MARRIOTT VACATIONS WORLDWIDE Corp
For the period ended Dec 31, 2023. Filed Feb 27, 2024.
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FY2023 · Filed Feb 27, 2024
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14. Leases
- LEASES
The following table presents the carrying values of our leases and the classification on our Balance Sheet.
| ($ in millions) | Balance Sheet Classification | At December 31, 2023 | At December 31, 2022 |
|---|---|---|---|
| Operating lease assets | Other assets | $77 | $102 |
| Finance lease assets | Property and equipment, net | 165 | 88 |
| $242 | $190 | ||
| Operating lease liabilities | Accrued liabilities | $102 | $114 |
| Finance lease liabilities | Debt, net | 189 | 86 |
| $291 | $200 | ||
The following table presents the lease costs and the classification on our Income Statements for 2023, 2022, and 2021.
| ($ in millions) | Income Statement Classification | 2023 | 2022 | 2021 |
|---|---|---|---|---|
| Operating lease cost | Marketing and sales expenseGeneral and administrative expense | $31 | $31 | $35 |
| Finance lease cost | ||||
| Amortization of right-of-use assets | Depreciation and amortization | 10 | 7 | 5 |
| Interest on lease liabilities | Financing expense | 11 | 4 | 1 |
| Variable lease cost | Marketing and sales expense | 3 | 3 | 2 |
| $55 | $45 | $43 | ||
The following table presents the maturity of our operating and finance lease liabilities as of December 31, 2023.
| ($ in millions) | Operating Leases | Finance Leases(1) | Total |
|---|---|---|---|
| 2024 | $24 | $17 | $41 |
| 2025 | 21 | 16 | 37 |
| 2026 | 20 | 13 | 33 |
| 2027 | 13 | 12 | 25 |
| 2028 | 10 | 12 | 22 |
| Thereafter | 37 | 455 | 492 |
| Total lease payments | 125 | 525 | 650 |
| Less: Imputed interest | (23) | (336) | (359) |
| $102 | $189 | $291 |
(1)Includes new corporate headquarters discussed below.
Corporate Headquarters Finance Lease
During 2020, we entered into a finance lease arrangement for our new corporate headquarters in Orlando, Florida. The lease term commenced for accounting purposes during the first quarter of 2023, upon the substantial completion of construction. The lease includes a 26-year lease term consisting of a 16-year initial term plustwo five-year renewal options. As of December 31, 2023, the carrying amount of the related finance lease asset was $76 million and the corresponding finance lease liability was $100 million.
Upon our relocation to the new corporate headquarters during the fourth quarter of 2023, we recorded a non-cash impairment charge of $16 million to the right-to-use asset related to the operating leases for our previous corporate headquarters as we do not expect proceeds from subleasing the spaces to exceed our future obligations under the operating leases.
Lease Term and Discount Rate
The following table presents additional information about our lease obligations.
| At December 31, 2023 | At December 31, 2022 | |
|---|---|---|
| Weighted-average remaining lease term | ||
| Operating leases | 7.6 years | 6.8 years |
| Finance leases | 36.4 years | 51.5 years |
| Weighted-average discount rate | ||
| Operating leases | 6.6% | 6.2% |
| Finance leases | 6.5% | 5.3% |
Other Information
The following table presents supplemental cash flow information for 2023, 2022, and 2021.
| ($ in millions) | 2023 | 2022 | 2021 |
|---|---|---|---|
| Cash paid for amounts included in measurement of lease liabilities | |||
| Operating cash flows for finance leases | $7 | $5 | $1 |
| Operating cash flows for operating leases | $33 | $32 | $34 |
| Financing cash flows for finance leases | $5 | $4 | $5 |
| Right-of-use assets obtained in exchange for lease obligations | |||
| Operating leases | $31 | $6 | $7 |
| Finance leases | $88 | $8 | $86 |
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