Quarterly report pursuant to Section 13 or 15(d)

COVID-19 Related Items (Notes)

v3.21.2
COVID-19 Related Items (Notes)
6 Months Ended
Jun. 30, 2021
Restructuring and Related Activities [Abstract]  
COVID-19 Related Impacts [Text Block] COVID-19 Related Items
During the three months ended June 30, 2021, the Company had expenses directly related to COVID-19 as detailed in the table below (in millions):
Vacation Ownership Travel and Membership Corporate Consolidated Income Statement Classification
Allowance for loan losses:
Provision $ (26) $ —  $ —  $ (26) Vacation ownership interest sales
Recoveries 10  —  —  10  Cost/(recovery) of vacation ownership interests
Employee compensation related and other —  —  COVID-19 related costs
Total COVID-19 $ (15) $ —  $ —  $ (15)

During the six months ended June 30, 2021, the Company had expenses directly related to COVID-19 as detailed in the table below (in millions):
Vacation Ownership Travel and Membership Corporate Consolidated Income Statement Classification
Allowance for loan losses:
Provision $ (26) $ —  $ —  $ (26) Vacation ownership interest sales
Recoveries 10  —  —  10  Cost/(recovery) of vacation ownership interests
Employee compensation related and other —  COVID-19 related costs
Lease related (1) —  —  (1) Restructuring
Total COVID-19 $ (16) $ —  $ $ (15)

During the three months ended June 30, 2020, the Company had expenses directly related to COVID-19 as detailed in the table below (in millions):
Vacation Ownership Travel and Membership Corporate Consolidated Income Statement Classification
Employee compensation related and other $ 32  $ $ $ 45  COVID-19 related costs
Asset impairments 30  —  38  Asset impairments/
Operating expenses
Lease related 22  —  23  Restructuring
Total COVID-19 $ 41  $ 57  $ $ 106 
During the six months ended June 30, 2020, the Company had expenses directly related to COVID-19 as detailed in the table below (in millions):
Vacation Ownership Travel and Membership Corporate Consolidated Income Statement Classification
Allowance for loan losses:
Provision $ 225  $ —  $ —  $ 225  Vacation ownership interest sales
Recoveries (55) —  —  (55) Cost/(recovery) of vacation ownership interests
Employee compensation related and other 51  11  67  COVID-19 related costs
Asset impairments 14  34  —  48  Asset impairments/
Operating expenses
Exchange inventory write-off —  38  —  38  Operating expenses
Lease related 22  —  23  Restructuring
Total COVID-19 $ 236  $ 99  $ 11  $ 346 

Allowance for loan losses - Due to the closure of resorts and sales centers and the economic downturn resulting from COVID-19 during the first quarter of 2020, the Company evaluated the potential impact of COVID-19 on its owners’ ability to repay their contract receivables and as a result of higher unemployment, the Company recorded a COVID-19 related allowance for loan losses. This allowance consisted of a $225 million COVID-19 related provision, which was reflected as a reduction to Vacation ownership interest sales and $55 million of estimated recoveries, which were reflected as a reduction to Cost/(recovery) of vacation ownership interests on the Condensed Consolidated Statements of Income/(Loss). The net negative impact of this COVID-19 related allowance on Adjusted EBITDA was $170 million for the six months ended June 30, 2020.

During the second quarter of 2021, the Company analyzed the adequacy of the COVID-19 related allowance consistent with past methodology, and due to the improvement in net new defaults the Company reduced this allowance resulting in a $26 million increase to Vacation ownership interest sales and a corresponding $10 million increase to Cost/(recovery) of vacation ownership interests on the Condensed Consolidated Statements of Income/(Loss). The net positive impact of this allowance release on Adjusted EBITDA was $16 million for the six months ended June 30, 2021. The Company will continue to monitor this reserve as more information becomes available. Refer to Note 7—Vacation Ownership Contract Receivables for additional details.

Employee compensation related and other - During the three and six months ended June 30, 2020, these costs included $39 million and $59 million related to severance and other employee costs resulting from the layoffs, salary and benefits continuation for certain employees while operations were suspended, and vacation payments associated with furloughed employees; and $6 million and $8 million of expenses during the three and six months ended June 30, 2020 related to renegotiating or exiting certain agreements and other professional fees; partially offset by $21 million of employee retention credits earned in connection with government programs, primarily the CARES Act.

In connection with these actions the Company recorded COVID-19 employee-related liabilities which are included within Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets. The activity associated with these COVID-19 related liabilities is summarized as follows (in millions):
Liability as of Liability as of
December 31, 2020 Costs Recognized Cash Payments June 30, 2021
COVID-19 employee-related $ $ —  $ (5) $
$ $ —  $ (5) $
Asset impairments - During the three and six months ended June 30, 2020, the Company incurred $38 million and $48 million of COVID-19 related impairments. These impairments include $33 million and $44 million recorded within Asset impairments on the Condensed Consolidated Statements of Income/(Loss) during each period as discussed in Note 21—Impairments, and $5 million included in Operating expenses during the second quarter of 2020.

Exchange inventory write-off - During the six months ended June 30, 2020, the Company wrote-off $38 million of exchange inventory, which is included in Operating expenses on the Condensed Consolidated Statements of Income/(Loss) as discussed in Note 8—Inventory.

Lease related - The Company also recognized $23 million of restructuring charges during the second quarter of 2020. This was driven by $22 million related to the New Jersey lease discussed in Note 22—Restructuring.