Quarterly report pursuant to Section 13 or 15(d)

COVID-19 Related Items (Notes)

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COVID-19 Related Items (Notes)
9 Months Ended
Sep. 30, 2021
Restructuring and Related Activities [Abstract]  
COVID-19 Related Impacts [Text Block] COVID-19 Related Items
During the three months ended September 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 $ (21) $ —  $ —  $ (21) Vacation ownership interest sales
Recoveries —  —  Cost/(recovery) of vacation ownership interests
Employee compensation related and other —  —  COVID-19 related costs
Total COVID-19 $ (12) $ —  $ —  $ (12)

During the nine months ended September 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 $ (47) $ —  $ —  $ (47) Vacation ownership interest sales
Recoveries 17  —  —  17  Cost/(recovery) of vacation ownership interests
Employee compensation related and other —  COVID-19 related costs
Lease related (1) —  —  (1) Restructuring
Total COVID-19 $ (29) $ —  $ $ (28)

During the three months ended September 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 $ 11  $ $ $ 14  COVID-19 related costs
Exchange inventory write-off —  10  —  10  Operating expenses
Asset impairments —  —  Asset impairments
Lease related —  —  Restructuring
Total COVID-19 $ 18  $ 11  $ $ 31 
During the nine months ended September 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 62  13  81  COVID-19 related costs
Asset impairments 20  34  —  54  Asset impairments/
Operating expenses
Exchange inventory write-off —  48  —  48  Operating expenses
Lease related 22  —  24  Restructuring
Total COVID-19 $ 254  $ 110  $ 13  $ 377 

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 provision on Adjusted EBITDA was $170 million for the nine months ended September 30, 2020.

During 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 $21 million and $47 million increase to Vacation ownership interest sales during the three and nine months ended September 30, 2021 and a corresponding $8 million and $17 million increase to Cost/(recovery) of vacation ownership interests on the Condensed Consolidated Statements of Income/(Loss). The net positive impact of these adjustments on Adjusted EBITDA was $13 million and $30 million for the three and nine months ended September 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 nine months ended September 30, 2020, these costs included $9 million and $68 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. These costs are inclusive of $3 million and $24 million of employee retention credits earned in connection with government programs, primarily the CARES Act.

Employee compensation related and other costs also included $5 million and $13 million of expenses during the three and nine months ended September 30, 2020 related to renegotiating or exiting certain agreements and other professional fees.

During the three and nine months ended September 30, 2021, the Company incurred an additional $1 million and $3 million employee related costs associated with benefits continuation, inclusive of $2 million of employee retention credits earned in connection with government programs for the nine months ended September 30, 2021.
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 September 30, 2021
COVID-19 employee-related $ $ $ (6) $
$ $ $ (6) $

Asset impairments - During the three and nine months ended September 30, 2020, the Company incurred $6 million and $54 million of COVID-19 related impairments. These impairments include $6 million and $49 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 nine months ended September 30, 2020.

Exchange inventory write-off - During the three and nine months ended September 30, 2020, the Company wrote-off $10 million and $48 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 $24 million of restructuring charges during the nine months ended September 30, 2020. This was driven by $22 million related to the New Jersey lease discussed in Note 22—Restructuring.