Business Segments

9 Months Ended

Sep. 30, 2019

Note 18: Business Segments

We operate our business through the following two segments:

•

Real estate sales and financing – We market and sell VOIs that we own. We also source VOIs through fee-for-service agreements with third-party developers. Related to the sales of the VOIs that we own, we provide consumer financing, which includes interest income generated from the origination of consumer receivables to customers to finance their purchase of VOIs and revenue from servicing the timeshare financing receivables. We also generate fee revenue from servicing the timeshare financing receivables provided by third-party developers to purchasers of their VOIs.

•

Resort operations and club management – We manage the Club, earn activation fees, annual dues and transaction fees from member exchanges for other vacation products. We earn fees for managing the timeshare properties. We generate rental revenue from unit rentals of unsold inventory and inventory made available due to ownership exchanges under our Club program. We also earn revenue from food and beverage, retail and spa outlets at our timeshare properties.

The performance of our operating segments is evaluated primarily based on adjusted earnings before interest expense (excluding non-recourse debt), taxes, depreciation and amortization (“EBITDA”). We define Adjusted EBITDA as EBITDA which has been further adjusted to exclude certain items, including, but not limited to, gains, losses and expenses in connection with: (i) asset dispositions; (ii) foreign currency transactions; (iii) debt restructurings/retirements; (iv) non-cash impairment losses; (v) reorganization costs, including severance and relocation costs; (vi) share-based and other compensation expenses; (vii) costs related to the spin-off; and (viii) other items.

We do not include equity in earnings (losses) from unconsolidated affiliates in our measures of segment operating performance.

The following table present revenues for our reportable segments reconciled to consolidated amounts:

	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2019			2018			2019			2018
Revenues:
Real estate sales and financing	$	324		$	291		$	939		$	967
Resort operations and club management⁽¹⁾⁽²⁾		108			108			332			304
Total segment revenues		432			399			1,271			1,271
Cost reimbursements		43			36			128			110
Intersegment eliminations⁽¹⁾⁽²⁾		(9	)		(8	)		(29	)		(24	)
Total revenues	$	466		$	427		$	1,370		$	1,357

⁽¹⁾

Includes charges to the real estate sales and financing segment from the resort operations and club management segment for fulfillment of discounted marketing package stays at resorts. These charges totaled $9 million and $8 million for the three months ended September 30, 2019 and 2018, respectively, and $29 million and $24 million for the nine months ended September 30, 2019 and 2018, respectively.

⁽²⁾	Includes charges to the real estate sales and financing segment from the resort operations and club management segment for the rental of model units to show prospective buyers. These charges totaled less than $1 million for each of the three and nine months ended September 30, 2019 and 2018.

The following table presents Segment Adjusted EBITDA for our reportable segments reconciled to net income:

	Three Months Ended September 30,						Nine Months Ended September 30,
($ in millions)	2019			2018			2019			2018
Adjusted EBITDA:
Real estate sales and financing⁽¹⁾	$	94		$	67		$	243		$	274
Resort operations and club management⁽¹⁾		62			62			193			179
Segment Adjusted EBITDA		156			129			436			453
General and administrative		(28	)		(31	)		(82	)		(84	)
Depreciation and amortization		(14	)		(9	)		(37	)		(25	)
License fee expense		(26	)		(25	)		(75	)		(73	)
Other loss, net		(1	)		(1	)		(3	)		(1	)
Interest expense		(12	)		(7	)		(33	)		(22	)
Income tax expense		(20	)		(15	)		(55	)		(64	)
Equity in earnings from unconsolidated affiliates		1			1			4			—
Other adjustment items		(6	)		(1	)		(11	)		(6	)
Net income	$	50		$	41		$	144		$	178

⁽¹⁾	^{Includes intersegment transactions. Refer to our table presenting revenues by reportable segment above for additional discussion.}