0001524358 ~~srt:NonGuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember 2018-12-31~~vac:ServiceBasedRestrictedStockUnitMember 2020-01-01 2020-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________________

FORM 10-Q

(Mark One)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2019~~March 31, 2020



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-35219

_________________________

Marriott Vacations Worldwide Corporation

(Exact name of registrant as specified in its charter)

_________________________



Delaware				45-2598330
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)
	6649 Westwood Blvd.	Orlando	FL	32821
(Address of principal executive offices)				(Zip Code)

(407) 206-6000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value	VAC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the issuer’s common stock, par value $0.01 per share, as of ~~July 26, 2019~~May 15, 2020 was ~~43,527,329.~~41,051,580.

MARRIOTT VACATIONS WORLDWIDE CORPORATION

FORM 10-Q TABLE OF CONTENTS



		Page
Part I.	FINANCIAL INFORMATION (UNAUDITED)	1
Item 1.	Financial Statements	1
	Interim Consolidated Statements of Income	1
	Interim Consolidated Statements of Comprehensive Income	2
	Interim Consolidated Balance Sheets	3
	Interim Consolidated Statements of Cash Flows	4
	Interim Consolidated Statements of Shareholders’ Equity	6
	Notes to Interim Consolidated Financial Statements	87
	1. Basis of Presentation	87
	2. Significant Accounting Policies and Recent Accounting Standards	98
	3. Acquisitions and Dispositions	109
	4. Revenue	149
	5. Income Taxes	1711
	6. Vacation Ownership Notes Receivable	1812
	7. Financial Instruments	2418
	8. Earnings Per Share	2620
	9. Inventory	2721
	10. ~~Property~~Goodwill and ~~Equipment~~Intangibles	2721
	11. Contingencies and Commitments	2822
	12. ~~Leases~~Securitized Debt	25
	13. Debt	26
	14. Shareholders’ Equity	29
	15. Share-Based Compensation	30
	~~13. Securitized Debt~~16. Variable Interest Entities	33
	~~14. Debt~~	35
	~~15. Shareholders’ Equity~~	38
	~~16. Share-Based Compensation~~	3931
	17. ~~Variable Interest Entities~~	40
	~~18.~~ Business Segments	44
	~~19. Supplemental Guarantor Information~~	4634
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5636
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8660
Item 4.	Controls and Procedures	8761
Part II.	OTHER INFORMATION	8761
Item 1.	Legal Proceedings	8761
Item 1A.	Risk Factors	8761
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8863
Item 6.	Exhibits	8864
	SIGNATURES	9066

Throughout this report, we refer to Marriott Vacations Worldwide Corporation, together with its consolidated subsidiaries, as “Marriott Vacations Worldwide,” “MVW,” “we,” “us,” or “the Company.” We also refer to brands that we own, as well as those brands that we license, as our brands. All brand names, trademarks, service marks and trade names cited in this report are the property of their respective owners, including those of other companies and organizations. Solely for convenience, trademarks, trade names and service marks referred to in this report may appear without the ^®or ^TMsymbols, however such references are not intended to indicate in any way that MVW or the owner, as applicable, will not assert, to the fullest extent under applicable law, all rights to such trademarks, trade names and service marks. Capitalized terms used and not specifically defined herein have the same meaning given those terms in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019 (the “2019 Annual Report”). When discussing our properties or markets, we refer to the United States, Mexico, Central America and the Caribbean as “North America.”

~~On September~~The COVID-19 pandemic (as defined and discussed further in Footnote 1 ~~2018, we completed~~“Basis of Presentation”) has caused significant disruptions in international and U.S. economies and markets. We discuss the ~~acquisition~~COVID-19 pandemic and its potential future implications in this report; however, the COVID-19 pandemic is an evolving and challenging situation and its impact on our business in the future remains uncertain.

Due to circumstances related to the COVID-19 pandemic, the Company has availed itself of ~~ILG, LLC (formerly known as ILG, Inc. (“ILG”))~~an extension to file this Quarterly Report on Form 10-Q under the Securities and Exchange Commission’s Order under Section 36 of the Securities Exchange Act of 1934 Modifying Exemptions from the Reporting and Proxy Delivery Requirements for Public Companies, dated March 25, 2020 (Release No. 34-88465). ~~ILG’s businesses~~The Company’s operations and business have experienced significant disruptions due to the unprecedented conditions surrounding the COVID-19 pandemic. These disruptions include, ~~Aqua-Aston Hospitality, Hyatt Vacation Ownership (“HVO”), Interval International, Trading Places International (“TPI”), Vacation Resorts International (“VRI”), VRI Europe~~but are not limited to, the temporary closure of all of the Company’s sales centers, the temporary closure of its resorts in North America to rental guests, the temporary reduction of amenities and ~~Vistana Signature Experiences (“Vistana”),~~operations at all of its resorts based on various government mandates and advisories, and other interruptions of the ~~exclusive licensee for~~Company’s business and financial operations associated with or caused by COVID-19. To finalize this Form 10-Q, the ~~Sheraton~~Company needed to perform significant valuation work, including, among other things, assessing subsequent events, and ~~Westin brands in vacation ownership.~~determining whether assets were impaired. However, because of mandatory social quarantining/self-isolation, work from home orders and reduced hours, Company personnel had limited availability to perform this work.

PART I. FINANCIAL INFORMATION (UNAUDITED)

Item 1. Financial Statements

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)

(Unaudited)

Three Months Ended Six Months Ended
June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
REVENUES
Sale of vacation ownership products $ 350
$ 205
$ 651
$ 380
Management and exchange 239
78
478
148
Rental 158
74
323
149
Financing 69
36
137
71
Cost reimbursements 252
202
539
418
TOTAL REVENUES 1,068
595
2,128
1,166
EXPENSES
Cost of vacation ownership products 91
57
171
103
Marketing and sales 193
106
381
211
Management and exchange 118
39
234
75
Rental 104
62
212
117
Financing 25
10
47
21
General and administrative 79
33
157
61
Depreciation and amortization 36
5
73
11
Litigation charges 1
16
2
16
Royalty fee 26
16
52
31
Impairment —
—
26
—
Cost reimbursements 252
202
539
418
TOTAL EXPENSES 925
546
1,894
1,064
Gains (losses) and other income (expense), net 2
(7 ) 10
(6 )
Interest expense (35 ) (5 ) (69 ) (9 )
ILG acquisition-related costs (36 ) (19 ) (62 ) (20 )
Other —
(1 ) —
(3 )
INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS 74
17
113
64
Provision for income taxes (25 ) (6 ) (40 ) (17 )
NET INCOME 49
11
73
47
Net income attributable to noncontrolling interests —
—
—
—
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 49
$ 11
$ 73
$ 47

EARNINGS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS
Basic $ 1.11
$ 0.40
$ 1.62
$ 1.75
Diluted $ 1.10
$ 0.39
$ 1.61
$ 1.71

CASH DIVIDENDS DECLARED PER SHARE $ 0.45
$ 0.40
$ 0.90
$ 0.80



	Three Months Ended
	March 31, 2020			March 31, 2019
REVENUES
Sale of vacation ownership products	$	258		$	293
Management and exchange	227			239
Rental	135			147
Financing	72			68
Cost reimbursements	318			287
TOTAL REVENUES	1,010			1,034
EXPENSES
Cost of vacation ownership products	60			78
Marketing and sales	183			186
Management and exchange	138			133
Rental	98			80
Financing	38			22
General and administrative	70			67
Depreciation and amortization	32			37
Litigation charges	2			1
Royalty fee	26			26
Impairment	95			26
Cost reimbursements	318			287
TOTAL EXPENSES	1,060			943
(Losses) gains and other (expense) income, net	(56		)	8
Interest expense	(33		)	(34		)
ILG acquisition-related costs	(21		)	(26		)
Other	(3		)	—
(LOSS) INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS	(163		)	39
Benefit (provision) for income taxes	58			(15		)
NET (LOSS) INCOME	(105		)	24
Net income attributable to noncontrolling interests	(1		)	—
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(106	)	$	24

(LOSS) EARNINGS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS
Basic	$	(2.56	)	$	0.52
Diluted	$	(2.56	)	$	0.51

CASH DIVIDENDS DECLARED PER SHARE	$	0.54		$	0.45

See Notes to Interim Consolidated Financial Statements

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

Three Months Ended Six Months Ended
June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
NET INCOME $ 49
$ 11
$ 73
$ 47

Foreign currency translation adjustments (2 ) (7 ) (1 ) (1 )
Derivative instrument adjustment, net of tax (13 ) —
(16 ) —
OTHER COMPREHENSIVE LOSS, NET OF TAX (15 ) (7 ) (17 ) (1 )

Net income attributable to noncontrolling interests —
—
—
—
Other comprehensive income attributable to noncontrolling interests —
—
—
—
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS —
—
—
—

COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 34
$ 4
$ 56
$ 46



	Three Months Ended
	March 31, 2020			March 31, 2019
NET (LOSS) INCOME	$	(105	)	$	24

Foreign currency translation adjustments	(17		)	1
Derivative instrument adjustment, net of tax	(24		)	(3		)
OTHER COMPREHENSIVE LOSS, NET OF TAX	(41		)	(2		)

Net income attributable to noncontrolling interests	(1		)	—
Other comprehensive income attributable to noncontrolling interests	—			—
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	(1		)	—

COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(147	)	$	22

See Notes to the Interim Consolidated Financial Statements

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share data)


	Unaudited June 30, 2019			December 31, 2018			Unaudited March 31, 2020			December 31, 2019
ASSETS
Cash and cash equivalents	$	179		$	231		$	651		$	287
Restricted cash (including $80 and $69 from VIEs, respectively)	337			383
Accounts receivable, net (including $12 and $11 from VIEs, respectively)	327			324
Vacation ownership notes receivable, net (including $1,681 and $1,627 from VIEs, respectively)	2,098			2,039
Restricted cash (including $71 and $64 from VIEs, respectively)							369			414
Accounts receivable, net (including $13 and $13 from VIEs, respectively)							267			323
Vacation ownership notes receivable, net (including $1,822 and $1,750 from VIEs, respectively)							2,159			2,233
Inventory	888			863			776			859
Property and equipment	837			951			833			718
Goodwill	2,824			2,828			2,817			2,892
Intangibles, net	1,075			1,107			989			1,027
Other (including $34 and $26 from VIEs, respectively)	458			292
Other (including $36 and $39 from VIEs, respectively)							571			461
TOTAL ASSETS	$	9,023		$	9,018		$	9,432		$	9,214

LIABILITIES AND EQUITY
Accounts payable	$	164		$	253		$	169		$	286
Advance deposits	186			171			161			187
Accrued liabilities (including $3 and $2 from VIEs, respectively)	417			357
Accrued liabilities (including $2 and $2 from VIEs, respectively)							344			397
Deferred revenue	356			319			536			433
Payroll and benefits liability	172			211			164			186
Deferred compensation liability	102			93			103			110
Securitized debt, net (including $1,787 and $1,706 from VIEs, respectively)	1,792			1,714
Securitized debt, net (including $1,925 and $1,871 from VIEs, respectively)							1,926			1,871
Debt, net	2,157			2,104			2,778			2,216
Other	64			12			189			197
Deferred taxes	343			318			290			300
TOTAL LIABILITIES	5,753			5,552			6,660			6,183
Contingencies and Commitments (Note 11)
Preferred stock — $0.01 par value; 2,000,000 shares authorized; none issued or outstanding	—			—			—			—
Common stock — $0.01 par value; 100,000,000 shares authorized; 57,862,278 and 57,626,462 shares issued, respectively	1			1
Treasury stock — at cost; 13,979,609 and 11,633,731 shares, respectively	(1,004		)	(790		)
Common stock — $0.01 par value; 100,000,000 shares authorized; 75,235,823 and 75,020,272 shares issued, respectively							1			1
Treasury stock — at cost; 34,196,625 and 33,438,176 shares, respectively							(1,335		)	(1,253		)
Additional paid-in capital	3,730			3,721			3,729			3,738
Accumulated other comprehensive (loss) income	(11		)	6
Accumulated other comprehensive loss							(77		)	(36		)
Retained earnings	548			523			441			569
TOTAL MVW SHAREHOLDERS' EQUITY	3,264			3,461			2,759			3,019
Noncontrolling interests	6			5			13			12
TOTAL EQUITY	3,270			3,466			2,772			3,031
TOTAL LIABILITIES AND EQUITY	$	9,023		$	9,018		$	9,432		$	9,214

The abbreviation VIEs above means Variable Interest Entities.

See Notes to Interim Consolidated Financial Statements

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Six Months Ended						Three Months Ended
	June 30, 2019			June 30, 2018			March 31, 2020			March 31, 2019
OPERATING ACTIVITIES
Net income	$	73		$	47
Net (loss) income							$	(105	)	$	24
Adjustments to reconcile net income to net cash, cash equivalents and restricted cash provided by operating activities:
Depreciation and amortization of intangibles	73			11			32			37
Amortization of debt discount and issuance costs	9			8			5			5
Vacation ownership notes receivable reserve	51			24			71			20
Share-based compensation	17			10			3			7
Impairment charges	26			—			95			26
Deferred income taxes	20			12			(10		)	5
Net change in assets and liabilities, net of the effects of acquisition:
Accounts receivable	(18		)	24			45			2
Vacation ownership notes receivable originations	(423		)	(233		)	(174		)	(194		)
Vacation ownership notes receivable collections	309			155			174			154
Inventory	76			37			(8		)	39
Purchase of vacation ownership units for future transfer to inventory							(61		)	—
Other assets	(30		)	12			(83		)	(102		)
Accounts payable, advance deposits and accrued liabilities	(129		)	(59		)	(184		)	(83		)
Deferred revenue	37			29			107			117
Payroll and benefit liabilities	(39		)	(27		)	(20		)	(41		)
Deferred compensation liability	9			8			(7		)	6
Other liabilities							(7		)	2
Other, net	(5		)	—			5			4
Net cash, cash equivalents and restricted cash provided by operating activities	56			58
Net cash, cash equivalents and restricted cash (used in) provided by operating activities							(122		)	28
INVESTING ACTIVITIES
Capital expenditures for property and equipment (excluding inventory)	(19		)	(7		)	(17		)	(10		)
Proceeds from collection of notes receivable	38			—			—			38
Purchase of company owned life insurance	(4		)	(12		)	(4		)	(1		)
Net cash, cash equivalents and restricted cash provided by (used in) investing activities	15			(19		)
Net cash, cash equivalents and restricted cash (used in) provided by investing activities							(21		)	27

Continued

See Notes to Interim Consolidated Financial Statements

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In millions)

(Unaudited)


	Six Months Ended						Three Months Ended
	June 30, 2019			June 30, 2018			March 31, 2020			March 31, 2019
FINANCING ACTIVITIES
Borrowings from securitization transactions	574			423			202			124
Repayment of debt related to securitization transactions	(496		)	(154		)	(148		)	(133		)
Proceeds from debt	310			—			666			125
Repayments of debt	(266		)	(33		)	(102		)	(52		)
Debt issuance costs	(6		)	(7		)
Finance lease payment							(9		)	—
Repurchase of common stock	(215		)	(2		)	(82		)	(106		)
Payment of dividends	(61		)	(32		)	(45		)	(41		)
Payment of withholding taxes on vesting of restricted stock units	(10		)	(8		)	(14		)	(9		)
Net cash, cash equivalents and restricted cash (used in) provided by financing activities	(170		)	187
Net cash, cash equivalents and restricted cash provided by (used in) financing activities							468			(92		)
Effect of changes in exchange rates on cash, cash equivalents and restricted cash	1			1			(6		)	1
Change in cash, cash equivalents and restricted cash	(98		)	227			319			(36		)
Cash, cash equivalents and restricted cash, beginning of period	614			491			701			614
Cash, cash equivalents and restricted cash, end of period	$	516		$	718		$	1,020		$	578

SUPPLEMENTAL DISCLOSURES
Non-cash transfer from property and equipment to inventory	$	64		$	—		$	—		$	64
Non-cash transfer from inventory to property and equipment							65			—
Non-cash issuance of treasury stock for employee stock purchase plan							1			1
Interest paid, net of amounts capitalized	81			12			58			54
Income taxes paid, net of refunds	60			13			4			12

See Notes to Interim Consolidated Financial Statements

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In millions)

(Unaudited)



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


75.0	BALANCE AT DECEMBER 31, 2019	$	1	$	(1,253	)	$	3,738		$	(36	)	$	569		$	3,019		$	12	$	3,031
—	Net (loss) income	—		—			—			—			(106		)	(106		)	1		(105		)
—	Foreign currency translation adjustments	—		—			—			(17		)	—			(17		)	—		(17		)
—	Derivative instrument adjustment	—		—			—			(24		)	—			(24		)	—		(24		)
0.2	Share-based compensation plans	—		—			(9		)	—			—			(9		)	—		(9		)
—	Repurchase of common stock	—		(82		)	—			—			—			(82		)	—		(82		)
—	Dividends	—		—			—			—			(22		)	(22		)	—		(22		)
—	Employee stock plan issuance	—		—			—			—			—			—			—		—
75.2	BALANCE AT MARCH 31, 2020	$	1	$	(1,335	)	$	3,729		$	(77	)	$	441		$	2,759		$	13	$	2,772

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

57.6
BALANCE AT DECEMBER 31, 2018 $ 1
$ (790 ) $ 3,721
$ 6
$ 523
$ 3,461
$ 5
$ 3,466
—
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 —
—
—
—
24
24
—
24
—
Foreign currency translation adjustments —
—
—
1
—
1
—
1
—
Derivative instrument adjustment —
—
—
(3 ) —
(3 ) —
(3 )
0.2
Share-based compensation plans —
—
(4 ) —
—
(4 ) —
(4 )
—
Repurchase of common stock —
(106 ) —
—
—
(106 ) —
(106 )
—
Dividends —
—
—
—
(20 ) (20 ) —
(20 )
—
Employee stock plan issuance —
1
—
—
—
1
—
1
57.8
BALANCE AT MARCH 31, 2019 1
(895 ) 3,717
4
519
3,346
5
3,351
—
Net income —
—
—
—
49
49
—
49
—
ILG Acquisition purchase accounting adjustment —
—
—
—
—
—
1
1
—
Foreign currency translation adjustments —
—
—
(2 ) —
(2 ) —
(2 )
—
Derivative instrument adjustment —
—
—
(13 ) —
(13 ) —
(13 )
—
Share-based compensation plans —
—
13
—
—
13
—
13
—
Repurchase of common stock —
(109 ) —
—
—
(109 ) —
(109 )
—
Dividends —
—
—
—
(20 ) (20 ) —
(20 )
0.1
Employee stock plan issuance —
—
—
—
—
—
—
—
57.9
BALANCE AT JUNE 30, 2019 $ 1
$ (1,004 ) $ 3,730
$ (11 ) $ 548
$ 3,264
$ 6
$ 3,270

~~Continued~~

~~MARRIOTT VACATIONS WORLDWIDE CORPORATION~~

~~INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (CONTINUED)~~

~~(In millions)~~

~~(Unaudited)~~



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

							��
57.6	BALANCE AT DECEMBER 31, 2018	$	1	$	(790	)		$	3,721		$	6		$	523		$	3,461		$	5	$	3,466
—	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	—		—				—			—			24			24			—		24
—	Foreign currency translation adjustments	—		—				—			1			—			1			—		1
—	Derivative instrument adjustment	—		—				—			(3		)	—			(3		)	—		(3		)
0.2	Share-based compensation plans	—		—				(4		)	—			—			(4		)	—		(4		)
—	Repurchase of common stock	—		(106		)		—			—			—			(106		)	—		(106		)
—	Dividends	—		—				—			—			(20		)	(20		)	—		(20		)
—	Employee stock plan issuance	—		1				—			—			—			1			—		1
57.8	BALANCE AT MARCH 31, 2019	$	1	$	(895	)		$	3,717		$	4		$	519		$	3,346		$	5	$	3,351

See Notes to Interim Consolidated Financial Statements

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

36.9
BALANCE AT DECEMBER 31, 2017 $ —
$ (694 ) $ 1,189
$ 17
$ 529
$ 1,041
$ —
$ 1,041
—
Net income —
—
—
—
36
36
—
36
—
Foreign currency translation adjustments —
—
—
6
—
6
—
6
0.1
Share-based compensation plans —
—
(5 ) —
—
(5 ) —
(5 )
—
Repurchase of common stock —
(2 ) —
—
—
(2 ) —
(2 )
—
Dividends —
—
—
—
(10 ) (10 ) —
(10 )
37.0
BALANCE AT MARCH 31, 2018 —
(696 ) 1,184
23
555
1,066
—
1,066
—
Net income —
—
—
—
11
11
—
11
—
Foreign currency translation adjustments —
—
—
(7 ) —
(7 ) —
(7 )
—
Share-based compensation plans —
—
7
—
—
7
—
7
—
Dividends —
—
—
—
(11 ) (11 ) —
(11 )
37.0
BALANCE AT JUNE 30, 2018 $ —
$ (696 ) $ 1,191
$ 16
$ 555
$ 1,066
$ —
$ 1,066

~~See Notes to Interim Consolidated Financial Statements~~

MARRIOTT VACATIONS WORLDWIDE CORPORATION

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS



1.	BASIS OF PRESENTATION

The Interim 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 Interim Consolidated Financial Statements as our “Financial Statements,” (ii) our Interim Consolidated Statements of Income as our “Income Statements,” (iii) our Interim Consolidated Balance Sheets as our “Balance Sheets,” and (iv) our Interim 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 Interim Consolidated Financial Statements, unless otherwise noted. Capitalized terms used and not specifically defined herein have the same meaning given those terms in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019 (the ~~“2018~~“2019 Annual Report”). We use certain other terms that are defined within these Financial Statements.

The Financial Statements presented herein and discussed below include 100 percent 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 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. Intercompany accounts and transactions between consolidated companies have been eliminated in consolidation.

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”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. 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, property and equipment valuation, accounting for acquired vacation ownership notes receivable, vacation ownership notes receivable reserves, income taxes and loss contingencies. The uncertainty created by the COVID-19 pandemic (defined below), and efforts to contain it, has made such estimates more difficult and subjective. Accordingly, ~~actual amounts may~~ultimate results could differ from ~~these estimated amounts.~~those estimates.

In our opinion, our Financial Statements reflect all normal and recurring adjustments necessary to present fairly our financial position, the results of our operations and cash flows for the periods presented. Interim results may not be indicative of fiscal year performance because of, among other reasons, the ~~ILG Acquisition~~impact of the COVID-19 pandemic (defined below) and seasonal and short-term variations. These Financial Statements have not been audited. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP. Although we believe our footnote disclosures are adequate to make the information presented not misleading, the Financial Statements in this report should be read in conjunction with the consolidated financial statements and notes thereto in our ~~2018~~2019 Annual Report.

The accompanying Financial Statements also reflect our adoption of new accounting standards. See Footnote 2 “Significant Accounting Policies and Recent Accounting Standards” for additional information.

COVID-19 Pandemic

In March 2020, the World Health Organization declared the coronavirus (COVID-19) a global pandemic (the “COVID-19 pandemic”). National, federal, state, and local governments have since implemented various restrictions, border closings, restrictions on public gatherings, quarantining of people who may have been exposed to the virus, shelter-in-place restrictions and limitations on business operations. The speed with which the effects of the COVID-19 pandemic have changed the U.S. and global economic landscape, outlook and, in particular, the travel and hospitality industries has been swift and unexpected.

Our business has experienced significant disruptions due to the unprecedented conditions surrounding the COVID-19 pandemic. In our Vacation Ownership business, in response to quickly accelerating travel restrictions and restrictions on business operations as a result of the COVID-19 pandemic, we have closed all of our sales centers, and, beginning March 25, 2020, we closed our resorts for rental guests with stays at our branded North America vacation ownership resorts. In addition, based on various governmental mandates and advisories, we have closed many of our resorts, and have reduced operations and amenities at our resorts that remain open. At this time, we are unable to determine when we will be able to re-open our sales

centers, and the re-opening of our resorts is dependent upon when, and the extent to which, government restrictions are lifted, which cannot be determined at this time. Additionally, in our Exchange & Third-Party Management business, the closures of certain affiliated resorts and managed properties had a significant impact on our business, and we have implemented certain temporary adjustments to cancellation policies for near-term travel.

We have also implemented furloughs and reduced work hours for our associates and have instituted “work from home” measures for many of our associates. We are monitoring the situation and will reopen our sales centers as conditions permit; however, extended or further closures may be required. This situation is unprecedented and rapidly changing and has unknown duration and severity.

See Footnote 12 “Securitized Debt” and Footnote 13 “Debt” for discussion of events subsequent to the first quarter of 2020 related to our financial flexibility in light of the impact on global markets resulting from the COVID-19 pandemic.

Reclassifications

We have reclassified ~~the following~~certain prior year amounts to conform to ~~the~~our current year ~~presentation:~~

~~Reclassified Resort management and other services revenue to Management and exchange revenue;~~

~~Reclassified Resort management and other services expense to Management and exchange expense;~~

~~Consolidated Consumer financing interest expense into Financing expense;~~

~~Reclassified depreciation expense from Marketing and sales expense, Management and exchange expense, Rental expense, and General and administrative expense to Depreciation and amortization expense;~~

~~Reclassified $8 million from Accrued liabilities to Accounts payable;~~

~~Reclassified $58 million from Accrued liabilities to Advance deposits; and~~


•	~~Reclassified~~ ~~$20 million~~ ~~of other debt from Debt, net to Securitized debt, net.~~

~~Acquisition of ILG~~

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



2.	SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING STANDARDS

New Accounting Standards

Accounting Standards Update ~~2017-12~~2016-13 – “~~Derivatives and Hedging~~Financial Instruments – Credit Losses (Topic ~~815): Targeted Improvements to Accounting for Hedging Activities~~326), Measurement of Credit Losses on Financial Instruments” (“ASU ~~2017-12”~~2016-13”)

In August 2017, the FASB issued ASU 2017-12, which amends and simplifies existing guidance in order to allow companies to better portray the economic effects of risk management activities in the financial statements and enhance the transparency and understandability of the results of hedging activities. ASU 2017-12 eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also eases certain documentation and assessment requirements. This update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The adoption of ASU 2017-12 in the first quarter of ~~2019~~2020, we adopted ASU 2016-13, which replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The update is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The current expected credit loss model provides that an initial estimate of expected credit losses over the contractual life of the financial instrument is reflected in the allowance for credit losses and any changes to that estimate are recognized as adjustments to the allowance. ASU 2016-13 did not have a material impact ~~on our Financial Statements or disclosures.~~upon adoption.

~~We record derivatives at fair value. The designation~~Vacation Ownership Notes Receivable

Our originated vacation ownership notes receivable are recorded net of a ~~derivative instrument as a hedge and its ability to meet~~reserve that is calculated in accordance with ASC 606 so there was no material impact upon adoption of ASU 2016-13. Our acquired vacation ownership notes receivable have historically been accounted for using the hedge accounting criteria determine how we reflect the change in fair value of the derivative instrument in our Financial Statements. A derivative qualifies for hedge accounting if we expect it to be highly effective in offsetting the underlying hedged exposure and we fulfill the hedge documentation requirements. We may designate a hedge as aexpected cash flow ~~hedge, fair value hedge, or a net investment in non-U.S. operations hedge~~method of recognizing discount accretion based on the ~~exposure we are hedging. For the effective portion~~expected cash flows of ~~qualifying hedges, we record changes in fair value in other comprehensive income.~~

We assess the effectiveness of our hedging instruments quarterly, recognize current period hedge ineffectiveness immediately in earnings, and discontinue hedge accounting for any hedge that we no longer consider to be highly effective. We recognize changes in fair value for derivatives not designated as hedges or those ~~not qualifying for hedge accounting in current period earnings.~~

We are exposed to market risk from changes in interest rates, currency exchange rates and debt prices. 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. 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.

~~Accounting Standards Update 2016-02 – “Leases (Topic 842)” (“ASU 2016-02”)~~

In February 2016, the FASB issued ASU 2016-02 to increase transparency and comparability of information regarding an entity’s leasing activities by providing additional information to users of financial statements, which as amended, created Accounting Standards Codification 842, ~~Leases~~ (“ASC 842”). ASU 2016-02 requires a lessee to recognize most leases on its balance sheet by recording a liability for its lease obligation and an asset for its right to use the underlying asset as of the lease commencement date and recognizing expenses on the income statement in a similar manner to the current guidance in Accounting Standards Codification 840, ~~Leases~~ (“ASC 840”). Lessor accounting remains largely unchanged, other than certain targeted improvements intended to align lessor accounting with the lessee accounting model and with the updated revenue recognition guidance.

instruments. Upon adoption of ASU ~~2016-02, as amended, leases~~2016-13, 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. In addition, we recorded a noncredit discount of $2 million, which represents the difference between the amortized cost basis and the par value of our acquired vacation ownership notes receivable. The noncredit discount will be ~~classified~~amortized to interest expense over the contractual life of the acquired vacation ownership notes receivable and is recorded as ~~either finance or operating, with classification affecting~~Financing expenses on our Income Statements. For additional information on our vacation ownership notes receivable, including information on the ~~geography~~related reserves, see Footnote 6 “Vacation Ownership Notes Receivable.”

Accounts Receivable

Our Accounts receivable include amounts due from customers, principally credit card receivables, and amounts due from resort developers, members and managed properties. These amounts are typically due within one year and are presented net of ~~expense recognition in~~an allowance for credit losses. Subsequent to our adoption of ASU 2016-13 we estimate expected credit losses for our accounts receivable by considering a number of factors, including previous loss history and the income statement. Additionally, enhanced quantitative and qualitative disclosures regarding leases are required. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted.

~~As permitted by~~condition of the ~~amended guidance, we elected~~general economy as well as any other significant events that may impact the collectibility of the specific accounts receivable. There was no material impact to retain the original lease classification and historical accounting for existing or expired contracts of lessees and lessors so that we will not be required to reassess whether such contracts contain leases, the lease classification of any such leases or the initial direct costs of any such leases. We will continue to report comparative periods presented in theour financial statements or disclosures related to adoption of ASU 2016-13 for accounts receivable, and also no material change in the period of adoption under GAAP in effect as of such comparative period, resulting in a balance sheet presentation that is not comparable to the prior period in the first year of adoption. Additionally, with respect to our ~~real estate leases, we elected an accounting policy by class of underlying asset to combine lease and non-lease components. We also elected to apply an exemption~~allowance for short-term leases whereby leases with an initial term of a year or less are not recorded on the balance sheet. We did not utilize the practical expedient which allows the use of hindsight by lessees and lessors in determining the lease term and in assessing impairment of their right-of-use assets.

~~We adopted ASU 2016-02, as amended,~~credit losses during the first quarter of 2019 using the transition method which allows the application of the standard at the adoption date, January 1, 2019. Upon adoption, we recognized a lease obligation of $165 million and a right-of-use asset of $155 million, as well as, a cumulative-effect adjustment of $8 million to the opening balance of retained earnings for our operating and finance leases, primarily related to leases of real estate and other assets.2020.

The adoption of ASU 2016-02 did not have a material effect on our Income Statement or Cash Flows for the six months ended June 30, 2019. See Footnote 12 “Leases” for further discussion of the adoption and the impact on our Financial Statements.

Future Adoption of Accounting Standards

Accounting Standards Update ~~2017-04~~2019-12 – “~~Intangibles~~ – ~~Goodwill and Other~~“Income Taxes (Topic ~~350)~~740): Simplifying the ~~Test~~Accounting for ~~Goodwill Impairment~~Income Taxes”” (“ASU ~~2017-04”~~2019-12”)

In ~~January 2017,~~December 2019, the FASB issued ASU ~~2017-04,~~2019-12, which amends and simplifies existing guidance in an effort to reduce the ~~subsequent measurement~~complexity of ~~goodwill by eliminating~~accounting for income taxes while maintaining or enhancing the ~~second step from the goodwill impairment test. ASU 2017-04 requires an entity~~helpfulness of information provided to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and is applied on a prospective basis. Early adoption is permitted for interim or annual impairment tests performed after January 1, 2017. We expect to adopt ASU 2017-04 when required and will follow this guidance during our annual impairment testing to be performed during the fourth quarter of 2019, or earlier upon the occurrence of certain events or substantive changes in circumstances. We do not expect the adoption of ASU 2017-04 to have a material effect on our financial statements or disclosures.

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

In June 2016, the FASB issued ASU 2016-13, which replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses. The update is intended to provide financial statement ~~users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.~~users. This update is effective for fiscal years beginning after December 15, ~~2019,~~2020, including interim

periods ~~within those fiscal years,~~therein, with early adoption ~~permitted for fiscal years beginning after December 15, 2018.~~permitted. We expect to adopt ASU ~~2016-13~~2019-12 commencing in fiscal year 2021 and continue to evaluate the impact that adoption of this update will have on our financial statements and disclosures.

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 ~~are continuing~~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. 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.



3.	ACQUISITIONS AND DISPOSITIONS

~~Acquisitions~~

~~ILG Acquisition~~

On September 1, 2018, (the “Acquisition Date”), we completed the ILG Acquisition. ILG is a leading provider of professionally delivered vacation experiences with a portfolio of leisure businesses ranging from vacation exchange and rental services to vacation ownership, and is the exclusive global licensee for the Hyatt, Sheraton and Westin brands in vacation ownership. The combination of our brands created a leading global provider of upper-upscale vacation ownership, exchange networks and management services with access to world-class loyalty programs and an expanded portfolio of highly demanded vacation destinations.

Shareholders of ILG received 0.165 shares of our common stock and $14.75 in cash for each share of ILG common stock. The following table presents the fair value of each class of consideration transferred at the Acquisition Date, as adjusted at June 30, 2019.

(in millions, except per share amounts)
Equivalent shares of Marriott Vacations Worldwide common stock issued in exchange for ILG outstanding shares 20.5
Marriott Vacations Worldwide common stock price per share as of Acquisition Date $ 119.00
Fair value of Marriott Vacations Worldwide common stock issued in exchange for ILG outstanding shares 2,441
Cash consideration to ILG shareholders, net of cash acquired of $154 million 1,680
Fair value of ILG equity-based awards attributed to pre-combination service 64
Total consideration transferred, net of cash acquired 4,185
Noncontrolling interests 30
$ 4,215

~~Preliminary Fair Values of Assets Acquired and Liabilities Assumed~~

We accounted for the ILG Acquisition as a business combination, which required us to record the assets acquired and liabilities assumed at fair value as of the Acquisition Date. The amounts recorded for certain assets and liabilities are preliminary in nature and are subject to adjustment as additional information is obtained about the facts and circumstances that existed as of the Acquisition Date. We are continuing to evaluate the underlying inputs and assumptions used in our valuations. Accordingly, these preliminary estimates are subject to change during the measurement period, which is up to one year from the 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 preliminary estimates of the fair values of the assets that we acquired and the liabilities that we assumed on the Acquisition Date in connection with the business combination as previously reported at December 31, 2018 and as adjusted at June 30, 2019. During the second quarter of 2019, we refined our valuation models related to certain acquired property and equipment and our assumptions related to certain acquired management agreements, and recorded an indemnification asset and corresponding liability for tax matters that we believe will be indemnified. See Footnote 5, “Income Taxes” for further information.

($ in millions)
September 1, 2018
(as reported at
December 31, 2018)
Adjustments
September 1, 2018
(as adjusted at
June 30, 2019)
Vacation ownership notes receivable $ 753
$ —
$ 753
Inventory 474
—
474
Property and equipment 374
(1 ) 373
Intangible assets 1,166
(3 ) 1,163
Other assets 620
42
662
Deferred revenue (217 ) —
(217 )
Deferred taxes (179 ) 4
(175 )
Debt (392 ) —
(392 )
Securitized debt from VIEs (702 ) —
(702 )
Other liabilities (511 ) (37 ) (548 )
Net assets acquired 1,386
5
1,391
Goodwill⁽¹⁾
2,828
(4 ) 2,824
$ 4,214
$ 1
$ 4,215

~~_________________________~~


⁽¹⁾	Goodwill is calculated as total consideration transferred, net of cash acquired, less identified net assets acquired and it primarily represents the value that we expect to obtain from synergies and growth opportunities from our combined operations.

~~Vacation Ownership Notes Receivable~~

We acquired vacation ownership notes receivable, which consist of loans to customers who purchased vacation ownership products and chose to finance their purchase. These vacation ownership notes receivable are collateralized by the underlying vacation ownership interests (“VOIs”) and generally have terms ranging from five to 15 years. We provisionally estimated the fair value of the vacation ownership notes receivables using a discounted cash flow model, which calculated a present value of expected future cash flows over the term of the respective vacation ownership notes receivable (Level 2). We are continuing to evaluate the significant assumptions underlying the discounted cash flow model including default and prepayment assumptions, which could result in changes to our provisional estimate. See Footnote 6 “Vacation Ownership Notes Receivable” for additional information.

~~Inventory~~

We acquired inventory, which consisted of completed unsold VOIs and vacation ownership projects under construction. We provisionally estimated the value of acquired inventory using an income approach, which is primarily based on significant Level 3 assumptions, such as estimates of future income growth, capitalization rates, discount rates and capital expenditure needs of the relevant properties. We are continuing to assess the market assumptions and property conditions, which could result in changes to these provisional values.

~~Property and Equipment~~

We acquired property and equipment, which included four owned hotels, information technology, ancillary business assets, furniture and equipment and land held for future development. We provisionally estimated the value of the property and equipment using a combination of the income, cost, and market approaches, which are primarily based on significant Level 3 assumptions, such as estimates of future income growth, capitalization rates, discount rates and capital expenditure needs of the hotels. We are continuing to refine our estimate of the capital expenditure needs of one of the owned hotels, which could result in a change to the provisional value of that asset. We do not expect any other material changes to the provisional estimates.

~~Goodwill~~

We allocated the carrying amount of our preliminary estimate of goodwill to our Vacation Ownership and our Exchange & Third-Party Management reporting units. The following table details the carrying amount of our goodwill at June 30, 2019 and December 31, 2018, and reflects our preliminary estimate of goodwill added as a result of the ILG Acquisition. The assignment of goodwill to our reporting units may change during the measurement period as we have not yet finalized the fair value of the assets and liabilities assumed in the ILG Acquisition.

($ in millions) Vacation Ownership Segment Exchange & Third-Party Management Segment Total Consolidated
Balance at December 31, 2018 $ 2,448
$ 380
$ 2,828
Adjustments (4 ) —
(4 )
Balance at June 30, 2019 $ 2,444
$ 380
$ 2,824

~~Intangible Assets~~

~~The following table presents our preliminary estimates of the fair values of ILG’s identified intangible assets and their related estimated useful lives as of the Acquisition Date.~~

Estimated Fair Value
($ in millions)

Estimated Useful Life
(in years)
Member relationships $ 695
15 to 20
Management contracts 356
15 to 25
Management contracts⁽¹⁾
30
indefinite
Trade names and trademarks 82
indefinite
$ 1,163

~~_________________________~~

⁽¹⁾

The indefinite-lived management contracts, by their terms, continue for the foreseeable horizon. There are no legal, regulatory, contractual, competitive, economic or other factors which limit the period of time over which these resort management contracts are expected to contribute future cash flows. These management contracts were entirely related to the VRI Europe business, which we disposed of in the fourth quarter of 2018.

We provisionally estimated the value of the trade names and trademarks using the relief-from-royalty method, which applies an estimated royalty rate to forecasted future cash flows, discounted to present value. We estimated the value of management contracts and member relationships 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. These valuation approaches utilize Level 3 inputs, and we continue to review the related contracts in addition to evaluating the inputs, including the discount rates and renewal and growth assumptions, which could result in changes to these provisional values.

~~Deferred Revenue~~

Deferred revenue primarily relates to membership fees, which are deferred and recognized over the terms of the applicable memberships, ranging from one to five years, on a straight-line basis. Additionally, deferred revenue includes maintenance fees collected from owners, in certain cases, which are earned by the relevant property owners’ association over the applicable period. We provisionally estimated the value of the deferred revenue utilizing Level 3 inputs based on a review of existing deferred revenue balances against legal performance obligations. While we continue to review the related contracts in addition to evaluating the inputs, we do not expect a material change to the provisional estimate.

~~Deferred Income Taxes~~

Deferred income taxes primarily relate to the fair value of assets and liabilities acquired, including vacation ownership notes receivable, inventory, property and equipment, intangible assets and debt. We provisionally estimated deferred income taxes based on statutory rates in the jurisdictions of the legal entities where the acquired assets and liabilities are recorded. We are continuing to assess the tax rates used, and we will update our estimate of deferred income taxes based on changes to our provisional valuations of the related assets and liabilities and refinement of the effective tax rates, which could result in changes to these provisional values.

~~Debt~~

We valued the IAC Notes (as defined in Footnote 14 “Debt”) using a quoted market price, which is considered a Level 2 input as it is observable in the market; however these notes have only a limited trading volume and as such this fair value estimate is not necessarily indicative of the value at which the IAC Notes could be retired or transferred. The carrying value of the outstanding balance on the revolving credit facility that was acquired (the “ILG Revolving Credit Facility”) approximated fair value, as the contractual interest rate was variable plus an applicable margin based credit rating (Level 3 input). The ILG Revolving Credit Facility was extinguished and all amounts due were repaid in full upon completion of the ILG Acquisition.

~~Securitized Debt from VIEs~~

We provisionally estimated the fair value of the securitized debt from VIEs using a discounted cash flow model. The significant assumptions in our analysis include default rates, prepayment rates, bond interest rates and other structural factors (Level 3 inputs). We are continuing to evaluate the significant assumptions underlying the discounted cash flow model including default and prepayment assumptions, which could result in changes to our provisional estimate.

~~Pro Forma Results of Operations~~

The following unaudited pro forma information presents the combined results of operations of Marriott Vacations Worldwide and ILG as if we had completed the ILG Acquisition on December 30, 2016, the last day of our 2016 fiscal year, but using our preliminary fair values of assets and liabilities as of the Acquisition Date. 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 ILG Acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations.

($ in millions, except per share data)
Six Months Ended
June 30, 2018
Revenues $ 2,097
Net income $ 71
Net income attributable to common shareholders $ 68
EARNINGS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS
Basic $ 1.45
Diluted $ 1.42

~~The unaudited pro forma results above include $27 million of ILG acquisition-related costs for the six months ended June 30, 2018.~~

~~ILG Results of Operations~~

~~The following table presents the results of Legacy-ILG operations included in our Income Statement for the three and six months ended June 30, 2019.~~

($ in millions)
Three Months Ended
June 30, 2019

Six Months Ended
June 30, 2019
Revenue $ 455
$ 913
Net income attributable to common shareholders $ 34
$ 66

~~Marco Island, Florida~~New York, New York

During the first quarter of ~~2018,~~2020, we acquired 2057 completed vacation ownership units, as well as office and ancillary space, located at our ~~resort~~Marriott Vacation Club Pulse, New York City property for $89 million, of which $22 million was a prepayment for future tranches and $20 million was paid in ~~Marco Island, Florida for $24 million.~~December 2019. We accounted for the transaction as an asset acquisition with ~~all of~~ the purchase price allocated to ~~Inventory.~~Other assets ($22 million) and Property and equipment ($67 million).

San Francisco, California

During the first quarter of 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. 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).



4.	REVENUE

Sources of Revenue by Segment

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


	Three Months Ended June 30, 2019									Three Months Ended March 31, 2020
($ in millions)	Vacation Ownership		Exchange & Third-Party Management		Corporate and Other			Total		Vacation Ownership		Exchange & Third-Party Management		Corporate and Other			Total
Sale of vacation ownership products	$	350	$	—	$	—		$	350	$	258	$	—	$	—		$	258

Ancillary revenues	66		1		—			67		46		1		—			47
Management fee revenues	38		11		(3		)	46		38		10		(4		)	44
Other services revenues	30		63		33			126		28		61		47			136
Management and exchange	134		75		30			239		112		72		43			227

Rental	141		17		—			158		122		13		—			135

Cost reimbursements	258		22		(28		)	252		345		21		(48		)	318
Revenue from contracts with customers	883		114		2			999		837		106		(5		)	938

Financing	68		1		—			69		71		1		—			72
Total Revenues	$	951	$	115	$	2		$	1,068	$	908	$	107	$	(5	)	$	1,010

Three Months Ended June 30, 2018
($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total
Sale of vacation ownership products $ 205
$ —
$ —
$ 205

Ancillary revenues 36
—
—
36
Management fee revenues 26
—
—
26
Other services revenues 16
—
—
16
Management and exchange 78
—
—
78

Rental 74
—
—
74

Cost reimbursements 202
—
—
202
Revenue from contracts with customers 559
—
—
559

Financing 36
—
—
36
Total Revenues $ 595
$ —
$ —
$ 595

Six Months Ended June 30, 2019
($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total
Sale of vacation ownership products $ 651
$ —
$ —
$ 651

Ancillary revenues 123
2
—
125
Management fee revenues 75
26
(7 ) 94
Other services revenues 61
129
69
259
Management and exchange 259
157
62
478

Rental 288
34
1
323

Cost reimbursements 549
46
(56 ) 539
Revenue from contracts with customers 1,747
237
7
1,991

Financing 135
2
—
137
Total Revenues $ 1,882
$ 239
$ 7
$ 2,128


	Six Months Ended June 30, 2018								Three Months Ended March 31, 2019
($ in millions)	Vacation Ownership		Exchange & Third-Party Management		Corporate and Other		Total		Vacation Ownership		Exchange & Third-Party Management		Corporate and Other			Total
Sale of vacation ownership products	$	380	$	—	$	—	$	380	$	293	$	—	$	—		$	293

Ancillary revenues	64		—		—		64		57		1		—			58
Management fee revenues	50		—		—		50		36		15		(4		)	47
Other services revenues	34		—		—		34		32		66		36			134
Management and exchange	148		—		—		148		125		82		32			239

Rental	149		—		—		149		129		17		1			147

Cost reimbursements	418		—		—		418		291		24		(28		)	287
Revenue from contracts with customers	1,095		—		—		1,095		838		123		5			966

Financing	71		—		—		71		67		1		—			68
Total Revenues	$	1,166	$	—	$	—	$	1,166	$	905	$	124	$	5		$	1,034

Timing of Revenue from Contracts with Customers by Segment

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


	Three Months Ended June 30, 2019								Three Months Ended March 31, 2020
($ in millions)	Vacation Ownership		Exchange & Third-Party Management		Corporate and Other		Total		Vacation Ownership		Exchange & Third-Party Management		Corporate and Other			Total
Services transferred over time	$	471	$	55	$	2	$	528	$	530	$	54	$	(5	)	$	579
Goods or services transferred at a point in time	412		59		—		471		307		52		—			359
	$	883	$	114	$	2	$	999
Revenue from contracts with customers									$	837	$	106	$	(5	)	$	938


	Three Months Ended June 30, 2018								Three Months Ended March 31, 2019
($ in millions)	Vacation Ownership		Exchange & Third-Party Management		Corporate and Other		Total		Vacation Ownership		Exchange & Third-Party Management		Corporate and Other		Total
Services transferred over time	$	315	$	—	$	—	$	315	$	489	$	59	$	5	$	553
Goods or services transferred at a point in time	244		—		—		244		349		64		—		413
	$	559	$	—	$	—	$	559
Revenue from contracts with customers									$	838	$	123	$	5	$	966

Six Months Ended June 30, 2019
($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total
Services transferred over time $ 978
$ 113
$ 7
$ 1,098
Goods or services transferred at a point in time 769
124
—
893
$ 1,747
$ 237
$ 7
$ 1,991

Six Months Ended June 30, 2018
($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total
Services transferred over time $ 643
$ —
$ —
$ 643
Goods or services transferred at a point in time 452
—
—
452
$ 1,095
$ —
$ —
$ 1,095

Sale of Vacation Ownership Products

Revenues were reduced during the ~~second~~first quarter ~~and first half~~ of ~~2019~~2020 by $4$46 million ~~and $3 million, respectively,~~ due to changes in our estimate of variable consideration for performance obligations that were satisfied in prior periods.

Receivables, Contract Assets & Contract Liabilities

The following table shows the composition of our receivables and contract liabilities. We had no0 contract assets at either ~~June 30, 2019~~March 31, 2020 or December 31, ~~2018.~~2019.


($ in millions)	At June 30, 2019		At December 31, 2018		At March 31, 2020		At December 31, 2019
Receivables
Accounts receivable	$	127	$	164	$	123	$	166
Vacation ownership notes receivable, net	2,098		2,039		2,159		2,233
	$	2,225	$	2,203	$	2,282	$	2,399
Contract Liabilities
Advance deposits	$	186	$	171	$	161	$	187
Deferred revenue	356		319		536		433
	$	542	$	490	$	697	$	620

Revenue recognized during the ~~second~~first quarter ~~and first half~~ of ~~2019~~2020 that was included in our contract liabilities balance at December 31, ~~2018~~2019 was ~~$51 million and $203 million, respectively.~~$117 million.

Remaining Performance Obligations

Our remaining performance obligations represent the expected transaction price allocated to our contracts that we expect to recognize as revenue in future periods when we perform under the contracts. At ~~June 30, 2019, over~~March 31, 2020, approximately 90 percent of this amount is expected to be recognized as revenue over the next two years.



5.	INCOME TAXES

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

Our interim effective tax rate was ~~32.97~~35.4 percent and ~~38.08~~40.4 percent for the three months ended ~~June 30,~~March 31, 2020 and March 31, 2019, ~~and June 30, 2018,~~ respectively. The decrease in effective tax rate is predominately attributable to a pre-tax loss and a release in uncertain tax benefits for the three months ended March 31, 2020, and a change in our projected mix of earnings in international jurisdictions with differing tax rates and jurisdictions where valuation allowances are ~~recorded, primarily as a result~~recorded.

We have considered the income tax accounting and disclosure implications of the ~~ILG Acquisition.~~

~~Our interim~~relief provided by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) enacted on March 27, 2020. As of March 31, 2020, we evaluated the income tax provisions of the CARES Act and have determined there to be no effect on either the March 31, 2020 tax rate or the computation of the estimated effective tax rate ~~was 35.55 percent and 27.05 percent~~ for the ~~six~~year ended December 31, 2020. We will continue to evaluate the income tax provisions of the CARES Act and monitor the developments in the jurisdictions where we have significant operations for tax law changes that could have income tax accounting and disclosure implications.

Unrecognized Tax Benefits

The following table summarizes the activity related to our unrecognized tax benefits (excluding interest and penalties) during the three months ended ~~June 30, 2019 and June 30, 2018, respectively.~~ March 31, 2020.



($ in millions)	Unrecognized Tax Benefits
Balance at December 31, 2019	$	21
Decreases related to settlements with taxing authorities	(10		)
Decreases related to tax positions taken during a prior period	(1		)
Balance at March 31, 2020	$	10

The ~~increase in~~total unrecognized tax benefits related to uncertain income tax positions, which would affect the effective tax rate if recognized, was $10 million at March 31, 2020 and $21 million at December 31, 2019. The total amount of gross interest and penalties accrued was $17 million at March 31, 2020 and $41 million at December 31, 2019. The decrease in our unrecognized tax benefits, including interest and penalties, is ~~predominately attributable~~offset by a $32 million expense to (Losses) gains and other (expense) income, net for amounts previously recorded as indemnified pursuant to a Tax Matters Agreement dated May 11, 2016, (the “Tax

Matters Agreement”) by and among Starwood Hotels & Resorts Worldwide, Inc., Vistana Signature Experiences, Inc., and Interval Leisure Group, Inc.

We anticipate $10 million of unrecognized tax benefits, including interest and penalties, to be indemnified pursuant to the ~~change~~Tax Matters Agreement and consequently have recorded a corresponding indemnification asset. The unrecognized tax benefits, including accrued interest and penalties, are included in ~~expected annual income primarily as a result of the ILG Acquisition, and discrete tax adjustments relating to share-based compensation.~~other liabilities on our Balance Sheet.

~~We file~~Our income tax returns ~~with U.S. federal and state and non-U.S. jurisdictions and~~ are subject to ~~audits in these jurisdictions.~~examination by relevant tax authorities. Certain of our returns are being audited in various jurisdictions for tax years 2012 through 2017. ~~During~~We reasonably expect the ~~second quarter~~amount of ~~2019, we adjusted our preliminary purchase price allocation for~~ the ILG Acquisition to record a $36 million reserve for Legacy-ILG tax matters prior to the ILG Acquisition. We expect that we will be indemnified for this amount pursuant to the Tax Matters Agreement dated May 11, 2016, among Starwood Hotels & Resorts Worldwide, Inc. (“Starwood”), Vistana Signature Experiences, Inc., and Interval Leisure Group, Inc., and as such, have recorded a corresponding indemnification asset. Our unrecognized tax ~~benefit balance could change significantly during~~benefits will decrease within the next ~~fiscal year~~twelve months as a result of ~~audits in various jurisdictions and our total unrecognized~~certain agreed upon audit settlements with tax ~~benefit balance that, if recognized,~~authorities, which would not have an impact ~~our effective tax rate, was $2 million at both June 30, 2019 and December 31, 2018.~~on net income.



6.	VACATION OWNERSHIP NOTES RECEIVABLE

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


	June 30, 2019						December 31, 2018						March 31, 2020						December 31, 2019
($ in millions)	Originated		Acquired		Total		Originated		Acquired		Total		Originated		Acquired		Total		Originated		Acquired		Total
Securitized	$	1,209	$	472	$	1,681	$	1,070	$	557	$	1,627	$	1,466	$	356	$	1,822	$	1,378	$	372	$	1,750
Non-securitized
Eligible for securitization⁽¹⁾	83		11		94		85		22		107		70		7		77		155		10		165
Not eligible for securitization⁽¹⁾	261		62		323		233		72		305		232		28		260		261		57		318
Subtotal	344		73		417		318		94		412		302		35		337		416		67		483
	$	1,553	$	545	$	2,098	$	1,388	$	651	$	2,039	$	1,768	$	391	$	2,159	$	1,794	$	439	$	2,233

_________________________


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

We reflect interest income associated with vacation ownership notes receivable in our Income Statements in the Financing revenues caption. The following table summarizes interest income associated with vacation ownership notes receivable.


	Three Months Ended				Six Months Ended				Three Months Ended
($ in millions)	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018		March 31, 2020		March 31, 2019
Interest income associated with vacation ownership notes receivable — securitized	$	59	$	27	$	118	$	53	$	63	$	59
Interest income associated with vacation ownership notes receivable — non-securitized	8		7		14		15		6		6
Total interest income associated with vacation ownership notes receivable	$	67	$	34	$	132	$	68	$	69	$	65

COVID-19 Impact on Vacation Ownership Notes Receivable Reserves

We evaluated our vacation ownership notes receivable reserves in light of the COVID-19 pandemic, using a reference point of the performance of our vacation ownership notes receivable in response to the 2008/2009 financial crisis. Using this information, we increased our estimated default rates by approximately 50 percent for a 15 month period, to align with the period over which we experienced increased defaults during the previous recessionary period. As a result, we increased our vacation ownership notes receivable reserves by $52 million in the first quarter. This was reflected as a $42 million reduction to Sale of vacation ownership products, a $10 million increase in Financing expenses, and a $15 million reduction in Cost of vacation ownership products on our Income Statement for the first quarter of 2020.

Acquired Vacation Ownership Notes Receivable

As part of the ILG Acquisition, we acquired existing portfolios of vacation ownership notes receivable. These notes receivable are accounted for using the expected cash flow method of recognizing discount accretion based on the expected cash flows from the acquired vacation ownership notes receivable pursuant to ASC 310-30, “~~Loans acquired with deteriorated credit quality” (“ASC 310-30”).~~ At acquisition, we recorded these ~~acquired~~ vacation ownership notes receivable at fair value. Upon adoption of ASU 2016-13 on January 1, 2020, we established a ~~preliminary estimate of fair value, including~~reserve for credit losses and a ~~credit discount which is accreted as an adjustment to yield over~~corresponding increase in the ~~estimated life of the vacation ownership notes receivable.~~

The fair value of our acquired vacation ownership notes receivable as of the Acquisition Date was determined using a discounted cash flow method, which calculated a present value of expected future cash flows based on scheduled principal and interest payments over the term of the respective vacation ownership notes receivable, while considering anticipated defaults and early repayments based on historical experience. Consequently, the fairbook value of the acquired vacation ownership notes receivable, resulting in no impact to the recorded balance. In addition, we established a noncredit discount of $2 million, which represents the difference between the amortized cost basis and the par value of our acquired vacation ownership notes receivable. 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 ~~balance sheet as of the Acquisition Date included an estimate for future uncollectible amounts, which became the historical cost basis for that portfolio going forward.~~Income Statements.

The following table ~~below presents a rollforward from December 31, 2018 of~~summarizes the ~~accretable yield (interest income) expected to be earned~~activity related to our acquired vacation ownership notes receivable as well as the amount of non-accretable difference at the end of the period. The non-accretable difference represents estimated contractually required payments in excess of estimated cash flows expected to be collected. The accretable yield represents the excess of estimated cash flows expected to be collected over the carrying amount of the acquired vacation ownership notes receivable.reserve.

($ in millions) Six Months Ended June 30, 2019
Accretable yield balance at December 31, 2018 $ 199
Accretion (43 )
Reclassification from non-accretable difference (3 )
Accretable yield balance at June 30, 2019 $ 153

Non-accretable difference at June 30, 2019 $ 55



	Acquired Vacation Ownership Notes Receivable Reserve
($ in millions)	Non-Securitized			Securitized		Total
Balance at December 31, 2019, as reported	$	—		$	—	$	—
Impact of adoption of ASU 2016-13	29			26		55
Opening Balance at January 1, 2020	29			26		55
Write-offs	(9		)	—		(9		)
Recoveries	4			—		4
Increase in vacation ownership notes receivable reserve⁽¹⁾	5			8		13
Balance at March 31, 2020	$	29		$	34	$	63

The accretable yield is recognized into interest income over the estimated life of the acquired vacation ownership notes receivable using the level yield method. The accretable yield may change in future periods due to changes in the anticipated remaining life of the acquired vacation ownership notes receivable, which may alter the amount of future interest income expected to be collected, and changes in expected future principal and interest cash collections, which impacts the non-accretable difference._________________________

Our acquired vacation ownership notes receivable are remeasured at period end based on expected future cash flows, which takes into consideration an estimated measure of anticipated defaults and early repayments. We consider historical Legacy-ILG vacation ownership notes receivable performance and the current economic environment in developing the expected future cash flows used in the re-measurement of our acquired vacation ownership notes receivable.


⁽¹⁾	Increase in vacation ownership notes receivable reserve includes $10 million ($2 million non-securitized and $8 million securitized) attributable to additional reserve resulting from the COVID-19 pandemic.

The following table shows future contractual principal payments, as well as interest rates, for our non-securitized and securitized acquired vacation ownership notes receivable at ~~June 30, 2019.~~March 31, 2020.


	Acquired Vacation Ownership Notes Receivable						Acquired Vacation Ownership Notes Receivable
($ in millions)	Non-Securitized		Securitized		Total		Non-Securitized		Securitized		Total
2019, remaining	$	7	$	55	$	62
2020	7		53		60
2020, remaining							$	3	$	34	$	37
2021	8		53		61		4		45		49
2022	8		53		61		4		45		49
2023	8		52		60		4		44		48
2024							4		43		47
Thereafter	35		206		241		16		145		161
Balance at June 30, 2019	$	73	$	472	$	545
Balance at March 31, 2020							$	35	$	356	$	391
Weighted average stated interest rate	13.5%		13.4%		13.4%		13.4%		13.4%		13.4%
Range of stated interest rates	0.0% to 17.9%		6.0% to 16.9%		0.0% to 17.9%		3.0% to 17.9%		6.0% to 16.9%		3.0% to 17.9%

Originated Vacation Ownership Notes Receivable

Originated vacation ownership notes receivable represent vacation ownership notes receivable originated by Legacy-ILG subsequent to the Acquisition Date and all Legacy-MVW vacation ownership notes receivable. The following table shows future principal payments, net of reserves, as well as interest rates, for our originated non-securitized and securitized originated vacation ownership notes receivable at ~~June 30, 2019.~~March 31, 2020.


	Originated Vacation Ownership Notes Receivable							Originated Vacation Ownership Notes Receivable
($ in millions)	Non-Securitized			Securitized		Total		Non-Securitized		Securitized		Total
2019, remaining	$	34		$	65	$	99
2020	45		��	114		159
2020, remaining								$	30	$	104	$	134
2021	37			120		157		32		141		173
2022	32			125		157		28		145		173
2023	29			128		157		25		148		173
2024								24		149		173
Thereafter	167			657		824		163		779		942
Balance at June 30, 2019	$	344		$	1,209	$	1,553
Balance at March 31, 2020								$	302	$	1,466	$	1,768
Weighted average stated interest rate	11.8%			12.6%		12.4%		12.3%		12.6%		12.6%
Range of stated interest rates	0.0% to 18.0%			5.2% to 17.5%		0.0% to 18.0%		0.0% to 18.0%		0.0% to 17.5%		0.0% to 18.0%

For originated vacation ownership notes receivable, 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.

The following table summarizes the activity related to our originated vacation ownership notes receivable reserve.


	Originated Vacation Ownership Notes Receivable Reserve									Originated Vacation Ownership Notes Receivable Reserve
($ in millions)	Non-Securitized			Securitized			Total			Non-Securitized			Securitized			Total
Balance at December 31, 2018	$	61		$	79		$	140
Balance at December 31, 2019										$	90		$	114		$	204
Increase in vacation ownership notes receivable reserve(1)	38			8			46			36			35			71
Securitizations	(35		)	35			—			(16		)	16			—
Clean-up call⁽¹⁾	18			(18		)	—
Write-offs	(23		)	—			(23		)	(12		)	—			(12		)
Defaulted vacation ownership notes receivable repurchase activity⁽²⁾	11			(11		)	—			15			(15		)	—
Balance at June 30, 2019	$	70		$	93		$	163
Balance at March 31, 2020										$	113		$	150		$	263

_________________________


⁽¹⁾	~~Refers to our voluntary repurchase of previously securitized non-defaulted~~ Increase in vacation ownership notes receivable reserve includes $42 million ($16 million non-securitized and $26 million securitized) attributable to ~~retire outstanding vacation ownership notes receivable~~additional reserve resulting from ~~our Warehouse Credit Facility.~~the COVID-19 pandemic.


⁽²⁾	Decrease in securitized vacation ownership notes receivable reserve and increase in non-securitized vacation ownership notes receivable reserve was attributable to the transfer of the reserve when we voluntarily repurchased defaulted securitized vacation ownership notes receivable.

Credit Quality of Vacation Ownership Notes Receivable

Legacy-MVW Vacation Ownership Notes Receivable

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. We consider loans over 150 days past due to be in default and fully reserve such amounts. 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. We resume accruing interest when vacation ownership notes receivable are less than 90 days past due. 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 Asia Pacific or Europe, when revocation is complete. For both Legacy-MVW non-securitized and securitized vacation ownership notes receivable, we estimated average remaining default rates of ~~6.94 percent and 7.01~~8.89 percent as of ~~June 30, 2019~~March 31, 2020 (includes 1.89 percent attributed to the additional reserve resulting from the COVID-19 pandemic), and 7.04 percent as of December 31, ~~2018, respectively.~~2019. A 0.5

percentage point increase in the estimated default rate would have resulted in an increase in ~~our~~the related vacation ownership notes receivable reserve of $7$8 million as of both ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.

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

Legacy-MVW Vacation Ownership Notes Receivable
($ in millions) Non-Securitized Securitized Total
Investment in vacation ownership notes receivable on non-accrual status at June 30, 2019 $ 41
$ 8
$ 49
Investment in vacation ownership notes receivable on non-accrual status at December 31, 2018 $ 36
$ 9
$ 45
Average investment in vacation ownership notes receivable on non-accrual status during the second quarter of 2019 $ 39
$ 10
$ 49
Average investment in vacation ownership notes receivable on non-accrual status during the second quarter of 2018 $ 39
$ 8
$ 47
Average investment in vacation ownership notes receivable on non-accrual status during the first half of 2019 $ 38
$ 9
$ 47
Average investment in vacation ownership notes receivable on non-accrual status during the first half of 2018 $ 39
$ 7
$ 46



	Legacy-MVW Vacation Ownership Notes Receivable
($ in millions)	Non-Securitized		Securitized		Total
Investment in vacation ownership notes receivable on non-accrual status at March 31, 2020	$	48	$	14	$	62
Investment in vacation ownership notes receivable on non-accrual status at December 31, 2019	$	43	$	11	$	54

The following table details the origination year of our Legacy-MVW vacation ownership notes receivable as of March 31, 2020.



	Legacy-MVW Vacation Ownership Notes Receivable
($ in millions)	Non-Securitized		Securitized		Total
Year of Origination
2020	$	78	$	36	$	114
2019	70		471		541
2018	36		357		393
2017	16		202		218
2016	9		95		104
2015 and Prior	28		169		197
	$	237	$	1,330	$	1,567

The following table shows the aging of the recorded investment in principal, before reserves, in Legacy-MVW vacation ownership notes receivable as of ~~June 30, 2019.~~March 31, 2020.


	Legacy-MVW Vacation Ownership Notes Receivable						Legacy-MVW Vacation Ownership Notes Receivable
($ in millions)	Non-Securitized		Securitized		Total		Non-Securitized		Securitized		Total
31 – 90 days past due	$	6	$	21	$	27	$	9	$	36	$	45
91 – 150 days past due	5		8		13		4		14		18
Greater than 150 days past due	36		—		36		44		—		44
Total past due	47		29		76		57		50		107
Current	223		1,160		1,383		180		1,280		1,460
Total vacation ownership notes receivable	$	270	$	1,189	$	1,459	$	237	$	1,330	$	1,567

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, ~~2018.~~2019.


	Legacy-MVW Vacation Ownership Notes Receivable						Legacy-MVW Vacation Ownership Notes Receivable
($ in millions)	Non-Securitized		Securitized		Total		Non-Securitized		Securitized		Total
31 – 90 days past due	$	7	$	26	$	33	$	7	$	33	$	40
91 – 150 days past due	3		9		12		4		11		15
Greater than 150 days past due	33		—		33		39		—		39
Total past due	43		35		78		50		44		94
Current	235		1,090		1,325		222		1,254		1,476
Total vacation ownership notes receivable	$	278	$	1,125	$	1,403	$	272	$	1,298	$	1,570

Legacy-ILG Vacation Ownership Notes Receivable

~~On an ongoing basis, we monitor credit quality of our Legacy-ILG vacation ownership notes receivable portfolio based on payment activity as follows:~~

~~Current — The vacation ownership note receivable is in good standing as payments and reporting are current per the terms contractually stipulated in the agreement.~~

~~Delinquent — We consider a vacation ownership note receivable to be delinquent based on the contractual terms of each individual financing agreement.~~

Non-performing — Our vacation ownership notes receivable are generally considered non-performing if interest or principal is more than 30 days past due. All non-performing vacation ownership notes receivable are placed on non-accrual status and we do not resume interest accrual until the vacation ownership notes receivable becomes contractually current. We apply payments we receive for vacation ownership notes receivable on non-performing status first to interest, then to principal, and any remainder to fees.

We consider vacation ownership notes receivable to be in default upon reaching 120 days outstanding. We use the origination of the vacation ownership notes receivable by brand (Hyatt, Sheraton or Westin) and the FICO scores of the customer as the primary credit quality indicators for our Legacy-ILG 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 property they have acquired, supplemented by the FICO scores of the customers.

At ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the weighted average FICO score within our consolidated Legacy-ILG vacation ownership notes receivable pools was 711 and ~~710,~~712, respectively, based upon the outstanding vacation ownership notes receivable balance at time of origination. The average estimated rate for all future defaults for our Legacy-ILG consolidated outstanding pool of vacation ownership notes receivable was 17.00 percent as of ~~June 30, 2019~~March 31, 2020 (includes 3.44 percent attributed to the additional reserve resulting from the COVID-19 pandemic) and 12.65 percent as of December 31, ~~2018 was 12.41 percent and 12.37 percent, respectively.~~2019. A 0.5 percentage point increase in the estimated default rate on the Legacy-ILG originated vacation ownership notes receivable would have resulted in an increase in the related vacation ownership notes receivable reserve of $2 million ~~and $1 million~~ as of ~~June 30, 2019~~both March 31, 2020 and December 31, ~~2018, respectively.~~2019.

The following tables show the Legacy-ILG acquired vacation ownership notes receivable by brand and FICO score, before reserves. Vacation ownership notes receivable with no FICO score primarily relate to non-U.S. resident borrowers.



	Acquired Vacation Ownership Notes Receivable as of March 31, 2020
($ in millions)	700 +		600 - 699		< 600		No Score		Total
Westin	$	105	$	58	$	5	$	13	$	181
Sheraton	99		87		16		37		239
Hyatt	16		10		1		1		28
Other	3		1		—		2		6
	$	223	$	156	$	22	$	53	$	454



	Acquired Vacation Ownership Notes Receivable as of December 31, 2019
($ in millions)	700 +		600 - 699		< 600		No Score		Total
Westin	$	103	$	57	$	4	$	13	$	177
Sheraton	95		83		15		37		230
Hyatt	15		10		1		—		26
Other	3		1		—		2		6
	$	216	$	151	$	20	$	52	$	439

The following table ~~shows~~details the origination year of our Legacy-ILG acquired vacation ownership notes receivable by brand and FICO score as of ~~June 30, 2019.~~March 31, 2020. Vacation ownership notes receivable with no FICO score primarily relate to non-U.S. resident borrowers.

Acquired Vacation Ownership Notes Receivable
($ in millions) 700 + 600 - 699 < 600
No Score⁽¹⁾
Total
Westin $ 127
$ 70
$ 5
$ 17
$ 219
Sheraton 120
104
19
45
288
Hyatt 17
12
2
—
31
Other 4
1
—
2
7
$ 268
$ 187
$ 26
$ 64
$ 545



	Acquired Vacation Ownership Notes Receivable - Westin
($ in millions)	2020		2019		2018		2017		2016		2015 & Prior		Total
700 +	$	—	$	—	$	28	$	28	$	18	$	31	$	105
600 - 699	—		—		13		15		11		19		58
< 600	—		—		3		1		—		1		5
No Score	—		—		3		3		2		5		13
	$	—	$	—	$	47	$	47	$	31	$	56	$	181

~~_________________________~~

⁽¹⁾



	Acquired Vacation Ownership Notes Receivable - Sheraton
($ in millions)	2020		2019		2018		2017		2016		2015 & Prior		Total
700 +	$	—	$	—	$	27	$	27	$	18	$	27	$	99
600 - 699	—		—		22		22		15		28		87
< 600	—		—		9		3		1		3		16
No Score	—		—		10		10		6		11		37
	$	—	$	—	$	68	$	62	$	40	$	69	$	239



	Acquired Vacation Ownership Notes Receivable - Hyatt and Other
($ in millions)	2020		2019		2018		2017		2016		2015 & Prior		Total
700 +	$	—	$	—	$	5	$	4	$	3	$	7	$	19
600 - 699	—		—		2		2		2		5		11
< 600	—		—		—		1		—		—		1
No Score	—		—		—		—		—		3		3
	$	—	$	—	$	7	$	7	$	5	$	15	$	34

~~Vacation ownership notes receivable with no FICO score primarily relate to non-U.S. resident borrowers.~~

The following ~~table shows~~tables show the Legacy-ILG ~~acquired~~originated vacation ownership notes receivable by brand and FICO score. Vacation ownership notes receivable with no FICO score ~~as of December 31, 2018.~~primarily relate to non-U.S. resident borrowers.


	Acquired Vacation Ownership Notes Receivable										Originated Vacation Ownership Notes Receivable as of March 31, 2020
($ in millions)	700 +		600 - 699		< 600		No Score⁽¹⁾		Total		700 +		600 - 699		< 600		No Score		Total
Westin	$	154	$	82	$	6	$	21	$	263	$	126	$	52	$	6	$	27	$	211
Sheraton	145		124		21		55		345		103		67		14		45		229
Hyatt	20		13		2		—		35		17		7		—		—		24
Other	4		1		—		3		8
	$	323	$	220	$	29	$	79	$	651	$	246	$	126	$	20	$	72	$	464

~~_________________________~~



	Originated Vacation Ownership Notes Receivable as of December 31, 2019
($ in millions)	700 +		600 - 699		< 600		No Score		Total
Westin	$	122	$	46	$	5	$	25	$	198
Sheraton	97		61		13		37		208
Hyatt	16		6		—		—		22
	$	235	$	113	$	18	$	62	$	428


⁽¹⁾	~~Vacation ownership notes receivable with no FICO score primarily relate to non-U.S. resident borrowers.~~

The following ~~table shows~~tables detail the origination year of our Legacy-ILG originated vacation ownership notes receivable by brand and FICO score as of ~~June 30, 2019.~~March 31, 2020. Vacation ownership notes receivable with no FICO score primarily relate to non-U.S. resident borrowers.

Originated Vacation Ownership Notes Receivable
($ in millions) 700 + 600 - 699 < 600
No Score⁽¹⁾
Total
Westin $ 80
$ 27
$ 2
$ 14
$ 123
Sheraton 58
36
6
21
121
Hyatt 9
4
1
—
14
$ 147
$ 67
$ 9
$ 35
$ 258

~~_________________________~~


⁽¹⁾	~~Vacation ownership notes receivable with no FICO score primarily relate to non-U.S. resident borrowers.~~

~~The following table shows the Legacy-ILG originated vacation ownership notes receivable by brand and FICO score as of December 31, 2018.~~



	Originated Vacation Ownership Notes Receivable - Westin
($ in millions)	2020		2019		2018		2017		2016		2015 & Prior		Total
700 +	$	26	$	83	$	17	$	—	$	—	$	—	$	126
600 - 699	8		36		8		—		—		—		52
< 600	1		4		1		—		—		—		6
No Score	11		14		2		—		—		—		27
	$	46	$	137	$	28	$	—	$	—	$	—	$	211

Originated Vacation Ownership Notes Receivable
($ in millions) 700 + 600 - 699 < 600
No Score⁽¹⁾
Total
Westin $ 43
$ 11
$ 1
$ 7
$ 62
Sheraton 28
17
3
9
57
Hyatt 5
2
—
—
7
$ 76
$ 30
$ 4
$ 16
$ 126

~~_________________________~~


⁽¹⁾	~~Vacation ownership notes receivable with no FICO score primarily relate to non-U.S. resident borrowers.~~

~~The following table shows the aging of the recorded investment in principal, before reserves, in Legacy-ILG originated vacation ownership notes receivable as of June 30, 2019 and December 31, 2018.~~



	Originated Vacation Ownership Notes Receivable - Sheraton
($ in millions)	2020		2019		2018		2017		2016		2015 & Prior		Total
700 +	$	14	$	71	$	18	$	—	$	—	$	—	$	103
600 - 699	7		46		14		—		—		—		67
< 600	1		11		2		—		—		—		14
No Score	9		29		7		—		—		—		45
	$	31	$	157	$	41	$	—	$	—	$	—	$	229



	Originated Vacation Ownership Notes Receivable - Hyatt
($ in millions)	2020		2019		2018		2017		2016		2015 & Prior		Total
700 +	$	4	$	11	$	2	$	—	$	—	$	—	$	17
600 - 699	1		5		1		—		—		—		7
< 600	—		—		—		—		—		—		—
No Score	—		—		—		—		—		—		—
	$	5	$	16	$	3	$	—	$	—	$	—	$	24

Originated Vacation Ownership Notes Receivable
Delinquent
Defaulted⁽¹⁾
Total Delinquent & Defaulted
($ in millions) Receivables Current 30 - 59 Days 60 - 89 Days 90 - 119 Days > 120 Days
As of June 30, 2019 $ 258
$ 252
$ 3
$ 2
$ 1
$ —
$ 6

As of December 31, 2018 $ 126
$ 124
$ 2
$ —
$ —
$ —
$ 2

~~_________________________~~


⁽¹⁾	~~Vacation ownership notes receivable equal to or greater than 120 days are considered in default.~~



7.	FINANCIAL INSTRUMENTS

The following table shows the carrying values and the estimated fair values of financial assets and liabilities that qualify as financial instruments, determined in accordance with the authoritative guidance for disclosures regarding the fair value of financial instruments. Considerable judgment is required in interpreting market data to develop estimates of fair value. 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, 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 also excludes acquired vacation ownership notes receivable which are remeasured at each period end based on expected future cash flows. See Footnote 6 “Vacation Ownership Notes Receivable” for additional information on our acquired vacation ownership notes receivable.


	At June 30, 2019						At December 31, 2018						At March 31, 2020						At December 31, 2019
($ in millions)	Carrying Amount			Fair Value			Carrying Amount			Fair Value			Carrying Amount			Fair Value			Carrying Amount			Fair Value
Originated vacation ownership notes receivable	$	1,553		$	1,584		$	1,388		$	1,413
Vacation ownership notes receivable													$	2,159		$	2,224		$	2,233		$	2,264
Other assets	41			41			66			66			41			41			45			45
Total financial assets	$	1,594		$	1,625		$	1,454		$	1,479		$	2,200		$	2,265		$	2,278		$	2,309

Securitized debt, net	$	(1,792	)	$	(1,820	)	$	(1,714	)	$	(1,718	)	$	(1,926	)	$	(1,861	)	$	(1,871	)	$	(1,924	)
Exchange Notes, net	(88		)	(89		)	(88		)	(87		)
Senior Unsecured Notes, net	(742		)	(807		)	(741		)	(726		)
IAC Notes	(141		)	(140		)	(141		)	(140		)
2026 Notes, net													(743		)	(652		)	(742		)	(824		)
2028 Notes, net													(345		)	(266		)	(345		)	(358		)
Term Loan, net	(884		)	(895		)	(888		)	(887		)	(879		)	(771		)	(881		)	(899		)
Revolving Corporate Credit Facility, net	(76		)	(76		)	—			—			(593		)	(593		)	(27		)	(27		)
Convertible notes, net	(203		)	(221		)	(199		)	(198		)
Non-interest bearing note payable, net	—			—			(30		)	(30		)
Convertible Notes, net													(209		)	(182		)	(207		)	(247		)
Total financial liabilities	$	(3,926	)	$	(4,048	)	$	(3,801	)	$	(3,786	)	$	(4,695	)	$	(4,325	)	$	(4,073	)	$	(4,279	)

~~Originated~~ Vacation Ownership Notes Receivable


	At June 30, 2019				At December 31, 2018				At March 31, 2020				At December 31, 2019
($ in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Originated vacation ownership notes receivable
Vacation ownership notes receivable
Securitized	$	1,209	$	1,238	$	1,070	$	1,093	$	1,822	$	1,875	$	1,750	$	1,771

Eligible for securitization	83		85		85		87		77		89		165		175
Not eligible for securitization	261		261		233		233		260		260		318		318
Non-securitized	344		346		318		320		337		349		483		493
	$	1,553	$	1,584	$	1,388	$	1,413	$	2,159	$	2,224	$	2,233	$	2,264

We estimate the fair value of our ~~originated~~ vacation ownership notes receivable that have been securitized using a discounted cash flow model. We believe this is comparable to the model that an independent third party would use in the current market. Our model uses default rates, prepayment rates, coupon rates and loan terms for our securitized vacation ownership notes receivable portfolio as key drivers of risk and relative value to determine the fair value of the underlying vacation ownership notes receivable. We concluded that this fair value measurement should be categorized within Level 3.

Due to factors that impact the general marketability of our ~~originated~~ vacation ownership notes receivable that have not been securitized, as well as current market conditions, we bifurcate our non-securitized vacation ownership notes receivable at each balance sheet date into those eligible and not eligible for securitization using criteria applicable to current securitization transactions in the ABS market. Generally, vacation ownership notes receivable are considered not eligible for securitization if any of the following attributes are present: (1) payments are greater than 30 days past due; (2) the first payment has not been received; or (3) the collateral is located in Asia or Europe. In some cases, eligibility may also be determined based on the credit score of the borrower, the remaining term of the loans and other similar factors that may reflect investor demand in a securitization transaction or the cost to effectively securitize the vacation ownership notes receivable.

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

We estimate the fair value of the portion of our ~~originated~~ vacation ownership notes receivable that have not been securitized that we believe will ultimately be securitized in the same manner as ~~originated~~ vacation ownership notes receivable that have been securitized. We value the remaining ~~originated~~ 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 concluded that this fair value measurement should be categorized within Level 3.

Other Assets

Other assets include ~~$34~~$36 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. The carrying value of the COLI policies is equal to their cash surrender value (Level 2 inputs). In addition, we have investments in marketable securities of $7$5 million that are marked to market as trading securities using quoted market prices (Level 1 inputs).

Securitized Debt

We generate cash flow estimates by modeling all bond tranches for our active vacation ownership notes receivable securitization transactions, with consideration for the collateral specific to each tranche. The key drivers in our analysis include default rates, prepayment rates, bond interest rates and other structural factors, which we use to estimate the projected cash flows. In order to estimate market credit spreads by rating, we obtain indicative credit spreads from investment banks that actively issue and facilitate the market for vacation ownership securities and determine an average credit spread by rating level of the different tranches. We then apply those estimated market spreads to swap rates in order to estimate an underlying discount rate for calculating the fair value of the active bonds payable. We concluded that this fair value measurement should be categorized within Level 3.

~~Exchange~~2026 Notes and 2028 Notes

We estimate the fair value of our ~~Exchange~~2026 Notes and 2028 Notes (as defined in Footnote 14 “Debt”) using indicative quotes from securities dealers 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 Exchange Notes could be retired or transferred. We concluded that this fair value measurement should be categorized within Level 3.

~~Senior Unsecured Notes~~

~~We estimate the fair value of our Senior Unsecured Notes (as defined in Footnote 14~~13 “Debt”) using quoted market prices as of the last trading day for the quarter; however these notes have only a limited trading history and volume, and as such this fair value estimate is not necessarily indicative of the value at which ~~the Senior Unsecured Notes~~these notes could be retired or transferred. We concluded that this fair value measurement should be categorized within Level 2.

~~IAC Notes~~

We estimate the fair value of our IAC Notes (as defined in Footnote 14 “Debt”) using indicative quotes from securities dealers as of the last trading day for the quarter; however these notes have only a limited trading volume and as such this fair value estimate is not necessarily indicative of the value at which the IAC Notes could be retired or transferred. We concluded that this fair value measurement should be categorized within Level 3.

Term Loan

We estimate ~~that~~ the fair value of our Term Loan (as defined in Footnote 1413 “Debt”) ~~indicative~~using quotes from securities dealers 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 Term Loan could be retired or transferred. We concluded that this fair value measurement should be categorized within Level 3.

Revolving Corporate Credit Facility

We estimate that the fair value of our Revolving Corporate Credit Facility (as defined in Footnote ~~11 “Contingencies and Commitments”~~13 ��Debt”) approximates its gross carrying value as the contractual interest rate is variable plus an applicable margin. We concluded that this fair value measurement should be categorized within Level 3.

Convertible Notes

We estimate the fair value of our Convertible Notes (as defined in Footnote 1413 “Debt”) using quoted market prices as of the last trading day for the quarter; however these notes have only a limited trading history and volume and as such this fair value estimate is not necessarily indicative of the value at which the 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.



8.	EARNINGS PER SHARE

Basic (loss) earnings per common share attributable to common shareholders is calculated by dividing net (loss) income attributable to common shareholders by the weighted average number of shares of common stock outstanding during the reporting period. Treasury stock is excluded from the weighted average number of shares of common stock outstanding. Diluted earnings per common share attributable to common shareholders is calculated to give effect to all potentially dilutive common shares that were outstanding during the reporting ~~period.~~period, except in periods when there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect. The dilutive effect of outstanding equity-based compensation awards is reflected in diluted earnings 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 per share attributable to common shareholders reflects our intent to settle conversions of the 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. As no conversion premium existed as of ~~either June 30,~~March 31, 2020 or March 31, 2019, ~~or June 30, 2018,~~ there was no dilutive impact from the Convertible Notes for either the ~~second~~first quarter of 2020 or ~~first half of 2019 or 2018.~~2019.

The shares issuable on exercise of the Warrants (as defined in Footnote 1413 “Debt”) sold in connection with the issuance of the Convertible Notes will not impact the total dilutive weighted average shares outstanding unless and until the price of our common stock exceeds the strike price, which was subject to adjustment during the ~~second~~first quarter of ~~2019~~2020 to ~~$175.79,~~$175.04, as described in Footnote 1413 “Debt.” If and when the price of our common stock exceeds the strike price 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 (as defined in Footnote 1413 “Debt”) purchased in connection with the issuance of the Convertible Notes are considered to be anti-dilutive and will not impact our calculation of diluted earnings per share attributable to common shareholders.

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

Three Months Ended Six Months Ended
(in millions, except per share amounts)
June 30, 2019⁽¹⁾

June 30, 2018⁽¹⁾

June 30, 2019⁽¹⁾

June 30, 2018⁽¹⁾
Computation of Basic Earnings Per Share Attributable to Common Shareholders
Net income attributable to common shareholders $ 49
$ 11
$ 73
$ 47
Shares for basic earnings per share 44.7
26.7
45.1
26.7
Basic earnings per share $ 1.11
$ 0.40
$ 1.62
$ 1.75
Computation of Diluted Earnings Per Share Attributable to Common Shareholders
Net income attributable to common shareholders $ 49
$ 11
$ 73
$ 47
Shares for basic earnings per share 44.7
26.7
45.1
26.7
Effect of dilutive shares outstanding
Employee stock options and SARs 0.3
0.4
0.3
0.4
Restricted stock units 0.2
0.2
0.2
0.2
Shares for diluted earnings per share 45.2
27.3
45.6
27.3
Diluted earnings per share $ 1.10
$ 0.39
$ 1.61
$ 1.71



	Three Months Ended
(in millions, except per share amounts)	March 31, 2020			March 31, 2019⁽¹⁾
Computation of Basic (Loss) Earnings Per Share Attributable to Common Shareholders
Net (loss) income attributable to common shareholders	$	(106	)	$	24
Shares for basic (loss) earnings per share	41.5			45.6
Basic (loss) earnings per share	$	(2.56	)	$	0.52
Computation of Diluted (loss) Earnings Per Share Attributable to Common Shareholders
Net (loss) income attributable to common shareholders	$	(106	)	$	24
Shares for basic (loss) earnings per share	41.5			45.6
Effect of dilutive shares outstanding
Employee stock options and SARs	—			0.3
Restricted stock units	—			0.2
Shares for diluted (loss) earnings per share	41.5			46.1
Diluted (loss) earnings per share	$	(2.56	)	$	0.51

⁽¹⁾

The computations of diluted earnings per share attributable to common shareholders exclude approximately 452,000 ~~and 307,000~~ shares of common stock, the maximum number of shares issuable as of ~~June 30,~~March 31, 2019, ~~and June 30, 2018, respectively,~~ upon the vesting of certain performance-based awards, because the performance conditions required to be met for the shares subject to such awards to vest were not achieved by the end of the reporting period.

In accordance with the applicable accounting guidance for calculating earnings per share, for the ~~second~~first quarter of 2019, we excluded from our calculation of diluted earnings per share 167,760 shares underlying stock appreciation rights (“SARs”) that may settle in shares of common stock because the exercise prices of such SARs, which ranged from $100.52 to $143.38, were greater than the average market price for the applicable period.

~~For the first half~~ of 2019, we excluded from our calculation of diluted earnings per share 249,737 shares underlying ~~SARs~~stock appreciation rights (“SARs”) that may settle in shares of common stock because the exercise prices of such SARs, which ranged from $97.53 to $143.38, were greater than the average market price for the applicable period.

For the second quarter and first half of 2018, 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 applicable period.



9.	INVENTORY

The following table shows the composition of our inventory balances:


($ in millions)	At June 30, 2019		At December 31, 2018		At March 31, 2020		At December 31, 2019
Finished goods⁽¹⁾	$	828	$	843	$	741	$	777
Work-in-progress	48		9		21		69
Real estate inventory	876		852		762		846
Other	12		11		14		13
	$	888	$	863	$	776	$	859

_________________________


⁽¹⁾	Represents completed inventory that is ~~either~~ registered for sale as vacation ownership interests ~~or unregistered~~ and ~~available for sale in its current form.~~inventory expected to be acquired pursuant to estimated future foreclosures.

We value vacation ownership products at the lower of cost or fair market value less costs to sell, in accordance with applicable accounting guidance, and we record operating supplies at the lower of cost (using the first-in, first-out method) or net realizable value. Product cost true-up activity relating to vacation ownership products increased carrying values of inventory by ~~$4 million and less than $1~~$8 million during the first ~~half~~quarter of ~~2019~~2020 and increased by $3 million during the first ~~half~~quarter of ~~2018, respectively.~~2019. Additionally, during the first quarter of 2020, we recorded a $4 million impairment to Inventory.

In addition to the above, at ~~June 30, 2019,~~March 31, 2020, we had ~~$48~~$147 million of completed vacation ownership units which have been classified as a component of Property and equipment until the time at which they are legally registered for sale as vacation ownership products. We also have $39 million and $38 million of deposits on future purchases of inventory at March 31, 2020 and December 31, 2019, respectively, which are included in the Other assets line on our Balance Sheets.



10.	~~PROPERTY~~GOODWILL AND ~~EQUIPMENT~~INTANGIBLES

Goodwill

The following table details the ~~composition~~carrying amount of our ~~property~~goodwill at March 31, 2020 and ~~equipment balances:~~December 31, 2019, and reflects goodwill attributed to the ILG Acquisition.

($ in millions) At June 30, 2019 At December 31, 2018
Land and land improvements $ 373
$ 466
Buildings and leasehold improvements 403
404
Furniture, fixtures and other equipment 87
88
Information technology 311
297
Construction in progress 38
32
1,212
1,287
Accumulated depreciation (375 ) (336 )
$ 837
$ 951



($ 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		)
Balance at March 31, 2020	$	2,445	$	372		$	2,817

AsIn connection with the preparation of the first quarter 2020 Financial Statements we initially concluded that it was more likely than not that the fair value of both of our reporting units were below their carrying amounts. The factors that led to this conclusion were related to the COVID-19 pandemic and included: (i) the substantial decline in our stock price and market capitalization; (ii) the closure of substantially all of our Vacation Ownership reporting unit sales centers; (iii) the governmental 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. We recognized a non-cash impairment charge of $73 million in the Impairment line on our Income Statement during the first quarter of 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 ~~ILG Acquisition,~~near-term and anticipated recovery of the business resulting from the impact of the COVID-19 pandemic.

Indefinite-Lived Intangibles

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



($ in millions)	Trade Names and Trademarks
Balance at December 31, 2019	$	82
Impairment	(18		)
Balance at March 31, 2020	$	64

In connection with the preparation of the first quarter 2020 Financial Statements we ~~are performing a comprehensive review~~concluded that it was more likely than not that the fair value of our ~~property~~indefinite lived intangibles were below their carrying amounts. The factors that led to this conclusion were related to the COVID-19 pandemic and ~~equipment to determine~~ included: (i) the best strategic direction with respect to these assets for the combined company. These assets include undeveloped parcels, future phases of existing resorts, operating hotels and other non-core assets. A key focusgovernmental stay-at-home orders in place in many of the ~~comprehensive review is to evaluate opportunities to reduce holdings~~jurisdictions in ~~markets where~~which we ~~have excess supply so that future inventory spend will be focused on markets that create incremental cost-effective sales locations in areas~~operate; (ii) the impact of ~~high customer demand. The result of this review could have a material impact~~travel restrictions on the ~~carrying value~~hospitality industry; and (iii) the macroeconomic fallout from the COVID-19 pandemic.

We used the relief of ~~certain assets, which,~~royalty method in ~~turn, would result in non-cash impairments.~~

~~During~~calculating the second quarter of 2019, we entered into a contract to sell land and land improvements associated with a future phase of an existing resort located in Orlando, Florida for $10 million, which was less than the carryingfair value of the ~~land~~trade names and ~~land improvements. As a result, we recorded~~trademarks (Level 3). We recognized a non-cash impairment charge of ~~$26~~$18 million in the Impairment line on our Income Statement during the first ~~half~~quarter of ~~2019. The impairment is~~2020, which was primarily ~~attributable~~attributed to the ~~fact that~~decline in estimated near-term revenues and related recovery of long-term revenues attributed to the ~~book value~~impact of the ~~assets to be sold exceeds the sales price because the book value includes allocations of common costs incurred when we built the infrastructure for the resort, including future phases.~~COVID-19 pandemic.



11.	CONTINGENCIES AND COMMITMENTS

Commitments and Letters of Credit

As of ~~June 30, 2019,~~March 31, 2020, we had the following commitments outstanding:

We have various contracts for the use of information technology hardware and software that we use in the normal course of business. Our aggregate commitments under these contracts were ~~$62~~$66 million, of which we expect ~~$19~~$24 million, ~~$19~~$20 million, ~~$10~~$13 million, $7 million ~~$6 million~~ and $1$2 million will be paid in the remainder of ~~2019,~~ 2020, 2021, 2022, 2023 and ~~thereafter,~~2024, respectively.


•	~~We have commitments of~~ ~~$3 million~~ ~~to subsidize operating costs of vacation ownership property owners’ associations, which we expect to pay in 2019.~~

We have a remaining commitment to purchase an operating property, that we manage, located in New York, New York for ~~$182 million, of which $7 million is attributable to a related finance lease arrangement and recorded in Debt.~~$97 million. We expect to acquire the remaining units in the property, in their current form, ~~over time,~~in two transactions during 2021. See Footnote 3 “Acquisitions and ~~we expect to make payments~~Dispositions” for ~~these units~~information on the purchase that occurred during the first quarter of ~~$120 million and $62 million in~~ 2020 and ~~2021, respectively. We currently manage this property, which was rebranded as Marriott Vacation Club Pulse, New York City. See~~ Footnote 1716 “Variable Interest Entities” for additional information on this transaction and our activities relating to the variable interest entity 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 within specified timeframes.~~standards. We expect to complete the acquisition in ~~2020~~2021 and to make the remaining payments with respect to these units when specific construction milestones are completed, as follows: ~~$7 million in 2019, $23~~$2 million in 2020 and $2$23 million in 2021.

~~During the second quarter of 2019, we amended~~We have a remaining commitment to purchase an operating property, that we manage, located in San Francisco, California for ~~$158 million of which $9 million is attributable to a related finance lease arrangement and recorded in Debt.~~$88 million. We expect to acquire the operating property over time and ~~expect~~are committed to make payments for the operating property as follows: ~~$57~~$32 million in ~~2019, $55~~2021, $24 million in ~~2020~~2022, and ~~$46~~$32 million in ~~2021. We currently manage this property, which was rebranded as Marriott Vacation Club Pulse, San Francisco, during 2019.~~2023. See Footnote 1716 “Variable Interest Entities” for additional information on this transaction and our activities relating to the variable interest entity involved in this ~~transaction. Subsequent~~transaction and Footnote 3 “Acquisitions and Dispositions” for information on the purchase that occurred during the first quarter of 2020.

During the first quarter of 2020, we assigned a commitment to purchase a property located in Waikiki, Hawaii to a third-party developer. If we are unable to negotiate a capital efficient inventory arrangement, we are committed to purchasing the property, in its current form, for $98 million in 2021. See Footnote 16 “Variable Interest Entities” for additional information on this transaction and our activities relating to the ~~end of the second quarter of 2019, we made a payment of $57 million relating to~~variable interest entity involved in this ~~commitment.~~transaction.

Surety bonds issued as of ~~June 30, 2019~~March 31, 2020 totaled ~~$78~~$103 million, the majority of which were requested by federal, state, or local governments in connection with our operations.

As of ~~June 30, 2019,~~March 31, 2020, we had $4$3 million of letters of credit outstanding under our ~~$600 million revolving credit facility (the “Revolving~~Revolving Corporate Credit ~~Facility”~~Facility (as defined in Footnote 13 “Debt”). In addition, as of ~~June 30, 2019,~~March 31, 2020, we had $4$5 million in letters of credit outstanding related to and in lieu of reserves required for several vacation ownership notes receivable securitization transactions outstanding. These letters of credit are not issued pursuant to, nor do they impact our borrowing capacity under, the Revolving Credit Facility.

We estimate the cash outflow associated with completing the phases of our existing portfolio of vacation ownership projects currently under development will be approximately ~~$17~~$7 million, of which $3$4 million is included within liabilities on our Balance Sheet at ~~June 30, 2019.~~March 31, 2020. This estimate is based on our current development plans, which remain subject to change, and we expect the phases currently under development will be completed by the end of ~~2019.~~

2021.

Guarantees

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 ~~June 30, 2019,~~March 31, 2020, our maximum exposure under ~~these~~fixed dollar guarantees ~~is $37~~was $27 million, of which $8 ~~million, $10~~ million, $9 million, $4 million, $2 million, $1 million and $4$3 million relate to the remainder of ~~2019,~~ 2020, 2021, 2022, 2023, 2024 and thereafter. ~~In addition,~~Based on the impact of the COVID-19 pandemic on our ~~maximum exposure~~rental operations, we declared the occurrence of a force majeure event under ~~other guarantees is $4 million.~~many of these agreements, generally effective as of April 1, 2020. As a result, owner distributions made under such agreements will be paid on a net operating income basis, rather than as guaranteed amounts, until such time as force majeure event conditions abate.

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 are seeking compensatory damages, disgorgement, punitive damages, fees and costs.

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 ~~challenges~~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 ~~are seeking~~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 have appealed the ruling.

In December 2016, Flora and Bruce Gillespie and other owners and former owners of fractional interests at the Fifth and Fifty-Fifth Residence Club located within The St. Regis, New York (the “St. Regis NY Club”) filed an action in the U.S. District Court for the Southern District of New York against ILG, certain of its subsidiaries, and certain third parties alleging that the sale of less than all interests offered in the fractional offering plan, the amendment of the plan to include additional units, and the rental of unsold fractional interests by the plan’s sponsor breached the relevant agreements and harmed the value of plaintiffs’ fractional interests. The plaintiffs are seeking compensatory damages, rescission, disgorgement, fees and costs. On May 21, 2020, the court granted our motion for summary judgment and dismissed the case.

In February 2017, the owners’ association for the St. Regis NY Club filed a separate suit against ILG and certain of its subsidiaries in the U.S. District Court for the Southern District of New York, which was amended to add Marriott International and Starwood as additional defendants in March 2017. The lawsuit was subsequently transferred to the U.S. District Court for the Middle District of Florida. The operative complaint ~~alleges~~alleged that the sponsor of the St. Regis NY Club (St. Regis Residence Club, New York, Inc.), the St. Regis NY Club manager (St. Regis New York Management, Inc.), and certain affiliated entities, as well as Marriott International and Starwood, breached their fiduciary duties related to sale and rental practices, and further ~~alleges~~alleged tortious interference with the management agreement, unjust enrichment, and anticompetitive conduct. The amended complaint also ~~alleges~~alleged anticompetitive conduct in connection with the renewal of the St. Regis NY Club management agreement. The plaintiff ~~is seeking~~sought declaratory relief in connection with the Starpoint conversion program and the exchange program at the St. Regis NY Club, unspecified damages, and disgorgement of payments under the management and purchase agreements. In March 2020, the U.S. District Court for the Middle District of Florida dismissed the case with prejudice.

In February 2019, the owners’ association for the St. Regis NY Club filed a separate 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 plaintiff is seeking unspecified damages, punitive damages and disgorgement of payments under the management and purchase agreements.

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. Thomas alleging that their fractional interests were devalued by the affiliation of The Ritz-Carlton Club, St. Thomas and other Ritz-Carlton Clubs with our MVCD program. The lawsuit was subsequently removed to the U.S. District Court for the District of the Virgin Islands. 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 is seeking 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.

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

In the ordinary course of our business, various claims and lawsuits have been filed or are pending against us. A number of these lawsuits and claims may exist at any given time. Additionally, the COVID-19 pandemic may give rise to various claims and lawsuits from owners, members and other parties. We record and accrue for legal contingencies when we determine that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In making such determinations, we evaluate, among other things, the degree of probability of an unfavorable outcome and, when it is probable that a liability has been incurred, our ability to make a reasonable estimate of loss. We review these accruals each reporting period and make revisions based on changes in facts and circumstances.

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 in the aggregate. For matters not requiring accrual, we do not believe that the ultimate outcome of such matters, individually and in the aggregate, will materially harm our financial position, cash flows, or overall trends in results of operations based on information currently available. However, legal proceedings are inherently uncertain, and while we believe that our accruals are adequate and/or we have valid defenses to the claims asserted, unfavorable rulings could occur that could, individually or in the aggregate, have a material adverse effect on our business, financial condition, or operating results.

~~Other~~Leases That Have Not Yet Commenced

During June 2018, we identified forged and fraudulently induced electronic payment disbursements we made to third parties in an aggregate amount of $10 million resulting from unauthorized third-party access to our email system. Upon detection, we immediately notified law enforcement authorities and relevant financial institutions and commenced a forensic investigation. During 2018, we recovered $6 million. During the second quarter of 2019, we received $3 million from our insurance company as final settlement of our claim, and the insurance company waived the requirement for us to reimburse the insurance company for any monies subsequently recovered. We recorded a gain of $3 million in the Gains (losses) and other income (expense), net line of our Income Statement for the second quarter and first half of 2019. Any additional recoveries will be recorded in our results in the future. We have concluded that this event did not involve access to any of our other systems. No other misappropriation of assets was identified during our investigation.

~~Insurance Recoveries~~

During September 2017, the Westin St. John Resort Villas, a Legacy-ILG property, sustained damage as a result of Hurricane Irma and remained closed until January 2019. As of June 30, 2019, the property insurance claim receivable related to this event and other 2017 storms was $10 million and is presented within Accounts receivable on our Balance Sheet. This balance is subject to change.

In September 2017, over 20 of our Legacy-MVW properties were impacted by Hurricane Irma and Hurricane Maria and, as a result, as of December 31, 2017, we accrued $1 million for the estimated property damage insurance deductibles and impairment of property and equipment, which was recorded in the Gains and other income, net line on our Income Statement for the year ended December 31, 2017. In 2018, we received $32 million of insurance proceeds related to the settlement of Legacy-MVW business interruption insurance claims arising from Hurricane Irma. These proceeds, and the related deductible of $3 million, were recorded net in the Gains and other income, net line on our Income Statement for the year ended December 31, 2018. During the first quarter of ~~2019,~~2020, we entered into a finance lease arrangement for our new global headquarters in Orlando, Florida. The new office building is expected to be completed in 2021, at which time the lease term will commence and a right-of-use asset and corresponding liability will be recorded ~~an additional $9~~on our balance sheet. The initial lease term is approximately 16 years with total lease payments of $129 million ~~of other income relating~~for the aforementioned period. Subsequent to the ~~final settlement~~first quarter of ~~these business interruption insurance claims, which was recorded~~2020, in response to the ~~Gains (losses)~~COVID-19 pandemic and ~~other income (expense), net line~~our ongoing evaluation of future space needs, we entered into a standstill arrangement with the developer/lessor. The agreement provides for a standstill on ~~our Income Statement~~certain project spending for several months, extends certain deliverable dates pertaining to the ~~six months ended June 30, 2019.~~development and lease, and grants MVW a limited termination option in exchange for reimbursement of certain developer soft costs.



12.	~~LEASES~~

We account for leases in accordance with ASC 842, which we adopted using the optional transition method in the period of adoption as of January 1, 2019, without retrospective application to comparative periods. See Footnote 2 “Significant Accounting Policies and Recent Accounting Standards” for additional information.

Operating leases include lease arrangements for various land, corporate facilities, real estate and equipment. Our land leases consist of long-term leases for a golf course (term of 30 years) and for land underlying an operating hotel (term of 50 years). Corporate facilities leases are for office space, including our corporate headquarters in Orlando, Florida, and have lease terms that range from nine to 14 years. Other operating leases are primarily for office and retail space, as well as various equipment supporting our operations, with varying terms and renewal option periods.

Finance leases (analogous to capital leases under ASC 840) include lease arrangements for ancillary and operations space for which it is reasonably certain we will exercise the option to purchase the underlying assets in connection with the commitment to purchase the associated operating property. See Footnote 11 “Contingencies and Commitments” for additional information regarding these transactions. In addition, we also lease various equipment supporting our operations and classify these leases as finance leases in accordance with ASC 842. The depreciable life of these assets are limited to the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Right-of-use assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. 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. For existing leases that commenced prior to the adoption of ASC 842, we made an accounting policy election to use our incremental borrowing rate, considering the remaining lease term and remaining minimum rental payments during transition, in establishing our lease liabilities. For new leases entered into after the adoption of ASC 842, we will use an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Certain of our lease agreements include variable rental payments that are based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation.

~~The following table presents the carrying values of our leases and the classification on our Balance Sheet as of June 30, 2019.~~

($ in millions) Balance Sheet Classification At June 30, 2019
Operating lease assets Other assets $ 121
Finance lease assets Property and equipment 22
$ 143

Operating lease liabilities Accrued liabilities $ 134
Finance lease liabilities Debt 22
$ 156

~~The following table presents the lease costs and the classification on our Income Statement for the three and six months ended June 30, 2019.~~

($ in millions) Income Statement Classification Three Months Ended June 30, 2019 Six Months Ended June 30, 2019
Operating lease cost Marketing and sales expense
General and administrative expense $ 9
$ 17
Finance lease cost
Amortization of right-of-use assets Depreciation and amortization 1
2
Interest on lease liabilities Interest expense 1
1
Variable lease cost Marketing and sales expense 1
2
$ 12
$ 22

~~The following table presents the maturity of our operating and financing lease liabilities as of June 30, 2019.~~

($ in millions) Operating Leases
Finance Leases⁽¹⁾
Total
2019, remaining $ 15
$ 11
$ 26
2020 29
10
39
2021 21
2
23
2022 18
—
18
2023 16
—
16
Thereafter 103
—
103
Total lease payments 202
23
225
Less: Imputed interest (68 ) (1 ) (69 )
$ 134
$ 22
$ 156

~~_________________________~~


⁽¹⁾	Finance lease payments include $17 million related to residual value guarantees associated with purchase commitments for operating properties in San Francisco, California and New York, New York. See Footnote 11 “Contingencies and Commitments” for additional information regarding these transactions.

~~Lease Term and Discount Rate~~



	~~At June 30, 2019~~
~~Weighted-average remaining lease term (in years)~~
~~Operating leases~~	~~11.4 years~~
~~Finance leases~~	~~0.7 years~~
~~Weighted-average discount rate~~
~~Operating leases~~	~~6.1%~~
~~Finance leases~~	~~4.8%~~

~~Other Information~~

($ in millions) Six Months Ended June 30, 2019
Cash paid for amounts included in measurement of lease liabilities
Operating cash flows for finance leases $ —
Operating cash flows for operating leases 17
Financing cash flows for finance leases 2
$ 19



~~13.~~	SECURITIZED DEBT

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


($ in millions)	($ in millions)	At June 30, 2019			At December 31, 2018			($ in millions)	At March 31, 2020				At December 31, 2019
Vacation ownership notes receivable securitizations, gross⁽¹⁾	Vacation ownership notes receivable securitizations, gross⁽¹⁾	$	1,787		$	1,590		Vacation ownership notes receivable securitizations, gross⁽¹⁾	$	1,706			$	1,850
Unamortized debt discount and issuance costs	Unamortized debt discount and issuance costs	(15		)	(11		)	Unamortized debt discount and issuance costs	(16		)		(18		)
		1,772			1,579				1,690				1,832

Warehouse Credit Facility, gross(2)	Warehouse Credit Facility, gross(2)	—			116			Warehouse Credit Facility, gross(2)		219				21
Unamortized debt issuance costs⁽²⁾	Unamortized debt issuance costs⁽²⁾	—			(1		)	Unamortized debt issuance costs⁽²⁾		(2		)		(2		)
		—			115				217				19

Other⁽³⁾	Other⁽³⁾	20			20			Other⁽³⁾		19				20
		$	1,792		$	1,714			$	1,926			$	1,871

_________________________


⁽¹⁾	Interest rates as of ~~June 30, 2019~~March 31, 2020 range from 2.2% to ~~6.3%~~4.4%, with a weighted average interest rate of 2.9%


⁽²⁾	~~Excludes $1 million of unamortized debt issuance costs~~Effective interest rate as of ~~June 30, 2019, as no cash borrowings were outstanding on the Warehouse Credit Facility at that time~~March 31, 2020 was 2.3%

~~(3)Non-recourse~~

All of our securitized debt is non-recourse to us. See Footnote 1716 “Variable Interest Entities” for a discussion of the collateral for the non-recourse debt associated with ~~the~~our securitized ~~vacation ownership notes receivable and~~debt.

The following table shows scheduled future principal payments for our ~~non-recourse warehouse credit facility (the “Warehouse Credit Facility”). The~~securitized debt ~~associated with our vacation ownership notes receivable securitizations and our Warehouse Credit Facility is non-recourse to us.~~as of March 31, 2020.



	Vacation Ownership Notes Receivable Securitizations		Warehouse Credit Facility		Other		Total
($ in millions)	Vacation Ownership Notes Receivable Securitizations		Warehouse Credit Facility		Other		Total
Payments Year
2020, remaining	$	133	$	8	$	1	$	142
2021	180		12		2		194
2022	183		14		2		199
2023	186		185		2		373
2024	186		—		3		189
Thereafter	838		—		9		847
	$	1,706	$	219	$	19	$	1,944

Vacation Ownership Notes Receivable Securitizations

On May 23, 2019, we completed the securitization of a pool of $459 million of vacation ownership notes receivable. Approximately $367 million of the vacation ownership notes receivable were purchased on May 23, 2019 by MVW 2019-1 LLC (the “2019-1 LLC”), and an additional $85 million of the vacation ownership notes receivable were purchased prior to June 30, 2019. As of June 30, 2019, the 2019-1 LLC held $6 million of the proceeds, which were released as the remaining vacation ownership notes receivable were purchased. On July 12, 2019, subsequent to the end of the second quarter of 2019, the 2019-1 LLC purchased the remaining $7 million of vacation ownership notes receivable and $6 million was released from restricted cash. In connection with the securitization, investors purchased in a private placement $450 million in vacation ownership loan backed notes from the 2019-1 LLC. Three classes of vacation ownership loan backed notes were issued by the 2019-1 LLC: $350 million of Class A Notes, $67 million of Class B Notes and $33 million of Class C Notes. The Class A Notes have an interest rate of 2.89 percent, the Class B Notes have an interest rate of 3.00 percent and the Class C Notes have an interest rate of 3.33 percent, for an overall weighted average interest rate of 2.94 percent.

Each of the securitized vacation ownership notes receivable transactions contains various triggers relating to the performance of the underlying vacation ownership notes receivable. If a pool of securitized vacation ownership notes receivable fails to perform within the pool’s established parameters (default or delinquency thresholds vary by transaction), transaction provisions effectively redirect the monthly excess spread we would otherwise receive from that pool (attributable to the interests we retained) to accelerate the principal payments to investors (taking into account the subordination of the different tranches to the extent there are multiple tranches) until the performance trigger is cured. During the ~~second~~first quarter of ~~2019,~~2020, and as of ~~June 30, 2019, no~~March 31, 2020, 0 securitized vacation ownership notes receivable pools were out of compliance with their respective established parameters. As of ~~June 30, 2019,~~March 31, 2020, we had 12 securitized vacation ownership notes receivable pools outstanding.

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 ~~below~~above due to prepayments by the vacation ownership notes receivable obligors.

~~The following table shows scheduled future principal payments for our securitized debt as of June 30, 2019.~~

Vacation Ownership
Notes Receivable Securitizations
Other Total
($ in millions)
Payments Year
2019, remaining $ 128
$ 1
$ 129
2020 225
2
227
2021 202
2
204
2022 191
3
194
2023 185
3
188
Thereafter 856
9
865
$ 1,787
$ 20
$ 1,807

Warehouse Credit Facility

~~The Warehouse~~Our $350 million warehouse credit facility (the “Warehouse Credit ~~Facility, which has a borrowing capacity of $250 million,~~Facility”), allows for the securitization of ~~Legacy-MVW~~ vacation ownership notes receivable on a revolving non-recourse basis through ~~March 13, 2020.~~December 20, 2021. During the first quarter of ~~2019,~~2020, we securitized vacation ownership notes receivable under our Warehouse Credit Facility. The carrying amount of the vacation ownership notes receivable securitized was ~~$146~~$240 million. The average advance rate was 8584 percent, which resulted in gross proceeds of ~~$124~~$202 million. Net proceeds were ~~$123~~$201 million due to the funding of reserve accounts of $1 million.

AsSubsequent to the end of ~~June 30, 2019, there were no cash borrowings outstanding under~~the first quarter of 2020, we amended our Warehouse Credit ~~Facility. All outstanding amounts were repaid with proceeds~~Facility to increase the borrowing capacity by $181 million, to $531 million. The revolving period for the existing $350 million remains the same and will terminate in December 2021, if not renewed. The revolving period for the additional $181 million portion will terminate in March 2021, if not renewed. As part of this amendment, the interest rate increased from ~~our vacation ownership notes receivable securitization transaction during the second quarter of 2019.~~primarily LIBOR plus 1.1% to primarily LIBOR plus 1.4%.



~~14.~~13.	DEBT

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


($ in millions)	($ in millions)	At June 30, 2019			At December 31, 2018			($ in millions)	At March 31, 2020			At December 31, 2019
Senior Notes
	Exchange Notes	$	89		$	89
	Unamortized debt issuance costs	(1		)	(1		)
Senior Unsecured Notes								Senior Unsecured Notes
		88			88			2026 Notes	$	750		$	750
								Unamortized debt issuance costs	(7		)	(8		)
	Senior Unsecured Notes	750			750				743			742
	Unamortized debt issuance costs	(8		)	(9		)
		742			741			2028 Notes	350			350
								Unamortized debt discount and issuance costs	(5		)	(5		)
	IAC Notes	141			141				345			345

Corporate Credit Facility	Corporate Credit Facility							Corporate Credit Facility
	Term Loan	895			900			Term Loan	891			893
	Unamortized debt discount and issuance costs	(11		)	(12		)	Unamortized debt discount and issuance costs	(12		)	(12		)
		884			888				879			881

	Revolving Corporate Credit Facility	80			—			Revolving Corporate Credit Facility	596			30
	Unamortized debt issuance costs⁽¹⁾	(4		)	—			Unamortized debt issuance costs	(3		)	(3		)
		76			—				593			27

Convertible notes, gross		230			230
Convertible Notes								Convertible Notes	230			230
Unamortized debt discount and issuance costs	Unamortized debt discount and issuance costs	(27		)	(31		)	Unamortized debt discount and issuance costs	(21		)	(23		)
		203			199

Non-Interest bearing note payable		—			31
Unamortized debt discount		—			(1		)
		—			30				209			207

Finance leases	Finance leases	23			17			Finance leases	9			14
		$	2,157		$	2,104			$	2,778		$	2,216

~~_________________________~~


⁽¹⁾	~~Excludes $4 million of unamortized debt issuance costs as of December 31, 2018, as no cash borrowings were outstanding on the Revolving Corporate Credit Facility at that time.~~

The following table shows scheduled future principal payments for our debt, excluding finance leases, as of ~~June 30, 2019.~~March 31, 2020.



($ in millions)	2026 Notes		2028 Notes		Term Loan		Revolving Corporate Credit Facility		Convertible Notes		Total
Payments Year
2020, remaining	$	—	$	—	$	7	$	—	$	—	$	7
2021	—		—		9		—		—		9
2022	—		—		9		—		230		239
2023	—		—		9		596		—		605
2024	—		—		9		—		—		9
Thereafter	750		350		848		—		—		1,948
	$	750	$	350	$	891	$	596	$	230	$	2,817

Payments Year
($ in millions) Remaining 2019 2020 2021 2022 2023 Thereafter Total
Exchange Notes $ —
$ —
$ —
$ —
$ 89
$ —
$ 89
Senior Unsecured Notes —
—
—
—
—
750
750
IAC Notes —
—
—
—
141
—
141
Term Loan 4
9
9
9
9
855
895
Revolving Corporate Credit Facility —
—
—
—
80
—
80
Convertible Notes —
—
—
230
—
—
230
$ 4
$ 9
$ 9
$ 239
$ 319
$ 1,605
$ 2,185

Senior Unsecured Notes

Our Senior Unsecured Notes, as further discussed below, include the following: ~~$750~~

$750 million aggregate principal amount of 6.500% ~~senior unsecured notes~~Senior Unsecured Notes due 2026 issued in the third quarter of 2018 with a maturity date of September 15, 2026 (the ~~“Senior Unsecured~~“2026 Notes”); ~~$350~~and

$350 million in aggregate principal amount of ~~outstanding 5.625%~~4.750% Senior Unsecured Notes due ~~2023 assumed~~2028 issued in ~~connection with~~ the ~~ILG Acquisition (the “IAC Notes”); and 5.625% Senior Unsecured Notes due 2023 offered in exchange for the IAC Notes during the third~~fourth quarter of ~~2018~~2019 with a maturity date of January 15, 2028 (the ~~“Exchange~~“2028 Notes”).

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 Corporate Credit Facility~~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 ~~2.25~~1.75 percent. Borrowings under the Revolving Corporate Credit Facility generally bear interest at a floating rate plus an applicable margin that varies from 0.50 percent to 2.75 percent 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. ~~The Revolving Corporate Credit Facility also includes a letter of credit sub-facility of $75 million.~~ As of ~~June 30, 2019,~~March 31, 2020, we were in compliance with the applicable financial and operating covenants under the Corporate Credit Facility.

WeAs a precautionary measure to ensure adequate liquidity for a sustained period, we borrowed the remaining $386 million under our Revolving Corporate Credit Facility in March 2020 to increase our cash position and preserve financial flexibility in light of the impact on global markets resulting from the COVID-19 pandemic.

In May 2020, we entered into a waiver (the “Waiver”) to the agreement that governs the Corporate Credit Facility. The Waiver, among other things, suspends the requirement to comply with the leverage covenant in the Revolving Corporate Credit Facility for up to four quarters, commencing with the fiscal quarter ending June 30, 2020. During the suspension period, we will be required to maintain monthly minimum liquidity of at least $300 million until the later of March 31, 2021 or the end of the suspension period. In addition, for the duration of the period during which the waiver of the leverage covenant remains in effect, we are prohibited from making certain restricted payments, including share repurchases and dividends.

Further, subsequent to the first quarter of 2020, we repaid the entire $596 million balance that was outstanding on the Revolving Corporate Credit Facility as of March 31, 2020.

Prior to 2020, we entered into $250 million of interest rate swaps under which we pay a fixed rate of 2.9625 percent 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 percent 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%~~2.5000 percent and a floor strike rate of ~~1.8810%~~1.8810 percent 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 ~~June 30,~~March 31, 2020 and December 31, 2019. 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~~instruments:



	Three Months Ended
($ in millions)	March 31, 2020			March 31, 2019
Derivative instrument adjustment balance, beginning of period	$	(21	)	$	(6	)
Other comprehensive loss before reclassifications	(24		)	(3		)
Reclassification to Income Statement	—			—
Net other comprehensive loss	(24		)	(3		)
Derivative instrument adjustment balance, end of period	$	(45	)	$	(9	)

Senior Secured Notes

Subsequent to the first ~~half~~quarter of ~~2019:~~

($ in millions) Derivative Instrument Adjustments
Balance at December 31, 2018 $ (6 )
Other comprehensive loss before reclassifications (3 )
Reclassification to Income Statement —
Net other comprehensive loss (3 )
Balance at March 31, 2019 (9 )
Other comprehensive loss before reclassifications (13 )
Reclassification to Income Statement —
Net other comprehensive loss (13 )
Balance at June 30, 2019 $ (22 )

2020, in May 2020, we issued $500 million aggregate principal amount of 6.125% Senior Secured Notes due September 15, 2025 (the “2025 Notes”). The 2025 Notes will be pari passu with and secured by the same collateral as our Corporate Credit Facility. We will pay interest on the 2025 Notes on May 15 and November 15 of each year, commencing on November 15, 2020. We received net proceeds of approximately $494 million from the offering of the 2025 Notes, after deducting fees and expenses related to the offering.

Convertible Notes

~~Our~~During 2017, we issued $230 million of ~~1.50% Convertible Senior Notes due 2022~~aggregate principal amount of convertible senior notes (the “Convertible Notes”) ~~were convertible~~that bear interest at ~~an initial~~a rate of ~~6.7482 shares of common stock per $1,000 principal amount of Convertible Notes (equivalent to an initial conversion price of approximately $148.19 per share of our common stock).~~1.50 percent, payable in cash semi-annually. The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes and was subject to adjustment during the ~~second~~first quarter of ~~2019~~2020 to ~~6.7825~~6.8114 shares of common stock per $1,000 principal amount of Convertible Notes (equivalent to a conversion price of approximately ~~$147.44~~$146.81 per share of our common stock) when we declared a quarterly dividend of ~~$0.45~~$0.54 per share, which was greater than the quarterly dividend ~~at the time of the issuance of~~when the Convertible ~~Notes.~~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 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 ~~June 30, 2019,~~March 31, 2020, the effective interest rate was 4.7% and the remaining discount amortization period was ~~3.2~~2.5 years.

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


($ in millions)	At June 30, 2019			At December 31, 2018			At March 31, 2020			At December 31, 2019
Liability component
Principal amount	$	230		$	230		$	230		$	230
Unamortized debt discount	(23		)	(26		)	(18		)	(20		)
Unamortized debt issuance costs	(4		)	(5		)	(3		)	(3		)
Net carrying amount of the liability component	$	203		$	199		$	209		$	207

Carrying amount of equity component, net of issuance costs	$	33		$	33		$	33		$	33

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


	Three Months Ended				Six Months Ended				Three Months Ended
($ in millions)	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018		March 31, 2020		March 31, 2019
Contractual interest expense	$	—	$	1	$	1	$	2	$	1	$	1
Amortization of debt discount	1		2		3		3		2		2
Amortization of debt issuance costs	1		—		1		—		—		—
	$	2	$	3	$	5	$	5	$	3	$	3

Convertible Note Hedges and Warrants

In connection with the offering of the Convertible Notes, we concurrently entered into the following privately-negotiated separate transactions: convertible note hedge transactions with respect to our common stock (“Convertible Note Hedges”), covering a total of approximately 1.55 million shares of our common stock, and warrant transactions (“Warrants”), whereby we sold to the counterparties to the Convertible Note Hedges warrants to acquire approximately 1.55 million shares of our common stock at an initial strike price of $176.68 per share. The strike price was subject to adjustment during the ~~second~~first quarter of ~~2019~~2020 to ~~$175.79~~$175.04 per share when we declared a quarterly dividend of ~~$0.45~~$0.54 per share. As of ~~June 30, 2019, no~~March 31, 2020, 0 Convertible Note Hedges or Warrants have been exercised.

~~Finance Leases~~

~~See Footnote 12 “Leases” for information on our finance leases accounted for under ASC 842.~~

Restrictions

Amounts borrowed under the Corporate Credit 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 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. ~~The IAC~~In addition, the 2026 Notes ~~are guaranteed by MVWC, ILG~~ and ~~certain other subsidiaries whose voting securities are wholly owned directly or indirectly by ILG. The Senior Unsecured~~2028 Notes are guaranteed by MVWC and certain of ~~its subsidiaries whose voting securities are wholly owned directly or indirectly by MVWC. The Exchange Notes are guaranteed by MVWC~~our direct and ~~its~~indirect, existing and future, domestic subsidiaries, ~~that guarantee the Corporate Credit Facility. See Footnote 19 “Supplemental Guarantor Information” for additional information.~~excluding bankruptcy remote special purpose subsidiaries.



~~15.~~14.	SHAREHOLDERS’ EQUITY

Marriott Vacations Worldwide has 100,000,000 authorized shares of common stock, par value of $0.01 per share. At ~~June 30, 2019,~~March 31, 2020, there were ~~57,862,278~~75,235,823 shares of Marriott Vacations Worldwide common stock issued, of which ~~43,882,669~~41,039,198 shares were outstanding and ~~13,979,609~~34,196,625 shares were held as treasury stock. At December 31, ~~2018,~~2019, there were ~~57,626,462~~75,020,272 shares of Marriott Vacations Worldwide common stock issued, of which ~~45,992,731~~41,582,096 shares were outstanding and ~~11,633,731~~33,438,176 shares were held as treasury stock. Marriott Vacations Worldwide has 2,000,000 authorized shares of preferred stock, par value of $0.01 per share, ~~none~~NaN of which were issued or outstanding as of ~~June 30, 2019~~March 31, 2020 or December 31, ~~2018.~~2019.

Share Repurchase Program

The following table summarizes share repurchase activity under our current share repurchase program:

($ in millions, except per share amounts) Number of Shares Repurchased Cost of Shares Repurchased Average Price Paid per Share
As of December 31, 2018 11,687,774
$ 793
$ 67.85
For the first half of 2019 2,358,808
215
91.12
As of June 30, 2019 14,046,582
$ 1,008
$ 71.76



($ in millions, except per share amounts)	Number of Shares Repurchased	Cost of Shares Repurchased		Average Price Paid per Share
As of December 31, 2019	16,418,950	$	1,258	$	76.60
For the first quarter of 2020	769,935	82		106.60
As of March 31, 2020	17,188,885	$	1,340	$	77.95

~~As of June~~On July 30, 2019, our Board of Directors had authorized the repurchase of an aggregate of up to 14.9 million shares of our common stock under the share repurchase program since the initiation of the program in October 2013. Subsequent to the end of the second quarter of 2019, our Board of Directors authorized the extension of the duration of our existing share repurchase program to December 31, 2020, as well as the repurchase of up to 4.5 million additional shares of our common stock. As of March 31, 2020, our Board of Directors had authorized the repurchase of an aggregate of up to 19.4 million shares of our common stock under the share repurchase program since the initiation of the program in October 2013. Share repurchases may be made through open market purchases, privately negotiated transactions, block transactions, tender offers, accelerated share repurchase agreements or otherwise. The specific timing, amount and other terms of the repurchases will depend on market conditions, corporate and regulatory requirements and other factors. Acquired shares of our common stock are held as treasury shares carried at cost in our Financial Statements. In connection with the repurchase program, we are authorized to adopt one or more trading plans pursuant to the provisions of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

As of ~~June 30, 2019, 0.6~~March 31, 2020, 1.9 million shares remained available for repurchase under the authorization approved by our 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. Due to the impact of the COVID-19 pandemic, we temporarily suspended repurchasing shares of our common stock. Any future share repurchases will be subject to the restrictions associated with the Waiver to the Corporate Credit Facility.

Dividends

We declared cash dividends to holders of common stock during the first ~~half~~quarter of ~~2019~~2020 as follows:



Declaration Date	Shareholder Record Date	Distribution Date	Dividend per Share
February ~~15, 2019~~14, 2020	February ~~28, 2019~~27, 2020	March ~~14, 2019~~12, 2020	$~~0.45~~
~~May 9, 2019~~	~~May 23, 2019~~	~~June 6, 2019~~	~~$0.45~~0.54

Due to the impact of the COVID-19 pandemic, we temporarily suspended cash dividends. Any future dividend payments will be subject to the restrictions associated with the Waiver to the Corporate Credit Facility and Board approval, and there can be no assurance that we will pay dividends in the future.

Noncontrolling Interests

Property Owners’ Associations

~~As part of the ILG Acquisition we established a noncontrolling interest in~~We consolidate certain property owners’ associations ~~that Legacy-ILG consolidates~~ under the voting interest ~~model, which~~model. Noncontrolling interests represents the portion of the property owners’ associations related to individual or third-party VOI owners. AsNoncontrolling interests of ~~June 30, 2019, this noncontrolling interest amounts to $10~~$13 million and is$12 million, as of March 31, 2020 and December 31, 2019, respectively, are included on our Balance ~~Sheet~~Sheets as a component of equity.



~~16.~~15.	SHARE-BASED COMPENSATION

We maintain the Marriott Vacations Worldwide Corporation Stock and Cash Incentive Plan (the “MVW Stock Plan”) for the benefit of our officers, directors, and employees. Under the MVW Stock Plan, we are authorized to award: (1) restricted stock units (“RSUs”) of our common stock, (2) SARs relating to our common stock, and (3) stock options to purchase our common stock. A total of 6 million shares are authorized for issuance pursuant to grants under the MVW Stock Plan. As of ~~June 30, 2019,~~March 31, 2020, less than 1 million shares were available for grants under the MVW Stock Plan.

As part of the ILG Acquisition, we assumed the Interval Leisure Group, Inc. 2013 Stock and Incentive Plan (the “ILG Stock Plan”) and equity based awards outstanding under the ILG Stock Plan. As of ~~June 30, 2019,~~March 31, 2020, 1 million shares were available for grants under the ILG Stock Plan to Legacy-ILG employees.

Subsequent to the first quarter of 2020, our shareholders approved the Marriott Vacations Worldwide Corporation 2020 Equity Incentive Plan (the “MVW 2020 Equity Plan”), which supersedes both the MVW Stock Plan and the ILG Stock Plan (collectively, the “Prior Plans”) and no new awards will be granted under the Prior Plans. All awards that were granted under the Prior Plans will remain outstanding and continue to be governed by the Prior Plans. Approximately 2 million shares were available for grant under the MVW 2020 Equity Plan as of May 20, 2020.

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


	Three Months Ended				Six Months Ended				Three Months Ended
($ in millions)	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018		March 31, 2020			March 31, 2019
Service-based RSUs	$	6	$	4	$	9	$	6	$	4		$	3
Performance-based RSUs	2		2		3		3		(2		)	1
ILG Acquisition Converted RSUs	2		—		6		—		1			4
	10		6		18		9		3			8
SARs	1		—		2		1		1			1
Stock options	—		—		—		—		—			—
	$	11	$	6	$	20	$	10	$	4		$	9

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


($ in millions)	At June 30, 2019		At December 31, 2018		At March 31, 2020		At December 31, 2019
Service-based RSUs	$	25	$	16	$	35	$	17
Performance-based RSUs	16		7		5		10
ILG Acquisition Converted RSUs	7		15		2		3
	48		38		42		30
SARs	3		1		4		1
Stock options	—		—		—		—
	$	51	$	39	$	46	$	31

Restricted Stock Units

We granted ~~189,300~~248,172 service-based RSUs, which are subject to time-based vesting conditions, with a weighted average grant-date fair value of ~~$96.25,~~$91.08, to our employees and non-employee directors during the first ~~half~~quarter of ~~2019.~~2020. During the first ~~half~~quarter of ~~2019,~~2020, we also granted performance-based RSUs, which are subject to performance-based vesting conditions, to members of management. A maximum of ~~287,876~~177,208 RSUs may be earned under the performance-based RSU awards granted during the first ~~half~~quarter of ~~2019.~~2020.

Stock Appreciation Rights

We granted ~~111,111~~116,434 SARs, with a weighted average grant-date fair value of ~~$28.89~~$29.63 and a weighted average exercise price of ~~$100.52,~~$96.82, to members of management during the first ~~half~~quarter of ~~2019.~~2020. We use the Black-Scholes model to estimate the fair value of the SARs granted. The expected stock price volatility was calculated based on the average of the historical and implied volatility of our stock price. The average expected life was calculated using the simplified method, as we have insufficient historical information to provide a basis for estimating average expected life. The risk-free interest rate was calculated based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. The dividend yield assumption listed below is based on the expectation of future payouts.

The following table outlines the assumptions used to estimate the fair value of grants during the first ~~half~~quarter of ~~2019:~~2020:



Expected volatility	~~31.10%~~38.81%
Dividend yield	~~1.76%~~2.13%
Risk-free rate	~~2.59%~~0.96%
Expected term (in years)	6.25

~~Legacy-ILG Deferred Compensation Plan~~

Certain deferred share units (“DSUs”) of ILG common stock were outstanding on the Acquisition Date under the Interval Leisure Group, Inc. Deferred Compensation Plan for Non-Employee Directors. On the Acquisition Date, these DSUs were converted to equity-based awards with respect to MVW’s common stock and cash-based awards, resulting in 12,265 DSUs (“ILG DSUs”) and $1 million of cash-based awards. The ILG DSUs had a weighted average fair value of $114.31 on the Acquisition Date. The services associated with the ILG DSUs were completed as of the Acquisition Date, resulting in no deferred compensation costs. The ILG DSUs and related cash-based awards were paid in full during the first quarter of 2019 and there is no remaining obligation as of June 30, 2019.



~~17.~~16.	VARIABLE INTEREST ENTITIES

Variable Interest Entities Related to Our Vacation Ownership Notes Receivable Securitizations

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

We created these bankruptcy remote special purpose entities to serve as a mechanism for holding assets and related liabilities, and the entities have no equity investment at risk, making them ~~variable interest entities.~~VIEs. We continue to service the vacation ownership notes receivable, transfer all proceeds collected to these special purpose entities, and retain rights to receive benefits that are potentially significant to the entities. Accordingly, we concluded that we are the entities’ primary beneficiary and, therefore, consolidate them. There is no noncontrolling interest balance related to these entities and the creditors of these entities do not have general recourse to us.

As part of the ILG Acquisition, we acquired the variable interests in the entities associated with ILG’s outstanding vacation ownership notes receivable securitization transactions. As these vacation ownership notes receivable securitizations are similar in nature to the Legacy-MVW vacation ownership notes receivable securitizations they have been aggregated for disclosure purposes.

The following table shows consolidated assets, which are collateral for the obligations of these ~~variable interest entities,~~VIEs, and consolidated liabilities included on our Balance Sheet at ~~June 30, 2019:~~March 31, 2020:

($ in millions)
Vacation Ownership
Notes Receivable
Securitizations

Warehouse
Credit Facility
Total
Consolidated Assets
Vacation ownership notes receivable, net of reserves $ 1,681
$ —
$ 1,681
Interest receivable 12
—
12
Restricted cash⁽¹⁾
80
—
80
Total $ 1,773
$ —
$ 1,773
Consolidated Liabilities
Interest payable $ 3
$ —
$ 3
Debt 1,787
—
1,787
Total $ 1,790
$ —
$ 1,790

~~_________________________~~

⁽¹⁾

Includes $6 million of the proceeds from the securitization transaction completed during the second quarter of 2019, which were released when the remaining vacation ownership notes receivable were purchased by the 2019-1 LLC subsequent to the end of the second quarter. Refer to Footnote 13 “Securitized Debt” for a discussion of the terms of this securitization transaction and the purchase of additional vacation ownership notes receivable by the 2019-1 LLC subsequent to June 30, 2019.

~~The following table shows the interest income and expense recognized as a result of our involvement with these variable interest entities during the second quarter of 2019:~~

($ in millions)
Vacation Ownership
Notes Receivable
Securitizations

Warehouse
Credit Facility
Total
Interest income $ 55
$ 4
$ 59
Interest expense to investors $ 13
$ 1
$ 14
Debt issuance cost amortization $ 1
$ 1
$ 2
Administrative expenses $ 1
$ —
$ 1



($ in millions)	Vacation Ownership Notes Receivable Securitizations		Warehouse Credit Facility		Total
Consolidated Assets
Vacation ownership notes receivable, net of reserves	$	1,589	$	233	$	1,822
Interest receivable	12		1		13
Restricted cash	61		10		71
Total	$	1,662	$	244	$	1,906
Consolidated Liabilities
Interest payable	$	2	$	—	$	2
Securitized Debt	1,706		219		1,925
Total	$	1,708	$	219	$	1,927

The following table shows the interest income and expense recognized as a result of our involvement with these ~~variable interest entities~~VIEs during the first ~~half~~quarter of ~~2019:~~2020:

($ in millions)
Vacation Ownership
Notes Receivable
Securitizations

Warehouse
Credit Facility
Total
Interest income $ 107
$ 11
$ 118
Interest expense to investors $ 26
$ 3
$ 29
Debt issuance cost amortization $ 2
$ 1
$ 3
Administrative expenses $ 1
$ —
$ 1



($ in millions)	Vacation Ownership Notes Receivable Securitizations		Warehouse Credit Facility		Total
Interest income	$	57	$	6	$	63
Interest expense to investors	$	13	$	1	$	14
Debt issuance cost amortization	$	2	$	—	$	2

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


	Six Months Ended						Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018			March 31, 2020			March 31, 2019
Cash Inflows
Net proceeds from vacation ownership notes receivable securitizations	$	445		$	419
Principal receipts	237			127			$	121		$	119
Interest receipts	101			52			56			50
Reserve release⁽¹⁾	99			1
Reserve release							—			13
Total	882			599			177			182
Cash Outflows
Principal to investors	(233		)	(117		)	(129		)	(119		)
Voluntary repurchases of defaulted vacation ownership notes receivable	(23		)	(15		)	(15		)	(9		)
Voluntary clean-up call	—			(22		)
Interest to investors	(22		)	(10		)	(13		)	(11		)
Funding of restricted cash^{(2) (3)}	(93		)	(110		)
Total	(371		)	(274		)	(157		)	(139		)
Net Cash Flows	$	511		$	325		$	20		$	43

~~_________________________~~

⁽¹⁾

Includes the release of $84 million related to the securitization transaction completed during the second quarter of 2019, which was released as the remaining vacation ownership notes receivable were purchased by the 2019-1 LLC. Refer to Footnote 13 “Securitized Debt” for a discussion of the terms of this securitization transaction and the purchase of additional vacation ownership notes receivable by the 2019-1 LLC subsequent to June 30, 2019.

⁽²⁾

Includes $90 million of the proceeds from the securitization transaction completed during the second quarter of 2019, of which $84 million was released during the second quarter of 2019, as a portion of the remaining vacation ownership notes receivable were purchased by the 2019-1 LLC. The remaining $6 million was released when the remaining vacation ownership notes receivable were purchased by the 2019-1 LLC subsequent to the end of the second quarter of 2019.


⁽³⁾	Includes $106 million of the proceeds from the securitization transaction completed during the second quarter of 2018, which were released when the remaining vacation ownership notes receivable were purchased by the 2018-1 Trust during the third quarter of 2018.

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

The following table shows cash flows between us and the Warehouse Credit Facility ~~variable interest entity:~~VIE:


	Six Months Ended						Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018			March 31, 2020			March 31, 2019
Cash Inflows
Proceeds from vacation ownership notes receivable securitizations	$	124		$	—		$	202		$	124
Principal receipts	12			—			11			7
Interest receipts	12			—			4			7
Reserve release	2			—
Total	150			—			217			138
Cash Outflows
Principal to investors	(12		)	—			(4		)	(5		)
Repayment of Warehouse Credit Facility	(228		)	—
Interest to investors	(4		)	(1		)	(1		)	(2		)
Funding of restricted cash	(1		)	—			(1		)	(1		)
Total	(245		)	(1		)	(6		)	(8		)
Net Cash Flows	$	(95	)	$	(1	)	$	211		$	130

Other Variable Interest Entities

We have a commitment to purchase an operating property located in San Francisco, California, that we currently manage as Marriott Vacation Club Pulse, San Francisco. Refer to Footnote 11 “Contingencies and Commitments” for additional information on the commitment. We are required to purchase the ~~operating~~ property from the ~~third party~~third-party developer unless the developer has sold the property to another party. The ~~operating~~ property is held by a ~~variable interest entity~~VIE for which we are not the primary beneficiary as we cannot prevent the ~~variable interest entity~~VIE from selling the ~~operating~~ property at a higher price. Accordingly, we have not consolidated the ~~variable interest entity.~~VIE. As of ~~June 30, 2019,~~March 31, 2020, our Balance Sheet reflected ~~$14~~$3 million in Property and equipment related to a finance lease and leasehold improvements, $1 million in Accrued liabilities and $9 million in Debt related to the finance lease liability for ancillary and operations space we lease from the variable interest entity. In addition,Accounts Receivable, including a note receivable of less than $1 million, ~~is included~~and $5 million in Other assets for a deposit related to the ~~Accounts receivable line.~~acquisition of a portion of this property. We believe that our maximum exposure to loss as a result of our involvement with this ~~variable interest entity~~VIE is $5approximately $8 million as of ~~June 30, 2019.~~March 31, 2020.

We have a commitment to purchase an operating property located in New York, New York, that we currently manage as Marriott Vacation Club Pulse, New York City. Refer to Footnote 11 “Contingencies and Commitments” for additional information on the commitment. We are required to purchase the completed property from the ~~third party~~third-party developer unless the developer has sold the property to another party. The property is held by a ~~variable interest entity~~VIE for which we are not the primary beneficiary as we cannot prevent the ~~variable interest entity~~VIE from selling the property at a higher price. Accordingly, we have not consolidated the ~~variable interest entity.~~VIE. As of ~~June 30, 2019,~~March 31, 2020, our Balance Sheet reflected $8$22 million in ~~Property and equipment related to~~Other assets for a ~~finance lease and leasehold improvements, $1 million in Accrued liabilities and $7 million in Debt~~deposit related to the ~~finance lease liability for ancillary~~acquisition of a portion of this property, and ~~operations space we lease from the variable interest entity. In addition,~~ a note receivable of less than $1 million that is included in the Accounts receivable ~~line on the Balance Sheet as of June 30, 2019.~~line. We believe that our maximum exposure to loss as a result of our involvement with this ~~variable interest entity~~VIE is approximately $23 million as of March 31, 2020.

We have a commitment to purchase a property located in Waikiki, Hawaii. Refer to Footnote 11 “Contingencies and Commitments” for additional information on the commitment. If we are unable to negotiate a capital efficient inventory arrangement, we are committed to purchasing the property, in its current form. We are required to purchase the completed property from the third-party developer 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. Accordingly, we have not consolidated the VIE. As of March 31, 2020, our Balance Sheet reflected $1 million in Accounts Receivable, including a note receivable of less than $1 million. We believe that our maximum exposure to loss as a result of our involvement with this VIE is less than $1 million as of ~~June 30, 2019.~~March 31, 2020.

Deferred Compensation Plan

We consolidate the liabilities of the Marriott Vacations Worldwide Deferred Compensation Plan and the related assets, which consist of the COLI policies held in the rabbi trust. The rabbi trust is considered a ~~variable interest entity.~~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 ~~June 30, 2019,~~March 31, 2020, the value of the assets held in the rabbi trust was ~~$34~~$36 million, which is included in the Other line within assets on our Balance Sheets.



~~18.~~17.	BUSINESS SEGMENTS

We define our reportable segments based on the way in which the chief operating decision maker (“CODM”), currently our chief executive officer, manages the operations of the ~~company~~Company for purposes of allocating resources and assessing performance. We operate in ~~two~~2 operating and reportable business segments:

Vacation Ownership includes a diverse portfolio of resorts that includes ~~seven~~7 vacation ownership brands licensed under exclusive, long-term relationships with Marriott International and Hyatt Hotels Corporation. We are the exclusive worldwide developer, marketer, seller and manager of vacation ownership and related products under the Marriott Vacation Club, Grand Residences by Marriott, Sheraton Vacation Club, Westin Vacation Club and Hyatt Residence Club brands, as well as under Marriott Vacation Club Pulse, an extension to the Marriott Vacation Club brand. We are also the exclusive worldwide developer, marketer and seller of vacation ownership and related products under The Ritz-Carlton Destination Club brand, we have the non-exclusive right to develop, market and sell whole ownership residential products under The Ritz-Carlton Residences brand and have a license to use the St. Regis brand for specified fractional ownership resorts.

Our Vacation Ownership segment generates most of its revenues from four primary sources: selling vacation ownership products; managing vacation ownership resorts, clubs and owners’ associations; financing consumer purchases of vacation ownership products; and renting vacation ownership inventory.

Exchange & Third-Party Management includes exchange networks and membership programs, as well as management of resorts and lodging properties. We provide these services through a variety of brands including Interval International, Trading Places International, Vacation Resorts International, ~~Aqua-Aston~~ and ~~Great Destinations.~~Aqua-Aston. Exchange & Third-Party Management revenue generally is fee-based and derived from membership, exchange and rental transactions, property and association management, and other related products and services.

Our CODM evaluates the performance of our segments based primarily on the results of the segment without allocating corporate expenses or income taxes. We do not allocate corporate interest expense or indirect general and administrative expenses to our segments. 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. Corporate and other represents that portion of our results that are not allocable to our segments, including those relating to property owners’ associations consolidated under the voting interest model, 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 attributable to common shareholders excluded from Adjusted EBITDA are not separately evaluated. Adjusted EBITDA is defined as net income attributable to common shareholders, before interest expense (excluding consumer financing interest ~~expense)~~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 or our operating performance. Our reconciliation of the aggregate amount of Adjusted EBITDA for our reportable segments to consolidated net (loss) income attributable to common shareholders is presented below.

Revenues


	Three Months Ended				Six Months Ended				Three Months Ended
($ in millions)	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018		March 31, 2020			March 31, 2019
Vacation Ownership	$	951	$	595	$	1,882	$	1,166	$	908		$	905
Exchange & Third-Party Management	115		—		239		—		107			124
Total segment revenues	1,066		595		2,121		1,166		1,015			1,029
Corporate and other	2		—		7		—		(5		)	5
	$	1,068	$	595	$	2,128	$	1,166	$	1,010		$	1,034

Adjusted EBITDA and Reconciliation to Net (Loss) Income Attributable to Common Shareholders


	Three Months Ended						Six Months Ended						Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018			March 31, 2020			March 31, 2019
Adjusted EBITDA Vacation Ownership	$	208		$	104		$	379		$	192		$	147		$	172
Adjusted EBITDA Exchange & Third-Party Management	58			—			124			—			41			54
Reconciling items:
Corporate and other	(71		)	(28		)	(142		)	(53		)	(50		)	(60		)
Interest expense	(35		)	(5		)	(69		)	(9		)	(33		)	(34		)
Tax provision	(25		)	(6		)	(40		)	(17		)
Tax benefit (provision)													58			(15		)
Depreciation and amortization	(36		)	(5		)	(73		)	(11		)	(32		)	(37		)
Share-based compensation expense	(11		)	(6		)	(20		)	(10		)	(4		)	(9		)
Certain items	(39		)	(43		)	(86		)	(45		)	(233		)	(47		)
Net income attributable to common shareholders	$	49		$	11		$	73		$	47
Net (loss) income attributable to common shareholders													$	(106	)	$	24

Assets


($ in millions)	At June 30, 2019		At December 31, 2018		At March 31, 2020		At December 31, 2019
Vacation Ownership	$	7,358	$	7,275	$	7,446	$	7,345
Exchange & Third-Party Management	1,124		1,182		1,073		1,162
Total segment assets	8,482		8,457		8,519		8,507
Corporate and other	541		561		913		707
	$	9,023	$	9,018	$	9,432	$	9,214

We conduct business globally, and our operations outside the United States represented approximately 1312 percent and 1214 percent of our revenues, excluding cost reimbursements, for the three months ended ~~June 30,~~March 31, 2020 and March 31, 2019, ~~and June 30, 2018, respectively, and 14 percent and 12 percent of our revenues, excluding cost reimbursements, for the six months ended June 30, 2019 and June 30, 2018,~~ respectively.



~~19.~~	~~SUPPLEMENTAL GUARANTOR INFORMATION~~

~~IAC Notes~~

The IAC Notes are guaranteed by MVWC, ILG and certain other subsidiaries whose voting securities are wholly owned directly or indirectly by ILG (such subsidiaries collectively, the “IAC Notes Guarantors”). These guarantees are full and unconditional and joint and several. The guarantees of the IAC Notes Guarantors are subject to release in limited circumstances only upon the occurrence of certain customary conditions. The indenture governing the IAC Notes contains covenants that, among other things, limit the ability of Interval Acquisition Corp. (the “Issuer”) and the IAC Notes Guarantors to pay dividends to us or make distributions, loans or advances to us.

The following tables present consolidating financial information as of June 30, 2019 and December 31, 2018, and for the three and six months ended June 30, 2019 and June 30, 2018 for MVWC and ILG on a stand-alone basis, the Issuer on a stand-alone basis, the IAC Notes Guarantors, the combined non-guarantor subsidiaries of MVW and MVW on a consolidated basis.

~~Condensed Consolidating Balance Sheet~~

As of June 30, 2019
($ in millions) MVWC Interval Acquisition Corp. IAC Notes Guarantors Non-Guarantor Subsidiaries Total Eliminations MVW Consolidated
Cash and cash equivalents $ —
$ 1
$ 27
$ 151
$ —
$ 179
Restricted cash —
—
52
285
—
337
Accounts receivable, net 67
2
115
147
(4 ) 327
Vacation ownership notes receivable, net —
—
189
1,909
—
2,098
Inventory —
—
449
439
—
888
Property and equipment —
—
230
607
—
837
Goodwill 2,824
—
—
—
—
2,824
Intangibles, net —
—
1,034
41
—
1,075
Due from parent —
—
—
1,957
(1,957 ) —
Investments in subsidiaries 2,520
1,942
1,828
—
(6,290 ) —
Other 35
27
245
219
(68 ) 458
Total assets $ 5,446
$ 1,972
$ 4,169
$ 5,755
$ (8,319 ) $ 9,023

Accounts payable $ 12
$ —
$ 40
$ 105
$ 7
$ 164
Advance deposits —
—
81
105
—
186
Accrued liabilities 5
—
170
274
(32 ) 417
Deferred revenue —
—
145
215
(4 ) 356
Payroll and benefits liability 3
—
67
102
—
172
Deferred compensation liability —
—
7
95
—
102
Securitized debt, net —
—
—
1,792
—
1,792
Debt, net 203
141
1
1,812
—
2,157
Due to subsidiary 1,957
—
—
—
(1,957 ) —
Other 2
—
38
24
—
64
Deferred taxes —
—
179
164
—
343
MVW shareholders' equity 3,264
1,831
3,445
1,057
(6,333 ) 3,264
Noncontrolling interests —
—
(4 ) 10
—
6
Total liabilities and equity $ 5,446
$ 1,972
$ 4,169
$ 5,755
$ (8,319 ) $ 9,023

As of December 31, 2018⁽¹⁾
($ in millions) MVWC Interval Acquisition Corp. IAC Notes Guarantors Non-Guarantor Subsidiaries Total Eliminations MVW Consolidated
Cash and cash equivalents $ 1
$ 11
$ 28
$ 191
$ —
$ 231
Restricted cash —
—
83
300
—
383
Accounts receivable, net 31
2
107
184
—
324
Vacation ownership notes receivable, net —
—
176
1,863
—
2,039
Inventory —
—
440
423
—
863
Property and equipment —
—
272
679
—
951
Goodwill 2,828
—
—
—
—
2,828
Intangibles, net —
—
1,065
42
—
1,107
Due from parent —
—
—
1,834
(1,834 ) —
Investments in subsidiaries 2,681
1,975
1,875
—
(6,531 ) —
Other 27
28
140
172
(75 ) 292
Total assets $ 5,568
$ 2,016
$ 4,186
$ 5,688
$ (8,440 ) $ 9,018

Accounts payable $ 50
$ —
$ 72
$ 131
$ —
$ 253
Advance deposits —
—
81
90
—
171
Accrued liabilities 7
—
79
295
(24 ) 357
Deferred revenue —
—
117
206
(4 ) 319
Payroll and benefits liability 15
—
77
119
—
211
Deferred compensation liability —
—
7
86
—
93
Securitized debt, net —
—
—
1,714
—
1,714
Debt, net 199
141
1
1,763
—
2,104
Due to subsidiary 1,834
—
—
—
(1,834 ) —
Other 2
—
1
9
—
12
Deferred taxes —
—
155
159
4
318
MVW shareholders' equity 3,461
1,875
3,599
1,108
(6,582 ) 3,461
Noncontrolling interests —
—
(3 ) 8
—
5
Total liabilities and equity $ 5,568
$ 2,016
$ 4,186
$ 5,688
$ (8,440 ) $ 9,018

~~_________________________~~


⁽¹⁾	~~Amounts have been revised to correct certain immaterial prior period errors as reported in the 2018 Annual Report and have been reclassified to conform to the current year presentation.~~

~~Condensed Consolidating Statement of Income~~

Three Months Ended June 30, 2019
($ in millions) MVWC Interval Acquisition Corp. IAC Notes Guarantors Non-Guarantor Subsidiaries Total Eliminations MVW Consolidated
Revenues $ —
$ —
$ 398
$ 671
$ (1 ) $ 1,068
Expenses (6 ) —
(346 ) (574 ) 1
(925 )
Gains (losses) and other income (expense), net —
—
2
—
—
2
Interest expense (2 ) (2 ) (3 ) (28 ) —
(35 )
ILG acquisition-related costs —
—
(14 ) (22 ) —
(36 )
Other —
—
—
—
—
—
Equity in earnings from unconsolidated entities —
—
—
—
—
—
Equity in net income of subsidiaries 54
28
27
—
(109 ) —
Provision for income taxes 3
1
(12 ) (16 ) (1 ) (25 )
Net income 49
27
52
31
(110 ) 49
Net income attributable to noncontrolling interests —
—
—
—
—
—
Net income attributable to common shareholders $ 49
$ 27
$ 52
$ 31
$ (110 ) $ 49

Three Months Ended June 30, 2018
($ in millions) MVWC Interval Acquisition Corp. IAC Notes Guarantors Non-Guarantor Subsidiaries Total Eliminations MVW Consolidated
Revenues $ —
$ —
$ —
$ 595
$ —
$ 595
Expenses (2 ) —
—
(544 ) —
(546 )
Gains (losses) and other income (expense), net —
—
—
(7 ) —
(7 )
Interest expense (3 ) —
—
(2 ) —
(5 )
ILG acquisition-related costs —
—
—
(19 ) —
(19 )
Other —
—
—
(1 ) —
(1 )
Provision for income taxes 1
—
—
(7 ) —
(6 )
Equity in earnings from unconsolidated entities —
—
—
—
—
—
Equity in net income of subsidiaries 15
—
—
—
(15 ) —
Net income 11
—
—
15
(15 ) 11
Net income attributable to noncontrolling interests —
—
—
—
—
—
Net income attributable to common shareholders $ 11
$ —
$ —
$ 15
$ (15 ) $ 11

Six Months Ended June 30, 2019
($ in millions) MVWC Interval Acquisition Corp. IAC Notes Guarantors Non-Guarantor Subsidiaries Total Eliminations MVW Consolidated
Revenues $ —
$ —
$ 797
$ 1,340
$ (9 ) $ 2,128
Expenses (9 ) —
(715 ) (1,179 ) 9
(1,894 )
Gains (losses) and other income (expense), net —
—
—
10
—
10
Interest expense (5 ) (3 ) (3 ) (58 ) —
(69 )
ILG acquisition-related costs —
—
(14 ) (48 ) —
(62 )
Other —
—
—
—
—
—
Provision for income taxes 4
1
(22 ) (23 ) —
(40 )
Equity in earnings from unconsolidated entities —
—
—
—
—
—
Equity in net income of subsidiaries 83
64
62
—
(209 ) —
Net income 73
62
105
42
(209 ) 73
Net income attributable to noncontrolling interests —
—
—
—
—
—
Net income attributable to common shareholders $ 73
$ 62
$ 105
$ 42
$ (209 ) $ 73

Six Months Ended June 30, 2018
($ in millions) MVWC Interval Acquisition Corp. IAC Notes Guarantors Non-Guarantor Subsidiaries Total Eliminations MVW Consolidated
Revenues $ —
$ —
$ —
$ 1,166
$ —
$ 1,166
Expenses (4 ) —
—
(1,060 ) —
(1,064 )
Gains (losses) and other income (expense), net —
—
—
(6 ) —
(6 )
Interest expense (5 ) —
—
(4 ) —
(9 )
ILG acquisition-related costs —
—
—
(20 ) —
(20 )
Other —
—
—
(3 ) —
(3 )
Provision for income taxes 2
—
—
(19 ) —
(17 )
Equity in earnings from unconsolidated entities —
—
—
—
—
—
Equity in net income of subsidiaries 54
—
—
—
(54 ) —
Net income 47
—
—
54
(54 ) 47
Net income attributable to noncontrolling interests —
—
—
—
—
—
Net income attributable to common shareholders $ 47
$ —
$ —
$ 54
$ (54 ) $ 47

~~Condensed Consolidating Statement of Cash Flows~~

Six Months Ended June 30, 2019
($ in millions) MVWC Interval Acquisition Corp. IAC Notes Guarantors Non-Guarantor Subsidiaries Total Eliminations MVW Consolidated
Net cash, cash equivalents and restricted cash provided by (used in) operating activities $ (71 ) $ (2 ) $ 106
$ 315
$ (292 ) $ 56
Net cash, cash equivalents and restricted cash (used in) provided by investing activities (4 ) —
22
(3 ) —
15
Net cash, cash equivalents and restricted cash (used in) provided by financing activities 74
(8 ) (160 ) (368 ) 292
(170 )
Effect of changes in exchange rates on cash, cash equivalents and restricted cash —
—
—
1
—
1
Cash, cash equivalents and restricted cash, beginning of period 1
11
111
491
—
614
Cash, cash equivalents and restricted cash, end of period $ —
$ 1
$ 79
$ 436
$ —
$ 516

Six Months Ended June 30, 2018
($ in millions) MVWC Interval Acquisition Corp. IAC Notes Guarantors Non-Guarantor Subsidiaries Total Eliminations MVW Consolidated
Net cash, cash equivalents and restricted cash provided by (used in) operating activities $ (45 ) $ —
$ —
$ 101
$ 2
$ 58
Net cash, cash equivalents and restricted cash (used in) provided by investing activities (12 ) —
—
(7 ) —
(19 )
Net cash, cash equivalents and restricted cash (used in) provided by financing activities 57
—
—
132
(2 ) 187
Effect of changes in exchange rates on cash, cash equivalents and restricted cash —
—
—
1
—
1
Cash, cash equivalents and restricted cash, beginning of period —
—
—
491
—
491
Cash, cash equivalents and restricted cash, end of period $ —
$ —
$ —
$ 718
$ —
$ 718

~~Senior Unsecured Notes and Exchange Notes~~

The Senior Unsecured Notes and Exchanges Notes (collectively referred to as the “Senior MVW Notes”) are guaranteed by MVWC, Marriott Ownership Resorts, Inc. (“MORI”), ILG and certain other subsidiaries whose voting securities are wholly owned directly or indirectly by MORI or ILG (such subsidiaries collectively, the “Senior Notes Guarantors”). These guarantees are full and unconditional and joint and several. The guarantees of the Senior Notes Guarantors are subject to release in limited circumstances only upon the occurrence of certain customary conditions.

The following tables present consolidating financial information as of June 30, 2019 and December 31, 2018, and for the three and six months ended June 30, 2019 and June 30, 2018 for MVWC on a stand-alone basis, each of MORI and ILG on a stand-alone basis (collectively, the “Issuers” and each individually, an “Issuer”), the Senior Notes Guarantors, the combined non-guarantor subsidiaries of MVW and MVW on a consolidated basis.

~~Condensed Consolidating Balance Sheet~~

As of June 30, 2019
MVWC Issuers Senior Notes Guarantors Non-Guarantor Subsidiaries Total Eliminations MVW Consolidated
($ in millions) MORI ILG
Cash and cash equivalents $ —
$ 44
$ —
$ 29
$ 106
$ —
$ 179
Restricted cash —
20
—
54
263
—
337
Accounts receivable, net 67
28
—
131
105
(4 ) 327
Vacation ownership notes receivable, net —
108
—
196
1,794
—
2,098
Inventory —
304
—
489
95
—
888
Property and equipment —
274
1
272
290
—
837
Goodwill 2,824
—
—
—
—
—
2,824
Intangibles, net —
—
—
1,034
41
—
1,075
Due from parent —
1,957
—
—
—
(1,957 ) —
Investments in subsidiaries 2,520
21
1,828
—
—
(4,369 ) —
Other 35
53
—
359
79
(68 ) 458
Total assets $ 5,446
$ 2,809
$ 1,829
$ 2,564
$ 2,773
$ (6,398 ) $ 9,023

Accounts payable $ 12
$ 44
$ —
$ 74
$ 26
$ 8
$ 164
Advance deposits —
76
—
90
20
—
186
Accrued liabilities 5
71
7
177
189
(32 ) 417
Deferred revenue —
4
—
239
117
(4 ) 356
Payroll and benefits liability 3
77
—
76
16
—
172
Deferred compensation liability —
86
—
15
1
—
102
Securitized debt, net —
—
—
—
1,792
—
1,792
Debt, net 203
1,805
—
149
—
—
2,157
Due to subsidiary 1,957
—
—
—
—
(1,957 ) —
Other 2
22
—
38
2
—
64
Deferred taxes —
138
—
181
24
—
343
MVW shareholders' equity 3,264
486
1,822
1,529
576
(4,413 ) 3,264
Noncontrolling interests —
—
—
(4 ) 10
—
6
Total liabilities and equity $ 5,446
$ 2,809
$ 1,829
$ 2,564
$ 2,773
$ (6,398 ) $ 9,023

As of December 31, 2018⁽¹⁾
MVWC Issuers Senior Notes Guarantors Non-Guarantor Subsidiaries Total Eliminations MVW Consolidated
($ in millions) MORI ILG
Cash and cash equivalents $ 1
$ 62
$ 2
$ 39
$ 127
$ —
$ 231
Restricted cash —
19
—
122
242
—
383
Accounts receivable, net 31
20
—
169
104
—
324
Vacation ownership notes receivable, net —
121
—
183
1,735
—
2,039
Inventory —
212
—
475
176
—
863
Property and equipment —
439
1
308
203
—
951
Goodwill 2,828
—
—
—
—
—
2,828
Intangibles, net —
—
—
1,065
42
—
1,107
Due from parent —
1,834
—
—
—
(1,834 ) —
Investments in subsidiaries 2,681
93
1,875
—
—
(4,649 ) —
Other 27
53
—
251
36
(75 ) 292
Total assets $ 5,568
$ 2,853
$ 1,878
$ 2,612
$ 2,665
$ (6,558 ) $ 9,018

Accounts payable $ 50
$ 13
$ —
$ 165
$ 25
$ —
$ 253
Advance deposits —
65
—
89
17
—
171
Accrued liabilities 7
96
7
121
150
(24 ) 357
Deferred revenue —
6
—
189
128
(4 ) 319
Payroll and benefits liability 15
96
—
84
16
—
211
Deferred compensation liability —
79
—
13
1
—
93
Securitized debt, net —
—
—
—
1,714
—
1,714
Debt, net 199
1,726
—
179
—
—
2,104
Due to subsidiary 1,834
—
—
—
—
(1,834 ) —
Other 2
6
—
1
3
—
12
Deferred taxes —
133
—
157
24
4
318
MVW shareholders' equity 3,461
633
1,871
1,617
579
(4,700 ) 3,461
Noncontrolling interests —
—
—
(3 ) 8
—
5
Total liabilities and equity $ 5,568
$ 2,853
$ 1,878
$ 2,612
$ 2,665
$ (6,558 ) $ 9,018

~~_________________________~~


⁽¹⁾	~~Amounts have been revised to correct certain immaterial prior period errors as reported in the 2018 Annual Report and have been reclassified to conform to the current year presentation.~~

~~Condensed Consolidating Statement of Income~~

Three Months Ended June 30, 2019
MVWC Issuers Senior Notes Guarantors Non-Guarantor Subsidiaries Total Eliminations MVW Consolidated
($ in millions) MORI ILG
Revenues $ —
$ 191
$ —
$ 695
$ 183
$ (1 ) $ 1,068
Expenses (6 ) (200 ) —
(583 ) (137 ) 1
(925 )
Gains (losses) and other income (expense), net —
2
—
—
—
—
2
Interest expense (2 ) (24 ) —
(5 ) (4 ) —
(35 )
ILG acquisition-related costs —
(22 ) —
(14 ) —
—
(36 )
Other —
—
—
—
—
—
—
Provision for income taxes 3
16
—
(35 ) (9 ) —
(25 )
Equity in earnings from unconsolidated entities —
—
—
—
—
—
—
Equity in net income of subsidiaries 54
62
27
—
—
(143 ) —
Net income 49
25
27
58
33
(143 ) 49
Net income attributable to noncontrolling interests —
—
—
—
—
—
—
Net income attributable to common shareholders $ 49
$ 25
$ 27
$ 58
$ 33
$ (143 ) $ 49

Three Months Ended June 30, 2018
MVWC Issuers Senior Notes Guarantors Non-Guarantor Subsidiaries Total Eliminations MVW Consolidated
($ in millions) MORI ILG
Revenues $ —
$ 194
$ —
$ 286
$ 115
$ —
$ 595
Expenses (2 ) (189 ) —
(257 ) (98 ) —
(546 )
Gains (losses) and other income (expense), net —
(7 ) —
—
—
—
(7 )
Interest expense (3 ) (1 ) —
(1 ) —
—
(5 )
ILG acquisition-related costs —
(19 ) —
—
—
—
(19 )
Other —
(1 ) —
—
—
—
(1 )
Provision for income taxes 1
7
—
(12 ) (2 ) —
(6 )
Equity in earnings from unconsolidated entities —
—
—
—
—
—
—
Equity in net income of subsidiaries 15
16
—
—
—
(31 ) —
Net income 11
—
—
16
15
(31 ) 11
Net income attributable to noncontrolling interests —
—
—
—
—
—
—
Net income attributable to common shareholders $ 11
$ —
$ —
$ 16
$ 15
$ (31 ) $ 11

Six Months Ended June 30, 2019
MVWC Issuers Senior Notes Guarantors Non-Guarantor Subsidiaries Total Eliminations MVW Consolidated
($ in millions) MORI ILG
Revenues $ —
$ 350
$ —
$ 1,406
$ 381
$ (9 ) $ 2,128
Expenses (9 ) (392 ) —
(1,214 ) (288 ) 9
(1,894 )
Gains (losses) and other income (expense), net —
11
—
(1 ) —
—
10
Interest expense (5 ) (54 ) —
(6 ) (4 ) —
(69 )
ILG acquisition-related costs —
(48 ) —
(14 ) —
—
(62 )
Other —
—
—
—
—
—
—
Provision for income taxes 4
40
—
(70 ) (14 ) —
(40 )
Equity in earnings from unconsolidated entities —
—
—
—
—
—
—
Equity in net income of subsidiaries 83
115
62
—
—
(260 ) —
Net income 73
22
62
101
75
(260 ) 73
Net income attributable to noncontrolling interests —
—
—
—
—
—
—
Net income attributable to common shareholders $ 73
$ 22
$ 62
$ 101
$ 75
$ (260 ) $ 73

Six Months Ended June 30, 2018
MVWC Issuers Senior Notes Guarantors Non-Guarantor Subsidiaries Total Eliminations MVW Consolidated
($ in millions) MORI ILG
Revenues $ —
$ 363
$ —
$ 585
$ 218
$ —
$ 1,166
Expenses (4 ) (362 ) —
(510 ) (188 ) —
(1,064 )
Gains (losses) and other income (expense), net —
(6 ) —
—
—
—
(6 )
Interest expense (5 ) (2 ) —
(2 ) —
—
(9 )
ILG acquisition-related costs —
(20 ) —
—
—
—
(20 )
Other —
(3 ) —
—
—
—
(3 )
Provision for income taxes 2
11
—
(27 ) (3 ) —
(17 )
Equity in earnings from unconsolidated entities —
—
—
—
—
—
—
Equity in net income of subsidiaries 54
46
—
—
—
(100 ) —
Net income 47
27
—
46
27
(100 ) 47
Net income attributable to noncontrolling interests —
—
—
—
—
—
—
Net income attributable to common shareholders $ 47
$ 27
$ —
$ 46
$ 27
$ (100 ) $ 47

~~Condensed Consolidating Statement of Cash Flows~~

Six Months Ended June 30, 2019
MVWC Issuers Senior Notes Guarantors Non-Guarantor Subsidiaries Total Eliminations MVW Consolidated
($ in millions) MORI ILG
Net cash, cash equivalents and restricted cash provided by (used in) operating activities $ (71 ) $ (31 ) $ —
$ 151
$ 19
$ (12 ) $ 56
Net cash, cash equivalents and restricted cash (used in) provided by investing activities (4 ) (14 ) —
26
7
—
15
Net cash, cash equivalents and restricted cash (used in) provided by financing activities 74
28
(2 ) (255 ) (27 ) 12
(170 )
Effect of changes in exchange rates on cash, cash equivalents and restricted cash —
—
—
—
1
—
1
Cash, cash equivalents and restricted cash, beginning of period 1
81
2
161
369
—
614
Cash, cash equivalents and restricted cash, end of period $ —
$ 64
$ —
$ 83
$ 369
$ —
$ 516

Six Months Ended June 30, 2018
MVWC Issuers Senior Notes Guarantors Non-Guarantor Subsidiaries Total Eliminations MVW Consolidated
($ in millions) MORI ILG
Net cash, cash equivalents and restricted cash provided by (used in) operating activities $ (45 ) $ 111
$ —
$ (2 ) $ (8 ) $ 2
$ 58
Net cash, cash equivalents and restricted cash (used in) provided by investing activities (12 ) (4 ) —
—
(3 ) —
(19 )
Net cash, cash equivalents and restricted cash (used in) provided by financing activities 57
49
—
(22 ) 105
(2 ) 187
Effect of changes in exchange rates on cash, cash equivalents and restricted cash —
—
—
—
1
—
1
Cash, cash equivalents and restricted cash, beginning of period —
377
—
30
84
—
491
Cash, cash equivalents and restricted cash, end of period $ —
$ 533
$ —
$ 6
$ 179
$ —
$ 718

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

We make forward-looking statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report on Form 10-Q based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include, among other things, the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, ~~and~~ the effects of ~~competition.~~competition, and the ongoing COVID-19 pandemic. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” “may,” “might,” “should,” “could” or the negative of these terms or similar expressions.

~~Forward-looking~~ The Company cautions you that these statements ~~involve~~are not guarantees and are subject to numerous risks and uncertainties, such as: the effects of the COVID-19 pandemic outbreak, including reduced demand for vacation ownership and ~~assumptions. Actual~~exchange products and services, volatility in the international and national economy and credit markets, worker absenteeism, quarantines or other travel or health-related restrictions; the length and severity of the COVID-19 pandemic outbreak; the pace of recovery following the COVID-19 pandemic outbreak; competitive conditions; the availability of capital to finance growth, and other matters referred to under the heading “Risk Factors” contained herein and also in the our most recent Annual Report on Form 10-K filed and on our Current Report on Form 8-K filed May 6, 2020 with the U.S. Securities and Exchange Commission (the “SEC”), any of which could cause actual results ~~may~~to differ materially from those expressed in ~~these forward-looking statements. You should not put undue reliance on~~or implied in this press release. The Company undertakes no obligation to publicly update or revise any forward-looking ~~statements in this Quarterly Report. We do not have any intention~~statement, whether as a result of new information, future events, or ~~obligation to update forward-looking statements after the date of this Quarterly Report on Form 10-Q, except as required by law.~~otherwise.

The risk factors discussed in “Risk Factors” in our most recent Annual Report on Form 10-K, our Current Report on Form 8-K filed May 6, 2020 and which may be discussed in subsequent Quarterly Reports on Form 10-Q or other filings with the ~~Securities and Exchange Commission (“SEC”),~~SEC, could cause our results to differ materially from those expressed in forward-looking statements. There may be other risks and uncertainties that we cannot predict at this time or that we currently do not expect will have a material adverse effect on our financial position, results of operations or cash flows. Any such risks could cause our results to differ materially from those we express in forward-looking statements.

Our Financial Statements (as defined below), which we discuss below, reflect our historical financial condition, results of operations and cash flows. The financial information discussed below and included in this Quarterly Report on Form 10-Q may not necessarily reflect what our financial condition, results of operations or cash flows may be in the future. In order to make this report easier to read, we refer to (i) our Interim Consolidated Financial Statements as our “Financial Statements,” (ii) our Interim Consolidated Statements of Income as our “Income Statements,” (iii) our Interim Consolidated Balance Sheets as our “Balance Sheets” and (iv) our Interim Consolidated Statements of Cash Flows as our “Cash Flows.” In addition, references throughout to numbered “Footnotes” refer to the numbered Notes to our Financial Statements that we include in the Financial Statements of this Quarterly Report on Form 10-Q.

Business Overview

We are a leading global vacation company that offers vacation ownership, exchange, rental, and resort and property management, along with related businesses, products and services. Our business operates in two reportable segments: Vacation Ownership and Exchange & Third-Party Management.

~~On September 1,~~In 2018, we completed the ILG Acquisition ~~for approximately $4.2 billion in aggregate consideration. In connection with the ILG Acquisition, we entered into multiple financing arrangements, which include the issuance of senior notes~~ and the replacement of our previously existing corporate credit facility with a new senior secured corporate credit agreement, our Corporate Credit Facility, that provides for a term loan and revolving loans.

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

Our Vacation Ownership segment includes seven vacation ownership brands licensed under exclusive, long-term relationships with Marriott International and Hyatt Hotels Corporation. We are the exclusive worldwide developer, marketer, seller and manager of vacation ownership and related products under the Marriott Vacation Club, Grand Residences by Marriott, Sheraton Vacation Club, Westin Vacation Club, and Hyatt Residence Club brands, as well as under Marriott Vacation Club Pulse, an extension to the Marriott Vacation Club brand. We are also the exclusive worldwide developer, marketer and seller of vacation ownership and related products under The Ritz-Carlton Destination Club brand, we have the non-exclusive right to develop, market and sell whole ownership residential products under The Ritz-Carlton Residences brand and have a license to use the St. Regis brand for specified fractional ownership resorts.

Our Exchange & Third-Party Management segment includes exchange networks and membership programs, as well as management of resorts and lodging properties. We provide these services through a variety of brands including Interval International, Trading Places International, Vacation Resorts International, ~~Aqua-Aston~~ and ~~Great Destinations.~~Aqua-Aston. Exchange & Third-Party Management revenue generally is fee-based and derived from membership, exchange and rental transactions, property and association management, and other related products and services.

Corporate and other represents that portion of our results that are not allocable to our segments, including those relating to property owners’ associations consolidated under the voting interest model (“Consolidated Property Owners’ Associations”).

~~Hurricane Activity~~COVID-19 pandemic

~~During the third quarter~~The COVID-19 pandemic (as discussed further in Footnote 1 “Basis of ~~2017, over 20 Legacy-MVW properties and two Legacy-ILG properties were negatively impacted by one or both of Hurricane Irma and Hurricane Maria (collectively, the “2017 Hurricanes”). All~~Presentation” of the ~~Legacy-MVW properties reopened prior to~~Financial Statements) has caused significant disruptions in international and U.S. economies and markets. We discuss the ~~end of 2018. The Legacy-ILG property~~COVID-19 pandemic and its potential future implications in ~~St. John partially reopened~~this report; however, the COVID-19 pandemic is an evolving and challenging situation and its impact on our business in the ~~first quarter of 2019 and the Legacy-ILG resort in Puerto Rico is expected to open in 2020.~~

We received $29 million and $9 million of net insurance proceeds in 2018 and 2019, respectively, related to the settlement of Legacy-MVW business interruption insurance claims arising from the 2017 Hurricanes. We have submitted most of the insurance claims for our Legacy-ILG business interruption losses as well as Legacy-MVW and Legacy-ILG property damage experienced by both us and associated property owners’ associations from these 2017 Hurricanes. We received an initial $25 million advance of insurance proceeds related to the business interruption losses at the Legacy-ILG St. John property in 2018, we received $7 million of insurance proceeds related to the business interruption losses at the other Legacy-ILG properties in 2019 and we received advances of $108 million of insurance proceeds related to the Legacy-ILG property damage experienced by the related property owners’ associations as of the second quarter of 2019. Repairs are underway at the Legacy-ILG resort in Puerto Rico and the related insurance claim is expected to be submitted in 2020 upon the completion of construction. However, we cannot quantify the extent of any additional payments under such claims at this time.

During the third quarter of 2018, our Legacy-MVW properties in South Carolina and Florida were negatively impacted by Hurricane Florence and Hurricane Michael, respectively (collectively, the “2018 Hurricanes”). We expect to submit insurance claims for our business interruption losses as well as property damage experienced by both us and associated property owners’ associations from these 2018 Hurricanes. However, we cannot quantify the extent of any payments under such claims at this time.future remains uncertain.

Significant Accounting Policies Used in Describing Results of Operations

Sale of Vacation Ownership Products

We recognize revenues from the sale of vacation ownership products (“VOIs”) when control of the vacation ownership product is transferred to the customer and the transaction price is deemed collectible. Based upon the different terms of the contracts with the customer and business practices, control of the vacation ownership product is transferred to the customer at closing for Legacy-MVW transactions and upon expiration of the statutory rescission period for Legacy-ILG transactions. Sales of vacation ownership products may be made for cash or we may provide financing. In addition, we recognize settlement fees associated with the transfer of vacation ownership products and commission revenues from sales of vacation ownership products on behalf of third parties, which we refer to as “resales revenue.”

We also provide sales incentives to certain purchasers. These sales incentives typically include Marriott Bonvoy points, World of Hyatt points or an alternative sales incentive that we refer to as “plus points.” These plus points are redeemable for stays at our resorts or for use in other third-party offerings, generally up to two years from the date of issuance. Typically, sales incentives are only awarded if the sale is closed.

~~As a result of the revenue recognition requirements included in Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606”), there~~There may be timing differences between the date of the contract with the customer and when revenue is recognized. When comparing results year-over-year, this timing difference may generate significant variances, which we refer to as the impact of revenue reportability.

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

We report, on a supplemental basis, contract sales for our Vacation Ownership segment. Contract sales consist of the total amount of vacation ownership product sales under contract signed during the period where we have generally received a down payment of at least ten percent of the contract price, reduced by actual rescissions during the period, inclusive of contracts

associated with sales of vacation ownership products on behalf of third-parties, which we refer to as “resales contract sales.” In circumstances where a customer applies any or all of their existing ownership interests as part of the purchase price for additional interests, we include only the incremental value purchased as contract sales. Contract sales differ from revenues from the sale of vacation ownership products that we report on our income statements due to the requirements for revenue recognition described above.We consider contract sales to be an important operating measure because it reflects the pace of sales in our business.

Cost of vacation ownership products includes costs to develop and construct our projects (also known as real estate inventory costs), other non-capitalizable costs associated with the overall project development process and settlement expenses associated with the closing process. For each project, we expense real estate inventory costs in the same proportion as the revenue recognized. Consistent with the applicable accounting guidance, to the extent there is a change in the estimated sales revenues or inventory costs for the project in a period, a non-cash adjustment is recorded on our income statements to true-up costs in that period to those that would have been recorded historically if the revised estimates had been used. These true-ups, which we refer to as product cost true-up activity, can have a positive or negative impact on our income statements.

We refer to revenues from the sale of vacation ownership products less the cost of vacation ownership products and marketing and sales costs as development margin. Development margin percentage is calculated by dividing development margin by revenues from the sale of vacation ownership products.

Management and Exchange

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

In addition, we earn revenue from ancillary offerings, including food and beverage outlets, golf courses and other retail and service outlets located at our Vacation Ownership resorts. We also receive annual membership fees, club dues and certain transaction-based fees from members, owners and other third parties.

Management and exchange expenses include costs to operate the food and beverage outlets and other ancillary operations and to provide overall customer support services, including reservations, and certain transaction-based expenses relating to external exchange service providers.

In our Vacation Ownership segment and Consolidated Property Owners’ Associations, we refer to these activities as “Resort Management and Other Services.”

Financing

We offer financing to qualified customers for the purchase of most types of our vacation ownership products. The average FICO score of customers who were U.S. citizens or residents who financed a vacation ownership purchase was as follows:

Six Months Ended
June 30, 2019 June 30, 2018
Average FICO score 739 739



	Three Months Ended
	March 31, 2020	March 31, 2019
Average FICO score	739	744

The typical financing agreement provides for monthly payments of principal and interest with the principal balance of the loan fully amortizing over the term of the related vacation ownership note receivable, which is generally ten years. Included within our vacation ownership notes receivable are originated vacation ownership notes receivable and vacation ownership notes receivable acquired in connection with the ILG Acquisition.

Acquired vacation ownership notes receivable are accounted for using the expected cash flow method of recognizing discount accretion based on the expected cash flows. At acquisition, we recorded these vacation ownership notes receivable at a preliminary estimate of fair value, including a credit discount which is accreted as an adjustment to yield over the estimated life of the vacation ownership notes receivable. Our acquired vacation ownership notes receivable are remeasured at each reporting date based on expected future cash flows which takes into consideration an estimated measure of anticipated defaults and early repayments. See Footnote 6 “Vacation Ownership Notes Receivable” for further information regarding the accounting for acquired vacation ownership notes receivable.

The interest income earned from the originated vacation ownership financing arrangements is earned on an accrual basis on the principal balance outstanding over the contractual life of the arrangement and is recorded as Financing revenues on our Income Statements. Financing revenues also include fees earned from servicing the existing vacation ownership notes

receivable portfolio. Financing expenses include costs in support of the financing, servicing and securitization ~~processes.~~processes and changes in expected credit losses related to acquired vacation ownership notes receivable. The amount of interest income earned in a period depends on the amount of outstanding vacation ownership notes receivable, which, for originated vacation ownership notes receivable, is impacted positively by the origination of new vacation ownership notes receivable and negatively by principal collections. We calculate financing propensity as contract sales volume of finance contracts originated in the period divided by contract sales volume of all contracts originated in the period. We do not include resales contract sales in the financing propensity calculation. Financing propensity was ~~63 percent in the second quarter of 2018 and~~ 62 percent in the ~~second~~first quarter of ~~2019.~~2019 and 57 percent in the first quarter of 2020. We expect to continue to offer financing incentive programs and that interest income will continue to increase as new originations of vacation ownership notes receivable outpace the decline in principal of existing vacation ownership notes receivable.

In the event of a default, we generally have the right to foreclose on or revoke the underlying VOI. We return VOIs that we reacquire through foreclosure or revocation back to inventory. As discussed above, for originated vacation ownership notes receivable, we record a reserve at the time of sale and classify the reserve as a reduction to revenues from the sale of vacation ownership products on our Income Statements. Historical default rates, which represent defaults as a percentage of each year’s beginning gross vacation ownership notes receivable balance, were as follows:

Six Months Ended
June 30, 2019 June 30, 2018
Historical default rates 2.1% 1.7%



	Three Months Ended
	March 31, 2020	March 31, 2019
Historical default rates	1.3%	1.0%

Financing expenses include consumer financing interest expense, which represents interest expense associated with the securitization of our vacation ownership notes receivable. We distinguish consumer financing interest expense from all other interest expense because the debt associated with the consumer financing interest expense is secured by vacation ownership notes receivable that have been sold to bankruptcy remote special purpose entities and is generally non-recourse to us.

Rental

In our Vacation Ownership segment, we operate a rental business to provide owner flexibility and to help mitigate carrying costs associated with our inventory. We generate revenue from rentals of inventory that we hold for sale as interests in our vacation ownership programs, inventory that we control because our owners have elected alternative usage options permitted under our vacation ownership programs and rentals of owned-hotel properties. We also recognize rental revenue from the utilization of plus points under the MVCD program when the points are redeemed for rental stays at one of our resorts or in other third-party offerings. We obtain rental inventory from unsold inventory and inventory we control because owners have elected alternative usage options offered through our vacation ownership programs. For rental revenues associated with vacation ownership products which we own and which are registered and held for sale, to the extent that the revenues from rental are less than costs, revenues are reported net in accordance with ASC Topic 978, “Real Estate - Time-Sharing Activities” (“ASC 978”). The rental activity associated with discounted vacation packages requiring a tour (“preview stays”) is not included in transient rental metrics, and because the majority of these preview stays are sourced directly or indirectly from unsold inventory, the associated revenues and expenses are reported net in Marketing and sales expense.

In our Exchange & Third-Party Management segment, we offer vacation rental opportunities to members of the Interval International Network and certain other membership programs. The offering of Getaways allows us to monetize excess availability of resort accommodations within the applicable exchange network. Resort accommodations available as Getaways typically result from seasonal oversupply or underutilized space, as well as resort accommodations we source specifically for Getaways.

Rental expenses include:

Maintenance fees on unsold inventory;

Costs to provide alternative usage options, including Marriott Bonvoy points, World of Hyatt points and offerings available as part of third-party offerings, for owners who elect to exchange their inventory;

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

Costs to secure resort accommodations for use in Getaways.

Rental metrics, including the average daily transient rate or the number of transient keys rented, may not be comparable between periods given fluctuation in available occupancy by location, unit size (such as two bedroom, one bedroom or studio unit), owner use and exchange behavior. In addition, rental metrics may not correlate with rental revenues due to the requirement to report certain rental revenues net of rental expenses in accordance with ASC 978 (as discussed

above). Further, as our ability to rent certain luxury and other inventory is often limited on a site-by-site basis, rental operations may not generate adequate rental revenues to cover associated costs. Our Vacation Ownership segment units are either “full villas” or “lock-off” villas. Lock-off villas are units that can be separated into a master unit and a guest room. Full villas are “non-lock-off” villas because they cannot be separated. A “key” is the lowest increment for reporting occupancy statistics based upon the mix of non-lock-off and lock-off villas. Lock-off villas represent two keys and non-lock-off villas represent one key. The “transient keys” metric represents the blended mix of inventory available for rent and includes all of the combined inventory configurations available in our resort system.

Cost Reimbursements

Cost reimbursements include direct and indirect costs that are reimbursed to us by customers under management contracts. All costs, with the exception of taxes assessed by a governmental authority, reimbursed to us by customers are reported on a gross basis. We recognize cost reimbursements when we incur the related reimbursable costs. Cost reimbursements consist of actual expenses with no added margin.

Interest Expense

Interest expense consists of all interest expense other than consumer financing interest expense, which is included with Financing expense.

Other Items

We measure operating performance using the following key metrics:

Contract sales from the sale of vacation ownership products;

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

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

Development margin percentage;

Volume per guest (“VPG”), which we calculate by dividing consolidated vacation ownership contract sales, excluding fractional sales, telesales, resales, joint venture sales and other sales that are not attributed to a tour at a sales location, by the number of tours at sales locations in a given period (which we refer to as “tour flow”). We believe that this operating metric is valuable in evaluating the effectiveness of the sales process as it combines the impact of average contract price with the number of touring guests who make a purchase;

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

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

Consolidated Results


	Three Months Ended						Six Months Ended						Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018			March 31, 2020			March 31, 2019
REVENUES
Sale of vacation ownership products	$	350		$	205		$	651		$	380		$	258		$	293
Management and exchange	239			78			478			148			227			239
Rental	158			74			323			149			135			147
Financing	69			36			137			71			72			68
Cost reimbursements	252			202			539			418			318			287
TOTAL REVENUES	1,068			595			2,128			1,166			1,010			1,034
EXPENSES
Cost of vacation ownership products	91			57			171			103			60			78
Marketing and sales	193			106			381			211			183			186
Management and exchange	118			39			234			75			138			133
Rental	104			62			212			117			98			80
Financing	25			10			47			21			38			22
General and administrative	79			33			157			61			70			67
Depreciation and amortization	36			5			73			11			32			37
Litigation charges	1			16			2			16			2			1
Royalty fee	26			16			52			31			26			26
Impairment	—			—			26			—			95			26
Cost reimbursements	252			202			539			418			318			287
TOTAL EXPENSES	925			546			1,894			1,064			1,060			943
Gains (losses) and other income (expense), net	2			(7		)	10			(6		)
(Losses) gains and other (expense) income, net													(56		)	8
Interest expense	(35		)	(5		)	(69		)	(9		)	(33		)	(34		)
ILG acquisition-related costs	(36		)	(19		)	(62		)	(20		)	(21		)	(26		)
Other	—			(1		)	—			(3		)	(3		)	—
INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS	74			17			113			64
Provision for income taxes	(25		)	(6		)	(40		)	(17		)
NET INCOME	49			11			73			47
(LOSS) INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS													(163		)	39
Benefit (provision) for income taxes													58			(15		)
NET (LOSS) INCOME													(105		)	24
Net income attributable to noncontrolling interests	—			—			—			—			(1		)	—
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	49		$	11		$	73		$	47
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS													$	(106	)	$	24

Operating Statistics

~~2019 Second~~2020 First Quarter


	Three Months Ended						Change due to Legacy-ILG			Change Excluding Legacy-ILG Impact			Three Months Ended
(Contract sales $ in millions)	June 30, 2019		June 30, 2018		Change				March 31, 2020					March 31, 2019		Change		% Change
Vacation Ownership							Change due to Legacy-ILG			Change Excluding Legacy-ILG Impact
Total contract sales	$	398	$	232	$	166	$	152		$	14	6%	$	315	$	365	$	(50	)	(14%)
Consolidated contract sales	$	386	$	232	$	154	$	140		$	14	6%	$	306	$	354	$	(48	)	(13%)
Legacy-MVW North America
Consolidated contract sales	$	219	$	211	$	8	$	—		$	8	4%
VPG	$	3,700	$	3,672	$	28	$	—		$	28	1%
Tour flow	54,532		52,787		1,745		$	—		1,745		3%
Exchange & Third-Party Management
Total active members at end of period (000's)	1,691		—										1,636		1,694		(58		)	(3%)
Average revenue per member⁽¹⁾													$	41.37	$	46.24	$	(4.87	)	(11%)

~~2019 First Half~~_______________


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

Six Months Ended Change
due to
Legacy-ILG Change Excluding
Legacy-ILG Impact
(Contract sales $ in millions) June 30, 2019 June 30, 2018 Change
Vacation Ownership
Total contract sales $ 763
$ 436
$ 327
$ 294
$ 33
8%
Consolidated contract sales $ 740
$ 436
$ 304
$ 271
$ 33
8%
Legacy-MVW North America
Consolidated contract sales $ 420
$ 399
$ 21
$ 21
5%
VPG $ 3,736
$ 3,698
$ 38
$ 38
1%
Tour flow 103,510
98,842
4,668
4,668
5%
Exchange & Third-Party Management
Total active members at end of period (000's) 1,691
—

Revenues

~~2019 Second~~2020 First Quarter

The following table presents our revenues for the ~~second~~first quarter of ~~2019~~2020 compared to the ~~second quarter of 2018 and, as a result of the ILG Acquisition on September 1, 2018, includes results for Legacy-ILG for the second~~first quarter of 2019.

Three Months Ended Change
due to
Legacy-ILG Change Excluding
Legacy-ILG Impact
($ in millions) June 30, 2019 June 30, 2018 Change
Vacation Ownership $ 951
$ 595
$ 356
$ 338
$ 18
3%
Exchange & Third-Party Management 115
—
115
115
—
—%
Total Segment Revenues 1,066
595
471
453
18

Consolidated Property Owners’ Associations 2
—
2
2
—
—%
Total Revenues $ 1,068
$ 595
$ 473
$ 455
$ 18
3%

~~2019 First Half~~

The following table presents our revenues for the first half of 2019 compared to the first half of 2018 and, as a result of the ILG Acquisition on September 1, 2018, includes results for Legacy-ILG for the first half of 2019.


	Six Months Ended						Change due to Legacy-ILG				Change Excluding Legacy-ILG Impact				Three Months Ended
($ in millions)	June 30, 2019		June 30, 2018		Change					March 31, 2020						March 31, 2019				Change			% Change
Vacation Ownership	$	1,882	$	1,166	$	716	Change due to Legacy-ILG	$	667		Change Excluding Legacy-ILG Impact		$	49			4%	$	908		$	905			$	3	—%
Exchange & Third-Party Management	239		—		239		239				—			—%	107				124			(17		)		(14%)
Total Segment Revenues	2,121		1,166		955		906				49				1,015				1,029			(14		)		(2%)
Consolidated Property Owners’ Associations	7		—		7		7				—			—%	(5		)		5			(10		)		(211%)
Total Revenues	$	2,128	$	1,166	$	962	$	913			$	49		4%	$	1,010			$	1,034		$	(24	)		(2%)

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

EBITDA, a financial measure that is not prescribed by GAAP, is defined as earnings, or net income attributable to common shareholders, before interest expense (excluding consumer financing interest ~~expense)~~expense associated with term loan securitization transactions), income taxes, depreciation and amortization. For purposes of our EBITDA and Adjusted EBITDA calculations, we do not adjust for consumer financing interest expense because we consider it to be an operating expense of our business. We consider EBITDA and Adjusted EBITDA to be indicators of operating performance, which we use to measure our ability to service debt, fund capital expenditures and expand our business. We also use EBITDA and Adjusted EBITDA, as do analysts, lenders, investors and others, because these measures exclude certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company’s capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. EBITDA and Adjusted EBITDA also exclude depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies. Adjusted EBITDA reflects additional adjustments for certain items described below, and excludes share-based compensation expense to address considerable variability among companies in recording compensation expense because companies use share-based payment awards differently, both in the type and quantity of awards granted. We evaluate Adjusted EBITDA as an indicator of operating performance because it allows for period-over-period comparisons of our on-going core operations before the impact of the excluded items. Together, EBITDA and Adjusted EBITDA facilitate our comparison of results from our on-going core operations before the impact of these items with results from other vacation ownership companies.

EBITDA and Adjusted EBITDA have limitations and should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. In addition, other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than we do or may not calculate them at all, limiting their usefulness as comparative measures. The table below shows our EBITDA and Adjusted EBITDA calculation and reconciles these measures with Net (loss) income attributable to common shareholders, which is the most directly comparable GAAP financial measure.

~~2019 Second~~2020 First Quarter


	Three Months Ended							Change due to Legacy-ILG				Change Excluding Legacy-ILG Impact			Three Months Ended					Change
($ in millions)	June 30, 2019		June 30, 2018		Change						March 31, 2020					March 31, 2019				Change
Net income attributable to common shareholders	$	49	$	11	$	38		Change due to Legacy-ILG	$	34		Change Excluding Legacy-ILG Impact			$	4
Net (loss) income attributable to common shareholders															$	(106	)	$	24	$	(130	)
Interest expense	35		5		30			2				28			33			34		(1		)
Tax provision	25		6		19			16				3
Tax (benefit) provision															(58		)	15		(73		)
Depreciation and amortization	36		5		31			29				2			32			37		(5		)
EBITDA	145		27		118			81				37			(99		)	110		(209		)
Share-based compensation expense	11		6		5			4				1			4			9		(5		)
Certain items	39		43		(4		)	10				(14		)	233			47		186
Adjusted EBITDA	$	195	$	76	$	119		$	95			$	24		$	138		$	166	$	(28	)

Certain items for the second quarter of 2019 consisted of $36 million of ILG acquisition-related costs, $4 million of purchase accounting adjustments and $1 million of litigation charges, partially offset by $2 million of gains and other income.

Certain items for the ~~second~~first quarter of ~~2018~~2020 consisted of ~~$20~~$95 million of impairment charges, $24 million of acquisition costs (including ~~$19~~$21 million of ILG acquisition-related costs and $1$3 million of other acquisition ~~costs associated with the then anticipated capital efficient acquisition of the operating property in San Francisco)~~costs), ~~$16 million of litigation charges (including $11 million related to a project in San Francisco and $5 million related to a project in Lake Tahoe), and $7~~$56 million of losses and other expenses, $54 million of other charges, $2 million of purchase price adjustments, and $2 million of litigation charges.

The $56 million of losses and other expenses includes $32 million related to foreign currency translation and $33 million related to a true-up to a Marriott International indemnification receivable upon settlement (true-up to the offsetting accrual is included in the provision for income taxes line), partially offset by a $6 million receivable related to an indemnification from Marriott International for VAT charges and $3 million related to insurance proceeds).

The $54 million of other charges includes $37 million related to the net sales reserve adjustment due primarily ~~resulting~~to the impact of the COVID-19 pandemic, $11 million related to an accrual for certain health and welfare costs for furloughed associates, and $6 million related to VAT charges (see offset from ~~fraudulently induced electronic payment disbursements made to third parties.~~indemnification above).

The reduction in share-based compensation expense in the first quarter of 2020 includes a $4 million true-up for projected expense associated with the Company’s performance based share awards based upon the projected impact of the COVID-19 pandemic on financial metrics for the programs.

~~2019 First Half~~

Six Months Ended Change
due to
Legacy-ILG Change Excluding
Legacy-ILG Impact
($ in millions) June 30, 2019 June 30, 2018 Change
Net income attributable to common shareholders $ 73
$ 47
$ 26
$ 66
$ (40 )
Interest expense 69
9
60
4
56
Tax provision 40
17
23
33
(10 )
Depreciation and amortization 73
11
62
58
4
EBITDA 255
84
171
161
10
Share-based compensation expense 20
10
10
8
2
Certain items 86
45
41
19
22
Adjusted EBITDA $ 361
$ 139
$ 222
$ 188
$ 34

Certain items for the first ~~half~~quarter of 2019 consisted of ~~$62~~$26 million of ILG acquisition-related costs, $26 million of ~~asset impairments, $5~~impairment charges, $1 million of purchase ~~accounting~~price adjustments, $2$1 million of litigation charges, and $1 million of other severance costs, partially offset by ~~$10~~$8 million of gains and other income.

Certain items for the first half of 2018 consisted of $23 million of acquisition costs (including $20 million of ILG acquisition-related costs and $3 million of acquisition costs associated with the then anticipated capital efficient acquisition of the operating property in San Francisco), $16 million of litigation charges (including $11 million related to a project in San Francisco and $5 million related to a project in Lake Tahoe), and $7 million of losses and other expenses primarily resulting from fraudulently induced electronic payment disbursements made to third parties, partially offset by a $1 million favorable true up of previously recorded costs associated with the 2017 Hurricanes (recorded in Gains and other income).

Segment Adjusted EBITDA

~~2019 Second~~2020 First Quarter

Three Months Ended
Change
due to
Legacy-ILG
Change Excluding Legacy-ILG Impact
($ in millions) June 30, 2019 June 30, 2018 Change
Vacation Ownership $ 208
$ 104
$ 104
$ 79
$ 25
Exchange & Third-Party Management 58
—
58
58
—
Segment adjusted EBITDA 266
104
162
137
25
General and administrative (71 ) (28 ) (43 ) (42 ) (1 )
Consolidated property owners’ associations —
—
—
—
—
Adjusted EBITDA $ 195
$ 76
$ 119
$ 95
$ 24

~~2019 First Half~~


	Six Months Ended									Change due to Legacy-ILG				Change Excluding ILG Impact			Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018			Change						March 31, 2020					March 31, 2019				Change
Vacation Ownership	$	379		$	192		$	187		Change due to Legacy-ILG	$	150		Change Excluding ILG Impact			$	37		$	147			$	172			$	(25	)
Exchange & Third-Party Management	124			—			124			124				—			41				54				(13		)
Segment adjusted EBITDA	503			192			311			274				37			188				226				(38		)
General and administrative	(143		)	(53		)	(90		)	(87		)		(3		)	(51		)		(61		)		10
Consolidated property owners’ associations	1			—			1			1				—			1				1				—
Adjusted EBITDA	$	361		$	139		$	222		$	188			$	34		$	138			$	166			$	(28	)

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

Vacation Ownership

~~2019 Second~~2020 First Quarter


	Three Months Ended									Change due to Legacy-ILG				Change Excluding Legacy-ILG Impact			Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018			Change						March 31, 2020					March 31, 2019				Change
Segment adjusted EBITDA	$	208		$	104		$	104		Change due to Legacy-ILG	$	79		Change Excluding Legacy-ILG Impact			$	25		$	147			$	172			$	(25	)
Depreciation and amortization	(17		)	(4		)	(13		)	(12		)		(1		)	(18		)		(17		)		(1		)
Share-based compensation expense	(2		)	(1		)	(1		)	(1		)		—			(1		)		(2		)		1
Certain items	(6		)	(17		)	11			(4		)		15			(47		)		(19		)		(28		)
Segment financial results	$	183		$	82		$	101		$	62			$	39		$	81			$	134			$	(53	)

Certain items in the Vacation Ownership segment for the ~~second~~first quarter of ~~2019~~2020 consisted of $37 million related to the net sales reserve adjustment due primarily to the impact of the COVID-19 pandemic, $3 million of transaction costs associated with our asset light inventory arrangements, $4 million of impairment charges, $2 million of purchase accounting adjustments, $1and $2 million of litigation charges, ~~and~~partially offset by $1 million of gains and other income.

Certain items in the Vacation Ownership segment for the ~~second~~first quarter of 2018 consisted of $16 million of litigation charges (including $11 million related to a project in San Francisco and $5 million related to a project in Lake Tahoe) and $1 million of acquisition costs associated with the then anticipated capital efficient acquisition of the operating property in San Francisco.

~~2019 First Half~~

Six Months Ended Change
due to
Legacy-ILG Change Excluding
Legacy-ILG Impact
($ in millions) June 30, 2019 June 30, 2018 Change
Segment adjusted EBITDA $ 379
$ 192
$ 187
$ 150
$ 37
Depreciation and amortization (34 ) (9 ) (25 ) (23 ) (2 )
Share-based compensation expense (4 ) (2 ) (2 ) (2 ) —
Certain items (25 ) (18 ) (7 ) (5 ) (2 )
Segment financial results $ 316
$ 163
$ 153
$ 120
$ 33

~~Certain items in the Vacation Ownership segment for the first half~~ of 2019 consisted of $26 million of ~~asset impairments, $5~~impairment charges, $1 million of purchase ~~accounting~~price adjustments, and $2$1 million of litigation charges, partially offset by $8$9 million of gains and other income.

Certain items in the Vacation Ownership segment for the first half of 2018 consisted of $16 million of litigation charges (including $11 million related to a project in San Francisco and $5 million related to a project in Lake Tahoe) and $3 million of acquisition costs associated with the then anticipated capital efficient acquisition of the operating property in San Francisco, partially offset by a $1 million favorable true up of previously recorded costs associated with Hurricane Irma and Hurricane Maria (recorded in Gains and other income).

Exchange & Third-Party Management

~~2019 Second~~2020 First Quarter

Three Months Ended
($ in millions) June 30, 2019 June 30, 2018 Change
Segment adjusted EBITDA $ 58
$ —
$ 58
Depreciation and amortization (12 ) —
(12 )
Share-based compensation expense (1 ) —
(1 )
Certain items —
—
—
Segment financial results $ 45
$ —
$ 45

~~2019 First Half~~


	Six Months Ended								Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018		Change			March 31, 2020			March 31, 2019			Change
Segment adjusted EBITDA	$	124		$	—	$	124		$	41		$	54		$	(13	)
Depreciation and amortization	(24		)	—		(24		)	(5		)	(12		)	7
Non-cash share-based compensation expense	(2		)	—		(2		)
Share-based compensation expense									(1		)	(1		)	—
Certain items	(1		)	—		(1		)	(90		)	(1		)	(89		)
Segment financial results	$	97		$	—	$	97		$	(55	)	$	40		$	(95	)

Certain items in the Exchange & Third-Party Management segment for the first ~~half~~quarter of ~~2019~~2020 consisted primarily of $1$91 million of ~~purchase accounting adjustments.~~impairment charges related to Goodwill and certain trademarks resulting from the impact of the COVID-19 pandemic. See Footnote 10 “Goodwill and Intangibles” to our Financial Statements for additional information.

Business Segments

Our business is grouped into two reportable business segments: Vacation Ownership and Exchange & Third-Party Management. See Footnote 1817 “Business Segments” to our Financial Statements for further information on our segments.

Vacation Ownership


	Three Months Ended						Six Months Ended					Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018			June 30, 2019		June 30, 2018			March 31, 2020			March 31, 2019
REVENUES
Sale of vacation ownership products	$	350		$	205		$	651	$	380		$	258		$	293
Resort management and other services	134			78			259		148			112			125
Rental	141			74			288		149			122			129
Financing	68			36			135		71			71			67
Cost reimbursements	258			202			549		418			345			291
TOTAL REVENUES	951			595			1,882		1,166			908			905
EXPENSES
Cost of vacation ownership products	91			57			171		103			60			78
Marketing and sales	181			106			358		211			170			172
Resort management and other services	70			39			136		75			56			63
Rental	99			62			201		117			107			85
Financing	24			10			46		21			37			22
Depreciation and amortization	17			4			34		9			18			17
Litigation charges	1			16			2		16			2			1
Royalty fee	26			16			52		31			26			26
Impairment	—			—			26		—			4			26
Cost reimbursements	258			202			549		418			345			291
TOTAL EXPENSES	767			512			1,575		1,001			825			781
(Losses) gains and other (expense) income, net	(1		)	—			8		1
Gains and other income, net												1			9
Other	—			(1		)	—		(3		)	(3		)	—
SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS	183			82			315		163			81			133
Net loss attributable to noncontrolling interests	—			—			1		—			—			1
SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	183		$	82		$	316	$	163		$	81		$	134

Contract Sales

~~2019 Second~~2020 First Quarter

Three Months Ended Change
due to
Legacy-ILG Change Excluding
Legacy-ILG Impact
($ in millions) June 30, 2019 June 30, 2018 Change
Legacy-MVW North America consolidated contract sales $ 219
$ 211
$ 8
$ —
$ 8
4%
Other consolidated contract sales 167
21
146
140
6
28%
Total consolidated contract sales 386
232
154
140
14
6%
Joint venture contract sales 12
—
12
12
—
NM
Total contract sales $ 398
$ 232
$ 166
$ 152
$ 14
6%

The increase in Legacy-MVW North America consolidated contract sales reflected a 3 percent increase in the number of North America tours and a 1 percent increase in North America VPG to $3,700 in the second quarter of 2019 from $3,672 in the second quarter of 2018. The ~~3 percent increase in the number of North America tour~~s was due to increases in both owner tours and first time buyer tours. In addition, the increase in the number of total tours reflected the continued ramp up of new sales locations as well as an increase in tours from existing sales locations. The increase in Legacy-MVW other consolidated contract sales reflected an increase in the Asia Pacific region due to increases in tours at existing and new sales locations.

~~2019 First Half~~

Six Months Ended Change
due to
Legacy-ILG
($ in millions) June 30, 2019 June 30, 2018 Change Change Excluding
Legacy-ILG Impact
Legacy-MVW North America consolidated contract sales $ 420
$ 399
$ 21
$ —
$ 21
5%
Other consolidated contract sales 320
37
283
271
12
30%
Total consolidated contract sales 740
436
304
271
33
8%
Joint venture contract sales 23
—
23
23
—
—%
Total contract sales $ 763
$ 436
$ 327
$ 294
$ 33
8%

The increase in Legacy-MVW North America consolidated contract sales reflected a 5 percent increase in the number of North America tours and a 1 percent increase in North America VPG to $3,736 in the first half of 2019 from $3,698 in the first half of 2018. The ~~5 percent increase in the number of North America tours~~ was due to increases in both owner tours and first time buyer tours. In addition, the increase in the number of total tours reflected the continued ramp up of new sales locations as well as an increase in tours from existing sales locations. The increase in Legacy-MVW other consolidated contract sales reflected an increase in the Asia Pacific region due to increases in tours at existing and new sales locations.



	Three Months Ended
($ in millions)	March 31, 2020		March 31, 2019		Change			% Change
Total consolidated contract sales	$	306	$	354	$	(48	)	(13%)
Joint venture contract sales	9		11		(2		)	(18%)
Total contract sales	$	315	$	365	$	(50	)	(14%)

Sale of Vacation Ownership Products

~~2019 Second~~2020 First Quarter


	Three Months Ended									Change due to Legacy-ILG				Change Excluding Legacy-ILG Impact					Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018			Change						March 31, 2020							March 31, 2019				Change				% Change
Total contract sales	$	398		$	232		$	166			$	152					$	14			6%	$	315			$	365			$	(50	)	(14%)
Less resales contract sales	(8		)	(7		)	(1		)	—				(1		)			(7		)		(8		)		1
Less joint venture contract sales	(12		)	—			(12		)	(12		)		—					(9		)		(11		)		2
Consolidated contract sales, net of resales	378			225			153			140				13					299				346				(47		)
Plus:
Settlement revenue⁽¹⁾	11			4			7			7				—					6				5				1
Resales revenue⁽¹⁾	4			3			1			—				1					4				3				1
Revenue recognition adjustments:
Reportability	(8		)	(4		)	(4		)	—				(4		)			34				(30		)		64
Sales reserve	(27		)	(15		)	(12		)	(10		)		(2		)			(71		)		(19		)		(52		)
Other⁽²⁾⁽¹⁾	(8		)	(8		)	—			(2		)		2					(14		)		(12		)		(2		)
Sale of vacation ownership products	$	350		$	205		$	145		$	135			$	10			5%	$	258			$	293			$	(35	)		(12%)

_______________


⁽¹⁾	~~Previously included in Resort management and other services revenue prior to the adoption of ASC 606.~~


⁽²⁾	Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue and other adjustments to Sale of vacation ownership products revenue.

~~Excluding~~Sale of vacation ownership products decreased $35 million due to $47 million of lower contract sales volumes and $52 million of higher sales reserve activity, partially offset by a $64 million favorable change in revenue reportability.

The lower contract sales performance as well as the higher sales reserve activity is driven primarily from the impact of the ~~ILG Acquisition, sale~~COVID-19 pandemic. Contract sales and VPG as of ~~vacation ownership products increased $10 million, driven~~March 13, 2020 were 10 percent and 11 percent higher, respectively, than the same period during the first quarter of 2019. However, as the virus continued to spread throughout the United States and, as we began closing our sales centers during the second half of March, contract sales volumes declined significantly. The higher sales reserve recorded in the first quarter of 2020 reflects an estimate of future default activity to the extent our notes receivable portfolio performs similar to how it performed during the financial crisis of 2009 and 2010. We expect to continue to evaluate this estimate against actual activity as we proceed throughout the year.

While revenue reportability is typically negative in the first quarter of a particular year, revenue reportability was significantly positive in the first quarter of 2020. The first quarter of 2020 benefited from the contract sales from late in the fourth quarter of 2019 that were recognized as revenue in 2020. However, it was not impacted by ~~the increase in contract sales. Revenue reportability had a negative impact in~~an offsetting shift of revenues into the second quarter, ~~of 2019 and~~given the ~~second quarter of 2018 due to a net increase~~low sales volumes in ~~unclosed contracts during the respective quarters.~~

The higher Legacy-MVW sales reserve reflected a higher required reserve in the second quarter of 2019 due to the increase in financing propensity and slightly higher default activity as compared to the second quarter of 2018.

~~2019 First Half~~

Six Months Ended Change
due to
Legacy-ILG
($ in millions) June 30, 2019 June 30, 2018 Change Change Excluding
Legacy-ILG Impact
Total contract sales $ 763
$ 436
$ 327
$ 294
$ 33
8%
Less resales contract sales (16 ) (15 ) (1 ) —
(1 )
Less joint venture contract sales (23 ) —
(23 ) (23 ) —

Consolidated contract sales, net of resales 724
421
303
271
32

Plus:
Settlement revenue⁽¹⁾
20
8
12
12
—

Resales revenue⁽¹⁾
7
5
2
—
2

Revenue recognition adjustments:
Reportability (38 ) (16 ) (22 ) —
(22 )
Sales reserve (46 ) (24 ) (22 ) (18 ) (4 )
Other⁽²⁾
(16 ) (14 ) (2 ) (5 ) 3

Sale of vacation ownership products $ 651
$ 380
$ 271
$ 260
$ 11
3%

~~_______________~~


⁽¹⁾	~~Previously included in Resort management and other services revenue prior to the adoption of ASC 606.~~


⁽²⁾	~~Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue and other adjustments to Sale of vacation ownership products revenue.~~

~~Excluding~~March 2020 resulting from the impact of the ILG Acquisition, sale of vacation ownership products increased $11 million, driven by the increase in contract sales. Revenue reportability had a negative impact in the first half of 2019 and the first half of 2018 due to an increase in unclosed contracts during the respective quarters.COVID-19 pandemic.

The higher Legacy-MVW sales reserve reflected a higher required reserve in the first half of 2019 due to the increase in financing propensity and slightly higher default activity as compared to the first half of 2018.

Development Margin

~~2019 Second~~2020 First Quarter


	Three Months Ended									Change due to Legacy-ILG				Change Excluding Legacy-ILG Impact					Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018			Change						March 31, 2020							March 31, 2019				Change				% Change
Sale of vacation ownership products	$	350		$	205		$	145		Change due to Legacy-ILG	$	135		Change Excluding Legacy-ILG Impact			$	10			5%	$	258			$	293			$	(35	)	(12%)
Cost of vacation ownership products	(91		)	(57		)	(34		)	(38		)		4				7%	(60		)		(78		)		18				(22%)
Marketing and sales	(181		)	(106		)	(75		)	(71		)		(4		)		(2%)	(170		)		(172		)		2				(1%)
Development margin	$	78		$	42		$	36		$	26			$	10			26%	$	28			$	43			$	(15	)		(36%)
Development margin percentage	22.2%			19.9%			2.3 pts												10.7%				14.8%				(4.1 pts)

~~Excluding the impact of the ILG Acquisition, development~~Development margin ~~increased $10~~decreased $15 million year-over-year. The change in ~~Legacy-MVW development~~ margin reflected $7$52 million related to higher sales reserve activity due primarily to higher estimated defaults projected due to the impact of the COVID-19 pandemic ($42 million) and $34 million due to lower sales volumes and less efficient marketing and sales spending due to the inability to leverage fixed costs also resulting from the COVID-19 pandemic. These declines were partially offset by $46 million due to favorable revenue reportability compared to the first quarter of 2019 and $25 million from lower product costs, primarily from the lower revenue resulting from the sales reserve adjustment ($15 million) as well as from a favorable mix of ~~inventory~~products being sold ~~$4 million related to more efficient marketing~~ and ~~sales spending, and $2 million from higher vacation ownership contract sales volume net~~the timing of ~~the sales reserve and direct variable expenses (i.e., cost of vacation ownership products and marketing and sales), partially offset by a $3 million decline due to unfavorable revenue reportability~~reacquired inventory costs compared to the ~~second~~first quarter of ~~2018.~~2019.

The ~~increase~~decrease in the development margin percentage reflected a 4.1 percentage point improvement from Legacy-MVW results, partially offset by a negative 1.8 percentage point impact from the inclusion of Legacy-ILG results for the second quarter of 2019. The Legacy-MVW results included a 3.2 percentage point increase due to a favorable mix of lower cost vacation ownership real estate inventory being sold and a 2.1 percentage point improvement in marketing and sales costs due to leveraging fixed costs on the increase in contract sales, partially offset by a 0.815 percentage point decline due to ~~the unfavorable revenue reportability~~higher sales reserve activity (revenue impact net of related product costs) and a ~~0.4~~9 percentage point decline ~~related~~due to ~~sales reserve and other activity year-over-year. Legacy-MVW development margin percentage was 24.0 percent in the second quarter of 2019.~~

~~2019 First Half~~

Six Months Ended Change
due to
Legacy-ILG Change Excluding
Legacy-ILG Impact
($ in millions) June 30, 2019 June 30, 2018 Change
Sale of vacation ownership products $ 651
$ 380
$ 271
$ 260
$ 11
3%
Cost of vacation ownership products (171 ) (103 ) (68 ) (74 ) 6
6%
Marketing and sales (358 ) (211 ) (147 ) (140 ) (7 ) (3)%
Development margin $ 122
$ 66
$ 56
$ 46
$ 10
15%
Development margin percentage 18.7% 17.2% 1.5 pts

~~Excluding the impact of the ILG Acquisition, development margin increased $10 million year-over-year. The change in Legacy-MVW development margin reflected $11 million related to more~~less efficient marketing and sales spending ~~$9 million~~due to the inability to leverage fixed costs with the lower sales volumes resulting from ~~a favorable mix of inventory being sold, $6 million from higher vacation ownership contract sales volume net of~~ the ~~sales reserve and direct variable expenses (i.e., cost of vacation ownership products and marketing and sales), and $3 million from favorable product cost true-up activity year-over-year,~~COVID-19 pandemic. These declines were partially offset by ~~a $16 million decline~~14 percentage points due to ~~unfavorable~~favorable revenue reportability ~~and $3 million related to sales reserve and other activity~~ compared to the first ~~half~~quarter of ~~2018.~~

~~The increase in the development margin~~2019 and 6 percentage ~~reflected a 2.0 percentage point improvement~~points from Legacy-MVW results, partially offset by a negative 0.5 percentage point impact from the inclusion of Legacy-ILG results for the first half of 2019. The Legacy-MVW results included a 2.9 percentage point improvement in marketing and sales costs due to leveraging fixed costs on the increase in contract sales, a 2.2 percentage point increase due to a favorable mix of higher cost vacation ownership real estate inventory being sold, and a 0.7 percentage point increase from favorablelower product ~~cost true-up activity. These increases were partially offset by a 2.7 percentage point decline due to the unfavorable revenue reportability and a 1.1~~

~~percentage point decline related to sales reserve and other activity year-over-year. Legacy-MVW development margin percentage was 19.2 percent in the first half of 2019.~~costs.

Resort Management and Other Services Revenues, Expenses and Margin

~~2019 Second~~2020 First Quarter


	Three Months Ended						Change				Change due to Legacy-ILG			Change Excluding Legacy-ILG Impact				Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018						March 31, 2020				Change Excluding Legacy-ILG Impact				March 31, 2019				Change			% Change
Management fee revenues	$	38		$	26		Change		$	12	Change due to Legacy-ILG			$	13		$	(1	)		(1%)	$	38		$	36		$	2	5%
Ancillary revenues	66			36			30				29			1			5%	46				57			(11		)	(18%)
Other management and exchange revenues	30			16			14				10			4			3%	28				32			(4		)	(14%)
Resort management and other services revenues	134			78			56				52			4			5%	112				125			(13		)	(11%)
Resort management and other services expenses	(70		)	(39		)	(31		)		(29		)	(2		)	(4%)	(56		)		(63		)	7			12%
Resort management and other services margin	$	64		$	39		$	25			$	23		$	2		7%	$	56			$	62		$	(6	)	(9%)
Resort management and other services margin percentage	47.3%			49.1%			(1.8 pts)											50.5%				49.6%			0.9 pts

~~2019 First Half~~Resort management and other services revenues reflected lower ancillary revenues, including revenues from food and beverage and golf offerings, and lower other revenues earned in conjunction with our exchange programs, all as a result of the impact of the COVID-19 pandemic in the quarter. These declines were partially offset by higher management fees resulting from the cumulative increase in the number of vacation ownership products sold and higher operating costs across the system.

The decrease in the resort management and other services margin reflected the decrease in revenues partially offset by lower ancillary expenses as a result of the lower ancillary revenues mentioned above.

Six Months Ended Change
due to
Legacy-ILG
($ in millions) June 30, 2019 June 30, 2018 Change Change Excluding
Legacy-ILG Impact
Management fee revenues 75
50
$ 25
$ 25
$ —
2%
Ancillary revenues $ 123
$ 64
59
55
4
7%
Other management and exchange revenues 61
34
27
20
7
18%
Resort management and other services revenues 259
148
111
100
11
8%
Resort management and other services expenses (136 ) (75 ) (61 ) (57 ) (4 ) (5)%
Resort management and other services margin $ 123
$ 73
$ 50
$ 43
$ 7
11%
Resort management and other services margin percentage 47.4% 48.8% (1.4 pts)

Rental Revenues, Expenses and Margin

~~2019 Second~~2020 First Quarter


	Three Months Ended						Change				Change due to Legacy-ILG			Change Excluding Legacy-ILG Impact			Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018						March 31, 2020				Change Excluding Legacy-ILG Impact			March 31, 2019				Change			% Change
Rental revenues	$	141		$	74		Change		$	67	Change due to Legacy-ILG			$	61	$	6			8%	$	122		$	129		$	(7	)	(6%)
Rental expenses	(99		)	(62		)	(37		)		(41		)	4		8%	(107		)		(85		)	(22		)	(25%)
Rental margin	$	42		$	12		$	30			$	20		$	10	85%	$	15			$	44		$	(29	)	(66%)
Rental margin percentage	29.0%			16.7%			12.3 pts										12.4%				34.1%			(21.7 pts)


	Three Months Ended								Change due to Legacy-ILG		Change Excluding Legacy-ILG Impact			Three Months Ended
	June 30, 2019		June 30, 2018					March 31, 2020						March 31, 2019			Change		% Change
Transient keys rented⁽¹⁾	619,212		336,892				282,320				265,179		17,141			5%	533,583		611,754			(78,171	)	(13%)
Average transient key rate	$	224.76	$	216.53	$	8.23			$	2.33	$	5.90	3%	$	244.20		$	244.78	$	(0.58	)	—%
Resort occupancy	88.6%		92.0%		(3.4 pts)				(3.5 pts)		0.1 pts			79.7%			88.6%		(8.9 pts)

_________________________


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

The decline in rental margin resulted from a decline in keys rented and a decline in average transient rate resulting from the COVID-19 pandemic. Rental margin as of the end of February 2020 was nearly $4 million higher than the comparable period of 2019.

~~2019 First Half~~

Six Months Ended Change
due to
Legacy-ILG
($ in millions) June 30, 2019 June 30, 2018 Change Change Excluding
Legacy-ILG Impact
Rental revenues $ 288
$ 149
$ 139
$ 128
$ 11
8%
Rental expenses (201 ) (117 ) (84 ) (86 ) 2
2%
Rental margin $ 87
$ 32
$ 55
$ 42
$ 13
46%
Rental margin percentage 29.9% 21.0% 8.9 pts

Six Months Ended Change
due to
Legacy-ILG
June 30, 2019 June 30, 2018 Change Change Excluding
Legacy-ILG Impact
Transient keys rented⁽¹⁾
1,230,966
669,800
561,166
540,500
20,666
3%
Average transient key rate $ 234.71
$ 225.78
$ 8.93
$ 3.51
$ 5.42
2%
Resort occupancy 88.6% 90.0% (1.4 pts) (3.0 pts) 1.6 pts

~~_________________________~~


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

Financing Revenues, Expenses and Margin

~~2019 Second~~2020 First Quarter


	Three Months Ended									Change due to Legacy-ILG				Change Excluding Legacy-ILG Impact					Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018			Change						March 31, 2020							March 31, 2019				Change				% Change
Interest income	$	67		$	34		$	33		Change due to Legacy-ILG	$	26		Change Excluding Legacy-ILG Impact			$	7			19%	$	69			$	65			$	4	6%
Other financing revenues	1			2			(1		)	—				(1		)		—%	2				2				—				8%
Financing revenues	68			36			32			26				6				18%	71				67				4				6%
Financing expenses	(10		)	(4		)	(6		)	(5		)		(1		)		(14%)	(22		)		(8		)		(14		)		(182%)
Consumer financing interest expense	(14		)	(6		)	(8		)	(5		)		(3		)		(43%)	(15		)		(14		)		(1		)		(10%)
Financing margin	$	44		$	26		$	18		$	16			$	2			12%	$	34			$	45			$	(11	)		(25%)
Financing propensity	61.9%			62.7%															56.9%				62.1%

~~Legacy-MVW financing revenues~~Financing margin increased due to higher financing revenues resulting from a ~~$169~~$273 million increase in the average gross vacation ownership notes receivable balance, ~~($5 million),~~offset by slightly ~~lower~~higher financing ~~program incentive costs,~~expenses (including $10 million related to the higher reserve on the acquired vacation ownership notes receivable related to the COVID-19 pandemic as well as timing of technology related spending) and ~~favorable late and service fees. The~~slightly higher consumer financing interest expense ~~was due to a~~resulting from higher ~~average outstanding~~overall securitized debt ~~balance and slightly higher average debt interest rate.~~

~~2019 First Half~~

Six Months Ended Change
due to
Legacy-ILG
($ in millions) June 30, 2019 June 30, 2018 Change Change Excluding
Legacy-ILG Impact
Interest income $ 132
$ 68
$ 64
$ 52
$ 12
18%
Other financing revenues 3
3
—
—
—
—%
Financing revenues 135
71
64
52
12
17%
Financing expenses (18 ) (8 ) (10 ) (9 ) (1 ) (8%)
Consumer financing interest expense (28 ) (13 ) (15 ) (11 ) (4 ) (30%)
Financing margin $ 89
$ 50
$ 39
$ 32
$ 7
15%
Financing propensity 62.0% 62.2%

~~Legacy-MVW financing revenues increased due to a $169 million increase in the average gross vacation ownership notes receivable balance ($10 million)~~balances. ~~The higher consumer financing interest expense was due to a higher average outstanding debt balance and slightly higher average debt interest rate.~~

Litigation Charges

~~2019 Second~~2020 First Quarter


	Three Months Ended							Change due to Legacy-ILG				Change Excluding Legacy-ILG Impact			Three Months Ended
($ in millions)	June 30, 2019		June 30, 2018		Change						March 31, 2020					March 31, 2019				Change			% Change
Litigation charges	$	1	$	16	$	(15	)	Change due to Legacy-ILG	$	—		Change Excluding Legacy-ILG Impact	$	(15	)		(95%)	$	2		$	1		$	1	47%

Royalty Fee

2020 First Quarter



	Three Months Ended
($ in millions)	March 31, 2020		March 31, 2019		Change		% Change
Royalty fee	$	26	$	26	$	—	1%

Royalty fee expense remained flat in the ~~second~~first quarter of 2020 as the amount of closings, in dollars, was similar to the prior year quarter.

Depreciation and Amortization

2020 First Quarter



	Three Months Ended
($ in millions)	March 31, 2020		March 31, 2019		Change		% Change
Depreciation and amortization	$	18	$	17	$	1	10%

Impairment

2020 First Quarter



	Three Months Ended
($ in millions)	March 31, 2020		March 31, 2019		Change			% Change
Impairment	$	4	$	26	$	(22	)	(86%)

During the first quarter of 2020, we recorded a non-cash impairment of $4 million related to our Asia Pacific inventory product resulting from the impact of the COVID-19 pandemic.

During the first quarter of 2019, we ~~incurred $1~~recorded a non-cash impairment of $26 million of litigation charges. In the second quarter of 2018, we incurred $16 million of litigation charges, including $11 million related to a project in San Francisco and $5 million related to a project in Lake Tahoe.

~~2019 First Half~~

Six Months Ended Change
due to
Legacy-ILG Change Excluding
Legacy-ILG Impact
($ in millions) June 30, 2019 June 30, 2018 Change
Litigation charges $ 2
$ 16
$ (14 ) $ —
$ (14 ) (89%)

In the first half of 2019, we incurred $2 million of litigation charges. In the first half of 2018, we incurred $16 million of litigation charges, including $11 million related to a project in San Francisco and $5 million related to a project in Lake Tahoe.

~~Royalty Fee~~

~~2019 Second Quarter~~

Three Months Ended Change
due to
Legacy-ILG Change Excluding
Legacy-ILG Impact
($ in millions) June 30, 2019 June 30, 2018 Change
Royalty fee $ 26
$ 16
$ 10
$ 11
$ (1 ) (4%)

Excluding the impact of the ILG Acquisition, Legacy-MVW royalty fee expense decreased $1 million in the second quarter of 2019 due to an increase in the mix of sales of pre-owned inventory, which carry a lower royalty fee as compared to initial sales of our inventory (one percent versus two percent), partially offset by an increase in the dollar volume of closings and an increase in the fixed portion of the royalty fee. The prior year period benefited from a contractual decrease in the fixed portion of the royalty fee owed to Marriott International as a result of amendments to our licensing agreements with Marriott International entered into during the first quarter of 2018. This decrease in the fixed portion of the royalty fee was terminated upon completion of the ILG Acquisition on September 1, 2018.

~~2019 First Half~~

Six Months Ended Change
due to
Legacy-ILG
($ in millions) June 30, 2019 June 30, 2018 Change Change Excluding
Legacy-ILG Impact
Royalty fee $ 52
$ 31
$ 21
$ 21
$ —
—%

Excluding the impact of the ILG Acquisition, Legacy-MVW royalty fee expense remained flat year-over-year due to an increase in the mix of sales of pre-owned inventory, which carry a lower royalty fee as compared to initial sales of our inventory (one percent versus two percent), partially offset by an increase in the dollar volume of closings and an increase in the fixed portion of the royalty fee. The prior year period benefited from a contractual decrease in the fixed portion of the royalty fee owed to Marriott International as a result of amendments to our licensing agreements with Marriott International entered into during the first quarter of 2018. This decrease in the fixed portion of the royalty fee was terminated upon completion of the ILG Acquisition on September 1, 2018.

~~Depreciation~~

~~2019 Second Quarter~~

Three Months Ended Change
due to
Legacy-ILG Change Excluding
Legacy-ILG Impact
($ in millions) June 30, 2019 June 30, 2018 Change
Depreciation and amortization $ 17
$ 4
$ 13
$ 12
$ 1
34%

~~2019 First Half~~

Six Months Ended Change
due to
Legacy-ILG
($ in millions) June 30, 2019 June 30, 2018 Change Change Excluding
Legacy-ILG Impact
Depreciation and amortization $ 34
$ 28
$ 6
$ 4
$ 2
37%

~~Impairment~~

~~2019 First Half~~

Six Months Ended Change
due to
Legacy-ILG
($ in millions) June 30, 2019 June 30, 2018 Change Change Excluding
Legacy-ILG Impact
Impairment $ 26
$ —
$ 26
$ —
$ 26
NM

~~During the second quarter of 2019, we entered~~entering into a contract to sell land and land improvements associated with a future phase of an existing resort located in Orlando, Florida, which was for $10 million, ~~which~~and was less than the carrying value of the land and land improvements. ~~As a result, we recorded a non-cash impairment of $26 million in the first half of 2019.~~ The impairment iswas primarily attributable to the fact that the book value of the assets to be sold ~~exceeds~~exceeded the sales price because the book value ~~includes~~included allocations of common costs incurred when we built the infrastructure for the resort, including future phases.

Cost Reimbursements

~~2019 Second~~2020 First Quarter

Three Months Ended
Change
due to
Legacy-ILG

Change Excluding
Legacy-ILG Impact
($ in millions) June 30, 2019 June 30, 2018 Change
Cost reimbursements $ 258
$ 202
$ 56
$ 64
$ (8 ) (4%)

~~2019 First Half~~


	Six Months Ended						Change due to Legacy-ILG				Change Excluding Legacy-ILG Impact			Three Months Ended
($ in millions)	June 30, 2019		June 30, 2018		Change					March 31, 2020					March 31, 2019				Change			% Change
Cost reimbursements	$	549	$	418	$	131	Change due to Legacy-ILG	$	127		Change Excluding Legacy-ILG Impact	$	4			1%	$	345		$	291		$	54	18%

Other

~~2019 Second~~2020 First Quarter

Six Months Ended Change
due to
Legacy-ILG Change Excluding
Legacy-ILG Impact
($ in millions) June 30, 2019 June 30, 2018 Change
Other $ —
$ (1 ) $ 1
$ —
$ 1
100%

~~2019 First Half~~


	Six Months Ended							Change due to Legacy-ILG				Change Excluding Legacy-ILG Impact			Three Months Ended
($ in millions)	June 30, 2019		June 30, 2018			Change					March 31, 2020					March 31, 2019				Change			% Change
Other	$	—	$	(3	)	$	3	Change due to Legacy-ILG	$	—		Change Excluding Legacy-ILG Impact	$	3			100%	$	(3	)	$	—		$	(3	)	NM

In the first ~~half~~quarter of ~~2018,~~2020, we incurred $3 million of other expenses associated with ~~the then anticipated~~our capital efficient ~~acquisition of an operating property in San Francisco.~~inventory arrangements.

~~(Losses)~~ Gains / Losses and Other ~~(Expense)~~ Income / Expense

~~2019 Second~~2020 First Quarter

Three Months Ended Change
due to
Legacy-ILG Change Excluding
Legacy-ILG Impact
($ in millions) June 30, 2019 June 30, 2018 Change
Losses and other expense, net $ (1 ) $ —
$ (1 ) $ —
$ (1 ) NM

~~2019 First Half~~


	Six Months Ended											Three Months Ended
($ in millions)	June 30, 2019		June 30, 2018		Change		Change due to Legacy-ILG		Change Excluding Legacy-ILG Impact			March 31, 2020		March 31, 2019		Change			% Change
Gains and other income, net	$	8	$	1	$	7	$	—	$	7	NM	$	1	$	9	$	(8	)	(89%)

In the first ~~half~~quarter of 2019, we recorded $9 million of gains and other income related to net insurance proceeds ~~from~~related to the settlement of Legacy-MVW business interruption insurance claims arising from ~~the 2017 Hurricanes, partially offset by $1 million of miscellaneous losses and other expense.~~prior year hurricanes.

Noncontrolling Interest

2020 First Quarter



	Three Months Ended
($ in millions)	March 31, 2020		March 31, 2019		Change			% Change
Net loss attributable to noncontrolling interests	$	—	$	1	$	(1	)	(100%)

Exchange & Third-Party Management

~~Our~~



	Three Months Ended
($ in millions)	March 31, 2020			March 31, 2019
REVENUES
Management and exchange	$	72		$	82
Rental	13			17
Financing	1			1
Cost reimbursements	21			24
TOTAL REVENUES	107			124
EXPENSES
Marketing and sales	13			14
Management and exchange	27			26
Rental	5			8
Financing	1			—
Depreciation and amortization	5			12
Impairment	91			—
Cost reimbursements	21			24
TOTAL EXPENSES	163			84
Gains and other income, net	1			—
SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(55	)	$	40

Management and Exchange & Third-Party Management segment offers access to vacation accommodations and other travel-related transactions and services to leisure travelers by providing vacation exchange and management services, including vacation rentals and other services. We provide these services through a variety of brands including Interval International, Trading Places International, Vacation Resorts International, Aqua-Aston and Great Destinations. These brands were acquired as part of our acquisition of ILG on September 1, 2018 and, consequently, are only included in our results for the periods subsequent to that date.Margin

2020 First Quarter

Three Months Ended Six Months Ended
($ in millions) June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
REVENUES
Management and exchange $ 75
$ —
$ 157
$ —
Rental 17
—
34
—
Financing 1
—
2
—
Cost reimbursements 22
—
46
—
TOTAL REVENUES 115
—
239
—
EXPENSES
Marketing and sales 12
—
23
—
Management and exchange 16
—
33
—
Rental 7
—
15
—
Financing 1
—
1
—
Depreciation and amortization 12
—
24
—
Cost reimbursements 22
—
46
—
TOTAL EXPENSES 70
—
142
—
SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 45
$ —
$ 97
$ —



	Three Months Ended
($ in millions)	March 31, 2020			March 31, 2019			Change			% Change
Management and exchange revenue	$	72		$	82		$	(10	)	(13%)
Management and exchange expense	(27		)	(26		)	(1		)	(4%)
Management and exchange margin	$	45		$	56		$	(11	)	(21%)
Management and exchange margin percentage	62.6%			68.7%			(6.1 pts)

The decline in management and exchange margin reflects lower exchange activity and lower average exchange transaction fees primarily driven by the impact of the COVID-19 pandemic.

Rental Revenues, Expenses and Margin

2020 First Quarter



	Three Months Ended
($ in millions)	March 31, 2020			March 31, 2019			Change			% Change
Rental revenues	$	13		$	17		$	(4	)	(26%)
Rental expenses	(5		)	(8		)	3			49%
Rental margin	$	8		$	9		$	(1	)	(4%)
Rental margin percentage	65.8%			50.6%			15.2 pts

The decline in rental revenue reflects lower Getaway program transactions and lower average Getaway program transaction fees driven by supply challenges in certain markets and fewer bookings into purchased inventory as well as the impact of the COVID-19 pandemic.

The decline in rental margin reflects the declines in rental revenue offset by a reduction in space procurement costs resulting from the fewer bookings into purchased inventory and adjustments for cancellations and from resorts unavailable due to the COVID-19 pandemic.

Impairment

2020 First Quarter



	Three Months Ended
($ in millions)	March 31, 2020		March 31, 2019		Change		% Change
Impairment	$	91	$	—	$	91	NM

During the first quarter of 2020, we recorded a non-cash impairment charge of $91 million related to Goodwill and certain trademarks resulting from the impact of the COVID-19 pandemic. See Footnote 10 “Goodwill and Intangibles” to our Financial Statements for additional information.

Corporate and Other

Corporate and Other consists of results that are not allocable to our segments, including company-wide general and administrative costs, corporate interest expense, ILG acquisition-related costs and provision for income taxes. In addition, Corporate and Other includes the revenues and expenses from the Consolidated Property Owners’ Associations.


	Three Months Ended						Six Months Ended						Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018			March 31, 2020			March 31, 2019
REVENUES
Resort management and other services	$	30		$	—		$	62		$	—		$	43		$	32
Rental	—			—			1			—			—			1
Cost reimbursements	(28		)	—			(56		)	—			(48		)	(28		)
TOTAL REVENUES	2			—			7			—			(5		)	5
EXPENSES
Resort management and other services	32			—			65			—			55			44
Rental	(2		)	—			(4		)	—			(14		)	(13		)
General and administrative	79			33			157			61			70			67
Depreciation	7			1			15			2
Depreciation and amortization													9			8
Cost reimbursements	(28		)	—			(56		)	—			(48		)	(28		)
TOTAL EXPENSES	88			34			177			63			72			78
Gains (losses) and other income (expense), net	3			(7		)	2			(7		)
Losses and other expense, net													(58		)	(1		)
Interest expense	(35		)	(5		)	(69		)	(9		)	(33		)	(34		)
ILG acquisition-related costs	(36		)	(19		)	(62		)	(20		)	(21		)	(26		)
FINANCIAL RESULTS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS	(154		)	(65		)	(299		)	(99		)	(189		)	(134		)
Provision for income taxes	(25		)	(6		)	(40		)	(17		)
Benefit (provision) for income taxes													58			(15		)
FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS	(179		)	(71		)	(339		)	(116		)	(131		)	(149		)
Net income attributable to noncontrolling interests	—			—			(1		)	—			(1		)	(1		)
FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(179	)	$	(71	)	$	(340	)	$	(116	)	$	(132	)	$	(150	)

Consolidated Property Owners’ Associations

The following table illustrates the impact of the Consolidated Property Owners’ Associations of the acquired Legacy-ILG vacation ownership properties under the voting interest model, which represents the portion related to individual or third-party VOI owners.


	Three Months Ended					Six Months Ended					Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018		June 30, 2019			June 30, 2018		March 31, 2020			March 31, 2019
REVENUES
Resort management and other services	$	30		$	—	$	62		$	—	$	43		$	32
Rental	—			—		1			—		—			1
Cost reimbursements	(28		)	—		(56		)	—		(48		)	(28		)
TOTAL REVENUES	2			—		7			—		(5		)	5
EXPENSES
Resort management and other services	32			—		65			—		55			44
Rental	(2		)	—		(4		)	—		(14		)	(13		)
Cost reimbursements	(28		)	—		(56		)	—		(48		)	(28		)
TOTAL EXPENSES	2			—		5			—		(7		)	3
FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS	—			—		2			—		2			2
Net income attributable to noncontrolling interests	—			—		(1		)	—		(1		)	(1		)
FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	—		$	—	$	1		$	—	$	1		$	1

General and Administrative

~~2019 Second~~2020 First Quarter


	Three Months Ended						Change due to Legacy-ILG				Change Excluding Legacy-ILG Impact			Three Months Ended
($ in millions)	June 30, 2019		June 30, 2018		Change					March 31, 2020					March 31, 2019				Change			% Change
General and administrative	$	79	$	33	$	46	Change due to Legacy-ILG	$	44		Change Excluding Legacy-ILG Impact	$	2			15%	$	70		$	67		$	3	5%

~~Excluding the impact of the ILG Acquisition, general~~General and administrative expenses increased $2$3 million due to an accrual for health and welfare costs for furloughed employees ($11 million) and higher ~~personnel related~~VAT charges ($6 million which is expected to be indemnified by Marriott International), offset partially by synergy and other ~~expenses, partially offset by savings from synergy initiatives. The personnel related and other expenses included annual merit, bonus and inflationary~~ cost ~~increases.~~

~~2019 First Half~~

Six Months Ended Change
due to
Legacy-ILG Change Excluding
Legacy-ILG Impact
($ in millions) June 30, 2019 June 30, 2018 Change
General and administrative $ 157
$ 61
$ 96
$ 90
$ 6
14%

Excluding the impact of the ILG Acquisition, general and administrative expenses increased $6 million due to higher personnel related and other expenses, partially offset by savings from synergy initiatives. The personnel related and other expenses included annual merit, bonus and inflationary cost increases.savings.

Depreciation and Amortization

~~Depreciation~~

~~2019 Second~~2020 First Quarter

Three Months Ended Change
due to
Legacy-ILG Change Excluding
Legacy-ILG Impact
($ in millions) June 30, 2019 June 30, 2018 Change
Depreciation and amortization $ 7
$ 1
$ 6
$ 5
$ 1
10%

~~2019 First Half~~


	Six Months Ended						Change due to Legacy-ILG				Change Excluding Legacy-ILG Impact			Three Months Ended
($ in millions)	June 30, 2019		June 30, 2018		Change					March 31, 2020					March 31, 2019				Change			% Change
Depreciation and amortization	$	15	$	2	$	13	Change due to Legacy-ILG	$	11		Change Excluding Legacy-ILG Impact	$	2			27%	$	9		$	8		$	1	15%

Gains ~~(Losses)~~/ Losses and Other Income ~~(Expense)~~/ Expense

~~2019 Second~~2020 First Quarter

Three Months Ended Change
due to
Legacy-ILG Change Excluding
Legacy-ILG Impact
($ in millions) June 30, 2019 June 30, 2018 Change
Gains (losses) and other income (expense), net $ 3
$ (7 ) $ 10
$ 1
$ 9
121%

In the second quarter of 2019, we recorded $3 million of gains and other income resulting from the recovery of a portion of the fraudulently induced electronic payment disbursements made in the second quarter of 2018. In the second quarter of 2018, we recorded $7 million of losses and other expenses primarily resulting from fraudulently induced electronic payment disbursements made to third parties.

~~2019 First Half~~


	Six Months Ended							Change due to Legacy-ILG				Change Excluding Legacy-ILG Impact			Three Months Ended
($ in millions)	June 30, 2019		June 30, 2018			Change					March 31, 2020					March 31, 2019			Change			% Change
Gains (losses) and other income (expense), net	$	2	$	(7	)	$	9	Change due to Legacy-ILG	$	1		Change Excluding Legacy-ILG Impact	$	8			112%
Losses and other expense, net															$	(58	)	$	(1	)	$	(57	)	NM

In the first ~~half~~quarter of ~~2019,~~2020, we recorded $3$31 million ~~of gains~~related to foreign currency translation and ~~other income resulting~~$33 million related to a true-up to an indemnification receivable from Marriott International, Inc. related to settlement with a taxing authority (true-up to the ~~recovery of a portion of the fraudulently induced electronic payment disbursements made~~offsetting accrual is included in the ~~second quarter of 2018,~~Benefit (provision) for income taxes line), offset partially ~~offset~~ by $1a $6 million ~~of losses~~payment related to an indemnification from Marriott International, Inc. for VAT penalties and ~~other expenses. In the first half of 2018, we recorded $7 million of losses and other expenses primarily resulting from fraudulently induced electronic payment disbursements made to third parties.~~interest.

Interest Expense

~~2019 Second~~2020 First Quarter

Three Months Ended Change
due to
Legacy-ILG Change Excluding
Legacy-ILG Impact
($ in millions) June 30, 2019 June 30, 2018 Change
Interest expense $ (35 ) $ (5 ) $ (30 ) $ (2 ) $ (28 ) NM

Interest expense increased $30 million due to $27 million of interest expense associated with the new debt issued in the third quarter of 2018 in connection with the ILG Acquisition, $2 million of interest expense associated with assumed Legacy-ILG debt in the second quarter of 2019 and $1 million of higher interest expense associated with the Warehouse Credit Facility due to higher usage in the second quarter of 2019.

~~2019 First Half~~

Six Months Ended Change
due to
Legacy-ILG Change Excluding
Legacy-ILG Impact
($ in millions) June 30, 2019 June 30, 2018 Change
Interest expense $ (69 ) $ (9 ) $ (60 ) $ (4 ) $ (56 ) NM

Interest expense increased $60 million due to $53 million of interest expense associated with the new debt issued in the third quarter of 2018 in connection with the ILG Acquisition, $4 million of interest expense associated with assumed Legacy-ILG debt in the first half of 2019 and $3 million of higher interest expense associated with the Warehouse Credit Facility due to higher usage in the first half of 2019.



	Three Months Ended
($ in millions)	March 31, 2020			March 31, 2019			Change		% Change
Interest expense	$	(33	)	$	(34	)	$	1	3%

ILG Acquisition-Related Costs

~~2019 Second~~2020 First Quarter

Three Months Ended Change
due to
Legacy-ILG Change Excluding
Legacy-ILG Impact
($ in millions) June 30, 2019 June 30, 2018 Change
ILG acquisition-related costs $ (36 ) $ (19 ) $ (17 ) $ (7 ) $ (10 ) (50%)

~~2019 First Half~~


	Six Months Ended									Change due to Legacy-ILG				Change Excluding Legacy-ILG Impact			Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018			Change						March 31, 2020					March 31, 2019				Change			% Change
ILG acquisition-related costs	$	(62	)	$	(20	)	$	(42	)	Change due to Legacy-ILG	$	(15	)	Change Excluding Legacy-ILG Impact	$	(27	)		(132%)	$	(21	)	$	(26	)	$	5	14%

ILG acquisition-related costs include transaction costs, employee termination costs and integration costs. Transaction costs represent costs related to the planning and execution of the ILG Acquisition, primarily for financial advisory, legal, and other professional service ~~fees.~~fees, as well as certain tax related accruals. Employee termination costs represent charges for employee severance, retention and other termination related benefits. Acquisition and integration costs primarily represent integration employee salaries and share-based compensation, fees paid to change management consultants and technology-related costs.

Income Tax

~~2019 Second~~2020 First Quarter


	Three Months Ended									Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018			Change			March 31, 2020		March 31, 2019			Change		% Change
Provision for income taxes	$	(25	)	$	(6	)	$	(19	)
Benefit (provision) for income taxes										$	58	$	(15	)	$	73	NM

The increase in the ~~provision~~benefit for income taxes ~~was primarily due~~is predominately attributable to ~~increases~~a pre-tax loss, a reduction in ~~U.S.~~uncertain tax benefits predominately related to a settlement with a taxing authority (for which an offset of $32 million relating to an indemnification asset from Marriott International, Inc. is recorded in (Losses) gains and ~~foreign~~other (expense) income, net), and a change in our projected mix of earnings ~~as a result of the ILG Acquisition during the third quarter of 2018.~~in international jurisdictions with differing tax rates and jurisdictions where valuation allowances are recorded.

~~2019~~

Noncontrolling Interest

2020 First ~~Half~~Quarter

Six Months Ended
($ in millions) June 30, 2019 June 30, 2018 Change
Provision for income taxes $ (40 ) $ (17 ) $ (23 )

~~The increase in the provision for income taxes was primarily due to increases in U.S. and foreign earnings as a result of the ILG Acquisition during the third quarter of 2018.~~



	Three Months Ended
($ in millions)	March 31, 2020			March 31, 2019			Change		% Change
Net income attributable to noncontrolling interests	$	(1	)	$	(1	)	$	—	—%

Recent Accounting Pronouncements

See Footnote 2 “Significant Accounting Policies and Recent Accounting Standards” to our Financial Statements for a discussion of recently issued accounting pronouncements, including information on new accounting standards and the future adoption of such standards.

Liquidity and Capital Resources

~~Our~~Typically, our capital needs are supported by cash on hand ($~~179~~651 million at the end of the ~~second~~first quarter of ~~2019)~~2020), cash generated from operations, our ability to raise capital through securitizations in the ABS market and, to the extent necessary, funds available under the Warehouse Credit Facility and the Revolving Corporate Credit Facility.

As a precautionary measure to ensure adequate liquidity for a sustained period, we borrowed the remaining $386 million under our Revolving Corporate Credit Facility in March 2020 to increase our cash position and preserve financial flexibility in light of the impact on global markets resulting from the COVID-19 pandemic. Further, we significantly reduced cash spending by:

◦Reducing executive leadership team salaries by 50%;

◦Furloughing approximately 65% of our associates and reducing work weeks by roughly 25%, on average, for our remaining associates;

◦Deferring merit increases and 401(k) match contributions;

◦Deferring inventory and other investments by up to $240 million and substantially reducing other operating costs; and

◦Temporarily suspending share repurchases and dividends.

We ~~believe these sources of capital~~anticipate that, even if sales center closures and limited transient rentals were to persist, our cash position will beprovide us with adequate liquidity to ~~meet~~fund our ~~short-term~~operations and ~~long-term liquidity requirements, finance our long-term growth plans, satisfy~~ debt service ~~requirements, fulfill other cash requirements~~payments through 2021. We have no corporate debt maturities until September 2022 and ~~return capital to shareholders.~~ are currently in compliance with all debt covenants.

At ~~June 30, 2019,~~March 31, 2020, we had ~~$4.0~~$4.7 billion of total gross debt outstanding, which included ~~$1.8~~$1.9 billion of non-recourse debt associated with vacation ownership notes receivable securitizations, ~~$1.0~~$1.1 billion of ~~Senior Notes, $1.0~~senior unsecured notes, $1.5 billion on our Corporate Credit Facility, $230 million of Convertible Notes and ~~$23~~$9 million related to financed lease obligations.

At the end of the ~~second~~first quarter of ~~2019,~~2020, we had ~~$876~~$762 million of real estate inventory on hand, comprised of ~~$828~~$741 million of finished goods and ~~$48~~$21 million of work in progress. In addition, we had ~~$48~~$147 million of completed vacation ownership units that have been classified as a component of Property and equipment until the time at which they are legally registered and held for sale as vacation ownership products.

~~Our Vacation Ownership segment product offerings allow us~~Subsequent to ~~utilize~~the first quarter of 2020, we issued $500 million aggregate principal amount of senior secured notes and we amended our ~~inventory efficiently. The majority of our sales are of points-based products, which permits us~~warehouse credit facility to sell vacation ownership products at most of our sales locations, including those where little or no weeks-based inventory remains available for sale. Because we no longer need specific resort-based inventory at each sales location, we needincrease the borrowing capacity by approximately $181 million, bringing the total capacity to ~~have only~~approximately $531 million. We also entered into a ~~few resorts under construction at any given time and can~~waiver (the “Waiver”) to suspend the requirement to comply with the leverage ~~successful sales locations at completed resorts. This allows us to maintain long-term sales locations and reduces the need to develop and staff on-site sales locations at smaller projects~~covenant in the ~~future. We believe our points-based programs enable us~~Revolving Corporate Credit Facility for up to ~~align our inventory acquisitions~~four quarters, commencing with the ~~pace of sales of vacation ownership products. We are continuing to standardize our sales inventory acquisition policies across our portfolio of vacation ownership brands acquired as part of~~fiscal quarter ending June 30, 2020. In addition, in May 2020, we repaid $596 million, the ~~ILG Acquisition.~~

We are selectively pursuing growth opportunities in our Vacation Ownership segment by targeting high-quality inventory that allows us to add desirable new destinations to our systems with new on-site sales locations through transactions that limit our up-front capital investment and allow us to purchase finished inventory closer toentire amount outstanding at March 31, 2020, on the ~~time it is needed for sale. These capital efficient deal structures may consist of the development of new inventory, or the conversion of previously built units by third parties, just prior to sale.~~

Our Exchange & Third-Party Management segment includes exchange networks, membership programs and third-party property management services that were acquired as part of the ILG Acquisition. These networks, programs and services generate revenue that is generally fee-based and derived from membership, exchange and rental transactions, property and association management and other related products and services.Revolving Corporate Credit Facility.

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


	Six Months Ended						Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018			March 31, 2020			March 31, 2019
Cash, cash equivalents and restricted cash provided by (used in):
Operating activities	$	56		$	58		$	(122	)	$	28
Investing activities	15			(19		)	(21		)	27
Financing activities	(170		)	187			468			(92		)
Effect of change in exchange rates on cash, cash equivalents and restricted cash	1			1			(6		)	1
Net change in cash, cash equivalents and restricted cash	$	(98	)	$	227		$	319		$	(36	)

Cash from Operating Activities

Our primary sources of funds from operations are (1) cash sales and down payments on financed sales, (2) cash from our financing operations, including principal and interest payments received on outstanding vacation ownership notes receivable, (3) cash from fee-based membership, exchange and rental transactions and (4) net cash generated from our rental and resort management and other services operations. Outflows include spending for the development of new phases of existing resorts, the acquisition of additional inventory, enhancement of our inventory exchange network of resorts and related technology infrastructure and funding our working capital needs.

We minimize our working capital needs through cash management, strict credit-granting policies and disciplined collection efforts. Our working capital needs fluctuate throughout the year given the timing of annual maintenance fees on unsold inventory we pay to property owners’ associations and certain annual compensation-related outflows. In addition, our cash from operations varies due to the timing of our owners’ repayment of vacation ownership notes receivable, the closing or

recording of sales contracts for vacation ownership products, financing propensity and cash outlays for inventory acquisition and development.

In the first ~~half~~quarter of ~~2019,~~2020, we ~~generated $56~~had $122 million of cash ~~flows from~~outflows for operating activities, ~~compared to $58~~while we generated $28 million in the first ~~half~~quarter of ~~2018.~~2019. Excluding the impact of changes in net income (loss) and adjustments for non-cash items, the change in cash flows from operations reflected higher ~~originations of vacation ownership notes receivable driven by higher contract sales,~~inventory spending and timing of maintenance fee payments on unsold inventory, ~~higher inventory spending and payments related to employee benefits programs,~~ partially offset by higher collections due to an increasing portfolio of outstanding vacation ownership notes receivable and ~~timing of collections of maintenance fees, management fees and exchange club dues.~~lower payments on employee benefit programs.

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

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


	Six Months Ended						Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018			March 31, 2020			March 31, 2019
Inventory spending	$	(67	)	$	(52	)	$	(54	)	$	(23	)
Purchase of vacation ownership units for future transfer to inventory							(61		)	—
Inventory costs	144			89			49			62
Inventory spending less than cost of sales	$	77		$	37
Inventory spending (in excess of) less than cost of sales							$	(66	)	$	39

Our Vacation Ownership segment product offerings allow us to utilize our inventory efficiently. The majority of our sales are of points-based products, which permits us to sell vacation ownership products at most of our sales locations, including those where little or no weeks-based inventory remains available for sale. Because we do not need specific resort-based inventory at each sales location, we need to have only a few resorts under construction at any given time and can leverage successful sales locations at completed resorts. This allows us to maintain long-term sales locations and reduces the need to develop and staff on-site sales locations at smaller projects in the future. We believe our points-based programs enable us to align our inventory acquisitions with the pace of sales of vacation ownership products.

We selectively pursue growth opportunities in our Vacation Ownership segment by targeting high-quality inventory that allows us to add desirable new destinations to our systems with new on-site sales locations through transactions that limit our up-front capital investment and allow us to purchase finished inventory closer to the time it is needed for sale. These capital efficient deal structures may consist of the development of new inventory, or the conversion of previously built units by third parties, just prior to sale.

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

~~Given the significant level of completed real estate inventory on hand, as well as the capital efficiency resulting from our points programs and capital efficient transactions, our~~Our spending for real estate inventory ~~remained below~~in the first quarter of 2020 was higher than the amount of real estate inventory costs ~~in both~~given the ~~first half~~timing of ~~2019 and the first half of 2018. We expect our 2019 full year inventory spending to be lower than our inventory costs, even including~~ payments to satisfy our remaining commitments to purchase vacation ownership units. We entered into these commitments in prior periods as part of our capital efficiency strategy to limit our up-front capital investment and purchase finished inventory closer to the time it is needed for sale. See Footnote 11 “Contingencies and Commitments” to our Financial Statements for additional information regarding our remaining commitments.

~~Our~~ Given the impact of the COVID-19 pandemic, we expect to significantly reduce our planned inventory spending was less than inventory costs in the first half of 2018, even including payments to satisfy a portion of our then remaining commitment to purchase vacation ownership units located at our resort in Marco Island, Florida. During the first half of 2018, inventory spending included $24 million for the ~~acquisition~~remainder of ~~20 completed vacation ownership units at our resort in Marco Island, Florida, as well as a deposit of $2 million for the purchase of completed vacation ownership units located in Bali, Indonesia.~~2020.

Through our existing vacation ownership interest repurchase program, we proactively buy back previously sold vacation ownership interests at lower costs than would be required to develop new inventory. By repurchasing inventory in desirable locations, we expect to be able to stabilize the future cost of vacation ownership products. However, given the impact of the COVID-19 pandemic, we have temporarily discontinued the majority of this repurchase activity.

Vacation Ownership Notes Receivable Collections Less Than Originations


	Six Months Ended						Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018			March 31, 2020			March 31, 2019
Vacation ownership notes receivable collections — non-securitized	$	88		$	50		$	88		$	45
Vacation ownership notes receivable collections — securitized	221			105			86			109
Vacation ownership notes receivable originations	(423		)	(233		)	(174		)	(194		)
Vacation ownership notes receivable collections less than originations	$	(114	)	$	(78	)	$	—		$	(40	)

Vacation ownership notes receivable collections include principal from non-securitized and securitized vacation ownership notes receivable. Vacation ownership notes receivable collections increased during the first ~~half~~quarter of ~~2019,~~2020, as compared to the first ~~half~~quarter of ~~2018,~~2019, due to an increase in the portfolio of outstanding vacation ownership notes ~~receivable, including vacation ownership notes receivable acquired as part of the ILG acquisition.~~ receivable.Vacation ownership notes receivable originations in the first quarter of 2020 decreased due to lower sales in the latter half of ~~2019 increased~~March 2020 due to ~~higher Legacy-MVW contract sales and~~ the ~~inclusion of Legacy-ILG contract sales in 2019.~~ COVID-19 pandemic combined with a lower financing propensity.Financing propensity ~~was stable at~~also declined to 57 percent for the first quarter of 2020 compared to 62 percent for the first ~~half~~quarter of ~~2019 and for the first half of 2018.~~2019.

Cash from Investing Activities


	Six Months Ended						Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018			March 31, 2020			March 31, 2019
Capital expenditures for property and equipment (excluding inventory)	$	(19	)	$	(7	)	$	(17	)	$	(10	)
Proceeds from collection of notes receivable	38			—			—			38
Purchase of company owned life insurance	(4		)	(12		)	(4		)	(1		)
Net cash, cash equivalents and restricted cash provided by (used in) investing activities	$	15		$	(19	)
Net cash, cash equivalents and restricted cash (used in) provided by investing activities							$	(21	)	$	27

Capital Expenditures for Property and Equipment

Capital expenditures for property and equipment relate to spending for technology development, buildings and equipment used at sales locations and ancillary offerings, such as food and beverage offerings, at locations where such offerings are provided. Additionally, it includes spending related to maintenance of buildings and equipment used in common areas at some of our resorts.

In the first ~~half~~quarter of 2020, capital expenditures for property and equipment of $17 million included $14 million to support business operations (including $9 million for ancillary and other operations assets and $5 million for sales locations) and $3 million for technology spending. Given the impact of the COVID-19 pandemic, we expect to significantly reduce our planned spending for property and equipment for the remainder of 2020.

In the first quarter of 2019, capital expenditures for property and equipment of ~~$19~~$10 million included $7$4 million to support business operations (including $4$1 million for ancillary and other operations assets and $3 million for sales locations) and ~~$12 million for technology spending.~~

In the first half of 2018, capital expenditures for property and equipment of $7 million included $5 million to support business operations (including $2 million for ancillary and other operations assets and $3 million for sales locations) and $2$6 million for technology spending.

Proceeds from Collection of Notes Receivable

During the first ~~half~~quarter of 2019, we collected $23 million of notes receivable related to the disposition of our interest in VRI Europe in the fourth quarter of 2018. In addition, we collected a $15 million note receivable acquired in the ILG Acquisition.

Purchase of Company Owned Life Insurance

To support our ability to meet a portion of our obligations under the Marriott Vacations Worldwide Corporation Deferred Compensation Plan (the “Deferred Compensation Plan”), we acquired company owned insurance policies on the lives of certain participants in the Deferred Compensation Plan, the proceeds of which are intended to be aligned with the investment alternatives elected by plan participants. During the first ~~half~~quarter of ~~2019,~~2020, we paid $4 million to acquire these policies as compared to ~~$12~~$1 million during the first ~~half~~quarter of ~~2018.~~2019.

Cash from Financing Activities


	Six Months Ended						Three Months Ended
($ in millions)	June 30, 2019			June 30, 2018			March 31, 2020			March 31, 2019
Borrowings from securitization transactions	$	574		$	423		$	202		$	124
Repayment of debt related to securitization transactions	(496		)	(154		)	(148		)	(133		)
Proceeds from debt	310			—			666			125
Repayments of debt	(266		)	(33		)	(102		)	(52		)
Debt issuance costs	(6		)	(7		)
Finance lease payment							(9		)	—
Repurchase of common stock	(215		)	(2		)	(82		)	(106		)
Payment of dividends	(61		)	(32		)	(45		)	(41		)
Payment of withholding taxes on vesting of restricted stock units	(10		)	(8		)	(14		)	(9		)
Net cash, cash equivalents and restricted cash (used in) provided by financing activities	$	(170	)	$	187
Net cash, cash equivalents and restricted cash provided by (used in) financing activities							$	468		$	(92	)

Borrowings from / Repayment of Debt Related to Securitization Transactions

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

As of ~~June 30, 2019, $104~~March 31, 2020, $98 million of gross vacation ownership notes receivable were eligible for securitization.

During the ~~second~~first quarter of ~~2019,~~2020, we ~~completed the securitization of a pool of $459 million of~~securitized vacation ownership notes ~~receivable. In connection with~~receivable under our Warehouse Credit Facility. The carrying amount of the ~~securitization, investors purchased in a private placement $450 million in~~ vacation ownership ~~loan backed~~ notes ~~from~~receivable securitized was $240 million. The average advance rate was 84 percent, which resulted in gross proceeds of $202 million. Net proceeds were $201 million due to the ~~2019-1 LLC. Three classes~~funding of ~~vacation ownership loan backed notes were issued by the 2019-1 LLC: $350 million~~reserve accounts of Class A Notes, $67 million of Class B Notes and $33 million of Class C Notes. The Class A Notes have an interest rate of 2.89 percent, the Class B Notes have an interest rate of 3.00 percent and the Class C Notes have an interest rate of 3.33 percent, for an overall weighted average interest rate of 2.94 percent.$1 million.

During the first quarter of 2019, we securitized vacation ownership notes receivable under our Warehouse Credit Facility. The carrying amount of the vacation ownership notes receivable securitized was $146 million. The advance rate was 85 percent, which resulted in gross proceeds of $124 million. Net proceeds were $123 million due to the funding of reserve accounts of $1 million. There were no amounts outstanding under our Warehouse Credit Facility as of June 30, 2019. See Footnote 13 “Securitized Debt” to our Financial Statements for additional information regarding our Warehouse Credit Facility.

Proceeds from / Repayments of Debt

Borrowings from / Repayment of Corporate Credit Facility

During the first ~~half~~quarter of ~~2019,~~2020, we borrowed ~~$310~~$666 million under our Revolving Corporate Credit Facility to facilitate the funding of our short-term working capital needs ~~$230~~and to increase our cash position and preserve financial flexibility in light of the impact on global markets resulting from the COVID-19 pandemic. We repaid $100 million ~~of which has been repaid,~~during the quarter and had ~~$80~~$596 million outstanding as of ~~June 30,~~March 31, 2020, which we repaid in full subsequent to the first quarter of 2020.

During the first quarter of 2019, we borrowed $125 million under our Revolving Corporate Credit Facility to facilitate the funding of our short-term working capital needs, $50 million of which was repaid during the quarter, leaving $75 million outstanding as of March 31, 2019. During the first ~~half~~quarter of 2019, we also repaid $5$2 million of the amount outstanding under the Term Loan, which is part of our Corporate Credit Facility.

See Footnote 1413 “Debt” to our Financial Statements for additional information regarding our Corporate Credit Facility that includes our Revolving Corporate Credit Facility and the Term Loan.

~~Debt Issuance Costs~~Finance Lease Payment

During the first ~~half of 2019, we paid $6 million of debt issuance costs associated with the 2019-1 vacation ownership notes receivable securitization.~~

During the first half of 2018, we paid $7 million of debt issuance costs, which included $6 million associated with the 2018 vacation ownership notes receivable securitization and $1 million associated with the amendment and extension of our Warehouse Credit Facility.

~~Repayment of Other Debt~~

~~During the second~~ quarter of ~~2019, we paid the remaining balance of $31 million on the non-interest bearing note payable related to~~2020, in conjunction with the acquisition of ~~112~~the 57 completed vacation ownership units ~~located on~~at our Marriott Vacation Club Pulse, New York City property, we made finance lease payments of $7 million related to the ~~Big Island~~purchase of ~~Hawaii in 2017.~~the accompanying ancillary and office space.

Share Repurchase Program

The following table summarizes share repurchase activity under our current share repurchase program:



($ in millions, except per share amounts)	Number of Shares Repurchased	Cost of Shares Repurchased		Average Price Paid per Share
As of December 31, 2019	16,418,950	$	1,258	$	76.60
For the first quarter of 2020	769,935	82		106.60
As of March 31, 2020	17,188,885	$	1,340	$	77.95

See Footnote 1514 “Shareholders' Equity” to our Financial Statements for further information related to our share repurchase program. Due to the impact of the COVID-19 pandemic, we temporarily suspended repurchasing shares of our common stock. Future share repurchases will be subject to the restrictions associated with the Waiver to the Corporate Credit Facility.

Dividends

We distributed cash dividends to holders of common stock during the first ~~half~~quarter of ~~2019~~2020 as follows:



Declaration Date	Shareholder Record Date	Distribution Date	Dividend per Share
December ~~6, 2018~~	~~December 20, 2018~~	~~January 3, 2019~~	~~$0.45~~
~~February 15, 2019~~	~~February 28, 2019~~	~~March 14, 2019~~	~~$0.45~~
~~May~~ 9, 2019	~~May~~December 23, 2019	~~June~~January 6, ~~2019~~2020	$~~0.45~~0.54
February 14, 2020	February 27, 2020	March 12, 2020	$0.54

~~We currently expect to pay quarterly~~Given the impact of the COVID-19 pandemic, we temporarily suspended cash ~~dividends in the future, but any future dividend payments will be subject to Board approval, which will depend on our financial condition, results of operations and capital requirements, as well as~~

~~applicable law, regulatory constraints, industry practice and other business considerations that our Board of Directors considers relevant.~~dividends. In addition, our Corporate Credit Facility and the indentures governing our senior notes contain restrictions on our ability to pay ~~dividends,~~dividends. Future dividend payments will also be subject to the restrictions associated with the Waiver to the Corporate Credit Facility and ~~the terms~~will be subject to Board of ~~agreements governing debt~~Directors’ approval, which will depend on our financial condition, results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice and other business considerations that ~~we may incur in the future may also limit or prohibit dividend payments.~~our Board of Directors considers relevant. The payment of certain cash dividends may also result in an adjustment to the conversion rate of the Convertible Notes in a manner adverse to us. Accordingly, there can be no assurance that we will pay dividends in the future at the same rate or at all.

Supplemental Guarantor Information

The 2026 Notes are guaranteed by MVWC, Marriott Ownership Resorts, Inc. (“MORI”), and certain other subsidiaries whose voting securities are wholly owned directly or indirectly by MORI (such subsidiaries collectively, the “Senior Notes Guarantors”). These guarantees are full and unconditional and joint and several. The guarantees of the Senior Notes Guarantors are subject to release in limited circumstances only upon the occurrence of certain customary conditions.

The following tables present consolidating financial information as of March 31, 2020 and for the three months ended March 31, 2020 for MVWC and MORI on a stand-alone basis (collectively, the “Issuers”), the Senior Notes Guarantors, the combined non-guarantor subsidiaries of MVW and MVW on a consolidated basis.

Condensed Consolidating Balance Sheet



	As of March 31, 2020
	Issuers				Senior Notes Guarantors		Non-Guarantor Subsidiaries		Total Eliminations			MVW Consolidated
($ in millions)	MVWC		MORI		Senior Notes Guarantors		Non-Guarantor Subsidiaries		Total Eliminations			MVW Consolidated
Cash and cash equivalents	$	41	$	330	$	174	$	106	$	—		$	651
Restricted cash	—		21		39		309		—			369
Accounts receivable, net	69		61		91		56		(10		)	267
Vacation ownership notes receivable, net	—		95		161		1,903		—			2,159
Inventory	—		313		368		95		—			776
Property and equipment	—		245		346		242		—			833
Goodwill	—		—		2,817		—		—			2,817
Intangibles, net	—		—		934		55		—			989
Investments in subsidiaries	2,871		4,606		—		—		(7,477		)	—
Other	36		100		301		157		(23		)	571
Total assets	$	3,017	$	5,771	$	5,231	$	2,923	$	(7,510	)	$	9,432

Accounts payable	$	49	$	45	$	67	$	—	$	8		$	169
Advance deposits	—		75		64		22		—			161
Accrued liabilities	—		84		164		115		(19		)	344
Deferred revenue	—		4		198		334		—			536
Payroll and benefits liability	—		82		65		17		—			164
Deferred compensation liability	—		89		13		1		—			103
Securitized debt, net	—		—		—		1,926		—			1,926
Debt, net	209		2,567		1		1		—			2,778
Other	—		45		121		23		—			189
Deferred taxes	—		120		151		19		—			290
MVW shareholders' equity	2,759		2,660		4,387		452		(7,499		)	2,759
Noncontrolling interests	—		—		—		13		—			13
Total liabilities and equity	$	3,017	$	5,771	$	5,231	$	2,923	$	(7,510	)	$	9,432

Condensed Consolidating Statement of Income



	Three Months Ended March 31, 2020
	Issuers						Senior Notes Guarantors			Non-Guarantor Subsidiaries			Total Eliminations			MVW Consolidated
($ in millions)	MVWC			MORI			Senior Notes Guarantors			Non-Guarantor Subsidiaries			Total Eliminations			MVW Consolidated
Revenues	$	—		$	130		$	638		$	248		$	(6	)	$	1,010
Expenses	(14		)	(238		)	(701		)	(226		)	6			(1,173		)
Benefit (provision) for income taxes	2			17			35			4			—			58
Equity in net (loss) income of subsidiaries	(94		)	7			—			—			87			—
Net (loss) income	(106		)	(84		)	(28		)	26			87			(105		)
Net income attributable to noncontrolling interests	—			—			(1		)	—			—			(1		)
Net (loss) income attributable to common shareholders	$	(106	)	$	(84	)	$	(29	)	$	26		$	87		$	(106	)

Contractual Obligations and Off-Balance Sheet Arrangements

The following table summarizes our contractual obligations as of ~~June 30, 2019:~~March 31, 2020:


			Payments Due by Period										Payments Due by Period
($ in millions)	Total		Remainder of 2019		Years 2020 - 2021		Years 2022 - 2023		Thereafter		Total		Remainder of 2020		Years 2021 - 2022		Years 2023 - 2024		Thereafter
Contractual Obligations
Debt⁽¹⁾	$	4,971	$	219	$	768	$	1,219	$	2,765	$	5,717	$	265	$	975	$	1,446	$	3,031
Purchase obligations⁽²⁾	450		93		349		8		—		409		49		320		40		—
Operating lease obligations	202		15		50		34		103		226		22		48		37		119
Finance lease obligations⁽³⁾	23		11		12		—		—		9		3		5		—		1
Other long-term obligations⁽⁴⁾	56		26		20		6		4		37		14		17		3		3
Total contractual obligations	$	5,702	$	364	$	1,199	$	1,267	$	2,872	$	6,398	$	353	$	1,365	$	1,526	$	3,154

_________________________


⁽¹⁾	Includes principal as well as interest payments and excludes unamortized debt discount and issuance costs.

⁽²⁾

Arrangements are considered purchase obligations if a contract specifies all significant terms, including fixed or minimum quantities to be purchased, a pricing structure, and approximate timing of the transaction. Amounts reflected represent expected funding under such contracts. Amounts reflected on the consolidated balance sheet as accounts payable and accrued liabilities are excluded from the table above.


⁽³⁾	Includes interest.


⁽⁴⁾	Primarily relates to future guaranteed purchases of rental inventory, operational support services, marketing related benefits, membership fulfillment benefits and other commitments.

Critical Accounting Policies and Estimates

~~The~~Our preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. Management considers an accounting estimate to be critical if: (1) it requires assumptions to be made that are uncertain at the time the estimate is made; and (2) changes in the estimate, or different estimates that could have been selected, could have a material effect on our results of operations or financial condition.

While we believe that our estimates, assumptions, and judgments are reasonable, they are based on information presently available. Actual results may differ significantly. Additionally, changes in our assumptions, estimates or assessments as a result of unforeseen events or otherwise could have a material impact on our consolidated financial position or results of operations. We have discussed those policies and estimates that we believe are critical and require the use of complex judgment in their application in our most recent Annual Report on Form 10-K. Since the date of our most recent Annual Report on Form 10-K, there have been no material changes to our critical accounting policies or the methodologies or assumptions we apply under them, except those resulting from ~~the following:~~

•

~~Our adoption of Accounting Standards Update 2016-02, “Leases (Topic 842)~~Accounting for acquired vacation ownership notes receivable,” as amended, which is discussed in Footnote 2 “Significant Accounting Policies and Recent Accounting Standards” and Footnote 12 “Leases” to our interim consolidated financial statements presented in Part 1, Item 1 of this Quarterly Report on Form 10-Q; and

~~Purchase price allocations of business combinations,~~ which is discussed in Footnote ~~3 “Acquisitions~~2 “Significant Accounting Policies and ~~Dispositions”~~Recent Accounting Standards” and Footnote 6 “Vacation Ownership Notes Receivable” to our interim consolidated financial statements presented in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk has not changed materially from that disclosed in Part I, Item 7A of our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, we evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), and management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which by their nature, can provide only reasonable assurance about management’s control objectives. Our disclosure controls and procedures have been designed to provide reasonable assurance of achieving the desired control objectives. However, you should note that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Based upon the foregoing evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and operating to provide reasonable assurance that we record, process, summarize and report the information we are required to disclose in the reports that we file or submit under the Exchange Act within the time periods specified in the rules and forms of the SEC, and to provide reasonable assurance that we accumulate and communicate such information to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions about required disclosure.

Changes in Internal Control Over Financial Reporting

We made no changes in our internal control over financial reporting during the ~~period covered by this Quarterly Report on Form 10-Q~~first quarter of 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting other than changes in control over financial reporting to integrate the business we acquired in the ILG ~~Acquisition.~~Acquisition, which included the acquisition of our Exchange & Third-Party Management segment. In the fourth quarter of 2019, we migrated a portion of the Exchange & Third-Party Management segment to our existing general ledger system; the remainder of the Exchange & Third-Party Management segment was migrated in the first quarter of 2020. Also, during the first quarter of 2020, we implemented a new enterprise-wide human resources information system and we transitioned the U.S.-based Legacy-ILG associates to our U.S. payroll service provider.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

Currently, and from time to time, we are subject to claims in legal proceedings arising in the normal course of business, including, among others, the legal actions discussed in Footnote 11 “Contingencies and Commitments” to our Financial Statements. While management presently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, cash flows, or overall trends in results of operations, legal proceedings are inherently uncertain, and unfavorable rulings could, individually or in aggregate, have a material adverse effect on our business, financial condition, or operating results.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019 other than as discussed below. The risk factors below update the additional risk factors previously disclosed on our Form 8-K filed on May 6, 2020.

The COVID-19 pandemic is severely and adversely affecting our sales and our operations, and will have serious adverse effects on our business, financial condition and results of operations for an unknown period of time.

In March 2020, the World Health Organization declared the coronavirus (“COVID-19 pandemic”) outbreak a pandemic. In the wake of this declaration, our operations have been impacted by recommendations and/or mandates from national, federal, state, and local authorities to stay home and to avoid non-essential contact and gatherings of people, and to self-quarantine. As a result, since March 16, 2020, we have seen marked declines in occupancy, rentals, and contract sales because of the temporary closure of substantially all of our sales centers internationally, the temporary closure of many of our resorts, the temporary closure of our resorts for rental guests with stays at our branded North America vacation ownership resorts, and the reduction in operations and amenities at all of our resorts based on various government mandates and advisories. We have implemented furloughs and reduced work hours for our associates and have instituted “work from home” measures for many of our associates. In addition, to minimize the risk of the COVID-19 pandemic to our employees and customers and to prevent the continued spread of the virus, we are implementing social distancing and enhanced hygiene protocols at our resorts, sales centers, and corporate offices in accordance with the guidelines from national, federal, state, and local authorities. These measures, while intended to protect human life, may result in additional costs, operational

inefficiencies, and fewer revenue opportunities. While it is not possible at this time to estimate the impact that any protocols adopted to combat the COVID-19 pandemic could have on our business, measures such as canceling in-person sales tours and customized presentations could result in lesser effectiveness of customer-associate interaction and diminished customer satisfaction, which could adversely impact our financial condition. We are monitoring the situation and intend to reopen our sales centers and resorts and increase operations and amenities as conditions permit; however, extended or further closures may be ~~adversely affected by changes~~required nationally, regionally, or in ~~LIBOR reporting practices or the method in which LIBOR is determined.~~

As of June 30, 2019, approximately $950 million of our gross aggregate consolidated indebtedness was indexed to the London Interbank Offered Rate (“LIBOR”). Our Warehouse Credit Facility, under which no amounts were outstanding as of June 30, 2019, is also indexed to LIBOR.specific locations. In addition, we cannot predict any limitations national, federal, state and local governments may impose on our operations when we are able to reopen our resorts, which may include, for example, limitations on access to swimming pools, gyms and other sports facilities, mask protection, as well as other protections that may limit the use of ~~June 30, 2019, we were party~~amenities at our resorts to ~~$550 million of derivative instruments indexed to LIBOR. Central banks around the world, including the Federal Reserve, have commissioned working groups of market participants~~enforce social distancing measures. This situation is unprecedented and ~~official sector representatives with the goal of finding suitable replacements for LIBOR based on observable market transactions. It~~rapidly changing and has unknown duration and severity.

The COVID-19 pandemic has had a material adverse impact, and is expected that a transition away from the widespread use of LIBOR to alternative rates will occur over the course of the next few years. The U.K. Financial Conduct Authority, which regulates LIBOR, has announced that it has commitments from panel banks to continue to contribute to LIBOR through the end of 2021, but that it will not use its powers to compel contributions beyond such date. Accordingly, there is considerable uncertainty regarding the publication of such rates beyond 2021. The Federal Reserve Bank of New York and various other authorities have commenced the publication of reforms and actions relating to alternatives to U.S. dollar LIBOR. Although the full impact of such reforms and actions, together with any transition away from LIBOR, including the potential or actual discontinuance of LIBOR publication, remains unclear, these changes may have a material adverse impact, on global economies and financial markets, which has resulted in an economic downturn that has reduced demand for our products. The success of our business and our profitability depend, in substantial part, upon the health of the travel industry, which has been adversely affected by the COVID-19 pandemic. A substantial amount of our sales activity occurs at our resorts, and the number of prospective and current owners who visit our resorts has an impact on sales volume. Fear of exposure to the COVID-19 pandemic has caused travelers to cancel travel plans to our resorts. These changes in vacation and travel patterns due to the COVID-19 pandemic have begun to adversely affect our cash flows, revenues and profits. Moreover, even once travel advisories and restrictions are lifted, travel demand may remain weak for a significant length of time, and we cannot predict if or when demand for our resorts will return to pre-COVID-19 pandemic levels. Adverse changes in the perceived or actual economic climate, including higher unemployment rates, declines in income levels and loss of personal wealth resulting from the impact of the COVID-19 pandemic are expected to negatively affect travel demand for a prolonged period of time.

The COVID-19 pandemic has led to an increase in payment delinquencies for our vacation ownership notes receivable. The number of delinquencies may increase over time if the duration of the pandemic or its effect on economic conditions continues for a long period and could lead to defaults on financing that we provide to purchasers of our products. Purchaser defaults may cause us to foreclose on vacation ownership notes receivable and reclaim ownership of the financed interests and could impact our ability to secure ABS or warehouse credit facility financing on terms that are acceptable to us, or at all. In addition, the transactions in which we have securitized vacation ownership notes receivable contain certain portfolio performance requirements related to default and delinquency rates, which, if not met, would result in loss or disruption of cash flow until portfolio performance sufficiently improves to satisfy the requirements.

The duration and extent of the impact of the COVID-19 pandemic on our business and financial results will largely depend on future developments, including the duration and spread of the pandemic, the extent and severity of any resurgences of the pandemic in the future, the response by all levels of government in their efforts to contain the pandemic and to mitigate the economic disruptions, the related impact on consumer confidence and spending, and how quickly economies and demand for our products recover after the pandemic subsides, all of which are highly uncertain, rapidly changing and cannot be predicted. Such impacts are expected to adversely affect our profitability, cash flows, financial results, and capital resources for a significant period of time.

The COVID-19 pandemic and the volatile regional and global economic conditions stemming from the pandemic could also precipitate or aggravate the other risk factors that we identify in our Annual Report on Form 10-K for the year ended December 31, 2019, which could materially adversely affect our business, financial condition, results of operations (including revenue, profitability and cash flow) and/or stock price. Further, the COVID-19 pandemic may also adversely affect our operating and financial results in a manner that is not presently known to us or that we currently do not consider to present significant risks to our operations.

The economic disruption caused by the COVID-19 pandemic is adversely affecting our ability to generate cash to support our continuing operations, implement our growth plans, pay quarterly dividends, resume our stock repurchase program, and make interest and other payments with respect to our indebtedness and other obligations.

We depend upon our operations to generate strong cash flows to support our operating activities, supply capital to finance our operations and growth, make capital expenditures and acquisitions, manage our debt levels, and return value to our shareholders through dividends and stock repurchases. The economic disruption caused by the COVID-19 pandemic is adversely affecting our ability to generate sufficient cash flows from operations to support these activities and could adversely affect our ability to make interest and other payments with respect to our indebtedness and other obligations.

We have taken steps to reduce operating costs and improve efficiency, including furloughing most of our associates and significantly reducing work weeks for most of the remaining associates. Such steps, and further changes we may make in the future to reduce costs, may negatively impact owner and guest satisfaction and our ability to attract and retain associates. For example, if furloughed personnel do not return to work with us when the COVID-19 pandemic subsides, including because

they found new jobs during the furlough, we may experience operational challenges that impact owner satisfaction and demand for our products, which could limit our ability to grow and expand our business and could reduce our profits.

We have also taken steps to reduce or defer planned inventory and corporate capital expenditures, which may negatively impact owner satisfaction and may make our products less attractive to prospective purchasers.

We have temporarily suspended our stock repurchase program and the declaration and payment of quarterly cash dividends for the foreseeable future. The failure to repurchase stock and failure to pay dividends may negatively impact our reputation and investor confidence in us, which may negatively affect our stock price.

In addition, we may not be able to generate sufficient cash from operations to service our indebtedness and other obligations. If we cannot make scheduled payments under any of the agreements governing our debt, we would be in default under such agreements, and the lenders under our Corporate Credit Facility could terminate their commitments to loan money. In the case of secured debt, such lenders and other creditors could foreclose on the assets securing such debt and apply the amounts realized from such foreclosures to repay amounts owed to them. Any of these actions would likely trigger cross-default or cross-acceleration provisions in our other debt instruments, which would allow the creditors under such instruments to exercise similar rights. If any of these actions were taken, we could be forced into restructuring, bankruptcy or liquidation.

Our Corporate Credit Facility and our indentures contain various restrictive covenants. The failure to comply with such covenants could have an adverse effect on us. We may not be able to raise additional financing.

The credit agreement that governs the Corporate Credit Facility and the indentures that govern our senior notes impose significant operating and financial restrictions on us, which, among other things, limit our ability and the ability of certain of our subsidiaries to incur debt, pay dividends and make other restricted payments, make loans and investments, incur liens, sell assets, enter into affiliate transactions, enter into agreements restricting subsidiaries’ ability to pay dividends and consolidate, merge or sell all or substantially all of their assets. All of these covenants and restrictions limit how we conduct our business. In addition, we are required to maintain a specified leverage ratio under the terms of the Corporate Credit Facility.

Any failure to comply with the restrictions contained in the Corporate Credit Facility or the indentures governing our senior notes, including any failure to comply with financial maintenance covenants in the Corporate Credit Facility due to the negative effects of the COVID-19 pandemic on our revenue and results of operations or any failure to comply with the reporting covenants in the Corporate Credit Facility or the indentures governing our senior notes, may result in an event of default under our Corporate Credit Facility or the indentures governing our senior notes. If an event of default occurs and is not cured or waived, our obligations under the Corporate Credit Facility or the indentures could be accelerated. We may not have sufficient cash to repay any such debt.

We may be required to raise additional capital to refinance our obligations under the Corporate Credit Facility or the indentures or support our operations. Our access to and cost of financing will depend on, among other things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, ~~including LIBOR-based loans,~~our prospects and our credit ratings, and the outlook for our industry as a whole. The terms of future debt agreements could include more restrictive covenants or require incremental collateral, which may further restrict our business operations or cause future financing to be unavailable due to our covenant restrictions then in effect. There is no guarantee that debt or equity financings will be available in the future on ~~our financing costs.~~terms favorable to us or at all.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Period Total Number of Shares Purchased
Average
Price per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽¹⁾

Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs⁽¹⁾⁽²⁾
April 1, 2019 – April 30, 2019 140,923 $101.40 140,923 1,554,888
May 1, 2019 – May 31, 2019 473,157 $95.85 473,157 1,081,731
June 1, 2019 – June 30, 2019 514,460 $95.45 514,460 567,271
Total 1,128,540 $96.36 1,128,540 567,271



Period	Total Number of Shares Purchased	Average Price per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽¹⁾	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs⁽¹⁾
January 1, 2020 – January 31, 2020	207,332	$125.84	207,332	2,487,571
February 1, 2020 – February 29, 2020	213,144	$117.49	213,144	2,274,427
March 1, 2020 – March 31, 2020	349,459	$88.54	349,459	1,924,968
Total	769,935	$106.60	769,935	1,924,968

_________________________

⁽¹⁾

⁽²⁾

~~Reflects the decrease~~ As of ~~286,147 shares inadvertently included in this number in the Quarterly Report on Form 10-Q for the quarter ended~~ March 31, ~~2019 and~~2020, our Board of Directors had authorized the ~~Annual Report on Form 10-K for~~repurchase of an aggregate of up to 19.4 million shares of our common stock under the ~~year ended December 31, 2018.~~share repurchase program since the initiation of the program in October 2013.

Item 6. Exhibits

All documents referenced below are being filed as a part of this Quarterly Report on Form 10-Q, unless otherwise noted.

Exhibit Number Description
Filed
Herewith
Incorporation By Reference From
Form Exhibit Date Filed
2.1
Agreement and Plan of Merger, dated as of April 30, 2018, by and among Marriott Vacations Worldwide Corporation, ILG, Inc., Ignite Holdco, Inc., Ignite Holdco Subsidiary, Inc., Volt Merger Sub, Inc., and Volt Merger Sub LLC* 8-K 2.1 5/1/2018
3.1
Restated Certificate of Incorporation of Marriott Vacations Worldwide Corporation 8-K 3.1 11/22/2011
3.2
Restated Bylaws of Marriott Vacations Worldwide Corporation 8-K 3.2 11/22/2011
4.1
Form of certificate representing shares of common stock, par value $0.01 per share, of Marriott Vacations Worldwide Corporation 10 4.1 10/14/2011
4.2
Indenture between Marriott Vacations Worldwide Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee, dated September 25, 2017 10-Q 4.1 11/2/2017
4.3
Form of 1.50% Convertible Senior Note due 2022 (included as Exhibit A to Exhibit 4.2 above) 10-Q 4.1 11/2/2017
4.4
Indenture, dated as of August 23, 2018, by and among Marriott Ownership Resorts, Inc., Marriott Vacations Worldwide Corporation, as guarantor, the other guarantors party thereto and the Bank of New York Mellon Trust Company, N.A., as trustee 8-K 4.1 8/23/2018
4.5
Supplemental Indenture, dated September 1, 2018, by and among Marriott Ownership Resorts, Inc., ILG, LLC, the guarantors party thereto and the Bank of New York Mellon Trust Company, N.A., as trustee 8-K 4.7 9/5/2018
4.6
Form of 6.500% Senior Note due 2026 (included as Exhibit A to Exhibit 4.4 above) 8-K 4.1 8/23/2018
4.7
Registration Rights Agreement, dated as of August 23, 2018, by and among Marriott Ownership Resorts, Inc., Marriott Vacations Worldwide Corporation, as guarantor, the other guarantors party thereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated 8-K 4.3 8/23/2018



Exhibit Number	Description	Filed Herewith	Incorporation By Reference From
Exhibit Number	Description	Filed Herewith	Form	Exhibit	Date Filed
2.1	Agreement and Plan of Merger, dated as of April 30, 2018, by and among Marriott Vacations Worldwide Corporation, ILG, Inc., Ignite Holdco, Inc., Ignite Holdco Subsidiary, Inc., Volt Merger Sub, Inc., and Volt Merger Sub LLC*		8-K	2.1	5/1/2018
3.1	Restated Certificate of Incorporation of Marriott Vacations Worldwide Corporation		8-K	3.1	11/22/2011
3.2	Restated Bylaws of Marriott Vacations Worldwide Corporation		8-K	3.2	11/22/2011
4.1	Form of certificate representing shares of common stock, par value $0.01 per share, of Marriott Vacations Worldwide Corporation		10	4.1	10/14/2011
4.2	Indenture between Marriott Vacations Worldwide Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee, dated September 25, 2017		10-Q	4.1	11/2/2017
4.3	Form of 1.50% Convertible Senior Note due 2022 (included as Exhibit A to Exhibit 4.2 above)		10-Q	4.1	11/2/2017
4.4	Indenture, dated as of August 23, 2018, by and among Marriott Ownership Resorts, Inc., Marriott Vacations Worldwide Corporation, as guarantor, the other guarantors party thereto and the Bank of New York Mellon Trust Company, N.A., as trustee		8-K	4.1	8/23/2018
4.5	First Supplemental Indenture, dated September 1, 2018, by and among Marriott Ownership Resorts, Inc., ILG, LLC, the guarantors party thereto and the Bank of New York Mellon Trust Company, N.A., as trustee		8-K	4.7	9/5/2018
4.6	Second Supplemental Indenture, dated December 31, 2019, by and among Marriott Ownership Resorts, Inc., ILG, LLC, MVW Vacations, LLC and the Bank of New York Mellon Trust Company, N.A., as trustee		10-K	4.6	3/2/2020
4.7	Third Supplemental Indenture, dated February 26, 2020, by and among Marriott Ownership Resorts, Inc., ILG, LLC, MVW Services Corporation, and the Bank of New York Mellon Trust Company, N.A., as trustee		10-K	4.7	3/2/2020
4.8	Form of 6.500% Senior Note due 2026 (included as Exhibit A to Exhibit 4.4 above)		8-K	4.1	8/23/2018
4.9	Registration Rights Agreement, dated as of August 23, 2018, by and among Marriott Ownership Resorts, Inc., Marriott Vacations Worldwide Corporation, as guarantor, the other guarantors party thereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated		8-K	4.3	8/23/2018
4.10	Joinder Agreement to Registration Rights Agreement, dated as of September 1, 2018, by and among ILG, LLC, the guarantors party thereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated as the representative of the initial purchasers		8-K	4.8	9/5/2018
4.11	Indenture, dated as of October 1, 2019, by and among Marriott Ownership Resorts, Inc., Marriott Vacations Worldwide Corporation, as guarantor, the other guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee		8-K	4.1	10/1/2019
4.12	Supplemental Indenture, dated December 31, 2019, by and among Marriott Ownership Resorts, Inc., MVW Vacations, LLC and the Bank of New York Mellon Trust Company, N.A., as trustee		10-K	4.12	3/2/2020
4.13	Second Supplemental Indenture, dated February 26, 2020, by and among Marriott Ownership Resorts, Inc., MVW Services Corporation, and the Bank of New York Mellow Trust Company, N.A., as trustee		10-K	4.13	3/2/2020

Exhibit Number Description
Filed
Herewith
Incorporation By Reference From
Form Exhibit Date Filed
4.8
Joinder Agreement to Registration Rights Agreement, dated as of September 1, 2018, by and among ILG, LLC, the guarantors party thereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated as the representative of the initial purchasers 8-K 4.8 9/5/2018
4.9
Indenture, dated as of September 4, 2018, by and among Marriott Ownership Resorts, Inc., ILG, LLC, Marriott Vacations Worldwide Corporation, as guarantor, the other guarantors party thereto and HSBC Bank USA, National Association, as trustee 8-K 4.1 9/5/2018
4.10
Form of 5.625% Senior Note due 2023 (included as Exhibit A to Exhibit 4.9 above) 8-K 4.1 9/5/2018
4.11
Registration Rights Agreement, dated as of September 4, 2018, by and among Marriott Ownership Resorts, Inc., ILG, LLC, Marriott Vacations Worldwide Corporation, as a guarantor, the other guarantors party thereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC 8-K 4.3 9/5/2018
4.12
Indenture, dated April 10, 2015, among Interval Acquisition Corp., Interval Leisure Group, Inc., the other Guarantors party thereto and HSBC Bank UA, National Association, as trustee
8-K⁽¹⁾
4.1 4/10/2015
4.13
Form of Interval Acquisition Corp. 5.625% Senior Note due 2023 (included as Exhibit A to Exhibit 4.12 above)
8-K⁽¹⁾
4.1 4/10/2015
4.14
Supplemental Indenture, dated as of June 29, 2016, among Interval Acquisition Corp., certain subsidiary guarantors and HSBC Bank USA, National Association
8-K⁽¹⁾
4.1 7/1/2016
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 X
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 X
32.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002 Furnished
32.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002 Furnished
101 The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in Inline XBRL: (i) Interim Consolidated Statements of Income, (ii) Interim Consolidated Statements of Comprehensive Income, (iii) Interim Consolidated Balance Sheets, (iv) Interim Consolidated Statements of Cash Flows, (v) Interim Consolidated Statements of Shareholders’ Equity, and (vi) Notes to Interim Consolidated Financial Statements, tagged as blocks of text and including detailed tags
104 The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in Inline XBRL and contained in Exhibit 101



Exhibit Number	Description	Filed Herewith	Incorporation By Reference From
Exhibit Number	Description	Filed Herewith	Form	Exhibit	Date Filed
4.14	Form of 4.750% Senior Notes due 2028 (included as Exhibit A to Exhibit 4.11 above)		8-K	4.2	10/1/2019
4.15	Registration Rights Agreement, dated as of October 1, 2019, by and among Marriott Ownership Resorts, Inc., Marriott Vacations Worldwide Corporation, as guarantor, the other guarantors party thereto and J.P. Morgan Securities LLC		8-K	4.3	10/1/2019
4.16	Indenture, dated as of May 13, 2020, by and among Marriott Ownership Resorts, Inc., Marriott Vacations Worldwide Corporation, as guarantor, the other guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent		8-K	4.1	5/15/2020
4.17	Form of 6.125% Senior Secured Notes due 2025 (included as Exhibit A to Exhibit 4.16)		8-K	4.2	5/15/2020
4.18	Waiver to Credit Agreement, dated as of May 14, 2020, by and among Marriott Vacations Worldwide Corporation, Marriott Ownership Resorts, Inc., the Revolving Credit Lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent		8-K	4.3	5/15/2020
4.19	Description of Registered Securities		10-K	4.16	3/2/2020
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934	X
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934	X
32.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002	Furnished
32.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002	Furnished
101	The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in Inline XBRL: (i) Interim Consolidated Statements of Income, (ii) Interim Consolidated Statements of Comprehensive Income, (iii) Interim Consolidated Balance Sheets, (iv) Interim Consolidated Statements of Cash Flows, (v) Interim Consolidated Statements of Shareholders’ Equity, and (vi) Notes to Interim Consolidated Financial Statements
104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in Inline XBRL and contained in Exhibit 101



*		Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplemental copies to the SEC of any omitted schedule upon request by the SEC.
~~(1)~~		~~Filing made by ILG, LLC under SEC File No. 001-34062.~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		MARRIOTT VACATIONS WORLDWIDE CORPORATION

~~August 6, 2019~~May 22, 2020		/s/ Stephen P. Weisz
		Stephen P. Weisz
		President and Chief Executive Officer

		/s/ John E. Geller, Jr.
		John E. Geller, Jr.
		Executive Vice President and Chief Financial and Administrative Officer

9066



(in millions, except per share amounts)
Equivalent shares of Marriott Vacations Worldwide common stock issued in exchange for ILG outstanding shares	20.5
Marriott Vacations Worldwide common stock price per share as of Acquisition Date	$	119.00
Fair value of Marriott Vacations Worldwide common stock issued in exchange for ILG outstanding shares	2,441
Cash consideration to ILG shareholders, net of cash acquired of $154 million	1,680
Fair value of ILG equity-based awards attributed to pre-combination service	64
Total consideration transferred, net of cash acquired	4,185
Noncontrolling interests	30
	$	4,215



($ in millions)	September 1, 2018 (as reported at December 31, 2018)			Adjustments			September 1, 2018 (as adjusted at June 30, 2019)
Vacation ownership notes receivable	$	753		$	—		$	753
Inventory	474			—			474
Property and equipment	374			(1		)	373
Intangible assets	1,166			(3		)	1,163
Other assets	620			42			662
Deferred revenue	(217		)	—			(217		)
Deferred taxes	(179		)	4			(175		)
Debt	(392		)	—			(392		)
Securitized debt from VIEs	(702		)	—			(702		)
Other liabilities	(511		)	(37		)	(548		)
Net assets acquired	1,386			5			1,391
Goodwill⁽¹⁾	2,828			(4		)	2,824
	$	4,214		$	1		$	4,215



	Estimated Fair Value ($ in millions)		Estimated Useful Life (in years)
Member relationships	$	695	15 to 20
Management contracts	356		15 to 25
Management contracts⁽¹⁾	30		indefinite
Trade names and trademarks	82		indefinite
	$	1,163



($ in millions, except per share data)	Six Months Ended June 30, 2018
Revenues	$	2,097
Net income	$	71
Net income attributable to common shareholders	$	68
EARNINGS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS
Basic	$	1.45
Diluted	$	1.42



($ in millions)	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Revenue	$	455	$	913
Net income attributable to common shareholders	$	34	$	66



	Six Months Ended June 30, 2019
($ in millions)	Vacation Ownership		Exchange & Third-Party Management		Corporate and Other			Total
Sale of vacation ownership products	$	651	$	—	$	—		$	651

Ancillary revenues	123		2		—			125
Management fee revenues	75		26		(7		)	94
Other services revenues	61		129		69			259
Management and exchange	259		157		62			478

Rental	288		34		1			323

Cost reimbursements	549		46		(56		)	539
Revenue from contracts with customers	1,747		237		7			1,991

Financing	135		2		—			137
Total Revenues	$	1,882	$	239	$	7		$	2,128



($ in millions)	Six Months Ended June 30, 2019
Accretable yield balance at December 31, 2018	$	199
Accretion	(43		)
Reclassification from non-accretable difference	(3		)
Accretable yield balance at June 30, 2019	$	153

Non-accretable difference at June 30, 2019	$	55



	Originated Vacation Ownership Notes Receivable
					Delinquent						Defaulted⁽¹⁾		Total Delinquent & Defaulted
($ in millions)	Receivables		Current		30 - 59 Days		60 - 89 Days		90 - 119 Days		> 120 Days		Total Delinquent & Defaulted
As of June 30, 2019	$	258	$	252	$	3	$	2	$	1	$	—	$	6

As of December 31, 2018	$	126	$	124	$	2	$	—	$	—	$	—	$	2



($ in millions)	Balance Sheet Classification	At June 30, 2019
Operating lease assets	Other assets	$	121
Finance lease assets	Property and equipment	22
		$	143

Operating lease liabilities	Accrued liabilities	$	134
Finance lease liabilities	Debt	22
		$	156



($ in millions)	Income Statement Classification	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Operating lease cost	Marketing and sales expense General and administrative expense	$	9	$	17
Finance lease cost
Amortization of right-of-use assets	Depreciation and amortization	1		2
Interest on lease liabilities	Interest expense	1		1
Variable lease cost	Marketing and sales expense	1		2
		$	12	$	22



($ in millions)	Operating Leases			Finance Leases⁽¹⁾			Total
2019, remaining	$	15		$	11		$	26
2020	29			10			39
2021	21			2			23
2022	18			—			18
2023	16			—			16
Thereafter	103			—			103
Total lease payments	202			23			225
Less: Imputed interest	(68		)	(1		)	(69		)
	$	134		$	22		$	156



($ in millions)	Six Months Ended June 30, 2019
Cash paid for amounts included in measurement of lease liabilities
Operating cash flows for finance leases	$	—
Operating cash flows for operating leases	17
Financing cash flows for finance leases	2
	$	19



	Payments Year
($ in millions)	Remaining 2019		2020		2021		2022		2023		Thereafter		Total
Exchange Notes	$	—	$	—	$	—	$	—	$	89	$	—	$	89
Senior Unsecured Notes	—		—		—		—		—		750		750
IAC Notes	—		—		—		—		141		—		141
Term Loan	4		9		9		9		9		855		895
Revolving Corporate Credit Facility	—		—		—		—		80		—		80
Convertible Notes	—		—		—		230		—		—		230
	$	4	$	9	$	9	$	239	$	319	$	1,605	$	2,185



($ in millions)	Derivative Instrument Adjustments
Balance at December 31, 2018	$	(6	)
Other comprehensive loss before reclassifications	(3		)
Reclassification to Income Statement	—
Net other comprehensive loss	(3		)
Balance at March 31, 2019	(9		)
Other comprehensive loss before reclassifications	(13		)
Reclassification to Income Statement	—
Net other comprehensive loss	(13		)
Balance at June 30, 2019	$	(22	)



	As of December 31, 2018⁽¹⁾
($ in millions)	MVWC		Interval Acquisition Corp.		IAC Notes Guarantors			Non-Guarantor Subsidiaries		Total Eliminations			MVW Consolidated
Cash and cash equivalents	$	1	$	11	$	28		$	191	$	—		$	231
Restricted cash	—		—		83			300		—			383
Accounts receivable, net	31		2		107			184		—			324
Vacation ownership notes receivable, net	—		—		176			1,863		—			2,039
Inventory	—		—		440			423		—			863
Property and equipment	—		—		272			679		—			951
Goodwill	2,828		—		—			—		—			2,828
Intangibles, net	—		—		1,065			42		—			1,107
Due from parent	—		—		—			1,834		(1,834		)	—
Investments in subsidiaries	2,681		1,975		1,875			—		(6,531		)	—
Other	27		28		140			172		(75		)	292
Total assets	$	5,568	$	2,016	$	4,186		$	5,688	$	(8,440	)	$	9,018

Accounts payable	$	50	$	—	$	72		$	131	$	—		$	253
Advance deposits	—		—		81			90		—			171
Accrued liabilities	7		—		79			295		(24		)	357
Deferred revenue	—		—		117			206		(4		)	319
Payroll and benefits liability	15		—		77			119		—			211
Deferred compensation liability	—		—		7			86		—			93
Securitized debt, net	—		—		—			1,714		—			1,714
Debt, net	199		141		1			1,763		—			2,104
Due to subsidiary	1,834		—		—			—		(1,834		)	—
Other	2		—		1			9		—			12
Deferred taxes	—		—		155			159		4			318
MVW shareholders' equity	3,461		1,875		3,599			1,108		(6,582		)	3,461
Noncontrolling interests	—		—		(3		)	8		—			5
Total liabilities and equity	$	5,568	$	2,016	$	4,186		$	5,688	$	(8,440	)	$	9,018

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company