UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q


☑~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2019~~March 31, 2020


☐	☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-32876

WYNDHAM DESTINATIONS, INC.

(Exact Name of Registrant as Specified in Its Charter)



Delaware		20-0052541
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

6277 Sea Harbor Drive		32821
Orlando,	Florida	(Zip Code)
(Address of Principal Executive Offices)

(407) 626-5200

(Registrant’s Telephone Number, Including Area Code)

None

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value per share	WYND	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐
		Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the last practicable date:

~~92,225,966~~85,134,818 shares of common stock outstanding as of ~~June 30, 2019.~~March 31, 2020.

Table of Contents



		Page
PART I	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Report of Independent Registered Public Accounting Firm	3
	Condensed Consolidated Statements of (Loss)/Income	4
	Condensed Consolidated Statements of Comprehensive (Loss)/Income	5
	Condensed Consolidated Balance Sheets	6
	Condensed Consolidated Statements of Cash Flows	7
	Condensed Consolidated Statements of ~~(Deficit)/Equity~~Deficit	8
	Notes to Condensed Consolidated Financial Statements	109
	Note 1 - Background and Basis of Presentation	109
	Note 2 - New Accounting Pronouncements	10
	Note 3 - Revenue Recognition	1110
	Note 4 - ~~Earnings~~Earnings/(Loss) Per Share	14
	Note 5 - Acquisitions	15
	Note 6 - Discontinued Operations	15
	Note 7 - Held-for-Sale Business	16
	Note 58 - ~~Discontinued Operations~~Vacation Ownership Contract Receivables	1716
	Note 69 - ~~Held-for-Sale Business~~Inventory	18
	Note 710 - ~~Vacation Ownership Contract Receivables~~Property and Equipment	1819
	Note ~~8 - Inventory~~	20
	~~Note 9 - Property and Equipment~~	20
	~~Note 10~~11 - Debt	20
	Note 1112 - Variable Interest Entities	22
	Note 1213 - Fair Value	23
	Note 1314 - Derivative Instruments and Hedging Activities	24
	Note 1415 - Income Taxes	24
	Note 1516 - Leases	2425
	Note 1617 - Commitments and Contingencies	27
	Note 1718 - Accumulated Other Comprehensive (Loss)/Income	28
	Note 1819 - Stock-Based Compensation	29
	Note 1920 - Segment Information	30
	~~Note 20 - Separation and Transaction Costs~~	3231
	Note 21 - ~~Restructuring~~Separation and Related Costs	3233
	Note 22 - ~~Transactions with Former Parent and Former Subsidiaries~~COVID-19 Related Items	3233
	Note 23 - ~~Related Party Transactions~~Impairments	34
	Note 24 - Restructuring	34
	Note 25 - Transactions with Former Parent and Former Subsidiaries	34
	Note 26 - Related Party Transactions	36
	Note 27 - Subsequent Events	3436
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3538
	Forward-Looking Statements	3538
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	4951
Item 4.	Controls and Procedures	4951
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	5053
Item 1A.	Risk Factors	5053
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5054
Item 3.	Defaults Upon Senior Securities	5055
Item 4.	Mine Safety Disclosures	5055
Item 5.	Other Information	5055
Item 6.	Exhibits	5156
	Signatures	5257

Table of Contents

GLOSSARY OF TERMS

The following terms and acronyms appear in the text of this report and have the definitions indicated below:



Adjusted EBITDA	A non-GAAP measure, defined by the Company as Net (loss)/income before Depreciation and amortization, Interest expense (excluding Consumer financing interest), ~~Early~~early extinguishment of debt, Interest income (excluding Consumer financing revenues) and ~~Income taxes, each of which is presented on the Condensed Consolidated Statements of Income.~~income taxes. Adjusted EBITDA also excludes stock-based compensation costs, separation and restructuring costs, transaction costs, impairments, gains and losses on sale/disposition of business, and items that meet the conditions of unusual and/or infrequent.
AOCL	Accumulated Other Comprehensive Loss
ARN	Alliance Reservations Network
AUD	Australian Dollar
Board	Board of Directors
~~Buyer~~CARES	Coronavirus Aid, Relief, and Economic Security Act
Company	Wyndham Destinations, Inc. and its subsidiaries
Compass	Compass IV Limited, an affiliate of Platinum Equity, LLC
~~Company~~COVID-19	~~Wyndham Destinations, Inc. and its subsidiaries~~
~~EBITDA~~	~~Earnings Before Interest, Income Taxes and Depreciation/Amortization~~Novel coronavirus global pandemic
EPS	~~Earnings~~Earnings/(loss) Per Share
Exchange Act	Securities Exchange Act of 1934
FASB	Financial Accounting Standards Board
FICO	Fair Isaac Corporation
GAAP	Generally Accepted Accounting Principles in the United States
~~La Quinta~~	~~La Quinta Holdings, Inc.~~
LIBOR	London Interbank Offered Rate
NQ	Non-Qualified stock options
NZD	New Zealand Dollar
PCAOB	Public Company Accounting Oversight Board
PSU	Performance-vested restricted Stock Units
RSU	Restricted Stock Unit
SEC	Securities and Exchange Commission
SPE	Special Purpose Entity
~~SOFR~~	~~Secured Overnight Financing Rate~~
Spin-off	Spin-off of Wyndham Hotels & Resorts, Inc.
SSAR	Stock-Settled Appreciation Rights
U.S.	United States of America
USD	United States of America Dollar
Vacasa	Vacasa LLC
VIE	Variable Interest Entity
VOCR	Vacation Ownership Contract Receivable
VOI	Vacation Ownership Interest
VPG	Volume Per Guest
Wyndham Hotels	Wyndham Hotels & Resorts, Inc.
Wyndham Destinations	Wyndham Destinations, Inc.
Wyndham Worldwide	Wyndham Worldwide Corporation

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited).

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

Wyndham Destinations, Inc.

Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed consolidated balance sheet of Wyndham Destinations, Inc. and subsidiaries (the "Company") as of ~~June 30, 2019,~~March 31, 2020, the related condensed consolidated statements of (loss)/income, comprehensive (loss)/income, (deficit) and ~~(deficit)/equity, for the three-month and six-month periods ended June 30, 2019 and 2018, and of~~ cash flows, for the ~~six-month~~three-month periods ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ and the related notes (collectively referred to as the "interim financial statements"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, ~~2018,~~2019, and the related consolidated statements of income, comprehensive income, cash flows and ~~equity~~equity/(deficit) for the year then ended (not presented herein); and in our report dated February 26, ~~2019,~~2020, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, ~~2018,~~2019, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

~~The~~We have reviewed the accompanying condensed consolidated balance sheet of Wyndham Destinations, Inc. and subsidiaries (the "Company") as of March 31, 2020, the related condensed consolidated statements of (loss)/income, comprehensive (loss)/income, (deficit) and cash flows, for the three-month periods ended March 31, 2020 and 2019, and the related notes (collectively referred to as the "interim financial statements"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements ~~are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required~~for them to be ~~independent~~in conformity with ~~respect to~~accounting principles generally accepted in the ~~Company in accordance with the U.S. federal securities laws and the applicable rules and regulations~~United States of ~~the Securities and Exchange Commission and the PCAOB.~~America.

We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conductedhave previously audited, in accordance with the standards of the ~~PCAOB,~~Public Company Accounting Oversight Board (United States) (PCAOB), the ~~objective~~consolidated balance sheet of the Company as of December 31, 2019, and the related consolidated statements of income, comprehensive income, cash flows and equity/(deficit) for the year then ended (not presented herein); and in our report dated February 26, 2020, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2019, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which ~~is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.~~it has been derived.

/s/ Deloitte & Touche LLP

Tampa, FL

~~July 30, 2019~~May 6, 2020

Table of Contents

WYNDHAM DESTINATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS)/INCOME

(In millions, except per share amounts)

(Unaudited)


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2019			2018			2019			2018			2020			2019
Net revenues
Vacation ownership interest sales	$	481		$	462		$	856		$	820
Service and membership fees	409			409			815			828			$	327		$	405
Consumer financing	128			120			253			237			127			125
Vacation ownership interest sales													90			375
Other	21			16			33			29			14			13
Net revenues	1,039			1,007			1,957			1,914			558			918
Expenses
Operating	421			418			818			821			398			397
Cost of vacation ownership interests	50			47			81			78
Consumer financing interest	26			20			52			39			25			26
(Recovery)/cost of vacation ownership interests													(31		)	30
Marketing	170			155			317			286			131			147
General and administrative	123			133			251			286			110			129
COVID-19 related costs													23			—
Asset impairments													10			—
Restructuring													2			3
Separation and related costs	22			133			36			163			—			15
Restructuring	1			—			4			—
Depreciation and amortization	28			36			59			73			31			31
Total expenses	841			942			1,618			1,746			699			778
Operating income	198			65			339			168
Operating (loss)/income													(141		)	140
Other (income), net	(2		)	(5		)	(12		)	(11		)	(2		)	(11		)
Interest expense	40			46			82			91			41			41
Interest (income)	(2		)	(2		)	(4		)	(3		)	(2		)	(2		)
Income before income taxes	162			26			273			91
Provision for income taxes	44			38			74			62
Net income/(loss) from continuing operations	118			(12		)	199			29
Loss from operations of discontinued businesses, net of income taxes	—			(42		)	—			(49		)
Gain on disposal of discontinued businesses, net of income taxes	6			432			5			432
Net income attributable to Wyndham Destinations shareholders	$	124		$	378		$	204		$	412
(Loss)/income before income taxes													(178		)	112
(Benefit)/provision for income taxes													(44		)	31
Net (loss)/income from continuing operations													(134		)	81
Loss on disposal of discontinued businesses, net of income taxes													—			(1		)
Net (loss)/income attributable to Wyndham Destinations shareholders													$	(134	)	$	80

Basic earnings per share
Basic earnings/(loss) per share
Continuing operations	$	1.27		$	(0.12	)	$	2.12		$	0.29		$	(1.54	)	$	0.86
Discontinued operations	0.06			3.90			0.05			3.83			—			(0.01		)
	$	1.33		$	3.78		$	2.17		$	4.12		$	(1.54	)	$	0.85
Diluted earnings per share
Diluted earnings/(loss) per share
Continuing operations	$	1.26		$	(0.12	)	$	2.12		$	0.29		$	(1.54	)	$	0.85
Discontinued operations	0.06			3.89			0.05			3.82			—			—
	$	1.32		$	3.77		$	2.17		$	4.11		$	(1.54	)	$	0.85

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

WYNDHAM DESTINATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

(In millions)

(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2019 2018 2019 2018
Net income attributable to Wyndham Destinations shareholders $ 124
$ 378
$ 204
$ 412
Other comprehensive income, net of tax
Foreign currency translation adjustments (1 ) (33 ) 1
(19 )
Unrealized gain on cash flow hedges —
1
—
—
Defined benefit pension plans —
3
—
4
Other comprehensive (loss)/income, net of tax (1 ) (29 ) 1
(15 )
Comprehensive income $ 123
$ 349
$ 205
$ 397



	Three Months Ended
	March 31,
	2020			2019
Net (loss)/income attributable to Wyndham Destinations shareholders	$	(134	)	$	80
Other comprehensive (loss)/income, net of tax
Foreign currency translation adjustments	(65		)	2
Other comprehensive (loss)/income, net of tax	(65		)	2
Comprehensive (loss)/income	$	(199	)	$	82

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

WYNDHAM DESTINATIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

(Unaudited)


	June 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Assets
Cash and cash equivalents	$	257		$	218		$	1,018		$	355
Restricted cash (VIE - $118 as of 2019 and $120 as of 2018)	152			155
Restricted cash (VIE - $118 as of 2020 and $110 as of 2019)							153			147
Trade receivables, net	140			121			137			144
Vacation ownership contract receivables, net (VIE - $2,916 as of 2019 and $2,883 as of 2018)	3,048			3,037
Vacation ownership contract receivables, net (VIE - $3,018 as of 2020 and $2,984 as of 2019)							2,792			3,120
Inventory	1,216			1,224			1,218			1,199
Prepaid expenses	195			153			221			221
Property and equipment, net	715			712			682			680
Goodwill	922			922			962			970
Other intangibles, net	105			109			135			143
Other assets	444			304			458			474
Assets of held-for-sale business	272			203
Total assets	$	7,466		$	7,158		$	7,776		$	7,453
Liabilities and (deficit)
Accounts payable	$	81		$	66		$	71		$	73
Accrued expenses and other liabilities	949			1,004			885			973
Deferred income	554			518			553			541
Non-recourse vacation ownership debt (VIE)	2,374			2,357			2,413			2,541
Debt	3,058			2,881			3,981			3,034
Deferred income taxes	761			736			764			815
Liabilities of held-for-sale business	249			165
Total liabilities	8,026			7,727			8,667			7,977
Commitments and contingencies (Note 16)
Commitments and contingencies (Note 17)
Stockholders' (deficit):
Preferred stock, $.01 par value, authorized 6,000,000 shares, none issued and outstanding	—			—			—			—
Common stock, $.01 par value, 600,000,000 shares authorized, 220,401,065 issued as of 2019 and 220,120,808 as of 2018	2			2
Treasury stock, at cost – 128,093,823 shares as of 2019 and 125,137,857 shares as of 2018	(6,168		)	(6,043		)
Common stock, $.01 par value, 600,000,000 shares authorized, 220,959,494 issued as of 2020 and 220,863,070 as of 2019							2			2
Treasury stock, at cost – 135,824,676 shares as of 2020 and 132,759,876 shares as of 2019							(6,508		)	(6,383		)
Additional paid-in capital	4,094			4,077			4,119			4,118
Retained earnings	1,558			1,442			1,607			1,785
Accumulated other comprehensive loss	(51		)	(52		)	(117		)	(52		)
Total stockholders’ (deficit)	(565		)	(574		)	(897		)	(530		)
Noncontrolling interest	5			5			6			6
Total (deficit)	(560		)	(569		)	(891		)	(524		)
Total liabilities and (deficit)	$	7,466		$	7,158		$	7,776		$	7,453

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

WYNDHAM DESTINATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Six Months Ended						Three Months Ended
	June 30,						March 31,
	2019			2018			2020			2019
Operating activities
Net income	$	204		$	412
Loss from operations of discontinued businesses, net of income taxes	—			49
Gain on disposal of discontinued businesses, net of income taxes	(5		)	(432		)
Adjustments to reconcile net income to net cash provided by operating activities:
Net (loss)/income							$	(134	)	$	80
Loss on disposal of discontinued businesses, net of income taxes							—			1
Adjustments to reconcile net (loss)/income to net cash provided by operating activities:
Depreciation and amortization	59			73			31			31
Provision for loan losses	238			218			315			109
Deferred income taxes	27			74			(50		)	14
Stock-based compensation	12			109			1			5
Asset impairments	10			9			10			—
Non-cash lease expense	15			—			6			8
Non-cash interest	10			8			5			5
Net change in assets and liabilities, excluding the impact of acquisitions and dispositions:
Trade receivables	(9		)	(28		)	4			(45		)
Vacation ownership contract receivables	(251		)	(233		)	(15		)	(91		)
Inventory	(31		)	(64		)	(40		)	(18		)
Deferred income	28			42			18			45
Accounts payable, accrued expenses, prepaid expenses, other assets and other liabilities	(52		)	(145		)	(96		)	12
Other, net	11			1			2			(4		)
Net cash provided by operating activities - continuing operations	266			93
Net cash (used in)/provided by operating activities - discontinued operations	(1		)	212
Net cash provided by operating activities	265			305			57			152
Investing activities
Property and equipment additions	(50		)	(41		)	(21		)	(20		)
Net assets acquired, net of cash acquired, and acquisition-related payments	—			(5		)
Proceeds from asset sales	6			—			—			6
Other, net	(1		)	(6		)	3			(1		)
Cash used in investing activities - continuing operations	(45		)	(52		)
Cash used in investing activities - discontinued operations	(22		)	(672		)
Net cash used in investing activities - continuing operations							(18		)	(15		)
Net cash used in investing activities - discontinued operations							—			(27		)
Net cash used in investing activities	(67		)	(724		)	(18		)	(42		)
Financing activities
Proceeds from non-recourse vacation ownership debt	913			924			250			672
Principal payments on non-recourse vacation ownership debt	(896		)	(931		)	(372		)	(572		)
Proceeds from debt	1,350			2,281			1,064			608
Principal payments on debt	(1,196		)	(2,491		)	(77		)	(660		)
Repayments of commercial paper, net	—			(147		)
Proceeds from notes issued and term loan	—			300
Repayment of notes	(2		)	(789		)	(41		)	(1		)
Repayments of vacation ownership inventory arrangement	(7		)	(7		)	(5		)	(7		)
Dividends to shareholders	(84		)	(114		)	(43		)	(42		)
Cash transferred to Wyndham Hotels related to spin-off	(69		)	(495		)
Proceeds from issuance of common stock	6			—
Repurchase of common stock	(125		)	(123		)	(128		)	(61		)
Debt issuance costs	(8		)	(9		)	(1		)	(5		)
Net share settlement of incentive equity awards	(1		)	(67		)	(1		)	—
Other, net	(2		)	(2		)
Cash used in financing activities - continuing operations	(121		)	(1,670		)
Cash provided by financing activities - discontinued operations	—			2,066
Net cash (used in)/provided by financing activities	(121		)	396
Net cash provided by/(used in) financing activities							646			(68		)
Effect of changes in exchange rates on cash, cash equivalents and restricted cash	2			(6		)	(16		)	1
Net change in cash, cash equivalents and restricted cash	79			(29		)	669			43
Cash, cash equivalents and restricted cash, beginning of period	404			416			502			404
Cash, cash equivalents and restricted cash, end of period	483			387			1,171			447
Less: Restricted cash	152			232			153			186
Less: Cash and restricted cash included in assets of discontinued operations and held-for-sale business	74			—			—			44
Cash and cash equivalents	$	257		$	155		$	1,018		$	217

See Notes to Condensed Consolidated Financial Statements.

WYNDHAM DESTINATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~(DEFICIT)/EQUITY~~DEFICIT

(In millions)

(Unaudited)

Common Shares Outstanding Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive (Loss)/Income Non-controlling Interest Total (Deficit)
Balance as of December 31, 2018 95
$ 2
$ (6,043 ) $ 4,077
$ 1,442
$ (52 ) $ 5
$ (569 )
Net income —
—
—
—
80
—
—
80
Other comprehensive income —
—
—
—
—
2
—
2
Change in stock-based compensation —
—
—
5
—
—
—
5
Repurchase of common stock (1 ) —
(60 ) —
—
—
—
(60 )
Dividends ($0.45 per share) —
—
—
—
(42 ) —
—
(42 )
Balance as of March 31, 2019 94
2
(6,103 ) 4,082
1,480
(50 ) 5
(584 )
Net income —
—
—
—
124
—
—
124
Other comprehensive loss —
—
—
—
—
(1 ) —
(1 )
Net share settlement of stock-based compensation —
—
—
(1 ) —
—
—
(1 )
Employee stock purchase program issuances —
—
—
6
—
—
—
6
Change in stock-based compensation —
—
—
7
—
—
—
7
Repurchase of common stock (2 ) —
(65 ) —
—
—
—
(65 )
Dividends ($0.45 per share) —
—
—
—
(43 ) —
—
(43 )
Distribution for separation of Wyndham Hotels and adjustments related to discontinued business —
—
—
—
(3 ) —
—
(3 )
Balance as of June 30, 2019 92

$ 2

$ (6,168 )
$ 4,094

$ 1,558

$ (51 )
$ 5
$ (560 )



	Common Shares Outstanding		Common Stock		Treasury Stock			Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Non-controlling Interest		Total Deficit
Balance as of December 31, 2019	88		$	2	$	(6,383	)	$	4,118	$	1,785		$	(52	)	$	6	$	(524	)
Net loss	—		—		—			—		(134		)	—			—		(134		)
Other comprehensive loss	—		—		—			—		—			(65		)	—		(65		)
Change in stock-based compensation	—		—		—			1		—			—			—		1
Repurchase of common stock	(3	)	—		(125		)	—		—			—			—		(125		)
Dividends ($0.50 per share)	—		—		—			—		(44		)	—			—		(44		)
Balance as of March 31, 2020	85		$	2	$	(6,508	)	$	4,119	$	1,607		$	(117	)	$	6	$	(891	)



	Common Shares Outstanding		Common Stock		Treasury Stock			Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Non-controlling Interest		Total Deficit
Balance as of December 31, 2018	95		$	2	$	(6,043	)	$	4,077	$	1,442		$	(52	)	$	5	$	(569	)
Net income	—		—		—			—		80			—			—		80
Other comprehensive income	—		—		—			—		—			2			—		2
Change in stock-based compensation	—		—		—			5		—			—			—		5
Repurchase of common stock	(1	)	—		(60		)	—		—			—			—		(60		)
Dividends ($0.45 per share)	—		—		—			—		(42		)	—			—		(42		)
Balance as of March 31, 2019	94		$	2	$	(6,103	)	$	4,082	$	1,480		$	(50	)	$	5	$	(584	)

See Notes to Condensed Consolidated Financial Statements.

~~WYNDHAM DESTINATIONS, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF (DEFICIT)/EQUITY~~

~~(In millions)~~

~~(Unaudited)~~

Common Shares Outstanding Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive (Loss)/Income Non-controlling Interest Total Equity/(Deficit)
Balance as of December 31, 2017 100
$ 2
$ (5,719 ) $ 3,996
$ 2,501
$ (11 ) $ 5
$ 774
Beginning balance adjustment due to change in accounting principle —
—
—
—
(17 ) —
—
(17 )
Net income —
—
—
—
34
—
—
34
Other comprehensive income —
—
—
—
—
14
—
14
Issuance of shares for RSU vesting 1
—
—
—
—
—
—
—
Net share settlement of stock-based compensation —
—
—
(32 ) —
—
—
(32 )
Change in stock-based compensation —
—
—
21
—
—
—
21
Change in stock-based compensation for Board of Directors —
—
—
1
—
—
—
1
Repurchase of common stock (1 ) —
(76 ) —
—
—
—
(76 )
Dividends ($0.66 per share)^(a)
—
—
—
—
(67 ) —
—
(67 )
Balance as of March 31, 2018 100
2
(5,795 ) 3,986
2,451
3
5
652
Net income —
—
—
—
378
—
—
378
Other comprehensive loss —
—
—
—
—
(29 ) —
(29 )
Issuance of shares for RSU vesting 1
—
—
—
—
—
—
—
Net share settlement of stock-based compensation —
—
—
(35 ) —
—
—
(35 )
Change in stock-based compensation —
—
—
109
—
—
—
109
Change in stock-based compensation for Board of Directors —
—
—
(9 ) —
—
—
(9 )
Repurchase of common stock (1 ) —
(42 ) —
—
—
—
(42 )
Dividends ($0.41 per share) —
—
—
—
(43 ) —
—
(43 )
Distribution for separation of Wyndham Hotels and adjustments related to discontinued business —
—
—
—
(1,499 ) —
—
(1,499 )
Balance as of June 30, 2018 100
$ 2
$ (5,837 ) $ 4,051
$ 1,287
$ (26 ) $ 5
$ (518 )


^(a)	~~Represents dividends declared by Wyndham Worldwide Corporation prior to the spin-off of Wyndham Hotels & Resorts, Inc.~~

~~See Notes to Condensed Consolidated Financial Statements.~~

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WYNDHAM DESTINATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise noted, all amounts are in millions, except share and per share amounts)

(Unaudited)


1.	Background and Basis of Presentation

Background

Wyndham Destinations, Inc. and its subsidiaries (collectively, “Wyndham Destinations” or the “Company”), is a global provider of hospitality services and products. The Company operates in ~~two~~2 segments: Vacation Ownership and ~~Exchange & Rentals.~~Vacation Exchange. The Vacation Ownership segment develops, markets and sells vacation ownership interests (“VOIs”) to individual consumers, provides consumer financing in connection with the sale of VOIs, and provides property management services at resorts. The Vacation Exchange ~~& Rentals~~ segment provides leisure travelers with flexibility and access to a wide variety of accommodation options that include vacation ~~exchange services~~ownership resorts, hotels, privately-owned vacation homes, apartments, and ~~products~~condominiums around the world.

The results of operations during the first quarter of 2020 include impacts related to ~~owners~~the novel coronavirus global pandemic (“COVID-19”), which have been significantly negative for the travel industry, the Company, its customers and employees. In response to COVID-19, the Company temporarily closed its resorts in mid-March across the globe and suspended its sales and marketing operations. As a result, the Company significantly reduced its workforce and furloughed thousands of ~~VOIs~~employees. Given these significant events, the Company’s revenues were negatively impacted and ~~manages~~it also incurred $241 million of charges related to COVID-19, which are discussed in further detail in Note 22—COVID-19 Related Items. As a precautionary measure to enhance liquidity, the Company drew down its $1.0 billion revolving credit facility at the end of the first quarter, and ~~markets vacation rental properties primarily~~suspended its share repurchase activity.

On August 7, 2019, the Company acquired Alliance Reservations Network (“ARN”) for $102 million ($97 million net of cash acquired). ARN provides private-label travel booking technology solutions. This acquisition was undertaken for the purpose of accelerating growth at RCI by increasing the offerings available to its members and affiliates. The Company has recognized the assets and liabilities of ARN based on ~~behalf~~estimates of ~~independent owners.~~their acquisition date fair values. ARN is reported within the Vacation Exchange segment. See Note 5—Acquisitions for additional details.

During ~~the fourth quarter of~~ 2018, the Company decided to explore strategic alternatives for its North American vacation rentals ~~business.~~business and on October 22, 2019, completed the sale of this business for $162 million. The assets and liabilities of this business ~~have been~~were classified as ~~held-for-sale as of June 30, 2019 and December 31, 2018. The~~held-for-sale. This business ~~does~~did not meet the criteria to be classified as a discontinued operation; therefore, the results ~~are~~of operations through the date of sale were reflected within continuing operations on the Condensed Consolidated Statements of (Loss)/Income. See Note 6—7—Held-for-Sale Business for further details. ~~On July 30, 2019, the Company entered into an agreement for the sale of its North American vacation rentals business. See Note 24—Subsequent Events~~ ~~for additional details.~~

~~During 2018, the Company completed the spin-off of Wyndham Hotels & Resorts, Inc. (“Spin-off”) and the sale of its European vacation rentals business.~~

The prior period Condensed Consolidated Financial Statements have been reclassified to reflect the results of the hotel business and European vacation rentals business as discontinued operations. See further detail in Note 5—~~Discontinued Operations.~~

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q include the accounts and transactions of Wyndham Destinations, as well as the entities in which Wyndham Destinations directly or indirectly has a controlling financial interest. The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.”). All intercompany balances and transactions have been eliminated in the Condensed Consolidated Financial Statements. In addition, certain prior period amounts have been reclassified to comply with newly adopted accounting standards. ~~See further detail in Note 2—New Accounting Pronouncements~~.

In presenting the Condensed Consolidated Financial Statements, management makes estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ from those ~~estimates.~~estimates and assumptions. In management’s opinion, the Condensed Consolidated Financial Statements contain all normal recurring adjustments necessary for a fair presentation of interim results reported. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire year or any subsequent interim period. These Condensed Consolidated Financial Statements should be read in conjunction with the Company’s ~~2018~~2019 Consolidated Financial Statements included in its Annual Report ~~filed~~ on Form 10-K filed with the Securities and Exchange Commission on February 26, ~~2019.~~2020.

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2.	New Accounting Pronouncements

Recently Issued Accounting Pronouncements

Simplifying the Accounting for Income Taxes. In December 2019, the Financial Accounting Standards Board (“FASB”) issued guidance to simplify the accounting for income taxes and clarifies the financial statement presentation for tax benefits related to tax deductible dividends. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this guidance on its financial statements and related disclosures.

Reference Rate Reform. In March 2020, the FASB issued guidance which provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria that reference the London Interbank Offered Rate or another reference rate expected to be discontinued. This guidance is effective as of March 12, 2020, and will apply through December 31, 2022. The Company is currently evaluating the impact of the adoption of this guidance on its financial statements and related disclosures.

Recently Adopted Accounting Pronouncements

Financial Instruments - Credit Losses. In June 2016, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued guidance which amends the guidance on measuring credit losses on financial assets held at amortized cost. The guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This guidance iswas effective for ~~fiscal years beginning after December 15, 2019,~~the Company on January 1, 2020, including interim periods within ~~those~~the fiscal ~~years.~~year. The adoption of this guidance did not have a material impact on the Company’s financial statements and related disclosures as the Company’s prior approach in estimating the allowance for loan losses generally aligned with the expected credit loss model required upon adoption of this guidance. The Company ~~is currently evaluating the impact of~~has included additional disclosures in accordance with the adoption of this guidance, ~~on its financial statements and related disclosures.~~which are included in Note 8—

~~Table of Contents~~Vacation Ownership Contract Receivables.

Simplifying the Test for Goodwill Impairment. In January 2017, the FASB issued guidance which simplifies the current two-step goodwill impairment test by eliminating ~~Step 2~~step two of the test. The guidance requires a one-step impairment test in which an entity compares the fair value of a reporting unit with its carrying amount and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. This guidance iswas effective for ~~fiscal years beginning after December 15, 2019 and~~the Company on January 1, 2020, including interim periods within ~~those~~the fiscal ~~years,~~year, and should be applied on a prospective basis. Early adoption is permitted for the interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of the adoption of this guidance on its financial statements and related disclosures.

~~Recently Adopted Accounting Pronouncements~~

~~Leases.~~ In February 2016, the FASB issued guidance for lease accounting. The guidance requires a lessee to recognize right-of-use assets and lease liabilities on the balance sheet for all lease obligations and disclose key information about leasing arrangements, such as the amount, timing, and uncertainty of cash flows arising from leases. The Company adopted this standard using the modified retrospective approach; therefore, the Company used the transition method practical expedient under ASU 2018-11 and prior year financial statements were not recast. As a result of the adoption, on January 1, 2019 the Company recognized $158 million of right-of-use assets and $200 million of related lease liabilities. Right-of-use assets were decreased by $42 million of tenant improvement allowances and deferred rent balances reclassified from other liabilities. Both the right-of-use assets and related lease liabilities recognized upon adoption included $21 million associated with the Company’s held-for-sale business. Right-of-use assets are included within Other assets and the related lease liabilities are included within Accrued and other liabilities on the Condensed Consolidated Balance Sheets. The adoption of this standard did not have a material impact to the income statement related to existing leases; therefore a cumulative-effect adjustment was not recorded. The adoption of this standard did not materially impact consolidated net income, liquidity or compliance with our debt covenants under our current agreements. See Note 15— ~~Leases~~ ~~for more information.~~

~~Implementation Costs in Cloud Computing Arrangements.~~ In August 2018, the FASB issued guidance on implementation costs incurred in a cloud computing arrangement that is a service contract. This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the guidance on capitalizing costs associated with developing or obtaining internal-use software and also adds certain disclosure requirements related to implementation costs incurred for internal-use software and cloud computing arrangements. This guidance is effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years, with early adoption permitted. The Company early adopted this guidance as of January 1, 2019 on a prospective basis. The adoption of this guidance did not have a material impact on the Company’s financial statements ~~and related disclosures.~~

~~Stock Compensation - Improvements to Nonemployee Share-Based Payment Accounting.~~ In June 2018, the FASB issued guidance intended to simplify nonemployee share-based payment accounting. This new guidance more closely aligns the accounting for share-based payment awards issued to employees and nonemployees. The Company adopted this guidance as of January 1, 2019 with no material impact to its Condensed Consolidated Financial Statements and related disclosures.


3.	Revenue Recognition

Vacation Ownership

The Company develops, markets and sells VOIs to individual consumers, provides consumer financing in connection with the sale of VOIs, and provides property management services at resorts. The Company’s sales of VOIs are either cash sales or developer-financed sales. Developer financed sales are typically collateralized by the underlying VOI. Revenue is recognized on VOI sales upon transfer of control, which is defined as the point in time when a binding sales contract has been executed, the financing contract has been executed for the remaining transaction price, the statutory rescission period has expired, and the transaction price has been deemed to be collectible.

For developer-financed sales, the Company reduces the VOI sales transaction price by an estimate of uncollectible consideration at the time of the sale. The Company’s estimates of uncollectible amounts are based largely on the results of the Company’s static pool analysis which relies on historical payment data by customer class.

In connection with entering into a VOI sale, the Company may provide its customers with certain non-cash incentives, such as credits for future stays at its resorts. For those VOI sales, the Company bifurcates the sale and allocates the sales price between the VOI sale and the non-cash incentive. Non-cash incentives generally have expiration periods of 18 months or less and are recognized at a point in time upon transfer of control.

~~Table of Contents~~

The Company provides day-to-day property management services including oversight of housekeeping services, maintenance, and certain accounting and administrative services for property owners’ associations and clubs. These services may also include reservation and resort renovation activities. Such agreements are generally for terms of one year or less, and are renewed automatically on an annual basis. The Company’s management agreements contain cancellation clauses, which allow for either party to cancel the agreement, by either a majority board vote or a majority vote of non-developer interests. The Company receives fees for such property management services which are collected monthly in advance and are based upon total costs to operate such resorts (or as services are provided in the case of resort renovation

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activities). Fees for property management services typically approximate 10% of budgeted operating expenses. The Company is entitled to consideration for reimbursement of costs incurred on behalf of the property owners’ association in providing ~~the~~ management services (“reimbursable revenue”). These reimbursable costs principally relate to the payroll costs for management of the associations, club and resort properties where the Company is the employer and are reflected as a component of Operating expenses on the Condensed Consolidated Statements of (Loss)/Income. The Company reduces its management fees for amounts it has paid to the property owners’ association that reflect maintenance fees for VOIs for which it retains ownership, as the Company has concluded that such payments are consideration payable to a customer.

Property management fee revenues are recognized when the services are performed and are recorded as a component of Service and membership fees on the Condensed Consolidated Statements of (Loss)/Income. Property management revenues, which are comprised of management fee revenue and reimbursable revenue, were ~~$170~~$176 million and ~~$162~~$170 million during the three months ended ~~June 30, 2019~~March 31, 2020 and ~~2018, respectively, and $341~~2019. Management fee revenues were $98 million and ~~$325~~$97 million during the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 and ~~2018.~~2019. Reimbursable revenues were $78 million and $73 million during the three months ended March 31, 2020 and 2019. One of the associations that the Company manages paid its Vacation Exchange segment $7 million for exchange services during both the three months ended March 31, 2020 and 2019.

Vacation Exchange ~~& Rentals~~

As a provider of vacation exchange services, the Company enters into affiliation agreements with developers of vacation ownership properties to allow owners of VOIs to trade their intervals for intervals at other properties affiliated with the Company’s vacation exchange ~~brands~~network and, for some members, for other leisure-related services and products. Additionally, as a marketer of vacation rental properties, generally the Company enters into contracts for exclusive periods of time with property owners to market the rental of such properties to rental customers.

The Company’s vacation exchange ~~brands derive~~business derives a majority of revenues from membership dues and fees for facilitating members’ trading of their intervals. Revenues from membership dues represent the fees paid by members or affiliated clubs on their behalf. The Company recognizes revenues from membership dues paid by the member on a straight-line basis over the membership period as the performance obligations are fulfilled through delivery of publications, if applicable, and by providing access to ~~other~~ travel-related products and services. Estimated net contract consideration payable by affiliated clubs for memberships ~~are~~is recognized as revenue over the term of the contract with the affiliated club in proportion to the estimated average monthly member count. Such estimates are adjusted periodically for changes in the actual and forecasted member activity. For additional fees, members have the right to exchange their intervals for intervals at other properties affiliated with the Company’s vacation exchange networks and, for certain members, for other leisure-related services and products. ~~Fees~~The Company also derives revenue from facilitating bookings of travel accommodations for ~~facilitating exchanges are~~both members and non-members. Revenue is recognized ~~as revenue, net of expected cancellations,~~ when these transactions have been confirmed, ~~to the member.~~net of expected cancellations.

The Company’s vacation exchange ~~brands~~business also ~~derive~~derives revenues ~~from: (i) additional services,~~from programs with affiliated resorts, club servicing, and loyalty ~~programs~~programs; and ~~(ii)~~ additional exchange-related products that provide members with the ability to protect trading power or points, extend the life of deposits, and combine two or more deposits for the opportunity to exchange into intervals with higher trading power. Other vacation exchange related product fees are deferred and recognized as revenue upon the occurrence of a future exchange, event, or other related ~~transaction or event.~~transaction.

The Company earns revenue from its RCI Elite Rewards co–branded credit card program, which is primarily generated by cardholder spending and the enrollment of new cardholders. The advance payments received under the program are recognized as a contract liability until the Company’s performance obligations have been satisfied. The primary performance obligation for the program relates to brand performance services. Total contract consideration is estimated and recognized on a straight-line basis over the contract term.

~~The~~Prior to the sale of the vacation rental businesses, the Company’s vacation rental brands ~~derive~~derived revenue from fees associated with the rental of vacation ~~rental~~ properties managed and marketed by the Company on behalf of independent owners. The Company ~~remits~~remitted the rental fee received from the renter to the independent owner, net of the Company’s agreed-upon fee. The related revenue from such fees, net of expected refunds, iswas recognized over the renter’s stay. The Company’s vacation rental brands also ~~derive~~derived revenues from additional services delivered to independent owners, vacation rental guests, and property owners’ associations ~~that are~~which were generally recognized when the service iswas delivered.

~~Table of Contents~~

Other Items

The Company records property management services revenues and RCI Elite Rewards revenues for its Vacation Ownership and Vacation Exchange ~~& Rentals~~ segments in accordance with the guidance for reporting revenues gross as a principal versus net as an agent, which requires that these revenues be recorded on a gross basis.

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Contract Liabilities

Contract liabilities generally represent payments or consideration received in advance for goods or services that the Company has not yet transferred to the customer. Contract liabilities as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018 are~~2019, were as ~~follows:~~follows (in millions):


Contract Liabilities^(a)	June 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Deferred subscription revenue	$	220	$	220	$	205	$	206
Deferred VOI trial package revenue	137		125		144		145
Deferred VOI incentive revenue	103		96		105		107
Deferred exchange-related revenue ^(b)(a)	57		56		76		58
Deferred co-branded credit card programs revenue	21		14		18		19
Deferred other revenue	17		8		10		4
Total	$	555	$	519	$	558	$	539


^(a)	~~There is $60 million and $42 million of deferred vacation rental revenue included in Liabilities of held-for-sale business on the Condensed Consolidated Balance Sheets for 2019 and 2018, respectively.~~


^(b)	Balance includes contractual liabilities to accommodate members for cancellations initiated by the Company due to unexpected events. These amounts are included within Accrued expenses and other liabilities on the Condensed Consolidated Balance ~~Sheet.~~Sheets.

In the Company’s vacation ownership business, deferred VOI trial package revenue represents consideration received in advance for a trial VOI, which allows customers to utilize a vacation package typically within one year of purchase. Deferred VOI incentive revenue represents payments received in advance for additional travel-related services and products at the time of a VOI sale. Revenue is recognized when a customer utilizes the additional services and products, which is typically within one year of the VOI sale.

Within the Company’s vacation exchange business, deferred subscription revenue represents billings and payments received in advance from members and affiliated clubs for memberships in the Company’s vacation exchange programs which are recognized in future periods. Deferred exchange-related revenue primarily represents payments received in advance from members for the right to exchange their intervals for intervals at other properties affiliated with the Company’s vacation exchange networks and for other leisure-related services and products which are generally recognized as revenue within one year. In the Company's vacation rentals business, deferred vacation rental revenue represents billings and payments received in advance of a customer’s rental stay which are generally recognized as revenue within one year.

Changes in contract liabilities for the ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019, ~~follow:~~follow (in millions):


	Amount			Amount
Contract liabilities as of December 31, 2018	$	519
Contract liabilities as of December 31, 2019				$	539
Additions	224			103
Revenue recognized	(188		)	(84		)
Contract liabilities as of June 30, 2019	$	555
Contract liabilities as of March 31, 2020				$	558



	Amount
Contract liabilities as of December 31, 2018	$	519
Additions	125
Revenue recognized	(92		)
Contract liabilities as of March 31, 2019	$	552

Capitalized Contract Costs

The Company’s vacation ownership business incurs certain direct and incremental selling costs in connection with VOI trial package and incentive revenues. Such costs are capitalized and subsequently amortized over the utilization period, which is typically within one year of the sale. ~~These~~As of March 31, 2020 and December 31, 2019, these capitalized costs were ~~$51~~$54 million ~~as of June 30, 2019~~ and ~~$45 million as of December 31, 2018,~~$53 million; and are included within Other assets on the Condensed Consolidated Balance ~~Sheet.~~Sheets.

The Company’s vacation exchange ~~and vacation rentals businesses incur~~business incurs certain direct and incremental selling costs to obtain contracts with customers in connection with subscription revenues and exchange–related ~~revenues, and vacation rental~~

~~Table of Contents~~

revenues. Such costs, which are primarily comprised of commissions paid to internal and external parties and credit card processing fees, are deferred at the inception of the contract and recognized when the benefit is transferred to the customer. As of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, these capitalized costs were ~~$20~~$18 million and ~~$22 million, respectively. In addition, there were $2 million of these capitalized costs~~$20 million; and are included within ~~Assets~~Other assets on the Condensed Consolidated Balance Sheets.

Table of ~~held-for-sale business as of June 30, 2019~~Contents.

Practical Expedients

The Company has not adjusted the consideration for the effects of a significant financing component if it expected, at contract inception, that the period between when the Company satisfied the performance obligation and when the customer paid for that good or service was one year or less.

For contracts with customers that were modified prior to 2015, the Company did not retrospectively restate the revenue associated with the contract for those modifications. Instead, it reflected the aggregate effect of all prior modifications in determining (i) the performance obligations and transaction prices, and (ii) the allocation of such transaction prices to the performance obligations.

Performance Obligations

A performance obligation is a promise in a contract with a customer to transfer a distinct good or service to the customer. The consideration received from a customer is allocated to each distinct performance obligation and recognized as revenue when, or as, each performance obligation is satisfied.

The following table summarizes the Company’s remaining performance obligations for the ~~twelve month~~12-month periods set forth ~~below:~~below (in millions):


	7/1/2019 - 6/30/2020		7/1/2020 - 6/30/2021		7/1/2021 - 6/30/2022		Thereafter		Total		4/1/2020 - 3/31/2021		4/1/2021 - 3/31/2022		4/1/2022 - 3/31/2023		Thereafter		Total
Subscription revenue	$	126	$	52	$	23	$	19	$	220	$	121	$	48	$	20	$	16	$	205
VOI trial package revenue	137		—		—		—		137		144		—		—		—		144
VOI incentive revenue	103		—		—		—		103		105		—		—		—		105
Exchange-related revenue	51		4		1		1		57		72		3		1		—		76
Co-branded credit card programs revenue	5		4		4		8		21		4		3		3		8		18
Other revenue	17		—		—		—		17		10		—		—		—		10
Total	$	439	$	60	$	28	$	28	$	555	$	456	$	54	$	24	$	24	$	558

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Disaggregation of Net Revenues

The table below presents a disaggregation of the Company’s net revenues from contracts with customers by major services and products for each of the Company’s ~~segments:~~segments (in millions):


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2019			2018			2019			2018			2020			2019
Vacation Ownership
Vacation ownership interest sales	$	481		$	462		$	856		$	820
Property management fees and reimbursable revenues	170			162			341			325			$	176		$	170
Consumer financing	128			120			253			237			127			125
Vacation ownership interest sales ^(a)													90			375
Fee-for-Service commissions	12			10			12			20			3			—
Ancillary revenues	19			16			31			29			13			13
Total Vacation Ownership	810			770			1,493			1,431			409			683

Exchange & Rentals
Vacation Exchange
Exchange revenues	161			166			340			354			133			180
Vacation rental revenues	48			47			86			85			—			38
Ancillary revenues	21			25			40			45			17			18
Total Exchange & Rentals	230			238			466			484
Total Vacation Exchange													150			236

Corporate and other
Ancillary revenues	2			—			2			—
Eliminations	(3		)	(1		)	(4		)	(1		)	(1		)	(1		)
Total Corporate and other	(1		)	(1		)	(2		)	(1		)

Net revenues	$	1,039		$	1,007		$	1,957		$	1,914		$	558		$	918

1513

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^(a)	As a result of higher unemployment associated with COVID-19, the Company increased its loan loss allowance by $225 million in the quarter ended March 31, 2020, which is reflected as a reduction to Vacation ownership interest sales on the Condensed Consolidated Statements of (Loss)/Income.


4.	~~Earnings~~Earnings/(Loss) Per Share

The computation of basic and diluted ~~earnings~~earnings/(loss) per share (“EPS”) isare based on net (loss)/income attributable to Wyndham Destinations shareholders divided by the basic weighted average number of common shares and diluted weighted average number of common shares ~~respectively.~~outstanding. The following table sets forth the computation of basic and diluted EPS (in millions, except per share data):

Three Months Ended Six Months Ended
June 30, June 30,
2019 2018 2019 2018
Net income/(loss) from continuing operations attributable to Wyndham Destinations shareholders $ 118
$ (12 ) $ 199
$ 29
Loss from operations of discontinued businesses attributable to Wyndham Destinations shareholders, net of tax —
(42 ) —
(49 )
Gain on disposal of discontinued businesses attributable to Wyndham Destinations shareholders, net of tax 6
432
5
432
Net income attributable to Wyndham Destinations shareholders $ 124
$ 378
$ 204
$ 412

Basic earnings per share
Continuing operations $ 1.27
$ (0.12 ) $ 2.12
$ 0.29
Discontinued operations 0.06
3.90
0.05
3.83
$ 1.33
$ 3.78
$ 2.17
$ 4.12
Diluted earnings per share
Continuing operations ^(a)
$ 1.26
$ (0.12 ) $ 2.12
$ 0.29
Discontinued operations 0.06
3.89
0.05
3.82
$ 1.32
$ 3.77
$ 2.17
$ 4.11

Basic weighted average shares outstanding 93.0
100.0
93.7
100.1
Stock-settled appreciation rights (“SSARs”), RSUs ^(b) and PSUs ^(c)
0.3
0.3
0.3
0.3
Diluted weighted average shares outstanding^(d)(e)
93.3
100.3
94.0
100.4

Dividends:
Aggregate dividends paid to shareholders $ 42
$ 44
$ 84
$ 114



	Three Months Ended
	March 31,
	2020			2019
Net (loss)/income from continuing operations attributable to Wyndham Destinations shareholders	$	(134	)	$	81
Loss on disposal of discontinued businesses attributable to Wyndham Destinations shareholders, net of tax	—			(1		)
Net (loss)/income attributable to Wyndham Destinations shareholders	$	(134	)	$	80

Basic earnings/(loss) per share
Continuing operations	$	(1.54	)	$	0.86
Discontinued operations	—			(0.01		)
	$	(1.54	)	$	0.85
Diluted earnings/(loss) per share
Continuing operations	$	(1.54	)	$	0.85
Discontinued operations	—			—
	$	(1.54	)	$	0.85

Basic weighted average shares outstanding	86.9			94.4
Stock-settled appreciation rights (“SSARs”), RSUs ^(a) and PSUs ^(b)	—			0.3
Diluted weighted average shares outstanding^(c)(d)	86.9			94.7

Dividends:
Aggregate dividends paid to shareholders	$	43		$	42


^(a)	For the three months ended June 30, 2018, the dilutive impacts of SSARS, RSUs and PSUs were excluded from the diluted EPS calculation for continuing operations as their impact would have been anti-dilutive given the Company’s loss from continuing operations.

^(b)

Excludes ~~0.9 million and 0.8~~1.2 million restricted stock units (“RSUs”) that would have been anti-dilutive to EPS for the three ~~and six~~ months ended ~~June 30, 2019, but could potentially dilute earnings per share~~March 31, 2020, of which 0.5 million would have been dilutive had the Company not been in ~~the future.~~a net loss position. Excludes ~~0.2~~0.7 million of ~~unvested~~anti-dilutive RSUs for the three months ended ~~June 30, 2018 that would have been dilutive but given~~March 31, 2019. These shares could potentially dilute EPS in the ~~Company’s loss from continuing operations would have had an anti-dilutive impact to EPS. The number of anti-dilutive RSUs for the six months ended June 30, 2018, the number was immaterial.~~future.

^(c)(b)

Excludes 0.3 million and 0.2 millionperformance-vested restricted stock units (“PSUs”) for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019, ~~respectively,~~ as the Company has not met the required performance metrics. These PSUs could potentially dilute ~~earnings per share~~basic EPS in the future. ~~As a result of the spin-off of Wyndham Hotels during the second quarter of 2018, the Company accelerated the vesting of outstanding PSUs. There were no outstanding PSUs as of June 30, 2018.~~

^(d)(c)

Excludes ~~1.3~~1.6 million and ~~1.1~~0.9 million of outstanding stock option awards that would have been anti-dilutive to EPS for the three ~~and six~~ months ended ~~June 30, 2019,~~March 31, 2020 and ~~0.3 million and 0.1 million of anti-dilutive outstanding stock options for the three and six months ended June 30, 2018.~~2019. These outstanding stock option awards could potentially dilute ~~earnings per share~~EPS in the future.


^(e)(d)	The dilutive impact of the Company’s potential common stock is computed utilizing the treasury stock method using average market prices during the period.

~~Table of Contents~~

Stock Repurchase Program

The following table summarizes stock repurchase activity under the current stock repurchase ~~program:~~program (in millions):

Shares Repurchased Cost
As of December 31, 2018 100.6
$ 5,262
Repurchases 3.0
125
As of June 30, 2019 103.6
$ 5,387



	Shares Repurchased	Cost
As of December 31, 2019	108.2	$	5,602
Repurchases	3.1	125
As of March 31, 2020	111.3	$	5,727

The Company had ~~$691~~$351 million of remaining availability under its program as of ~~June 30, 2019.~~March 31, 2020. In March 2020, the Company suspended its share repurchase activity due to the uncertainty resulting from COVID-19.

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5.	Acquisitions

Alliance Reservations Network. On August 7, 2019, the Company acquired all of the equity of ARN. ARN provides private-label travel booking technology solutions. This acquisition was undertaken for the purpose of accelerating growth at RCI by increasing the offerings available to its members and affiliates. ARN was acquired for $102 million ($97 million net of cash acquired), subject to customary post-closing adjustments based on final valuation information and additional analysis. The fair value of purchase consideration was comprised of: (i) $48 million delivered at closing; (ii) Wyndham Destinations stock valued at $10 million (253,350 shares at $39.29 per share) delivered at closing; (iii) $21 million to be paid over 24 months post-closing; (iv) $10 million of contingent consideration based on achieving certain financial and operational metrics; and (v) additional shares of Wyndham Destinations stock valued at $13 million to be paid on August 7, 2020.

The Company has recognized the assets and liabilities of ARN based on estimates of their acquisition date fair values. The determination of the fair values of the acquired assets and assumed liabilities, including goodwill and other intangible assets, requires significant judgment. The preliminary purchase price allocation, including the impacts of certain post-closing adjustments, consists of: (i) $20 million of developed software with a weighted average life of 10 years included within Property and equipment, net; (ii) $45 million of Goodwill; (iii) $36 million of definite-lived intangible assets with a weighted average life of 12 years primarily consisting of customer relationships; and (iv) $4 million of Accounts payable. All of the goodwill and other intangible assets are expected to be deductible for income tax purposes. ARN is reported within the Vacation Exchange segment.

Given the impact of COVID-19 on the industry and business, the Company performed a qualitative assessment of the goodwill acquired as part of the ARN acquisition as of March 31, 2020. Based on the results of this assessment, the Company determined that it is more likely than not that the goodwill of ARN is not impaired.

Although the Company does not believe the goodwill of ARN is impaired at this time, to the extent estimated market-based valuation multiples and/or discounted cash flows are revised downward, as a result of continued COVID-19 impacts or other events, the Company may be required to write-down all or a portion of this goodwill, which would negatively impact earnings.

As a result of the impacts of COVID-19, the Company also performed an interim impairment analysis of ARN’s property and equipment and other intangible assets as of March 31, 2020, and determined these assets were not impaired.


5.6.	Discontinued Operations

During 2018, the Company completed the spin-off of its hotel business (“Spin-off”) Wyndham Hotels & Resorts, Inc. (“Wyndham Hotels”) and the sale of its European vacation rentals business. As a result, the Company has classified the results of operations for these businesses as discontinued operations in its Condensed Consolidated Financial Statements and related notes. Discontinued operations include direct expenses clearly identifiable to the businesses being discontinued. The Company does not expect to incur significant ongoing expenses classified as discontinued operations except for certain tax adjustments that may be required as final tax returns are completed. Discontinued operations exclude the allocation of corporate overhead and interest.

Prior to its classification as a discontinued operation, the hotel business comprised the Hotel Group segment and the European vacation rentals business was part of the former Destination Network segment, now known as ~~Exchange & Rentals.~~Vacation Exchange.

The following table presents information regarding certain components of income from discontinued operations, net of income taxes ~~for the three and six months ended:~~

(in millions):

June 30, June 30,
2019 2018 2019 2018
Net revenues $ —
$ 311
$ —
$ 720
Expenses:
Operating —
150
—
340
Marketing —
86
—
200
General and administrative —
34
—
89
Separation and related costs —
72
—
93
Depreciation and amortization —
18
—
52
Total expenses —
360
—
774
Other (income), net —
2
—
—
(Benefit) for income taxes —
(9 ) —
(5 )
Loss from operations of discontinued businesses, net of income taxes —
(42 ) —
(49 )
Gain on disposal of discontinued businesses, net of income taxes 6
432
5
432
Income from discontinued operations, net of income taxes $ 6
$ 390
$ 5
$ 383



	Three Months Ended
	March 31,
	2020		2019
Loss on disposal of discontinued businesses, net of income taxes	$	—	$	(1	)
Net (loss)/income attributable to Wyndham Destinations shareholders	$	—	$	(1	)

1715

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The following table presents information regarding certain components of cash flows from discontinued operations ~~for the six months ended:~~(in millions):

June 30, 2019 June 30, 2018
Cash flows (used in)/provided by operating activities $ (1 ) $ 212
Cash flows used in investing activities (22 ) (672 )
Cash flows provided by financing activities —
2,066

Non-cash items:
Forgiveness of intercompany debt from Wyndham Hotels —
197
Depreciation and amortization —
52
Stock-based compensation —
22
Deferred income taxes —
(23 )

Property and equipment additions —
(38 )
Net assets of business acquired, net of cash acquired —
(1,695 )
Proceeds from sale of businesses and asset sales —
1,052



	Three Months Ended
	March 31,
	2020		2019
Net cash provided by operating activities	$	—	$	—
Net cash used in investing activities	—		(27		)
Net cash provided by/(used in) financing activities	—		—


6.7.	Held-for-Sale Business

During ~~the fourth quarter of~~ 2018, the Company decided to explore strategic alternatives for its North American vacation rentals ~~business.~~ business and on July 30, 2019, entered into an agreement to sell this business to Vacasa LLC (“Vacasa”). On October 22, 2019, the Company closed on the sale of this business for $162 million. After customary closing adjustments, the Company received $156 million in cash and $10 million in Vacasa equity, resulting in a gain of $68 million. The purchase agreement contains customary post-closing adjustments.

The assets and liabilities of this business ~~have been~~were classified as ~~held-for-sale as of June 30, 2019 and December 31, 2018.~~held-for-sale. The business ~~does~~did not meet the criteria to be classified as a discontinued operation; therefore, the results ~~are~~of operations through the date of sale were reflected within continuing operations on the Condensed Consolidated Statements of (Loss)/Income. ~~This~~Prior to its sale, this business ~~is currently~~was reported within the Vacation Exchange ~~& Rentals~~ segment.

Total assets of this business at June 30, 2019 were $272 million including $74 million Restricted cash, $81 million Trade receivables, net, $43 million Goodwill and other intangibles, net, $36 million Property & equipment, net and $33 million Other assets. Total liabilities of this business at June 30, 2019 were $249 million including $122 million Accounts payable, $60 million Deferred income and $60 million Accrued expenses and other liabilities.

Total assets of this business at December 31, 2018 were $203 million including $31 million Restricted cash, $82 million Trade receivables, net, $42 million Goodwill and other intangibles, net, $35 million Property & equipment, net and $8 million Other Assets. Total liabilities of this business at December 31, 2018 were $165 million including $87 million Accounts payable, $42 million Deferred income and $27 million Accrued expenses and other liabilities.

~~On July 30, 2019, the Company entered into an agreement for the sale of its North American vacation rentals business. See Note 24—Subsequent Events~~ ~~for additional details.~~


7. 8.	Vacation Ownership Contract Receivables

The Company generates vacation ownership contract receivables (“VOCRs”) by extending financing to the purchasers of its VOIs. Vacation ownership contract receivables, net consisted ~~of:~~of (in millions):


	June 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Vacation ownership contract receivables:
Securitized	$	2,916	$	2,883	$	3,018	$	2,984
Non-securitized	867		888		704		883
Vacation ownership contract receivables, gross	3,783		3,771		3,722		3,867
Less: Allowance for loan losses	735		734		930		747
Vacation ownership contract receivables, net	$	3,048	$	3,037	$	2,792	$	3,120

~~The~~During the three months ended March 31, 2020 and 2019, the Company’s securitized ~~vacation ownership contract receivables~~VOCRs generated interest income of ~~$101~~$106 million and ~~$200 million during the three and six months ended June 30, 2019, respectively, and $89 million and $175 million during the three and six months ended June 30, 2018, respectively.~~$99 million. Such interest income is included within Consumer financing revenue on the Condensed Consolidated Statements of (Loss)/Income.

During the three months ended March 31, 2020 and 2019, the Company originated VOCRs of $237 million and $322 million, and received principal collections of $222 million and $230 million. The weighted average interest rate on outstanding VOCRs was 14.4% as of March 31, 2020 and December 31, 2019.

The activity in the allowance for loan losses on VOCRs was as follows (in millions):



	Amount
Allowance for loan losses as of December 31, 2019	$	747
Provision for loan losses	315
Contract receivables write-offs, net	(132		)
Allowance for loan losses as of March 31, 2020	$	930



	Amount
Allowance for loan losses as of December 31, 2018	$	734
Provision for loan losses	109
Contract receivables write-offs, net	(122		)
Allowance for loan losses as of March 31, 2019	$	721

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During the six months ended June 30, 2019 and 2018, the Company originated vacation ownership contract receivables of $718 million and $686 million, respectively, and received principal collections of $467 million and $453 million, respectively. The weighted average interest rate on outstanding vacation ownership contract receivables was 14.2% and 14.1% as of June 30, 2019 and December 31, 2018, respectively.

~~The activity in the allowance for loan losses on vacation ownership contract receivables was as follows:~~

Amount
Allowance for loan losses as of December 31, 2018 $ 734
Provision for loan losses 238
Contract receivables write-offs, net (237 )
Allowance for loan losses as of June 30, 2019 $ 735

Amount
Allowance for loan losses as of December 31, 2017 $ 691
Provision for loan losses 218
Contract receivables write-offs, net (204 )
Allowance for loan losses as of June 30, 2018 $ 705

The Company recorded a provision for loan losses of ~~$129 million and $238~~$315 million as a reduction of net revenues during the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020, and ~~$126 million and $218~~$109 million for the three ~~and six~~ months ended ~~June 30, 2018, respectively.~~March 31, 2019. Due to the closure of resorts and sales centers and the current economic downturn resulting from COVID-19, 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 increased its loan loss allowance. This was reflected as a $225 million reduction to Vacation ownership interest sales and a $55 million reduction to (Recovery)/cost of vacation ownership interests on the Condensed Consolidated Statements of (Loss)/Income.

Estimating the amount of the additional loan loss allowance for COVID-19 involved the use of significant estimates and assumptions. Management based its estimates on the Company’s historical data during the most recent recession in 2008 utilizing the relationship between unemployment rates and net new defaults. The Company’s estimate assumes that it would take approximately 18 months for employment rates to return to the levels pre-COVID-19. The Company will update these estimates as more data is available.

Credit Quality for Financed Receivables and the Allowance for Credit Losses

The basis of the differentiation within the identified class of financed VOI contract receivables is the consumer’s Fair Isaac Corporation (“FICO”) score. A FICO score is a branded version of a consumer credit score widely used inwithin the ~~United States~~U.S. by the largest banks and lending institutions. FICO scores range from 300 to 850 and are calculated based on information obtained from one or more of the three major U.S. credit reporting agencies that compile and report on a consumer’s credit history. The Company updates its records for all active VOI contract receivables with a balance due on a rolling monthly basis to ensure that all VOI contract receivables are scored at least every six months. The Company groups all VOI contract receivables into five different categories: FICO scores ranging from 700 to 850, from 600 to 699, below 600, no score (primarily comprised of consumers for whom a score is not readily available, including consumers declining access to FICO scores and non-U.S. residents), and Asia Pacific (comprised of receivables in the Company’s Wyndham Vacation Club Asia Pacific business for which scores are not readily available).

~~Table of Contents~~

The following table details an aging analysis of financing receivables using the most recently updated FICO scores, ~~(based~~based on the policy described ~~above)~~above (in millions):


	As of June 30, 2019												As of March 31, 2020
	700+		600-699		<600		No Score		Asia Pacific		Total		700+		600-699		<600		No Score		Asia Pacific		Total
Current	$	1,988	$	1,056	$	195	$	135	$	249	$	3,623	$	1,941	$	1,021	$	220	$	130	$	221	$	3,533
31 - 60 days	19		26		19		5		2		71		24		34		18		5		2		83
61 - 90 days	14		17		13		3		1		48		15		23		18		4		1		61
91 - 120 days	11		13		14		3		—		41		11		16		16		2		—		45
Total	$	2,032	$	1,112	$	241	$	146	$	252	$	3,783	$	1,991	$	1,094	$	272	$	141	$	224	$	3,722

	As of December 31, 2018												As of December 31, 2019
	700+		600-699		<600		No Score		Asia Pacific		Total		700+		600-699		<600		No Score		Asia Pacific		Total
Current	$	1,996	$	1,041	$	166	$	135	$	246	$	3,584	$	2,019	$	1,049	$	196	$	134	$	250	$	3,648
31 - 60 days	22		35		18		6		2		83		25		37		21		5		2		90
61 - 90 days	15		22		13		3		1		54		18		28		17		3		1		67
91 - 120 days	12		17		16		4		1		50		13		21		24		3		1		62
Total	$	2,045	$	1,115	$	213	$	148	$	250	$	3,771	$	2,075	$	1,135	$	258	$	145	$	254	$	3,867

The Company ceases to accrue interest on VOI contract receivables once the contract has remained delinquent for greater than 90 days. At greater than 120 days, the VOI contract receivable is written off to the allowance for loan losses. In accordance with its policy, the Company assesses the allowance for loan losses using a static pool methodology and thus does not assess individual loans for impairment separate from the pool.

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The following table details the year of origination of financing receivables using the most recently updated FICO scores, based on the policy described above (in millions):



	As of March 31, 2020
	700+		600-699		<600		No Score		Asia Pacific		Total
2020	$	202	$	83	$	1	$	16	$	34	$	336
2019	695		410		79		41		84		1,309
2018	437		244		76		29		38		824
2017	276		149		49		21		23		518
2016	159		82		27		13		16		297
Prior	222		126		40		21		29		438
Total	$	1,991	$	1,094	$	272	$	141	$	224	$	3,722

	As of December 31, 2019
	700+		600-699		<600		No Score		Asia Pacific		Total
2019	$	866	$	454	$	54	$	53	$	119	$	1,546
2018	486		285		80		32		49		932
2017	303		166		51		23		29		572
2016	173		89		29		14		20		325
2015	99		56		17		9		14		195
Prior	148		85		27		14		23		297
Total	$	2,075	$	1,135	$	258	$	145	$	254	$	3,867


8.9.	Inventory

Inventory consisted ~~of:~~of (in millions):


	June 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Land held for VOI development	$	4	$	4	$	3	$	3
VOI construction in process	25		45		21		24
Inventory sold subject to repurchase	29		33		24		24
Completed VOI inventory	817		797		822		802
Estimated VOI recoveries	279		286		322		281
Exchange & Rentals vacation credits and other	62		59
Vacation Exchange vacation credits and other					26		65
Total inventory	$	1,216	$	1,224	$	1,218	$	1,199

~~During the six months ended June 30, 2019 and 2018, the~~The Company had net transfers ~~of $12 million and $35 million, respectively,~~ of VOI inventory to property and ~~equipment.~~equipment of $12 million and $15 million during the three months ended March 31, 2020 and 2019.

Due to the closure of resorts and sales centers and the current economic downturn resulting from COVID-19, 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 increased its loan loss allowance by $225 million. In conjunction with this increased allowance the Company estimated $55 million of inventory recoveries which are included in Inventory on the Condensed Consolidated Balance Sheets as of March 31, 2020.

Additionally, as a result of resort closures and cancellations surrounding COVID-19, the Company recorded a $38 million reduction of exchange inventory consisting of costs previously incurred by RCI to provide enhanced out-of-network travel options to members. This write-off is included within Operating expenses on the Condensed Consolidated Statements of (Loss)/Income for the Vacation Exchange segment. The Company anticipates that remaining inventory will be fully utilized to maximize exchange supply for its members in 2020 and beyond.

Inventory Sale Transactions

During 2017, the Company acquired property located in Austin, Texas, from a third-party developer for vacation ownership inventory and property and equipment.

Table of Contents

During 2013, the Company sold real property located in Las Vegas, Nevada, and Avon, Colorado, to a third-party developer, consisting of vacation ownership inventory and property and equipment.

The Company recognized no0 gain or loss on these ~~sales~~sale transactions.

In accordance with ~~these~~the agreements with third-party developers, the Company has conditional rights and conditional obligations to repurchase the completed properties from the developers subject to the properties conforming to the Company's vacation ownership resort standards and provided that the third-party developers have not sold the properties to another party. ~~The Company’s~~Under the sale of real estate accounting guidance, the conditional rights and obligations of the Company constitute continuing involvement ~~therefore prohibiting~~and thus the Company ~~from accounting~~was unable to account for these transactions as sales.

~~During 2017, the Company acquired property located in Austin, Texas from a third-party developer for vacation ownership inventory and property and equipment.~~

Inventory Obligations

The following table summarizes the activity related to the Company’s inventory ~~obligations:~~obligations (in millions):


	Avon ^(a)			Las Vegas ^(a)			Austin ^(a)			Other ^(b)			Total
December 31, 2017	$	22		$	60		$	62		$	6		$	150
Purchases	—			11			—			89			100
Payments	(11		)	(16		)	(31		)	(88		)	(146		)
June 30, 2018	$	11		$	55		$	31		$	7		$	104
																Avon ^(a)			Las Vegas ^(a)			Austin ^(a)		Other ^(b)			Total
December 31, 2018	$	11		$	52		$	31		$	6		$	100		$	11		$	52		$	31	$	6		$	100
Purchases	—			13			1			60			74			—			—			1		27			28
Payments	(11		)	(18		)	(32		)	(53		)	(114		)	(11		)	(18		)	—		(24		)	(53		)
June 30, 2019	$	—		$	47		$	—		$	13		$	60
March 31, 2019																$	—		$	34		$	32	$	9		$	75

December 31, 2019																$	—		$	43		$	—	$	6		$	49
Purchases																—			—			—		42			42
Payments																—			(19		)	—		(33		)	(52		)
March 31, 2020																$	—		$	24		$	—	$	15		$	39


^(a)	Included in Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets.


^(b)	Included in Accounts payable on the Condensed Consolidated Balance Sheets.

The Company has committed to repurchase the completed property located in Las Vegas, Nevada, from a third-party ~~developer~~developers subject to the property meeting the Company’s vacation ownership resort standards and provided that the third-party ~~developer has~~developers have not sold the property to another party. The maximum potential future payments that the Company may be required to make under ~~these commitments~~this commitment was ~~$142~~$106 million as of ~~June 30, 2019.~~March 31, 2020.


9.10.	Property and Equipment

Property and equipment, net, consisted ~~of:~~of (in millions):


	June 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Land	$	32	$	30	$	29	$	28
Building and leasehold improvements	618		588		581		572
Furniture, fixtures and equipment	242		250		222		218
Capitalized software	631		604		655		652
Finance leases	11		12		9		14
Construction in progress	49		81		45		40
Total property and equipment	1,583		1,565		1,541		1,524
Less: Accumulated depreciation and amortization	868		853		859		844
Net property and equipment	$	715	$	712
Property and equipment, net					$	682	$	680

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~~10.~~11.	Debt

The Company’s indebtedness consisted ~~of:~~of (in millions):


	June 30, 2019			December 31, 2018		March 31, 2020		December 31, 2019
Non-recourse vacation ownership debt: ^(a)
Term notes ^(b)	$	1,769		$	1,839	$	1,711	$	1,969
$800 million bank conduit facility (due August 2021) ^(c)	605			518
USD bank conduit facility (due August 2021) ^(c)						623		508
AUD/NZD bank conduit facility (due September 2021)^(d)						79		64
Total	$	2,374		$	2,357	$	2,413	$	2,541
			��
Debt: ^(d)
$1.0 billion secured revolving credit facility (due May 2023) ^(e)	$	368		$	181
Debt: ^(e)
$1.0 billion secured revolving credit facility (due May 2023) ^(f)						$	987	$	—
$300 million secured term loan B (due May 2025)	295			296		293		293
$40 million 7.375% secured notes (due March 2020)	40			40		—		40
$250 million 5.625% secured notes (due March 2021)	249			249		249		249
$650 million 4.25% secured notes (due March 2022) ^(f)	649			649
$400 million 3.90% secured notes (due March 2023) ^(g)	404			405
$650 million 4.25% secured notes (due March 2022) ^(g)						649		649
$400 million 3.90% secured notes (due March 2023) ^(h)						403		404
$300 million 5.40% secured notes (due April 2024)	298			297		298		298
$350 million 6.35% secured notes (due October 2025) ^(h)	342			341
$400 million 5.75% secured notes (due April 2027) ⁽ⁱ⁾	410			388
$350 million 6.35% secured notes (due October 2025) ⁽ⁱ⁾						343		342
$400 million 5.75% secured notes (due April 2027) ^(j)						409		409
$350 million 4.625% secured notes (due March 2030)						345		345
Finance leases	3			3		5		5
Other	—			32
Total	$	3,058		$	2,881	$	3,981	$	3,034

^(a)

Represents non-recourse debt that is securitized through bankruptcy-remote special purpose entities (“SPEs”), the creditors of which have no recourse to the Company for principal and interest. These outstanding borrowings (which legally are not liabilities of the Company) are collateralized by ~~$3.06~~$3.17 billion and ~~$3.03~~$3.12 billion of underlying gross ~~vacation ownership contract receivables~~VOCRs and related assets (which legally are not assets of the Company) as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018, respectively.~~2019.


^(b)	The carrying amounts of the term notes are net of debt issuance costs ~~aggregating~~of $20 million and ~~$21~~$23 million as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018, respectively.~~2019.


^(c)	The Company has a borrowing capability of $800 million under the ~~Sierra Receivable Funding Conduit II 2008-A~~USD bank conduit facility through August 2021. Borrowings under this facility are required to be repaid as the collateralized receivables amortize but no later than September 2022.


^(d)	The Company has a borrowing capability of 255 million Australian dollars (“AUD”) and 48 million New Zealand dollars (“NZD”) under the AUD/NZD bank conduit facility through September 2021. Borrowings under this facility are required to be repaid no later than September 2023.


^(e)	The carrying amounts of the secured notes and term loan are net of unamortized discounts of ~~$10 million and $11~~$12 million as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018, respectively,~~2019, and net of unamortized debt financing costs of $6 million and $7 million as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018, respectively.~~2019.

^(e)(f)

~~For the six months ended June 30, 2019, the~~The weighted average effective interest rate on borrowings from this facility ~~was 5.94%.~~were 3.21% and 5.19% as of March 31, 2020 and December 31, 2019. In late March 2020, the Company drew down its $1.0 billion secured revolving credit facility as a precautionary measure due to COVID-19. The Company currently has over $1 billion in Cash and cash equivalents on the Condensed Consolidated Balance Sheet at March 31, 2020.


^(f)(g)	Includes $1 million of unamortized gains from the settlement of a derivative as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.


^(g)(h)	Includes $5$4 million and $6$5 million of unamortized gains from the settlement of a derivative as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.


^(h)(i)	Includes $6 ~~million and $7~~ million of unamortized losses from the settlement of a derivative as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.


^(i)(j)	Includes $12 million and $13 million of unamortized gains from the settlement of a derivative ~~and $2 million increase in the carrying value resulting from a fair value hedge derivative~~ as of ~~June 30, 2019,~~March 31, 2020 and ~~$8 million decrease in the carrying value resulting from a fair value hedge derivative as of~~December 31, 2019.

Maturities and Capacity

The Company’s outstanding debt as of March 31, 2020, matures as follows (in millions):



	Non-recourse Vacation Ownership Debt		Debt		Total
Within 1 year	$	216	$	254	$	470
Between 1 and 2 years	818		654		1,472
Between 2 and 3 years	200		407		607
Between 3 and 4 years	201		991		1,192
Between 4 and 5 years	216		301		517
Thereafter	762		1,374		2,136
	$	2,413	$	3,981	$	6,394

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~~December 31, 2018. As of June 30, 2019, the variable interest rate on the notional portion of these notes was 4.59%, and the effective rate was 5.84%.~~

~~Sierra Timeshare 2019-1 Receivables Funding LLC~~

On March 20, 2019, the Company closed on a private placement of a series of term notes payable, issued by Sierra Timeshare 2019-1 Receivables Fundings LLC, with an initial principal amount of $400 million, which are secured by vacation ownership contract receivables and bear interest at a weighted average coupon rate of 3.57%. The advance rate for this transaction was 98.00%.

~~Sierra Timeshare Conduit Renewal~~

~~On April 24, 2019, the Company renewed its $800 million non-recourse vacation ownership conduit facility, extending the end of the commitment period from April 6, 2020 to August 30, 2021.~~

~~Fair Value Hedges~~

During the first quarter of 2017, the Company entered into pay-variable/receive-fixed interest rate swap agreements on its 5.75% secured notes with notional amounts of $400 million. The fixed interest rates on these notes were effectively modified to a variable LIBOR-based index. During June 2019, the Company terminated $350 million of these swap agreements resulting in a gain of $12 million, which will be amortized over the remaining life of the secured notes as a reduction to Interest expense on the Condensed Consolidated Statements of Income. The Company had $12 million of deferred gains associated with this transaction as of June 30, 2019, which are included within Debt on the Condensed Consolidated Balance Sheets.

~~Maturities and Capacity~~

~~The Company’s outstanding debt as of June 30, 2019 matures as follows:~~

Non-recourse Vacation Ownership Debt Debt Total
Within 1 year $ 195
$ 41
$ 236
Between 1 and 2 years 220
250
470
Between 2 and 3 years 724
649
1,373
Between 3 and 4 years 204
773
977
Between 4 and 5 years 217
298
515
Thereafter 814
1,047
1,861
$ 2,374
$ 3,058
$ 5,432

Required principal payments on the non-recourse vacation ownership debt are based on the contractual repayment terms of the underlying ~~vacation ownership contract receivables.~~VOCRs. Actual maturities may differ as a result of prepayments by the ~~vacation ownership contract receivable~~VOCR obligors.

As of ~~June 30, 2019,~~March 31, 2020, available capacity under the Company’s borrowing arrangements was as ~~follows:~~follows (in millions):


	Non-recourse Conduit Facilities ^(a)		Revolving Credit Facilities ^(b)		Non-recourse Conduit Facilities ^(a)		Revolving Credit Facilities ^(b)
Total capacity	$	800	$	1,000	$	985	$	1,000
Less: Outstanding borrowings	605		368		702		987
Less: Letters of credit	—		21		—		12
Available capacity	$	195	$	611	$	283	$	1


^(a)	Consists of the Company’s ~~Sierra Receivable Funding Conduit II 2008-A~~USD bank conduit facility and AUD/NZD bank conduit facility. The capacity of ~~this facility~~these facilities is subject to the Company’s ability to provide additional assets to collateralize additional non-recourse borrowings.


^(b)	Consists of the Company’s $1.0 billion secured revolving credit facility.

Debt Covenants

~~Table of Contents~~

measurement date. The interest coverage ratio is calculated by dividing consolidated EBITDA (as defined in the credit agreement) by consolidated interest expense (as defined in the credit agreement), both as measured on a trailing 12-month basis preceding the measurement date. As of ~~June 30, 2019, our~~March 31, 2020, the Company’s interest coverage ratio was ~~6.5~~6.8 to 1.0. The first lien leverage ratio is calculated by dividing consolidated first lien debt (as defined in the credit agreement) as of the measurement date by consolidated EBITDA (as defined in the credit agreement) as measured on a trailing 12-month basis preceding the measurement date. As of ~~June 30, 2019, our~~March 31, 2020, the Company’s first lien leverage ratio was 2.9 to 1.0. These ratios do not include interest expense or indebtedness related to any qualified securitization financing (as defined in the credit agreement). As of ~~June 30, 2019, we were~~March 31, 2020, the Company was in compliance with all of the financial covenants described above. The continued impact of COVID-19 on the Company’s industry and business will lead to a higher first lien leverage ratio in the future. Under the credit agreement, if this ratio exceeds 3.75 to 1.0, the interest rate on revolver borrowings would increase 25 basis points, and the Company would be subject to higher fees associated with its letters of credit.

Each of ~~our~~the Company’s non-recourse, securitized term notes, and the bank conduit facilities contain various triggers relating to the performance of the applicable loan pools. If the ~~vacation ownership contract receivables~~VOCRs pool that collateralizes one of ~~our~~the Company’s securitization notes fails to perform within the parameters established by the contractual triggers (such as higher default or delinquency rates), there are provisions pursuant to which the cash flows for that pool will be maintained in the securitization as extra collateral for the note holders or applied to accelerate the repayment of outstanding principal to the note holders. As of ~~June 30, 2019,~~March 31, 2020, all of ~~our~~the Company’s securitized loan pools were in compliance with applicable contractual triggers.

Interest Expense

~~During the three and six months ended June 30, 2019, the~~The Company incurred interest expense of ~~$40~~$41 million ~~and $82 million, respectively,~~during the three months ended March 31, 2020. Such amount consisted primarily of interest on debt, excluding non-recourse vacation ownership debt, ~~including~~and included an offset of less than $1 million of capitalized interest. Cash paid related to such interest was $39 million during the three months ended March 31, 2020.

The Company incurred interest expense of $41 million during the three months ended March 31, 2019. Such amount consisted primarily of interest on debt, excluding non-recourse vacation ownership debt, and included an offset of $1 million of capitalized ~~interest in each period. Such amounts are included within Interest expense on the Condensed Consolidated Statements of Income.~~interest. Cash paid related to such interest was ~~$79~~$40 million during the ~~six~~three months ended ~~June 30,~~March 31, 2019.

During the three and six months ended June 30, 2018, the Company incurred interest expense of $46 million and $91 million, respectively, on debt excluding non-recourse vacation ownership debt, including an offset of less than $1 million and $1 million of capitalized interest. Such amounts are included within Interest expense on the Condensed Consolidated Statements of Income. Cash paid related to such interest was $90 million during the six months ended June 30, 2018.

Interest expense incurred in connection with the Company’s non-recourse vacation ownership debt ~~during the three and six months ended June 30, 2019~~ was ~~$26~~$25 million and ~~$52 million, respectively, and $20 million and $39~~$26 million during the three ~~and six~~ months ended ~~June 30, 2018, respectively,~~March 31, 2020 and 2019, and is recorded within Consumer financing interest on the Condensed Consolidated Statements of (Loss)/Income. Cash paid related to such interest was ~~$41~~$19 million and ~~$25~~$20 million for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 and ~~2018.~~2019.

~~Transition from LIBOR~~

~~The Company is currently evaluating the impact~~Table of the transition from LIBOR as an interest rate benchmark to other potential alternative reference rates, including but not limited to the Secured Overnight Financing Rate (“SOFR”). Currently the Company has several debt and derivative instruments in place that reference LIBOR-based rates. The transition from LIBOR is estimated to take place in 2021 and management will continue to actively assess the related opportunities and risks involved in this transition.Contents


~~11.~~12.	Variable Interest Entities

In accordance with the applicable accounting guidance for the consolidation of a variable interest entity (“VIE”), the Company analyzes its variable interests, including loans, guarantees, ~~special purpose entities (“SPEs”)~~SPEs, and equity investments, to determine if an entity in which the Company has a variable interest is a VIE. If the entity is considered to be a VIE, the Company determines whether it would be considered the entity’s primary beneficiary. The Company consolidates into its financial statements those VIEs for which it has determined that it is the primary beneficiary.

Vacation Ownership Contract Receivables Securitizations

The Company pools qualifying ~~vacation ownership contract receivables~~VOCRs and sells them to bankruptcy-remote entities. ~~Vacation ownership contract receivables~~VOCRs qualify for securitization based primarily on the credit strength of the VOI purchaser to whom financing has been extended. ~~Vacation ownership contract receivables~~VOCRs are securitized through bankruptcy-remote SPEs that are consolidated within the Company’s financial statements. As a result, the Company does not recognize gains or losses resulting from these securitizations at the time of sale to the SPEs. Interest income is recognized when earned over the contractual life of the ~~vacation ownership contract receivables.~~VOCRs. The Company services the securitized ~~vacation ownership contract receivables~~VOCRs pursuant to servicing agreements negotiated on an arm’s-length basis based on market conditions. The activities of these SPEs are limited to (i) purchasing ~~vacation ownership contract receivables~~VOCRs from the Company’s vacation ownership subsidiaries, (ii) issuing debt securities and/or borrowing under a conduit facility to fund such purchases, and (iii) entering into derivatives to hedge interest rate exposure. The bankruptcy-remote SPEs are legally separate from the Company. The receivables held by the bankruptcy-remote SPEs are not available to creditors of the Company and legally are not assets of the Company. Additionally, the non-recourse debt that is securitized through the SPEs is legally not a liability of the Company and thus, the creditors of these SPEs have no recourse to the Company for principal and interest.

The assets and liabilities of these vacation ownership SPEs are as ~~follows:~~follows (in millions):


	June 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Securitized contract receivables, gross ^(a)	$	2,916	$	2,883	$	3,018	$	2,984
Securitized restricted cash ^(b)	118		120		118		110
Interest receivables on securitized contract receivables ^(c)	24		23		25		25
Other assets ^(d)	4		3		5		4
Total SPE assets	3,062		3,029		3,166		3,123
Non-recourse term notes ^{(e) (f)}	1,769		1,839		1,711		1,969
Non-recourse conduit facilities ^(e)	605		518		702		572
Other liabilities ^(g)	6		3		4		4
Total SPE liabilities	2,380		2,360		2,417		2,545
SPE assets in excess of SPE liabilities	$	682	$	669	$	749	$	578


^(a)	~~Included~~The Company does not allocate allowance for loan losses to SPEs. This amount is included in Vacation ownership contract receivables, net on the Condensed Consolidated Balance Sheets.


^(b)	Included in Restricted cash on the Condensed Consolidated Balance Sheets.


^(c)	Included in Trade receivables, net on the Condensed Consolidated Balance Sheets.


^(d)	Primarily includes deferred financing costs for the bank conduit facility and a security investment asset, which is included in Other assets on the Condensed Consolidated Balance Sheets.


^(e)	Included in Non-recourse vacation ownership debt on the Condensed Consolidated Balance Sheets.


^(f)	Includes deferred financing costs of $20 million and ~~$21~~$23 million as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018, respectively,~~2019, related to non-recourse debt.


^(g)	Primarily includes accrued interest on non-recourse debt, which is included in Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets.

In addition, the Company has ~~vacation ownership contract receivables~~VOCRs that have not been securitized through bankruptcy-remote SPEs. Such gross receivables were ~~$867~~$704 million and ~~$888~~$883 million as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018, respectively.~~2019. A summary of total vacation ownership receivables and other securitized assets, net of securitized liabilities and the allowance for loan losses, is as follows (in millions):



	March 31, 2020		December 31, 2019
SPE assets in excess of SPE liabilities	$	749	$	578
Non-securitized contract receivables	704		883
Less: Allowance for loan losses	930		747
Total, net	$	523	$	714

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~~A summary of total vacation ownership contract receivables and other securitized assets, net of non-recourse liabilities and the allowance for loan losses, is as follows:~~

June 30,
2019 December 31,
2018
SPE assets in excess of SPE liabilities $ 682
$ 669
Non-securitized contract receivables 867
888
Less: Allowance for loan losses 735
734
Total, net $ 814
$ 823

Saint Thomas, U.S. Virgin Islands Property

During 2015, the Company sold real property located in Saint Thomas, U.S. Virgin Islands, to a third-party developer to construct VOI inventory through an SPE. In accordance with the agreements with the third-party developer, the Company ~~has~~had conditional rights and conditional obligations to repurchase the completed property from the developer subject to the property conforming to the Company's vacation ownership resort standards and provided that the third-party developer ~~has~~had not sold the property to another party.

As a result of a disruption to VOI sales caused by the impact of the hurricanes on Saint Thomas, U.S. Virgin Islands, in 2017 there was a change in the economics of the transaction due to a reduction in the fair value of the assets of the SPE. As such, the Company is now considered the primary beneficiary for specified assets and liabilities of the SPE, and therefore consolidated ~~$64 million of Property and equipment and $104 million of Debt on its Condensed Consolidated Balance Sheet. As a result of~~ this ~~consolidation, the Company incurred a non-cash $37 million loss due to a write-down of property and equipment to fair value.~~SPE. During the first quarter of 2019, the Company made its final purchase of VOI inventory from the SPE, and the debt was extinguished.

~~The assets and liabilities of the Saint Thomas Property SPE were as follows:~~

December 31,
2018
Property and equipment, net $ 23
Total SPE assets 23
Debt ^(a)
32
Total SPE liabilities 32
SPE equity (deficit) $ (9 )


^(a)	~~Included $32 million relating to mortgage notes, which were included in Debt on the Condensed Consolidated Balance Sheets as of December 31, 2018.~~

During the ~~six~~three months ended ~~June 30,~~March 31, 2019, ~~and 2018,~~ the SPE conveyed $23 million ~~and $17 million, respectively,~~ of property and equipment to the Company.


~~12.~~13.	Fair Value

The Company measures its financial assets and liabilities at fair value on a recurring basis and utilizes the fair value hierarchy to determine such fair values. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

Level 1: Quoted prices for identical instruments in active markets.

Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value driver is observable.

Level 3: Unobservable inputs used when little or no market data is available.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement falls has been determined based on the lowest level input (closest to Level 3) that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The Company’s derivative instruments ~~primarily~~currently consist of ~~receive-fixed/pay-variable interest rate swaps,~~ interest rate caps and foreign exchange forward contracts.

As of ~~June 30, 2019,~~March 31, 2020, the Company had ~~interest rate swap contracts and~~ foreign exchange contracts ~~resulting~~which resulted in $1$2 million ~~and less than $1 million, respectively,~~ of assets which are included within Other assets and $1 million of liabilities which are included within Accrued expenses and other liabilities on the Condensed Consolidated Balance ~~Sheet.~~Sheets. On a recurring basis, such assets and liabilities (all of which are Level 2) are remeasured at estimated fair value ~~(all of which are Level 2)~~ and thus are equal to the carrying value.

For assets and liabilities that are measured using quoted prices in active markets, the fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs. Assets and liabilities that are measured using other significant observable inputs are valued by reference to similar assets and liabilities. For these items, a significant portion of fair value is derived by reference to quoted prices of similar assets and liabilities in active markets. For assets and liabilities that are measured using significant unobservable inputs, fair value is primarily derived using a fair value model, such as a discounted cash flow model.

The fair value of financial instruments is generally determined by reference to market values resulting from trading on a national securities exchange or in an over-the-counter market. In cases where quoted market prices are not available, fair value is based on estimates using present value or other valuation techniques, as appropriate. The carrying amounts of cash and cash equivalents, restricted cash, trade receivables, accounts payable, and accrued expenses and other current liabilities approximate fair value due to the short-term maturities of these assets and liabilities.

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The carrying amounts and estimated fair values of all other financial instruments ~~are~~were as ~~follows:~~follows (in millions):

June 30, 2019 December 31, 2018

Carrying
Amount
Estimated Fair Value
Carrying
Amount
Estimated Fair Value
Assets
Vacation ownership contract receivables, net $ 3,048
$ 3,721
$ 3,037
$ 3,662
Debt
Total debt $ 5,432
$ 5,520
$ 5,238
$ 4,604



	March 31, 2020				December 31, 2019
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets
Vacation ownership contract receivables, net (Level 3)	$	2,792	$	3,376	$	3,120	$	3,907
Liabilities
Debt (Level 2)	$	6,394	$	6,003	$	5,575	$	5,709

The Company estimates the fair value of its ~~vacation ownership contract receivables~~VOCRs using a discounted cash flow model which it believes is comparable to the model that an independent third-party would use in the current market. The model uses Level 3 inputs consisting of default rates, prepayment rates, coupon rates, and loan terms for the contract receivables portfolio as key drivers of risk and relative value that, when applied in combination with pricing parameters, determines the fair value of the underlying contract receivables.

The Company estimates the fair value of its non-recourse vacation ownership debt by obtaining Level 2 inputs comprised of indicative bids from investment banks that actively issue and facilitate the secondary market for timeshare securities. The Company estimates the fair value of its debt, excluding finance leases, using Level 2 inputs based on indicative bids from investment banks and determines the fair value of its secured notes using quoted market prices (such secured notes are not actively traded).


~~13.~~14.	Derivative Instruments and Hedging Activities

Foreign Currency Risk

The Company has foreign currency rate exposure to exchange rate fluctuations worldwide with particular exposure to the Euro, British pound, ~~Euro, the~~Australian and Canadian dollars, Mexican peso, and ~~Australian dollars and the Mexican peso.~~South African rand. The Company uses freestanding foreign currency forward contracts to manage a portion of its exposure to changes in foreign currency exchange rates associated with its foreign currency denominated receivables, payables, and forecasted earnings of foreign subsidiaries. Additionally, the Company has used foreign currency forward contracts designated as cash flow hedges to manage a portion of its exposure to changes in forecasted foreign currency denominated vendor payments. The amount of gains or losses relating to contracts designated as cash flow hedges that the Company expects to reclassify from Accumulated other comprehensive loss (“AOCL”) to earnings over the next 12 months is not material.

Interest Rate Risk

A portion of the debt used to finance the Company’s operations is exposed to interest rate fluctuations. The Company periodically uses ~~various hedging strategies and derivative~~ financial ~~instruments~~derivatives to ~~create a desired~~strategically adjust its mix of fixed ~~and~~to floating rate ~~assets and liabilities. Derivative~~debt. The derivative instruments ~~currently used in these hedging strategies~~utilized include ~~swaps. Interest~~interest rate swaps ~~are used to~~which convert ~~specific fixed-rate~~fixed–rate debt into ~~variable-rate~~variable–rate debt (i.e., fair value hedges) to manage the overall interest cost. For relationships designated as fair value hedges, changes in fair value of the derivatives ~~were~~are recorded in income, with offsetting adjustments to ~~income, partially offset by changes in~~ the ~~fair value~~carrying amount of the hedged debt. ~~The difference in these values resulted in an immaterial impact to~~As of March 31, 2020, the ~~Condensed Consolidated Statements of Income.~~Company had 0 fair value interest rate hedges.

Losses on derivatives recognized in AOCL for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018~~ were not material.


~~14.~~15.	Income Taxes

The Company files U.S. federal, state and foreign income tax returns in ~~the U.S. federal and state~~ jurisdictions ~~as well as in foreign jurisdictions.~~with varying statutes of limitations. The Company is no longer subject to U.S. federal income tax examinations for years prior to ~~2015.~~2016. In addition, with few exceptions, the Company is no longer subject to state, local or foreign income tax examinations for years prior to 2010.

The Company’s effective tax rate decreased from ~~146.2%~~27.7% during the three months ended ~~June 30, 2018~~March 31, 2019, to ~~27.2%~~24.7% during the three months ended ~~June 30, 2019~~March 31, 2020, primarily due to an increase in the ~~absence of non-cash state tax charges~~valuation allowance associated with foreign tax credit carryforwards, which reduced the ~~separation of~~overall benefit for income taxes in the ~~hotel business.~~

The Company’s effective tax rate decreased from 68.1% during the six months ended June 30, 2018 to 27.1% during the six months ended June 30, 2019 primarily due to the absence of non-cash tax charges from certain internal restructurings associated with the sale of the European vacation rentals business and non-cash state tax charges associated with the separation of the hotel business during 2018; partially offset by excess tax benefits in relation to stock based compensation in 2018.current year.

The Company made cash income tax payments, net of tax refunds, of ~~$53~~$5 million and ~~$92~~$2 million during the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 and 2018, respectively. The Company also made cash income tax payments of $39 million during the six months ended June 30, 2019 resulting from the sale of the Company’s European vacation rentals business. In addition, the Company made cash income tax payments, net of refunds, of $10 million during the six months ended June 30, 2018 related to discontinued operations.

~~15. Leases~~

The Company adopted the new Leases accounting standard as of January 1, 2019, resulting in the recognition of $158 million of right-of-use assets and $200 million of related lease liabilities. Right-of-use assets were decreased by $42 million of tenant improvement allowances and deferred rent balances reclassified from other liabilities. Both the right-of-use assets and related lease liabilities recognized upon adoption included $21 million associated with the Company’s held-for-sale business. The new standard requires a lessee to recognize right-of-use assets and lease liabilities on the balance sheet for all lease obligations and disclose key information about leasing arrangements, such as the amount, timing, and uncertainty of cash flows arising from leases. We adopted the standard using the modified retrospective approach; therefore, prior year financial statements were not recast. We elected the package of transition provisions available for expired or existing contracts, which allowed us to carryforward our historical assessments of (i) whether contracts are leases or contain leases, (ii) lease classification and (iii) initial direct costs.2019.

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~~We lease~~Tax positions are reviewed at least quarterly and adjusted as new information becomes available. The recoverability of deferred tax assets is evaluated by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, available tax planning strategies and forecasted operating earnings. These estimates of future taxable income inherently require significant judgment. To the extent it is considered more likely than not that a deferred tax asset will be not recovered, a valuation allowance is established. The significant negative impacts of COVID-19 resulted in the establishment of additional valuation allowances in the first quarter of 2020 of $3 million related to foreign tax credits.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was established to provide emergency assistance and health care for individuals, families, and businesses affected by COVID-19 and generally support the U.S. economy. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. The Company expects to take advantage of the payroll tax credits and deferral of the social security payments. The Company will also have additional depreciation deductions relating to qualified improvement property. The Company has not completed the full analysis of the impact of the CARES Act.


16.	Leases

The Company leases property and equipment under finance and operating leases for ~~our~~its corporate headquarters, administrative functions, marketing and sales offices, and various other facilities and equipment. For leases with terms greater than 12 months, ~~we record~~the Company records the related asset and obligation at the present value of lease payments over the term. Many of ~~our~~its leases include rental escalation clauses, lease incentives, renewal options and/or termination options that are factored into ~~our~~the Company’s determination of lease payments. The Company elected the hindsight practical expedient to determine the reasonably certain lease term for existing leases. The Company also made an accounting policy election to keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments on a straight-line basis over the lease term in the ~~income statement.~~statements of (loss)/income.

When available, ~~we use~~the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of ~~our~~its leases do not provide a readily determinable implicit rate. Therefore, wethe Company must estimate ~~our~~its incremental borrowing rate to discount the lease payments based on information available at lease commencement. ~~Our~~The majority of the Company’s leases have remaining lease terms of one ~~year~~ to 20 years, some of which include options to extend the leases for up to ~~five~~10 years, and some of which include options to terminate the leases within one year.

~~As of June 30, 2019, the~~The Company had right-of-use assets of $137 million and $136 million and related lease liabilities of ~~$182 million.~~$181 million and $180 million as of March 31, 2020 and December 31, 2019. Right-of-use assets are included within Other assets, and the related lease liabilities are included within Accrued expenses and other liabilities on the ~~balance sheet.~~Condensed Consolidated Balance Sheets.

The table below presents certain information related to the lease costs for finance and operating ~~leases:~~leases (in millions):


	Three Months Ended		Six Months Ended		Three Months Ended
	June 30,		June 30,		March 31,
	2019		2019		2020		2019
Operating lease cost	$	8	$	17	$	8	$	9

Short-term lease cost	$	5	$	10	$	5	$	5

Finance lease cost:
Amortization of right-of-use assets	$	—	$	1	$	1	$	—
Interest on lease liabilities	—		—		—		—
Total finance lease cost	$	—	$	1	$	1	$	—

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The table below presents supplemental cash flow information related to ~~leases:~~leases (in millions):


	Six Months Ended		Three Months Ended
	June 30,		March 31,
	2019		2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	20	$	10	$	10
Operating cash flows from finance leases	$	—	—		—
Financing cash flows from finance leases	$	1	1		—
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	22	$	7	$	4
Finance leases	$	1	1		—

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The table below presents the lease-related assets and liabilities recorded on the balance ~~sheet:~~sheets:


	Balance Sheet Classification	June 30, 2019			Balance Sheet Classification	March 31, 2020			December 31, 2019
Operating Leases:
Operating Leases (in millions):
Operating lease right-of-use assets	Other assets	$	137		Other assets	$	137		$	136
Operating lease liabilities	Accrued expenses and other liabilities	$	182		Accrued expenses and other liabilities	$	181		$	180

Finance Leases:
Finance Leases (in millions):
Finance lease assets ^(a)	Property and equipment, net	$	3		Property and equipment, net	$	5		$	5
Finance lease liabilities	Debt	$	3		Debt	$	5		$	5

Weighted Average Remaining Lease Term:
Operating leases		9.4 years				7.6 years			7.8 years
Finance leases		2.1 years				2.9 years			2.8 years
Weighted Average Discount Rate:
Operating leases ^(b)		6.7		%		6.2		%	6.2		%
Finance leases		4.3		%		4.2		%	4.2		%

(a)Presented net of accumulated depreciation.

(b)Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.

The table below presents maturities of lease liabilities as of ~~June 30, 2019:~~March 31, 2020 (in millions):


	Operating Leases			Finance Leases		Operating Leases			Finance Leases
Six months ending December 31, 2019	$	20		$	1
2020	36			1
Nine months ending December 31, 2020						$	29		$	2
2021	30			1		34			2
2022	27			—		31			1
2023	25			—		28			—
2024						28			—
Thereafter	110			—		76			—
Total minimum lease payments	248			3		226			5
Less: Amount of lease payments representing interest	(66		)	—		(45		)	—
Present value of future minimum lease payments	$	182		$	3	$	181		$	5

The table below presents future minimum lease payments required under non-cancelable operating leases as reported in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on February 26, 2019:

December 31, 2018
2019 $ 34
2020 30
2021 26
2022 24
2023 22
Thereafter 99
Future minimum lease payments $ 235

~~During 2018, the Company incurred total rental expense of $61 million for continuing operations and $9 million for discontinued operations.~~

Subsequent to the spin-off of Wyndham Hotels and in accordance with the Company’s decision to further reduce its corporate footprint, the Company focused on rationalizing existing facilities which included abandoning portions of its administrative offices in New Jersey. As a result, during the second quarter of 2019 the Company recorded $10 million of non-cash impairment charges associated with the write-off of right-of-use assets and furniture, fixtures and equipment.

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~~These impairment charges are included within Separation and related costs on the Condensed Consolidated Statements of Income.~~


17.	~~16.~~ Commitments and Contingencies

The Company is involved in claims, legal and regulatory proceedings, and governmental inquiries related to ~~the Company’s~~its business, none of which, in the opinion of management, is expected to have a material effect on ~~our~~the Company’s results of operations or financial condition.

Wyndham Destinations Litigation

The Company may be from time to time involved in claims, legal and regulatory proceedings, and governmental inquiries arising in the ordinary course of its business including but not limited to: for its vacation ownership business–breach of contract, bad faith, conflict of interest, fraud, consumer protection and other statutory claims by property owners’ associations, owners and prospective owners in connection with the sale or use of VOIs or land, or the management of vacation ownership resorts, construction defect claims relating to vacation ownership units or resorts or in relation to guest reservations and bookings; and negligence, breach of contract, fraud, consumer protection and other statutory claims by guests and other consumers for alleged injuries sustained at or acts or occurrences related to vacation ownership units or resorts or in relation to guest reservations and bookings; for its vacation exchange ~~and rentals~~ business–breach of contract, fraud and bad faith claims by affiliates and customers in connection with their respective agreements, negligence, breach of contract, fraud, consumer protection and other statutory claims asserted by members, guests and other consumers for alleged injuries sustained at or acts or occurrences related to affiliated resorts, ~~and vacation rental properties,~~ or in relation to guest reservations and bookings; and for each of its businesses, bankruptcy proceedings involving efforts to collect receivables from a debtor in bankruptcy, employment matters including but not limited to, claims of wrongful termination, retaliation, discrimination, harassment and wage and hour claims, whistleblower claims, claims of infringement upon third parties’ intellectual property rights, claims relating to information security, privacy and consumer protection, fiduciary duty/trust claims, tax claims, environmental claims, and landlord/tenant disputes.

The Company records an accrual for legal contingencies when it determines, after consultation with outside counsel, that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In making such determinations, the Company evaluates, among other things, the degree of probability of an unfavorable outcome and, when it is probable that a liability has been incurred, the Company’s ability to make a reasonable estimate of loss. The Company reviews these accruals each ~~reporting period~~fiscal quarter and makes revisions based on changes in facts and circumstances including changes to its strategy in dealing with these matters.

The Company believes that it has adequately accrued for such matters with reserves of ~~$13~~$11 million and ~~$14~~$13 million as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019. Such reserves are exclusive of matters relating to the Company’s separation from Cendant, matters relating to the Spin-off, matters relating to the sale of the European vacation rentals business, and matters relating to the sale of the ~~European vacations~~North American vacation rentals business, which are discussed in Note ~~22—~~25—Transactions with Former Parent and Former Subsidiaries. For matters not requiring accrual, the Company believes that such matters will not have a material effect on its results of operations, financial position or cash flows based on information currently available.L ~~However, litigation~~itigation is inherently unpredictable and, although the Company believes that its accruals are adequate and/or that it has valid defenses in these matters, unfavorable results could occur. As such, an adverse outcome from such proceedings for which claims are awarded in excess of the amounts accrued, if any, could be material to the Company with respect to earnings and/or cash flows in any given reporting period. As of ~~June 30, 2019,~~March 31, 2020, the potential exposure resulting from adverse outcomes of such legal proceedings could, in the aggregate, range up to ~~$48~~$34 million in excess of recorded accruals. However, the Company does not believe that the impact of such litigation should result in a material liability to the Company in relation to its consolidated financial position and/or liquidity.

For matters deemed reasonably possible, therefore not requiring accrual, the Company believes that such matters will not have a material effect on its results of operations, financial position or cash flows based on information currently available. As of March 31, 2020, the potential exposure resulting from adverse outcomes of such legal proceedings could, in the aggregate, range to an amount that is less than $1 million.

GUARANTEES/INDEMNIFICATIONS

Standard Guarantees/Indemnifications

In the ordinary course of business, the Company enters into agreements that contain standard guarantees and indemnities whereby the Company indemnifies another party for specified breaches of, or third-party claims relating to, an underlying agreement. Such underlying agreements are typically entered into by one of the Company’s subsidiaries. The various underlying agreements generally govern purchases, sales or outsourcing of products or services, leases of real estate, licensing of software and/or development of vacation ownership properties, access to credit facilities, derivatives and issuances of debt securities. Also in the ordinary course of business, the Company provides corporate guarantees for its operating business units relating to merchant credit-card processing for prepaid customer stays and other deposits. While a majority of these guarantees and indemnifications extend only for the duration of the underlying agreement, some survive the expiration of the agreement. The Company is not able to estimate the maximum potential amount of future payments to

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be made under these guarantees and indemnifications as the triggering events are not predictable. In certain cases, the Company maintains insurance coverage that may mitigate any potential payments.

Other Guarantees and Indemnifications

Vacation Ownership

The Company has committed to repurchase completed property located in Las Vegas, Nevada, from a third-party developer subject to such property meeting the Company’s vacation ownership resort standards and provided that the third-party developer has not sold such property to another party. See Note 8—9—Inventory for additional details.

For information on guarantees and indemnifications related to the Company’s former parent and subsidiaries see Note ~~22—~~25—Transactions with Former Parent and Former Subsidiaries.


18.	Accumulated Other Comprehensive (Loss)/Income

The components of accumulated other comprehensive (loss)/income are as follows (in millions):



	Foreign			Unrealized			Defined		Accumulated
	Currency			(Losses)/Gains			Benefit		Other
	Translation			on Cash Flow			Pension		Comprehensive
Pretax	Adjustments			Hedges			Plans		(Loss)/Income
Balance, December 31, 2019	$	(148	)	$	(1	)	$	1	$	(148	)
Other comprehensive loss	(65		)	—			—		(65		)
Balance, March 31, 2020	$	(213	)	$	(1	)	$	1	$	(213	)



Tax
Balance, December 31, 2019	$	95	$	1	$	—	$	96
Other comprehensive loss	—		—		—		—
Balance, March 31, 2020	$	95	$	1	$	—	$	96



Net of Tax
Balance, December 31, 2019	$	(53	)	$	—	$	1	$	(52	)
Other comprehensive loss	(65		)	—		—		(65		)
Balance, March 31, 2020	$	(118	)	$	—	$	1	$	(117	)

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	Foreign			Unrealized			Defined		Accumulated
	Currency			(Losses)/Gains			Benefit		Other
	Translation			on Cash Flow			Pension		Comprehensive
Pretax	Adjustments			Hedges			Plans		(Loss)/Income
Balance, December 31, 2018	$	(147	)	$	(2	)	$	2	$	(147	)
Other comprehensive income before reclassifications	2			—			—		2
Amount reclassified to earnings	—			1			—		1
Balance, March 31, 2019	$	(145	)	$	(1	)	$	2	$	(144	)

~~17. Accumulated Other Comprehensive (Loss)/Income~~

~~The components of Accumulated Other Comprehensive (Loss)/Income are as follows:~~

Foreign Unrealized Defined Accumulated
Currency (Losses) Benefit Other
Translation on Cash Flow Pension Comprehensive
Pretax Adjustments Hedges Plans (Loss)/Income
Balance, December 31, 2018 $ (147 ) $ (2 ) $ 2
$ (147 )
Other comprehensive income before
reclassifications
1
—
—
1
Amount reclassified to earnings —
1
—
1
Balance, June 30, 2019 $ (146 ) $ (1 ) $ 2
$ (145 )



Tax
Balance, December 31, 2018^(a)	$	94	$	2		$	(1	)	$	95
Other comprehensive loss before reclassifications	—		(1		)	—			(1		)
Amount reclassified to earnings	—		—			—			—
Balance, March 31, 2019	$	94	$	1		$	(1	)	$	94

Tax
Balance, December 31, 2018 ^(a)
$ 94
$ 2
$ (1 ) $ 95
Other comprehensive (loss) before
reclassifications
—
(1 ) —
(1 )
Amount reclassified to earnings —
—
—
—
Balance, June 30, 2019 $ 94
$ 1
$ (1 ) $ 94


Net of Tax
Balance, December 31, 2018	$	(53	)	$	—		$	1	$	(52	)	$	(53	)	$	—		$	1	$	(52	)
Other comprehensive income/(loss) before reclassifications	1			(1		)	—		—			2			(1		)	—		1
Amount reclassified to earnings	—			1			—		1			—			1			—		1
Balance, June 30, 2019	$	(52	)	$	—		$	1	$	(51	)
Balance, March 31, 2019												$	(51	)	$	—		$	1	$	(50	)


^(a)	Includes impact of the Company’s ~~early~~ adoption of ~~new~~ accounting guidance in the fourth quarter of 2018 which allows for the reclassification of the stranded tax effects resulting from the implementation of the Tax Cuts and Jobs Act of 2017. This adoption resulted in an $8 million reclassification of tax benefit from AOCL to Retained ~~Earnings.~~earnings.

Foreign Unrealized Defined Accumulated
Currency (Losses) Benefit Other
Translation on Cash Flow Pension Comprehensive
Pretax Adjustments Hedges Plans (Loss)/Income
Balance, December 31, 2017 $ (96 ) $ (2 ) $ (5 ) $ (103 )
Other comprehensive (loss) (44 ) —
—
(44 )
Amount reclassified to earnings 24
1
5
30
Balance, June 30, 2018 $ (116 ) $ (1 ) $ —
$ (117 )

Tax
Balance, December 31, 2017 $ 89
$ 2
$ 1
$ 92
Other comprehensive income 1
—
—

1
Amount reclassified to earnings —
(1 ) (1 ) (2 )
Balance, June 30, 2018 $ 90
$ 1
$ —
$ 91

Net of Tax
Balance, December 31, 2017 $ (7 ) $ —
$ (4 ) $ (11 )
Other comprehensive (loss) (43 ) —
—
(43 )
Amount reclassified to earnings 24
—
4
28
Balance, June 30, 2018 $ (26 ) $ —
$ —
$ (26 )

Currency translation adjustments exclude income taxes related to investments in foreign subsidiaries where the Company intends to reinvest the undistributed earnings indefinitely in those foreign operations.

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Reclassifications out of ~~accumulated other comprehensive (loss)/income~~AOCL are presented in the following table. Amounts in parenthesis indicate debits to the Condensed Consolidated Statements of ~~Income:~~(Loss)/Income (in millions):

Three Months Ended Six Months Ended
June 30, June 30,
2019 2018 2019 2018
Foreign currency translation adjustments, net
Gain on disposal of discontinued businesses, net of income taxes $ —
$ (24 ) $ —
$ (24 )
Net income attributable to Wyndham Destinations shareholders $ —
$ (24 ) $ —
$ (24 )

Unrealized losses on cash flow hedge, net
Gain on disposal of discontinued businesses, net of income taxes $ —
$ —
$ (1 ) $ —
Net income attributable to Wyndham Destinations shareholders $ —
$ —
$ (1 ) $ —

Defined benefit pension plans, net
Gain on disposal of discontinued businesses, net of income taxes $ —
$ (4 ) $ —
$ (4 )
Net income attributable to Wyndham Destinations shareholders $ —
$ (4 ) $ —
$ (4 )



	Three Months Ended
	March 31,
	2020		2019
Unrealized losses on cash flow hedge, net
Loss on disposal of discontinued businesses, net of income taxes	$	—	$	(1	)
Net (loss)/income attributable to Wyndham Destinations shareholders	$	—	$	(1	)


19.	~~18.~~ Stock-Based Compensation

The Company has a stock-based compensation plan available to grant RSUs, PSUs, SSARs, non-qualified stock options (“NQs”), and other stock-based awards to key employees, non-employee directors, advisors, and consultants.

The Wyndham Worldwide Corporation 2006 Equity and Incentive Plan was originally adopted in 2006 and was amended and restated in its entirety and approved by shareholders on May 17, 2018, (the “Amended and Restated Equity Incentive Plan”). Under the Amended and Restated Equity Incentive Plan, a maximum of 15.7 million shares of common stock may be awarded. As of ~~June 30, 2019, 13.8~~March 31, 2020, 12.1 million shares remain available.

Incentive Equity Awards Granted by the Company

~~During~~On March 4, 2020, the ~~six months ended June 30, 2019,~~Board of Directors approved the ~~Company granted~~Company’s annual incentive equity awards to key employees and senior officers totaling ~~$25~~$26 million in the form of RSUs, $7$8 million in the form of PSUs, and $5$8 million in the form of stock options. Of these awards, the majority of NQs and ~~majority of~~ RSUs will vest ratably over a period of ~~4 years, and the~~four years. The PSUs will cliff vest on the third anniversary of the grant ~~date;~~date, contingent upon the Company achieving certain performance metrics.

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The activity related to incentive equity awards granted to the Company’s key employees and senior officers by the Company for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020, consisted of the ~~following:~~following (in millions, except grant prices):


	Balance, December 31, 2018		Granted		Vested/Exercised			Balance, June 30, 2019^(a)			Balance, December 31, 2019		Granted		Vested/Exercised			Balance, March 31, 2020		^(a)
RSUs
Number of RSUs	0.9		0.5		(0.2		)	1.2		^(b)	1.0		0.6		(0.1		)	1.5		^(b)
Weighted average grant price	$	50.54	$	44.38	$	50.06		$	47.89		$	46.32	$	41.04	$	44.38		$	44.22

PSUs
Number of PSUs	—		0.2		—			0.2		^(c)	0.2		0.1		—			0.3		^(c)
Weighted average grant price	$	—	$	44.38	$	—		$	44.38		$	44.38	$	41.04	$	—		$	42.56

SSARs
Number of SSARs	0.2		—		—			0.2		^(d)	0.2		—		—			0.2		^(d)
Weighted average grant price	$	34.24	$	—	$	—		$	34.24		$	34.24	$	—	$	—		$	34.52

NQs
Number of NQs	0.8		0.6		—			1.4		^(e)	1.3		1.1		—			2.4		^(e)
Weighted average grant price	$	48.71	$	44.38	$	—		$	46.84		$	46.84	$	41.04	$	—		$	44.13


^(a)	The Company recognizes forfeitures as they occur. ~~The number of forfeitures during the six months ended June 30, 2019 was immaterial.~~


^(b)	Aggregate unrecognized compensation expense related to RSUs was ~~$48~~$58 million as of ~~June 30, 2019,~~March 31, 2020, which is expected to be recognized over a weighted average period of ~~3.3~~3.2 years.


^(c)	~~Maximum aggregate~~There was 0 unrecognized compensation expense related to PSUs ~~was $6 million~~ as of ~~June 30, 2019, which is expected to be recognized over a weighted average period of 3.7 years~~ March 31, 2020.


^(d)	There were 0.2 million SSARs that were exercisable as of ~~June 30, 2019.~~March 31, 2020. There was no0 unrecognized compensation expense related to SSARs as of ~~June 30, 2019~~March 31, 2020, as all SSARs were vested.


^(e)	Unrecognized compensation expense for NQs was $9$15 million as of ~~June 30, 2019,~~March 31, 2020, which is expected to be recognized over a weighted average period of ~~3.3~~3.4 years.

The fair ~~value~~values of stock options granted by the Company during ~~2019 was~~2020 were estimated on the date of ~~this~~ grant using the Black-Scholes option-pricing model with the relevant weighted average assumptions outlined in the table below. Expected volatility was based on both historical and implied volatilities of the Company’s stock and the stock of comparable companies over the estimated expected life for options. The expected life represents the period of time these awards are expected to be outstanding. ~~The-risk free~~The risk-free interest rate is based on yields on U.S. Treasury strips with a maturity similar to the estimated expected life of the options. The projected dividend yield was based on the Company’s anticipated annual dividend divided by the price of the Company’s stock on the date of the grant.

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Stock Options	2019			2020 ^(a)			2020 ^(b)
Grant date fair value	$	8.98		$	7.28		$	7.27
Grant date strike price	$	44.38		$	41.04		$	41.04
Expected volatility	29.97		%	32.60		%	32.88		%
Expected life	6.3 years			7.50 years			6.25 years
Risk-free interest rate	2.59		%	1.03		%	0.95		%
Projected dividend yield				4.87		%	4.87		%


^(a)	Stock options will cliff vest after a period of five years.


^(b)	Stock options will vest ratably over a period of four years.

Stock-Based Compensation Expense

The Company recorded stock-based compensation expense of $7$1 million and ~~$12~~$5 million during the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019, ~~and $110 million and $131 million during the three and six months ended June 30, 2018,~~ related to incentive equity awards granted to key employees, senior officers, and non-employee directors. ~~Such stock-based~~Stock-based compensation expense included ~~expense related to discontinued operations of $19 million and $22~~$2 million for the three ~~and six~~ months ended ~~June 30, 2018, respectively. Stock-based compensation expense of $2 million and $4 million for the three and six months ended June 30,~~March 31, 2019, ~~and $87 million and $92 million for the three and six months ended June 30, 2018, respectively,~~which has been classified within Separation and related costs ~~within~~in continuing ~~operations.~~operations in the Condensed Consolidated Statements of (Loss)/Income.

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The Company paid $1 ~~million and $67~~ million of taxes for the net share settlement of incentive equity awards that vested during the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 and ~~2018, respectively.~~

~~Employee Stock Purchase Plan~~

~~During 2019,~~NaN during the Company implemented an employee stock purchase plan. This plan allows eligible employees to purchase common shares of company stock through payroll deductions at a ten percent discount off the fair market value at the grant date. The Company issued 0.1 million shares and recognized less than $1 million of compensation expense related to the first grant under this plan in Junethree months ended March 31, 2019.


~~19.~~20.	Segment Information

The Company has two operating segments: Vacation Ownership and ~~Exchange & Rentals.~~Vacation Exchange. The Vacation Ownership segment develops, markets and sells VOIs to individual consumers, provides consumer financing in connection with the sale of VOIs, and provides property management services at resorts. The Vacation Exchange ~~& Rentals~~ segment provides leisure travelers with flexibility and access to a wide variety of accommodation options that include vacation ~~exchange services~~ownership resorts, hotels, privately-owned vacation homes, apartments, and ~~products to owners of VOIs and manages and markets vacation rental properties primarily on behalf of independent owners.~~condominiums around the world. During 2018, the Company decided to explore strategic alternatives for its North American vacation rentals business, which ~~is currently~~was part of its Vacation Exchange ~~& Rentals segment.~~segment and completed the sale of this business on October 22, 2019. The assets and liabilities of this business ~~have been~~were classified as ~~held-for-sale.~~held-for-sale until the sale was completed. This business did not meet the criteria to be classified as a discontinued operation; therefore, the results of operations through the date of sale are included in the results presented in the tables below. The reportable segments presented below represent the Company’s operating segments for which discrete financial information is available and which are utilized on a regular basis by its chief operating decision maker to assess performance and to allocate resources. In identifying its reportable segments, the Company also considers the nature of services provided by its operating segments. Management uses net revenues and Adjusted EBITDA to assess the performance of the reportable segments. Adjusted EBITDA is defined by the Company as Net (loss)/income before Depreciation and amortization, Interest expense (excluding Consumer financing interest), ~~Early~~early extinguishment of debt, Interest income (excluding Consumer financing revenues) and ~~Income taxes, each of which is presented on the Condensed Consolidated Statements of Income.~~income taxes. Adjusted EBITDA also excludes stock-based compensation costs, separation and restructuring costs, transaction costs, impairments, gains and losses on sale/disposition of business, and items that meet the conditions of unusual and/or infrequent. The Company believes that Adjusted EBITDA is a useful measure of performance for its segments which, when considered with GAAP measures, the Company believes gives a more complete understanding of its operating performance. The Company’s presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.

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The following tables present the Company’s segment information (in millions):


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
Net revenues	2019			2018			2019			2018			2020			2019
Vacation Ownership	$	810		$	770		$	1,493		$	1,431		$	409		$	683
Exchange & Rentals	230			238			466			484
Vacation Exchange													150			236
Total reportable segments	1,040			1,008			1,959			1,915			559			919
Corporate and other ^(a)	(1		)	(1		)	(2		)	(1		)	(1		)	(1		)
Total Company	$	1,039		$	1,007		$	1,957		$	1,914		$	558		$	918

	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
Reconciliation of Net income to Adjusted EBITDA	2019			2018			2019			2018
Net income attributable to Wyndham Destinations shareholders	$	124		$	378		$	204		$	412
Loss from operations of discontinued businesses, net of income taxes	—			42			—			49
Gain on disposal of discontinued businesses, net of income taxes	(6		)	(432		)	(5		)	(432		)
Provision for income taxes	44			38			74			62
Reconciliation of Net (loss)/income to Adjusted EBITDA													2020			2019
Net (loss)/income attributable to Wyndham Destinations shareholders													$	(134	)	$	80
Loss on disposal of discontinued businesses, net of income taxes													—			1
(Benefit)/provision for income taxes													(44		)	31
Depreciation and amortization	28			36			59			73			31			31
Interest expense	40			46			82			91			41			41
Interest (income)	(2		)	(2		)	(4		)	(3		)	(2		)	(2		)
Separation and related costs ^(b)	22			133			36			163
Exchange inventory write-off													38			—
COVID-19 related costs ^(b)													12			—
Asset impairments													10			—
Restructuring	1			—			4			—			2			3
Legacy items	(1		)	—			1			—
Stock-based compensation	5			4			8			17			1			3
Legacy items ^(c)													1			2
Separation and related costs ^(d)													—			15
Adjusted EBITDA	$	255		$	243		$	459		$	432		$	(44	)	$	205

	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
Adjusted EBITDA	2019			2018			2019			2018			2020			2019
Vacation Ownership	$	193		$	194		$	331		$	327		$	(73	)	$	138
Exchange & Rentals	72			70			151			149
Vacation Exchange													42			80
Total reportable segments	265			264			482			476			(31		)	218
Corporate and other ^(a)	(10		)	(21		)	(23		)	(44		)	(13		)	(13		)
Total Company	$	255		$	243		$	459		$	432		$	(44	)	$	205


^(a)	Includes the elimination of transactions between segments.


^(b)	Includes ~~$2 million~~severance and $4other costs associated with layoffs due to the COVID-19 workforce reduction.


^(c)	Represents the resolution of and adjustment to certain contingent liabilities resulting from the Spin-off, the sale of the European vacation rentals business, and the Company’s separation from Cendant.


^(d)	Includes $2 million of stock based compensation expenses for the three ~~and six~~ months ended ~~June 30, 2019 and $87 million and $92 million for the three and six months ended June 30, 2018.~~March 31, 2019.


Segment Assets ^(a)	June 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Vacation Ownership	$	5,565	$	5,421	$	5,321	$	5,582
Exchange & Rentals	1,409		1,376
Vacation Exchange					1,390		1,482
Total reportable segments	6,974		6,797		6,711		7,064
Corporate and other	220		158		1,065		389
Assets held-for-sale	272		203
Total Company	$	7,466	$	7,158	$	7,776	$	7,453


^(a)	Excludes investment in consolidated ~~subs.~~subsidiaries.

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~~20.~~21.	Separation and ~~Transaction~~Related Costs

During the three ~~and six~~ months ended ~~June 30,~~March 31, 2019, the Company incurred ~~$22 million and $36~~$15 million of expenses, in connection with the ~~spin-off of the hotel business completed on May 31, 2018 which are reflected within continuing operations. These~~ Spin-off related costs were related to stock compensation modification, severance and other employee costs, as well as impairment charges due to the write-off of right-of-use assets and furniture, fixtures and equipment as a result of the Company abandoning portions of its former corporate headquarters. This decision was part of the Company’s continued focus on rationalizing existing facilities in order to reduce its corporate footprint.

~~During the three and six months ended June 30, 2018, the Company incurred $133 million and $163 million of expenses, respectively, in connection with the spin-off of the hotel business~~ which are reflected in continuing operations. These costs were comprised of stock compensation ~~modification~~ expense, severance and other employee ~~costs offset, in part, by favorable foreign currency. In addition, these costs include certain impairment charges related to the separation including property sold to Wyndham Hotels.~~

Additionally, during the three and six months ended June 30, 2018, the Company incurred $72 million and $93 million of separation-related expenses, respectively, in connection with the Spin-off and sale of the European vacation rentals business which are reflected within discontinued operations. These expenses include legal, consulting and auditing fees, stock compensation modification expense, severance, and other employee-related costs.


~~21.~~22.	COVID-19 Related Items

During the three months ended March 31, 2020, the Company incurred $23 million of expenses in connection with COVID-19 which are included within COVID-19 related costs on the Condensed Consolidated Statements of (Loss)/Income. A reduction in workforce in March resulted in the layoff or furlough of approximately 9,000 employees. Of these costs, $21 million is related to severance and other employee costs resulting from the layoffs; as well as salary and benefits continuation for certain employees while operations are suspended, and vacation payments associated with furloughed employees. These charges consisted of (i) $17 million at the Vacation Ownership segment, (ii) $3 million at the Company’s corporate operations, and (iii) $1 million at the Vacation Exchange segment.

As of March 31, 2020, the Company had a liability of $20 million for COVID-19 employee related costs included within Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets. The activity associated with the Company’s COVID-19 related liabilities is summarized as follows (in millions):



	Liability as of							Liability as of
	December 31, 2019		Costs Recognized		Cash Payments			March 31, 2020
COVID-19 employee-related	$	—	$	21	$	(1	)	$	20
	$	—	$	21	$	(1	)	$	20

Due to the closure of resorts and sales centers and the current economic downturn resulting from COVID-19, 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 increased its loan loss allowance. This was reflected as a $225 million reduction to Vacation ownership interest sales and a $55 million reduction to (Recovery)/cost of vacation ownership interests on the Condensed Consolidated Statements of (Loss)/Income. The net negative impact of the additional provision related to COVID-19 on Adjusted EBITDA was $170 million. Refer to Note 8—Vacation Ownership Contract Receivables for additional details.

In addition to the impacts listed above, the Company wrote-off $38 million of exchange inventory included in Operating expenses on the Condensed Consolidated Statements of (Loss)/Income. The Company also performed an interim impairment analysis and identified asset impairments totaling $10 million included in Asset impairments on the Condensed Consolidated Statements of (Loss)/Income. Refer to Note 9—Inventory and Note 23—Impairments for additional details.

The table below presents the COVID-19 related impacts to the Company’s results of operations for the three months ended March 31, 2020, and the related classification on the Condensed Consolidated Statements of (Loss)/Income (in millions):



	Vacation Ownership			Vacation Exchange		Corporate		Consolidated			Income Statement Classification
Allowance for loan losses:
Provision	$	225		$	—	$	—	$	225		Vacation ownership interest sales
Recoveries	(55		)	—		—		(55		)	(Recovery)/cost of vacation ownership interests

Exchange inventory write-off	—			38		—		38			Operating expenses
Employee compensation related and other	19			1		3		23			COVID-19 related costs
Asset impairments	6			4		—		10			Asset impairments
Total COVID-19	$	195		$	43	$	3	$	241

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23.	Impairments

As a result of the impact on the business from COVID-19, the Company performed an interim impairment analysis on its property and equipment, inventory, intangible assets and certain other assets as of March 31, 2020. As a result of this analysis, the Company identified $6 million of impairments at its Vacation Ownership segment related to prepaid development costs and undeveloped land, and a $4 million impairment of the Love Home Swap tradename at its Vacation Exchange segment. These impairments are included within the Asset impairments line of the Condensed Consolidated Statements of (Loss)/Income.


24.	Restructuring

~~2018~~2019 Restructuring Plans

During ~~the fourth quarter of 2018,~~2019, the Company recorded ~~$16~~$5 million of charges related to restructuring initiatives, ~~all~~most of which ~~are~~were personnel-related resulting from a reduction of approximately ~~500~~100 employees. This action was primarily focused on enhancing organizational efficiency and rationalizing operations. The charges consisted of (i) ~~$11~~$2 million at the Vacation Ownership segment, (ii) $4$2 million at the Vacation Exchange ~~& Rentals~~ segment, and (iii) $1 million at the Company’s corporate operations. ~~During 2018, the~~The Company reduced its restructuring liability by $4$1 million of cash ~~payments.~~payments during 2019. During the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, the Company incurred an additional $2$1 million of restructuring expenses at its ~~corporate operations and an additional $2 million at its~~ Vacation ~~Ownership~~Exchange segment. The Company reduced its restructuring liability by $8$2 million of cash payments during the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. The remaining ~~2018~~2019 restructuring liability of $8$3 million is expected to be paid by the end of ~~2020.~~2021.

The Company has additional restructuring plans which were implemented prior to ~~2018.~~2019 for which the Company reduced the liabilities by $2 million of cash payments during the three months ended March 31, 2020. The remaining liability of ~~less than~~ $1 million as of ~~June 30, 2019~~March 31, 2020, is ~~related to leased facilities~~mostly personnel-related and is expected to be paid by ~~2020.~~the end of 2021.

The activity associated with the Company’s restructuring plans is summarized as ~~follows:~~follows (in millions):

Liability as of Liability as of
December 31, 2018 Costs Recognized Cash Payments June 30, 2019
Personnel-related $ 12
$ 4
$ (8 ) $ 8
$ 12
$ 4
$ (8 ) $ 8



	Liability as of							Liability as of
	December 31, 2019		Costs Recognized		Cash Payments			March 31, 2020
Personnel-related	$	7	$	1	$	(4	)	$	4
	$	7	$	1	$	(4	)	$	4


~~22.~~25.	Transactions with Former Parent and Former Subsidiaries

Matters Related to Cendant

Pursuant to the Cendant Separation and Distribution Agreement, the Company entered into certain guarantee commitments with Cendant and Cendant’s former subsidiary, Realogy. These guarantee arrangements primarily relate to certain contingent litigation liabilities, contingent tax liabilities, and Cendant contingent and other corporate liabilities, of which Wyndham Worldwide Corporation (“Wyndham Worldwide”) assumed 37.5% of the responsibility while Cendant’s former subsidiary Realogy is responsible for the remaining 62.5%. As a result of the Wyndham Worldwide separation, Wyndham Hotels agreed to retain one-third of Cendant’s contingent and other corporate liabilities and associated costs; therefore, Wyndham Destinations is effectively responsible for 25% of such matters subsequent to the separation. Since Cendant’s separation, Cendant settled the majority of the lawsuits pending on the date of the separation.

As of ~~June 30, 2019,~~March 31, 2020, the Cendant separation and related liabilities of ~~$14~~$13 million are comprised of $12 million for tax liabilities and $2$1 million for other contingent and corporate liabilities. As of December 31, 2019, the Company had $13 million of Cendant separation-related liabilities. These liabilities ~~were recorded~~are included within Accrued expenses and other liabilities on the Condensed Consolidated Balance ~~Sheet. As of December 31, 2018, the Company had~~

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~~$18 million of Cendant separation-related liabilities, which were recorded within Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheet.~~Sheets.

Matters Related to Wyndham Hotels

In connection with the ~~spin-off of the hotel business~~Spin-off on May 31, 2018, Wyndham Destinations entered into several agreements with Wyndham Hotels that govern the relationship of the parties following the ~~distribution~~separation including the Separation and Distribution Agreement, the Employee Matters Agreements, the Tax Matters Agreement, the Transition Services Agreement and the License, Development and Noncompetition Agreement.

In accordance with these agreements, Wyndham Destinations assumed two-thirds and Wyndham Hotels assumed one-third of certain contingent corporate liabilities of the Company incurred prior to the distribution, including liabilities of the

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Company related to certain terminated or divested businesses, certain general corporate matters, and any actions with respect to the separation plan. Likewise, Wyndham Destinations is entitled to receive two-thirds and Wyndham Hotels is entitled to receive one-third of the proceeds from certain contingent corporate assets of the Company arising or accrued prior to the distribution.

Wyndham Destinations entered into a transition service agreement with Wyndham Hotels, pursuant to which the companies agreed to provide each other certain transitional services including human resources, facilities, payroll, tax, information technology, information management and related services, treasury, finance, sourcing, and employee benefits administration on an interim, transitional basis. During the three ~~and six~~ months ended ~~June 30,~~March 31, 2020, transition service agreement expenses of less than $1 million were included in General and administrative expense. For the three months ended March 31, 2019, transition service agreement expenses ~~were~~included $1 million ~~and $2 million, included~~within in General and administrative expense and ~~less than~~ $1 million within Separation and ~~$1 million, included in Separation expense. Transition service agreement income during~~related costs on the three and six months ended June 30, 2019 was less than $1 million and $1 million, included in Other Revenue. For both the three and six months ended June 30, 2018, transition service agreement expenses were $1 million andCondensed Consolidated Statements of (Loss)/Income; transition service agreement income was $1 million. As of March 31, 2020, the majority of these transition services have ended with the exception of certain tax and treasury services which are expected to be completed in the second quarter of 2020.

Matters Related to the European Vacation Rentals Business

In connection with the sale of the Company’s European vacation rentals business, the Company and Wyndham Hotels agreed to certain post-closing credit support for the benefit of certain credit card service providers, a British travel association, and certain regulatory authorities to allow them to continue providing services or regulatory approval to the business. Post-closing credit support may be called if the business fails to meet its primary obligation to pay amounts when due. Compass IV Limited, an affiliate of Platinum Equity, LLC (“~~Buyer”~~Compass”) has provided an indemnification to Wyndham Destinations in the event that the post-closing credit support is enforced or called upon. Such post-closing credit support included a guarantee of up to $180 million which expired June 30, ~~2019, and had an estimated fair value of $2 million prior to expiration.~~2019.

At closing, the Company agreed to provide additional post-closing credit support to a British travel association and regulatory authority. An escrow was established at closing, of which $46 million was subsequently released in exchange for a secured bonding facility and a perpetual guarantee denominated in pound sterling of $46 million. The estimated fair value of the guarantee was $22 million as of ~~June 30, 2019.~~March 31, 2020. The Company established a $7 million receivable from Wyndham Hotels for its portion of the guarantee.

~~In January~~During 2019, the Company reached an agreement with ~~the Buyer~~Compass on certain post-closing adjustments, resulting in a reduction of proceeds by $27 million. In accordance with the separation agreement, the Company and Wyndham Hotels agreed to share ~~two–thirds~~two-thirds and ~~one–third, respectively,~~one-third, in the European vacation rentals business' final net proceeds (as defined by the sales agreement)~~, adjusted~~. The Company paid $40 million to Wyndham Hotels in 2019 for certain items including the return of the escrow, ~~post–closing~~post-closing adjustments, transaction expenses, and estimated taxes. ~~The Company paid $40 million to Wyndham Hotels in the second quarter of 2019.~~

The Company also deposited $5 million into an escrow account for which all obligations ceased to exist on May 9, 2019. The escrow was returned to the Company in May 2019.

In addition, the Company agreed to indemnify ~~the Buyer~~Compass against certain claims and assessments, including income tax, value-added tax and other tax matters, related to the operations of the European vacation rentals business for the periods prior to the transaction. ~~The~~During 2019, the estimated fair value of the indemnifications increased by $2 million to a total of $45 million at ~~June 30, 2019.~~March 31, 2020. The Company has a $15 million receivable from Wyndham Hotels for its portion of the guarantee.

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Wyndham Hotels provided certain post-closing credit support primarily for the benefit of a British travel association in the form of guarantees which are primarily denominated in pound sterling of up to an approximate $81 million on a perpetual basis. The estimated fair value of such guarantees was $39 million at ~~June 30, 2019.~~March 31, 2020. Wyndham Destinations is responsible for two-thirds of these guarantees. Wyndham Hotels is required to maintain minimum credit ratings of Ba2 for Moody’s Investors Service and BB for Standard & Poor’s Rating ~~Services.~~Services, which increases to minimum credit ratings of Ba1 for Moody’s Investors Service and BB+ for Standard & Poor’s Rating Services on May 9, 2020. If Wyndham Hotels drops below these minimum credit ratings, Wyndham Destinations would be required to post a ~~letter~~surety bond (or other acceptable form of ~~credit (or equivalent support)~~collateral) for the amount of the Wyndham Hotels guarantee.

The estimated fair value of the guarantees and indemnifications for which Wyndham Destinations is responsible related to the sale of the European vacation rentals business, including the two-thirds portion related to guarantees provided by Wyndham Hotels, totaled $95 million and was recorded in Accrued expenses and other liabilities on the Condensed

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Consolidated Balance Sheets at ~~June 30, 2019.~~March 31, 2020. Total receivables of $23 million were included in Other assets on the Condensed Consolidated Balance Sheets at ~~June 30, 2019~~March 31, 2020, representing the portion of these guarantees and indemnifications for which Wyndham Hotels is responsible. The total change in expired guarantees and returned escrow offset by increased tax liabilities increased the gain on sale of the European vacation rentals business by $6 million during the second quarter of 2019.

During ~~the second quarter of~~ 2019, Compass ~~IV Limited, an affiliate of Platinum Equity, LLC,~~ proposed certain post-closing adjustments of ~~approximately~~ $44 million which could serve to reduce the net consideration received from the sale of the European vacation rentals business. While the Company intends to vigorously dispute these proposed adjustments, at this time wethe Company cannot reasonably estimate the probability or amount of the potential liability owed to Compass, ~~IV Limited,~~ if any. Any actual liability would be split two-thirds and one-third between the Company and Wyndham Hotels ~~respectively,~~ and the impact would be included in discontinued operations.

Wyndham Destinations entered into a transition service agreement with ~~the European vacation business,~~Compass, pursuant to which the companies agreed to provide each other certain transitional services including human resources, facilities, payroll, tax, information technology, information management and related services, treasury, finance, and sourcing on an interim, transitional basis. During the three ~~and six~~ months ended ~~June 30, 2019,~~March 31, 2020, transition service agreement expenses were less than ~~$1 million and~~ $1 million and transition service agreement income was less than $1 ~~million and $1~~ million. ~~For both~~During the three ~~and six~~ months ended ~~June 30, 2018,~~March 31, 2019, transition service agreement expenses were $2$1 million and transition service agreement income was $1 million. Transition service agreement expenses were included in General and administrative expense and transition service income was included in Net revenues on the Condensed Consolidated Statements of (Loss)/Income.

Matter Related to the North American Vacation Rentals Business

In connection with the sale of the North American vacation rentals business, the Company agreed to indemnify Vacasa against certain claims and assessments, including income tax and other tax matters related to the operations of the North American vacations rentals business for the periods prior to the transaction. The estimated fair value of the indemnifications was $2 million, which was included in Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets at March 31, 2020.

In connection with the sale of the North American vacations rentals business in the fourth quarter of 2019, the Company entered into a transition service agreement with Vacasa, pursuant to which the companies agreed to provide each other certain transitional services including human resources, facilities, payroll, information technology, information management and related services, treasury, and finance on an interim, transitional basis. During the three months ended March 31, 2020, transition service agreement expenses were $1 million and transition service agreement income was $1 million. Transition service agreement expenses were included in General and administrative expense and transition service income was included in Other ~~Revenue.~~revenue on the Condensed Consolidated Statements of (Loss)/Income.


26.	23. Related Party Transactions

In March 2019, the Company entered into an agreement with a former executive of the Company whereby the former executive through an SPE would develop and construct VOI inventory located in Orlando, ~~FL.~~Florida. Subject to the property meeting the Company’s vacation ownership resort standards and provided that the property has not been sold to another party, the maximum potential future payments that the Company may be required to make under this commitment is $45 million.

In August 2018, the Company provided notification to the owner trustee of the Company’s leased aircraft of its intent to exercise the purchase option for such aircraft at fair market value. In connection with that purchase, the Company entered into an agreement to sell the Company aircraft to its former CEO and current Chairman of the Board of Directors at a price equivalent to the purchase price. In January 2019, the transaction to purchase the aircraft and sell the aircraft for $16 million was closed. The Company occasionally sublets this aircraft for business travel, and incurred less than $1 million of expenses associated with these transactions during the three months ended March 31, 2020 and 2019.


~~24.~~27.	Subsequent Events

Sierra Timeshare ~~2019-2~~2020-1 Receivables Funding LLC

On ~~July 24, 2019,~~April 29, 2020, the Company closed on a ~~placement of a series of term notes payable, issued by Sierra Timeshare 2019-2 Receivables Fundings LLC,~~private securitization financing with an initial principal amount of ~~$450~~$325 million, ~~which are~~ secured by vacation ownership contract receivables and ~~bear~~bearing an initial floating interest ~~at a weighted average coupon~~ rate of ~~2.96%~~3.84%. The advance rate for this transaction was ~~98.00%~~85%.

~~North American Vacation Rentals Business~~Status of Operations

~~On July 30, 2019,~~As of the date of this filing, the Company’s resorts remain closed and its sales and marketing operations remain suspended.

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The Company ~~announced~~is currently taking reservations for May 26, 2020 and beyond; however, the re-opening of resorts could be delayed depending on federal, state, and local government regulations and safety recommendations.

Wyndham Hotels’ Credit Rating

In connection with the sale of ~~its North American~~the Company’s European vacation rentals business, Wyndham Hotels provided certain post-closing credit support in the form of guarantees. As part of this agreement Wyndham Hotels is required to ~~Vacasa LLC (“Vacasa”)~~maintain minimum credit ratings which will increase to Ba1 for ~~$162 million. The~~Moody’s Investors Service and BB+ for Standard & Poor’s Rating Services on May 9, 2020. In April 2020, Standard & Poor’s Rating Services downgraded Wyndham Hotels’ credit rating from BB+ to BB. Although any ultimate exposure relative to indemnities retained from the European vacation rentals sale will be ~~comprised of $45 million cash at closing,~~shared two-thirds by Wyndham Destinations and one-third by Wyndham Hotels, as the selling entity, Wyndham Destinations is responsible for administering additional security to replace corporate guarantees in the event either company falls below a certain credit rating threshold. Wyndham Destinations may be required to post up to ~~$30~~£129 million ($160 million) in surety bonds (or other acceptable form of ~~Vacasa equity,~~collateral) for the Wyndham Destinations and ~~the remaining balance in~~Wyndham Hotels guarantees by June 30, 2020 and maintain them until such time that either ~~seller financing or cash at closing. The transaction is expected~~companies’ Standard & Poor’s and Moody’s Rating Services credit rating improves to ~~close in the fall of 2019, subject~~BB+/Ba1. Refer to ~~customary closing conditions, regulatory approval,~~Note 25—Transactions with Former Parent and ~~the timely completion of financing arrangements by Vacasa.~~Former Subsidiaries for additional details.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD-LOOKING STATEMENTS

This report includes “forward-looking statements” as that term is defined by the Securities and Exchange Commission (“SEC”). Forward-looking statements are any statements other than statements of historical fact, including statements regarding our expectations, beliefs, hopes, intentions or strategies regarding the future. In some cases, forward-looking statements can be identified by the use of words such as “may,” “will,” “expects,” “should,” “believes,” “plans,” “anticipates,” “estimates,” “predicts,” “potential,” “continue,” “future” or other words of similar meaning. Forward-looking statements are subject to risks and uncertainties that could cause actual results of Wyndham Destinations, Inc. and its subsidiaries (“Wyndham Destinations” or ~~the “Company”~~“we”) to differ materially from those discussed in, or implied by, the forward-looking statements. Factors that might cause such a difference include, but are not limited to, the potential impact of the novel coronavirus global pandemic (“COVID-19”) and our related contingency plans and cost and investment reductions on our business, vacation ownership interest (VOI) sales and tour flow and liquidity, general economic conditions, the performance of the financial and credit markets, the competition in and the economic environment for the timeshare industry, the impact of war, terrorist activity, or political strife, severe weather events and other natural disasters, and pandemics (including COVID-19) or threats of pandemics, operating risks associated with the vacation ownership and vacation exchange ~~and rentals~~ businesses, uncertainties related to our ability to realize the anticipated benefits of the spin-off of the hotel business (“Spin-off”) Wyndham Hotels & Resorts, Inc. (“Wyndham Hotels”) or the divestiture of our North American and European vacation rentals ~~business,~~businesses or the acquisition of Alliance Reservations Network (“ARN”), unanticipated developments related to the impact of the Spin-off, the divestiture of our North American and European vacation rentals ~~business~~businesses, the acquisition of ARN and related transactions, including any potential impact on our relationships with our customers, suppliers, employees and others with whom we have relationships, ~~unanticipated developments resulting from~~and possible disruption to our operations, ~~resulting from the Spin-off and the divestiture of~~ our ~~European vacation rentals business, the proposed strategic transaction involving~~ability to execute on our ~~North American vacation rentals business may not prove successful and could result in operating difficulties,~~strategy, the timing and amount of future dividends and share repurchases, if any, and those other factors disclosed as risks under “Risk Factors” in documents we have filed with the SEC, including in Part I, Item 1A1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018,~~2019, filed with the SEC on February 26, ~~2019.~~2020 and in Part II, Item 1A. of this Quarterly Report on Form 10-Q. We caution readers that any such statements are based on currently available operational, financial and competitive information, and they should not place undue reliance on these forward-looking statements, which reflect management’s opinion only as of the date on which they were made. Except as required by law, we undertake no obligation to review or update these forward-looking statements to reflect events or circumstances as they occur.

BUSINESS AND OVERVIEW

We are a global provider of hospitality services and products and operate our business in the following two segments:


•	Vacation Ownership—develops, markets and sells vacation ownership interests (“VOIs”) to individual consumers, provides consumer financing in connection with the sale of VOIs, and provides property management services at resorts.

•

Vacation Exchange ~~& Rentals~~—provides leisure travelers with flexibility and access to a wide variety of accommodation options that include vacation ~~exchange services~~ownership resorts, hotels, privately-owned vacation homes, apartments, and ~~products to owners of VOIs and manages and markets vacation rental properties primarily on behalf of independent owners.~~condominiums around the world.

COVID-19 impacts

The results of operations during the first quarter of 2020 include impacts related to COVID-19, which have been significantly negative for the travel industry, our company, our customers, and our employees. In response to COVID-19, we temporarily closed our resorts in mid-March across the globe and suspended our sales and marketing operations. As a result, we have reduced our workforce and furloughed thousands of employees. Given the magnitude of these events, our revenues were negatively impacted in the first quarter and we incurred $241 million of charges directly related to COVID-19, which are discussed in further detail in Note22—COVID-19 Related Items to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Currently, we are taking reservations for our resorts beginning May 26, 2020; however, the re-opening of resorts could be delayed. We expect to see U.S. consumers shift from international to domestic travel and also to destinations that require driving versus flying. We believe these shifts may be favorable to the timeshare industry. In addition, we believe larger condominium-like accommodations with kitchens will be more amenable for social distancing and travelers will also seek trusted brands in whom they can be comfortable that the vacation accommodations have been thoroughly cleaned for their arrival. Historically, occupancy at our resorts has remained high in downturns because our owners own their vacations and are therefore committed to traveling. We believe that this time will not be any different and encouragingly, we have seen demand return for reservations and exchanges for the last six months of 2020, which suggests that demand may be strong despite higher

unemployment driven by COVID-19. Given that our resorts and sales centers are not expected to re-open until May 26th at the earliest, revenues and profitability will significantly decrease in the second quarter of 2020 compared to the prior year.

Continued closure of our resorts and sales centers could result in additional COVID-19 charges including idle pay for certain sales and marketing employees and potential further impairment of assets. Continued closure could also lead to additional pressure on the allowance for loan losses for vacation ownership contract receivables (“VOCRs”) if unemployment rates increase and/or our collection experience declines more than we estimated in the first quarter. The additional $225 million allowance recorded in the first quarter provided for the full estimated impact of a prolonged recession (approximately 18 months to return to pre-COVID-19 employment) based on our historical data for the most recent recession in 2008; therefore, we would not expect any future additional adjustments to be as material as the adjustment taken in the first quarter. Additionally, if the recovery from COVID-19 happens more quickly than assumed, there could be an adjustment to reduce this additional allowance in future periods.

Given a range of different scenarios with a gradual return to normal operations beginning in the second quarter of 2020, we expect to maintain adequate liquidity and remain in compliance with debt covenants. As a precautionary measure to enhance liquidity, we drew down our $1.0 billion revolving credit facility at the end of the first quarter and have $1.02 billion of cash on hand. We suspended share repurchases in March and have made other operational decisions to preserve cash while preparing for the re-opening of our resorts. We continue to generate revenue and cash through the collection of resort management fees and exchange fees and also generate cash from VOCR collections. Although access to public asset-backed security funding has slowed as COVID-19 negatively impacted the capital markets in the first quarter, we successfully closed on a $325 million private securitization financing on April 29, 2020. While this transaction was at a higher cost compared to transactions we have completed in the past, it was favorable to similar transactions completed recently in the public market, and more importantly, provides reinforcement that we expect to maintain adequate liquidity. Given the uncertainty around COVID-19, we have withdrawn our full year outlook for revenue and earnings.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was established to provide emergency assistance and health care for individuals, families, and businesses affected by COVID-19 and generally support the U.S. economy. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. We expect to take advantage of the payroll tax credits and deferral of the social security payments. We will also have additional depreciation deductions relating to qualified improvement property. We have not completed the full analysis of the impact the CARES Act will have on us.

Alliance Reservations Network Acquisition

On August 7, 2019, we acquired Alliance Reservations Network (“ARN”) for $102 million ($97 million net of cash acquired). ARN provides private-label travel booking technology solutions. This acquisition was made to accelerate growth at RCI by increasing the offerings available to its members and affiliates. We have recognized the assets and liabilities of ARN based on estimates of their acquisition date fair values. ARN is reported within the Vacation Exchange segment.

North American Vacation Rentals Business Sale

During 2018, we decided to explore strategic alternatives for ~~our~~the North American vacation rentals ~~business.~~business and on October 22, 2019, we closed on the sale of this business for $162 million. The assets and liabilities of this business ~~have been~~were classified as ~~held-for-sale as of June 30, 2019 and December 31, 2018.~~held-for-sale. This business ~~does~~did not meet the criteria to be classified as a discontinued operation; therefore, the results of operations through the date of sale are reflected within continuing operations on the Condensed Consolidated Statements of (Loss)/Income. ~~For further details see Note 6—Held-for-Sale Business~~ to the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q. On July 30, 2019, we entered into an agreement for the sale of our North American vacation rentals business. See Note 24—~~Subsequent Events~~ ~~to the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for additional details.~~

~~Discontinued Operations~~

During 2018, we completed the spin-off of our hotel business and the sale of our European vacation rentals business. As a result, the Company has classified the results of operations for these businesses as discontinued operations in its prior period Condensed Consolidated Financial Statements and related notes. For further details see Note 5—~~Discontinued Operations~~ ~~to the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.~~

RESULTS OF OPERATIONS

The Company has two operating segments: Vacation Ownership and Exchange & Rentals. The Vacation Ownership segment develops, markets and sells VOIs to individual consumers, provides consumer financing in connection with the sale of VOIs and provides property management services at resorts. The Exchange & Rentals segment provides vacation exchange services and products to owners of VOIs and manages and markets vacation rental properties primarily on behalf of independent owners. During 2018, the Company decided to explore strategic alternatives for its North American vacation rentals business,

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~~which is currently part of its Exchange & Rentals segment. The assets and liabilities of this business have been classified as held-for-sale. The~~ reportable segments presented below represent ~~the Company’s~~our operating segments for which discrete financial information is available and which are utilized on a regular basis by ~~its~~our chief operating decision maker to assess performance and to allocate resources. In identifying ~~its~~the reportable segments, ~~the Company~~we also ~~considers~~consider the nature of services provided by ~~its~~our operating segments. Management uses net revenues and Adjusted EBITDA to assess the performance of the reportable segments. We define Adjusted EBITDA ~~is defined by the Company~~ as Net (loss)/income before Depreciation and amortization, Interest expense (excluding Consumer financing interest), ~~Early~~early extinguishment of debt, Interest income (excluding Consumer financing revenues) and ~~Income taxes, each of which is presented on the Condensed Consolidated Statements of Income.~~income taxes. Adjusted EBITDA also excludes stock-based compensation costs, separation and restructuring costs, transaction costs, impairments, gains and losses on sale/disposition of business, and items that meet the conditions of unusual and/or infrequent. ~~The Company believes~~We believe that Adjusted EBITDA is a useful measure of performance for ~~its~~our segments which, when considered with GAAP measures, ~~the Company believes~~we

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believe gives a more complete understanding of ~~its~~our operating performance. ~~The Company’s~~Our presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.

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OPERATING STATISTICS

The table below presents our operating statistics for the three months ended ~~June 30, 2019~~March 31, 2020 and ~~2018~~2019. These operating statistics are the drivers of our revenues and therefore provide an enhanced understanding of our businesses. Refer to the ~~Results of Operations~~Three months ended March 31, 2020 vs. three months ended March 31, 2019 section for a discussion on how these operating statistics affected our business for the periods presented.


	Three Months Ended June 30,					Three Months Ended March 31,
	2019		2018		% Change ^(g)	2020		2019		% Change ^(g)
Vacation Ownership(a)
Gross VOI sales (in millions) ^{(a) (h)}	$	626	$	602	3.9
Gross VOI sales (in millions) ^{(b) (h)}						$	413	$	484	(14.6)
Tours (in 000s) ^(b)(c)	249		241		3.2	162		192		(16.0)
Volume Per Guest (“VPG”) ^(c)(d)	$	2,425	$	2,411	0.6	$	2,128	$	2,405	(11.5)
Exchange & Rentals ^(d)
Vacation Exchange ^(a)
Average number of members (in 000s) ^(e)	3,893		3,844		1.3	3,864		3,875		(0.3)
Exchange revenue per member ^(f)	$	165.00	$	173.05	(4.7)	$	137.23	$	185.40	(26.0)


^(a)	Includes the impact from acquisitions from the acquisition dates forward.


^(b)	Represents total sales of VOIs, including sales under the Fee-for-Service program before the effect of loan loss provisions. We believe that Gross VOI sales provide an enhanced understanding of the performance of our vacation ownership business because it directly measures the sales volume of this business during a given reporting period.


^(b)(c)	Represents the number of tours taken by guests in our efforts to sell VOIs.

^(c)(d)

VPG is calculated by dividing Gross VOI sales (excluding tele-sales upgrades, which are non-tour upgrade sales) by the number of tours. Tele-sales upgrades were ~~$23~~$69 million and $21 million during the three months ended ~~June 30, 2019~~March 31, 2020 and ~~2018, respectively.~~2019. We have excluded tele-sales upgrades in the calculation of VPG because tele-sales upgrades are generated by a different marketing channel. We believe that VPG provides an enhanced understanding of the performance of our vacation ownership business because it directly measures the efficiency of this business’s tour selling efforts during a given reporting period.


^(d)	~~Includes the impact from acquisitions from the acquisition dates forward.~~


^(e)	Represents paid members in our vacation exchange programs who ~~paid~~are current on their annual membership dues ~~as of the end of the period~~ or ~~who are~~ within the allowed grace period.


^(f)	Represents total ~~annualized~~ revenues generated from fees associated with memberships, exchange transactions, ~~member-related rentals~~ and other servicing for the period divided by the average number of vacation exchange members during the period.


^(g)	Change percentages may not calculate due to rounding.


^(h)	The following table provides a reconciliation of ~~Gross VOI sales to~~ Vacation ownership interest sales, net to Gross VOI sales for the three months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ (in millions):


	2019		2018		2020		2019
Vacation ownership interest sales, net	$	481	$	462	$	90	$	375
Loan loss provision	129		126		315		109
Gross VOI sales, net of Fee-for-Service sales	610		588		405		484
Fee-for-Service sales ⁽¹⁾	16		14		8		—
Gross VOI sales	$	626	$	602	$	413	$	484

⁽¹⁾

Represents total sales of VOIs through our Fee-for-Service ~~program designed to offer turn-key solutions for developers or banks in possession of newly developed~~programs where inventory ~~which we will sell for a commission fee~~is sold through our ~~extensive~~ sales and marketing ~~channels.~~channels for a commission. There were $3 million Fee-for-Service commission revenues ~~were $12 million and $10 million~~ for the three months ended ~~June 30, 2019~~March 31, 2020 and ~~2018, respectively.~~no Fee-for-Service commission revenues for the three months ended March 31, 2019. These commissions are reported within Service and membership fees on the Condensed Consolidated Statements of (Loss)/Income.

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THREE MONTHS ENDED ~~JUNE 30, 2019~~MARCH 31, 2020 VS. THREE MONTHS ENDED ~~JUNE 30, 2018~~MARCH 31, 2019

Our consolidated results are as ~~follows:~~follows (in millions):

Three Months Ended June 30,
2019 2018 Favorable/(Unfavorable)
Net revenues $ 1,039
$ 1,007
$ 32
Expenses 841
942
101
Operating income 198
65
133
Other (income), net (2 ) (5 ) (3 )
Interest expense 40
46
6
Interest (income) (2 ) (2 ) —
Income before income taxes 162
26
136
Provision for income taxes 44
38
(6 )
Net income/(loss) from continuing operations 118
(12 ) 130
Loss from operations of discontinued businesses, net of income taxes —
(42 ) 42
Gain on disposal of discontinued businesses, net of income taxes 6
432
(426 )
Net income $ 124
$ 378
$ (254 )



	Three Months Ended March 31,
	2020			2019			Favorable/(Unfavorable)
Net revenues	$	558		$	918		$	(360	)
Expenses	699			778			79
Operating (loss)/income	(141		)	140			(281		)
Other (income), net	(2		)	(11		)	(9		)
Interest expense	41			41			—
Interest (income)	(2		)	(2		)	—
(Loss)/income before income taxes	(178		)	112			(290		)
(Benefit)/provision for income taxes	(44		)	31			75
Net (loss)/income from continuing operations	(134		)	81			(215		)
Loss on disposal of discontinued businesses, net of income taxes	—			(1		)	1
Net (loss)/income attributable to Wyndham Destinations shareholders	$	(134	)	$	80		$	(214	)

Net revenues ~~increased $32~~decreased $360 million ~~(3.2%)~~ for the three months ended ~~June 30, 2019~~March 31, 2020, compared with the same period last year. ~~Foreign currency~~During the first quarter of 2020 and in anticipation of increased defaults on VOCRs due to the impact of COVID-19, we recorded an additional $225 million provision which negatively impacted revenues and a corresponding $55 million benefit to cost of vacation ownership interests, representing estimated recoveries related to the additional provision. We expect the large increase in unemployment rates as a result of COVID-19 to have a negative impact on our owners’ ability to repay their contract receivables. The net negative impact of the additional provision related to COVID-19 on Adjusted EBITDA was $170 million. The total revenue decrease of $356 million (38.8%) was unfavorably impacted ~~net revenues~~ by ~~$6 million.~~foreign currency of $4 million (0.4%). Excluding foreign currency, the ~~increase~~decrease in net revenues was primarily the result of:

$44271 million of ~~higher~~decreased revenues at our Vacation Ownership segment primarily ~~resulting from an increase~~due to a decrease in net VOI sales as a result of the aforementioned additional allowance recorded and temporary closure of our resorts and suspension of sales and marketing operations directly related to COVID-19. The decrease in Net VOI sales was partially offset by increases in property management revenues and ~~consumer financing revenues; partially offset by~~commission revenues related to Fee-for-Service sales; and

$685 million of decreased revenues at our Vacation Exchange ~~& Rentals~~ segment ~~primarily~~ driven by the significantly negative impact of COVID-19 and a decrease in ~~ancillary revenues,~~vacation rentals revenue as a ~~change~~result of the sale of the North American vacation rentals business in ~~customer mix, lower other product revenue, and lower inventory levels.~~October 2019.

Expenses decreased ~~$101~~$79 million ~~(10.7%)~~ for the three months ended ~~June 30, 2019~~March 31, 2020, compared with the same period last year. ~~Foreign currency~~The decrease in expenses of $76 million (9.8%) was favorably impacted ~~expenses~~ by ~~$5 million.~~foreign currency of $3 million (0.4%). Excluding the foreign currency impact, the decrease in expenses was primarily the result of:

$~~111~~61 million decrease in cost of vacation ownership interests sold primarily due to the $55 million benefit representing estimated recoveries related to the additional provision for loan losses associated with COVID-19;

$54 million decrease in costs due to the sale of the North American vacation rentals business;

$15 million decrease in separation ~~costs which were higher in 2018 due to the spin-off of Wyndham Hotels;~~costs;

$1012 million decrease in ~~general and administrative expenses driven by lower employee-related costs; partially offset by~~

~~$15 million increase in~~ marketing costs ~~driven by~~at our Vacation Ownership segment due to ~~our emphasis on adding new owners,~~the temporary suspension of sales and anmarketing operations as a result of COVID-19;

$10 million of cost reductions primarily associated with lower exchange and related service revenues;

$9 million decrease in sales and commission expenses primarily due to lower gross VOI sales as a result of COVID-19; partially offset by

$38 million increase due to the write-down of Exchange inventory;

$23 million increase for COVID-19 related costs primarily due to workforce reduction;

$14 million of increased revenue-related expenses from the newly acquired ARN business; and

$10 million increase in ~~licensing fees for the use of the Wyndham tradename.~~impairments directly related to COVID-19.

Other income, net of other expenses decreased by $3$9 million for the three months ended ~~June 30, 2019~~March 31, 2020, compared with the same period last year, primarily due to ~~business interruption insurance claims received in 2018 related to hurricanes Irma and Maria.~~

Interest expense decreased $6 million for the three months ended June 30, 2019 compared with the same period last year primarily due to a decrease in the average outstanding revolving credit facility balances.

Our effective tax rates were 27.2% and 146.2% for the three months ended June 30, 2019 and 2018, respectively. The decrease was primarily due to the absence of non-cash state tax charges associated with the separation of the hotel business.

~~Gain on disposal of discontinued businesses, net of income taxes was $432 million for the six months ended June 30, 2018, representing~~ the gain on sale of ~~the European vacation rentals business.~~

As a ~~result of these items, net income decreased by $254 million for the three months ended June 30,~~building in 2019, ~~as compared to the same period last year.~~and an unfavorable tax settlement and lower business interruption recoveries in 2020.

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Our effective tax rates were 24.7% and 27.7% during the three months ended March 31, 2020 and 2019. The decrease was primarily due to an increase in the valuation allowance associated with foreign tax credit carryforwards, which reduced the overall benefit for income taxes in the current year.

As a result of these items, there was a Net loss attributable to Wyndham Destinations shareholders of $134 million for the three months ended March 31, 2020, as compared to Net income attributable to Wyndham Destinations shareholders of $80 million during the same period last year.

Our segment results are as ~~follows:~~follows (in millions):


	Three Months Ended						Three Months Ended
	June 30,						March 31,
Net revenues	2019			2018			2020			2019
Vacation Ownership	$	810		$	770		$	409		$	683
Exchange & Rentals	230			238
Vacation Exchange							150			236
Total reportable segments	1,040			1,008			559			919
Corporate and other ^(a)	(1		)	(1		)	(1		)	(1		)
Total Company	$	1,039		$	1,007		$	558		$	918

	Three Months Ended						Three Months Ended
	June 30,						March 31,
Reconciliation of Net income to Adjusted EBITDA	2019			2018
Net income attributable to Wyndham Destinations shareholders	$	124		$	378
Loss from operations of discontinued businesses, net of income taxes	—			42
Gain on disposal of discontinued businesses, net of income taxes	(6		)	(432		)
Provision for income taxes	44			38
Reconciliation of Net (loss)/income to Adjusted EBITDA							2020			2019
Net (loss)/income attributable to Wyndham Destinations shareholders							$	(134	)	$	80
Loss on disposal of discontinued businesses, net of income taxes							—			1
(Benefit)/provision for income taxes							(44		)	31
Depreciation and amortization	28			36			31			31
Interest expense	40			46			41			41
Interest (income)	(2		)	(2		)	(2		)	(2		)
Separation and related costs ^(b)	22			133
Exchange inventory write-off							38			—
COVID-19 related costs ^(b)							12			—
Asset impairments							10			—
Restructuring	1			—			2			3
Legacy items	(1		)	—
Stock-based compensation	5			4			1			3
Legacy items ^(c)							1			2
Separation and related costs ^(d)							—			15
Adjusted EBITDA	$	255		$	243		$	(44	)	$	205

	Three Months Ended						Three Months Ended
	June 30,						March 31,
Adjusted EBITDA	2019			2018			2020			2019
Vacation Ownership	$	193		$	194		$	(73	)	$	138
Exchange & Rentals	72			70
Vacation Exchange							42			80
Total reportable segments	265			264			(31		)	218
Corporate and other ^(a)	(10		)	(21		)	(13		)	(13		)
Total Company	$	255		$	243		$	(44	)	$	205


^(a)	Includes the elimination of transactions between segments.


^(b)	Includes ~~$2 million~~severance and ~~$87~~other costs associated with layoffs due to COVID-19 related workforce reduction.


^(c)	Represents the resolution of and adjustment to certain contingent liabilities resulting from the Spin-off, the sale of the European vacation rentals business, and the Company’s separation from Cendant.


^(d)	Includes $2 million of stock based compensation expenses for the three months ended ~~June 30, 2019 and 2018.~~March 31, 2019.

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Vacation Ownership

Net revenues ~~increased $40~~decreased $274 million ~~(5.2%)~~ and Adjusted EBITDA decreased $1$211 million ~~(0.5%)~~ during the three months ended ~~June 30, 2019~~March 31, 2020, compared with the same period of ~~2018. Foreign currency~~2019. During the first quarter of 2020 and in anticipation of increased defaults on VOCRs due to the impacts of COVID-19, we recorded an additional $225 million provision which negatively impacted revenues and a corresponding $55 million benefit to cost of vacation ownership interests, representing estimated recoveries related to the additional provision. We expect the large increase in unemployment rates as a result of COVID-19 to have a negative impact on our owners’ ability to repay their contract receivables. The net negative impact of the additional provision related to COVID-19 on Adjusted EBITDA was $170 million. The net revenue decrease of $271 million (39.7%) was unfavorably impacted ~~net revenues~~ by $4foreign currency of $3 million (0.4%) and the total Adjusted EBITDA decrease of $210 million (152.2%) was unfavorably impacted by ~~$2 million.~~foreign currency of $1 million (0.7%).

~~Increases~~

Other decreases in net revenues excluding the impact of currency were primarily driven by:

$2477 million ~~increase~~decrease in gross VOI sales, net of Fee-for-Service sales, primarily driven by a ~~3.2% increase~~16.0% decrease in tours ~~reflecting our continued focus on new owner generation,~~ and a ~~1.0% increase~~11.5% decrease in ~~VPG;~~VPG resulting from the temporary closure of our resorts and suspension of sales and marketing operations directly related to COVID-19; partially offset by a $3$19 million ~~increase~~decrease in our provision for loan losses primarily due to ~~higher~~lower gross VOI sales; partially offset by

$95 million increase in property management revenues primarily due to higher management fees;

$~~8 million increase in consumer financing revenues primarily due to a higher weighted average interest rate earned on a larger average portfolio balance; and~~

$24 million increase in commission revenues as a result of higher Fee-for-Service VOI ~~sales.~~sales; and

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$2 million increase in consumer financing revenues primarily due to the weighted average interest rate earned on a larger average portfolio balance.

In addition to the drivers mentioned above, Adjusted EBITDA excluding the impact of currency was further impacted by:

$1712 million ~~increase~~decrease in marketing costs primarily due to ~~our emphasis on adding new owners, which typically carry a higher cost per tour,~~the temporary suspension of sales and ~~an increase in licensing fees for the use of the Wyndham tradename;~~marketing operations;

$69 million ~~increase in consumer financing interest expense resulting from a higher weighted average interest rate on our non-recourse debt;~~

~~$5 million increase~~decrease in sales and commission expenses primarily due to ~~higher~~lower gross VOI sales;

$36 million ~~increase~~decrease in the cost of VOIs sold primarily ~~driven by higher~~due to lower gross VOI sales; partially offset by

$10 million increase in COVID-19 related costs primarily due to workforce reduction;

$5 million increase in property management expenses primarily due to higher management fees;

$3 million increase in maintenance fees on unsold inventory;

~~$3 million increase in general and administrative expenses;~~ and

$12 million increase in commission expense as a result of higher Fee-for-Service VOI sales.

Vacation Exchange ~~& Rentals~~

Net revenues decreased $8$86 million ~~(3.4%)~~ and Adjusted EBITDA ~~increased $2~~decreased $38 million ~~(2.9%)~~ during the three months ended ~~June 30, 2019~~March 31, 2020, compared with the same period ~~during 2018. Foreign currency~~of 2019. The revenue decrease of $85 million (36.0%) was unfavorably impacted ~~net revenues~~ by $2foreign currency of $1 million ~~and~~(0.4%). The Adjusted EBITDA decrease of $38 million (47.5%) was not materially impacted by ~~$2 million.~~foreign currency.

Decreases in net revenues excluding the impact of currency were primarily driven by:

$446 million decrease in ancillary revenues primarily driven by the loss of Wyndham Hotels and Resorts servicing revenues which were discontinued as a result of separation, and the loss of transitional servicing revenue related to the sale of the European vacation rentals business;

~~$3 million~~net decrease in exchange and related service revenues ~~primarily~~ driven by the significant negative impact of COVID-19, which resulted in an increase in cancellations and a ~~change~~decrease in ~~customer mix, lower other product~~March bookings;

$38 million decrease in vacation rentals revenue as a result of the sale of the North American vacation rentals business in October 2019; and ~~lower inventory levels; partially offset by~~

$1 million net decrease in ancillary revenues driven by the $16 million loss of ancillary revenue generated by the North American vacations rentals business, partially offset by an increase in ~~net revenues generated~~revenue of $15 million from ~~vacation rental transactions and related services.~~ARN, which was acquired in August 2019.

In addition to the drivers mentioned above, Adjusted EBITDA ~~excluding the impact of currency~~ was further impacted by:

$654 million decrease in ~~general~~costs due to the sale of the North American vacation rentals business in October 2019;

$10 million of cost reductions primarily associated with lower exchange and ~~administrative expenses;~~related service revenues; partially offset by

$14 million of increased revenue-related expenses from the ARN business; and

$3 million ~~decrease~~gain on the sale of a building in ~~costs primarily due to lower revenues.~~the first quarter of 2019.

Corporate and other

Corporate Adjusted EBITDA ~~increased $11 million during~~was flat for the three months ended ~~June 30, 2019~~March 31, 2020 compared to ~~2018 primarily due to lower employee-related costs as a result of a smaller corporate presence after the spin-off of Wyndham Hotels.~~2019.

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~~SIX MONTHS ENDED JUNE 30, 2019 VS. SIX MONTHS ENDED JUNE 30, 2018~~

~~Our consolidated results are as follows:~~

Six Months Ended June 30,
2019 2018 Favorable/(Unfavorable)
Net revenues $ 1,957
$ 1,914
$ 43
Expenses 1,618
1,746
128
Operating income 339
168
171
Other (income), net (12 ) (11 ) 1
Interest expense 82
91
9
Interest (income) (4 ) (3 ) 1
Income before income taxes 273
91
182
Provision for income taxes 74
62
(12 )
Net income from continuing operations 199
29
170
Loss from operations of discontinued businesses, net of income taxes —
(49 ) 49
Gain on disposal of discontinued businesses, net of income taxes 5
432
(427 )
Net income attributable to Wyndham Destinations shareholders $ 204
$ 412
$ (208 )

Net revenues increased $43 million (2.2%) for the six months ended June 30, 2019 compared with the same period last year. Foreign currency unfavorably impacted net revenues by $15 million. Excluding foreign currency, the increase in net revenues was primarily the result of:

$71 million of higher revenues at our Vacation Ownership segment primarily resulting from an increase in net VOI sales, consumer financing revenues, and property management revenues; partially offset by

$12 million of decreased revenues at our Exchange & Rentals segment primarily driven by a change in customer mix, lower other product revenue, lower inventory levels and a decrease in ancillary revenues.

Expenses decreased $128 million (7.3%) for the six months ended June 30, 2019 compared with the same period last year. Foreign currency favorably impacted expenses by $11 million. Excluding the foreign currency impact, the decrease in expenses was primarily the result of:

~~$126 million decrease in separation costs which were higher in 2018 due to the spin-off of Wyndham Hotels;~~

~~$36 million decrease in general and administrative expenses driven by lower employee-related costs; and~~

$14 million decrease in depreciation and amortization primarily due to conveyance of Wyndham Worldwide headquarters to Wyndham Hotels at Spin-off and designation of the North American vacation rentals business as held-for-sale; partially offset by

~~$31 million increase in marketing costs driven by our Vacation Ownership segment due to our emphasis on adding new owners and an increase in licensing fees for the use of the Wyndham tradename.~~

Other income, net of other expenses increased by $1 million for the six months ended June 30, 2019 compared with the same period last year, primarily due to gain on sale of a building and higher equity earnings at our Exchange & Rentals segment, partially offset by higher business interruption insurance claims received in 2018 related to hurricanes Irma and Maria in the previous year.

Interest expense decreased $9 million for the six months ended June 30, 2019 compared with the same period last year primarily due to a decrease in the average outstanding revolving credit facility balances.

Our effective tax rates were 27.1% and 68.1% for the six months ended June 30, 2019 and 2018, respectively. The decrease was primarily due to the absence of non-cash tax charges from certain internal restructurings associated with the sale of the European vacation rentals business and non-cash state tax charges associated with the separation of the hotel business during 2018; partially offset by excess tax benefits in relation to stock based compensation in 2018.

For the six months ended June 30, 2018, there was a loss from operations of discontinued businesses, net of income taxes of $49 million associated with the completion of the hotel spin-off and the sale of the European vacation rentals business.

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~~Income on disposal of discontinued businesses, net of income taxes was $432 million for the six months ended June 30, 2018, representing the gain on sale of the European vacation rentals business.~~

~~As a result of these items, net income attributable to Wyndham Destinations shareholders decreased $208 million for the six months ended June 30, 2019 as compared to the same period last year.~~

~~Our segment results are as follows:~~

Six Months Ended June 30,
Net Revenues 2019 2018
Vacation Ownership $ 1,493
$ 1,431
Exchange & Rentals 466
484
Total reportable segments 1,959
1,915
Corporate and other ^(a)
(2 ) (1 )
Total Company $ 1,957
$ 1,914

Reconciliation of Net income to Adjusted EBITDA Six Months Ended June 30,
2019 2018
Net income attributable to Wyndham Destinations shareholders $ 204
$ 412
Loss from operations of discontinued businesses, net of income taxes —
49
Gain on disposal of discontinued businesses, net of income taxes (5 ) (432 )
Provision for income taxes 74
62
Depreciation and amortization 59
73
Interest expense 82
91
Interest (income) (4 ) (3 )
Separation and related costs ^(b)
36
163
Restructuring 4
—
Legacy items 1
—
Stock-based compensation 8
17
Adjusted EBITDA $ 459
$ 432

Six Months Ended June 30,
Adjusted EBITDA 2019 2018
Vacation Ownership $ 331
$ 327
Exchange & Rentals 151
149
Total reportable segments 482
476
Corporate and other ^(a)
(23 ) (44 )
Total Company $ 459
$ 432

^(a)~~Includes the elimination of transactions between segments.~~


^(b)	~~Includes $4 million and $92 million of stock based compensation expenses for the six months ended June 30, 2019 and 2018.~~

~~Vacation Ownership~~

Net revenues increased $62 million (4.3%) and Adjusted EBITDA increased $4 million (1.2%) during the six months ended June 30, 2019 compared with the same period of 2018. Foreign currency unfavorably impacted net revenues by $9 million and Adjusted EBITDA by $3 million.

~~Increases in net revenues excluding the impact of currency were primarily driven by:~~

$63 million increase in gross VOI sales, net of Fee-for-Service sales, mainly due to a 5.5% increase in sales driven by a 2.4% increase in tours, reflecting our continued focus on new owner generation, and a 2.8% increase in VPG,

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~~partially offset by a $21 million increase in our provision for loan losses due to higher gross VOI sales and the impact of higher defaults;~~

~~$17 million increase in consumer financing revenues primarily due to a higher weighted average interest rate earned on a larger average portfolio balance;~~

~~$17 million increase in property management revenues primarily due to higher management fees; partially offset by~~

~~$8 million decrease in commission revenues as a result of lower Fee-for-Service VOI sales.~~

~~In addition to the drivers mentioned above, Adjusted EBITDA excluding the impact of currency was further impacted by:~~

~~$34 million increase in marketing costs due to our emphasis on adding new owners, which typically carry a higher cost per tour, and an increase in licensing fees for the use of the Wyndham tradename;~~

~~$17 million increase in sales and commission expenses primarily due to higher gross VOI sales;~~

~~$13 million increase in consumer financing interest expense resulting from an increase in the weighted average interest rate on our non-recourse debt;~~

~~$4 million increase in the cost of VOIs sold primarily driven by higher gross VOI sales; and~~

~~$3 million increase in maintenance fees on unsold inventory.~~

~~Such decreases in Adjusted EBITDA were partially offset by:~~

~~$8 million decrease in commission expenses as a result of lower Fee-for-Service VOI sales; and~~

~~$3 million decrease in general and administrative expenses primarily associated with lower employee-related costs.~~

~~Exchange & Rentals~~

Net revenues decreased $18 million (3.7%) and Adjusted EBITDA increased $2 million (1.3%) during the six months ended June 30, 2019 compared with the same period during 2018. Foreign currency unfavorably impacted net revenues by $6 million and Adjusted EBITDA by $4 million.

~~Decreases in net revenues excluding the impact of currency were primarily driven by:~~

~~$8 million decrease in exchange and related service revenues primarily driven by a change in customer mix, lower other product revenue, and lower inventory levels; and~~

$5 million decrease in ancillary revenues primarily driven by the loss of Wyndham Hotels and Resorts servicing revenues which were discontinued as a result of separation, and the loss of transitional servicing revenue related to the sale of the European vacation rentals business; partially offset by

~~$1 million increase in net revenues generated from vacation rental transactions and related services.~~

~~In addition to the drivers mentioned above, Adjusted EBITDA excluding the impact of currency was further impacted by:~~

~~$13 million decrease in general and administrative expenses; and~~

~~$4 million decrease in costs primarily due to lower revenues;~~

~~$3 million gain related to sale of building in the first quarter of 2019; partially offset by~~

~~$2 million negative impact from lower business interruption claims and legal settlements proceeds received.~~

~~Corporate and other~~

~~Corporate Adjusted EBITDA increased $21 million during the six months ended June 30, 2019 compared to 2018 primarily due to lower employee-related costs.~~

RESTRUCTURING PLANS

During ~~the fourth quarter of 2018, the Company~~2019, we recorded ~~$16~~$5 million of charges related to restructuring initiatives, ~~all~~most of which ~~are~~were personnel-related resulting from a reduction of approximately ~~500~~100 employees. This action was primarily focused on enhancing organizational efficiency and rationalizing operations. The charges consisted of (i) ~~$11~~$2 million at ~~the~~our Vacation Ownership segment, (ii) $4$2 million at ~~the~~our Vacation Exchange ~~& Rentals~~ segment, and (iii) $1 million at ~~the Company’s~~our corporate operations. During ~~2018, the Company~~2019, we reduced ~~its~~our restructuring liability by $4$1 million of cash ~~payments.~~payments during 2019. During the ~~six~~three months ended ~~June 30, 2019, the Company~~March 31, 2020, we incurred an additional $2$1 million of restructuring expenses at ~~its corporate operations~~our Vacation Exchange segment and ~~an additional $2 million at its Vacation Ownership segment. The Company~~ reduced ~~its~~our restructuring liability by $8$2 million of cash ~~payments during the six months ended June 30, 2019.~~payments. The remaining ~~2018~~2019 restructuring liability of $8$3 million is expected to be paid by the end of ~~2020.~~2021.

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~~The Company has~~We have additional restructuring plans which were implemented prior to ~~2018.~~2019 for which we reduced the liabilities by $2 million of cash payments during the three months ended March 31, 2020. The remaining liability of ~~less than~~ $1 million as of ~~June 30, 2019~~March 31, 2020, is ~~related to leased facilities~~mostly personnel-related and is expected to be paid by ~~2020.~~the end of 2021.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Financial Condition


	June 30, 2019			December 31, 2018			Change
(In millions)									March 31, 2020			December 31, 2019			Change
Total assets	$	7,466		$	7,158		$	308	$	7,776		$	7,453		$	323
Total liabilities	8,026			7,727			299		8,667			7,977			690
Total (deficit)	(560		)	(569		)	9		(891		)	(524		)	(367		)

Total assets increased by ~~$308~~$323 million from December 31, ~~2018~~2019 to ~~June 30, 2019~~March 31, 2020, primarily due to:

$39663 million increase in Cash and cash ~~equivalents;~~

~~$42 million increase in Prepaid expenses primarily for software and cloud implementations and other contractual arrangements;~~

~~$140 million increase in Other assets~~equivalents primarily due to ~~$137~~net cash proceeds from debt borrowings, partially offset by net repayments on our non-recourse debt, treasury share repurchases, and dividend payments. This increase was partially offset by

$328 million ~~of right-of-use assets recorded~~decrease in ~~2019 due to the adoption of the new Leases accounting standard;~~

~~$69 million increase in assets of the North American vacation rentals business recorded as held-for-sale,~~Vacation ownership contract receivables, net, primarily due to ~~seasonality~~an increase in the loan loss provision driven by the economic downturn as a result of ~~the business resulting in higher restricted cash~~COVID-19 and ~~right-of-use assets recorded in 2019 due to the adoption of the new Leases accounting standard.~~principle payments received.

Total liabilities increased by ~~$299~~$690 million from December 31, ~~2018~~2019 to ~~June 30, 2019~~March 31, 2020, primarily due to:

$~~36 million increase in Deferred income due to seasonality of the business;~~

~~$177~~947 million increase in Debt due to $987 million increased borrowing under our revolving credit facility, offset by repayment of our $40 million 7.375% secured notes. This increase was partially offset by

$128 million decrease in Non-recourse vacation ownership debt primarily due to ~~$188 million increase in the revolving credit facility;~~net repayments;

$~~25 million increase in Deferred income taxes; and~~

$84 million increase in liabilities of the North American vacation rentals business recorded as held-for-sale, primarily due to seasonality of the business resulting in higher trade payables and deferred revenues in the first half of the year and liabilities recorded in 2019 due to the adoption of the new Leases accounting standard.

~~Such increases in liabilities were partially offset by $55~~88 million decrease in Accrued expenses and other liabilities primarily due to ~~$237 million decrease related to deferred rent reclassified to other assets~~decreases in ~~connection with the new Leases standard, settlement with the purchaser of the European vacation rentals business, inventory purchases, income tax payments,~~accrued employee costs driven by employee bonus and commission ~~payments;~~payments, inventory sale obligations, accrued legal and professional fees, and accrued taxes, partially offset by ~~$182~~employee related liabilities associated with COVID-19 workforce reductions; and

$51 million ~~of lease liabilities recorded~~decrease in ~~2019 due~~deferred taxes primarily driven by the increased loan loss provision related to ~~the adoption~~COVID-19 impacts and a reduction of the ~~new Leases accounting standard.~~liability for installment sale income recognition.

Total deficit ~~decreased $9~~increased $367 million from December 31, ~~2018~~2019 to ~~June 30, 2019~~March 31, 2020, primarily due to ~~$204~~$134 million of Net ~~income~~loss attributable to Wyndham Destinations shareholders and $17 million of Additional paid in capital mainly due to changes in stock-based compensation and issuance of common stock under the Company’s employee stock purchase plan; partially offset byshareholders; $125 million ~~Treasury~~of treasury stock r~~epurchases and $85~~epurchases; $65 million of ~~Dividends.~~unfavorable currency translation adjustments driven by fluctuations in the exchange rates of the Australian dollar, the Euro, the South African Rand, and the British pound; and $44 million of dividends.

Liquidity and capital resources

~~Currently,~~The global spread of COVID-19 has significantly impacted the travel industry, our ~~financing needs are supported by cash generated from~~company, our customers, and our employees. In response to COVID-19, we temporarily closed our resorts in mid-March and suspended our sales and marketing operations. As a result, we significantly reduced our workforce and furloughed thousands of employees. These actions have had, and continue to have, an impact on our operations ~~and borrowings under~~which could impact our ~~revolving credit facility as well as issuance of secured debt. In addition,~~liquidity in the future. However, we ~~use our bank conduit facility and non-recourse debt borrowings to finance our vacation ownership contract receivables. We~~ believe that our current net cash from operations, cash and cash equivalents ~~access to our revolving credit facilities, our bank conduit facility~~on hand, and continued access to the debt markets provide us with sufficient liquidity to meet our ongoing cash ~~needs.~~needs for the near future.

~~Our~~At the end of the first quarter, we drew down our $1.0 billion five-year revolving credit facility, which expires in May 2023, ~~has~~as a ~~total capacity of $1.0 billion.~~precautionary measure to enhance liquidity. As of ~~June 30, 2019,~~March 31, 2020, we ~~had $611~~have $1.02 billion in cash and cash equivalents and $1 million of available capacity on our revolving credit facility, net of letters of credit.

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We plan to continue to use our conduit facilities and non-recourse debt borrowings to finance VOCRs. Access to public asset-backed security funding has slowed as COVID-19 negatively impacted the capital markets in the first quarter. Subsequent to the end of the first quarter, we successfully closed on a $325 million private securitization financing. While this transaction was at a higher cost compared to transactions we have completed in the past, it was favorable to similar transactions completed recently in the public market, and more importantly, provides reinforcement that we expect to maintain adequate liquidity. The impact of COVID-19 on the financial markets may have an impact on the availability of this type of funding in the near term and terms for hospitality/travel-related companies may command a higher interest rate.

Our ~~two-year~~ non-recourse ~~vacation ownership~~timeshare receivables U.S. dollars (“USD”) bank conduit facility, with borrowing capability of $800 million through August 2021, ~~has a total capacity~~had $177 million of ~~$800 million and~~ available capacity ~~of $195 million~~ as of ~~June 30, 2019.~~March 31, 2020. Borrowings under this facility are required to be repaid as the collateralized receivables amortize, but no later than September 2022.

Our non-recourse timeshare receivables Australian and New Zealand dollars (“AUD” and “NZD”) bank conduit facility has a borrowing capability of A$255 million and NZ$48 million through September 2021 and available capacity of $106 million as of March 31, 2020. Borrowings under this facility are required to be repaid no later than September 2023.

We may, from time to time, depending on market conditions and other factors, repurchase our outstanding indebtedness,

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whether or not such indebtedness trades above or below its face amount, for cash and/or in exchange for other securities or other consideration, in each case in open market purchases and/or privately negotiated transactions.

~~The Company is~~We are currently evaluating the impact of the transition from the London Interbank Offered Rate (“LIBOR”) as an interest rate benchmark to other potential alternative reference rates, including but not limited to the Secured Overnight Financing ~~Rate (“SOFR”).~~Rate. Currently, ~~the Company has several~~we have debt and derivative instruments in place that reference LIBOR-based rates. Although certain of these LIBOR based obligations provide for alternative methods of calculating the related interest rate payable (including transition to an alternative benchmark rate) if LIBOR is not reported, uncertainty as to the extent and manner of future changes may result in interest rates and/or payments that are higher than, lower than, or that do not otherwise correlate over time with the interest rates and/or payments that would have been made on our obligations if LIBOR was available in its current form. The transition from LIBOR is estimated to take place inafter 2021 and management will continue to actively assess the related opportunities and risks involved in this transition.

CASH FLOW

The following table summarizes the changes in cash, ~~and~~ cash equivalents and restricted cash during the ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018:~~(in millions):


	Six Months Ended June 30,									Three Months Ended March 31,
	2019			2018			Change			2020			2019			Change
Cash provided by/(used in)
Operating activities:
Continuing operations	$	266		$	93		$	173		$	57		$	152		$	(95	)
Discontinued operations	(1		)	212			(213		)	—			—			—
Investing activities:
Continuing operations	(45		)	(52		)	7			(18		)	(15		)	(3		)
Discontinued operations	(22		)	(672		)	650			—			(27		)	27
Financing activities:
Continuing operations	(121		)	(1,670		)	1,549			646			(68		)	714
Discontinued operations	—			2,066			(2,066		)	—			—			—
Effects of changes in exchange rates on cash and cash equivalents	2			(6		)	8			(16		)	1			(17		)
Net change in cash, cash equivalents and restricted cash	$	79		$	(29	)	$	108		$	669		$	43		$	626

Operating Activities

Net cash provided by operating activities from continuing operations was ~~$266~~$57 million for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020, compared to ~~$93~~$152 million in the prior year. ~~The increase in net cash provided by operating activities~~This $95 million decrease was driven by a ~~$170~~$215 million ~~increase~~decrease in ~~net~~ Net (loss)/income from continuing operations; a ~~$113~~$32 million ~~decrease~~increase in cash utilized for working capital (cash ~~inflow~~outflow due to the net change in assets and liabilities); partially offset by a ~~$110~~$152 million ~~decrease~~increase in non-cash add-back items mainly due to higher provision for loan losses offset in part by lower ~~stock-based compensation expense and~~ deferred income taxes.

~~Net cash used in operating activities from discontinued operations was $1 million for the six months ended June 30, 2019 compared to $212 million~~

Table of cash provided by operating activities from discontinued operations in the prior year. Prior year cash inflows were driven by $378 million in net income from discontinued operations, $233 million of cash provided by working capital (cash inflow due to the net change in assets and liabilities), partially offset by $398 million of non-cash add-back items mainly due to the gain on disposal of discontinued businesses, net of income taxes.Contents

Investing Activities

Net cash used in investing activities from continuing operations was ~~$45~~$18 million for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020, compared to ~~$52~~$15 million in the prior year. ~~The year-over-year decrease~~This increase was primarily due to ~~$6 million of~~ proceeds from asset sales recognized in ~~2019; $10 million for an acquisition and asset purchases in 2018 for which there was no equivalent in 2019; partially offset by $9 million higher additions of property and equipment in 2019.~~the prior year.

Net cash used in investing activities from discontinued operations was ~~$22 million for the six months ended June 30, 2019 compared to $672~~$27 million in ~~the prior year. Cash used in investing activities from discontinued operations in~~ 2019, is related to the sale of the European vacation rentals business. Cash used in investing activities from discontinued operations in the prior year was driven by $1.7 billion of net cash used to acquire La Quinta Holdings, Inc. (“La Quinta”), partially offset by $1.03 billion of cash proceeds from the sale of the European vacation rentals business.

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Financing Activities

Net cash ~~used in~~provided by financing activities from continuing operations was ~~$121~~$646 million for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020, compared to ~~$1.67 billion~~net cash used of $68 million in the prior year. The ~~decrease in 2019~~increase was primarily due to ~~$1.02 billion of lower net payments; $426 million less cash transferred to Wyndham Hotels relating to the spin-off; $66~~$781 million of ~~lower~~higher net proceeds from debt and non-recourse debt, driven by our draw down of the $1.0 billion secured revolving credit facility; partially offset by $67 million of cash used for share ~~settlement payments; and $30 million less dividends paid.~~repurchases.

Net cash provided by financing activities from discontinued operations for the six months ended June 30, 2019 was zero, compared to $2.07 billion in 2018, primarily related to borrowings associated with the La Quinta acquisition.

Capital Deployment

We focus on ~~optimizing cash flow and seek to deploy~~deploying capital for the highest possible returns. Ultimately, our business objective is to grow our business while ~~transforming our~~optimizing cash flow and ~~earnings profile by managing our cash streams to derive a greater proportion of~~ Adjusted ~~EBITDA from our Fee-for-Service businesses.~~EBITDA. We intend to continue to invest in select capital and technological improvements across our business. We may also seek to ~~acquire additional property management contracts and exclusive agreements for vacation rental properties on a strategic and selective basis as well as~~strategically grow the business through merger and acquisition activities. ~~In addition,~~Finally, over the long term we intend to continue to return ~~cash~~value to shareholders through the repurchase of common stock and payment of ~~dividends.~~dividends, although our share repurchase program was suspended in March 2020 as a result of the impact of COVID-19. Subsequent to the end of the first quarter, the Company's Board of Directors (“Board”) reaffirmed its dividend policy and intends to declare the second quarter cash dividend of $0.50 per share in mid-May. All future declarations of quarterly cash dividends are subject to final approval by the Board.

During the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, we spent ~~$61.6~~$46 million on vacation ownership development projects (inventory). We believe that our vacation ownership business currently has adequate finished inventory ~~on our balance sheet~~ to support vacation ownership sales for at least the next year. During ~~2019,~~2020, we anticipate spending between ~~$220~~$180 million and ~~$250~~$200 million on vacation ownership development ~~projects.~~projects, a reduction of approximately $65 million due to the impact of COVID-19 on our industry and business. The average inventory spend on vacation ownership development projects for the four-year period 2020 through 2023 is expected to be ~~approximately $250~~$185 million annually. ~~After factoring in the anticipated additional average annual spending, we~~We expect to have adequate inventory to support vacation ownership sales through at least the next four to five years.

During the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, we spent ~~$50~~$21 million on capital expenditures primarily for information technology ~~enhancement~~enhancements and sales center improvement projects. During ~~2019,~~2020, we anticipate spending between ~~$110~~$85 million and ~~$120~~$90 million on capital ~~expenditures.~~expenditures, a reduction of approximately $35 million due to the impact of COVID-19, deferring several projects beyond 2020.

In connection with our focus on optimizing cash flow, we are continuing our asset-light efforts in vacation ownership by seeking opportunities with financial partners whereby they make strategic investments to develop assets on our behalf. We refer to this as Just-in-Time. The partner may invest in new ground-up development projects or purchase from us, for cash, existing in-process inventory which currently resides on our balance sheet. The partner will complete the development of the project and we may purchase finished inventory at a future date as needed or as obligated under the agreement.

We expect that the majority of the expenditures that will be required to pursue our capital spending programs, strategic investments and vacation ownership development projects will be financed with cash flow generated through ~~operations.~~operations and cash and cash equivalents. Additional expenditures are expected to be financed with general corporate ~~borrowings, including through the use of available capacity under our revolving credit facility.~~borrowings.

Stock Repurchase Program

On August 20, 2007, our Board ~~of Directors (“Board”)~~ authorized a stock repurchase program that enables us to purchase our common stock. The Board has since increased the capacity of the program eight times, most recently in October 2017 by $1.0 billion, bringing the total authorization under the current program to $6.0 billion. Proceeds received from stock option exercises have increased repurchase capacity by $78 million since the inception of this program.

Under our current stock repurchase program, we repurchased ~~3.0~~3.1 million shares at an average price of ~~$42.31~~$40.79 for a cost of $125 million during the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. We have suspended share repurchase activity due to uncertainty associated with COVID-19.

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Dividends

During the quarterly ~~periods~~period ended March 31, ~~and June 30,~~2020, we paid cash dividends of $0.50 per share ($43 million in aggregate). During the quarterly period ended March 31, 2019, we paid cash dividends of $0.45 per share ($8442 million in aggregate). During the quarterly periods ended March 31 and June 30, 2018 we paid cash dividends of $0.66 and $0.41 per share, respectively ($114 million in aggregate). The dividend of $0.66 per share was declared by Wyndham Worldwide Corporation prior to the spin-off of Wyndham Hotels.

Our ongoing dividend policy is to grow our dividend at the rate of growth of our earnings at a ~~minimum, with the exception of the adjustment during the second quarter of 2018 as a result of the spin-off of Wyndham Hotels.~~minimum. The declaration and payment

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of future dividends to holders of our common stock are at the discretion of our Board and depend upon many factors, including our financial condition, earnings, capital requirements of our business, covenants associated with certain debt obligations, legal requirements, regulatory constraints, industry practice and other factors that our Board deems relevant. There is no assurance that a payment of a dividend will occur in the future.

Financial Obligations

Debt Covenants

The revolving credit facilities and term loan B are subject to covenants including the maintenance of specific financial ratios as defined in the credit agreement. The financial ratio covenants consist of a minimum interest coverage ratio of at least 2.5 to 1.0 as of the measurement date and a maximum first lien leverage ratio not to exceed 4.25 to 1.0 as of the measurement date. The interest coverage ratio is calculated by dividing consolidated EBITDA (as defined in the credit agreement) by consolidated interest expense (as defined in the credit agreement), both as measured on a trailing 12-month basis preceding the measurement date. As of ~~June 30, 2019,~~March 31, 2020, our interest coverage ratio was ~~6.5~~6.8 to 1.0. The first lien leverage ratio is calculated by dividing consolidated first lien debt (as defined in the credit agreement) as of the measurement date by consolidated EBITDA (as defined in the credit agreement) as measured on a trailing 12-month basis preceding the measurement date. As of ~~June 30, 2019,~~March 31, 2020, our first lien leverage ratio was 2.9 to 1.0. These ratios do not include interest expense or indebtedness related to any qualified securitization financing (as defined in the credit agreement). As of ~~June 30, 2019,~~March 31, 2020, we were in compliance with all of the financial covenants described above.

The global spread of COVID-19 has significantly impacted the travel industry, our company, our customers, and our employees. In response to COVID-19, we temporarily closed our resorts in mid-March and suspended our sales and marketing operations. As a result, we significantly reduced our workforce and furloughed thousands of employees. These actions have had, and may continue to have, a significant negative impact on our operations which could impact our liquidity in the future. The continued impact of COVID-19 on our industry and business will lead to a higher first lien leverage ratio in the future. Under the credit agreement, if this ratio exceeds 3.75 to 1.0, the interest rate on revolver borrowings would increase 25 basis points, and we would be subject to higher fees associated with our letters of credit.

Each of our non-recourse, securitized term notes, and the bank conduit facilities contain various triggers relating to the performance of the applicable loan pools. If the ~~vacation ownership contract receivables~~VOCRs pool that collateralizes one of our securitization notes fails to perform within the parameters established by the contractual triggers (such as higher default or delinquency rates), there are provisions pursuant to which the cash flows for that pool will be maintained in the securitization as extra collateral for the note holders or applied to accelerate the repayment of outstanding principal to the note holders. As of ~~June 30, 2019,~~March 31, 2020, all of our securitized loan pools were in compliance with applicable contractual triggers.

LIQUIDITY

~~The Company~~Our vacation ownership business finances certain of its ~~vacation ownership contract receivables~~VOCRs through (i) an asset-backed ~~bank~~ conduit ~~facility~~facilities and (ii) term asset-backed securitizations, all of which are non-recourse to ~~the Company~~us with respect to principal and interest.

We ~~believe that our $800 million~~have a USD bank conduit facility with an extended term through August 2021, and an AUD/NZD bank conduit facility, with a term through September 2021, amounting to a combined ~~with our ability to issue term asset-backed securities, should provide sufficient liquidity for our expected sales pace, and we expect to have available liquidity to finance the sale~~capacity of ~~VOIs.~~$985 million. As of ~~June 30, 2019,~~March 31, 2020, we had ~~$195~~$283 million of availability under ~~this~~these asset-backed ~~bank~~ conduit ~~facility. Any disruption~~facilities.

Our liquidity position may also be negatively affected by unfavorable conditions in the capital markets in which we operate or if our VOCRs portfolios do not meet specified portfolio credit parameters. Our liquidity, as it relates to our VOCRs securitization program, could be adversely affected if we were to fail to renew or replace our conduit facilities on their expiration dates, or if a particular receivables pool were to fail to meet certain ratios, which could occur in certain instances if the default rates or other credit metrics of the underlying VOCRs deteriorate. Our ability to sell securities backed by our VOCRs depends on the continued ability and willingness of capital market participants to invest in such securities. Access to public asset-backed security funding has slowed as COVID-19 negatively impacted the capital markets in the first quarter. Subsequent to the ~~asset-backed securities market could adversely impact our future ability~~end of the first quarter, we successfully closed on a $325 million private securitization financing. While this transaction was at a higher cost compared to ~~obtain asset-backed financings.~~transactions we have completed in the past, it was favorable to similar transactions

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completed recently in the public market, and more importantly, provides reinforcement that we expect to maintain adequate liquidity.

We primarily utilize surety bonds atin our vacation ownership business for sales and development transactions in order to meet regulatory requirements of certain states. In the ordinary course of our business, we have assembled commitments from 1412 surety providers in the amount of ~~$2.4~~$2.31 billion as of March 31, 2020, of which ~~we had $370~~$284 million ~~outstanding as of June 30, 2019.~~is outstanding. The availability, terms and conditions and pricing of ~~such~~ bonding capacity are dependent on, among other things, continued financial strength and stability of the insurance company affiliates providing the bonding capacity, general availability of such capacity and our corporate credit rating. If the bonding capacity is unavailable or, alternatively, if the terms and conditions and pricing of ~~such~~the bonding capacity are unacceptable to us, our vacation ownership business could be negatively impacted.

Our liquidity position may also be negatively affected by unfavorable conditions in the capital markets in which we operate or if our vacation ownership contract receivables portfolios do not meet specified portfolio credit parameters. Our liquidity, as it relates to our vacation ownership contract receivables securitization program, could be adversely affected if we were to fail to renew or replace our conduit facility on its expiration date, or if a particular receivables pool were to fail to meet certain ratios, which could occur in certain instances if the default rates or other credit metrics of the underlying vacation ownership contract receivables deteriorate. Our ability to sell securities backed by our vacation ownership contract receivables depends on the continued ability and willingness of capital market participants to invest in such securities.

Our secured debt is rated Ba2 with a “stable outlook” by Moody’s Investors Service, BB- with a ~~“positive~~“negative outlook” by Standard and Poor’s, and BB+ with a “stable outlook” by Fitch Rating Agency. A security rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal by the assigning rating organization. Reference in this report to any such credit rating is intended for the limited purpose of discussing or referring to aspects of our liquidity and of our costs of funds. Any reference to a credit rating is not intended to be any guarantee or assurance of, nor should there be any undue reliance

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upon, any credit rating or change in credit rating, nor is any such reference intended as any inference concerning future performance, future liquidity or any future credit rating.

SEASONALITY

We experience seasonal fluctuations in our net revenues and net income from sales of VOIs and vacation exchange ~~fees and commission income earned from renting vacation properties.~~fees. Revenues from sales of VOIs are generally higher in the third quarter than in other quarters due to increased leisure travel. Revenues from vacation exchange fees are generally highest in the first quarter, which is generally when members of our vacation exchange business book their vacations for the year. ~~Revenues from vacation rentals are generally highest in the third quarter, when vacation arrivals are highest.~~ Our seasonality could be impacted by COVID-19.

The seasonality of our business may cause fluctuations in our quarterly operating results. As we expand into new markets and geographical locations, we may experience increased or different seasonality dynamics that create fluctuations in operating results different from the fluctuations we have experienced in the past.

CONTRACTUAL OBLIGATIONS

The following table summarizes our future contractual obligations for the ~~twelve month~~12-month periods set forth ~~below:~~below (in millions):

7/1/19 - 6/30/20 7/1/20 - 6/30/21 7/1/21 - 6/30/22 7/1/22 - 6/30/23 7/1/23 - 6/30/24 Thereafter Total
Non-recourse debt ^(a)
$ 195
$ 220
$ 724
$ 204
$ 217
$ 814
$ 2,374
Debt 41
250
649
773
298
1,047
3,058
Interest on debt ^(b)
237
221
185
141
104
116
1,004
Operating leases 34
32
29
27
25
101
248
Purchase commitments ^(c)
216
221
120
114
113
415
1,199
Inventory sold subject to conditional repurchase ^(d)
36
47
59
—
—
—
142
Separation liabilities ^(e)
1
12
—
—
—
3
16
Total ^(f)
$ 760
$ 1,003
$ 1,766
$ 1,259
$ 757
$ 2,496
$ 8,041



	4/1/20 - 3/31/21		4/1/21 - 3/31/22		4/1/22 - 3/31/23		4/1/23 - 3/31/24		4/1/24 - 3/31/25		Thereafter		Total
Non-recourse debt ^(a)	$	216	$	818	$	200	$	201	$	216	$	762	$	2,413
Debt	252		652		406		991		301		1,374		3,976
Interest on debt ^(b)	252		222		178		132		103		153		1,040
Finance leases	2		2		1		—		—		—		5
Operating leases ^(c)	35		34		30		29		28		69		225
Purchase commitments ^(d)	277		210		122		114		116		450		1,289
Inventory sold subject to conditional repurchase ^(e)	47		59		—		—		—		—		106
Separation liabilities ^(f)	1		12		—		—		—		2		15
Other^(g)	24		20		—		—		—		—		44
Total ^(h)	$	1,106	$	2,029	$	937	$	1,467	$	764	$	2,810	$	9,113


^(a)	Represents debt that is securitized through bankruptcy-remote special purpose entities the creditors of which have no recourse to us for principal and interest.


^(b)	Includes interest on both debt and non-recourse debt; estimated using the stated interest rates on our debt and ~~the swapped interest rates on our~~ non-recourse debt.


^(c)	Represents all operating leases including those with a lease of 12 months or less.


^(d)	Includes (i) ~~$967 million~~$1 billion for marketing-related activities, (ii) ~~$140~~$185 million relating to the development of vacation ownership properties, and (iii) ~~$44~~$30 million for information technology activities.

^(d)(e)

Represents obligations to repurchase completed vacation ownership properties from third-party developers (See Note 8—9—Inventory to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further detail) of which ~~$47~~$24 million was included within Accrued expenses and other liabilities, and $15 million was included within Accounts payable on the Condensed Consolidated Balance ~~Sheet.~~Sheets included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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^(e)(f)	Represents liabilities which we assumed and are responsible for pursuant to the Cendant Separation and ~~spin-off~~Spin-off of the hotel business (See Note 22—25—Transactions with Former Parent and Former Subsidiaries to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details).


^(f)(g)	Represents future consideration to be paid for the acquisition of ARN (See Note 5—Acquisitions to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details).


^(h)	Excludes a ~~$36~~$37 million liability for unrecognized tax benefits associated with the accounting guidance for uncertainty in income taxes since it is not reasonably estimable to determine the periods in which such liability would be settled with the respective tax authorities.

In addition to amounts shown in the table above, we have $41 million of contractual obligations related to our held-for-sale business, of which $12 million is due within one year. Such obligations primarily relate to operating leases and purchase obligations.

COMMITMENTS AND CONTINGENCIES

From time to time, ~~the Company is~~we are involved in claims, legal and regulatory proceedings, and governmental inquiries related to ~~the Company’s~~our business, none of which, in the opinion of management, is expected to have a material effect on our results of operations or financial condition. For discussion of these matters along with ~~the Company’s~~our guarantees and indemnifications see Note ~~16—~~17—Commitments and Contingencies to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

CRITICAL ACCOUNTING POLICIES

In presenting our financial statements in conformity with generally accepted accounting principles, we are required to make estimates and assumptions that affect the amounts reported therein. Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. However, events that are outside of our

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control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. If there is a significant unfavorable change to current conditions, it could result in a material impact to our consolidated results of operations, financial position and liquidity. We believe that the estimates and assumptions we used when preparing our financial statements were the most appropriate at that time. These Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements included in the Annual Report filed on Form 10-K with the SEC on February 26, ~~2019~~2020, which includes a description of our critical accounting policies that involve subjective and complex judgments that could potentially affect reported results. Below we include updates that have occurred since the filing of our most recent 10-K.

Impairment of Long-Lived Assets. With regard to the goodwill and other indefinite-lived intangible assets recorded in connection with business combinations, we annually (during the fourth quarter of each year subsequent to completing our annual forecasting process), or more frequently if circumstances indicate that the value of goodwill may be impaired, review the reporting units’ carrying values as required by the guidance for goodwill and other intangible assets. This is done either by performing a qualitative assessment or a quantitative assessment, with an impairment being recognized only if a reporting unit’s fair value is less than carrying value. In any given year we can elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is in excess of its carrying value. If it is not more likely than not that the fair value is in excess of the carrying value, or we elect to bypass the qualitative assessment, we would utilize the quantitative assessment. The qualitative factors evaluated include macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, our historical share price as well as other industry-specific considerations. Given the impact of COVID-19 on our industry and business, we performed a qualitative assessment for impairment on each reporting unit’s goodwill as of March 31, 2020. Based on the results of these qualitative assessments we determined that it is more likely than not that the goodwill is not impaired at our vacation exchange, ARN, or vacation ownership reporting units. To the extent estimated market-based valuation multiples and/or discounted cash flows are revised downward, as a result of continued COVID-19 impacts or other events, we may be required to write-down all or a portion of goodwill, which would adversely impact earnings.

We also determine whether the carrying value of other indefinite-lived intangible assets is impaired on an annual basis or more frequently if indicators of potential impairment exist. Application of the other indefinite-lived intangible assets impairment test requires judgment in the assumptions underlying the approach used to determine fair value. The fair value of each other indefinite-lived intangible asset is estimated using a discounted cash flow methodology. This analysis requires significant judgments, including anticipated market conditions, operating expense trends, estimation of future cash flows, which are dependent on internal forecasts, and estimation of long-term rate of growth. The estimates used to calculate the fair value of other indefinite-lived intangible assets change from year to year based on operating results and market conditions. Changes in these estimates and assumptions could materially affect the determination of fair value and the other indefinite-lived intangible assets impairment.

We also evaluate the recoverability of our other long-lived assets, including property and equipment and amortizable intangible assets, if circumstances indicate impairment may have occurred, pursuant to guidance for impairment or disposal of long-lived assets. This analysis is performed by comparing the respective carrying values of the assets to the current and expected future cash flows, on an undiscounted basis, to be generated from such assets. Property and equipment is evaluated separately within

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each segment. If such analysis indicates that the carrying value of these assets is not recoverable, the carrying value of such assets is reduced to fair value.

In addition to the goodwill qualitative assessment mentioned above, as a result of the impacts of COVID-19 we also performed an interim impairment analysis on our property and equipment, inventory, other intangible assets and certain other assets as of March 31, 2020. As a result of this analysis, we identified $6 million of impairments at our Vacation Ownership segment related to prepaid development costs and undeveloped land, and a $4 million impairment of the Love Home Swap tradename at our Vacation Exchange segment. These impairments are included within the Asset impairments line of the Condensed Consolidated Statements of (Loss)/Income.

In addition to the critical accounting policies discussed ~~within our Annual Report on Form 10-K,~~above, as part of our adoption of the ~~new Leases~~Credit Losses accounting standard, we made an accounting policy election to ~~keep leases with~~present accrued interest receivable included within Trade receivables, net separate from our Vacation ownership contract receivables, net on the Condensed Consolidated Balance Sheets included in Part I, Item 1 of this Quarterly Report on Form 10-Q and elected not to estimate an ~~initial term~~allowance for credit losses on the accrued interest receivable balance. Once a contract is 91 days past due, we cease accruing interest and reverse all accrued interest recognized to date against interest income included within Consumer financing revenue on the Condensed Consolidated Statements of ~~12 months or~~(Loss)/Income included in Part I, Item 1 of this Quarterly Report on Form 10-Q. We resume accruing interest for contracts which we had previously ceased accruing interest once the contract is less off the balance sheet and recognize the associated lease payments on a straight-line basis over the lease term in the income statement. Additionally, when available, we use the rate implicit in the lease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement.than 91 days past due.

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Item 3. Quantitative and Qualitative Disclosures about Market Risks.

We assess our market risks based on changes in interest and foreign currency exchange rates utilizing a sensitivity analysis that measures the potential impact in earnings, fair values and cash flows based on a hypothetical 10% change (increase and decrease) in interest and foreign currency exchange rates. We used ~~June 30, 2019~~March 31, 2020, market rates to perform a sensitivity analysis separately for each of our market risk exposures. The estimates assume instantaneous, parallel shifts in interest rate yield curves and exchange rates. We have determined, through such analyses, that a hypothetical 10% change in the interest rates would have resulted in an approximate $2 million increase or decrease in annual consumer financing interest expense. We have determined that a hypothetical 10% change in the foreign currency exchange rates would have resulted in an approximate increase or decrease to the fair value of our outstanding forward foreign currency exchange contracts of ~~less than $1~~$5 million, which would generally be offset by an opposite effect on the underlying exposure being economically hedged. As such, we believe that a 10% change in interest rates or foreign currency exchange rates would not have a material effect on our prices, earnings, fair values, and cash flows.

Our variable rate borrowings, which include our term loan, ~~secured notes synthetically converted to variable rate debt via interest rate swaps, bank~~non-recourse conduit ~~facility~~facilities and revolving credit facility, expose us to risks caused by fluctuations in the applicable interest rates. The total outstanding balance of such variable rate borrowings at ~~June 30, 2019~~March 31, 2020, was ~~approximately $605~~$702 million in non-recourse ~~vacation ownership~~ debt and ~~$713 million~~$1.28 billion in corporate debt. A 100 basis point change in the underlying interest rates would result in ~~an approximate $6~~a $7 million increase or decrease in annual consumer financing interest expense and ~~an approximate $7~~a $13 million increase or decrease in our annual debt interest expense.

Item 4. Controls and Procedures.

(a)

Disclosure Controls and Procedures. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive and principal financial officers, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13(a)-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on such evaluation, our principal executive and principal financial officers concluded that our disclosure controls and procedures were designed and functioning effectively to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

(b)

Internal Control Over Financial Reporting. There have been no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the period to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As of ~~June 30, 2019,~~March 31, 2020, we utilized the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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As a result of COVID-19, most of our employees began working remotely in late March 2020. We have not identified any material changes in our disclosure controls and procedures, nor our internal control over financial reporting as a result of this change. We are continually monitoring and assessing the COVID-19 situation to minimize the impact on the design and operating effectiveness of our internal controls.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

We are involved in various claims and lawsuits arising in the ordinary course of business, none of which, in the opinion of management, is expected to have a material adverse effect on our results of operations or financial condition. See Note ~~16—~~17—Commitments and Contingencies to the Condensed Consolidated Financial Statements for a description of claims and legal actions arising in the ordinary course of our business and Note ~~22—~~25—Transactions with Former Parent and Former Subsidiaries to the Condensed Consolidated Financial Statements for a description of our obligations regarding Cendant contingent litigation, matters related to Wyndham Hotels ~~and~~& Resorts, Inc., matters related to the European vacation rentals business, and the North American vacation rentals business. Both notes are included in Part 1I, Item 1 of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors.

The discussion of our business and operations should be read together with the risk factors contained in Part I, Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018,~~2019, filed with the Securities and Exchange Commission, which describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. As of ~~June 30, 2019, there~~March 31, 2020, there have been no material changes to the risk factors set forth in Part I, Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019, except as noted below and except to the extent factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such risk factors.

The global outbreak of COVID-19 and the recent temporary closure of all of our resorts and sales centers have significantly negatively affected our operations and continued closure and measures that limit our ability to operate may significantly negatively affect our future business, financial condition and results of operations.

The global outbreak of novel coronavirus global pandemic (“COVID-19”) has been declared a global pandemic by the World Health Organization, a national emergency by the United States federal government and by other countries and a state of emergency by all states in the United States. This outbreak has led, and may continue to lead, to disruptions in the global economy. Tourism and travel-related industries face significant disruption as a result of the COVID-19 pandemic, as the United States federal government and its individual states have taken, and may continue to take, actions to curb the spread of COVID-19, including encouraging "social distancing" and quarantines, mandating certain business closures, limiting the number of individuals that may gather in one location and implementing travel restrictions. COVID-19 has caused, and may continue to cause, extreme volatility in the equity markets and the capital markets, generally.

Our business has been significantly negatively affected by COVID-19. On March 25, 2020, we announced the temporary closure of most of our resorts to comply with federal, state and local government orders and we have since closed all our resorts and sales centers and laid off or furloughed thousands of our employees. The duration of the impact of COVID-19 and our resort and sales centers closures and our ability to implement our growth strategy is uncertain, as the full impact and duration of the COVID-19 outbreak continues to evolve. Our temporary resort and sales center closures have led to significant declines in our vacation ownership interest (VOI) sales during this closure period. We have also experienced an increase in cancellations and a decrease in March bookings for our vacation exchange business. Continued closure of our resorts and sales centers is expected to result in additional COVID-19 charges including idle pay for certain sales and marketing employees and potential further impairment of assets. As a result, management expects the current and continued resort and sales center closures, increased cancellations, reduced bookings and ongoing length and severity of the economic downturn caused by COVID-19, and potential reluctance of customers to travel even after all government restrictions and recommendations are no longer in effect, or to spend on discretionary items such as vacation, will have a significantly negative impact on our future business, financial condition and results of operations.

The actions we have taken to reduce operating costs and improve efficiency, including the layoff and furloughing of a substantial number of our employees and further changes we may make in the future to reduce costs, may cause us to experience operational challenges, including as a result of furloughed employees not returning to employment because they have obtained alternative employment or otherwise, and negatively impact our ability to attract and retain associates, our reputation and market share.

In addition, increases in unemployment due to COVID-19 and related social distancing and quarantine orders and travel restrictions may negatively impact our VOI owners’ ability to repay their contract receivables. For the three months ended March 31, 2020, we increased our loan loss allowance by $225 million, partially offset by $55 million of inventory recoveries; as a result of this increase in unemployment. If the increase in unemployment continues or economic conditions do not improve

following the termination of social distancing and quarantine orders and travel restriction, our revenues will continue to be negatively impacted.

Further, the effects of COVID-19 may also negatively affect our ability to comply with existing covenants under our debt agreements, increase our cost of capital or make additional capital more difficult to obtain or available only on terms less favorable to us, if at all. Our revolving credit facilities and term loan B require us to maintain a minimum interest coverage ratio of at least 2.50 to 1.00 as of the measurement date and a maximum first lien leverage ratio not to exceed 4.25 to 1.00 as of the measurement date. The continued impact of COVID-19 on our industry and business may impact our ability to remain in compliance with these debt covenants in the future. If we fail to comply with our debt covenants, the lenders under our revolving credit facilities and term loan B, subject to our right to cure, would have the right to terminate and declare the outstanding loans to be immediately due and payable, and any such default could trigger a cross-default, acceleration or other consequences under other indebtedness or financial instruments to which we are a party. Any continued impact of COVID-19 on our industry and business will also lead to a higher first lien leverage ratio in the future. If this ratio exceeds 3.75 to 1.0, the interest rate on revolver borrowings will increase 25 basis points, and the Company would be subject to higher fees associated with its letters of credit. COVID-19 has also impacted the public asset-backed securities market, and thus impacted our ability to issue asset-backed securities in the first quarter. Subsequent to the end of the first quarter, we successfully closed on a $325 million private securitization financing at a higher cost compared to transactions we have completed in the past. The impact of COVID-19 on the financial markets may have an impact on the availability of this type of funding in the near term and terms for hospitality/travel-related companies may command a higher interest rate.The ongoing effects of COVID-19 on our operations could have a significant negative impact on our financial results and liquidity, and such negative impact could continue well beyond the containment of such outbreak. As of March 31, 2020, we had $283 million of availability under our asset-backed conduit facilities. Any further disruption to the asset-backed securities market could continue to negatively impact our ability to obtain asset-backed financings. Our liquidity, as it relates to our vacation ownership contract receivables (“VOCRs”) securitization program, could be adversely affected if we were to fail to renew or replace our conduit facilities on their expiration dates, or if a particular receivables pool were to fail to meet certain ratios, which could occur in certain instances if the default rates or other credit metrics of the underlying VOCRs deteriorate as a result of the COVID-19 crisis or otherwise. Our ability to sell securities backed by our VOCRs depends on the continued ability and willingness of capital market participants to invest in such securities, which may be negatively affected by COVID-19 and its impact on economic conditions and the credit of our VOCRs pools.

We utilize surety bonds in our vacation ownership business for sales and development transactions in order to meet regulatory requirements of certain states. The availability, terms and conditions and pricing of bonding capacity are dependent on, among other things, continued financial strength and stability of the insurance company affiliates providing the bonding capacity, general availability of such capacity and our corporate credit rating. As a result of COVID-19, we are anticipating a reduction in commitments from our surety providers. Any such reduction in commitments or reduced availability of bonding capacity, or a negative change to the terms and conditions and pricing of the bonding capacity may negatively impact our vacation ownership business.

The volatile conditions stemming from COVID-19, as well as reactions to future pandemics or resurgences of COVID-19, could also precipitate or aggravate the other risk factors that we identify in Part I, Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, which in turn could significantly negatively affect our business, financial condition, liquidity, results of operations (including revenues and profitability) and/or stock price. Further, COVID-19 may affect our operating and financial results in a manner that is not presently known to us or that we currently do not consider to present significant risks to our operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.


(c)	Below is a summary of our common stock repurchases by month for the quarter ended ~~June 30, 2019:~~March 31, 2020:

ISSUER PURCHASES OF EQUITY SECURITIES
Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Approximate Dollar Value of Shares that May Yet Be Purchased Under Plan		Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Approximate Dollar Value of Shares that May Yet Be Purchased Under Plan
April 2019	472,547	$	42.44	472,547	$	736,010,937
May 2019	561,704	43.12		561,704	711,791,349
June 2019 ^(a)	487,010	42.61		487,010	691,040,744
January 2020							887,800	$	51.27	887,800	$	430,556,643
February 2020							843,400	47.43		843,400	390,552,188
March 2020							1,333,600	29.60		1,333,600	351,074,356
Total	1,521,261	$	42.74	1,521,261	$	691,040,744	3,064,800	$	40.79	3,064,800	$	351,074,356

^(a)Table of Contents~~Includes 53,700 shares purchased for which the trade date occurred during June 30, 2019 while settlement occurred during July 2019.~~

On August 20, 2007, our Board of Directors (“Board”) authorized a stock repurchase program that enables us to purchase our common stock. The Board has since increased the capacity of the program eight times, most recently on October 23, 2017, for $1.0 billion, bringing the total authorization under the current program to $6.0 billion. Under our current and prior stock repurchase plans, the total authorization is $6.8 billion. In March 2020, we announced that we have suspended our share repurchase activity due to the uncertainty resulting from the COVID-19 pandemic.

For a description of limitations on the payment of our dividends, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - ~~Dividends.~~Dividends,” included in Part I, Item 2 of this Quarterly Report on Form 10-Q.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.



Exhibit No.	Description
~~10.1~~	Ninth Amendment, dated as of April 24, 2019, to the Amended and Restated Indenture and Servicing Agreement, dated as of October 1, 2010, by and among Sierra Timeshare Conduit Receivables Funding II, LLC, as Issuer, Wyndham Consumer Finance, Inc., as Servicer, Wells Fargo Bank, National Association, as Trustee and U.S. Bank National Association, as Collateral Agent ~~(incorporated by reference to Exhibit 10.10 to the Registrant’s Form 10-Q filed May 1, 2019).~~
15*	Letter re: Unaudited Interim Financial Information
31.1*	Certification of President and Chief Executive Officer Pursuant to Rule 13a-14(a) Under the Securities and Exchange Act of 1934.
31.2*	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) Under the Securities Exchange Act of 1934
32**	Certification of President and Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.INS*	Inline XBRL Instance Document
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*	Filed with this report

** Furnished with this report

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		WYNDHAM DESTINATIONS, INC.

Date: ~~July 30, 2019~~May 6, 2020	By:	/s/ Michael A. Hug
		Michael A. Hug
		Chief Financial Officer

Date: ~~July 30, 2019~~May 6, 2020	By:	/s/ Elizabeth E. Dreyer
		Elizabeth E. Dreyer
		Chief Accounting Officer

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	June 30, 2019			June 30, 2018
Cash flows (used in)/provided by operating activities	$	(1	)	$	212
Cash flows used in investing activities	(22		)	(672		)
Cash flows provided by financing activities	—			2,066

Non-cash items:
Forgiveness of intercompany debt from Wyndham Hotels	—			197
Depreciation and amortization	—			52
Stock-based compensation	—			22
Deferred income taxes	—			(23		)

Property and equipment additions	—			(38		)
Net assets of business acquired, net of cash acquired	—			(1,695		)
Proceeds from sale of businesses and asset sales	—			1,052



Tax
Balance, December 31, 2018 ^(a)	$	94	$	2		$	(1	)	$	95
Other comprehensive (loss) before reclassifications	—		(1		)	—			(1		)
Amount reclassified to earnings	—		—			—			—
Balance, June 30, 2019	$	94	$	1		$	(1	)	$	94



Tax
Balance, December 31, 2017	$	89	$	2		$	1		$	92
Other comprehensive income	1		—			—			1
Amount reclassified to earnings	—		(1		)	(1		)	(2		)
Balance, June 30, 2018	$	90	$	1		$	—		$	91



Net of Tax
Balance, December 31, 2017	$	(7	)	$	—	$	(4	)	$	(11	)
Other comprehensive (loss)	(43		)	—		—			(43		)
Amount reclassified to earnings	24			—		4			28
Balance, June 30, 2018	$	(26	)	$	—	$	—		$	(26	)



	7/1/19 - 6/30/20		7/1/20 - 6/30/21		7/1/21 - 6/30/22		7/1/22 - 6/30/23		7/1/23 - 6/30/24		Thereafter		Total
Non-recourse debt ^(a)	$	195	$	220	$	724	$	204	$	217	$	814	$	2,374
Debt	41		250		649		773		298		1,047		3,058
Interest on debt ^(b)	237		221		185		141		104		116		1,004
Operating leases	34		32		29		27		25		101		248
Purchase commitments ^(c)	216		221		120		114		113		415		1,199
Inventory sold subject to conditional repurchase ^(d)	36		47		59		—		—		—		142
Separation liabilities ^(e)	1		12		—		—		—		3		16
Total ^(f)	$	760	$	1,003	$	1,766	$	1,259	$	757	$	2,496	$	8,041