What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-27 compared with 2022-03-01 · 567 added, 556 removed, 1441 unchanged (44% of the section changed)

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Notes to Consolidated Financial Statements

Basis of Presentation

Summary of Significant Accounting Policies

Acquisitions and Dispositions

Vacation Ownership Notes Receivable

Financial Instruments

Earnings per Share

Property and Equipment

Contingencies and Commitments

Securitized Debt

Shareholders' Equity

Share-based Compensation

Variable Interest Entities

Business Segments

MANAGEMENT’S REPORT ON

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generally accepted accounting principles.

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

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

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

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

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

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In our opinion, Marriott Vacations Worldwide Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

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

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

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

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

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the accompanying consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 27, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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Orlando, Florida

March 1, 2022

February 27, 2023

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2022 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 27, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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Auditing the Company’s application of the relative sales value method was challenging due to the nature and extent of audit effort required as the calculations are complex and contain a significant volume of data.

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

Additionally, the determination of the cost of vacation ownership products was sensitive to the selection and application of assumptions used in estimating future revenues from sale of vacation ownership products which are affected by expectations about future market and economic conditions.

Cost of Vacation Ownership Products

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

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

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

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

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

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

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

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

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

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

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

Accounting for the Acquisition of Welk Hospitality Group, Inc.

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

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

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

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

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

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

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

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

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

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

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

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

/s/ Ernst & Young LLP

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Orlando, Florida

March 1, 2022

February 27, 2023

MARRIOTT VACATIONS WORLDWIDE CORPORATION

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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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Foreign currency translation adjustments 10 11 6

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

Derivative instrument adjustment, net of tax 31 21 ( 18 )

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

Other comprehensive income attributable to noncontrolling interests — — —

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

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Restricted cash (including $ 85 and $ 139 from VIEs, respectively)

Accounts receivable, net (including $ 12 and $ 11 from VIEs, respectively)

Accounts and contracts receivable, net (including $ 13 and $ 12 from VIEs, respectively)

Vacation ownership notes receivable, net (including $ 1,792 and $ 1,662 from VIEs, respectively)

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Additional paid-in capital 3,941 4,072

Accumulated other comprehensive loss ( 16 ) ( 48 )

Accumulated other comprehensive income (loss) 15 ( 16 )

Retained earnings 593 275

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Impairment charges — 3 100

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

Gains and other income, net ( 48 ) — ( 4 )

Deferred income taxes 87 34 ( 38 )

Net change in assets and liabilities, net of the effects of acquisition:

Accounts receivable — 21 69

Accounts and contracts receivable ( 45 ) — 21

Vacation ownership notes receivable originations ( 980 ) ( 750 ) ( 377 )

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

Proceeds from collection of notes receivable — — 38

Proceeds from disposition of subsidiaries, net of cash and restricted cash transferred 94 — —

Capital expenditures for property and equipment (excluding inventory) ( 65 ) ( 47 ) ( 41 )

Issuance of note receivable to VIE ( 47 ) — —

Proceeds from collection of note receivable from VIE 47 — —

Purchase of company owned life insurance ( 18 ) ( 14 ) ( 6 )

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Other, net 2 2 —

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

Net cash, cash equivalents, and restricted cash provided by (used in) investing activities 16 ( 213 ) ( 32 )

See Notes to Consolidated Financial Statements

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Payment of debt issuance costs ( 15 ) ( 22 ) ( 14 )

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

Finance lease payments ( 4 ) ( 5 ) ( 11 )

Repurchase of common stock ( 701 ) ( 78 ) ( 82 )

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SUPPLEMENTAL DISCLOSURES

Dividends payable $ 23 $ — $ 23

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

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

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Non-cash issuance of treasury stock for employee stock purchase plan 5 3 2

SUPPLEMENTAL DISCLOSURES

Dividends payable 27 23 —

Interest paid, net of amounts capitalized 149 184 176

Income taxes paid, net of refunds ( 13 ) ( 32 ) 53

Income taxes paid, net of refunds (income tax refunds, net of income taxes paid) 57 ( 13 ) ( 32 )

See Notes to Consolidated Financial Statements

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(In millions)

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

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

75.0 BALANCE AT YEAR-END 2019 $ 1 $ ( 1,253 ) $ 3,738 $ ( 36 ) $ 569 $ 3,019 $ 12 $ 3,031

— Impact of adoption of ASU 2016-02

— — — — ( 8 ) ( 8 ) — ( 8 )

57.6 OPENING BALANCE 2019 $ 1 $ ( 790 ) $ 3,721 $ 6 $ 515 $ 3,453 $ 5 $ 3,458

— Net income — — — — 138 138 4 142

— ILG Acquisition purchase accounting adjustment — — — — — — 3 3

— Net (loss) income — — — — ( 275 ) ( 275 ) 19 ( 256 )

— Foreign currency translation adjustments — — — 6 — 6 — 6

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— Dividends — — — — ( 22 ) ( 22 ) — ( 22 )

17.1 Tax restructuring transaction — — — — — — — —

— Employee stock plan issuance — 1 1 — — 2 — 2

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

— Net (loss) income — — — — ( 275 ) ( 275 ) 19 ( 256 )

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

— Net income — — — — 49 49 4 53

— Welk Acquisition — 55 193 — — 248 — 248

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

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

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

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

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

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

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

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

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

See Notes to Consolidated Financial Statements

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (CONTINUED)

Fiscal Years 2022, 2021 and 2020

(In millions)

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

— Impact of adoption of ASU 2020-06

— — ( 111 ) — 31 ( 80 ) — ( 80 )

75.5 OPENING BALANCE 2022 1 ( 1,356 ) 3,961 ( 16 ) 306 2,896 10 2,906

— Net income — — — — 391 391 — 391

— Welk Acquisition — 55 193 — — 248 — 248

— Foreign currency translation adjustments — — — 10 — 10 — 10

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

— Derivative instrument adjustment — — — 31 — 31 — 31

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

— Tax effect on equity, convertible notes — — 25 — — 25 — 25

0.2 Amounts related to share-based compensation — 2 13 — — 15 — 15

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

— Purchase of convertible note hedges — — ( 107 ) — — ( 107 ) — ( 107 )

— Issuance of warrants — — 43 — — 43 — 43

— Expiration of warrants — — ( 3 ) — — ( 3 ) — ( 3 )

— Repurchase of common stock — ( 701 ) — — — ( 701 ) — ( 701 )

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The Consolidated Financial Statements present the results of operations, financial position and cash flows of Marriott Vacations Worldwide Corporation (referred to in this report as (i) “we,” “us,” “Marriott Vacations Worldwide,” “MVW,” or “the Company,” which includes our consolidated subsidiaries except where the context of the reference is to a single corporate entity, or (ii) “MVWC,” which shall refer only to Marriott Vacations Worldwide Corporation, without its consolidated subsidiaries).

In order to make this report easier to read, we refer throughout to (i) our Consolidated Financial Statements as our “Financial Statements,” (ii) our Consolidated Statements of Income as our “Income Statements,” (iii) our Consolidated Balance Sheets as our “Balance Sheets,” and (iv) our Consolidated Statements of Cash Flows as our “Cash Flows.” References throughout to numbered “Footnotes” refer to the numbered Notes in these Notes to Consolidated Financial Statements, unless otherwise noted.

In order to make this report easier to read, we refer throughout to (i) our Consolidated Financial Statements as our “Financial Statements,” (ii) our Consolidated Statements of Income as our “Income Statements,” (iii) our Consolidated Balance Sheets as our “Balance Sheets,” and (iv) our Consolidated Statements of Cash Flows as our “Cash Flows.” In addition, references throughout to numbered “Footnotes” refer to the numbered Notes in these Notes to Consolidated Financial Statements, unless otherwise noted.

We also refer to Marriott International, Inc.

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

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

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

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

Pursuant to a change in control of certain consolidated owners’ associations during 2022, we no longer consolidate these owners’ associations.

We recorded non-cash losses of $ 3 million in Gains (losses) and other income (expense), net on our Income Statement for the year ended December 31, 2022, and deconsolidated $ 110 million of assets, inclusive of $ 48 million of restricted cash, and $ 99 million of liabilities, resulting in a decrease in Noncontrolling interests of $ 8 million during 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 vacation ownership interests (“VOIs”).

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

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

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

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

The uncertainties created by the COVID-19 pandemic (as defined below) including the uncertainty of the success of ongoing efforts to mitigate the effects of the COVID-19 pandemic and inflationary pressures in the general macroeconomic environment, have made it more challenging to make these estimates.

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

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

COVID-19 Pandemic and Restructuring Update

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

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

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

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

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

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

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

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

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

Acquisition of Welk

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

Acquisition of ILG

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

Acquisition of ILG and Disposition of VRI America

On September 1, 2018 we completed the acquisition of ILG, LLC, formerly known as ILG, Inc.

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

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

We refer to our business associated with brands that existed prior to the ILG Acquisition as “Legacy-MVW” and to ILG’s business and brands that we acquired as “Legacy-ILG.” The businesses acquired from ILG that we currently operate as part of our Vacation Ownership business include Vistana Signature Experiences, which includes vacation ownership products branded as Sheraton or Westin,

and Hyatt Vacation Ownership.

The businesses acquired from ILG that we currently operate as part of our Exchange & Third-Party Management business include Interval International and Aqua-Aston Hospitality.

As part of the ILG Acquisition, we also acquired the Vacation Resorts International (“VRI”) and Trading Places International (“TPI”) businesses (together, the “VRI Americas” business).

Our Financial Statements reflect the disposition of the VRI Americas business on April 29, 2022.

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

COVID-19 Pandemic

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

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

economies and markets, and also had an unprecedented impact on the travel and hospitality industries, as well as our business and results of operations.

Although COVID-19’s negative impact on our business significantly decreased during 2022, the ongoing impact is uncertain and our financial results may not be indicative of long-term future performance.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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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 as described in “ Loan Loss Reserves ” below.

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

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

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

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

Revenues were reduced during 2022 by $ 29 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” for information on increases to our vacation ownership notes receivable reserve attributable to the COVID-19 pandemic.

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

We use the origination of vacation ownership notes receivable by Combined Marriott and the FICO scores of the customer as the primary credit quality indicators, as historical performance indicates that there is a relationship between the default behavior of borrowers and the brand associated with the VOI they have acquired.

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

In addition, we account for cash incentives provided to customers as a reduction of the transaction price.

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

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

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

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

Based upon the different terms of the contracts with the customer and business practices, for the contracts executed in the period prior to the third quarter of 2022, we determined that we transfer control of vacation ownership products at different times for each brand.

Prior to the third quarter of 2022, we recognized revenue on the sale of Marriott-branded vacation ownership products at closing.

We have historically recognized revenue on the sale of Sheraton-,Westin- and Hyatt-branded vacation ownership products upon expiration of the rescission period.

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

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

At the time at which we recognize revenue for Marriott-branded VOI contracts, we temporarily record a contract receivable for both cash contracts and financed contracts, until the time at which we collect the cash or originate a vacation ownership note receivable, which occurs at closing.

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

We have not changed our Hyatt or Legacy-Welk contract terms or business practices regarding how control of the VOI is transferred to the customer.

As such, we recognize revenue on the sale of Hyatt vacation ownership products at expiration of rescission and on Legacy-Welk vacation ownership products at closing.

Revenue for non-cash incentives, such as plus points, is recorded as Deferred revenue on our Balance Sheets at closing and is recognized as rental revenue upon transfer of control to the customer, which typically occurs upon delivery of the incentive, or at the point in time when the incentive is redeemed.

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

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

We record the difference between the contract receivable or vacation ownership note receivable and the variable consideration included in the transaction price for the sale of the related vacation ownership product as a reserve on our contracts receivable or vacation ownership notes receivable, as applicable.

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

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

Any potentially dilutive equity-based compensation awards are excluded from the calculation for periods when there is a net loss attributable to common shareholders to avoid anti-dilutive effects.

Any potentially dilutive shares are excluded from the calculation for periods when there is a net loss attributable to common shareholders to avoid anti-dilutive effects.

Business Combinations

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The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to the future cash flows of the acquired business.

An intangible asset with a finite useful life shall be amortized;

an intangible asset with an indefinite useful life shall not be amortized.

An intangible asset with a finite

useful life is amortized;

an intangible asset with an indefinite useful life is not amortized.

We base the estimate of the useful life of an intangible asset on an analysis of all pertinent factors, in particular, all of the following factors with no one factor being more presumptive than the other:

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• The level of maintenance expenditures required to obtain the expected future cash flows from the asset.

If no legal, regulatory, contractual, competitive, economic, or other factors limit the useful life of an intangible asset to the reporting entity, the useful life of the asset shall be considered to be indefinite.

If no legal, regulatory, contractual, competitive, economic, or other factors limit the useful life of an intangible asset to the reporting entity, the useful life of the asset is considered to be indefinite.

The term indefinite does not mean the same as infinite or indeterminate.

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Fair Value Measurements

We have several financial instruments that we must measure at fair value on a recurring basis.

We have several financial instruments that we are required to disclose at fair value on a recurring basis.

See Footnote 7 “Financial Instruments” for further information.

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Accounts Receivable

Accounts receivable are stated at amounts due from customers, principally resort developers, members and managed properties, net of a reserve for credit losses.

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

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

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

Loan Loss Reserves

Acquired Vacation Ownership Notes Receivable Reserve for Credit Losses

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At acquisition, we recorded these vacation ownership notes receivable at fair value.

Upon adoption of ASU 2016-13 (as defined below) on January 1, 2020, we account for these acquired vacation ownership notes receivable using the purchased credit deteriorated assets provision of the current expected credit loss model, whereby we established a reserve for credit losses and a corresponding increase in the book value of the acquired vacation ownership notes receivable, resulting in no impact to the recorded balance.

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

(“ASU 2016-13”) on January 1, 2020, we account for these acquired vacation ownership notes receivable using the purchased credit deteriorated assets provision of the current expected credit loss model, whereby we established a reserve for credit losses and a corresponding increase in the book value of the acquired vacation ownership notes receivable, resulting in no impact to the recorded balance.

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.

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

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

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

For acquired vacation ownership note receivables, the estimated collateral value is transferred from vacation ownership notes receivable to inventory upon foreclosure or revocation of the related vacation ownership note receivable.

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

Originated Vacation Ownership Notes Receivable Reserve

Contracts Receivable and Originated Vacation Ownership Notes Receivable Reserve

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

See “Financing Revenues” above for further information.

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We account for vacation ownership inventory and cost of vacation ownership products in accordance with the authoritative guidance for accounting for real estate time-sharing transactions, which defines a specific application of the relative sales value method for reducing vacation ownership inventory and recording cost of sales as described in our policy for revenue recognition for vacation ownership products.

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

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

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

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

Product cost true-up activity relating to vacation ownership products increased carrying values of inventory by $ 24 million, $ 10 million and $ 6 million during 2022, 2021 and 2020, respectively.

Property and Equipment

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

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

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

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

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For purposes of calculating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Macro-economic conditions are the primary factor used to estimate whether an option to extend a lease term will be exercised or not.

Macroeconomic conditions are the primary factor used to estimate whether an option to extend a lease term will be exercised or not.

Because the rate implicit in our leases is not readily determinable, we use our incremental borrowing rate as the discount rate, which approximates the interest rate at which we could borrow on a collateralized basis with similar terms and payments and in similar economic environments.

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

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

Convertible Senior Notes

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

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

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

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

The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

In accounting for the issuance costs related to the convertible notes, we allocated the total amount incurred to the liability and equity components based on their relative values.

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

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

In accounting for convertible notes issued prior to the adoption of ASU 2020-06 (as defined in New Accounting Standards below) in the first quarter of 2022, we bifurcated our convertible notes into liability and equity components.

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

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

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

Upon adoption of ASU 2020-06, we are no longer required to bifurcate our convertible notes into liability and equity components.

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

See Footnote 8 “Earnings per Share” and Footnote 16 “Debt” for more information and also see New Accounting Standards below for information on the impact of adoption of ASU 2020-06 on our consolidated financial statements.

Derivative Instruments

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Executive Deferred Compensation Plan (the “Marriott International EDC”), which Marriott International maintains and administers.

Subsequent to the Marriott Spin-Off, we remain liable to reimburse Marriott International for distributions to participants that were employees of Marriott Vacations Worldwide at the time of the Marriott Spin-Off including earnings thereon.

Subsequent to the Marriott Spin-Off, we remain liable to reimburse Marriott International for distributions to participants who were employees of Marriott Vacations Worldwide at the time of the Marriott Spin-Off, including earnings thereon.

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

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No new awards will be granted under the Prior Plans and all awards that were granted under the Prior Plans will remain outstanding and continue to be governed by the Prior Plans.

The MVW Equity Plan was established in order to compensate our employees and directors by granting them equity awards such as restricted stock units (“RSUs”), stock appreciation rights (“SARs”) and stock options.

The MVW Equity Plan is maintained for the benefit of our officers, directors, and employees.

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

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

We follow the provisions of ASC Topic 718 “ Compensation—Stock Compensation ,” which requires that a company measure the expense of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award.

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SARs awarded under the MVW Equity Plan are granted at exercise prices or strike prices equal to the market price of our common stock on the date of grant (this price is referred to as the “base value”).

SARs generally expire ten years after the date of grant and both vest and become exercisable in cumulative installments of one quarter of the grant at the end of each of

the first four years following the date of grant.

SARs generally expire ten years after the date of grant and both vest and become exercisable in cumulative installments of one quarter of the grant at the end of each of the first four years following the date of grant.

Upon exercise of SARs, our employees and non-employee directors receive a number of shares of our common stock equal to the number of SARs being exercised, multiplied by the quotient of (a) the market price of the common stock on the date of exercise (this price is referred to as the “final value”) minus the base value, divided by (b) the final value.

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We generally determine the fair value of SARs using the Black-Scholes option valuation model, which incorporates assumptions about expected volatility, risk free interest rate, dividend yield and expected term.

We will issue shares from authorized shares upon the exercise of SARs or stock options held by our employees and directors.

We issue shares from authorized shares upon the exercise of SARs or stock options held by our employees and directors.

For share-based awards granted to non-employee directors, we recognize compensation expense on the grant date based on the fair value of the awards as of that date.

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We report gains and losses from currency exchange rate changes related to intercompany receivables and payables that are not of a long-term investment nature, as well as gains and losses from non-U.S.

currency transactions, in the (Losses) gains and other (expense) income, net line on our Income Statements.

currency transactions, in the Gains (losses) and other income (expense), net line on our Income Statements.

We file income tax returns, including with respect to our subsidiaries, in various jurisdictions around the world.

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Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the provision for income tax in the period that includes the enactment date.

Changes in existing tax laws and rates, their related interpretations, and the uncertainty generated by the current economic environment may affect the amounts of deferred tax liabilities or the valuations of deferred tax assets over time.

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In the event we determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which impacts the provision for income taxes.

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

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

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

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

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New Accounting Standards

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

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

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

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

Future Adoption of Accounting Standards

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

In March 2020, the FASB issued ASU 2020-04, as amended, which provides optional expedients and exceptions to existing guidance on contract modifications and hedge accounting in an effort to ease the financial reporting burdens related to the expected market transition from the LIBOR and other interbank offered rates to alternative reference rates.

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

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

The instruments have not yet discontinued the use of LIBOR.

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

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

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

Accounting Standards Update 2020-06 – “ Debt — Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”)

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

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

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

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

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

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

Commencing in the first quarter of 2022, we will be required to calculate the impact of the convertible notes on diluted earnings per share under the “if-converted” method.

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

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

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

In the first quarter of 2022, we adopted ASU 2020-06, using the modified retrospective method.

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

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

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

The impacts of the adoption were recorded as a cumulative effect in the opening balance of retained earnings and the conversion feature related to our convertible notes was reclassified from equity to liabilities.

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

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

We will continue to amortize the remaining debt issuance costs associated with our convertible notes over the respective terms of our convertible notes.

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

See Footnote 16 “Debt” for further information on accounting for the convertible notes and the convertible note hedges, subsequent to the adoption of ASU 2020-06.

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

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

In October 2021, the FASB issued ASU 2021-08, which amends ASC 805 to require entities to apply ASC 606 to recognize and measure contract assets and contract liabilities from contracts with customers in a business combination.

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

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

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

In the first quarter of 2022, we adopted ASU 2021-08, which amended ASC 805 “Business Combinations,” to require entities to apply ASC 606 to recognize and measure contract assets and contract liabilities from contracts with customers in a business combination.

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

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

Future Adoption of Accounting Standards

Accounting Standards Update 2020-04 – “ Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting ” (“ASU 2020-04”) and Accounting Standards Update 2022-06 – “ Reference Rate Reform (Topic 848), Deferral of the Sunset Date of Topic 848 ” (“ASU 2022-06”)

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, as amended, which provides optional expedients and exceptions to existing guidance on contract modifications and hedge accounting in an effort to ease the financial reporting burdens related to the expected market transition from the USD London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates.

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

In December 2022, the FASB issued ASU 2022-06 to extend the temporary accounting rules under Topic 848 from December 31, 2022 to December 31, 2024.

During 2022, we amended the terms of our Warehouse Credit Facility and our Revolving Corporate Credit Facility, both as defined and discussed further in Footnote 15 “Securitized Debt” and Footnote 16 “Debt,” respectively, to, among other things, reference SOFR (as defined in Footnote 15 “Securitized Debt”) rather than LIBOR.

Our Term Loan and certain interest rate swaps and collars have not yet discontinued the use of LIBOR.

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

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

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

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

In March 2022, the FASB issued ASU 2022-02, which eliminates the recognition and measurement guidance applicable to troubled debt restructurings for creditors and enhances disclosure requirements with respect to loan modifications for borrowers experiencing financial difficulty.

ASU 2022-02 also requires disclosure of current-period gross write-offs by year of origination to be presented in the vintage disclosures for financing receivables.

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

We are evaluating the impact that the adoption of ASU 2022-02 will have on our financial statements and disclosures;

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

We expect to adopt ASU 2022-02 in the first quarter of 2023.

ACQUISITIONS AND DISPOSITIONS

Welk Acquisition

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

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

The following table presents the fair value of each type of consideration transferred in the Welk Acquisition at December 31, 2021.

We completed the Welk Acquisition on April 1, 2021.

The following table presents the fair value of each type of consideration transferred in the Welk Acquisition, as finalized at March 31, 2022.

(in millions, except per share amounts)

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

The values attributed to Vacation ownership notes receivable, Inventory, Property and equipment, Intangible assets, Deferred taxes and Securitized debt from VIEs are based on valuations prepared using Level 3 inputs and assumptions in accordance with ASC Topic 820, “ Fair Value Measurements ” (“ASC 820”).

The value attributed to Debt is based on Level 2 inputs in accordance with ASC 820.

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

Accordingly, these estimates are subject to change during the measurement period, which is up to one year from the Welk Acquisition Date, as permitted under GAAP.

Any potential adjustments could be material in relation to the values presented in the table below.

The following table presents our current estimates of the fair value of the assets that we acquired and the liabilities that we assumed in connection with the business combination as previously reported at the end of the third quarter of 2021 and as adjusted at December 31, 2021.

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

The values attributed to Vacation ownership notes receivable, Inventory, Property and equipment, Intangible assets, and Securitized debt from VIEs were based on valuations prepared using Level 3 inputs and assumptions in accordance with ASC Topic 820 “ Fair Value Measurements ” (“ASC 820”).

The value attributed to Debt was based on Level 2 inputs in accordance with ASC 820.

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

The following table presents the fair value of the assets that we acquired and the liabilities that we assumed in connection with the business combination as finalized.

($ in millions) April 1, 2021

(as previously reported) Adjustments April 1, 2021

(as adjusted)

(as finalized)

Vacation ownership notes receivable, net $ 255

$ 254 $ 1 $ 255

Inventory 111

136 ( 25 ) 111

Property and equipment 83

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Deferred taxes ( 24 )

Debt ( 189 ) — ( 189 )

Securitized debt ( 184 )

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_____________________________________________

_________________________

(1) Vacation ownership notes receivable, net has been determined to constitute purchased credit deteriorated assets under the provisions of ASC Topic 326, “ Financial Instruments - Credit Losses ,” due to the impact of the COVID-19 pandemic on the Welk business and the vacation ownership industry as a whole, and has been accounted for as such.

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

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

($ in millions)

Vacation ownership notes receivable $ 287

Allowance for credit losses ( 32 )

Vacation ownership notes receivable, net $ 255

(2) Inventory consists of completed unsold VOIs.

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

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

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

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

This valuation approach utilizes the following Level 3 inputs:

future income growth, future cost estimates and discount rate.

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

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Pro Forma Results of Operations

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

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

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

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

There were no Welk acquisition-related costs included in the unaudited pro forma results below for 2021, and $ 19 million included for 2020.

There were no Welk Acquisition-related costs included in the unaudited pro forma results below for 2021, and $ 19 million for 2020.

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

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Welk Results of Operations

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

The following table presents the results of Legacy-Welk operations included in our Income Statement for 2022 and 2021.

($ in millions) 2022 2021

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Net income $ 49 $ 17

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

Other Acquisitions

During 2022, we acquired 88 completed vacation ownership units, as well as a sales center, located in Bali, Indonesia for $ 36 million.

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

As consideration for the acquisition, we paid $ 12 million in cash and issued a non-interest bearing note payable for $ 11 million.

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

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

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

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San Francisco, California

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

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

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

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

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

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

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

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

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

During 2022, we disposed of VRI Americas for proceeds of $ 56 million, net of cash and restricted cash transferred to the buyer of $ 12 million, after determining that this business was not a core component of our future growth strategy and operating model.

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

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

As a result of the disposition, we recorded a gain of $ 17 million in Gains (losses) and other income (expense), net on our Income Statements for the year ended December 31, 2022.

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

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

As a result of this disposition, we recorded a gain of $ 33 million in Gains (losses) and other income (expense), net on our Income Statements for the year ended December 31, 2022, which included the realization of cumulative foreign currency translation gains of $ 10 million associated with the disposition of these entities.

We made no significant dispositions in 2021.

During 2020, we recorded a loss of $ 5 million in the (Losses) gains and other (expense) income, net line on our Income Statement for the year ended December 31, 2020 relating to the redemption of our interest in a joint venture in our Exchange & Third-Party Management segment which was consolidated under the voting interest model.

During 2020, we recorded a loss of $ 5 million in the Gains (losses) and other income (expense), net line on our Income Statement for the year ended December 31, 2020 relating to the redemption of our interest in a joint venture in our Exchange & Third-Party Management segment which was consolidated under the voting interest model.

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

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

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

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

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

2019 Strategy Change

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

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

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

Under the market approach, a Level 2 input, fair value is measured through an analysis of sales and offerings of comparable property which are adjusted to reflect differences between the asset being valued and the comparable assets, such as location, time and terms of sales, utility and physical characteristics.

Under the income approach, a Level 3 input, fair value is measured through a discounted cash flow.

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

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

REVENUE AND RECEIVABLES

Sources of Revenue by Segment

The following tables detail the sources of revenue by segment for each of the last three fiscal years.

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

49 unchanged sentences

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

Accounts receivable $ 172 $ 150

Accounts and contracts receivable, net $ 209 $ 172

Vacation ownership notes receivable, net 2,198 2,045

7 unchanged sentences

At December 31, 2022, approximately 92 % of this amount is expected to be recognized as revenue over the next two years .

Accounts Receivable

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

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

Accounts and Contracts Receivable

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

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

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

Receivables from contracts with customers $ 172 $ 150

Receivables from contracts with customers, net $ 209 $ 172

Interest receivable 16 14

Tax receivable 20 48

Indemnification asset 22 15

Indemnification assets 19 22

Employee tax credit receivable 16 19

Income Tax Provision

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

The following table presents the components of our Income (loss) before income taxes and noncontrolling interests for the last three fiscal years:

($ in millions) 2022 2021 2020

2 unchanged sentences

$ 582 $ 127 $ ( 340 )

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

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

($ in millions) 2022 2021 2020

3 unchanged sentences

( 109 ) ( 45 ) 43

( 45 ) 43 ( 77 )

Deferred – U.S.

Federal ( 13 ) ( 36 ) 26

State ( 26 ) 3 9

( 82 ) ( 29 ) 41

21 unchanged sentences

_________________________

(1) The 2022 impact is primarily due to non-deductible interest.

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

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

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

(2) The 2022 impact is primarily due to adjustments to deferred tax liability balances in foreign jurisdictions.

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

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

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

and foreign income tax rates and other foreign adjustments.

(3) The 2022 impact is primarily due to the increase of the valuation allowance on certain foreign entities.

The 2021 impact is primarily due to new valuation allowances.

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

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

For the years ended December 31, 2022, 2021 and 2020, the provision for income taxes included $ 3 million, $ 4 million, and $ 4 million of excess tax benefits resulting from equity incentive plan activities, respectively.

1 unchanged sentence

These holidays expire through 2034.

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

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

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

We expect that we will be indemnified for liabilities of $ 5 million in connection with these non-income tax matters pursuant to a Tax Matters Agreement dated May 11, 2016 by and among Starwood Hotels & Resorts Worldwide, Inc., Vistana Signature Experiences, Inc., and Interval Leisure Group, Inc., and consequently have recorded a corresponding indemnification asset.

During 2022, we completed the purchase accounting and established certain non-income tax reserves for the Welk Acquisition.

As of December 31, 2022, the balance of the reserve for non-income tax issues related to the ILG Acquisition and the Welk Acquisition was $ 47 million.

We expect that we will be indemnified for liabilities of $ 3 million in connection with the Legacy-ILG non-income tax matters pursuant to a Tax Matters Agreement dated May 11, 2016 by and among Starwood Hotels & Resorts Worldwide, Inc., Vistana Signature Experiences, Inc., and Interval Leisure Group, Inc., and consequently have recorded a corresponding indemnification asset.

Deferred Income Taxes

4 unchanged sentences

Reserves 80 70

Convertible debt 44 —

Deferred compensation 27 25

Deferred revenue 22 20

Property and equipment 67 67

Non-cash compensation 14 12

Net operating loss and capital loss carryforwards 137 146

7 unchanged sentences

Long lived intangible assets ( 214 ) ( 231 )

Deferred sales of vacation ownership interests ( 414 ) ( 362 )

Deferred sales of VOIs ( 556 ) ( 493 )

Right-of-use liability ( 25 ) ( 24 )

Convertible debt — ( 4 )

Other, net ( 24 ) ( 25 )

1 unchanged sentence

Total net deferred tax liabilities $ ( 326 ) $ ( 302 )

_________________________

(1) Certain prior year deferred tax assets and liabilities have been reclassified to align with the current year presentation.

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

2 unchanged sentences

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

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

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

We have $ 14 million of state net operating loss carryforwards, the majority of which will not expire within the next five years.

federal foreign tax credit carryforwards of $ 20 million and $ 9 million of state tax credit carryforwards.

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

8 unchanged sentences

($ in millions) 2022 2021 2020

Unrecognized tax benefit at beginning of year $ 14 $ 21 $ 2

Unrecognized tax benefits at beginning of year $ 26 $ 14 $ 21

Increases related to tax positions taken during a prior period 3 12 6

1 unchanged sentence

Decreases related to settlements with taxing authorities — — ( 14 )

Decreases related to tax positions taken during a prior period ( 4 ) — —

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

Unrecognized tax benefit at end of year $ 26 $ 14 $ 21

The total unrecognized tax benefits related to uncertain income tax positions, which would affect the effective tax rate if recognized, were $ 26 million at December 31, 2021 and $ 14 million at December 31, 2020.

The total amount of gross interest and penalties accrued were $ 42 million at December 31, 2021 and $ 25 million at December 31, 2020.

Unrecognized tax benefits at end of year $ 25 $ 26 $ 14

The total amount of gross interest and penalties accrued was $ 28 million at December 31, 2022 and $ 42 million at December 31, 2021.

This decrease was primarily related to a reassessment of the interest and penalty period for certain tax matters, which resulted in a reduction of interest and penalties offset by accruing additional amounts attributed to the passage of time.

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

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

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

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

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

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

Tax Law Update

We have considered the income tax accounting and disclosure implications of the relief provided by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) enacted in March 2020, and the Consolidated Appropriations Act, 2021 enacted in December 2020.

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

We will continue to evaluate the income tax provisions of the above mentioned acts and monitor the developments in the jurisdictions where we have significant operations for tax law changes that could have additional income tax accounting and disclosure implications.

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

VACATION OWNERSHIP NOTES RECEIVABLE

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Interest income associated with vacation ownership notes receivable — securitized $ 243 $ 219 $ 239

Interest income associated with vacation ownership notes receivable — non-securitized 40 18 32

Interest income associated with vacation ownership notes receivable —

non-securitized 41 40 18

Total interest income associated with vacation ownership notes receivable $ 284 $ 259 $ 257

COVID-19 Impact on Vacation Ownership Notes Receivable Reserves

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

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

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

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

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

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

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

In 2020, we increased our vacation ownership notes receivable reserves by $ 69 million as a result of higher actual and projected default activity which was predominantly due to the COVID-19 pandemic.

At that time, we allocated $ 59 million of the reserve to our originated vacation ownership notes receivable reserve (recorded as a reduction of Sale of vacation ownership products), $ 10 million to our acquired vacation ownership notes receivable reserve (recorded as an increase in Financing expenses), and a corresponding $ 19 million reduction in Cost of vacation ownership products on our Income Statement for the year ended December 31, 2020.

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

In the third quarter of 2022, in connection with the stabilization of default rates and the combination and alignment of the reserves for the Marriott-, Sheraton-, and Westin-brands (see Footnote 2 “Summary of Significant Accounting Policies”), we recorded a reversal of credit loss expense for the acquired vacation ownership notes receivable of $ 19 million, which was recorded in Financing expenses on our Income Statement for the year ended December 31, 2022, and an increase in the reserve for our originated vacation ownership notes receivable of $ 21 million, which was recorded as a reduction of Sale of vacation ownership products and partially offset by a corresponding $ 5 million increase in Cost of vacation ownership ownership products on our Income Statement for the year ended December 31, 2022.

There were no additional adjustments to our vacation ownership notes receivables reserves due to the COVID-19 pandemic during either 2021 or 2022.

Credit Quality Indicators - Vacation Ownership Notes Receivable

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

At December 31, 2022, the weighted average FICO score within our consolidated vacation ownership notes receivable pool was 721 , based upon the FICO score of the borrower at the time of origination.

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

Acquired Vacation Ownership Notes Receivable

31 unchanged sentences

Balance at December 31, 2021 47 23 70

Securitizations — — —

Clean-up call 1 ( 1 ) —

Write-offs ( 57 ) — ( 57 )

Recoveries 35 — 35

Defaulted vacation ownership notes receivable repurchase activity (1)

(Decrease) increase in vacation ownership notes receivable reserve ( 40 ) 21 ( 19 )

Balance at December 31, 2022 $ 11 $ 18 $ 29

_________________________

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

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

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

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

Acquired Vacation Ownership Notes Receivable as of December 31, 2022

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

Combined Marriott $ 67 $ 47 $ 6 $ 16 $ 136

Hyatt 5 3 — — 8

Welk 75 50 1 1 127

$ 147 $ 100 $ 7 $ 17 $ 271

Acquired Vacation Ownership Notes Receivable as of December 31, 2021

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

Westin $ 52 $ 32 $ 3 $ 8 $ 95

Sheraton 54 48 8 23 133

Hyatt 8 6 1 — 15

Welk 115 79 1 2 197

Other 2 — — 2 4

$ 231 $ 165 $ 13 $ 35 $ 444

The following tables detail the origination year of our acquired vacation ownership notes receivable, before reserves, by brand and FICO score as of December 31, 2022.

Acquired Vacation Ownership Notes Receivable - Combined Marriott

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

700 + $ — $ — $ — $ — $ 67 $ 67

600 - 699 — — — — 47 47

< 600 — — — — 6 6

No Score — — — — 16 16

$ — $ — $ — $ — $ 136 $ 136

Acquired Vacation Ownership Notes Receivable - Hyatt

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

700 + $ — $ — $ — $ — $ 5 $ 5

600 - 699 — — — — 3 3

< 600 — — — — — —

No Score — — — — — —

$ — $ — $ — $ — $ 8 $ 8

Acquired Vacation Ownership Notes Receivable - Welk

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

700 + $ — $ 6 $ 16 $ 20 $ 33 $ 75

600 - 699 — 3 9 13 25 50

< 600 — — 1 — — 1

No Score — — — — 1 1

$ — $ 9 $ 26 $ 33 $ 59 $ 127

Originated Vacation Ownership Notes Receivable

19 unchanged sentences

Balance at December 31, 2019 $ 90 $ 114 $ 204

Increase in vacation ownership notes receivable reserve 94 18 112

Securitizations ( 70 ) 70 —

2 unchanged sentences

Defaulted vacation ownership notes receivable repurchase activity (1)

Increase in vacation ownership notes receivable reserve (2)

Balance at December 31, 2020 193 117 310

12 unchanged sentences

_________________________

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

Credit Quality of Vacation Ownership Notes Receivable

Legacy-MVW Vacation Ownership Notes Receivable

For both Legacy-MVW non-securitized and securitized vacation ownership notes receivable, we estimated average remaining default rate of 6.74 % as of both December 31, 2021 and December 31, 2020.

A 0.5 percentage point increase in the estimated default rate would have resulted in an increase in the related vacation ownership notes receivable reserve of $ 6 million as of both December 31, 2021 and December 31, 2020.

We use the aging of the vacation ownership notes receivable as the primary credit quality indicator for our Legacy-MVW vacation ownership notes receivable, as historical performance indicates that there is a relationship between the default behavior of borrowers and the age of the receivable associated with the vacation ownership interest.

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

Legacy-MVW Vacation Ownership Notes Receivable

($ in millions) Non-Securitized Securitized Total

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

Investment in vacation ownership notes receivable on non-accrual status at December 31, 2020 $ 100 $ 14 $ 114

The following table shows the aging of the recorded investment in principal, before reserves, in Legacy-MVW vacation ownership notes receivable as of December 31, 2021 and December 31, 2020.

Legacy-MVW Vacation Ownership Notes Receivable

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

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

31 – 90 days past due $ 6 $ 20 $ 26 $ 8 $ 25 $ 33

91 – 150 days past due 4 8 12 5 14 19

Greater than 150 days past due 84 — 84 95 — 95

Total past due 94 28 122 108 39 147

Current 180 1,027 1,207 231 1,011 1,242

Total vacation ownership notes receivable $ 274 $ 1,055 $ 1,329 $ 339 $ 1,050 $ 1,389

The following table details the origination year of our Legacy-MVW vacation ownership notes receivable as of December 31, 2021 .

Legacy-MVW Vacation Ownership Notes Receivable

($ in millions) Non-Securitized Securitized Total

Year of Origination

2021 $ 129 $ 274 $ 403

2020 20 165 185

2019 46 250 296

2018 29 161 190

2017 15 96 111

2016 & Prior 35 109 144

$ 274 $ 1,055 $ 1,329

Legacy-ILG and Legacy-Welk Vacation Ownership Notes Receivable

At December 31, 2021 and December 31, 2020, the weighted average FICO score within our consolidated Legacy-ILG and Legacy-Welk vacation ownership notes receivable was 707 and 708 , respectively, based upon the FICO score of the borrower at the time of origination.

The average estimated rate for all future defaults for our Legacy-ILG and Legacy-Welk consolidated outstanding pool of vacation ownership notes receivable was 17.33 % as of December 31, 2021 and 14.63 % as of December 31, 2020.

A 0.5 percentage point increase in the estimated default rate on the Legacy-ILG and Legacy-Welk vacation ownership notes receivable would have resulted in an increase in the related vacation ownership notes receivable reserve of $ 4 million as of December 31, 2021, and $ 3 million as of December 31, 2020.

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

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

resident borrowers.

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

Legacy-ILG and Legacy-Welk Vacation Ownership Notes Receivable

($ in millions) Non-Securitized Securitized Total

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

Investment in vacation ownership notes receivable on non-accrual status at December 31, 2020 $ 109 $ 12 $ 121

The following table shows the aging of the recorded investment in principal, before reserves, in Legacy-ILG and Legacy-Welk vacation ownership notes receivable as of December 31, 2021 and December 31, 2020.

Legacy-ILG and Legacy-Welk Vacation Ownership Notes Receivable

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

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

31 – 90 days past due $ 16 $ 24 $ 40 $ 8 $ 19 $ 27

91 – 120 days past due 4 6 10 2 7 9

Greater than 120 days past due 110 4 114 107 5 112

Total past due 130 34 164 117 31 148

Current 219 735 954 123 550 673

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

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

Acquired Vacation Ownership Notes Receivable as of December 31, 2021

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

Westin $ 52 $ 32 $ 3 $ 8 $ 95

Sheraton 54 48 8 23 133

Hyatt 8 6 1 — 15

Welk 115 79 1 2 197

Other 2 — — 2 4

$ 231 $ 165 $ 13 $ 35 $ 444

Acquired Vacation Ownership Notes Receivable as of December 31, 2020

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

Westin $ 81 $ 48 $ 4 $ 11 $ 144

Sheraton 81 73 13 31 198

Hyatt 12 9 1 — 22

Other 2 1 — 2 5

$ 176 $ 131 $ 18 $ 44 $ 369

The following tables detail the origination year of our Legacy-ILG and Legacy-Welk acquired vacation ownership notes receivable by brand and FICO score as of December 31, 2021 .

Acquired Vacation Ownership Notes Receivable - Westin

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

700 + $ — $ — $ — $ 14 $ 38 $ 52

600 - 699 — — — 8 24 32

< 600 — — — 2 1 3

No Score — — — 2 6 8

$ — $ — $ — $ 26 $ 69 $ 95

Acquired Vacation Ownership Notes Receivable - Sheraton

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

700 + $ — $ — $ — $ 16 $ 38 $ 54

600 - 699 — — — 12 36 48

< 600 — — — 5 3 8

No Score — — — 7 16 23

$ — $ — $ — $ 40 $ 93 $ 133

Acquired Vacation Ownership Notes Receivable - Hyatt and Other

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

700 + $ — $ — $ — $ 2 $ 8 $ 10

600 - 699 — — — 2 4 6

< 600 — — — — 1 1

No Score — — — — 2 2

$ — $ — $ — $ 4 $ 15 $ 19

Acquired Vacation Ownership Notes Receivable - Welk

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

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

600 - 699 5 15 21 13 25 79

< 600 — 1 — — — 1

No Score — — 1 — 1 2

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

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

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

Originated Vacation Ownership Notes Receivable as of December 31, 2022

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

Westin $ 143 $ 66 $ 8 $ 34 $ 251

Sheraton 136 94 20 46 296

Combined Marriott $ 1,210 $ 549 $ 55 $ 278 $ 2,092

Hyatt 30 13 1 1 45

6 unchanged sentences

Hyatt 22 11 — — 33

$ 231 $ 132 $ 22 $ 66 $ 451

The following tables detail the origination year of our Legacy-ILG and Legacy-Welk originated vacation ownership notes receivable by brand and FICO score as of December 31, 2021.

Originated Vacation Ownership Notes Receivable - Westin

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

700 + $ 72 $ 22 $ 41 $ 8 $ — $ 143

600 - 699 30 10 22 4 — 66

Welk 65 27 1 1 94

$ 366 $ 198 $ 29 $ 81 $ 674

No Score 20 5 8 1 — 34

_________________________

Originated Vacation Ownership Notes Receivable - Sheraton

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

The following tables detail the origination year of our originated vacation ownership notes receivable, before reserves, by brand and FICO score as of December 31, 2022.

Originated Vacation Ownership Notes Receivable - Combined Marriott

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

18 unchanged sentences

$ 129 $ 52 $ — $ — $ — $ — $ 181

Vacation Ownership Notes Receivable on Non-Accrual Status

For both non-securitized and securitized vacation ownership notes receivable, we estimated the average remaining default rate of 11.62 % as of December 31, 2022 and 11.75 % as of December 31, 2021.

A 0.5 percentage point increase in the estimated default rate would have resulted in an increase in the related vacation ownership notes receivable reserve of $ 12 million as of December 31, 2022 and $ 10 million as of December 31, 2021.

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

Vacation Ownership Notes Receivable

($ in millions) Non-Securitized Securitized Total

Investment in vacation ownership notes receivable on non-accrual status at December 31, 2022 $ 126 $ 24 $ 150

Investment in vacation ownership notes receivable on non-accrual status at December 31, 2021 $ 202 $ 18 $ 220

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

December 31, 2022 December 31, 2021

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

31 – 90 days past due $ 25 $ 56 $ 81 $ 22 $ 44 $ 66

91 – 120 days past due 7 16 23 7 10 17

Greater than 120 days past due 119 8 127 195 8 203

Total past due 151 80 231 224 62 286

Current 415 1,943 2,358 399 1,762 2,161

Total vacation ownership notes receivable $ 566 $ 2,023 $ 2,589 $ 623 $ 1,824 $ 2,447

FINANCIAL INSTRUMENTS

2 unchanged sentences

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

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

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

At December 31, 2022 At December 31, 2021

1 unchanged sentence

Value Carrying

Vacation ownership notes receivable $ 2,045 $ 2,102 $ 1,840 $ 1,886

Vacation ownership notes receivable, net $ 2,198 $ 2,245 $ 2,045 $ 2,102

Other assets 76 76 76 76

4 unchanged sentences

2029 Notes, net ( 494 ) ( 417 ) ( 493 ) ( 505 )

2029 Notes, net ( 493 ) ( 505 ) — —

Term Loan, net ( 778 ) ( 775 ) ( 776 ) ( 784 )

2022 Convertible notes, net (1)

— — ( 224 ) ( 280 )

2026 Convertible notes, net (1)

( 565 ) ( 560 ) ( 461 ) ( 682 )

2027 Convertible notes, net (1)

( 560 ) ( 568 ) — —

Non-interest bearing note payable, net ( 10 ) ( 10 ) — —

Total financial liabilities $ ( 4,940 ) $ ( 4,723 ) $ ( 4,404 ) $ ( 4,774 )

_________________________

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

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

Vacation Ownership Notes Receivable

2 unchanged sentences

Value Carrying

Vacation ownership notes receivable

Vacation ownership notes receivable, net

Securitized $ 1,792 $ 1,837 $ 1,662 $ 1,712

7 unchanged sentences

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

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

transactions in the asset-backed securities (“ABS”) market.

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

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We value the remaining vacation ownership notes receivable that have not been securitized at their carrying value, rather than using our pricing model.

We believe that the carrying value of these particular vacation ownership notes receivable approximates fair value because the stated, or otherwise imputed, interest rates of these loans are consistent with current market rates and the reserve for these vacation ownership notes receivable appropriately accounts for risks in default rates, prepayment rates, discount rates, and loan terms.

We believe that the carrying value of these particular vacation ownership notes receivable approximates fair value because the stated, or otherwise imputed, interest rates of these loans are generally consistent with current market rates and the reserve for these vacation ownership notes receivable appropriately accounts for risks in default rates, prepayment rates, discount rates, and loan terms.

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

Other assets include $ 76 million of company owned insurance policies (the “COLI policies”), acquired on the lives of certain participants in the Marriott Vacations Worldwide Deferred Compensation Plan, that are held in a rabbi trust.

Other assets include $ 76 million of COLI policies acquired on the lives of certain participants in the Marriott Vacations Worldwide Deferred Compensation Plan that are held in a rabbi trust.

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

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

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

We estimate the fair value of our senior notes using quoted market prices as of the last trading day for the quarter;

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

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Convertible Notes

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

We estimate the fair value of our convertible notes using quoted market prices as of the last trading day for the quarter;

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

We concluded that this fair value measurement should be categorized within Level 2.

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

The 2022 Convertible Notes (as defined in Footnote 16 “Debt”) matured on September 15, 2022, and were repaid in full during the third quarter of 2022.

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

Non-Interest Bearing Note Payable

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

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

EARNINGS PER SHARE

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

Our calculation of diluted earnings or loss per share attributable to common shareholders reflects our intent to settle conversions of our convertible notes through a combination settlement, which contemplates repayment in cash of the principal amount and repayment in shares of our common stock of any excess of the conversion value over the principal amount (the “conversion premium”).

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

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

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

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

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

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

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

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

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

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

Earnings per share for 2021 and 2020 have not been retrospectively restated and continue to be reported under the accounting standards in effect for that period.

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

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

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

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

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

The 2022 Convertible Notes and the 2022 Convertible Note Hedges (as defined in Footnote 16 “Debt”) matured on September 15, 2022.

However, a portion of the 2022 Warrants (as defined in Footnote 16 “Debt”) remained outstanding as of December 31, 2022.

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

(in millions, except per share amounts) 2022 2021 2020

2020 2019 (1)

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

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

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Basic earnings (loss) per share $ 9.69 $ 1.15 $ ( 6.65 )

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

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

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

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

Add back of interest expense related to convertible notes subsequent to the adoption of ASU 2020-06, net of tax 5 — —

Numerator used to calculate diluted earnings (loss) per share $ 396 $ 49 $ ( 275 )

Shares for basic earnings (loss) per share 40.4 42.5 41.3

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Restricted stock units 0.3 0.5 —

2022 Convertible Notes 0.1 — —

2022 Convertible Notes ($ 230 million of principal)

2026 Convertible Notes ($ 575 million of principal)

2027 Convertible Notes ($ 575 million of principal)

Shares for diluted earnings (loss) per share 45.2 43.3 41.3

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Restricted stock units 0.3

In accordance with the applicable accounting guidance for calculating earnings per share, for the year ended December 31, 2021, we excluded from our calculation of diluted earnings per share 126,804 shares underlying SARs that may settle in shares of common stock because the exercise price of $ 173.88 of such SARs was greater than the average market price for the period.

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

In accordance with the applicable accounting guidance for calculating earnings per share, for the year ended December 31, 2022, we excluded from our calculation of diluted earnings per share 199,813 shares underlying SARs that may settle in shares of common stock because the exercise prices of such SARs, which ranged from $ 159.27 to $ 173.88 , were greater than the average market price of our common stock for the applicable period.

For the year ended December 31, 2021, we excluded from our calculation of diluted earnings per share 126,804 shares underlying SARs that may settle in shares of common stock because the exercise price of $ 173.88 of such SARs was greater than the average market price of our common stock for the applicable period.

The following table shows the composition of our inventory balances:

($ in millions) At Year-End 2022 At Year-End 2021

Real estate inventory (1)

VOI inventory (1)

_________________________

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

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

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

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

In addition to the above, at December 31, 2022 and December 31, 2021, we had $ 428 million and $ 460 million, respectively, of completed vacation ownership units which are classified as a component of Property and equipment, net until the time at which they are available and legally registered for sale as vacation ownership products.

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

PROPERTY AND EQUIPMENT

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

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

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

Impairment — ( 73 ) ( 73 )

Foreign exchange adjustments — ( 2 ) ( 2 )

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

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

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Balance at December 31, 2021 2,778 372 3,150

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

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

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

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

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

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

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

(iv) our planned furloughs and reduced work schedule arrangements;

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

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

We utilized a combination of the income and market approaches to estimate the fair value of our reporting units (Level 3).

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

Measurement period adjustments ( 8 ) — ( 8 )

Disposition of VRI Americas — ( 25 ) ( 25 )

Balance at December 31, 2022 $ 2,770 $ 347 $ 3,117

2022 and 2021

During the fourth quarters of 2022 and 2021, we conducted our annual goodwill impairment test, which was a qualitative evaluation, and no impairment charges were recorded in either year.

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

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

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Indefinite-Lived Intangible Assets

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

($ in millions) Trade Names

Balance at December 31, 2019 $ 82

Impairment ( 18 )

Balance at December 31, 2020 64

Balance at December 31, 2021 $ 64

We recognized a non-cash impairment charge of $ 18 million in the Impairment line on our Income Statement during the first quarter of 2020 related to the indefinite-lived intangible assets in our Exchange & Third-Party Management segment, which was primarily attributed to the decline in estimated near-term revenues and related recovery of long-term revenues as a result of the impact of the COVID-19 pandemic.

All of our indefinite-lived intangible assets are related to the Exchange & Third-Party Management segment.

We performed our annual impairment test of indefinite-lived intangible assets during the fourth quarters of 2022 and 2021, and no impairment charges were recorded in either year.

During 2020, we recognized a non-cash impairment charge of $ 18 million in the Impairment line on our Income Statement related to indefinite-lived intangible assets, which was primarily attributed to the decline in estimated near-term revenues and related recovery of long-term revenues as a result of the impact of the COVID-19 pandemic.

CONTINGENCIES AND COMMITMENTS

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

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

Our aggregate commitment under these contracts was $ 86 million, of which we expect $ 59 million, $ 15 million, $ 8 million, and $ 4 million will be paid in 2023, 2024, 2025, and 2026, respectively.

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

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

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

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

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

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

Surety bonds issued as of December 31, 2022 totaled $ 128 million, the majority of which were requested by federal, state or local governments in connection with our operations.

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

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

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

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

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

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

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

At December 31, 2022, our maximum exposure under fixed dollar guarantees was $ 7 million, of which $ 2 million, $ 2 million, $ 1 million, $ 1 million, and $ 1 million relate to 2023, 2024, 2025, 2026, 2027 and thereafter, respectively.

The agreement will terminate on the earlier of:

1) sale of 95 % of the total ownership interests in the owners’ association;

or 2) upon our written notification of termination.

or 2) written notification of termination by either party.

At December 31, 2022, our expected commitment for 2023 is $ 10 million, which will ultimately be recorded as a component of rental expense on our income statement.

Loss Contingencies

In March 2017, RCHFU, L.L.C.

and other owners at The Ritz-Carlton Club, Aspen Highlands (“RCC Aspen Highlands”) filed a complaint in an action pending in the U.S.

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

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

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

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

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

District Court for the Middle District of Florida by Anthony and Beth Lennen against us and certain third parties.

The complaint challenged the characterization of the beneficial interests in the MVCD trust that are sold to customers as real estate interests under Florida law, the structure of the trust, and associated operational aspects of the trust.

The plaintiffs sought declaratory relief, an unwinding of the MVCD product, and punitive damages.

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

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

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

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

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

Regis Residence Club, New York filed a lawsuit in the Supreme Court for the State of New York, New York County, Commercial Division against ILG and several of its subsidiaries and certain third parties.

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

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

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

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

In February 2022, the Court granted our motion to dismiss the complaint and dismissed with prejudice all claims except one, with respect to which the plaintiff was granted leave to amend its complaint.

The plaintiff filed an amended complaint and appealed the dismissal of the other claims.

In November 2022, the Court granted our motion to dismiss the amended complaint and again granted plaintiff leave to amend.

The appeal remains pending.

We believe we have meritorious defenses to the claims in this matter and intend to vigorously defend against them.

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

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

In May 2019, the G.A.

Resort Condominium Association Inc., the owners’ association for the fractional owners at the Hyatt Residence Club Grand Aspen resort (“HRC Grand Aspen”) filed a lawsuit against us in the District Court for the County of Pitkin, Colorado relating to the transfer of ownership of developer-owned fractional interests at HRC Grand Aspen to the HPC Trust Club for sale and use as a part of the Hyatt Residence Club Portfolio Program.

The lawsuit was subsequently removed to the U.S.

District Court for the District of Colorado.

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

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

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

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

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

In September 2022, the U.S.

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

In February 2023, plaintiffs agreed to dismiss the case with prejudice pursuant to a settlement for a nominal amount.

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

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

We have accrued for other claims and lawsuits, but the

amount accrued is not material individually or in the aggregate.

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

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

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Operating lease assets Other assets $ 102 $ 96

Finance lease assets Property and equipment 89 8

Finance lease assets Property and equipment, net 88 89

Operating lease liabilities Accrued liabilities $ 114 $ 108

Finance lease liabilities Debt 83 8

Finance lease liabilities Debt, net 86 83

The following table presents the lease costs and the classification on our Income Statements for the years ended December 31, 2022 and December 31, 2021.

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Variable lease cost Marketing and sales expense 3 2

The following table presents the maturity of our operating and financing lease liabilities as of December 31, 2021.

The following table presents the maturity of our operating and finance lease liabilities as of December 31, 2022.

($ in millions) Operating Leases Finance Leases Total

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Leases That Have Not Yet Commenced

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

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

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

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

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

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

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

We expect the lease term of the new office building to commence in the first half of 2023 when construction is substantially complete, at which time we will record a right-of-use asset and corresponding lease liability on our balance sheet.

SECURITIZED DEBT

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

Warehouse Credit Facility, gross (2)

Unamortized debt issuance costs (3)

$ 1,938 $ 1,856

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(1) Interest rates as of December 31, 2022 range from 1.5 % to 6.4 %, with a weighted average interest rate of 3.3 %.

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

(2) Effective interest rate as of December 31, 2022 was 5.5 %.

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

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

See Footnote 19 “Variable Interest Entities” for a discussion of the collateral for the non-recourse debt associated with our securitized debt.

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

Vacation Ownership Notes Receivable Securitizations

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

Vacation Ownership Notes Receivable Securitizations Warehouse Credit Facility (1)

($ in millions)

Payments Year

2023 $ 177 $ 8 $ 185

2024 181 8 189

2025 182 146 328

2026 186 — 186

2027 184 — 184

Thereafter 889 — 889

$ 1,799 $ 162 $ 1,961

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(1) Excludes future Warehouse Credit Facility renewals.

Vacation Ownership Notes Receivable Securitizations

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

During 2021, and as of December 31, 2021, no securitized vacation ownership notes receivable pools were out of compliance with their respective established parameters.

As of December 31, 2021, we had 14 securitized vacation ownership notes receivable pools outstanding.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

During the fourth quarter of 2022, we completed the securitization of a pool of $ 286 million of vacation ownership notes receivable.

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

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

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

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

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

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

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

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

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

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

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

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

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

In connection with this securitization, we redeemed the remaining vacation ownership loan

backed notes issued in a prior securitization transaction for approximately $ 22 million.

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

Warehouse Credit Facility

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

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

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

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

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

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

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

The carrying amount of the vacation ownership notes receivable securitized was $ 125 million.

The average advance rate was 81 %, which resulted in gross proceeds of $ 102 million.

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

During the third quarter of 2022, we amended certain agreements associated with our Warehouse Credit Facility (the “Warehouse Amendment”).

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

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

The Warehouse Credit Facility now uses a U.S.

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

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

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

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

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

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

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

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

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Net proceeds were $ 159 million due to the funding of reserve accounts of $ 4 million.

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

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

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Unamortized debt discount and issuance costs ( 6 ) ( 7 )

2029 Notes 500 —

Unamortized debt discount and issuance costs ( 7 ) —

Corporate Credit Facility

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Unamortized debt discount and issuance costs ( 10 ) ( 114 )

2027 Convertible Notes 575 —

Unamortized debt discount and issuance costs ( 15 ) —

Non-interest bearing note payable 10 —

Finance leases 86 83

$ 3,088 $ 2,631

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

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

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

Payments Year

2022 $ — $ — $ — $ — $ 230 $ — $ 230

2023 — — — — — — —

2024 — — — — — — —

2025 250 — — 784 — — 1,034

2026 — — — — — 575 575

Thereafter — 350 500 — — — 850

($ in millions) 2023 2024 2025 2026 2027 Thereafter Total

2025 Notes $ 250 $ — $ — $ — $ — $ — $ 250

2028 Notes — — — — — 350 350

2029 Notes — — — — — 500 500

Term Loan — — 784 — — — 784

2026 Convertible Notes — — — 575 — — 575

2027 Convertible Notes — — — — 575 — 575

Non-interest bearing notes payable 6 4 — — — — 10

$ 256 $ 4 $ 784 $ 575 $ 575 $ 850 $ 3,044

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

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

Our senior notes include:

• $ 500 million aggregate principal amount of 6.125 % Senior Secured Notes due 2025 issued in the second quarter of 2020 with a maturity date of September 15, 2025 (the “2025 Notes”), of which $ 250 million of principal was outstanding as of December 31, 2022.

• $ 350 million aggregate principal amount of 4.750 % Senior Unsecured Notes due 2028 issued in the fourth quarter of 2019 with a maturity date of January 15, 2028 (the “2028 Notes”).

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

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

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

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

During the fourth quarter of 2022, we delivered a redemption notice for the remaining $ 250 million of 2025 Notes outstanding pursuant to the terms of the indenture governing the 2025 Notes.

Subsequent to the end of 2022, we redeemed, prior to maturity, the remaining $ 250 million aggregate principal amount of the 2025 Notes with proceeds from the issuance of the 2027 Convertible Notes (as discussed below).

In connection with this redemption, we expect to incur charges of approximately $ 10 million, inclusive of a redemption premium and the write-off of unamortized debt issuance costs, which will be recorded in the first quarter of 2023.

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

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

The net proceeds from the 2028 Notes were used (i) to redeem all of the outstanding 5.625 % Senior Unsecured Notes due 2023 assumed in connection with the ILG Acquisition (the “IAC Notes”), (ii) to redeem all of the outstanding 5.625 % Senior Unsecured Notes due 2023 offered in exchange for the IAC Notes during the third quarter of 2018 (the “Exchange Notes”), (iii) to repay a portion of the 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.

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, (iii) to repay a portion of the then outstanding borrowings under our Revolving Corporate Credit Facility, (iv) to pay transaction expenses and fees in connection with each of the foregoing and (v) for general corporate purposes.

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

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We may redeem some or all of the 2029 Notes prior to maturity under the terms provided in the indenture.

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

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

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

Corporate Credit Facility

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

The Term Loan bears interest at LIBOR plus 1.75 %.

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

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

Any amounts borrowed under that facility, as well as obligations with respect to letters of credit issued pursuant to that facility, are secured by a perfected first priority security interest in substantially all of the assets of the borrower under, and guarantors of, that facility (which include Marriott Vacations Worldwide and each of our direct and indirect, existing and future, domestic subsidiaries, excluding certain bankruptcy remote special purpose subsidiaries), in each case including inventory, subject to certain exceptions.

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

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

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

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

Our corporate credit facility (“Corporate Credit Facility”), which provides support for our business, including ongoing liquidity and letters of credit, includes a $ 900 million term loan facility (the “Term Loan”), which matures on August 31, 2025, and bears interest at LIBOR plus 1.75 %, and a revolving credit facility (the “Revolving Corporate Credit Facility”), which includes a letter of credit sub-facility of $ 75 million.

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

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

Interest rates for other select non-U.S.

dollar borrowings were also amended to be based on updated variable rate indices.

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

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

Borrowings under the Revolving Corporate Credit Facility generally bear interest at a floating rate plus an applicable margin that varies from 0.75 % to 2.25 % depending on the type of loan and our leverage.

In addition, we pay a commitment fee on the unused availability under the Revolving Corporate Credit Facility at a rate that varies from 25 to 35 basis points per annum, also depending on our leverage.

Any amounts borrowed under that facility, as well as obligations with respect to letters of credit issued pursuant to that facility, are secured by a perfected first priority security interest in substantially all of the assets of the borrower under, and guarantors of, that facility (which include MVWC and certain of our direct and indirect, existing and future, domestic subsidiaries, excluding certain bankruptcy remote special purpose subsidiaries), in each case including inventory, subject to certain exceptions.

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

During the fourth quarter of 2022, a portion of the proceeds from the issuance of the 2027 Convertible Notes was used to repay amounts outstanding on the Revolving Corporate Credit Facility (as discussed further below).

As of December 31, 2022, there were no amounts outstanding under the Revolving Corporate Credit Facility.

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

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

Both the interest rate swaps and the interest rate collar have been designated and qualify as cash flow hedges of interest rate risk and recorded in Other liabilities on our Balance Sheet as of December 31, 2021 and December 31, 2020.

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

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

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

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

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

The following table reflects the activity in accumulated other comprehensive income or loss related to our derivative instruments during 2022, 2021 and 2020.

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

($ in millions) 2022 2021 2020

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2022 Convertible Notes

During 2017, we issued $ 230 million of 2022 Convertible Notes that bear interest at a rate of 1.50 %, payable in cash semi-annually.

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

There are no financial or operating covenants related to the 2022 Convertible Notes.

The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes, and was subject to adjustment as of December 31, 2021 to 6.8282 shares of common stock per $ 1,000 principal amount of 2022 Convertible Notes (equivalent to a conversion price of approximately $ 146.45 per share of our common stock), as a result of the dividends that have been declared since issuance that were greater than the quarterly dividend when the 2022 Convertible Notes were issued.

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

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

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

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

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

Adoption of ASU 2020-06 (1)

— 5 — 5 ( 33 )

At January 1, 2022 230 — ( 1 ) 229 —

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

— ( 5 ) — ( 5 ) —

Amortization — 5 1 6 —

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

At December 31, 2022 $ — $ — $ — $ — $ —

________________________

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

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

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

(2) We issued notice of our intent to settle the 2022 Convertible Notes in cash, which became irrevocable on June 15, 2022.

As a result, our previous exception from derivative accounting for the conversion feature of the 2022 Convertible Notes no longer applied and we were required to fair value this conversion feature at that time.

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

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

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

($ in millions) 2022 2021 2020

Contractual interest expense $ 3 $ 3 $ 3

Amortization of debt discount 5 8 7

Amortization of debt issuance costs 1 1 1

$ 9 $ 12 $ 11

2022 Convertible Note Hedges and Warrants

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

convertible note hedge transactions with respect to our common stock (“2022 Convertible Note Hedges”) and warrant transactions (“2022 Warrants”), whereby we sold to the counterparties to the 2022 Convertible Note Hedges warrants to acquire approximately 1.6 million shares of our common stock.

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

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

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

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

As of December 31, 2022, the strike price of the 2022 Warrants was subject to adjustment to approximately $ 175.62 , as a result of the dividends we declared since the issuance of the 2022 Warrants that were greater than the quarterly dividend we paid when the 2022 Warrants were issued.

As of December 31, 2022, no 2022 Warrants have been exercised.

2026 Convertible Notes

During 2021, we issued $ 575 million aggregate principal amount of convertible senior notes (the “2026 Convertible Notes”) that bear interest at a rate of 0.00 %.

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

The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes, and was subject to adjustment as of December 31, 2022 to 5.9978 shares of common stock per $1,000 principal amount of 2026 Convertible Notes (equivalent to a conversion price of $ 166.73 per share of our common stock), as a result of the dividends we declared since issuance of the 2026 Convertible Notes that were greater than the quarterly dividend we paid when the 2026 Convertible Notes were issued.

Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election.

It is our intent to settle conversions of the 2022 Convertible Notes through combination settlement, which contemplates repayment in cash of the principal amount and repayment in shares of our common stock of any excess of the conversion value over the principal amount.

As of December 31, 2021, the effective interest rate was 4.73 % and the remaining discount amortization period was less than one year .

Holders may convert their 2022 Convertible Notes prior to June 15, 2022 only under certain circumstances.

We may not redeem the 2022 Convertible Notes prior to their maturity date.

If we undergo a fundamental change, as described in the indenture, subject to certain conditions, holders may require us to repurchase for cash all or any portion of their 2022 Convertible Notes, at a repurchase price equal to 100 % of the principal amount of the 2022 Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.

If certain fundamental changes referred to in the indenture as make-whole fundamental changes occur, the conversion rate applicable to the 2022 Convertible Notes may increase.

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

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

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

________________________

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

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

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

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

($ in millions) 2022 2021 2020

Contractual interest expense $ 3 $ 3 $ 3

Amortization of debt discount $ — $ 22 $ —

Amortization of debt issuance costs 3 2 —

$ 12 $ 11 $ 11

2026 Convertible Note Hedges and Warrants

In connection with the offering of the 2026 Convertible Notes, we concurrently entered into the following privately-negotiated separate transactions:

convertible note hedge transactions with respect to our common stock (“2022 Convertible Note Hedges”), covering a total of approximately 1.5 million shares of our common stock, and warrant transactions (“2022 Warrants”), whereby we sold to the counterparties to the 2022 Convertible Note Hedges warrants to acquire approximately 1.5 million shares of our common stock.

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

As of December 31, 2022, the strike prices of the 2026 Convertible Note Hedges and the 2026 Warrants were subject to adjustment to approximately $ 166.73 and $ 208.41 , respectively, and no 2026 Convertible Note Hedges or 2026 Warrants have been exercised.

2027 Convertible Notes

During 2021, we issued $ 575 million aggregate principal amount of 2026 Convertible Notes that bear interest at a rate of 0.00 %.

The 2026 Convertible Notes are governed by an indenture dated February 2, 2021 (the “Indenture”) among the Company, Marriott Ownership Resorts, Inc.

During the fourth quarter of 2022, we issued $ 575 million aggregate principal amount of convertible senior notes (the “2027 Convertible Notes”) that bear interest at a rate of 3.25 %.

The 2027 Convertible Notes are governed by an indenture dated December 8, 2022 (the “Indenture”) among MVWC, Marriott Ownership Resorts, Inc.

and the other guarantors party thereto (the “Guarantors”) and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”).

We received net proceeds from the offering of approximately $ 497 million after adjusting for debt issuance costs, including the discount to the initial purchasers, the cost of the 2027 Convertible Note Hedges, and proceeds from the 2027 Warrants (both as defined below).

The 2026 Convertible Notes do not bear regular interest and mature on January 15, 2026, unless earlier repurchased or converted in accordance with their terms prior to that date.

On or after October 15, 2025, and prior to the close of business on the second scheduled trading day immediately preceding the stated maturity date of the 2026 Convertible Notes, holders may convert their 2026 Convertible Notes at their option.

The conversion rate is subject to adjustment for certain events as described in the Indenture, and was subject to adjustment as of December 31, 2021 to 5.8884 shares of common stock per $1,000 principal amount of 2026 Convertible Notes (equivalent to a conversion price of $ 169.83 per share of our common stock), as a result of the dividends that have been declared since issuance.

The 2027 Convertible Notes bear interest at a rate of 3.25 %, payable in cash semi-annually on June 15 and December 15 of each year, beginning on June 15, 2023.

The 2027 Convertible Notes mature on December 15, 2027, unless earlier repurchased or converted in accordance with their terms prior to that date.

On or after September 15, 2027, and prior to the close of business on the second scheduled trading day immediately preceding the stated maturity date of the 2027 Convertible Notes, holders may convert their 2027 Convertible Notes at their option.

The 2027 Convertible Notes are convertible at a rate of 5.2729 shares of common stock per $1,000 principal amount of 2027 Convertible Notes (equivalent to a conversion price of $ 189.65 per share of our common stock) as of December 31, 2022.

The conversion rate is subject to adjustment for certain events as described in the Indenture.

Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election.

It is our intent to settle conversions of the 2027 Convertible Notes through combination settlement, which contemplates repayment in cash of the principal amount and repayment in shares of our common stock of any excess of the conversion value over the principal amount.

Holders may convert their 2026 Convertible Notes prior to October 15, 2025 only under the following circumstances:

As of December 31, 2022, the effective interest rate was 3.88 %.

Holders may convert their 2027 Convertible Notes prior to September 15, 2027 only under the following circumstances:

• during any calendar quarter commencing after the calendar quarter ending on March 31, 2023 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

• during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of 2027 Convertible Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the common stock and the conversion rate on each such trading day;

• if we call any or all of the holder’s notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date;

• upon the occurrence of specified corporate events as described in the Indenture.

We may not redeem the 2026 Convertible Notes prior to their maturity date, and no sinking fund is provided for them.

While the 2027 Convertible Notes are callable in certain circumstances prior to their maturity date, no sinking fund has been provided for them.

If we undergo a fundamental change, as described in the Indenture, subject to certain conditions, holders may require us to repurchase for cash all or any portion of their 2027 Convertible Notes.

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The 2027 Convertible Notes are our general senior unsecured obligations and rank equally in right of payment with all of our existing and future senior indebtedness, and senior in right of payment to all of our future subordinated debt.

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

The 2027 Convertible Notes will be effectively subordinated to any of our existing and future secured debt to the extent of the value of the assets securing such debt, including the guarantees of borrowings outstanding under the Corporate Credit Facility.

The 2027 Convertible Notes are structurally subordinated to any existing and future indebtedness and any other liabilities and obligations of any of our subsidiaries that are not guarantors of the 2027 Convertible Notes.

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

The guarantees are effectively subordinated to any of the Guarantors’ existing and future secured debt to the extent of the value of the assets securing such debt, including any borrowings outstanding under the Corporate Credit Facility and the 2025 Notes.

The guarantees are structurally subordinated to any existing and future indebtedness and any other liabilities and obligations of any of our subsidiaries that are not guarantors of the 2027 Convertible Notes.

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In case of certain events of bankruptcy or insolvency involving the Company, all of the principal of and accrued and unpaid interest on the 2027 Convertible Notes will automatically become immediately due and payable.

We separated the 2026 Convertible Notes into liability and equity components and allocated $ 449 million to the liability component and $ 126 million to the equity component.

The resulting debt discount is amortized as interest expense.

As of December 31, 2021, the effective interest rate was 0.00 % and the remaining debt discount amortization period was 4 years.

We had debt issuance costs, including initial purchasers’ discount to underwriters, of $ 15 million related to the 2026 Convertible Notes, which were allocated to the liability and equity components based on their relative values.

Issuance costs attributable to the liability component are amortized to interest expense over the term of the 2026 Convertible Notes, and issuance costs attributable to the equity component are included along with the equity component in shareholders’ equity.

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

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

Liability component

Principal amount $ 575 $ —

Unamortized debt discount ( 104 ) —

Unamortized debt issuance costs ( 10 ) —

Net carrying amount of the liability component $ 461 $ —

Carrying amount of equity component, net of issuance costs $ 117 $ —

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

($ in millions) 2021 2020 2019

Amortization of debt discount $ 22 $ — $ —

Amortization of debt issuance costs 2 — —

We had debt issuance costs, including initial purchasers’ discount to underwriters, of $ 14 million related to the 2027 Convertible Notes.

Issuance costs are amortized to interest expense over the term of the 2027 Convertible Notes.

2022, our contractual interest expense and amortization of debt issuance costs were $ 1 million and less than $ 1 million, respectively, related to the 2027 Convertible Notes.

2027 Convertible Note Hedges and Warrants

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The cost of the 2027 Convertible Note Hedges is expected to be tax deductible as an original issue discount over the life of the 2027 Convertible Notes, as the 2027 Convertible Notes and the 2027 Convertible Note Hedges represent an integrated debt instrument for tax purposes.

The cost of the 2026 Convertible Note Hedges was recorded as a reduction of Additional paid-in capital on our Balance Sheet.

The cost of the 2027 Convertible Note Hedges was recorded as a reduction of Additional paid-in capital on our Balance Sheet as of December 31, 2022.

Concurrently with the entry into the 2027 Convertible Note Hedges, we separately entered into privately-negotiated warrant transactions (the “2027 Warrants”), whereby we sold to the counterparties to the 2027 Convertible Note Hedges warrants to acquire, collectively, subject to anti-dilution adjustments, approximately 3 million shares of our common stock at an initial strike price of $ 286.26 per share.

We received aggregate proceeds of $ 43 million from the sale of the 2027 Warrants to the counterparties.

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

The proceeds from the issuance of the 2027 Warrants were recorded as an increase to Additional paid-in capital on our Balance Sheet as of December 31, 2022.

Taken together, the 2027 Convertible Note Hedges and the 2027 Warrants are generally expected to reduce the potential dilution to our common stock (or, in the event the conversion of the 2027 Convertible Notes is settled in cash, to reduce our cash payment obligation) in the event that at the time of conversion our stock price exceeds the conversion price under the 2027 Convertible Notes and to effectively increase the overall conversion price to the Company from $ 189.65 per share to $ 286.26 per share.

The 2026 Warrants will expire in ratable portions on a series of expiration dates commencing on April 15, 2026.

The 2027 Warrants will expire in ratable portions on a series of expiration dates commencing in March 2028.

The 2027 Convertible Notes, the 2027 Convertible Note Hedges, and the 2027 Warrants are transactions that are separate from each other.

Holders of any such instrument have no rights with respect to the other instruments.

As of December 31, 2021, the strike prices of the 2026 Convertible Note Hedges and the 2026 Warrants were subject to adjustment to approximately $ 169.83 and $ 212.28 , respectively, and no 2026 Convertible Note Hedges or 2026 Warrants have been exercised.

As of December 31, 2022, no 2027 Convertible Note Hedges or 2027 Warrants have been exercised.

Finance Leases

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Amounts borrowed under the Corporate Credit Facility and the 2025 Notes, as well as obligations with respect to letters of credit issued pursuant to the Corporate Credit Facility, are secured by a perfected first priority security interest in substantially all of the assets of the borrowers under, and guarantors of, that facility (which include MVWC and certain of our direct and indirect, existing and future, domestic subsidiaries, excluding certain bankruptcy remote special purpose subsidiaries), in each case including inventory, subject to certain exceptions.

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

In addition, the Corporate Credit Facility, the 2026 Convertible Notes, the 2027 Convertible Notes, the 2025 Notes, the 2028 Notes, and the 2029 Notes are guaranteed by MVWC and certain of our direct and indirect, existing and future, domestic subsidiaries, excluding bankruptcy remote special purpose subsidiaries.

SHAREHOLDERS’ EQUITY

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Share Repurchase Program

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

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

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

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

As of December 31, 2022, approximately $ 270 million remained available for share repurchases under the Share Repurchase Program.

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

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

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

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

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

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

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

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

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

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

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

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

As of December 31, 2021, $ 172 million remained available for repurchase under the authorization approved by the Board of Directors.

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

Subsequent to the end of 2021, our Board of Directors authorized the repurchase of up to an additional $ 300 million of our common stock, as well as the extension of the duration of our existing share repurchase program to March 31, 2023.

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

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Declaration Date Shareholder Record Date Distribution Date Dividend per Share

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

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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.

Noncontrolling Interests

Owners’ Associations

Noncontrolling Interests - Owners’ Associations

We consolidate certain owners’ associations.

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

Noncontrolling interests represent the portion of the owners’ associations related to third-party VOI owners.

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

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

(1) RSUs of our common stock, (2) SARs relating to our common stock, and (3) stock options to purchase our common stock.

(1) RSUs of our common stock, (2) SARs relating to our common stock, and (3) options to purchase our common stock.

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

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_________________________

(1) As of December 31, 2021, the weighted average remaining term for RSU grants outstanding at year-end 2021 was one to two years and we expect that deferred compensation expense will be recognized over a weighted average period of one to three years .

(1) As of December 31, 2022, the weighted average remaining term for RSU grants outstanding at year-end 2022 was one to two years and we expect that deferred compensation expense will be recognized over a weighted average period of one to two years .

Restricted Stock Units

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The weighted average grant-date fair value per RSU granted in 2021 and 2020 was $ 161.42 and $ 95.92 , respectively.

The fair value of the RSUs which vested in 2021, 2020, and 2019 was $ 46 million, $ 30 million, and $ 34 million, respectively, and included $ 3 million, $ 6 million, and $ 15 million, respectively, related to RSUs converted from ILG equity-based RSUs to MVW equity-based RSUs in the ILG Acquisition.

The fair value of the RSUs which vested in 2022, 2021, and 2020 was $ 65 million, $ 46 million, and $ 30 million, respectively.

The fair value of the RSUs which vested in 2021 and 2020 included $ 3 million and $ 6 million, respectively, related to RSUs converted from ILG equity-based RSUs to MVW equity-based RSUs in the ILG Acquisition.

Stock Appreciation Rights

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Employee Stock Purchase Plan

During 2015, the Board of Directors adopted, and our shareholders subsequently approved, the Marriott Vacations Worldwide Corporation Employee Stock Purchase Plan (the “ESPP”), which became effective during 2015.

During 2015, our Board of Directors adopted, and our shareholders subsequently approved, the Marriott Vacations Worldwide Corporation Employee Stock Purchase Plan (the “ESPP”), which became effective during 2015.

A total of 500,000 shares of common stock may be purchased under the ESPP.

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

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

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

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

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We also made voluntary repurchases of $ 338 million, $ 200 million and $ 383 million of other non-defaulted vacation ownership notes receivable during 2022, 2021 and 2020, respectively, to retire previous vacation ownership notes receivable securitizations.

Our maximum exposure to potential loss relating to the special purpose entities that purchase, sell, and own these vacation ownership notes receivable is the overcollateralization amount (the difference between the loan collateral balance and the balance on the outstanding vacation ownership notes receivable), plus cash reserves and any residual interest in future cash flows from collateral.

Our maximum exposure to potential loss relating to the special purpose entities that purchase, sell, and own these vacation ownership notes receivable is the overcollateralization amount (the difference between the loan collateral balance and the balance of the outstanding vacation ownership notes receivable), plus cash reserves and any residual interest in future cash flows from collateral.

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

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Other Variable Interest Entities

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

If we are unable to negotiate a capital efficient inventory arrangement, we are committed to purchase the property, in its then current form, for $ 104 million in 2022, unless it has been sold to another party.

The property is held by a VIE for which we are not the primary beneficiary as we do not control the operations of the VIE.

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

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

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

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

Accordingly, we have not consolidated the VIE.

As of December 31, 2021, our Balance Sheet reflected $ 1 million in Accounts Receivable, including a note receivable of less than $ 1 million, related to this VIE.

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

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

We expect to acquire the

property over time and as of December 31, 2022, we expect to make payments for the property as follows:

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

As of December 31, 2022, our Balance Sheet reflected $ 1 million in Accounts and contracts receivable, including a note receivable of less than $ 1 million, $ 1 million in Property and equipment, and $ 1 million in Accrued liabilities.

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

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Regis brand for specified fractional ownership resorts.

In addition, as part of the Welk Acquisition, we acquired the short-term license to use the Welk brand in connection with the continued operations of the Welk business.

We intend to rebrand all Welk resorts as Hyatt-branded resorts once all necessary approvals have been obtained.

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

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

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

We provide 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, owners’ association management, and other related products and services.

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

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

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

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

We allocate depreciation, other gains and losses, equity in earnings or losses from our joint ventures, and noncontrolling interest to each of our segments as appropriate.

We allocate depreciation and amortization, other gains and losses, equity in earnings or losses from our joint ventures, and noncontrolling interest to each of our segments as appropriate.

Corporate and other represents that portion of our results that are not allocable to our segments, including those relating to consolidated owners’ associations, as our CODM does not use this information to make operating segment resource allocations.

Prior year segment information has been reclassified to conform to the current reportable segment presentation.

Our CODM uses Adjusted EBITDA to evaluate the profitability of our operating segments, and the components of net income or loss attributable to common shareholders excluded from Adjusted EBITDA are not separately evaluated.

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

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

Our CODM uses Adjusted Earnings before Interest Expense, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) to evaluate the profitability of our operating segments, and the components of net income or loss attributable to common shareholders excluded from Adjusted EBITDA are not separately evaluated.

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

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

($ in millions) 2022 2021 2020

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Exchange & Third-Party Management 31 48 32

Total segment depreciation 137 111 115

Total segment depreciation and amortization 123 137 111

Corporate and other 9 9 12

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$ 215 $ 297 $ 202

Geographic Information

We conduct business globally, and our operations outside the United States represented approximately 10 %, 10 %, and 11 % of our revenues, excluding cost reimbursements, for 2021, 2020, and 2019, respectively.

Revenues Excluding Cost Reimbursements

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$ 3,289 $ 2,762 $ 1,844

Property and Equipment, net

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

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data