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Item 8. Financial Statements and Supplementary Data

2024-02-27 compared with 2023-02-27 · 426 added, 587 removed, 1421 unchanged (42% of the section changed)

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Consolidated Statements of Cash Flows

Consolidated Statements of Shareholders’ Equity

Consolidated Statements of Stockholders’ Equity

Notes to Consolidated Financial Statements

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Securitized Debt

Shareholders' Equity

Stockholders ' Equity

Share-based Compensation

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Business Segments

Impairment and Restructuring

MANAGEMENT’S REPORT ON

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Marriott Vacations Worldwide Corporation

To the Stockholders and the Board of Directors of Marriott Vacations Worldwide Corporation

Opinion on Internal Control Over Financial Reporting

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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, 2023, based on the COSO criteria.

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.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and our report dated February 27, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Marriott Vacations Worldwide Corporation

To the Stockholders and the Board of Directors of Marriott Vacations Worldwide Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Marriott Vacations Worldwide Corporation (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 (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Marriott Vacations Worldwide Corporation (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S.

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We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

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

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

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

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

Auditing the Company’s valuation of originated and acquired vacation ownership notes receivable was challenging due to the nature and extent of audit effort 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 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.

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 default rates 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 the defaults projected from the analyses.

We also compared the assumptions regarding future defaults to the Company’s historical and current default rates 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.

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Gains (losses) and other income (expense), net 47 40 ( 51 )

Interest expense ( 118 ) ( 164 ) ( 150 )

Interest expense, net ( 145 ) ( 118 ) ( 164 )

Transaction and integration costs ( 37 ) ( 125 ) ( 110 )

INCOME (LOSS) BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS 582 127 ( 340 )

(Provision for) benefit from income taxes ( 191 ) ( 74 ) 84

NET INCOME (LOSS) 391 53 ( 256 )

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

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 391 $ 49 $ ( 275 )

EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

Other ( 3 ) 1 2

INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS 398 582 127

Provision for income taxes ( 146 ) ( 191 ) ( 74 )

NET INCOME 252 391 53

Net loss (income) attributable to noncontrolling interests 2 — ( 4 )

NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS $ 254 $ 391 $ 49

EARNINGS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS

Basic $ 6.96 $ 9.69 $ 1.15

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2023 2022 2021

NET INCOME (LOSS) $ 391 $ 53 $ ( 256 )

NET INCOME $ 252 $ 391 $ 53

Foreign currency translation adjustments 11 10 11

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

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

Derivative instrument adjustment, net of tax ( 10 ) 31 21

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX 31 32 ( 12 )

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

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

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 422 $ 81 $ ( 287 )

OTHER COMPREHENSIVE INCOME, NET OF TAX 1 31 32

Net loss (income) attributable to noncontrolling interests 2 — ( 4 )

COMPREHENSIVE LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS 2 — ( 4 )

COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS $ 255 $ 422 $ 81

See Notes to Consolidated Financial Statements

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Additional paid-in capital 3,955 3,941

Accumulated other comprehensive income (loss) 15 ( 16 )

Accumulated other comprehensive income 16 15

Retained earnings 742 593

TOTAL MVW SHAREHOLDERS' EQUITY 2,496 2,976

TOTAL MVW STOCKHOLDERS' EQUITY 2,382 2,496

Noncontrolling interests — 2

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OPERATING ACTIVITIES

Net income (loss) $ 391 $ 53 $ ( 256 )

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

Net income $ 252 $ 391 $ 53

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

Depreciation and amortization of intangibles 135 132 146

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Deconsolidation of certain Consolidated Property Owners' Associations — ( 48 ) ( 168 )

Purchase of vacation ownership units for future transfer to inventory ( 12 ) ( 98 ) ( 61 )

Purchase of property for future transfer to inventory ( 27 ) ( 12 ) ( 98 )

Other, net ( 1 ) 3 —

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Other, net — 2 2

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

Net cash, cash equivalents, and restricted cash (used in) provided by investing activities ( 112 ) 16 ( 213 )

See Notes to Consolidated Financial Statements

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Proceeds from issuance of warrants — 43 70

Finance lease incentive 10 3 —

Finance lease payment ( 5 ) ( 4 ) ( 5 )

Payment of debt issuance costs ( 12 ) ( 15 ) ( 22 )

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

Repurchase of common stock ( 286 ) ( 701 ) ( 78 )

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Payment of withholding taxes on vesting of restricted stock units ( 12 ) ( 23 ) ( 20 )

Other, net 3 — —

Net cash, cash equivalents, and restricted cash (used in) provided by financing activities ( 486 ) ( 317 ) 23

Net cash, cash equivalents, and restricted cash used in financing activities ( 401 ) ( 486 ) ( 317 )

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

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

SUPPLEMENTAL DISCLOSURES

Dividends payable 27 27 23

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MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Fiscal Years 2023, 2022 and 2021

(In millions)

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

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

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

— Derivative instrument adjustment — — — ( 18 ) — ( 18 ) — ( 18 )

0.3 Amounts related to share-based compensation — — 21 — — 21 — 21

— Repurchase of common stock — ( 82 ) — — — ( 82 ) — ( 82 )

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

— 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

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

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

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

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

0.2 Share-based compensation plans — 1 29 — — 30 — 30

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

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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

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

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

0.2 Share-based compensation plans — 2 13 — — 15 — 15

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

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75.7 BALANCE AT YEAR-END 2022 1 ( 2,054 ) 3,941 15 593 2,496 2 2,498

Continued - See Notes to Consolidated Financial Statements

MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)

Fiscal Years 2023, 2022 and 2021

(In millions)

75.7 BALANCE AT YEAR-END 2022 1 ( 2,054 ) 3,941 15 593 2,496 2 2,498

— Net income (loss) — — — — 254 254 ( 2 ) 252

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

— Derivative instrument adjustment — — — ( 10 ) — ( 10 ) — ( 10 )

0.1 Share-based compensation plans — 8 14 — — 22 — 22

— Repurchase of common stock — ( 286 ) — — — ( 286 ) — ( 286 )

— Dividends — — — — ( 105 ) ( 105 ) — ( 105 )

75.8 BALANCE AT YEAR-END 2023 $ 1 $ ( 2,332 ) $ 3,955 $ 16 $ 742 $ 2,382 $ — $ 2,382

See Notes to Consolidated Financial Statements

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The Financial Statements presented herein and discussed below include 100 % of the assets, liabilities, revenues, expenses, and cash flows of Marriott Vacations Worldwide, all entities in which Marriott Vacations Worldwide has a controlling voting interest (“subsidiaries”), and those variable interest entities (“VIEs”) for which Marriott Vacations Worldwide is the primary beneficiary in accordance with consolidation accounting guidance.

References in these Financial Statements to net income or loss attributable to common shareholders and MVW shareholders’ equity do not include noncontrolling interests, which represent the outside ownership of our consolidated non-wholly owned entities and are reported separately.

References in these Financial Statements to net income or loss attributable to common stockholders and MVW stockholders’ equity do not include noncontrolling interests, which represent the outside ownership of our consolidated non-wholly owned entities and are reported separately.

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

Pursuant to a change in control of certain consolidated owners’ associations 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 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.

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

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

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

We refer to the business and brand that we acquired in the Welk Acquisition as “Legacy-Welk.” The Financial Statements in this report for fiscal year 2021 include Welk’s results of operations for the last three quarters of 2021.

During 2023, we rebranded all Legacy-Welk resorts as Hyatt Vacation Club resorts.

See Footnote 3 “Acquisitions and Dispositions” for more information on the Welk Acquisition.

Acquisition of ILG and Disposition of VRI America

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(“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.” 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.

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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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In connection with the sale of vacation ownership products, we provide sales incentives to certain purchasers and, in certain cases, membership in a brand affiliated club.

Non-cash incentives typically include Marriott Bonvoy points, Hyatt’s customer loyalty program points (“World of Hyatt” points), or an alternative sales incentive that we refer to as “plus points.” Plus points are redeemable for stays at our resorts or for use in an exclusive selection of travel packages provided by affiliate tour operators (the “Explorer Collection”), generally up to two years from the date of issuance.

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

Non-cash incentives typically include Marriott Bonvoy points, Hyatt’s customer loyalty program points (“World of Hyatt” points), or an alternative sales incentive that we refer to as “plus points.” Plus points are redeemable for stays at our resorts or for use in an exclusive selection of travel packages provided by affiliate tour operators (the “Explorer Collection” or “BEYOND”), generally up to two years from the date of issuance.

Upon execution of a legal sales agreement, we typically receive an upfront deposit from our customer with the remainder of the purchase price for the vacation ownership product to either be collected at closing (“cash contract”) or financed by the customer through our financing programs (“financed contract”).

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

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.

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, primarily 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 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.

Revenues were reduced during 2023 by $ 69 million due to changes in our estimates of variable consideration for performance obligations that were satisfied in prior periods, primarily due to the increase in our reserve for vacation ownership notes receivable.

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.

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

See Footnote 6 “Vacation Ownership Notes Receivable” for additional information on our reserve for vacation ownership notes receivable reserve and adjustments recorded for the years presented.

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

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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.

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

We have not changed contract terms or business practices regarding how control of Hyatt Vacation Club VOIs is transferred to the customer.

As such, we recognize revenue on the sale of Hyatt Vacation Club VOIs at expiration of rescission, except that revenue on the sale of VOIs derived from Legacy-Welk is recognized 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.

For non-cash incentives provided by third parties (i.e.

Marriott Bonvoy points, World of Hyatt points or third-party Explorer Collection offerings), we evaluated whether we control the underlying good or service prior to delivery to the customer.

Marriott Bonvoy points, World of Hyatt points, third-party Explorer Collection offerings, or BEYOND), we evaluated whether we control the underlying good or service prior to delivery to the customer.

We concluded that we are an agent for those non-cash incentives which we do not control prior to delivery and as such record the related revenue net of the related cost upon recognition.

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Membership fees and club dues are received in advance of providing access to the exchange services, are recorded as Deferred revenue on our Balance Sheets and are earned regardless of whether exchange services are provided.

Generally, Interval International memberships are cancellable and refundable on a pro-rata basis, with the exception of the Interval International network’s Platinum tier which is non-refundable.

Generally, Interval Network memberships are cancellable and refundable on a pro-rata basis, with the exception of the Interval Network’s Platinum tier which is non-refundable.

Transaction-based fees are typically collected at a point in time.

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

In our Exchange & Third-Party Management segment, we offer vacation rental opportunities for managed properties and to members of the Interval International network and certain other membership programs from seasonal oversupply or underutilized space, as well as sourced resort accommodations.

In our Exchange & Third-Party Management segment, we offer vacation rental opportunities for managed properties and to members of the Interval Network and certain other membership programs from seasonal oversupply or underutilized space, as well as sourced resort accommodations.

We receive payments for rentals primarily through credit card charges.

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

Earnings or Loss Per Share Attributable to Common Shareholders

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

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

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

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.

Earnings or Loss Per Share Attributable to Common Stockholders

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

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

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

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

Business Combinations

We allocate the purchase price of an acquisition to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date.

We recognize as goodwill the amount by which the purchase price of an acquired entity exceeds the net of the fair values assigned to the assets acquired and liabilities assumed.

We recognize the amount by which the purchase price of an acquired entity exceeds the net of the fair values assigned to the assets acquired and liabilities assumed as goodwill.

In determining the fair values of assets acquired and liabilities assumed, we use various recognized valuation methods including the income, cost and market approaches.

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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 is amortized;

An intangible asset with a finite useful life is amortized;

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

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As part of the ILG Acquisition, we acquired existing portfolios of vacation ownership notes receivable.

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

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.

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.

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.

For acquired vacation ownership notes receivable, 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.

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

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

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

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

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

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

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We do not accept payments for vacation ownership notes receivable during the foreclosure process unless the amount is sufficient to pay all past due principal, interest, fees and penalties owed and fully reinstate the note.

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

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

Our inventory consists primarily of completed vacation ownership products.

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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.

Property and equipment includes our sales centers, golf courses, information technology, including internally developed capitalized software, finance lease assets, 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 VOIs are classified as property and equipment until they are registered and available for sale.

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We determine if an arrangement is or contains a lease at contract inception.

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

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

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

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

Finance leases include lease arrangements for ancillary and operations space.

Finance leases include lease arrangements for our new corporate headquarters (commencing in 2023), ancillary and operations space.

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

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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.

environments.

Right-of-use assets exclude the unamortized portion of lease incentives received.

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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.

Convertible Senior 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.

Convertible Notes

In the first quarter of 2022, we adopted 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”), using the modified retrospective method.

Prior to the adoption of ASU 2020-06, we had 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 did 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.

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.

Subsequent to the adoption of ASU 2020-06, our convertible senior notes are accounted for entirely as a liability and measured at their amortized cost.

See Footnote 8 “Earnings Per Share” and Footnote 16 “Debt” for more information .

Derivative Instruments

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We manage our exposure to these risks by monitoring available financing alternatives, through pricing policies that may take into account currency exchange rates, and by entering into derivative arrangements.

We use derivative instruments as part of our overall strategy to manage our exposure to market risks associated with fluctuations in interest rates and currency exchange rates.

As a matter of policy, we only enter into transactions that we believe will be highly effective at offsetting the underlying risk and we do not use derivatives for trading or speculative purposes.

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The rabbi trust is considered a VIE.

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

At December 31, 2022, the value of the assets held in the rabbi trust was $ 76 million, which is included in the Other line within assets on our Balance Sheets.

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

At December 31, 2023 and December 31, 2022, the value of the assets held in the rabbi trust was $ 99 million and $ 76 million, respectively, and is included in the Other line within assets on our Balance Sheets.

Share-Based Compensation Costs

During the second quarter of 2020, our shareholders approved the Marriott Vacations Worldwide Corporation 2020 Equity Incentive Plan (the “MVW Equity Plan”), which supersedes both the Marriott Vacations Worldwide Corporation Stock and Cash Incentive Plan and the Interval Leisure Group, Inc.

In 2020, our stockholders approved the Marriott Vacations Worldwide Corporation 2020 Equity Incentive Plan (the “MVW Equity Plan”), which supersedes both the Marriott Vacations Worldwide Corporation Stock and Cash Incentive Plan and the Interval Leisure Group, Inc.

2013 Stock and Incentive Plan (collectively, the “Prior Plans”).

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For share-based awards with service-only vesting conditions, we record compensation expense on a straight-line basis over the requisite service period.

For RSUs with performance vesting conditions, the number of RSUs earned, if any, is determined following the end of a performance period (typically three years ) based upon the cumulative achievement over that period of specific quantitative operating financial measures and we recognize compensation expense once it is probable that the corresponding performance condition will be achieved.

For RSUs with performance vesting conditions, the number of RSUs earned, if any, is determined following the end of a performance period (typically three years ) based upon the achievement over that period of specific quantitative operating financial measures and we recognize compensation expense once it is probable that the corresponding performance condition will be achieved.

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”).

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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.

We recognize the expense associated with these awards on our Income Statements based on the fair value of the awards as of the date that the share-based awards are granted and adjust that expense to the estimated number of awards that we expect will vest or be earned.

expect will vest or be earned.

The fair value of RSUs represents the number of awards granted multiplied by the average of the high and low market price of our common stock on the date the awards are granted, reduced by the present value of the dividends expected to be paid on the shares during the vesting period, discounted at a risk-free interest rate.

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 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 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.

See Footnote 18 “Share-Based Compensation” for more information on the MVW Equity Plan.

Employee Stock Purchase Plan

During 2015, our Board of Directors adopted, and our stockholders 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.

The ESPP allows eligible employees to purchase shares of our common stock at a price per share not less than 95 % of the fair market value per share of common stock on the purchase date, up to a maximum threshold established by the plan administrator for the offering period.

dollar is the functional currency of our consolidated entities operating in the United States.

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New Accounting Standards

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

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

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

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 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.

In the first quarter of 2023, we adopted accounting standards update (“ASU”) 2022-02, which eliminated the recognition and measurement guidance applicable to troubled debt restructurings for creditors and enhanced 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.

The adoption of ASU 2022-02 on January 1, 2023, on a prospective basis, did not have a material impact on our financial statements or disclosures other than the addition of incremental disclosures relating to gross write-offs for vacation ownership notes receivable.

See Footnote 6 “Vacation Ownership Notes Receivable” for the incremental disclosures required by the adoption of ASU 2022-02.

In 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 generally were able to 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 the second quarter of 2023, we amended our Term Loan (as defined in Footnote 16 “Debt”) and our interest rate swaps and collar to reference SOFR (as defined in Footnote 15 “Securitized Debt”) rather than LIBOR.

See Footnote 16 “Debt” for more information.

Both our Term Loan and the related interest rate swaps and collar transitioned to SOFR at the same time, effective July 31, 2023.

As of December 31, 2023, we have no other financial instruments to transition from LIBOR.

Future Adoption of Accounting Standards

Accounting Standards Update 2023-07 – “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures” (“ASU 2023-07”)

In November 2023, the FASB issued ASU 2023-07, which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance.

This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

This update should be applied retrospectively for all prior periods presented in the financial statements.

We continue to evaluate the impact that the adoption of this update, including the timing of implementation, will have on our disclosures.

Accounting Standards Update 2023-09 – “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” (“ASU 2023-09”)

In December 2023, the FASB issued ASU 2023-09, which is intended to enhance the transparency and decision usefulness of income tax disclosures.

ASU 2023-09 primarily enhances and expands both the annual income tax rate reconciliation disclosure and the annual income taxes paid disclosure.

This update is effective for fiscal years beginning after December 15, 2024 and may be adopted on a prospective or retrospective basis, with early adoption permitted.

We continue to evaluate the impact that the adoption of this update, including the timing of implementation, will have on our disclosures.

ACQUISITIONS AND DISPOSITIONS

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Inventory 111

Property and equipment 83

Property and equipment, net 83

Intangible assets 102

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Net assets acquired 80

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

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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 for 2020.

There were no Welk Acquisition-related costs included in the unaudited pro forma results below for 2021.

($ in millions, except per share data) 2021

Revenues $ 3,937

Net income (loss) $ 70 $ ( 272 )

Net income (loss) attributable to common shareholders $ 62 $ ( 291 )

EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

Basic $ 1.46 $ ( 7.04 )

Diluted $ 1.43 $ ( 7.04 )

Welk Results of Operations

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

($ in millions) 2022 2021

Revenue $ 240 $ 146

Net income $ 70

Net income attributable to common stockholders $ 62

EARNINGS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS

Diluted $ 1.43

Other Acquisitions

Savannah, Georgia

During 2023, we acquired a property in Savannah, Georgia for $ 19 million.

We plan to convert the property into a 73 -unit vacation ownership property.

The transaction was accounted for as an asset acquisition and was recorded in Property and equipment, net.

Charleston, South Carolina

During 2023, we acquired a parcel of land and an adjacent retail space in Charleston, South Carolina for $ 17 million.

We plan to develop the parcel of land into a 50 -unit vacation ownership property and use a portion of the retail space to operate a sales center.

The transaction was accounted for as an asset acquisition and was recorded in Property and equipment, net.

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).

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

As consideration for the acquisition, we paid $ 12 million in cash and issued a non-interest bearing note payable for $ 11 million, of which $ 6 million was repaid in the first quarter of 2023.

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

During 2021, we acquired 24 completed vacation ownership units and an operations building located 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, net ($ 1 million).

New York, New York

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

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

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

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

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

San Francisco, California

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

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

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

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

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

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

During 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.

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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.

As a result of the disposition, we recorded a gain of $ 17 million in Gains (losses) and other income (expense), net on our Income Statement 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 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.

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.

As a result of this disposition, we recorded a gain of $ 33 million in Gains (losses) and other income (expense), net on our Income Statement 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.

REVENUE AND RECEIVABLES

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$ 398 $ 582 $ 127

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

Our (provision for) benefit from income taxes consisted of:

($ in millions) 2023 2022 2021

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( 62 ) 5 ( 50 )

( 206 ) ( 109 ) ( 45 )

Deferred – U.S.

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( 3.0 ) 1.5 ( 5.1 )

Impact related to the CARES Act of 2020 — — 6.0

Tax rate changes ( 0.8 ) 2.8 ( 3.8 )

income (loss) (2)

income 1.5 4.5 12.9

Tax credits ( 0.6 ) ( 0.2 ) ( 0.9 )

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Change in valuation allowance

1.0 10.4 ( 7.5 )

Other items 1.0 0.2 ( 0.2 )

Effective rate 36.5 % 32.9 % 58.4 %

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(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.

(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 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.

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) The 2023 permanent differences are primarily related to non-taxable income and foreign taxes deducted in the U.S.

The 2022 permanent differences primarily relate to non-deductible interest.

The 2021 permanent differences primarily relate to the deduction of foreign taxes paid in the U.S.

For the years ended December 31, 2023, 2022 and 2021, our provision for income taxes included $ 1 million, $ 3 million, and $ 4 million of excess tax benefits resulting from equity incentive plan activities, respectively.

We conduct business in countries that grant “holidays” from income taxes for ten to thirty-year periods.

These holidays expire through 2034.

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.

As of December 31, 2023, the $ 28 million tax reserve for non-income tax issues is predominantly related to the ILG Acquisition.

We expect that we will be indemnified for liabilities of $ 4 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.

21 unchanged sentences

Right-of-use liability ( 44 ) ( 25 )

Convertible debt — ( 4 )

Other, net ( 27 ) ( 24 )

1 unchanged sentence

Total net deferred tax liabilities $ ( 266 ) $ ( 326 )

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(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.

In 2022 we established an additional valuation allowance of $ 11 million.

We have $ 117 million of foreign net operating loss carryforwards, some of which begin expiring in 2023;

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

In 2023, the change in our valuation allowance is primarily related to certain existing non-U.S.

loss carryforwards where future sources of income are no longer available for realization of the losses.

We have $ 7 million in foreign capital loss carryforwards and $ 131 million of foreign net operating loss carryforwards, some of which begin expiring in 2024;

however, a significant portion of the net operating loss carryforwards have indefinite carryforward periods.

We have $ 13 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 $ 6 million of state tax credit carryforwards.

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

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

We continue to treat the undistributed earnings of certain foreign subsidiaries as permanently reinvested.

No taxes have been accrued with respect to these undistributed earnings or any outside basis differences.

Distribution of profits from foreign subsidiaries is not expected to cause a significant incremental U.S.

tax impact in the future;

However, distributions may be subject to non-U.S.

withholding taxes if profits are distributed from certain jurisdictions.

Our present intention is to indefinitely reinvest residual historic undistributed accumulated earnings associated with certain foreign subsidiaries.

We have not provided for deferred taxes on outside basis differences in our investments in these foreign subsidiaries, and such estimates are not practicable to be determined.

an estimate of the U.S.

tax impact is not practicable to determine.

Unrecognized Tax Benefits

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Increases related to tax positions taken during the current period — — 1

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

Decreases related to tax positions taken during a prior period ( 6 ) ( 4 ) —

1 unchanged sentence

Unrecognized tax benefits at end of year $ 106 $ 25 $ 26

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 increase in the unrecognized tax benefits during 2023 is primarily related to $ 80 million for a proposed tax method change for pre-acquisition Welk.

Unrecognized tax benefits (excluding interest and penalties) of $ 26 million would impact the effective tax rate if recognized.

The total amount of gross interest and penalties accrued relating to unrecognized tax benefits was $ 48 million at December 31, 2023 and $ 28 million at December 31, 2022, which is predominantly attributable to non-U.S.

jurisdictions.

We anticipate $ 36 million of unrecognized tax benefits, including interest and penalties, will 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 benefits, including accrued interest and penalties, are included in Other liabilities on our Balance Sheet.

14 unchanged sentences

$ 2,178 $ 165 $ 2,343 $ 1,956 $ 242 $ 2,198

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

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Total interest income associated with vacation ownership notes receivable $ 312 $ 284 $ 259

COVID-19 Impact on Vacation Ownership Notes Receivable Reserves

Vacation Ownership Notes Receivable Reserves

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 the third quarter of 2023, we evaluated our vacation ownership notes receivable reserve in light of trends in delinquencies and default rates.

As a result, we increased our originated vacation ownership notes receivable reserve by $ 59 million.

We primarily used a historical period of increased defaults as a basis for estimating the increase in our reserve.

This additional reserve adjusted our future default rate estimate, which reflected then-current macroeconomic conditions, including inflation outpacing wage growth, continuing high interest rates, mixed economic indicators and increased global insecurity.

In the third quarter of 2022, in connection with 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 our 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 products on our Income Statement for the year ended December 31, 2022.

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.

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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.

The weighted average FICO score within our consolidated vacation ownership notes receivable pool was 723 and 721 at December 31, 2023 and December 31, 2022, respectively, based upon the FICO score of the borrower at the time of origination.

Acquired Vacation Ownership Notes Receivable

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($ in millions) Non-Securitized Securitized Total

Balance at December 31, 2019, as reported $ — $ — $ —

Impact of adoption of ASU 2016-13

Opening Balance at January 1, 2020 29 26 55

Balance at December 31, 2020 $ 39 $ 21 $ 60

Securitizations ( 9 ) 9 —

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Defaulted vacation ownership notes receivable repurchase activity (1)

Increase in vacation ownership notes receivable reserve (2)

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

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

Balance at December 31, 2021 47 23 70

Securitizations ( 9 ) 9 —

Clean-up call 1 ( 1 ) —

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Defaulted vacation ownership notes receivable repurchase activity (1)

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

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

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Balance at December 31, 2023 $ 6 $ 9 $ 15

_________________________

(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.

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

Acquired Vacation Ownership Notes Receivable as of December 31, 2023

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Combined Marriott $ 46 $ 32 $ 4 $ 9 $ 91

Hyatt 5 3 — — 8

Welk 75 50 1 1 127

Hyatt and Welk 53 34 1 1 89

$ 99 $ 66 $ 5 $ 10 $ 180

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($ 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

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

Hyatt and Welk 80 53 1 1 135

$ 147 $ 100 $ 7 $ 17 $ 271

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.

The following tables detail the origination year of our acquired vacation ownership notes receivable, before reserves, by brand and borrower FICO score at origination as of December 31, 2023, and gross write-offs by brand for the year ended December 31, 2023.

Acquired Vacation Ownership Notes Receivable - Combined Marriott

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$ — $ — $ 91 $ 91

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

Gross write-offs $ — $ — $ 13 $ 13

Acquired Vacation Ownership Notes Receivable - Hyatt & Welk

($ in millions) 2021 2020 2019 & Prior Total

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$ 6 $ 18 $ 65 $ 89

Gross write-offs $ 1 $ 4 $ 10 $ 15

Originated Vacation Ownership Notes Receivable

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Balance at December 31, 2020 $ 193 $ 117 $ 310

Increase in vacation ownership notes receivable reserve 78 24 102

Securitizations ( 76 ) 76 —

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Defaulted vacation ownership notes receivable repurchase activity (1)

Increase in vacation ownership notes receivable reserve (2)

Balance at December 31, 2021 193 140 333

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Defaulted vacation ownership notes receivable repurchase activity (1)

Balance at December 31, 2022 $ 149 $ 213 $ 362

105 ( 105 ) —

Balance at December 31, 2023 $ 195 $ 260 $ 455

(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.

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

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

Originated Vacation Ownership Notes Receivable as of December 31, 2023

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Combined Marriott $ 1,381 $ 609 $ 57 $ 323 $ 2,370

Hyatt 30 13 1 1 45

Welk 127 51 2 1 181

Hyatt and Welk 188 70 2 3 263

$ 1,569 $ 679 $ 59 $ 326 $ 2,633

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

Westin $ 143 $ 66 $ 8 $ 34 $ 251

Sheraton 136 94 20 46 296

Hyatt 22 11 — — 33

Welk 65 27 1 1 94

$ 366 $ 198 $ 29 $ 81 $ 674

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

Hyatt and Welk 157 64 3 2 226

$ 1,367 $ 613 $ 58 $ 280 $ 2,318

(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.

The following tables detail the origination year of our originated vacation ownership notes receivable, before reserves, by brand and borrower FICO score at origination as of December 31, 2023, and gross write-offs by brand for the year ended December 31, 2023.

Originated Vacation Ownership Notes Receivable - Combined Marriott

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$ 839 $ 636 $ 351 $ 133 $ 411 $ 2,370

Originated Vacation Ownership Notes Receivable - Hyatt

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

700 + $ 17 $ 7 $ 2 $ 3 $ 1 $ — $ 30

600 - 699 7 3 1 2 — — 13

< 600 1 — — — — — 1

No Score 1 — — — — — 1

$ 26 $ 10 $ 3 $ 5 $ 1 $ — $ 45

Originated Vacation Ownership Notes Receivable - Welk

Gross write-offs $ 6 $ 23 $ 32 $ 12 $ 36 $ 109

Originated Vacation Ownership Notes Receivable - Hyatt and Welk

($ in millions) 2023 2022 2021 2020 2019 & Prior Total

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$ 128 $ 89 $ 39 $ 2 $ 5 $ 263

Gross write-offs $ 2 $ 13 $ 10 $ — $ 1 $ 26

Vacation Ownership Notes Receivable on Non-Accrual Status

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

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

The table excludes Cash and cash equivalents, Restricted cash, Accounts and contracts receivable (excluding contracts receivable for financed VOI sales, net), 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, 2023 At December 31, 2022

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Vacation ownership notes receivable, net $ 2,343 $ 2,427 $ 2,198 $ 2,245

Contracts receivable for financed VOI sales, net 37 37 22 22

Other assets 99 99 76 76

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Securitized debt, net $ ( 2,096 ) $ ( 2,068 ) $ ( 1,938 ) $ ( 1,828 )

Term Loan, net ( 781 ) ( 784 ) ( 778 ) ( 775 )

Revolving Corporate Credit Facility, net ( 101 ) ( 105 ) — —

2025 Notes, net — — ( 248 ) ( 258 )

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2029 Notes, net ( 495 ) ( 445 ) ( 494 ) ( 417 )

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

2026 Convertible notes, net

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2027 Convertible notes, net ( 563 ) ( 513 ) ( 560 ) ( 568 )

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

2027 Convertible notes, net (1)

( 560 ) ( 568 ) — —

Non-interest bearing note payable, net ( 4 ) ( 4 ) ( 10 ) ( 10 )

Total financial liabilities $ ( 4,956 ) $ ( 4,749 ) $ ( 4,940 ) $ ( 4,723 )

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(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

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