

In contrast, revenue reportability was significantly positive in 2020 due to contract sales from late in the fourth quarter of 2019 that were recognized as revenue in 2020.

However, 2020 was not impacted by a corresponding shift of revenues into 2021, given the low contract sales volumes in 2020 resulting from the impact of the COVID-19 pandemic.

The higher contract sales performance reflects the continued ramp-up of the business following the initial impact of the COVID-19 pandemic and $24 million of Legacy-Welk contract sales in the first quarter of 2022 (Legacy-Welk was acquired in the second quarter of 2021).

The Contract alignment resulted in an increase in reportability of $58 million in 2022.

The increase in the sales reserve as a percentage of Consolidated contract sales, net of resales is attributed to the Reserve alignment ($19 million or 110bps) recorded in the third quarter of 2022, the increase in reportability (40bps), an increase attributed to higher Legacy-Welk contract sales which carry a higher reserve rate (30bps), and an increase in financing propensity (20bps).

The Reserve alignment was offset by a corresponding decrease in the acquired reserve for vacation ownership notes receivable recorded as a reduction of Financing expenses.

Excluding the impact of the Alignment, Sale of vacation ownership products increased $426 million or 37%.

Development Profit

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

($ in millions) 2022 % of Revenue 2021 % of Revenue 2020 % of Revenue Change

Sale of vacation ownership products $ 1,618 $ 1,153 $ 546 $ 465 40%

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Marketing and sales (807) (50%) (617) (54%) (386) (71%) (190) (31%)

Development profit $ 286 $ 10 $ 310 $ 276 NM $ (300) NM

Development profit margin 24.8% 1.8% 22.9% 23.0 pts (21.1 pts)

Development profit $ 522 $ 286 $ 10 $ 236 82%

Development profit margin 32.2% 24.8% 1.8% 7.4 pts

2022 Compared to 2021

Development profit increased $276 million year-over-year.

The change reflected $268 million from the benefit of higher contract sales volumes and lower marketing and sales spending as a percentage of revenue, $74 million related to lower sales reserve activity, and $5 million of favorable product cost, due mainly to the sale of lower cost inventory and, to a lesser extent, favorable product cost true-up activity, partially offset by $71 million of unfavorable revenue reportability year-over-year.

Cost of vacation ownership products included favorable product cost true ups of $24 million and $10 million during 2022 and 2021, respectively.

Marketing and sales in 2022 was reduced by $6 million of lower marketing and sales associated with expired or forfeited deposits on pre-acquisition preview packages.

Excluding the impact of the Alignment, Development profit increased $204 million and Development profit margin increased to 31.0%.

We expect future development profit margins to remain above pre-pandemic levels and in line with recent results.

Resort Management and Other Services Revenues, Expenses and Profit

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

($ in millions) 2022 2021 2020 Change

Management fee revenues $ 166 $ 158 $ 149 $ 8 5%

4 unchanged sentences

Resort management and other services profit $ 294 $ 270 $ 220 $ 24 9%

Resort management and other services profit margin 57.5% 61.8% 53.0% (4.3 pts) 8.8 pts

Resort management and other services profit margin 55.1% 57.5% 61.8% (2.4 pts)

Resort occupancy (1)

89.3% 81.6% 57.2% 7.7 pts

_________________________

(1) Resort occupancy represents all transient, preview, and owner keys divided by total keys available, net of keys out of service.

2022 Compared to 2021

Resort management and other services revenues reflected higher ancillary revenues, including revenues from food and beverage and golf offerings, as a result of the continued ramp-up of the business following the initial impact of the COVID-19 pandemic starting late in the prior year first quarter, as well as higher management fees and nearly $25 million of revenues contributed by the Welk business.

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

The increase in resort management and other services profit reflected the increase in resort management and other services revenues, partially offset by higher ancillary expenses as a result of the higher ancillary revenues mentioned above and the impact from the write-off of $7 million of outstanding management fee receivables deemed uncollectible related to a capital efficient inventory arrangement.

While revenues from certain ancillary businesses continue to be adversely affected by government imposed capacity limits, we have continued to remain agile by adjusting product and service offerings and operating hours such that Resort management and other services profit remains strong.

We expect that once we revert to our high-touch service model in the latter half of 2022, commensurate with the quality expected of our iconic brands, we will have a slightly lower margin associated with our ancillary businesses.

Resort management and other services revenues reflect $50 million of higher ancillary revenues, including revenues from food and beverage and golf offerings, as a result of an increase in occupied keys (0.9 million keys or 13%) at resorts with ancillary business and a 14% increase in revenue per occupied key, $6 million of revenues relating to the Welk Acquisition, which we acquired in the second quarter of 2021, $5 million of increased commissions on third-party offerings and higher management fees, and $3 million attributed to higher annual club dues.

The increase in resort management and other services profit reflects $10 million of higher ancillary profit and higher management fee revenues, partially offset by higher customer services expenses due to wage increases and improvements in service levels.

Ancillary profit margin remained in line with the prior year because we raised pricing and optimized our food and beverage offerings to offset wage pressures.

We expect future ancillary profit margins to remain in line with recent results.

Rental Revenues, Expenses and Margin

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

($ in millions) 2022 2021 2020 Change

Rental revenues $ 509 $ 446 $ 239 $ 63 14%

Rental expenses (400) (394) (363) (6) (2%)

Rental profit $ 52 $ (124) $ 122 $ 176 NM $ (246) NM

Rental profit margin 11.7% NM 23.7% NM NM

Rental profit $ 109 $ 52 $ (124) $ 57 110%

Rental profit margin 21.4% 11.7% NM 9.7 pts

Fiscal Years 2022 vs.

2020 2020 vs.

(transient keys in millions) 2021 2020 2019 Change Change

(transient keys in millions) 2022 2021 2020 Change

Transient keys rented (1)

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Average transient key rate $ 268.39 $ 245.79 $ 219.82 $ 22.60 9%

Resort occupancy 81.6% 57.2% 88.1% 24.4 pts (30.9 pts)

Rental occupancy (2)

70.3% 55.1% 24.0% 15.2 pts

_________________________

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

(2) Rental occupancy represents transient and preview keys divided by keys available to rent, which is total available keys excluding owner usage.

2022 Compared to 2021

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

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

As the majority of the governmental restrictions in response to the pandemic that caused rental activity to decline, such as travel restrictions and quarantine requirements, have been lifted, we expect rental occupancies and revenues to continue to increase in 2022.

Rental profit for transient keys associated with our vacation ownership operations improved by $45 million (97%) in 2022 while rental profit for our owned hotels improved by $12 million (231%).

The improvement in rental profit resulted from an increase in transient keys rented and a higher average transient rate due to the continued ramp-up of the business following the waning impact of the COVID-19 pandemic starting late in the prior year first quarter net of higher associated tidy and variable costs, a $17 million increase in allocations of rental costs to marketing and sales expense for marketing purposes and

$5 million from higher plus point revenue.

These increases were partially offset by $36 million of higher costs associated with higher owner utilization of third-party vacation and other offerings, and excess inventory on hand compared to 2021.

In addition to these variances, there was a $52 million higher net down of rental revenues and expense in 2022 associated with unsold VOIs that are registered and held for sale.

Financing Revenues, Expenses and Margin

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

($ in millions) 2022 2021 2020 Change

Financing revenues $ 293 $ 268 $ 265 $ 25 9%

2 unchanged sentences

Financing profit $ 218 $ 180 $ 159 $ 38 22%

Financing profit margin 67.1% 59.8% 67.3% 7.3 pts (7.5 pts)

Financing propensity 53% 51% 63% 2 pts (12 pts)

Financing profit margin 74.5% 67.1% 59.8% 7.4 pts

Financing propensity 54% 53% 51%

2022 Compared to 2021

The Welk business increased our revenues by nearly $31 million in 2021.

Excluding the impact of the Welk business, financing revenues decreased due to a $245 million decrease in the average net vacation ownership notes receivable balance.

This balance decreased as a result of the continued pay-down of the existing vacation ownership notes receivable portfolio without a corresponding increase from new loan originations.

As contract sales volumes and new loan originations continue to grow in 2022, we expect that this growth should begin to more than offset the normal decline as a result of loan payment activity, which would cause interest income to increase.

Financing expenses decreased due to $14 million of higher credit losses associated with acquired vacation ownership notes receivable in the prior year, offset partially by $2 million of costs associated with the Welk business as well as $2 million of higher credit card fees.

Lower consumer financing interest expense resulted from the continued pay-down of securitized debt balances, offset partially by $2 million of costs from the Welk business.

Financing revenues reflect $23 million of higher interest income (including $10 million attributed to the lack of comparability due to the Welk Acquisition in the second quarter of 2021 and $13 million as a result of a higher average vacation ownership notes receivable balance and a slightly higher average interest rate driven by mix of customers and brands) and $2 million of lower plus point financing incentive costs year-over-year.

We plan to continue offering financing incentives to certain customers in the future.

Financing expenses decreased $19 million due to the Reserve alignment, which reduced the reserve related to our acquired vacation ownership notes receivable (recorded as a reduction of Financing expenses), partially offset by higher other expenses and an increase to our reserve for originated vacation ownership notes receivable (which is recorded as a reduction of Sales of vacation ownership products), partially offset by $1 million lower lien fee income.

The increase in consumer financing interest expense is attributable to the higher average securitized debt at a higher average interest rate for the more recent term securitization transactions.

We expect consumer financing interest expense to continue to remain elevated over our average outstanding interest rates on existing securitization transactions as a result of rising interest rates and we expect originations of vacation ownership notes receivable to outpace payoffs.

We do not adjust interest rates, on consumer financing offerings at the same pace as, or in lock-step with, broader market interest rates;

thus we expect our financing profit margin to decrease in 2023, as we repay existing securitization transactions with historically low interest rates and enter into new securitization transactions with higher interest rates.

Depreciation and Amortization

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

($ in millions) 2022 2021 2020 Change

Depreciation and amortization $ 92 $ 89 $ 79 $ 3 4%

2022 Compared to 2021

2021 included $8 million of depreciation and amortization expenses associated with assets acquired in the Welk Acquisition.

The increase in depreciation and amortization expense is attributed to an additional $2 million of depreciation expense associated with completed VOIs that 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 and $1 million attributed to the inclusion of expense associated with assets acquired in the Welk Acquisition for an additional quarter in 2022 compared to 2021.

Litigation Charges

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

($ in millions) 2022 2021 2020 Change

Litigation charges $ 9 $ 9 $ 6 $ — (3%)

2022 Compared to 2021

In 2021, we incurred $9 million of litigation charges related primarily to projects in Europe.

In 2020, we incurred $6 million of litigation charges, including approximately $4 million related to projects in Europe and approximately $1 million related to projects in California.

Restructuring

Fiscal Years 2021 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

Restructuring $ — $ 15 $ — $ (15) NM $ 15 NM

2021 Compared to 2020

No restructuring costs were recorded in 2021.

During 2020, we incurred $15 million in restructuring costs primarily related to a workforce reduction plan that we adopted as a result of the COVID-19 pandemic.

During 2022 and 2021, the litigation charges relate primarily to our business in Europe.

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

($ in millions) 2022 2021 2020 Change

Royalty fee $ 114 $ 106 $ 95 $ 8 7%

2022 Compared to 2021

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

Fiscal Years 2021 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

Impairment $ — $ 8 $ 99 $ (8) (98%) $ (91) (91%)

2021 Compared to 2020

No asset impairment charges were recorded in 2021.

During 2020, we recorded $8 million of non-cash impairment charges, including $6 million related to our Asia Pacific inventory as a result of the COVID-19 pandemic and $2 million of impairment charges for property and equipment.

Cost Reimbursements

Fiscal Years 2021 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

Cost reimbursements $ 1,202 $ 1,124 $ 1,136 $ 78 7% $ (12) (1%)

The increase in royalty fee expense included $6 million from an increase in the dollar volume of closings, $3 million from a contractual increase in the fixed portion of the royalty fee owed to Marriott International, and $1 million relating to the commencement of variable royalty fees for Hyatt in the fourth quarter of 2022, partially offset by $2 million from an increase in sales of pre-owned inventory, which carry a lower royalty fee as compared to initial sales of our inventory (one percent versus two percent).

Gains and Other Income

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

Gains and other income, net $ 1 $ 12 $ 28 $ (11) (96%) $ (16) (56%)

We recorded $12 million of gains and other income, including $6 million of net gains related to the disposition of excess land parcels in Orlando, Florida and Steamboat Springs, Colorado, $4 million of net insurance proceeds related to the settlement of Legacy-MVW business interruption insurance claims arising from a prior year hurricane, $1 million related to foreign currency translation and $1 million related to a miscellaneous insurance refund.

($ in millions) 2022 2021 2020 Change

Gains and other income, net $ 37 $ 1 $ 12 $ 36 NM

During 2022, we recorded gains and other income of $33 million related to the strategic decision to dispose of our hotel in Puerto Vallarta, Mexico, $3 million related to receipt of business interruption insurance proceeds, and $1 million related to property insurance proceeds.

Transaction and Integration Costs

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

Other $ 2 $ — $ 1 $ 2 NM $ (1) NM

2021 Compared to 2020

In 2021, we incurred $2 million of transaction costs associated with our capital efficient inventory arrangements.

($ in millions) 2022 2021 2020 Change

Transaction and integration costs $ (3) $ (2) $ (3) $ (1) (62%)

In 2022, we incurred $2 million of transaction costs associated with our capital efficient inventory arrangement in Waikiki and $1 million for costs incurred to identify required upgrades of acquired properties to meet brand standards.

EXCHANGE & THIRD-PARTY MANAGEMENT

Our Exchange & Third-Party Management segment offers access to vacation accommodations and other travel-related transactions and services to leisure travelers by providing vacation exchange and management services, including vacation rentals and other services.

We provide these services through a variety of brands including Interval International, Trading Places International, Vacation Resorts International, and Aqua-Aston.

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

Our results include those of VRI Americas for the period prior to its disposition in the second quarter of 2022.

($ in millions) 2022 2021 2020

4 unchanged sentences

TOTAL REVENUES 291 320 309

Marketing and sales — — 53

Management and exchange 120 131 122

6 unchanged sentences

TOTAL EXPENSES 174 227 321

Losses and other expense, net — (2) (3)

Gains (losses) and other income (expense), net 15 — (2)

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 132 $ 93 $ (14)

1 unchanged sentence

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

($ in millions) 2022 2021 2020 Change

Management and exchange revenue $ 226 $ 233 $ 211 $ (7) (3%)

1 unchanged sentence

Management and exchange profit $ 106 $ 102 $ 89 $ 4 4%

Management and exchange profit margin 43.8% 41.6% 65.9% 2.2 pts (24.3 pts)

Management and exchange profit margin 47.0% 43.8% 41.6% 3.2 pts

Fiscal Years 2022 vs.

2022 2021 2020 Change

Total active members at end of period (000's) 1,566 1,296 1,518 270 21%

Average revenue per member $ 157.97 $ 179.48 $ 144.97 $ (21.51) (12%)

2022 Compared to 2021

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

These increases were partially offset by lower membership revenue as a result of lower renewal activity, driven by a 15% decline in active members in 2021.

The decline in active members was primarily due to the non-renewal of one of Interval International’s corporate customers which the Company announced in February 2021.

Average exchange fee increased nearly 4% over 2020.

On January 1, 2022, we added affiliations with Disney Vacation Club, Welk Resorts, and El Cid to our Interval International exchange network, which resulted in over 300,000 new members.

The decrease in management and exchange revenue reflects $18 million of lower revenue due to the disposition of our VRI Americas business during the second quarter of 2022, partially offset by $10 million and $1 million of higher management fees and ancillary revenues, respectively, at Aqua-Aston managed properties due to the continued ramp-up of business in Hawaii subsequent to the initial impact of the COVID-19 pandemic.

For Interval International, revenue was in line with the prior year period while average revenue per member decreased 12% over the prior year comparable period.

This decline was due, in part, to recently added affiliations, for which we expect exchange activity to ramp up over time and lower inventory levels in the first half of 2022.

The increase in management and exchange profit primarily reflected $10 million of higher profit at Aqua-Aston, partially offset by $6 million of lower profit

due to the disposition of our VRI Americas business during the second quarter of 2022.

Management and exchange profit and profit margin excluding the impact of the disposition of VRI Americas would have increased by $10 million and 11%, respectively, during 2022.

Rental Revenues, Expenses and Margin

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

($ in millions) 2022 2021 2020 Change

Rental revenues $ 42 $ 40 $ 37 $ 2 4%

Rental expenses — (11) (28) 11 100% 17 62%

Rental profit $ 40 $ 26 $ 33 $ 14 54% $ (7) (22%)

Rental profit margin 100.0% 71.3% 54.6% 28.7 pts 16.7 pts

2022 Compared to 2021

The increase in rental profit reflected a 39% increase in Getaway program transactions and a 9% increase in average fee, reflecting customers’ desire to travel and pent up-demand due to COVID-19-related restrictions.

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

Results reflect a $1 million increase in gross Getaways revenues, driven by an 8% increase in the average Getaways fee, partially offset by a 6% decline in transactions and a $1 million increase in revenue from other rental operations.

Rental inventory procurement costs, which are recorded net within Rental revenues, were in line with the prior year.

The decline in Getaways transactions reflects fewer owner deposits in 2022 as more members chose to occupy their home resorts rather than exchange for usage through Interval International, which put pressure on the inventory available for Getaways.

Depreciation and Amortization

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

($ in millions) 2022 2021 2020 Change

Depreciation and amortization $ 31 $ 48 $ 32 $ (17) (36%)

2022 Compared to 2021

The increase in depreciation and amortization expense in 2021 relates to a true-up made to accelerate depreciation on a technology asset.

Restructuring

Fiscal Years 2021 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

Restructuring $ 1 $ 4 $ — $ (3) NM $ 4 —%

2021 Compared to 2020

During 2020, we incurred $4 million in restructuring costs primarily related to a workforce reduction plan that we adopted as a result of the COVID-19 pandemic.

During 2021, we incurred $1 million of additional restructuring costs related to this plan.

Given the continued ramp-up in the business, we do not currently expect any further workforce reductions.

Fiscal Years 2021 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

Impairment $ — $ 92 $ — $ (92) NM $ 92 —%

2021 Compared to 2020

No asset impairment charges were recorded in 2021.

In 2020, we recorded a non-cash impairment charge of $92 million primarily related to a decrease in the fair value of goodwill and certain trademarks resulting from the impact of the COVID-19 pandemic.

The decrease in depreciation and amortization expense in 2022 relates to a true-up made to accelerate depreciation on a technology asset in 2021 of $12 million.

Losses and Other Expense

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

Losses and other expense, net $ — $ (2) $ (3) $ 2 93% $ 1 11%

($ in millions) 2022 2021 2020 Change

Gains (losses) and other income (expense), net $ 15 $ — $ (2) $ 15 NM

2022 Compared to 2021

No losses and other expense were recorded for 2021 .

We recorded $2 million of net losses and other expense in 2020, including a $5 million loss related to the disposition of a previously consolidated subsidiary, partially offset by $3 million of gains and other income from other insurance proceeds.

During 2022, we recorded a $17 million gain related to the sale of our VRI Americas business, partially offset by $2 million of foreign currency translation.

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

CORPORATE AND OTHER

31 unchanged sentences

TOTAL EXPENSES 22 19 23

Gains and other income, net (4) — —

Losses and other expense, net (3) (4) —

FINANCIAL RESULTS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS (5) 8 24

2 unchanged sentences

FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (6) $ 3 $ 5

Pursuant to a change in control of certain Consolidated Property Owners’ Associations, we recorded a non-cash loss of $1 million in (Losses) gains and other (expense) income, net on our Income Statement for 2021, resulting from the deconsolidation of 13 owners’ associations.

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.

Pursuant to a change in control of certain Consolidated Property Owners’ Associations, we no longer consolidate these owners’ associations and we recorded a non-cash loss of $3 million in Gains (losses) and other income (expense), net on our Income Statement for the year ended December 31, 2022.

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

General and Administrative

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

($ in millions) 2022 2021 2020 Change

General and administrative $ 249 $ 227 $ 154 $ 22 10%

2022 Compared to 2021

General and administrative expenses increased $73 million due to $27 million of higher salary and wages costs as the prior year benefited from savings related to the furlough, reduced work week and workforce reduction programs implemented in response to the impact of the COVID-19 pandemic, $41 million related to higher bonus expense, and $11 million decrease in credits related to incentives under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) for companies who continued paying associates' benefit costs while they were not working as a result of the COVID-19 pandemic.

These increases were partially offset by $4 million of lower costs as the prior year period included an accrual for health and welfare costs for furloughed associates and $2 million of lower net overall spending across the business, including technology, travel, rent, training, and other expenses.

Depreciation and Amortization

Fiscal Years 2021 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

Depreciation and amortization $ 9 $ 12 $ 26 $ (3) (29%) $ (14) (53%)

Restructuring

Fiscal Years 2021 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

Restructuring $ (1) $ 6 $ — $ (7) NM $ 6 NM

2021 Compared to 2020

During 2020, we incurred $6 million of restructuring costs related to a work-force reduction plan that we adopted as a result of the COVID-19 pandemic.

During 2021, we trued up this restructuring accrual based upon changes to the initial plan.

Given the continued ramp-up in the business, we do not currently expect any further workforce reductions.

Fiscal Years 2021 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

Impairment $ 3 $ — $ — $ 3 NM $ — NM

2021 Compared to 2020

During 2021, we recorded a net $3 million non-cash impairment charge related to an equity method investment.

No impairment charges were recorded for 2020 .

During 2022, General and administrative expenses increased $22 million, attributed to transformation initiative spending, including procurement and artificial intelligence capabilities, business travel related expenses and other miscellaneous costs.

Compensation related costs remained relatively flat due to an increase in wages and benefits of $14 million, offset by $12 million and $4 million of lower stock compensation expense and bonus expense, respectively.

Losses and Other Expense

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

Losses and other expense, net $ (52) $ (36) $ (9) $ (16) (43%) $ (27) NM

We recorded $52 million of net losses and other expense, including $55 million related to the early redemption of our 2026 Notes (as defined below) and a portion of our 2025 Notes (as defined below), offset partially by $7 million related to a true-up of a Marriott International indemnification receivable upon settlement (the true-up to the offsetting accrual is included in the (Provision for) benefit from income taxes line).

We recorded $36 million of net losses and other expense, including $32 million for the true-up to an indemnification receivable from Marriott International as a result of a settlement of an indemnified liability with a taxing authority (the true-up to the offsetting accrual is included in the (Provision for) benefit from income taxes line), and $12 million related to foreign currency translation, partially offset by $6 million of other income related to an indemnification from Marriott International for VAT penalties and interest and $2 million of miscellaneous net gains and other income.

($ in millions) 2022 2021 2020 Change

Losses and other expense, net $ (12) $ (52) $ (36) $ 40 76%

In 2022, we recorded $8 million of foreign currency translation losses, $3 million of non-cash losses pursuant to a change in control of certain Consolidated Property Owners’ Associations, $3 million of non-income tax related adjustments to the receivable for the indemnification we expect to receive from Marriott International, partially offset by $2 million of proceeds from corporate owned life insurance.

In 2021, we recorded $55 million of expense related to the early redemption of senior unsecured notes, and $4 million of non-cash losses pursuant to a change in control of certain Consolidated Property Owners’ Associations, partially offset by $7 million related to a true-up of a Marriott International indemnification receivable upon settlement (the true-up to the offsetting accrual is included in the Provision for income taxes line).

Interest Expense

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

($ in millions) 2022 2021 2020 Change

Interest expense $ (118) $ (164) $ (150) $ 46 28%

2022 Compared to 2021

Interest expense increased $14 million, including $24 million of higher interest expense associated with the convertible notes issued in the first quarter of 2021, $12 million of higher interest expense associated with the senior notes issued in the second quarter of 2021, and $8 million of higher expense associated with the senior notes issued in the second quarter of 2020.

These increases were partially offset by a $21 million decline associated with the payoff of senior notes in the third quarter of 2021, $5 million associated with less drawn on the Warehouse Credit Facility and Revolving Corporate Credit Facility, and a $4 million decline associated with the Term Loan due to a partial pay-down in 2021.

The decrease in interest expense is attributable to redemption of higher coupon debt in 2021, which was refinanced at lower rates, and the adoption in 2022 of new accounting guidance related to convertible debt (see Footnote 2 “Summary of Significant Accounting Policies” to our Financial Statements).

The decrease in interest expense was partially offset by increases in borrowings under our revolving credit facilities.

Transaction and Integration Costs

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

($ in millions) 2022 2021 2020 Change

Transaction and integration costs $ (122) $ (108) $ (63) $ (14) (13%)

2022 Compared to 2021

We incurred $108 million of Transaction and integration costs for 2021, including $93 million of ILG Acquisition and integration related costs and $16 million of Welk Acquisition related costs.

All of the $63 million of Transaction and integration costs incurred during 2020 related to the ILG acquisition.

During 2022, Transaction and integration costs included $82 million of ILG integration-related costs, $16 million of other integration costs, $14 million of Welk Acquisition and integration-related costs, and $10 million of other transaction and integration-related costs.

During 2021, Transaction and integration costs included $93 million of ILG integration-related costs, and $16 million of Welk Acquisition and integration-related costs, partially offset by $1 million of other transaction and integration-related costs.

ILG Acquisition and integration costs primarily relate to the integration of the Sheraton, Westin and Marriott vacation ownership platforms and brands, including upgrading and combining information technology systems in order to create integrated servicing capabilities across brands.

These costs, which primarily relate to the implementation of multiple software applications and other enabling technologies, were expensed as incurred and do not include costs to maintain the applications and systems once they are in productive use.

As part of the integration of the ILG business, we have been working towards improving the customer experience via enhancing self-service tools and streamlining our business processes through technology.

While this effort is in process and we have experienced some servicing delays and website outages, as phases of the effort are completed, we expect these changes will provide enhanced owner and member experiences.

In addition, in April 2021, similar integration opportunities were introduced, albeit it on a smaller scale, when we completed the Welk Acquisition.

The ILG and Welk acquisitions presented the opportunity for us to transform our business by integrating the acquired platforms with our existing platforms.

Fiscal Years 2022 vs.

2020 2020 vs.

($ in millions) 2021 2020 2019 Change Change

($ in millions) 2022 2021 2020 Change

(Provision for) benefit from income taxes $ (191) $ (74) $ 84 $ (117) (159%)

2022 Compared to 2021

The change in the (Provision for) benefit from income taxes is predominately attributable to an increase in pre-tax income and an increase in the reserve for unrecognized tax benefits for fiscal year 2021.

The change in the (Provision for) benefit from income taxes is predominately attributable to an increase in pre-tax income for fiscal year 2022.

Liquidity and Capital Resources

Typically, our capital needs are supported by cash on hand ($342 million at the end of 2021), cash generated from operations, our ability to raise capital through securitizations in the ABS market, our ability to issue new, and refinance existing, debt, and, to the extent necessary, funds available under the Warehouse Credit Facility and the Revolving Corporate Credit Facility.

Typically, our capital needs are supported by cash on hand, cash generated from operations, our ability to raise capital through securitizations in the ABS market, our ability to issue new, and refinance existing, debt, and, to the extent necessary, our ability to access funds under the Warehouse Credit Facility and the Revolving Corporate Credit Facility.

We believe these sources of capital will be adequate to meet our short-term and long-term liquidity requirements, finance our long-term growth plans, satisfy debt service requirements, fulfill other cash requirements, and return capital to shareholders.

During 2021, we received proceeds from debt of $1,111 million, and redeemed or repaid $1,339 million of debt, which is discussed further in the “Cash from Financing Activities” section below, and also in Footnote 16 “Debt” to our Financial Statements.

At December 31, 2021, we had $4.7 billion of total gross debt outstanding, which included $1.9 billion of non-recourse debt associated with vacation ownership notes receivable securitizations, $1.1 billion of senior notes, $0.8 billion of convertible notes, $0.8 billion of debt under our Corporate Credit Facility, and $83 million related to finance lease obligations.

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

See Footnote 3 “Acquisitions and Dispositions” to our Financial Statements for additional information regarding the Welk Acquisition.

At the end of 2021, we had $710 million of completed real estate inventory on hand.

In addition, we had $460 million of completed vacation ownership units that have been classified as a component of Property and equipment until the time at which they are legally registered and available for sale as vacation ownership products.

Our vacation ownership product offerings allow us to utilize our real estate inventory efficiently.

The majority of our sales are of points-based products, which permits us to sell vacation ownership products at most of our sales locations, including those where little or no site specific inventory remains available for sale.

Because we no longer need specific resort-based inventory at each sales location, we need to have only a few resorts under development at any given time and can leverage successful sales locations at completed resorts.

This allows us to maintain long-term sales locations and reduces the need to develop and staff on-site sales locations at smaller projects in the future.

We believe our points-based programs enable us to closely align the timing of our real estate inventory acquisitions with the pace of sales of vacation ownership products.

We are selectively pursuing growth opportunities in North America and Asia Pacific by targeting high-quality inventory that allows us to add desirable new destinations to our system with new on-site sales locations through transactions that limit our up-front capital investment and allow us to purchase finished inventory closer to the time it is needed for sale.

These capital efficient vacation ownership deal structures may consist of the development of new inventory, or the conversion of previously built units by third parties, just prior to sale.

Our Exchange & Third-Party Management segment includes exchange networks, membership programs and third-party property management services that were acquired as part of the ILG Acquisition.

These networks, programs and services generate revenue that is generally fee-based and derived from membership, exchange and rental transactions, property and association management, and other related products and services.

This segment is expected to be less capital intensive than our Vacation Ownership segment and is expected to be funded with cash generated from segment operations.

Our material cash requirements from known contractual or other obligations were $6 billion as of December 31, 2021, of which we expect $850 million to be payable within the next twelve months.

These obligations primarily relate to our debt.

Please see “Material Cash Requirements” below for additional information.

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

($ in millions) 2021 2020 2019

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

Operating activities $ 343 $ 299 $ 382

Investing activities (213) (32) 37

Financing activities (317) 23 (331)

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

Net change in cash, cash equivalents, and restricted cash $ (189) $ 291 $ 87

Cash from Operating Activities

We continuously monitor the capital markets to evaluate the effect that changes in market conditions may have on our ability to fund our liquidity needs.

Excluding the impact of the Alignment, our corporate debt, net of cash and equivalents, to Adjusted EBITDA ratio was 2.8 at December 31, 2022, which is within our targeted leverage range of 2.5x to 3.0x.

Excluding the redemption of the 2025 Notes subsequent to the end of 2022, we have no material maturities of corporate debt until 2025.

As of December 31, 2022, our corporate debt, excluding finance leases and including the impact of interest rate hedges, had a weighted average interest rate of 3.7%, and 92% of such corporate debt accrued interest at a fixed rate.

Sources of Liquidity

Cash from Operations

Our primary sources of funds from operations are (1) cash sales and down payments on financed sales, (2) cash from our financing operations, including principal and interest payments received on outstanding vacation ownership notes receivable, (3) cash from fee-based membership, exchange and rental transactions, and (4) net cash generated from our rental and resort management and other services operations.

Outflows include spending for the development of new phases of existing resorts, the acquisition of additional inventory, enhancement of our inventory exchange network of resorts and related technology infrastructure and funding our working capital needs.

Vacation Ownership Notes Receivable Securitizations

We periodically securitize, without recourse, through bankruptcy remote special purpose entities, the majority of the notes receivable originated in connection with the sale of vacation ownership products to institutional investors in the ABS term securitization market.

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

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

In connection with each vacation ownership notes receivable securitization, we may retain a portion of the securities, subordinated tranches, interest-only strips, subordinated interests in accrued interest and fees on the securitized vacation ownership notes receivable or, in some cases, over-collateralization and cash reserve accounts.

Typically, we receive cash at inception of the term securitization transaction for the amount of notes issued less fees and monies held in reserve and we receive cash during the life of the transaction in amounts reflecting the excess spread of interest received on the related vacation ownership notes receivable less the interest payable on the ABS securities, less administrative fees and amounts from related vacation ownership notes receivable that default.

We completed two term securitization transactions in 2022 resulting in net proceeds of $621 million.

Each of the securitized vacation ownership notes receivable transactions contains various triggers relating to the performance of the underlying vacation ownership notes receivable.

If a pool of securitized vacation ownership notes receivable fails to perform within the pool’s parameters (default or delinquency thresholds vary by transaction), transaction provisions effectively redirect the monthly excess spread of interest accruing on the related vacation ownership notes receivable less the interest accruing on the ABS securities and fees 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 2022, and as of December 31, 2022, we had 14 term securitization transactions outstanding, all of which were in compliance with their respective required parameters.

Since 2000, we have issued approximately $8.1 billion of debt securities in securitization transactions in the term ABS market, excluding amounts securitized through warehouse credit facilities or private bank transactions.

On an ongoing basis, we have the ability to use our Warehouse Credit Facility to securitize, on a revolving non-recourse basis, eligible consumer loans derived from certain vacation ownership sales.

Those loans may later be transferred to term securitization transactions in the ABS market, which typically occur at least once per year.

Our Warehouse Credit Facility, as amended during the third quarter of 2022, provides for up to $425 million of aggregate borrowings through July 28, 2024.

As of December 31, 2022, $72 million of gross vacation ownership notes receivable were eligible for securitization.

Revolving Corporate Credit Facility

Our Revolving Corporate Credit Facility provides for up to $750 million of aggregate borrowings for general corporate needs, including working capital, capital expenditures, letters of credit, and acquisitions, and expires on March 31, 2027.

At December 31, 2022, no borrowings were outstanding on our Revolving Corporate Credit Facility and $1 million of le tters of credit were outstanding.

See Footnote 16 “Debt” to our Financial Statements for more information on interest rates pertaining to this facility.

Issuance of Senior Notes and Convertible Debt

Our ability to access the public debt markets through the issuance of senior notes and convertible debt remained strong during the COVID-19 pandemic.

We accessed the public debt markets every year between 2017 and 2022, including a $500 million senior note issuance during the height of the COVID-19 pandemic in May 2020.

We minimize our working capital needs through cash management, strict credit-granting policies, and disciplined collection efforts.

Our working capital needs fluctuate throughout the year given the timing of annual maintenance fees on unsold inventory we pay to owners’ associations and certain annual compensation-related outflows.

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

In 2021, we generated $343 million of cash flows from operating activities compared to $299 million in 2020.

Excluding the impact of changes in net income and adjustments for non-cash items, the change in cash flows from operations increased as a result of higher operational expense accruals, higher sales and rentals deposits due to the continued ramp-up of the business, and higher collections of vacation ownership notes receivable, partially offset by higher inventory spending and severance and benefit payments.

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

Inventory Spending (In Excess of) Less Than Cost of Sales

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

Cash and cash equivalents on hand at December 31, 2022 totaled $524 million, an increase of $182 million from December 31, 2021, primarily reflecting $653 million associated with net cash and cash equivalents provided by operating activities, $331 million of proceeds from the issuance of convertible notes in excess of repayments (net of the temporary refinancing of the 2022 Convertible Notes on our Revolving Corporate Credit Facility), $86 million of new securitized debt borrowings in excess of repayments, investing cash inflow related to the disposition of subsidiaries of $94 million, $43 million of proceeds from the issuance of warrants, and $7 million other net proceeds, partially offset by the repurchase of common stock of $701 million, $107 million for the purchase of convertible note hedges, payment of dividends of $99 million, capital expenditures for property and equipment (excluding inventory) of $65 million, $19 million of debt issuance costs and payments on finance leases, $23 million for payment of withholding taxes on vesting of restricted stock units and $18 million in purchases of company owned life insurance.

Our cash flow from operations fluctuates during the year due to the timing of certain receipts and contractual and compensation-related payments.

Significant changes in cash flow can result from the timing of our collection of maintenance fees, club dues, and other customer payments, which typically occur in either the fourth quarter or the first quarter of each year.

Cash outflows related to our payment of maintenance fees associated with unsold inventory occurs in the fourth quarter for our points products, and in the first quarter for our weeks-based products.

In addition, significant compensation-related cash outflows occur in the first quarter of each year associated with payment of annual bonuses.

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

Inventory Spending Less Than (In Excess of) Cost of Sales

($ in millions) 2022 2021 2020

2 unchanged sentences

Inventory costs 242 212 117

Inventory spending (in excess of) less than cost of sales $ (39) $ (42) $ 44

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

Given the significant level of completed real estate inventory on hand, as well as the capital efficiency resulting from our points programs and capital efficient transactions, our spending for real estate inventory was below the amount of real estate inventory costs in 2019.

In 2020 and 2021, however, while our spending for real estate inventory remained lower than pre-pandemic levels, given the slowdown in sales pace as a result of the COVID-19 pandemic, inventory spending exceeded inventory costs for both years due to commitments under capital efficient inventory acquisition arrangements that were entered into prior to the onset of the COVID-19 pandemic.

See Footnote 3 “Acquisitions and Dispositions” to our Financial Statements for additional information regarding the acquisitions of inventory .

Through our existing vacation ownership interest repurchase program, we proactively buy back previously sold vacation ownership interests at lower costs than would be required to develop new inventory.

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

Inventory spending less than (in excess of) cost of sales $ 92 $ (39) $ (42)

While we have significant excess inventory on hand, we will continue to selectively pursue growth opportunities by targeting high-quality inventory that allows us to add desirable new destinations to our system with new on-site sales locations through transactions that limit our up-front capital investment and allow us to purchase finished inventory closer to the time it is needed for sale.

These capital efficient vacation ownership transaction structures may consist of the development of new inventory, or the conversion of previously built units, by third parties, that we may purchase just prior to the time we need the

inventory to support future sales.

In addition, we may develop inventory in key markets where opportunities generate acceptable risk adjusted returns.

Through our existing VOI repurchase program, we proactively acquire previously sold VOIs from owners’ associations and individual owners at lower costs than would be required to develop new inventory.

Among other reasons, by repurchasing inventory, we expect to be able to help stabilize the future cost of our vacation ownership products.

Our spending for real estate inventory in 2022 was lower than cost of sales and was primarily related to our VOI repurchase program.

We acquired a higher amount of previously sold VOIs in 2022 due to the reinstatement of our VOI repurchase programs that were suspended as part of the cash preservation measures implemented in response to the COVID-19 pandemic.

We expect inventory spending to be less than cost of sales for 2023.

Vacation Ownership Notes Receivable Collections (Less Than) In Excess of Originations

4 unchanged sentences

Vacation ownership notes receivable collections (less than) in excess of originations $ (338) $ (64) $ 243

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

Vacation ownership notes receivable collections increased in 2021 compared to 2020 due to payment deferral programs offered in 2020 to assist owners experiencing financial hardship as a result of the the COVID-19 pandemic.

Vacation ownership notes receivable originations increased due to higher sales and a moderate increase in financing propensity to 53% in 2021 from 51% in 2020 .

Vacation ownership notes receivable collections increased in 2020 compared to 2019 due to a higher portfolio of outstanding vacation ownership notes receivable at the beginning of 2020.

Vacation ownership notes receivable originations in 2020 decreased due to lower sales due to the COVID-19 pandemic and a lower financing propensity.

Financing propensity declined to 51% in 2020 from 63% in 2019 as a result of the various sales programs that we offered to incentivize cash purchases over financed purchases during 2020, in response to the COVID-19 pandemic.

Cash from Investing Activities

($ in millions) 2021 2020 2019

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

Proceeds from collection of notes receivable — — 38

Capital expenditures for property and equipment (excluding inventory) (47) (41) (46)

Purchase of company owned life insurance (14) (6) (6)

Dispositions, net 3 15 51

Other, net 2 — —

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

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

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

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

Proceeds from Collection of Notes Receivable

During 2019, we collected $23 million of notes receivable related to the disposition of our interest in VRI Europe during the fourth quarter of 2018.

In addition, we also collected a $15 million note receivable acquired in the ILG Acquisition.

Capital Expenditures for Property and Equipment

Capital expenditures for property and equipment relate to spending for technology development, buildings and equipment used at sales locations and ancillary offerings, such as food and beverage offerings, at locations where such offerings are provided.

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

Purchase of Company Owned Life Insurance

To support our ability to meet a portion of our obligations under the Marriott Vacations Worldwide Corporation Deferred Compensation Plan (the “Deferred Compensation Plan”), we acquired company owned insurance policies on the lives of certain participants in the Deferred Compensation Plan, the proceeds of which are intended to be aligned with the investment alternatives elected by plan participants as discussed in Footnote 2 “Summary of Significant Accounting Policies” to our Financial Statements.

Dispositions, net

Dispositions of $3 million during 2021 included dispositions of excess land parcels in the Bahamas and St.

Thomas, USVI.

Dispositions of $15 million during 2020 related to the disposition of excess land parcels in Orlando, Florida and

Steamboat Springs, Colorado as part of our strategic decision to reduce holdings in markets where we have excess supply.

Dispositions of $51 million during 2019 related to our dispositions of excess land parcels in Cancun, Mexico and Avon, Colorado as part of our strategic decision to reduce holdings in markets where we have excess supply.

See additional information on these dispositions in Footnote 3 “Acquisitions and Dispositions” to our Financial Statements for additional information.

Cash from Financing Activities

($ in millions) 2021 2020 2019

Borrowings from securitization transactions $ 957 $ 690 $ 1,026

Repayment of debt related to securitization transactions (868) (960) (880)

Proceeds from debt 1,111 1,166 935

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

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

Purchase of convertible note hedges (100) — —

Proceeds from issuance of warrants 70 — —

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

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

Payment of dividends (23) (45) (81)

Payment of withholding taxes on vesting of restricted stock units (20) (16) (15)

Other, net — — 1

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

Borrowings from / Repayment of Debt Related to Securitization Transactions

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

We account for our securitizations of vacation ownership notes receivable as secured borrowings and therefore do not recognize a gain or loss as a result of the transaction.

The results of operations for the securitization entities are consolidated within our results of operations as these entities are variable interest entities for which we are the primary beneficiary.

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

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

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

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

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

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

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

Of the $425 million in proceeds from the transaction, approximately $107 million was used to repay all outstanding amounts previously drawn under our Warehouse Credit Facility, approximately $8 million was used to pay transaction expenses and fund required reserves, and the remainder is being used for general corporate purposes.

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

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

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

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

As of December 31, 2021, $113 million of gross vacation ownership notes receivable were eligible for securitization.

Proceeds from / Repayments of Debt

Borrowings from / Repayment of Corporate Credit Facility

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

Additionally, during 2021, we borrowed $50 million and repaid $50 million under our Revolving Corporate Credit Facility, which is also part of our Corporate Credit Facility, and had no amounts outstanding under the Revolving Corporate Credit Facility as of December 31, 2021.

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

During 2020, we repaid $696 million under the Revolving Corporate Credit Facility and no amounts were outstanding as of December 31, 2020.

Additionally, during 2020, we repaid $9 million of the amount outstanding under the Term Loan.

During 2019, we borrowed $585 million under our Revolving Corporate Credit Facility to facilitate the funding of our short-term working capital needs, of which $554 million was repaid during 2019.

Also during 2019, we repaid $7 million of the amount outstanding under the Term Loan.

See Footnote 16 “Debt” to our Financial Statements for additional information regarding our Corporate Credit Facility.

Proceeds from / Repayments of Senior Notes

The following activity related to our senior notes occurred during 2021, as further discussed in Footnote 16 “Debt” to our Financial Statements.

• We issued $500 million in aggregate principal amount of 4.500% Senior Unsecured Notes due 2029 (the “2029 Notes”) and used the proceeds to redeem a portion of the 2026 Notes and pay transaction expenses and fees in connection with the transaction.

• We redeemed, prior to maturity, all of the $750 million aggregate principal amount of 6.500% Senior Unsecured Notes due 2026 issued in the third quarter of 2018 (the “2026 Notes”) pursuant to the terms of the indenture governing the 2026 Notes.

In connection with the redemption of the 2026 Notes, we incurred charges of $36 million, including a redemption premium and the write-off of unamortized debt issuance costs, which was recorded in (Losses) gains and other (expense) income, net line on our Income Statement for the year ended December 31, 2021.

• We redeemed, prior to maturity, $250 million of the $500 million aggregate principal amount of 6.125% Senior Secured Notes due 2025 issued in the second quarter of 2020 (the “2025 Notes”) pursuant to the terms of the indenture governing the 2025 Notes.

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

During the second quarter of 2020, we issued $500 million in aggregate principal amount of the 2025 Notes.

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

During 2019, we issued $350 million in aggregate principal amount of 4.750% Senior Unsecured Notes due 2028 (“the 2028 Notes”).

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

Repayments of Non-interest Bearing Note Payable

During 2019, we paid the last installment of $31 million on a non-interest bearing note payable related to the acquisition of 112 completed vacation ownership units located on the Big Island of Hawaii in 2017.

Debt Issuance Costs

In 2021, we incurred $22 million of debt issuance costs, which included $11 million associated with vacation ownership notes receivable securitizations, $7 million associated with the issuance of senior notes, $2 million associated with an amendment of the Warehouse Credit Facility, $1 million associated with the issuance of convertible senior notes, and $1

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

In 2020, we incurred $14 million of debt issuance costs, which included $7 million associated with the issuance of senior notes, $5 million associated with a vacation ownership notes receivable securitization, $1 million associated with an amendment and extension of the Warehouse Credit Facility, and $1 million related to the Waiver.

In 2019, we incurred $20 million of debt issuance costs, which included $12 million associated with vacation ownership notes receivable securitizations, $5 million associated with the issuance of senior notes, $2 million associated with an amendment and extension of the Warehouse Credit Facility, and $1 million related to the Waiver.

The increase in sales of vacation ownership products subsequent to the COVID-19 pandemic combined with an increase in financing propensity (54% in 2022 compared to 53% in 2021) outpaced collections of vacation ownership notes receivable.

Repurchase of Common Stock

4 unchanged sentences

As of December 31, 2022 22,773,218 $ 2,119 $ 93.06

See Footnote 17 “Shareholders' Equity” to our Financial Statements for further information related to our share repurchase program, including the additional share repurchase authorization approved by our Board of Directors subsequent to the end of 2021.

See Footnote 17 “Shareholders' Equity” to our Financial Statements for further information related to our current share repurchase program, including the additional share repurchase authorization and extension approved by our Board of Directors during 2022.

Payment of Dividends to Common Shareholders

We distributed cash dividends to holders of common stock for the year ended December 31, 2021 as follows:

We distributed cash dividends to holders of common stock during the year ended December 31, 2022 as follows:

Declaration Date Shareholder Record Date Distribution Date Dividend per Share

December 9, 2021 December 23, 2021 January 6, 2022 $0.54

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

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

September 8, 2022 September 22, 2022 October 6, 2022 $0.62

On December 1, 2022, our Board of Directors declared a quarterly dividend of $0.72 per share that was paid subsequent to the end of 2022, on January 5, 2023, to shareholders of record as of December 22, 2022.

On February 18, 2022 subsequent to the end of 2021, our Board of Directors declared a quarterly dividend of $0.62 per share to be paid on March 17, 2022 to shareholders of record as of March 3, 2022.

We currently expect to pay quarterly dividends in the future, but any future dividend payments will be subject to Board approval, which will depend on our financial condition, results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice and other business considerations that our Board of Directors considers relevant.

In addition, our Corporate Credit Facility and the indentures governing our senior notes contain restrictions on our ability to pay dividends, and the terms of agreements governing debt that we may incur in the future may also limit or prohibit the payment of dividends.

Subsequent to the end of 2022, on February 16, 2023, our Board of Directors declared a quarterly dividend of $0.72 per share to be paid on March 16, 2023 to shareholders of record as of March 2, 2023.

We currently expect to pay quarterly dividends in the future, but any future dividend payments will be subject to Board of Directors approval, which will depend on our financial condition, results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice, and other business considerations that our Board of Directors considers relevant.

also limit or prohibit the payment of dividends.

The payment of certain cash dividends may also result in an adjustment to the conversion rate of our convertible notes in a manner adverse to us.

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Payments Due by Period

($ in millions) Total Less Than

1 Year 1 - 3 Years 3 - 5 Years More Than

($ in millions) Total Less Than 1 Year 1 - 3 Years 3 - 5 Years More Than 5 Years

$ 3,502 $ 365 $ 991 $ 1,262 $ 884

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(4) Includes interest.

(5) Primarily relates to future guaranteed purchases of rental inventory, operational support services, marketing related benefits, membership fulfillment benefits and other commitments.

(5) Primarily relates to future guaranteed purchases of rental inventory of $7 million, and our 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, of $10 million.

In the normal course of our resort management business, we enter into purchase commitments on behalf of owners’ associations to manage the daily operating needs of our resorts.

Since we are reimbursed for these commitments from the cash flows of the resorts, these obligations have minimal impact on our net income and cash flow.

These purchase commitments are excluded from the table above.

Leases That Have Not Yet Commenced

During the first quarter of 2020, we entered into a finance lease arrangement, that was amended in 2021, for a new corporate office building in Orlando, Florida.

The new Orlando corporate office building is currently expected to be completed in 2023, at which time the lease term will commence and a right-of-use asset and corresponding liability will be recorded on our balance sheet.

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

See Footnote 14 “Leases” to our Financial Statements for additional information on this lease, including additional arrangements made as a result of the COVID-19 pandemic.

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

The new global headquarters office building is expected to be substantially complete in the first half of 2023, at which time the lease term will commence and a right-of-use asset and corresponding lease liability will be recorded on our balance sheet.

Total payments for the initial lease term (approximately 16 years) plus, at our option, two five-year renewal terms, is $249 million.

Also see Footnote 14 “Leases” to our Financial Statements.

Supplemental Guarantor Information

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

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

The following tables present consolidating financial information as of December 31, 2022, and for the fiscal year ended December 31, 2022, for MVWC and MORI on a stand-alone basis (collectively, the “Issuers”), the Senior Notes Guarantors, the combined non-guarantor subsidiaries of MVWC, and MVW on a consolidated basis.

Condensed Consolidating Balance Sheet

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Restricted cash — 25 145 160 — 330

Accounts receivable, net 14 49 172 119 (75) 279

Accounts and contracts receivable, net 10 120 116 73 (27) 292

Vacation ownership notes receivable, net — 132 195 1,871 — 2,198

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See Footnote 2 “Summary of Significant Accounting Policies” to our Financial Statements for further information related to our critical accounting policies and estimates, which are as follows:

• Revenue recognition , including how we recognize revenue under Accounting Standards Codification (“ASC”) Topic 606, “ Revenue from Contracts with Customers ” (“ASC 606”) for the sale of vacation ownership products, including our estimates of variable consideration.

Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on the customer class and the results of our static pool analyses, which rely on historical payment data by customer class.

• Revenue recognition , including how we recognize revenue under ASC Topic 606 “ Revenue from Contracts with Customers ” for the sale of vacation ownership products, including our estimates of variable consideration.

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

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

See Footnote 6 “Vacation Ownership Notes Receivable” to our Financial Statements for further information on our assessments of our vacation ownership notes receivable reserve, including factors attributable to the COVID-19 pandemic.

See Footnote 6 “Vacation Ownership Notes Receivable” to our Financial Statements for further information on our assessments of our originated vacation ownership notes receivable reserve.

• Purchase price allocations of business combinations , which is also discussed in Footnote 3 “Acquisitions and Dispositions” to our Financial Statements.

Assets acquired and liabilities assumed as part of a business acquisition are generally recorded at their fair value at the date of acquisition.

The excess of purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill.

Determining fair value of identifiable assets, particularly intangibles, requires management to make estimates, which are based on all available information and in some cases assumptions with respect to the timing and amount of future revenues and expenses associated with an asset.

Determining the fair value of the assets acquired and liabilities assumed as part of a business acquisition requires management to make significant judgements and estimates.

On April 1, 2021, we acquired Welk (see Footnote 3 “Acquisitions and Dispositions” to our Financial Statements for further information).

• Inventories and cost of vacation ownership products, which requires estimation of future revenues, including incremental revenues from future price increases or from the sale of reacquired inventory resulting from defaulted vacation ownership notes receivable, and development costs to apply a relative sales value method specific to the vacation ownership industry and how we evaluate the fair value of our vacation ownership inventory.

For each vacation ownership product, we expense real estate inventory costs in the same proportion as we recognize the revenue.

Consistent with the applicable accounting guidance, to the extent there is a change in the estimated sales revenues or inventory costs for the project in a period, a non-cash adjustment is recorded on our income statements to true-up costs in that period to those that would have been recorded historically if the revised estimates had been used.

These true-ups, which we refer to as product cost true-up activity, can have a positive or negative impact on our income statements.

During 2021, we recorded a change in estimate of $5 million as an increase to development profit.

• Valuation of goodwill and intangible assets, including how we evaluate the fair value of intangible assets and reporting units, and when we record an impairment loss on intangible assets or goodwill.

During the 2021 fourth quarter, we conducted our annual goodwill impairment test and no impairment charges were recorded.

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

During 2021, we evaluated our intangibles for impairment and did not record any impairment charges.

• Inventories and cost of vacation ownership products, which requires estimation of future revenues and product costs to apply a relative sales value method specific to the vacation ownership industry and how we evaluate the fair value of our vacation ownership inventory.

• Valuation of goodwill and other intangible assets, including how we determine the fair value of goodwill and our other intangible assets and reporting units, and how we determine when an impairment loss should be recorded.

During the fourth quarter of 2022, we conducted our annual goodwill impairment test and did not record any impairment charges.

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

During 2022, we evaluated our other intangible assets for impairment and did not record any impairment charges.

• Accounting for acquired vacation ownership notes receivable , where estimates of future cash flows are based largely on the customer class and the results of our static pool analysis.

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• Loss contingencies , including information on how we account for loss contingencies.

Accruals for contingent liabilities are recorded when it is probable that a liability has been incurred, or an asset impaired, and the amount

of the loss can be reasonably estimated.

Accruals for contingent liabilities are recorded when it is probable that a liability has been incurred, or an asset impaired, and the amount of the loss can be reasonably estimated.

Liabilities accrued for legal matters require judgments regarding projected outcomes and range of loss based on historical litigation and settlement experience, recommendations of legal counsel and, if applicable, other experts.

We utilize in-house legal experts to develop estimates of our legal obligations.

These estimates are supplemented, as needed, by third-party specialists to analyze our most complex contingent liabilities.

• Income taxes , including information on how we determine our current year amounts payable or refundable, as well as our estimate of deferred tax assets and liabilities.

We record our global tax provision based on the respective tax rules and regulations for the jurisdictions in which we operate.

Where we believe that a tax position is supportable for income tax purposes, the item is included in our income tax returns.

The accounting guidance related to uncertain tax positions requires an evaluation process for all tax positions taken that involves a review of probability for sustaining a tax position.

Where treatment of a position is uncertain, liabilities are recorded based upon our evaluation of the “more likely than not” outcome considering technical merits of the position based on specific tax regulations and facts of each matter.

Changes to recorded liabilities are only made when an identifiable event occurs that changes the likely outcome, such as settlement with the relevant tax authority, the expiration of statutes of limitation for the subject tax year, change in tax laws, or recent court cases that are relevant to the matter.

Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.

Significant judgment is required in evaluating the need for and magnitude of appropriate valuation allowances against deferred tax assets.

The realization of these assets is dependent on generating future taxable income, as well as successful implementation of various tax planning strategies.

We provide for income taxes on a quarterly basis based on an estimated annual tax rate.

In determining this rate, we make estimates about taxable income for each of our largest locations worldwide, as well as the tax rate that will be in effect for each location.

To the extent these estimates change during the year, or actual results differ from these estimates, our estimated annual tax rate may change between quarterly periods and may differ from the actual effective tax rate for the year.

While we believe that these judgments and estimates are appropriate and reasonable under the circumstances, actual resolution of these matters may differ from recorded estimated amounts.

• Income taxes , including the accounting related to uncertain tax positions and the determination of valuation allowances on our deferred tax assets.

The recognition and measurement of uncertain tax positions involves consideration of the amounts and probabilities of various outcomes that could be realized upon ultimate resolution.

Tax valuation allowances are established to reduce deferred tax assets, such as tax loss carryforwards, to net realizable value.

Factors considered in estimating net realizable value include historical results by tax jurisdiction, carryforward periods, income tax strategies and forecasted taxable income.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis