Revenue from Contracts with Customers (Tables)

9 Months Ended

Sep. 30, 2018

Schedule of Disaggregated Revenues by Segment from Contracts with Customers

The following tables show our disaggregated revenues by segment from contracts with customers. We operate our business in the following two segments: (i) Real estate sales and financing and (ii) Resort operations and club management. Please refer to Note 18: Business Segments below for more details related to our segments.

	Three Months Ended September 30, 2018		Nine Months Ended September 30, 2018
($ in millions)
Real Estate and Financing Segment
Sales of VOIs, net	$	99	$	427
Sales, marketing, brand and other fees		152		423
Interest income		35		103
Other financing revenue		5		14
Real estate and financing segment revenues	$	291	$	967

	Three Months Ended September 30, 2018		Nine Months Ended September 30, 2018
($ in millions)
Resort Operations and Club Management Segment
Club management	$	25	$	71
Resort management		15		45
Rental (1)		53		144
Ancillary services		7		20
Resort operations and club management segment revenues	$	100	$	280

⁽¹⁾ Includes intersegment eliminations.

Schedule of Accounts Receivable and Contract Asset from Contracts with Customers and Changes in Contract Liabilities

The following table provides information on our accounts receivable and contract asset from contracts with customers which are included in Accounts Receivable, net on our condensed consolidated balance sheets:

($ in millions)	January 1, 2018		September 30, 2018
Receivables(1)	$	97	$	135
Contract asset		—		5

⁽¹⁾ Does not include financing receivables from sales of VOI.  See Note 5: Timeshare Financing Receivables for additional information.

The following table presents changes in our contract liabilities for the nine months ended September 30, 2018.

($ in millions)	January 1, 2018		Additions		Subtractions			September 30, 2018
Contract liabilities:
Advanced deposits	$	87	$	128	$	(115	)	$	100
Deferred revenue(1)		197		256		(215	)		238
Club Bonus Point incentive liability(2)		52		39		(31	)		60

⁽¹⁾ The deferred revenues balance is primarily comprised of (i) sales of VOI under construction, (ii) Club activation fees that are paid at the closing of a VOI purchase, which grants access to our points-based Club and (iii) annual dues for Club membership renewals.

⁽²⁾ Amounts related to the Club Bonus Point incentive liability are included in Accounts payable, accrued expenses and other on our unaudited condensed consolidated balance sheets. This liability is comprised of revenue for incentives from VOI sales and sales and marketing expenses in conjunction with our fee-for-service arrangements.

Schedule of Revenue and Direct Costs Expected to be Recognized in Future

The following table includes revenue and direct costs expected to be recognized in the future related to sales of VOIs under construction as of September 30, 2018:

	Remaining		Expected Recognition Period
($ in millions)	Performance Obligation			Q4 2018
Deferred revenues	$	154		$	154
Deferred expenses		72			72

Schedule of Remaining Transaction Price Related to Advanced Deposits Club Activation Fees and Club Bonus Points

The following table includes the remaining transaction price related to Advanced deposits, Club activation fees and Club Bonus Points as of September 30, 2018:

($ in millions)	Remaining Transaction Price		Recognition Period	Recognition Method
Advanced deposits	$	100	18 months	Upon customer stays
Club activation fees		61	7 years	Straight-line basis over average inventory holding     period
Club Bonus Points		60	24 months	Upon redemption

Topic 606

Schedule of Impact of Topic 606 on Financial Statements

The table below shows the adjustments that were made to the condensed consolidated balance sheet as of January 1, 2018:

	December 31, 2017		Adjustments			January 1, 2018
($ in millions)
ASSETS
Cash and cash equivalents	$	246	$	—		$	246
Restricted cash		51		—			51
Accounts receivable, net of allowance for doubtful  accounts		112		—			112
Timeshare financing receivables, net		1,071		—			1,071
Inventory		509		30			539
Property and equipment, net		238		—			238
Investment in unconsolidated affiliate		41		—			41
Intangible assets, net		72		—			72
Other assets		44		16			60
TOTAL ASSETS	$	2,384	$	46		$	2,430
LIABILITIES AND EQUITY
Liabilities:
Accounts payable, accrued expenses and other	$	339	$	2		$	341
Advanced deposits		104		(17	)		87
Debt, net		482		—			482
Non-recourse debt, net		583		—			583
Deferred revenues		109		112			221
Deferred income tax liabilities		249		(13	)		236
Total liabilities		1,866		84			1,950
Commitments and contingencies
Equity:
Preferred stock, $0.01 par value; 300,000,000 authorized    shares, none issued or outstanding as of December 31,    2017		—		—			—
Common stock, $0.01 par value; 3,000,000,000 authorized    shares, 99,136,304 issued and outstanding as of    December 31, 2017		1		—			1
Additional paid-in capital		162		—			162
Accumulated retained earnings		355		(38	)		317
Total equity		518		(38	)		480
TOTAL LIABILITIES AND EQUITY	$	2,384	$	46		$	2,430

The following tables compare the reported condensed consolidated balance sheet and statement of operations as of and for the three and nine months ended September 30, 2018, as well as the cash flows for the nine months ended September 30, 2018, to the previous accounting guidance:

	September 30, 2018
	As Reported		Effects of ASC 606			Previous Accounting Guidance
(in millions)
ASSETS
Cash and cash equivalents	$	145	$	—		$	145
Restricted cash		67		—			67
Accounts receivable, net of allowance for doubtful accounts		151		(5	)		146
Timeshare financing receivables, net		1,103		—			1,103
Inventory		582		(47	)		535
Property and equipment, net		538		—			538
Investment in unconsolidated affiliates		33		—			33
Intangible assets, net		73		—			73
Other assets		121		(20	)		101
TOTAL ASSETS	$	2,813	$	(72	)	$	2,741
LIABILITIES AND EQUITY
Liabilities:
Accounts payable, accrued expenses and other	$	337	$	(29	)	$	308
Advanced deposits		100		17			117
Debt, net		530		—			530
Non-recourse debt, net		806		—			806
Deferred revenues		263		(142	)		121
Deferred income tax liabilities		215		30			245
Total liabilities		2,251		(124	)		2,127
Commitments and contingencies
Equity:
Preferred stock, $0.01 par value; 300,000,000 authorized    shares, none issued or outstanding as of September 30, 2018		—		—			—
Common stock, $0.01 par value; 3,000,000,000 authorized    shares, 96,906,759 issued and outstanding as of    September 30, 2018		1		—			1
Additional paid-in capital		174		—			174
Accumulated retained earnings		387		52			439
Total equity		562		52			614
TOTAL LIABILITIES AND EQUITY	$	2,813	$	(72	)	$	2,741

	Three Months Ended September 30, 2018
($ in millions)	As Reported			Effects of ASC 606			Previous Accounting Guidance
Revenues
Sales of VOIs, net	$	99		$	58		$	157
Sales, marketing, brand and other fees		152			(2	)		150
Financing		40			—			40
Resort and club management		40			—			40
Rental and ancillary services		60			—			60
Cost reimbursements		36			—			36
Total revenues		427			56			483
Expenses
Cost of VOI sales		29			18			47
Sales and marketing		174			11			185
Financing		12			—			12
Resort and club management		11			—			11
Rental and ancillary services		37			—			37
General and administrative		31			—			31
Depreciation and amortization		9			—			9
License fee expense		25			—			25
Cost reimbursements		36			—			36
Total operating expenses		364			29			393
Interest expense		(7	)		—			(7	)
Equity in earnings from unconsolidated affiliates		1			—			1
Other loss		(1	)		—			(1	)
Income before income taxes		56			27			83
Income tax expense		(15	)		(6	)		(21	)
Net income	$	41		$	21		$	62
Earnings per share:
Basic	$	0.42		$	0.21		$	0.63
Diluted	$	0.42		$	0.21		$	0.63

	Nine Months Ended September 30, 2018
($ in millions)	As Reported			Effects of ASC 606			Previous Accounting Guidance
Revenues
Sales of VOIs, net	$	427		$	30		$	457
Sales, marketing, brand and other fees		423			4			427
Financing		117			—			117
Resort and club management		116			—			116
Rental and ancillary services		164			—			164
Cost reimbursements		110			—			110
Total revenues		1,357			34			1,391
Expenses
Cost of VOI sales		109			16			125
Sales and marketing		528			14			542
Financing		35			—			35
Resort and club management		33			—			33
Rental and ancillary services		95			—			95
General and administrative		84			—			84
Depreciation and amortization		25			—			25
License fee expense		73			—			73
Cost reimbursements		110			—			110
Total operating expenses		1,092			30			1,122
Interest expense		(22	)		—			(22	)
Other loss		(1	)		—			(1	)
Income before income taxes		242			4			246
Income tax expense		(64	)		(1	)		(65	)
Net income	$	178		$	3		$	181
Earnings per share:
Basic	$	1.82		$	0.03		$	1.85
Diluted	$	1.81		$	0.03		$	1.84

The adoption of ASC 606 had no impact on our total cash flows provided by operating activities or used by investing and financing activities. ASC 606 resulted in offsetting shifts in cash flows throughout net income and various changes in working capital balances.

	Nine Months Ended September 30, 2018
($ in millions)	As Reported			Previous Accounting Guidance
Net income	$	178		$	181
Adjustments to reconcile net income to net used in by operating activities		74			74
Changes in operating assets and liabilities
Accounts receivable, net		(39	)		(35	)
Timeshare financing receivables, net		(83	)		(83	)
Inventory		(15	)		1
Purchases of real estate for future conversion to inventory		(299	)		(299	)
Other assets		(61	)		(56	)
Accounts payable, accrued expenses and other		(15	)		(15	)
Advanced deposits		13			13
Deferred revenues		42			14
Net cash used in operating activities	$	(205	)	$	(205	)