Business Segments

3 Months Ended

Mar. 31, 2020

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 March 31,
($ in millions)	2020			2019
Revenues:
Real estate sales and financing	$	206		$	307
Resort operations and club management⁽¹⁾⁽²⁾		104			110
Total segment revenues		310			417
Cost reimbursements		49			42
Intersegment eliminations⁽¹⁾⁽²⁾		(8	)		(9	)
Total revenues	$	351		$	450

⁽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 $8 million and $9 million for the three months ended March 31, 2020 and 2019, 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 the three months ended March 31, 2020 and 2019.

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

	Three Months Ended March 31,
($ in millions)	2020			2019
Adjusted EBITDA:
Real estate sales and financing⁽¹⁾	$	15		$	80
Resort operations and club management⁽¹⁾		55			65
Segment Adjusted EBITDA		70			145
General and administrative		(21	)		(27	)
Depreciation and amortization		(12	)		(8	)
License fee expense		(22	)		(23	)
Other gain (loss), net		2			(1	)
Interest expense		(10	)		(10	)
Income tax expense		(1	)		(20	)
Equity in earnings from unconsolidated affiliates		3			1
Other adjustment items⁽²⁾		(1	)		(2	)
Net income	$	8		$	55

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

⁽²⁾	For the three months ended March 31, 2020 and 2019, this amount includes costs associated with restructuring, one-time charges and other non-cash items.