BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]


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, 2019 (the “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 (loss) 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, 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 mitigate it, has made it more challenging to make these estimates. Accordingly, ultimate results could differ materially from our 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 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 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 Update

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 travel restrictions, border closings, restrictions on public gatherings, mandatory quarantines, shelter-in-place mandates and limitations on business operations. The speed with which the effects of the COVID-19 pandemic have changed the global economic landscape, outlook and, in particular, the travel and hospitality industries, has been swift and unexpected.

The results of operations during the first three quarters of 2020 include impacts related to the COVID-19 pandemic, which have been significantly adverse for our business, and the overall travel and hospitality industry in general. We began to see an adverse impact on occupancy in our Vacation Ownership business in mid-March 2020, which quickly accelerated later that month and continued into May 2020. While many of our resorts remained open for owner occupancy throughout April and May, most owners chose to postpone their arrival until a later date, which resulted in substantially lower than normal resort occupancy in the second and third quarters of 2020.

In response to quickly evolving travel restrictions and restrictions on business operations, we closed all of our sales centers in March 2020, and beginning March 25, 2020, we closed our resorts for rental guests with stays at our branded North America vacation ownership resorts. Further, due to low occupancy rates and based on various governmental mandates and advisories, we closed several of our resorts and reduced operations and amenities at our resorts that remained open. The closure of our sales centers and low occupancy levels led to a material decrease in contract sales and rental revenues from our vacation ownership business beginning in the second quarter.

Based on these events and the uncertainty they created, we immediately began to focus on our liquidity, including quickly and substantially enhancing our cash holdings. In late-March, we drew down the remainder of our $600 million Revolving Corporate Credit Facility (as defined in Footnote 13 “Debt”). We issued senior secured debt in May, which we used to repay amounts outstanding on our Revolving Corporate Credit Facility. As of September 30, 2020, we had $660 million in cash and cash equivalents on hand, and $597 million of availability on our Revolving Corporate Credit Facility.

In addition to accessing the capital markets, we believe we have made significant progress in bolstering our liquidity through cost reduction. These efforts include reducing capital expenditures; suspending hiring and salary increases; reducing executive and other associate salaries; implementing furloughs and reduced work weeks for most of our associates; and modifying vendor and supplier payment terms where possible.

In late-May, as many government restrictions were beginning to be relaxed, owner occupancy at our resorts began to grow and we began reopening resorts to rental guests. As of September 30, 2020, over 95 percent of our vacation ownership resorts were open to owners and rental guests. We reopened certain sales centers in June and continued to open additional sales centers in July. As of September 30, 2020, over 80 percent of our sales centers had re-opened. However, extended or further closures of our sales centers may be required if demand declines again or if we are again impacted by government regulations requiring resort closures or restricting travel.

In our Exchange & Third-Party Management business, the closures of certain affiliated resorts and managed properties had a significant adverse impact on our business in the second quarter of 2020, with a large number of resorts closed or not taking reservations at the beginning of the second quarter, but by the end of September, over 90 percent of those affiliated resorts and managed properties had reopened. The closure of affiliated resorts and managed properties led to a decrease in management and exchange revenues. Our Aqua-Aston business was also negatively impacted by travel restrictions that significantly impacted the majority of the properties in Hawaii. Further resort and property closures may be required if demand declines again or if we are again impacted by government regulations requiring resort closures or restricting travel. The COVID-19 pandemic continues to depress the demand for vacation rentals due to “stay-at-home” recommendations or requirements, quarantines, and the reluctance of consumers to travel.

During the second and third quarters of 2020, we continued the temporary adjustments implemented in the first quarter of 2020 to cancellation policies for near-term travel for customers who were unable or unwilling to travel due to the COVID-19 pandemic. We continue to monitor this unprecedented and rapidly evolving situation and are unable to predict its duration or severity.

As a result of the COVID-19 pandemic, in September 2020, a workforce reduction plan was approved, which is expected to impact approximately 3,000 associates. We expect that we will incur approximately $25 to $30 million in restructuring and related charges primarily related to employee severance and benefit costs. In connection with this plan,we have recorded the following on our Income Statement for both the three and nine months ended September 30, 2020:


($ in millions)	Vacation Ownership		Exchange & Third-Party Management		Corporate and Other		Total
Cost reimbursement revenues	$	5	$	2	$	—	$	7
Cost reimbursement expenses	$	(5)	$	(2)	$	—	$	(7)
Restructuring	$	(11)	$	(3)	$	(6)	$	(20)

Reclassifications

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