Business Segments

12 Months Ended

Dec. 31, 2019

Note 21: 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 loans to customers to finance their purchase of VOIs and revenue from servicing the loans. We also generate fee revenue from servicing the loans 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 presents revenues for our reportable segments reconciled to consolidated amounts:

	Year Ended December 31,
($ in millions)	2019			2018			2017
Revenues:
Real estate sales and financing	$	1,252		$	1,462		$	1,239
Resort operations and club management⁽¹⁾		454			422			367
Total segment revenues		1,706			1,884			1,606
Cost reimbursements		168			147			135
Intersegment eliminations⁽¹⁾⁽²⁾		(36	)		(32	)		(30	)
Total revenues	$	1,838		$	1,999		$	1,711

⁽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 $35 million, $31 million and $29 million for the years ended December 31, 2019, 2018 and 2017, 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 $2 million for the year ended December 31, 2019 and less than $1 million for each of the years ended December 31, 2018 and 2017, respectively

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

	Year Ended December 31,
($ in millions)	2019			2018			2017
Adjusted EBITDA:
Real estate sales and financing⁽¹⁾	$	325		$	447		$	359
Resort operations and club management⁽¹⁾		265			245			204
Segment Adjusted EBITDA		590			692			563
General and administrative		(111	)		(117	)		(104	)
Depreciation and amortization		(51	)		(36	)		(29	)
License fee expense		(101	)		(98	)		(87	)
Other loss, net		(3	)		(1	)		—
Interest expense		(43	)		(30	)		(27	)
Income tax (expense) benefit ⁽²⁾		(57	)		(105	)		16
Equity in earnings from unconsolidated affiliates⁽³⁾		4			—			1
Other adjustment items		(12	)		(7	)		(6	)
Net income	$	216		$	298		$	327

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

⁽²⁾	On December 22, 2017, the United States enacted tax reform legislation, the TCJ Act, resulting in significant modifications to existing law which resulted in a reduction in income tax expense for the year ended December 31, 2017. See Note 17: Income Taxes for additional information.

₍₃₎	_{This amount primarily represents our 25 percent interest in BRE Ace LLC and our 50 percent interest in 1776 Holdings, LLC. See Note 9: Investment in Unconsolidated Affiliates for additional information.}

The following table presents total assets for our reportable segments, reconciled to consolidated amounts:

	December 31,
($ in millions)	2019		2018
Real estate sales and financing	$	2,753	$	2,501
Resort operations and club management		196		172
Total segment assets		2,949		2,673
Corporate		130		80
Total assets	$	3,079	$	2,753

The following table presents capital expenditures for property and equipment for our reportable segments, reconciled to consolidated amounts:

	December 31,
($ in millions)	2019		2018		2017
Real estate sales and financing	$	19	$	36	$	28
Resort operations and club management		5		—		2
Total segment capital expenditures for property and equipment		24		36		30
Corporate		13		8		5
Total capital expenditures for property and equipment	$	37	$	44	$	35