MARRIOTT VACATIONS WORLDWIDE Corp [VAC] Filings

10-Q 1 vac-20230930.htm 10-Q vac-20230930

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 September 30, 2023


☐			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.)

9002 San Marco Court

Orlando

32819

(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.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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 October 30, 2023 was 35,517,203.

MARRIOTT VACATIONS WORLDWIDE CORPORATION

FORM 10-Q TABLE OF CONTENTS


		Page
Part I.	FINANCIAL INFORMATION	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
	Interim Condensed Notes to Consolidated Financial Statements	8
	1. Basis of Presentation	8
	2. Significant Accounting Policies and Recent Accounting Standards	9
	3. Acquisitions and Dispositions	9
	4. Revenue and Receivables	10
	5. Income Taxes	13
	6. Vacation Ownership Notes Receivable	14
	7. Financial Instruments	19
	8. Earnings Per Share	21
	9. Inventory	23
	10. Contingencies and Commitments	23
	11. Securitized Debt	24
	12. Debt	26
	13. Shareholders’ Equity	29
	14. Share-Based Compensation	30
	15. Variable Interest Entities	31
	16. Business Segments	34

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	66
Item 4.	Controls and Procedures	66
Part II.	OTHER INFORMATION	67
Item 1.	Legal Proceedings	67
Item 1A.	Risk Factors	67
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 5.	Other Information	67
Item 6.	Exhibits	68
	SIGNATURES	70

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, trade names, and service marks 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 TM symbols, 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.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
REVENUES
Sale of vacation ownership products	$	319	$	444	$	1,085	$	1,179
Management and exchange	205		198		611		623
Rental	138		165		435		438
Financing	81		74		239		217
Cost reimbursements	443		371		1,163		1,011
TOTAL REVENUES	1,186		1,252		3,533		3,468
EXPENSES
Cost of vacation ownership products	50		76		174		216
Marketing and sales	202		207		618		603
Management and exchange	115		101		332		330
Rental	119		126		344		294
Financing	30		5		81		49
General and administrative	57		62		189		187
Depreciation and amortization	33		33		99		98
Litigation charges	2		2		7		7

Royalty fee	30		28		88		84
Impairment	—		1		4		1
Cost reimbursements	443		371		1,163		1,011
TOTAL EXPENSES	1,081		1,012		3,099		2,880
Gains (losses) and other income (expense), net	3		(2)		34		39
Interest expense, net	(36)		(34)		(106)		(91)
Transaction and integration costs	(5)		(34)		(28)		(99)
Other	(1)		(1)		—		—
INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS	66		169		334		437
Provision for income taxes	(24)		(59)		(115)		(134)
NET INCOME	42		110		219		303
Net income attributable to noncontrolling interests	—		(1)		—		—
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	42	$	109	$	219	$	303

EARNINGS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS
Basic	$	1.16	$	2.76	$	5.96	$	7.39
Diluted	$	1.09	$	2.53	$	5.33	$	6.68

CASH DIVIDENDS DECLARED PER SHARE	$	0.72	$	0.62	$	2.16	$	1.86

See Interim Condensed Notes to Consolidated Financial Statements

Table of Contents

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
NET INCOME	$	42	$	110	$	219	$	303

Foreign currency translation adjustments	(2)		(1)		10		1
Reclassification of foreign currency translation adjustments realized upon disposition of entities	—		—		—		(10)
Derivative instrument adjustment, net of tax	(3)		8		(7)		31
OTHER COMPREHENSIVE (LOSS) GAIN, NET OF TAX	(5)		7		3		22

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

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

COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	37	$	116	$	222	$	325

See Interim Condensed Notes to Consolidated Financial Statements

Table of Contents

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share data)


	Unaudited
	September 30, 2023		December 31, 2022
ASSETS
Cash and cash equivalents	$	265	$	524
Restricted cash (including $84 and $85 from VIEs, respectively)	238		330
Accounts and contracts receivable, net (including $14 and $13 from VIEs, respectively)	298		292
Vacation ownership notes receivable, net (including $1,885 and $1,792 from VIEs, respectively)	2,291		2,198
Inventory	642		660
Property and equipment, net	1,250		1,139
Goodwill	3,117		3,117
Intangibles, net	868		911
Other (including $88 and $76 from VIEs, respectively)	484		468
TOTAL ASSETS	$	9,453	$	9,639

LIABILITIES AND EQUITY
Accounts payable	$	238	$	356
Advance deposits	169		158
Accrued liabilities (including $3 and $5 from VIEs, respectively)	359		369
Deferred revenue	371		344
Payroll and benefits liability	193		251
Deferred compensation liability	156		139
Securitized debt, net (including $2,048 and $1,982 from VIEs, respectively)	2,026		1,938
Debt, net	3,031		3,088
Other	165		167
Deferred taxes	335		331
TOTAL LIABILITIES	7,043		7,141
Contingencies and Commitments (Note 10)
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; 75,807,873 and 75,744,524 shares issued, respectively	1		1
Treasury stock — at cost; 40,122,822 and 38,263,442 shares, respectively	(2,298)		(2,054)
Additional paid-in capital	3,953		3,941
Accumulated other comprehensive income	18		15
Retained earnings	734		593
TOTAL MVW SHAREHOLDERS' EQUITY	2,408		2,496
Noncontrolling interests	2		2
TOTAL EQUITY	2,410		2,498
TOTAL LIABILITIES AND EQUITY	$	9,453	$	9,639

The abbreviation VIEs above means Variable Interest Entities.

See Interim Condensed Notes to Financial Statements

Table of Contents

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Nine Months Ended
	September 30, 2023		September 30, 2022
OPERATING ACTIVITIES
Net income	$	219	$	303
Adjustments to reconcile net income to net cash, cash equivalents and restricted cash provided by operating activities:
Depreciation and amortization of intangibles	99		98
Amortization of debt discount and issuance costs	17		20
Vacation ownership notes receivable reserve	182		130
Share-based compensation	25		30
Impairment charges	2		1

Gains and other income, net	(8)		(48)
Deferred income taxes	2		64
Net change in assets and liabilities:
Accounts and contracts receivable	(16)		6
Vacation ownership notes receivable originations	(749)		(728)
Vacation ownership notes receivable collections	461		469
Inventory	80		74
Other assets	(10)		(21)
Accounts payable, advance deposits and accrued liabilities	(103)		(28)
Deferred revenue	24		(5)
Payroll and benefit liabilities	(58)		52
Deferred compensation liability	12		8
Other liabilities	(2)		7
Deconsolidation of certain Consolidated Property Owners' Associations	—		(48)
Purchase of property for future transfer to inventory	(27)		(12)
Other, net	(1)		8
Net cash, cash equivalents and restricted cash provided by operating activities	149		380
INVESTING ACTIVITIES
Proceeds from disposition of subsidiaries, net of cash and restricted cash transferred	—		94
Capital expenditures for property and equipment (excluding inventory)	(92)		(36)
Issuance of note receivable to VIE	—		(47)
Proceeds from collection of note receivable from VIE	—		47
Purchase of company owned life insurance	(8)		(14)
Other dispositions, net	15		5
Net cash, cash equivalents and restricted cash (used in) provided by investing activities	(85)		49

Continued

See Interim Condensed Notes to Consolidated Financial Statements

Table of Contents

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In millions)

(Unaudited)


	Nine Months Ended
	September 30, 2023		September 30, 2022
FINANCING ACTIVITIES
Borrowings from securitization transactions	916		609
Repayment of debt related to securitization transactions	(828)		(655)
Proceeds from debt	790		505
Repayments of debt	(956)		(505)


Finance lease incentive	10		—
Finance lease payment	(2)		(3)
Payment of debt issuance costs	(6)		(10)
Repurchase of common stock	(248)		(528)
Payment of dividends	(80)		(75)
Payment of withholding taxes on vesting of restricted stock units	(10)		(23)

Net cash, cash equivalents and restricted cash used in financing activities	(414)		(685)
Effect of changes in exchange rates on cash, cash equivalents and restricted cash	(1)		(4)
Change in cash, cash equivalents and restricted cash	(351)		(260)
Cash, cash equivalents and restricted cash, beginning of period	854		803
Cash, cash equivalents and restricted cash, end of period	$	503	$	543

SUPPLEMENTAL DISCLOSURES
Non-cash issuance of debt in connection with asset acquisition	$	—	$	11
Non-cash issuance of treasury stock for employee stock purchase plan	4		4
Non-cash transfer from inventory to property and equipment	11		45
Non-cash transfer from property and equipment to inventory	60		2
Non-cash transfer from other assets to property and equipment	—		15

Right-of-use asset obtained in exchange for finance lease obligation	80		—
Non-cash issuance of debt in connection with finance lease	97		—



Dividends payable	26		24
Interest paid, net of amounts capitalized	141		104
Income taxes paid, net of refunds	138		51

See Interim Condensed Notes to 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 Income (Loss)		Retained Earnings		Total MVW Shareholders' Equity		Noncontrolling Interests		Total Equity


75.7	BALANCE AT DECEMBER 31, 2022	$	1	$	(2,054)	$	3,941	$	15	$	593	$	2,496	$	2	$	2,498
—	Net income	—		—		—		—		87		87		—		87
—	Foreign currency translation adjustments	—		—		—		6		—		6		—		6
—	Derivative instrument adjustment	—		—		—		(3)		—		(3)		—		(3)
0.1	Share-based compensation plans	—		2		(4)		—		—		(2)		—		(2)
—	Repurchase of common stock	—		(80)		—		—		—		(80)		—		(80)
—	Dividends	—		—		—		—		(26)		(26)		—		(26)
75.8	BALANCE AT MARCH 31, 2023	1		(2,132)		3,937		18		654		2,478		2		2,480
—	Net income	—		—		—		—		90		90		—		90
—	Foreign currency translation adjustments	—		—		—		6		—		6		—		6
—	Derivative instrument adjustment	—		—		—		(1)		—		(1)		—		(1)
—	Share-based compensation plans	—		1		10		—		—		11		—		11
—	Repurchase of common stock	—		(82)		—		—		—		(82)		—		(82)
—	Dividends	—		—		—		—		(26)		(26)		—		(26)
75.8	BALANCE AT JUNE 30, 2023	1		(2,213)		3,947		23		718		2,476		2		2,478
—	Net income	—		—		—		—		42		42		—		42
—	Foreign currency translation adjustments	—		—		—		(2)		—		(2)		—		(2)
—	Derivative instrument adjustment	—		—		—		(3)		—		(3)		—		(3)
—	Share-based compensation plans	—		1		6		—		—		7		—		7
—	Repurchase of common stock	—		(86)		—		—		—		(86)		—		(86)

—	Dividends	—		—		—		—		(26)		(26)		—		(26)

75.8	BALANCE AT SEPTEMBER 30, 2023	$	1	$	(2,298)	$	3,953	$	18	$	734	$	2,408	$	2	$	2,410

Continued

See Interim Condensed Notes to Consolidated Financial Statements

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 (Loss) Income		Retained Earnings		Total MVW Shareholders' Equity		Noncontrolling Interests		Total Equity


75.5	BALANCE AT DECEMBER 31, 2021	$	1	$	(1,356)	$	4,072	$	(16)	$	275	$	2,976	$	10	$	2,986
—	Impact of adoption of ASU 2020-06	—		—		(111)		—		31		(80)		—		(80)
75.5	OPENING BALANCE 2022	1		(1,356)		3,961		(16)		306		2,896		10		2,906
—	Net income	—		—		—		—		58		58		—		58
—	Foreign currency translation adjustments	—		—		—		4		—		4		—		4
—	Derivative instrument adjustment	—		—		—		16		—		16		—		16
0.2	Share-based compensation plans	—		1		(16)		—		—		(15)		—		(15)
—	Repurchase of common stock	—		(119)		—		—		—		(119)		—		(119)
—	Dividends	—		—		—		—		(26)		(26)		—		(26)
75.7	BALANCE AT MARCH 31, 2022	1		(1,474)		3,945		4		338		2,814		10		2,824
—	Net income	—		—		—		—		136		136		(1)		135
—	Foreign currency translation adjustments	—		—		—		(2)		—		(2)		—		(2)
—	Reclassification of foreign currency translation adjustments realized upon disposition of entities	—		—		—		(10)		—		(10)		—		(10)
—	Derivative instrument adjustment	—		—		—		7		—		7		—		7
—	Adjustment for 2022 Convertible Note Hedges	—		—		6		—		—		6		—		6
—	Share-based compensation plans	—		1		12		—		—		13		—		13
—	Repurchase of common stock	—		(193)		—		—		—		(193)		—		(193)
—	Deconsolidation of certain Consolidated Property Owners' Associations	—		—		—		—		—		—		(8)		(8)
—	Dividends	—		—		—		—		(26)		(26)		—		(26)
75.7	BALANCE AT JUNE 30, 2022	1		(1,666)		3,963		(1)		448		2,745		1		2,746
—	Net income	—		—		—		—		109		109		1		110
—	Foreign currency translation adjustments	—		—		—		(1)		—		(1)		—		(1)
—	Derivative instrument adjustment	—		—		—		8		—		8		—		8
—	Tax effect on equity, convertible notes	—		—		(1)		—		—		(1)		—		(1)
—	Share-based compensation plans	—		—		5		—		—		5		—		5
—	Repurchase of common stock	—		(216)		—		—		—		(216)		—		(216)
—	Dividends	—		—		—		—		(24)		(24)		—		(24)
—	Employee stock plan issuance	—		—		1		—		—		1		—		1
75.7	BALANCE AT SEPTEMBER 30, 2022	$	1	$	(1,882)	$	3,968	$	6	$	533	$	2,626	$	2	$	2,628

See Interim Condensed Notes to Consolidated Financial Statements

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MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONDENSED NOTES TO 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 the Interim Condensed Notes to Consolidated Financial Statements, unless otherwise noted. Capitalized terms used and not specifically defined herein have the same meanings given those terms in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Annual Report”). We also use certain other terms that are defined within these Financial Statements.

The Financial Statements presented herein and discussed below include 100% of the assets, liabilities, revenues, expenses, and cash flows of Marriott Vacations Worldwide, all entities in which Marriott Vacations Worldwide has a controlling voting interest (“subsidiaries”), and variable interest entities (“VIEs”) for which Marriott Vacations Worldwide is the primary beneficiary, as determined in accordance with consolidation accounting guidance. References in these Financial Statements to net income or loss attributable to common shareholders and MVW shareholders’ equity do not include noncontrolling interests, which represent the outside ownership of our consolidated non-wholly owned entities and are reported separately. Intercompany accounts and transactions between consolidated entities 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, cost of vacation ownership products, inventory valuation, goodwill and intangibles valuation, accounting for acquired vacation ownership notes receivable, vacation ownership notes receivable reserves, income taxes, and loss contingencies. The uncertainties in the broader macroeconomic environment, including inflationary pressures, as well as effects of the COVID-19 pandemic, have made it more challenging to make these estimates. Actual results could differ from our estimates, and such differences may be material.

In our opinion, our Financial Statements reflect all normal and recurring adjustments necessary to present fairly our financial position, the results of our operations, and cash flows for the periods presented. Interim results may not be indicative of fiscal year performance because of, among other reasons, general macroeconomic conditions, including inflationary pressures, rising interest rates, and seasonal and short-term variations, as well as any effects of the COVID-19 pandemic. 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 2022 Annual Report.

We refer to the business and brands that we acquired in the acquisition of Welk Hospitality Group, Inc. (“Welk”) in 2021 (the “Welk Acquisition”) as “Legacy-Welk.” We refer to the business and brands that we acquired in the acquisition of ILG, LLC, formerly known as ILG, Inc. (“ILG”), in 2018 (the “ILG Acquisition”) as “Legacy-ILG.” We refer to the business we conducted, and the associated brands, prior to the ILG Acquisition as “Legacy-MVW.”

During the third quarter of 2023 we launched Hyatt Vacation Club across our former Hyatt Residence Club and Legacy-Welk properties, which connects these properties and associated vacation ownership programs under a single brand.

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2.			SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING STANDARDS

New Accounting Standards

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

In the first quarter of 2023, we adopted accounting standards update (“ASU”) 2022-02, which eliminated the recognition and measurement guidance applicable to troubled debt restructurings for creditors and enhanced disclosure requirements with respect to loan modifications for borrowers experiencing financial difficulty. ASU 2022-02 also requires disclosure of current-period gross write-offs by year of origination to be presented in the vintage disclosures for financing receivables. The adoption of ASU 2022-02 on January 1, 2023, on a prospective basis, did not have a material impact on our financial statements or disclosures other than the incremental disclosures relating to gross write-offs for vacation ownership notes receivable. See Footnote 6 “Vacation Ownership Notes Receivable” for the incremental disclosures required by the adoption of ASU 2022-02.

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

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, as amended, which provides optional expedients and exceptions to existing guidance on contract modifications and hedge accounting in an effort to ease the financial reporting burdens related to the expected market transition from the USD London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This update was effective upon issuance and issuers generally were able to elect to adopt the optional expedients and exceptions over time through a period ending on December 31, 2022. In December 2022, the FASB issued ASU 2022-06 to extend the temporary accounting rules under Topic 848 from December 31, 2022 to December 31, 2024. During the second quarter of 2023, we amended our Term Loan (as defined in Footnote 12 “Debt”) and our interest rate swaps and collar to reference SOFR (as defined in Footnote 12 “Debt”) rather than LIBOR. See Footnote 12 “Debt” for more information. Both our Term Loan and the related interest rate swaps and collar transitioned to SOFR at the same time, effective July 31, 2023. As of September 30, 2023, we have no other financial instruments to transition from LIBOR.


3.			ACQUISITIONS AND DISPOSITIONS

Acquisitions

Savannah, Georgia

During the third quarter of 2023, we acquired property in Savannah, Georgia for $19 million. We plan to convert the property into a 73-unit vacation ownership property. The transaction was accounted for as an asset acquisition and was recorded in Property and equipment, net.

Charleston, South Carolina

During the first quarter of 2023, we acquired a parcel of land and an adjacent retail space in Charleston, South Carolina for $17 million. We plan to develop the parcel of land into a 50-unit vacation ownership property and use a portion of the retail space to operate a sales center. The transaction was accounted for as an asset acquisition and was recorded in Property and equipment, net.

Bali

During the first quarter of 2022, we acquired 88 completed vacation ownership units, as well as a sales center, located in Bali, Indonesia for $36 million. The transaction was accounted for as an asset acquisition and the purchase price was allocated to Property and equipment, net. As consideration for the acquisition, we paid $12 million in cash and issued a non-interest bearing note payable for $11 million, of which $6 million was repaid in the first quarter of 2023. Further, during the first quarter of 2022, we reclassified $13 million of previous deposits associated with the project from Other assets to Property and equipment, net.

Dispositions

As part of the ILG Acquisition, we acquired the Vacation Resorts International (“VRI”) and Trading Places International (“TPI”) businesses (together, the “VRI Americas” business), which was part of our Exchange & Third-Party Management segment prior to our disposal of VRI Americas during the second quarter of 2022, as discussed below.

Table of Contents

During the second quarter of 2022, we disposed of VRI Americas for proceeds of $56 million, net of cash and restricted cash transferred to the buyer of $12 million, after determining that this business was not a core component of our future growth strategy and operating model. The results of VRI Americas are included in our Exchange and Third-Party Management segment through the date of the sale. The net carrying value of VRI Americas as of the date of the disposition was $51 million, including $25 million of goodwill and $20 million of intangible assets. As a result of the disposition, we recorded a gain of $1 million and $17 million in Gains (losses) and other income (expense), net on our Income Statements for the three and nine months ended September 30, 2022, respectively.

Additionally, during the second quarter of 2022, we disposed of entities that owned and operated a Vacation Ownership segment hotel in Puerto Vallarta, Mexico, for proceeds of $38 million, net of cash and restricted cash transferred to the buyer of $3 million, consistent with our strategy to dispose of non-strategic assets. The net carrying value of the business disposed of as of the date of the disposition, excluding the cumulative translation adjustment, was $18 million, substantially all of which was for property and equipment. As a result of this disposition, we recorded a gain of $33 million in Gains (losses) and other income (expense), net on our Income Statement for the nine months ended September 30, 2022, which included the realization of cumulative foreign currency translation gains of $10 million associated with the disposition of these entities.


4.			REVENUE AND RECEIVABLES

Sources of Revenue by Segment


	Three Months Ended September 30, 2023
($ in millions)	Vacation Ownership		Exchange & Third-Party Management		Corporate and Other		Total
Sale of vacation ownership products	$	319	$	—	$	—	$	319

Ancillary revenues	62		1		—		63
Management fee revenues	44		5		—		49
Exchange and other services revenues	37		44		12		93
Management and exchange	143		50		12		205

Rental	128		10		—		138

Cost reimbursements	455		4		(16)		443
Revenue from contracts with customers	1,045		64		(4)		1,105

Financing	81		—		—		81