Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
OR
o
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 Worldwide Corporation
(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.)
 
 
 
22 Sylvan Way
 
07054
Parsippany, New Jersey
 
(Zip Code)
(Address of Principal Executive Offices)
 
 
(973) 753-6000
(Registrant’s Telephone Number, Including Area Code)
None
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
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 þ     No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ     No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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
þ
 
 
 
 
Accelerated filer
o
Non-accelerated filer
o
 
 
(Do not check if a smaller reporting company)
 
 
 
 
 
 
Smaller reporting company
o
 
 
 
 
 
 
Emerging growth company
o
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes o    No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the last practicable date:
101,326,244 shares of common stock outstanding as of September 30, 2017.



Table of Contents

Table of Contents

 
 
Page
PART I
FINANCIAL INFORMATION
 
Item 1.
 
 
 
 
 
 
 
Item 2.
 
Item 3.
Item 4.
PART II
OTHER INFORMATION
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 



Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited).

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Wyndham Worldwide Corporation
We have reviewed the accompanying condensed consolidated balance sheet of Wyndham Worldwide Corporation and subsidiaries (the "Company") as of September 30, 2017, and the related condensed consolidated statements of income and comprehensive income for the three-month and nine-month periods ended September 30, 2017 and 2016, and the related condensed consolidated statements of cash flows and equity for the nine-month periods ended September 30, 2017 and 2016. These interim financial statements are the responsibility of the Company's management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information 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 conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated 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), the consolidated balance sheet of the Company as of December 31, 2016, and the related consolidated statements of income, comprehensive income, cash flows and equity for the year then ended (not presented herein); and in our report dated February 17, 2017, 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, 2016 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.



/s/ Deloitte & Touche LLP
Parsippany, New Jersey
October 25, 2017




Table of Contents
WYNDHAM WORLDWIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
(Unaudited)


 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Net revenues
 
 
 
 
 
 
 
Service and membership fees
$
754

 
$
735

 
$
2,043

 
$
2,001

Vacation ownership interest sales
467

 
441

 
1,265

 
1,191

Franchise fees
204

 
203

 
522

 
513

Consumer financing
119

 
112

 
343

 
327

Other
85

 
82

 
254

 
247

Net revenues
1,629

 
1,573

 
4,427

 
4,279


Expenses
 
 
 
 
 
 
 
Operating
713

 
679

 
1,968

 
1,915

Cost of vacation ownership interests
41

 
47

 
115

 
115

Consumer financing interest
17

 
19

 
54

 
55

Marketing and reservation
250

 
242

 
676

 
645

General and administrative
173

 
173

 
557

 
545

Separation and related costs

24

 

 
24

 

Asset impairments

 

 
140

 

Restructuring
8

 
14

 
15

 
14

Depreciation and amortization
69

 
63

 
197

 
187

Total expenses
1,295

 
1,237

 
3,746

 
3,476


Operating income
334

 
336

 
681

 
803

Other income, net
(19
)
 
(3
)
 
(24
)
 
(19
)
Interest expense
42

 
34

 
115

 
102

Early extinguishment of debt

 

 

 
11

Interest income
(2
)
 
(2
)
 
(6
)
 
(6
)
Income before income taxes
313

 
307

 
596

 
715

Provision for income taxes
110

 
110

 
173

 
267

Net income
203

 
197

 
423

 
448

Net income attributable to noncontrolling interest

 
(1
)
 
(1
)
 
(1
)
Net income attributable to Wyndham shareholders
$
203

 
$
196

 
$
422

 
$
447


Earnings per share
 
 
 
 
 
 
 
Basic
$
1.98

 
$
1.79

 
$
4.07

 
$
4.03

Diluted
1.97

 
1.78

 
4.05

 
4.01

 
 
 
 
 
 
 
 
Cash dividends declared per share
$
0.58

 
$
0.50

 
$
1.74

 
$
1.50



See Notes to Condensed Consolidated Financial Statements.
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WYNDHAM WORLDWIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)


 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Net income
$
203

 
$
197

 
$
423


$
448

Other comprehensive income, net of tax
 
 
 
 
 
 
 
Foreign currency translation adjustments
31

 
11

 
105


19

Unrealized gains/(losses) on cash flow hedges

 
(1
)
 
(1
)


Defined benefit pension plans

 

 


(1
)
Other comprehensive income, net of tax
31

 
10

 
104

 
18

Comprehensive income
234

 
207

 
527

 
466

Net income attributable to noncontrolling interest

 
(1
)
 
(1
)
 
(1
)
Comprehensive income attributable to Wyndham shareholders
$
234

 
$
206

 
$
526

 
$
465



See Notes to Condensed Consolidated Financial Statements.
3

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WYNDHAM WORLDWIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
(Unaudited)



 
September 30,
2017
 
December 31,
2016
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
289

 
$
185

Trade receivables, net
586

 
610

Vacation ownership contract receivables, net
257

 
262

Inventory
317

 
315

Prepaid expenses
161

 
144

Other current assets
429

 
296

Total current assets
2,039

 
1,812

Long-term vacation ownership contract receivables, net
2,607

 
2,515

Non-current inventory
1,016

 
1,035

Property and equipment, net
1,358

 
1,340

Goodwill
1,698

 
1,603

Trademarks, net
747

 
734

Franchise agreements and other intangibles, net
378

 
393

Other non-current assets
418

 
387

Total assets
$
10,261

 
$
9,819

Liabilities and Equity
 
 
 
Current liabilities:
 
 
 
Securitized vacation ownership debt
$
192

 
$
195

Current portion of long-term debt
42

 
34

Accounts payable
432

 
468

Deferred income
536

 
500

Accrued expenses and other current liabilities
919

 
835

Total current liabilities
2,121

 
2,032

Long-term securitized vacation ownership debt
1,809

 
1,946

Long-term debt
3,858

 
3,337

Deferred income taxes
1,285

 
1,214

Deferred income
187

 
197

Other non-current liabilities
371

 
375

Total liabilities
9,631

 
9,101

Commitments and contingencies (Note 12)

 

Stockholders’ equity:
 
 
 
Preferred stock, $.01 par value, authorized 6,000,000 shares, none issued and outstanding

 

Common stock, $.01 par value, authorized 600,000,000 shares, 218,751,241 issued as of 2017 and 218,198,050 shares in 2016
2

 
2

Treasury stock, at cost – 117,520,075 shares in 2017 and 112,617,112 shares in 2016
(5,568
)
 
(5,118
)
Additional paid-in capital
3,980

 
3,966

Retained earnings
2,219

 
1,977

Accumulated other comprehensive loss
(9
)
 
(113
)
Total stockholders’ equity
624

 
714

Noncontrolling interest
6

 
4

Total equity
630

 
718

Total liabilities and equity
$
10,261

 
$
9,819


See Notes to Condensed Consolidated Financial Statements.
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WYNDHAM WORLDWIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)


 
Nine Months Ended
 
September 30,
 
2017
 
2016
Operating Activities
 
 
 
Net income
$
423

 
$
448

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
197

 
187

Provision for loan losses
319

 
256

Deferred income taxes
50

 
73

Stock-based compensation
48

 
52

Excess tax benefits from stock-based compensation

 
(8
)
Asset impairments
140

 

Loss on early extinguishment of debt

 
11

Non-cash interest
17

 
17

Net change in assets and liabilities, excluding the impact of acquisitions:
 
 
 
Trade receivables
60

 
45

Vacation ownership contract receivables
(387
)
 
(295
)
Inventory
(79
)
 
(21
)
Prepaid expenses
(14
)
 
(1
)
Other current assets
(90
)
 
4

Accounts payable, accrued expenses and other current liabilities
(13
)
 
46

Deferred income
(10
)
 
(18
)
Other, net
5

 
(10
)
Net cash provided by operating activities
666

 
786

Investing Activities
 
 
 
Property and equipment additions
(125
)
 
(136
)
Net assets acquired, net of cash acquired
(43
)
 
(37
)
Payments of development advance notes
(6
)
 
(6
)
Proceeds from development advance notes
4

 
2

Equity investments and loans
(23
)
 
(11
)
Proceeds from asset sales
11

 
15

(Decrease)/increase in securitization restricted cash
(5
)
 
4

Increase/(decrease) in escrow deposit restricted cash
4

 
(2
)
Other, net
12

 
(1
)
Net cash used in investing activities
(171
)
 
(172
)
Financing Activities
 
 
 
Proceeds from securitized borrowings
1,087

 
1,497

Principal payments on securitized borrowings
(1,233
)
 
(1,506
)
Proceeds from long-term debt
1,338

 
75

Principal payments on long-term debt
(943
)
 
(114
)
(Repayments of)/proceeds from commercial paper, net
(327
)
 
295

Proceeds from notes issued and term loan
694

 
325

Repayment/repurchase of notes
(300
)
 
(327
)
Proceeds from vacation ownership inventory arrangements

 
20

Repayments of vacation ownership inventory arrangements
(41
)
 
(26
)
Dividends to shareholders
(184
)
 
(169
)
Repurchase of common stock
(447
)
 
(469
)
Excess tax benefits from stock-based compensation

 
8

Debt issuance costs
(7
)
 
(15
)
Net share settlement of incentive equity awards
(34
)
 
(34
)
Other, net
(7
)
 
(2
)
Net cash used in financing activities
(404
)
 
(442
)
Effect of changes in exchange rates on cash and cash equivalents
13

 
(11
)
Net increase in cash and cash equivalents
104

 
161

Cash and cash equivalents, beginning of period
185

 
171

Cash and cash equivalents, end of period
$
289

 
$
332


See Notes to Condensed Consolidated Financial Statements.
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WYNDHAM WORLDWIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF 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
Balance as of December 31, 2016
106

 
$
2

 
$
(5,118
)
 
$
3,966

 
$
1,977

 
$
(113
)
 
$
4

 
$
718

Net income

 

 

 

 
422

 

 
1

 
423

Other comprehensive income

 

 

 

 

 
104

 

 
104

Net share settlement of incentive equity awards

 

 

 
(34
)
 

 

 

 
(34
)
Change in deferred compensation

 

 

 
46

 

 

 

 
46

Change in deferred compensation for Board of Directors

 

 

 
2

 

 

 

 
2

Repurchase of common stock
(5
)
 

 
(450
)
 

 

 

 

 
(450
)
Dividends

 

 

 

 
(180
)
 

 

 
(180
)
Other

 

 

 

 

 

 
1

 
1

Balance as of September 30, 2017
101


$
2


$
(5,568
)

$
3,980


$
2,219


$
(9
)

$
6

 
$
630



 
Common Shares Outstanding
 
Common Stock
 
Treasury Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive (Loss)/Income
 
Non-controlling Interest
 
Total Equity
Balance as of December 31, 2015
114

 
$
2

 
$
(4,493
)
 
$
3,923

 
$
1,592

 
$
(74
)
 
$
3

 
$
953

Net income

 

 

 

 
447

 

 
1

 
448

Other comprehensive income

 

 

 

 

 
18

 

 
18

Issuance of shares for RSU vesting
1

 

 

 

 

 

 

 

Net share settlement of incentive equity awards

 

 

 
(34
)
 

 

 

 
(34
)
Change in deferred compensation

 

 

 
52

 

 

 

 
52

Change in deferred compensation for Board of Directors






1








1

Repurchase of common stock
(7
)
 

 
(475
)
 

 

 

 

 
(475
)
Change in excess tax benefit on equity awards

 

 

 
8

 

 

 

 
8

Dividends

 

 

 

 
(173
)
 

 

 
(173
)
Other

 

 

 
(1
)
 

 

 

 
(1
)
Balance as of September 30, 2016
108

 
$
2

 
$
(4,968
)
 
$
3,949

 
$
1,866

 
$
(56
)
 
$
4

 
$
797



See Notes to Condensed Consolidated Financial Statements.
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WYNDHAM WORLDWIDE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise noted, all amounts are in millions, except share and per share amounts)
(Unaudited)

1.
Basis of Presentation
Wyndham Worldwide Corporation (“Wyndham” or the “Company”) is a global provider of hospitality services and products. The accompanying Condensed Consolidated Financial Statements include the accounts and transactions of Wyndham, as well as the entities in which Wyndham 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. All intercompany balances and transactions have been eliminated in the Condensed Consolidated Financial Statements.

In presenting the Condensed Consolidated Financial Statements, management makes estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ from those estimates. 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 2016 Consolidated Financial Statements included in its Annual Report filed on Form 10-K with the Securities and Exchange Commission on February 17, 2017.

Business Description
The Company operates in the following business segments:
Hotel Group—primarily franchises hotels in the upscale, upper midscale, midscale, economy and extended stay segments and provides hotel management services for full-service and select limited-service hotels.
Destination Network—provides vacation exchange services and products to owners of vacation ownership interests (“VOIs”) and manages and markets vacation rental properties primarily on behalf of independent owners.
Vacation Ownership—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.

Recently Issued Accounting Pronouncements
Revenue from Contracts with Customers. In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance on revenue from contracts with customers. The guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The guidance also requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Entities have the option to apply the new guidance under a retrospective approach to each prior reporting period presented or a modified retrospective approach with the cumulative effect of initially applying the new guidance recognized at the date of initial application within the statement of financial position. The Company currently expects to adopt the new guidance utilizing the full retrospective transition method on its effective date of January 1, 2018.
The Company has substantially completed its assessment of the new guidance and is finalizing its quantification of the impact of its loyalty program based on latest available guidance. The Company estimates that its 2016 revenues will increase between $3 million and $6 million and the change in its 2016 net income will be between a $2 million decrease and a $2 million increase. The Company estimates that its 2016 beginning retained earnings will be reduced between $40 million and $60 million as a result of this adoption. Additionally, the Company expects a change in the seasonality of its revenues and net income, primarily reflecting a shift of revenues and net income from the first quarter to the third quarter.
The Company believes the most significant impacts relating to its Hotel Group segment are the accounting for initial fees, upfront costs, loyalty revenues and marketing and reservation expenses. Specifically, under the new guidance, the Company expects initial fees to be recognized ratably over the life of the noncancelable period of the franchise agreement and incremental upfront contract costs to be deferred and expensed over the life of the noncancelable period of the franchise agreement. The Company expects loyalty revenues to be deferred and primarily recognized over the loyalty points redemption pattern. The Company will no longer accrue a liability for future marketing and reservation costs when marketing and reservation revenues earned exceed costs incurred. Marketing and reservation costs incurred in excess of revenues earned will continue to be expensed as incurred.

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The Company believes the most significant impacts relating to its Destination Network segment are the accounting for vacation rental revenues and other vacation exchange related product fees. Specifically, under the new guidance, the Company expects (i) approximately thirty percent of its vacation rental revenue will no longer be recognized in the period that the rental reservation is booked and, instead, will be recognized over the term of the guest stay and (ii) other vacation exchange related product fees will no longer be recognized in the period that the product is purchased and, instead, will be deferred and recognized upon the occurrence of a future vacation exchange or other related transaction. The Company expects vacation exchange transaction and membership fees to remain substantially unchanged.
The Company expects the recognition of its Vacation Ownership segment revenues to remain substantially unchanged, with the exception of (i) revenue from certain travel packages utilized to market its VOI products, which will be presented on a gross basis within other revenues and (ii) a reduction of property management revenues by the proportionate share of maintenance fees paid on its unsold inventory.
Leases. In February 2016, the FASB issued guidance which requires companies generally to recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use assets. This guidance is effective for fiscal years beginning after December 15, 2018 and for interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this guidance on its financial statements and related disclosures.
Financial Instruments - Credit Losses. In June 2016, the 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 is effective for fiscal years beginning after December 15, 2019, 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.
Statement of Cash Flows. In August 2016, the FASB issued guidance intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. This guidance requires the retrospective transition method and is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. The Company believes the impact of this new guidance will result in payments of, and proceeds from, development advance notes being recorded within operating activities on its Condensed Consolidated Statement of Cash Flows.
Restricted Cash. In November 2016, the FASB issued guidance which requires amounts generally described as restricted cash and cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. The Company will adopt this new guidance on January 1, 2018, using a retrospective transition method. The Company believes the impact of the new restricted cash guidance will result in escrow deposits and restricted cash being included with cash and cash equivalents on the statement of cash flows.
The table below summarizes the effects of the new statement of cash flows and restricted cash guidance on the Company’s Condensed Consolidated Statements of Cash Flows:
 
Nine Months Ended September 30,
Increase/(decrease):
2017
 
2016
Operating Activities
$
(2
)
 
$
(4
)
Investing Activities
3

 
2

Cash and cash equivalents, beginning of period
149

 
152

Cash and cash equivalents, end of period
166

 
149

Intra-Entity Transfers of Assets Other Than Inventory. In October 2016, the FASB issued guidance which requires companies to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This guidance requires the modified retrospective approach and is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this guidance on its financial statements and related disclosures.
Clarifying the Definition of a Business. In January 2017, the FASB issued guidance clarifying the definition of a business, which assists entities when evaluating whether transactions should be accounted for as acquisitions of businesses or assets. This guidance is effective on a prospective basis for fiscal years beginning after December 15, 2017, including interim

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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.
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 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 is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, and should be applied on a prospective basis. Early adoption is permitted for 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.
Compensation - Stock Compensation. In May 2017, the FASB issued guidance which provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This guidance does not change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions, or award classification and would not be required if the changes are considered non-substantive. This guidance is effective for fiscal years beginning after December 15, 2017 and for interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this guidance on its financial statements and related disclosures.
Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities. In August 2017, the FASB issued guidance intended to better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The guidance will expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. This guidance is effective for fiscal years beginning after December 15, 2018 and for interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating impact of the adoption of this guidance on its financial statements and related disclosures.

Recently Adopted Accounting Pronouncements
Simplifying the Measurement of Inventory. In July 2015, the FASB issued guidance related to simplifying the measurement of inventory. This guidance requires an entity to measure inventory at the lower of cost or net realizable value, which consists of the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This guidance is effective prospectively for fiscal years beginning after December 15, 2016 and for interim periods within those fiscal years, with early adoption permitted. The Company adopted the guidance on January 1, 2017, as required. There was no material impact on its financial statements and related disclosures.
Compensation - Stock Compensation. In March 2016, the FASB issued guidance which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This guidance is effective for fiscal years beginning after December 15, 2016 and for interim periods within those fiscal years, with early adoption permitted. The Company adopted the guidance on January 1, 2017, as required. The Company elected to use the prospective transition method and as such, the excess tax benefits from stock-based compensation were presented as part of operating activities within its current period Condensed Consolidated Statement of Cash Flows. In addition, the excess tax benefit of $6 million has been recognized within the provision for income taxes for the nine months ended September 30, 2017, on the Condensed Consolidated Statement of Income.


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2.
Earnings Per Share
The computation of basic and diluted earnings per share (“EPS”) is based on net income divided by the basic weighted average number of common shares and diluted weighted average number of common shares, respectively.

The following table sets forth the computation of basic and diluted EPS (in millions, except per share data):
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Net income attributable to Wyndham shareholders
$
203

 
$
196

 
$
422

 
$
447

Basic weighted average shares outstanding
102.4

 
109.0

 
103.7

 
110.9

Stock-settled appreciation rights (“SSARs”), RSUs (a) and PSUs (b)
0.5

 
0.6

 
0.5

 
0.6

Diluted weighted average shares outstanding
102.9

 
109.6

 
104.2

 
111.5

Earnings per share:
 
 
 
 
 
 
 
Basic
$
1.98

 
$
1.79

 
$
4.07

 
$
4.03

Diluted
1.97

 
1.78

 
4.05

 
4.01

Dividends:
 
 
 
 
 
 
 
Aggregate dividends paid to shareholders
$
59

 
$
54

 
$
184

 
$
169


(a) 
Excludes 1.1 million and 1.0 million of restricted stock units (“RSUs”) for the three and nine months ended September 30, 2016, respectively, that would have been anti-dilutive to EPS. Includes unvested dilutive RSUs which are subject to future forfeiture.
(b) 
Excludes 0.6 million of performance vested restricted stock units (“PSUs”) for the three and nine months ended September 30, 2016, as the Company has not met the required performance metrics.

Stock Repurchase Program

The following table summarizes stock repurchase activity under the current stock repurchase program (in millions, except per share data):
 
Shares Repurchased
 
Cost
 
 Average Price Per Share
As of December 31, 2016
88.1

 
$
4,337

 
$
49.22

During the nine months ended September 30, 2017
4.9

 
450

 
91.81

As of September 30, 2017
93.0

 
$
4,787

 
51.47


The Company had $290 million of remaining availability under its program as of September 30, 2017.

3.
Acquisitions
Assets acquired and liabilities assumed in business combinations were recorded on the Condensed Consolidated Balance Sheets as of the respective acquisition dates based upon their estimated fair values at such dates. The results of operations of businesses acquired by the Company have been included in the Condensed Consolidated Statements of Income since their respective dates of acquisition. The excess of the purchase price over the estimated fair values of the underlying assets acquired and liabilities assumed was allocated to goodwill. In certain circumstances, the allocations of the excess purchase price are based upon preliminary estimates and assumptions. Accordingly, the allocations may be subject to revision when the Company receives final information, including appraisals and other analyses. Any revisions to the fair values during the allocation period will be recorded by the Company as further adjustments to the purchase price allocations. Although, in certain circumstances, the Company has substantially integrated the operations of its acquired businesses, additional future costs relating to such integration may occur. These costs may result from integrating operating systems, relocating employees, closing facilities, reducing duplicative efforts and exiting and consolidating other activities. These costs will be recorded on the Condensed Consolidated Statements of Income as expenses.

Love Home Swap. During the nine months ended September 30, 2017, the Company acquired a controlling interest in Love Home Swap, a United Kingdom home exchange company. The Company had convertible notes which, at the time of acquisition, it converted into a 47% equity ownership interest in Love Home Swap and purchased the remaining 53% of equity for $27 million, net of cash acquired. As a result, the Company recognized a non-cash gain of $13 million (no tax impact associated with this gain) resulting from the remeasurement of the carrying value of the Company’s 47% ownership

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interest to its fair value. The preliminary purchase price allocations resulted primarily in the recognition of (i) $48 million of goodwill, none of which is expected to be deductible for tax purposes, (ii) $5 million of trademarks, (iii) $5 million of definite-lived intangible assets with a weighted average life of nine years, (iv) $2 million of other assets and (v) $8 million of liabilities. This acquisition was not material to the Company’s results of operations, financial position or cash flows.

Other. During the nine months ended September 30, 2017, the Company completed three other acquisitions at its Destination Network segment for $16 million in cash, net of cash acquired, and $1 million of contingent consideration. The preliminary purchase price allocations resulted primarily in the recognition of (i) $27 million of other assets, (ii) $7 million of goodwill, of which $4 million is expected to be deductible for tax purposes, (iii) $3 million of definite-lived intangible assets with a weighted average life of eight years, (iv) $4 million of trademarks and (v) $24 million of liabilities. These acquisitions were not material to the Company’s results of operations, financial position or cash flows.


4.
Intangible Assets

Intangible assets consisted of:
 
September 30, 2017
 
December 31, 2016
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Unamortized Intangible Assets:

 

 

 

 

 

    Goodwill
$
1,698

 

 

 
$
1,603

 

 

    Trademarks
$
735

 


 


 
$
720

 


 


Amortized Intangible Assets:

 


 

 

 


 

    Franchise agreements
$
594

 
$
412

 
$
182

 
$
594

 
$
401

 
$
193

    Management agreements
171

 
64

 
107

 
168

 
54

 
114

    Trademarks
20

 
8

 
12

 
20

 
6

 
14

    Other
164

 
75

 
89

 
148

 
62

 
86

 
$
949

 
$
559

 
$
390

 
$
930

 
$
523

 
$
407


The changes in the carrying amount of goodwill are as follows:
 
Balance as of December 31, 2016
 
Adjustments to Goodwill Acquired During 2016
 
Goodwill Acquired During 2017
 
Foreign
Exchange
 
Balance as of September 30, 2017
 
 
 
 
 
 
 
 
 
 
Hotel Group
$
377

 
$
1

 
$

 
$

 
$
378

Destination Network
1,199

 
1

 
55

 
38

 
1,293

Vacation Ownership
27

 

 

 

 
27

Total Company
$
1,603

 
$
2

 
$
55

 
$
38

 
$
1,698


Amortization expense relating to amortizable intangible assets was as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Franchise agreements
$
3

 
$
3

 
$
11

 
$
11

Management agreements
3

 
3

 
9

 
8

Other
4

 
3

 
10

 
9

Total (*)
$
10

 
$
9

 
$
30

 
$
28

 
(*)  
Included as a component of depreciation and amortization on the Consolidated Statements of Income.

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Based on the Company's amortizable intangible assets as of September 30, 2017, the Company expects related amortization expense as follows:
 
Amount
Remainder of 2017
$
9

2018
34

2019
33

2020
32

2021
30

2022
29


5.
Vacation Ownership Contract Receivables
The Company generates vacation ownership contract receivables by extending financing to the purchasers of its VOIs. Current and long-term vacation ownership contract receivables, net consisted of:
 
September 30,
2017
 
December 31,
2016
Current vacation ownership contract receivables:
 
 
 
Securitized
$
226

 
$
235

Non-securitized
91

 
84

Current vacation ownership contract receivables, gross
317

 
319

Less: Allowance for loan losses
60

 
57

Current vacation ownership contract receivables, net
$
257

 
$
262

Long-term vacation ownership contract receivables:
 
 
 
Securitized
$
2,274

 
$
2,254

Non-securitized
957

 
825

Long-term vacation ownership contract receivables, gross
3,231

 
3,079

Less: Allowance for loan losses
624

 
564

Long-term vacation ownership contract receivables, net
$
2,607

 
$
2,515


The Company’s securitized vacation ownership contract receivables generated interest income of $85 million and $251 million during the three and nine months ended September 30, 2017, respectively, and $83 million and $247 million during the three and nine months ended September 30, 2016, respectively. Such interest income is included within consumer financing revenue on the Condensed Consolidated Statements of Income.

Principal payments that are contractually due on the Company’s vacation ownership contract receivables during the next twelve months are classified as current on the Condensed Consolidated Balance Sheets. During the nine months ended September 30, 2017 and 2016, the Company originated vacation ownership contract receivables of $1,043 million and $908 million, respectively, and received principal collections of $656 million and $613 million, respectively. The weighted average interest rate on outstanding vacation ownership contract receivables was 13.9% for both September 30, 2017 and December 31, 2016.

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, 2016
$
621

Provision for loan losses
319

Contract receivables write-offs, net
(256
)
Allowance for loan losses as of September 30, 2017
$
684


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Amount
Allowance for loan losses as of December 31, 2015
$
581

Provision for loan losses
256

Contract receivables write-offs, net
(218
)
Allowance for loan losses as of September 30, 2016
$
619

In accordance with the guidance for accounting for real estate time-sharing transactions, the Company recorded a provision for loan losses of $123 million and $319 million as a reduction of net revenues during the three and nine months ended September 30, 2017, respectively, and $104 million and $256 million for the three and nine months ended September 30, 2016, respectively.

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 FICO score. A FICO score is a branded version of a consumer credit score widely used in the United States 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, ranging 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 Resort Asia Pacific business for which scores are not readily available).

The following table details an aging analysis of financing receivables using the most recently updated FICO scores (based on the policy described above):
 
As of September 30, 2017
 
700+
 
600-699
 
<600
 
No Score
 
Asia Pacific
 
Total
Current
$
1,820

 
$
1,032

 
$
162

 
$
129

 
$
259

 
$
3,402

31 - 60 days
17

 
30

 
18

 
4

 
2

 
71

61 - 90 days
10

 
16

 
11

 
2

 
1

 
40

91 - 120 days
8

 
13

 
12

 
2

 

 
35

Total
$
1,855

 
$
1,091

 
$
203

 
$
137

 
$
262

 
$
3,548

 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2016
 
700+
 
600-699
 
<600
 
No Score
 
Asia Pacific
 
Total
Current
$
1,733

 
$
1,010

 
$
149

 
$
120

 
$
232

 
$
3,244

31 - 60 days
19

 
32

 
17

 
4

 
2

 
74

61 - 90 days
11

 
16

 
11

 
3

 
1

 
42

91 - 120 days
8

 
14

 
13

 
2

 
1

 
38

Total
$
1,771

 
$
1,072

 
$
190

 
$
129

 
$
236

 
$
3,398

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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6.
Inventory
Inventory consisted of:
 
September 30,
2017
 
December 31,
2016
Land held for VOI development
$
4

 
$
146

VOI construction in process
18

 
59

Inventory sold subject to conditional repurchase
92

 
163

Completed VOI inventory
878

 
667

Estimated VOI recoveries (a)
278

 
256

Destination Network vacation credits and other
63

 
59

Total inventory
1,333

 
1,350

Less: Current portion (b)
317

 
315

Non-current inventory
$
1,016

 
$
1,035

 
(a) 
Represents an estimate of VOI inventory that will be recovered upon vacation ownership contract receivable defaults.
(b) 
Represents inventory that the Company expects to sell within the next 12 months.

During the nine months ended September 30, 2017 and 2016, the Company transferred $36 million and $48 million, respectively, from property and equipment to VOI inventory. In addition to the inventory obligations listed below, the Company had $5 million and $8 million of inventory accruals as of September 30, 2017 and December 31, 2016, respectively, included within accounts payable on the Condensed Consolidated Balance Sheets.

During May 2017, the Company’s new leadership at its vacation ownership business performed an in-depth review of its operations, including its current development pipeline and long-term development plan. In connection with this review, the Company made a decision to no longer pursue future development at certain locations and thus performed a fair value assessment on these locations. As a result, the Company recorded a $135 million non-cash impairment charge primarily related to the write-down of land held for VOI development (see Note 17 - Asset Impairments and Other Charges for further details).

Inventory Sale Transactions
During 2015 and 2016, the Company sold real property located in St. Thomas, U.S. Virgin Islands (“St. Thomas”) to a third-party developer, consisting of vacation ownership inventory. 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 no gain or loss on these sales transactions. In accordance with the agreements with the 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. Under the sale of real estate accounting guidance, the conditional rights and obligations of the Company constitute continuing involvement and thus the Company did not account for these transactions as a sale.

During 2014, the Company acquired the property located in Avon, Colorado from the third-party developer. In connection with this acquisition, the Company had an outstanding obligation of $22 million as of September 30, 2017, of which $11 million was included within accrued expenses and other current liabilities and $11 million was included within other non-current liabilities on the Condensed Consolidated Balance Sheet. During the nine months ended September 30, 2017, the Company paid $11 million to the third-party developer, of which $9 million was for vacation ownership inventory and $2 million was to satisfy a portion of its inventory obligation. As of December 31, 2016, the Company had an outstanding obligation of $32 million, of which $11 million was included within accrued expenses and other current liabilities and $21 million was included within other non-current liabilities on the Condensed Consolidated Balance Sheet.

In connection with the Las Vegas, Nevada and St. Thomas properties, the Company had outstanding obligations of $93 million as of September 30, 2017, of which $39 million was included within accrued expenses and other current liabilities and $54 million was included within other non-current liabilities on the Condensed Consolidated Balance Sheet. During

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the nine months ended September 30, 2017, the Company paid $106 million to the third-party developer, of which $63 million was for vacation ownership inventory located in Las Vegas, Nevada and St. Thomas, $39 million was for its obligation under the vacation ownership inventory arrangements and $4 million was for accrued interest. As of December 31, 2016, the Company had an outstanding obligation related to the Las Vegas, Nevada and St. Thomas properties of $166 million, of which $74 million was included within accrued expenses and other current liabilities and $92 million was included within other non-current liabilities on the Condensed Consolidated Balance Sheet.

The Company has guaranteed to repurchase the completed properties located in Las Vegas, Nevada and St. Thomas from the third-party developers subject to the properties meeting the Company’s vacation ownership resort standards and provided that the third-party developers have not sold the properties to another party. The maximum potential future payments that the Company could be required to make under these commitments was $205 million as of September 30, 2017.

During the second quarter of 2017, the Company acquired property located in Austin, Texas from a third-party developer for $93 million. During the nine months ended September 30, 2017, the Company paid $31 million to the third-party developer for vacation ownership inventory. In connection with this acquisition, the Company had an outstanding obligation of $62 million as of September 30, 2017, of which $31 million was included within accrued expenses and other current liabilities and $31 million was included within other non-current liabilities on the Condensed Consolidated Balance Sheet.


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7.
Long-Term Debt and Borrowing Arrangements
The Company’s indebtedness consisted of:
 
September 30,
2017
 
December 31,
2016
Securitized vacation ownership debt: (a)
 
 
 
Term notes (b)
$
1,419

 
$
1,857

Bank conduit facility (c)
582

 
284

Total securitized vacation ownership debt
2,001

 
2,141

Less: Current portion of securitized vacation ownership debt
192

 
195

Long-term securitized vacation ownership debt
$
1,809

 
$
1,946

Long-term debt: (d)
 
 
 
Revolving credit facility (due July 2020)
$
455

 
$
14

Commercial paper
100

 
427

Term loan (due March 2021)
324

 
323

$300 million 2.95% senior unsecured notes (due March 2017)

 
300

$450 million 2.50% senior unsecured notes (due March 2018)
450

 
449

$40 million 7.375% senior unsecured notes (due March 2020)
40

 
40

$250 million 5.625% senior unsecured notes (due March 2021)
248

 
248

$650 million 4.25% senior unsecured notes (due March 2022) (e)
648

 
648

$400 million 3.90% senior unsecured notes (due March 2023) (f)
406

 
407

$300 million 4.15% senior unsecured notes (due April 2024)
297

 

$350 million 5.10% senior unsecured notes (due October 2025) (g)
339

 
338

$400 million 4.50% senior unsecured notes (due April 2027) (h)
400

 

Capital leases
143

 
143

Other
50

 
34

Total long-term debt
3,900

 
3,371

Less: Current portion of long-term debt
42

 
34

Long-term debt
$
3,858

 
$
3,337

 
(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 $2,614 million and $2,601 million of underlying gross vacation ownership contract receivables and related assets (which legally are not assets of the Company) as of September 30, 2017 and December 31, 2016, respectively.
(b) 
The carrying amounts of the term notes are net of debt issuance costs aggregating $18 million and $24 million as of September 30, 2017 and December 31, 2016, respectively.
(c) 
The Company has borrowing capability under the Bank conduit facility through August 2018. Borrowings under this facility are required to be repaid as the collateralized receivables amortize but no later than September 2019.
(d) 
The carrying amounts of the senior unsecured notes and term loan are net of unamortized discounts of $14 million and $11 million as of September 30, 2017 and December 31, 2016, respectively. The carrying amounts of the senior unsecured notes and term loan are net of debt issuance costs of $5 million and $4 million as of September 30, 2017 and December 31, 2016, respectively.
(e) 
Includes $2 million of unamortized gains from the settlement of a derivative as of both September 30, 2017 and December 31, 2016,
(f) 
Includes $8 million and $9 million of unamortized gains from the settlement of a derivative as of September 30, 2017 and December 31, 2016, respectively.
(g) 
Includes $8 million and $9 million of unamortized losses from the settlement of a derivative as of September 30, 2017 and December 31, 2016, respectively.
(h) 
Includes a $4 million increase in the carrying value resulting from a fair value hedge derivative as of September 30, 2017.
Long-Term Debt
The Company’s $450 million 2.50% senior unsecured notes due March 2018 are classified as long-term as the Company has the intent to refinance such debt on a long-term basis and the ability to do so with available capacity under its revolving credit facility.


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Debt Issuances
Sierra Timeshare 2017-1 Receivables Funding, LLC. During March 2017, the Company closed a series of term notes payable, issued by Sierra Timeshare 2017-1 Receivables Funding, LLC, with an initial principal amount of $350 million, which are secured by vacation ownership contract receivables and bear interest at a weighted average coupon rate of 2.97%. The advance rate for this transaction was 90%. As of September 30, 2017, the Company had outstanding borrowings under these term notes of $247 million, net of debt issuance costs.

4.15% Senior Unsecured Notes. During March 2017, the Company issued senior unsecured notes, with face value of $300 million and bearing interest at a rate of 4.15%, for net proceeds of $297 million. The interest on the senior unsecured notes will be subject to adjustments from time to time if there are downgrades to the credit ratings assigned to the notes. Interest began accruing on March 21, 2017 and is payable semi-annually in arrears on April 1 and October 1 of each year, commencing on October 1, 2017. The notes will mature on April 1, 2024 and are redeemable at the Company’s option at a redemption price equal to the greater of (i) the sum of the principal being redeemed and (ii) a “make-whole” price specified in the Indenture and the notes, plus, in each case, accrued and unpaid interest. These notes rank equally in right of payment with all of the Company’s other senior unsecured indebtedness.

4.50% Senior Unsecured Notes. During March 2017, the Company issued senior unsecured notes, with face value of $400 million and bearing interest at a rate of 4.50%, for net proceeds of $397 million. The interest on the senior unsecured notes will be subject to adjustments from time to time if there are downgrades to the credit ratings assigned to the notes. Interest began accruing on March 21, 2017 and is payable semi-annually in arrears on April 1 and October 1 of each year, commencing on October 1, 2017. The notes will mature on April 1, 2027 and are redeemable at the Company’s option at a redemption price equal to the greater of (i) the sum of the principal being redeemed and (ii) a “make-whole” price specified in the Indenture and the notes, plus, in each case, accrued and unpaid interest. These notes rank equally in right of payment with all of the Company’s other senior unsecured indebtedness.

Other. During 2015, the Company entered into an agreement with a third-party partner whereby the partner would develop and construct VOI inventory through an SPE. The SPE financed the development and construction with a four-year bank mortgage note. During the first quarter of 2017, the third-party partner met certain conditions of the agreement, which resulted in the Company committing to purchase $51 million of VOI inventory located in Clearwater, Florida, from the SPE over a two-year period. Such proceeds from the purchase will be used by the SPE to repay the mortgage notes. The Company is considered to be the primary beneficiary for specified assets and liabilities of the SPE and, therefore, the Company consolidated such assets and liabilities within its consolidated financial statements. As of September 30, 2017, the Company’s obligation under the notes was $35 million, with principal and interest payable tri-annually (see Note 8 - Variable Interest Entities for further details).

Commercial Paper
The Company maintains U.S. and European commercial paper programs with a total capacity of $750 million and $500 million, respectively. As of September 30, 2017, the Company had outstanding borrowings of $100 million at a weighted average interest rate of 1.97%, all of which were under its U.S. commercial paper program. As of December 31, 2016, the Company had outstanding borrowings of $427 million at a weighted average interest rate of 1.36%, all of which were under its U.S. commercial paper program. The Company considers outstanding borrowings under its commercial paper programs to be a reduction of available capacity on its revolving credit facility.

Fair Value Hedges
During the first quarter of 2017, the Company entered into pay-variable/receive-fixed interest rate swap agreements on its 4.50% senior unsecured notes with notional amounts of $400 million. The fixed interest rates on these notes were effectively modified to a variable LIBOR-based index. As of September 30, 2017, the variable interest rate on the notional portion of the 4.50% senior unsecured notes was 3.42%. The aggregate fair value of the swap agreements resulted in $4 million of assets as of September 30, 2017, which were included within other non-current assets on the Condensed Consolidated Balance Sheet.

During 2013, the Company entered into pay-variable/receive-fixed interest rate swap agreements on its 3.90% and 4.25% senior unsecured notes with notional amounts of $400 million and $100 million, respectively. The fixed interest rates on these notes were effectively modified to a variable LIBOR-based index. During May 2015, the Company terminated the swap agreements resulting in a gain of $17 million, which is being amortized over the remaining life of the senior unsecured notes as a reduction to interest expense on the Condensed Consolidated Statements of Income. The Company

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had $10 million and $11 million of deferred gains as of September 30, 2017 and December 31, 2016, respectively, which are included within long-term debt on the Condensed Consolidated Balance Sheets.

Maturities and Capacity
The Company’s outstanding debt as of September 30, 2017 matures as follows:
 
Securitized Vacation Ownership Debt
 
Long-Term Debt
 
Total
Within 1 year
$
192

 
$
506

(*) 
$
698

Between 1 and 2 years
669

 
39

 
708

Between 2 and 3 years
159

 
638

 
797

Between 3 and 4 years
170

 
544

 
714

Between 4 and 5 years
181

 
658

 
839

Thereafter
630

 
1,515

 
2,145

 
$
2,001

 
$
3,900

 
$
5,901

 
(*) 
Includes $464 million of senior unsecured notes that are classified as long-term debt as the Company has the intent to refinance such debt on a long-term basis and the ability to do so with available capacity under its revolving credit facility.

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

As of September 30, 2017, available capacity under the Company’s borrowing arrangements was as follows:
 
Securitized Bank
Conduit Facility
(a)
 
Revolving
Credit Facility
 
Total Capacity
$
650

 
$
1,500

 
Less: Outstanding Borrowings
582

 
455

 
          Letters of credit

 
1

 
          Commercial paper borrowings

 
100

(b) 
Available Capacity
$
68

 
$
944

 
 
(a) 
The capacity of this facility is subject to the Company’s ability to provide additional assets to collateralize additional securitized borrowings.
(b) 
The Company considers outstanding borrowings under its commercial paper programs to be a reduction of the available capacity of its revolving credit facility.

Early Extinguishment of Debt
During the first quarter of 2016, the Company redeemed the remaining portion of its 6.00% senior unsecured notes for a total of $327 million. As a result, the Company incurred an $11 million loss during the nine months ended September 30, 2016, which is included within early extinguishment of debt on the Condensed Consolidated Statement of Income.

Interest Expense
During the three and nine months ended September 30, 2017, the Company incurred non-securitized interest expense of $42 million and $115 million, respectively, which primarily consisted of $43 million and $117 million of interest on long-term debt, partially offset by less than $1 million and $2 million of capitalized interest. Such amounts are included within interest expense on the Condensed Consolidated Statements of Income. Cash paid related to interest on the Company’s non-securitized debt was $117 million during the nine months ended September 30, 2017.

During the three and nine months ended September 30, 2016, the Company incurred non-securitized interest expense of $34 million and $102 million, respectfully, which primarily consisted of $35 million and $106 million of interest on long-term debt, partially offset by $1 million and $4 million of capitalized interest. Such amounts are included within interest expense on the Condensed Consolidated Statements of Income. Cash paid related to interest on the Company’s non-securitized debt was $118 million during the nine months ended September 30, 2016.


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Interest expense incurred in connection with the Company’s securitized vacation ownership debt during the three and nine months ended September 30, 2017 was $17 million and $54 million, respectively, and $19 million and $55 million during the three and nine months ended September 30, 2016, respectively, and is recorded within consumer financing interest on the Condensed Consolidated Statements of Income. Cash paid related to such interest was $37 million and $38 million for the nine months ended September 30, 2017 and 2016, respectively.

8.
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, 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 and sells them to bankruptcy-remote entities. Vacation ownership contract receivables qualify for securitization based primarily on the credit strength of the VOI purchaser to whom financing has been extended. Vacation ownership contract receivables 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. The Company services the securitized vacation ownership contract receivables 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 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 have no recourse to the Company for principal and interest.

The assets and liabilities of these vacation ownership SPEs are as follows:
 
September 30,
2017
 
December 31,
2016
Securitized contract receivables, gross (a)
$
2,500

 
$
2,489

Securitized restricted cash (b)
94

 
90

Interest receivables on securitized contract receivables (c)
20

 
21

Other assets (d)
2

 
4

Total SPE assets
2,616

 
2,604

Securitized term notes (e) (f)
1,419

 
1,857

Securitized conduit facilities (e)
582

 
284

Other liabilities (g)
1

 
2

Total SPE liabilities
2,002

 
2,143

SPE assets in excess of SPE liabilities
$
614

 
$
461

 
(a) 
Included in current ($226 million and $235 million as of September 30, 2017 and December 31, 2016, respectively) and non-current ($2,274 million and $2,254 million as of September 30, 2017 and December 31, 2016, respectively) vacation ownership contract receivables on the Condensed Consolidated Balance Sheets.
(b) 
Included in other current assets ($72 million and $75 million as of September 30, 2017 and December 31, 2016, respectively) and other non-current assets ($22 million and $15 million as of September 30, 2017 and December 31, 2016, respectively) 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 are included in other non-current assets on the Condensed Consolidated Balance Sheets.
(e) 
Included in current ($192 million and $195 million as of September 30, 2017 and December 31, 2016, respectively) and long-term ($1,809 million and $1,946 million as of September 30, 2017 and December 31, 2016, respectively) securitized vacation ownership debt on the Condensed Consolidated Balance Sheets.

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(f) 
Includes deferred financing costs of $18 million and $24 million as of September 30, 2017 and December 31, 2016, respectively, related to securitized debt.
(g) 
Primarily includes accrued interest on securitized debt, which is included in accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets.

In addition, the Company has vacation ownership contract receivables that have not been securitized through bankruptcy-remote SPEs. Such gross receivables were $1,048 million and $909 million as of September 30, 2017 and December 31, 2016, respectively.

A summary of total vacation ownership contract receivables and other securitized assets, net of securitized liabilities and the allowance for loan losses, is as follows:
 
September 30,
2017
 
December 31,
2016
SPE assets in excess of SPE liabilities
$
614

 
$
461

Non-securitized contract receivables
1,048

 
909

Less: Allowance for loan losses
684

 
621

Total, net
$
978

 
$
749


In addition to restricted cash related to securitizations, the Company had $72 million and $59 million of restricted cash related to escrow deposits as of September 30, 2017 and December 31, 2016, respectively, which are recorded within other current assets on the Condensed Consolidated Balance Sheets.

Midtown 45, NYC Property
During 2013, the Company entered into an agreement with a third-party partner whereby the partner acquired the Midtown 45 property in New York City through an SPE. The Company is managing and operating the property for rental purposes while the Company converts it into VOI inventory. The SPE financed the acquisition and planned renovations with a four-year mortgage note and mandatorily redeemable equity provided by related parties of such partner. At the time of the agreement, the Company committed to purchase such VOI inventory from the SPE over a four-year period. Such proceeds from the purchase were used by the SPE to repay the four-year mortgage note and the mandatorily redeemable equity. The Company is considered to be the primary beneficiary of the SPE and therefore, the Company consolidated the SPE within its financial statements. During the first quarter of 2017, the Company made its final purchase of VOI inventory from the SPE.

Clearwater, FL Property
During 2015, the Company entered into an agreement with a third-party partner whereby the partner would develop and construct VOI inventory through an SPE. During the first quarter of 2017, the third-party partner met certain conditions of the agreement, which resulted in the Company committing to purchase $51 million of VOI inventory from the SPE over a two-year period. Such proceeds from the purchase will be used by the SPE to repay its mortgage notes related to the property. The Company is considered to be the primary beneficiary for specified assets and liabilities of the SPE and, therefore, the Company consolidated (non-cash) $51 million of both property and equipment and long-term debt on its Condensed Consolidated Balance Sheet.

The assets and liabilities of the Clearwater, FL Property and the Midtown 45, NYC Property SPEs are as follows:
 
September 30,
2017
 
December 31,
2016
Receivable for leased property and equipment (a)
$

 
$
16

Property and equipment, net
35

 

Total SPE assets
35

 
16

Long-term debt (b)
35

 
17

Total SPE liabilities
35

 
17

SPE deficit
$

 
$
(1
)
 
(a) 
Represents a receivable for assets leased to the Company which are reported within property and equipment, net on the Company’s Condensed Consolidated Balance Sheet.

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(b) 
As of September 30, 2017, included $35 million relating to a two-year mortgage note, of which $25 million was included in current portion of long-term debt on the Condensed Consolidated Balance Sheet. As of December 31, 2016, included $15 million relating to a four-year mortgage note due in 2017 and $2 million of mandatorily redeemable equity, both of which were included in current portion of long-term debt on the Condensed Consolidated Balance Sheet.

During the nine months ended September 30, 2017 and 2016, the SPE conveyed $30 million and $28 million, respectively, of property and equipment to the Company.

9.
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.

As of September 30, 2017, the Company had interest rate swap contracts resulting in $4 million of assets which are included within other non-current assets and foreign exchange contracts resulting in $1 million of assets which are included within other current assets and $1 million of liabilities which are included within accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheet. As of December 31, 2016, the Company had foreign exchange contracts resulting in $1 million of assets which are included within other current assets and $1 million of liabilities which are included within accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheet. On a recurring basis, such assets and liabilities are remeasured at estimated fair value (all of which are Level 2) and thus are equal to the carrying value.

The Company’s derivative instruments primarily consist of pay-fixed/receive-variable interest rate swaps, pay-variable/receive-fixed interest rate swaps, interest rate caps, foreign exchange forward contracts and foreign exchange average rate forward contracts. 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. The carrying amounts and estimated fair values of all other financial instruments are as follows:
 
September 30, 2017
 
December 31, 2016
 
Carrying
Amount
 
Estimated Fair Value
 
Carrying
 Amount
 
Estimated Fair Value
Assets
 
 
 
 
 
 
 
Vacation ownership contract receivables, net
$
2,864

 
$
3,448

 
$
2,777

 
$
3,344

Debt
 
 
 
 
 
 
 
Total debt
5,901

 
5,977

 
5,512

 
5,579



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The Company estimates the fair value of its vacation ownership contract receivables 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 securitized 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 other long-term debt, excluding capital leases, using Level 2 inputs based on indicative bids from investment banks and determines the fair value of its senior notes using quoted market prices (such senior notes are not actively traded).

10.
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 British pound, the Euro and the Canadian and Australian dollars. 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, forecasted earnings of foreign subsidiaries and intercompany borrowings that are denominated in currencies other than the Company’s underlying functional currency. During the first quarter of 2017, the Company undertook an internal restructuring to realign the capital structure of certain subsidiaries to reduce its exposure to changes in foreign currency exchange on certain intercompany borrowings.

Additionally, the Company uses 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. Gains and losses relating to freestanding foreign currency contracts are included in operating expenses on the Company’s Condensed Consolidated Statements of Income and are substantially offset by the earnings effect from the underlying items that were economically hedged. The freestanding foreign currency contracts resulted in $1 million and less than $1 million of losses during the three months ended September 30, 2017 and 2016, respectively. The freestanding foreign currency contracts resulted in $1 million of gains and $11 million of losses during the nine months ended September 30, 2017 and 2016, respectively. The amount of gains or losses relating to contracts designated as cash flow hedges that the Company expects to reclassify from accumulated other comprehensive income (“AOCI”) 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 uses various hedging strategies and derivative financial instruments to create a desired mix of fixed and floating rate assets and liabilities. Derivative instruments currently used in these hedging strategies include swaps and interest rate caps. The derivatives used to manage the risk associated with the Company’s floating rate debt include freestanding derivatives and derivatives designated as cash flow hedges. The Company also uses swaps to convert specific fixed-rate debt into variable-rate debt (i.e., fair value hedges) to manage the overall interest cost. For relationships designated as fair value hedges, changes in the fair value of the derivatives are recorded in income with offsetting adjustments to the carrying amount of the hedged debt. The amount of gains or losses that the Company expects to reclassify from AOCI to earnings during the next 12 months is not material.

Gains or losses recognized in AOCI for the three and nine months ended September 30, 2017 and 2016 were not material.

11.
Income Taxes
The Company files income tax returns in the U.S. federal and state jurisdictions, as well as in foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations for years prior to 2014. In addition, with few exceptions, the Company is no longer subject to state and local, or foreign income tax examinations for years prior to 2009.

The Company’s effective tax rates were 35.1% and 35.8% during the three months ended September 30, 2017 and 2016, respectively. The decrease was principally due to a nontaxable $13 million non-cash gain during 2017 resulting from the acquisition of a controlling interest in Love Home Swap at the Company’s destination network business, partially offset by certain nondeductible costs related to the planned spin-off of the Company’s hotel business and the exploration of strategic alternatives for its European rental brands during 2017.


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Table of Contents

The Company’s effective tax rates were 29.0% and 37.3% during the nine months ended September 30, 2017 and 2016, respectively. The decrease was principally due to (i) a tax benefit on foreign currency losses recognized from an internal restructuring undertaken to realign the organizational and capital structure of certain foreign operations during 2017, (ii) the impact of non-cash impairment charges primarily related to the write-down of undeveloped land during 2017, and (iii) a tax benefit associated with the recently adopted stock-based compensation pronouncement during 2017.

The Company made cash income tax payments, net of refunds, of $217 million and $124 million during the nine months ended September 30, 2017 and 2016, respectively.

12.
Commitments and Contingencies
The Company is involved in claims, legal and regulatory proceedings, and governmental inquiries related to its business.

Wyndham Worldwide Corporation Litigation
The Company is 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 hotel group business-breach of contract, fraud and bad faith claims between franchisors and franchisees in connection with franchise agreements and with owners in connection with management contracts, negligence, breach of contract, fraud, employment, consumer protection and other statutory claims asserted in connection with alleged acts or occurrences at owned, franchised or managed properties or in relation to guest reservations and bookings; for its destination network 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 and guests for alleged injuries sustained at or acts or occurrences related to affiliated resorts and vacation rental properties and consumer protection and other statutory claims asserted by consumers; 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, and negligence, breach of contract, fraud, consumer protection and other statutory claims by guests for alleged injuries sustained at or acts or occurrences related to vacation ownership units or resorts; 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, 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 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 $45 million and $40 million as of September 30, 2017 and December 31, 2016, respectively. Such reserves are exclusive of matters relating to the Company’s separation from Cendant (the “Cendant Separation”). 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. However, litigation 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. The Company had receivables of $17 million and $20 million as of September 30, 2017 and December 31, 2016, respectively, for certain matters which are covered by insurance and were included in other current assets on its Condensed Consolidated Balance Sheets. As of September 30, 2017, the potential exposure resulting from adverse outcomes of such legal proceedings could, in the aggregate, range up to $72 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 or liquidity.


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Table of Contents

Other Guarantees/Indemnifications
Hotel Group
From time to time, the Company may enter into a hotel management agreement that provides the hotel owner with a guarantee of a certain level of profitability based upon various metrics. Under such an agreement, the Company would be required to compensate such hotel owner for any profitability shortfall over the term of the guarantee and/or the life of the management agreement up to a specified aggregate amount. For certain agreements, the Company may be able to recapture all or a portion of the shortfall payments in the event that future operating results exceed targets. The original terms of the Company’s existing guarantees range from 8 to 10 years.

As of September 30, 2017, the Company had three guarantees for which the maximum potential amount of future payments that the Company may be required to fund was $118 million with a combined annual cap of $27 million. These guarantees have a remaining life of approximately 5 to 7 years with a weighted average life of approximately 6 years. One of the guarantees has a recapture provision and, as a result, the Company had receivables of $5 million and $4 million as of September 30, 2017 and December 31, 2016, respectively, which were included within other non-current assets on its Condensed Consolidated Balance Sheets. Such receivables were the result of payments made to date that are subject to recapture and which the Company believes will be recoverable from future operating performance.

As of September 30, 2017, the Company has an additional guarantee with a recapture provision under which the Company may be required to fund a maximum of $36 million. Such guarantee terminates in July 2020. The related hotel management agreement, which terminates in July 2038, also provides that the Company may have to fund future operating profitability shortfalls in excess of the maximum guarantee through the term of the management agreement. In the event the Company chooses not to fund any future operating profitability shortfalls, the hotel owner may terminate the hotel management agreement without penalty and the Company would be required to pay liquidated damages. The Company had a $37 million receivable related to this guarantee as of September 30, 2017, of which $1 million was included in other current assets and $36 million was included in other non-current assets on its Condensed Consolidated Balance Sheet. As of December 31, 2016, the Company had a $32 million receivable related to this guarantee which was included in other non-current assets on its Condensed Consolidated Balance Sheet. Such receivables were the result of payments made to date that are subject to recapture and which the Company believes will be recoverable from future operating performance.

In connection with such performance guarantees, as of September 30, 2017, the Company maintained a liability of $21 million, of which $16 million was included in other non-current liabilities and $5 million was included in accrued expenses and other current liabilities on its Condensed Consolidated Balance Sheet. As of September 30, 2017, the Company also had a corresponding $29 million asset related to these guarantees, of which $25 million was included in other non-current assets and $4 million was included in other current assets on its Condensed Consolidated Balance Sheet. As of December 31, 2016, the Company maintained a liability of $24 million, of which $17 million was included in other non-current liabilities and $7 million was included in accrued expenses and other current liabilities on its Condensed Consolidated Balance Sheet. As of December 31, 2016, the Company also had a corresponding $32 million asset related to the guarantees, of which $28 million was included in other non-current assets and $4 million was included in other current assets on its Condensed Consolidated Balance Sheet. Such assets are being amortized on a straight-line basis over the life of the agreements. The amortization expense for the performance guarantees noted above was $1 million for both the three months ended September 30, 2017 and 2016 and $3 million for both the nine months ended September 30, 2017 and 2016.

Vacation Ownership
The Company has committed to repurchase completed properties located in Las Vegas, Nevada and St. Thomas from third-party developers subject to such properties meeting the Company’s vacation ownership resort standards and provided that the third-party developers have not sold such properties to another party (see Note 6 - Inventory).

Cendant Litigation
Under the Cendant Separation agreement, the Company agreed to be responsible for 37.5% of certain of Cendant’s contingent and other corporate liabilities and associated costs, including certain contingent litigation. Since the Cendant Separation in 2006, the majority of the lawsuits pending on the date of the Cendant Separation have been settled. See Note 19 - Cendant Separation and Transactions with Former Parent and Subsidiaries regarding contingent litigation liabilities resulting from the Cendant Separation.


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Table of Contents

13.
Accumulated Other Comprehensive (Loss)/Income
The components of Accumulated Other Comprehensive (Loss)/Income are as follows:
 
Foreign
 
Unrealized
 
Defined
 
Accumulated
 
Currency
 
Gains /(Losses)
 
Benefit
 
Other
 
Translation
 
on Cash Flow
 
Pension
 
Comprehensive

Pretax
Adjustments
 
Hedges
 
Plans
 
(Loss)/Income
 Balance, December 31, 2016
$
(225
)
 
$

 
$
(7
)
 
$
(232
)
 Period change
118

 
(1
)
 

 
117

 Balance, September 30, 2017
$
(107
)
 
$
(1
)
 
$
(7
)
 
$
(115
)
Tax
 
 
 
 
 
 
 
 Balance, December 31, 2016
$
116

 
$
1

 
$
2

 
$
119

 Period change
(13
)
 

 

 
(13
)
 Balance, September 30, 2017
$
103

 
$
1

 
$
2

 
$
106

Net of Tax
 
 
 
 
 
 
 
 Balance, December 31, 2016
$
(109
)
 
$
1

 
$
(5
)
 
$
(113
)
 Period change
105

 
(1
)
 

 
104

 Balance, September 30, 2017
$
(4
)
 
$

 
$
(5
)
 
$
(9
)

 
Foreign
 
Unrealized
 
Defined
 
Accumulated
 
Currency
 
Gains /(Losses)
 
Benefit
 
Other
 
Translation
 
on Cash Flow
 
Pension
 
Comprehensive
Pretax
Adjustments
 
Hedges
 
Plans
 
(Loss)/Income
 Balance, December 31, 2015
$
(139
)
 
$

 
$
(9
)
 
$
(148
)
 Period change
(14
)
 

 
(1
)
 
(15
)
 Balance, September 30, 2016
$
(153
)