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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

For the quarterly period ended June 30, 2019

☐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	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 shares of common stock outstanding as of June 30, 2019.

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 Income	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Balance Sheets	6
	Condensed Consolidated Statements of Cash Flows	7
	Condensed Consolidated Statements of (Deficit)/Equity	8
	Notes to Condensed Consolidated Financial Statements	10
	Note 1 - Background and Basis of Presentation	10
	Note 2 - New Accounting Pronouncements	10
	Note 3 - Revenue Recognition	11
	Note 4 - Earnings Per Share	16
	Note 5 - Discontinued Operations	17
	Note 6 - Held-for-Sale Business	18
	Note 7 - Vacation Ownership Contract Receivables	18
	Note 8 - Inventory	20
	Note 9 - Property and Equipment	20
	Note 10 - Debt	20
	Note 11 - Variable Interest Entities	22
	Note 12 - Fair Value	23
	Note 13 - Derivative Instruments and Hedging Activities	24
	Note 14 - Income Taxes	24
	Note 15 - Leases	24
	Note 16 - Commitments and Contingencies	27
	Note 17 - Accumulated Other Comprehensive (Loss)/Income	28
	Note 18 - Stock-Based Compensation	29
	Note 19 - Segment Information	30
	Note 20 - Separation and Transaction Costs	32
	Note 21 - Restructuring	32
	Note 22 - Transactions with Former Parent and Former Subsidiaries	32
	Note 23 - Related Party Transactions	34
	Note 24 - Subsequent Events	34
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
	Forward-Looking Statements	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	49
Item 4.	Controls and Procedures	49
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3.	Defaults Upon Senior Securities	50
Item 4.	Mine Safety Disclosures	50
Item 5.	Other Information	50
Item 6.	Exhibits	51
	Signatures	52

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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 income before Depreciation and amortization, Interest expense (excluding Consumer financing interest), 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. Adjusted EBITDA also excludes stock-based compensation costs, separation and restructuring costs, transaction costs, impairments, and items that meet the conditions of unusual and/or infrequent.
AOCL	Accumulated Other Comprehensive Loss
Board	Board of Directors
Buyer	Compass IV Limited, an affiliate of Platinum Equity, LLC
Company	Wyndham Destinations, Inc. and its subsidiaries
EBITDA	Earnings Before Interest, Income Taxes and Depreciation/Amortization
EPS	Earnings 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
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
Vacasa	Vacasa LLC
VIE	Variable Interest Entity
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, the related condensed consolidated statements of income, comprehensive income 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 periods ended June 30, 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, 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 26, 2019, 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, 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 interim financial statements are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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 conducted in accordance with the standards of the PCAOB, 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.

/s/ Deloitte & Touche LLP

Tampa, FL

July 30, 2019

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WYNDHAM DESTINATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)

(Unaudited)



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net revenues
Vacation ownership interest sales	$	481		$	462		$	856		$	820
Service and membership fees	409			409			815			828
Consumer financing	128			120			253			237
Other	21			16			33			29
Net revenues	1,039			1,007			1,957			1,914
Expenses
Operating	421			418			818			821
Cost of vacation ownership interests	50			47			81			78
Consumer financing interest	26			20			52			39
Marketing	170			155			317			286
General and administrative	123			133			251			286
Separation and related costs	22			133			36			163
Restructuring	1			—			4			—
Depreciation and amortization	28			36			59			73
Total expenses	841			942			1,618			1,746
Operating income	198			65			339			168
Other (income), net	(2		)	(5		)	(12		)	(11		)
Interest expense	40			46			82			91
Interest (income)	(2		)	(2		)	(4		)	(3		)
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

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	$	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

See Notes to Condensed Consolidated Financial Statements.

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WYNDHAM DESTINATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE 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

See Notes to Condensed Consolidated Financial Statements.

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WYNDHAM DESTINATIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

(Unaudited)



	June 30, 2019			December 31, 2018
Assets
Cash and cash equivalents	$	257		$	218
Restricted cash (VIE - $118 as of 2019 and $120 as of 2018)	152			155
Trade receivables, net	140			121
Vacation ownership contract receivables, net (VIE - $2,916 as of 2019 and $2,883 as of 2018)	3,048			3,037
Inventory	1,216			1,224
Prepaid expenses	195			153
Property and equipment, net	715			712
Goodwill	922			922
Other intangibles, net	105			109
Other assets	444			304
Assets of held-for-sale business	272			203
Total assets	$	7,466		$	7,158
Liabilities and (deficit)
Accounts payable	$	81		$	66
Accrued expenses and other liabilities	949			1,004
Deferred income	554			518
Non-recourse vacation ownership debt (VIE)	2,374			2,357
Debt	3,058			2,881
Deferred income taxes	761			736
Liabilities of held-for-sale business	249			165
Total liabilities	8,026			7,727
Commitments and contingencies (Note 16)
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		)
Additional paid-in capital	4,094			4,077
Retained earnings	1,558			1,442
Accumulated other comprehensive loss	(51		)	(52		)
Total stockholders’ (deficit)	(565		)	(574		)
Noncontrolling interest	5			5
Total (deficit)	(560		)	(569		)
Total liabilities and (deficit)	$	7,466		$	7,158

See Notes to Condensed Consolidated Financial Statements.

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WYNDHAM DESTINATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)



	Six Months Ended
	June 30,
	2019			2018
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:
Depreciation and amortization	59			73
Provision for loan losses	238			218
Deferred income taxes	27			74
Stock-based compensation	12			109
Asset impairments	10			9
Non-cash lease expense	15			—
Non-cash interest	10			8
Net change in assets and liabilities, excluding the impact of acquisitions and dispositions:
Trade receivables	(9		)	(28		)
Vacation ownership contract receivables	(251		)	(233		)
Inventory	(31		)	(64		)
Deferred income	28			42
Accounts payable, accrued expenses, prepaid expenses, other assets and other liabilities	(52		)	(145		)
Other, net	11			1
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
Investing activities
Property and equipment additions	(50		)	(41		)
Net assets acquired, net of cash acquired, and acquisition-related payments	—			(5		)
Proceeds from asset sales	6			—
Other, net	(1		)	(6		)
Cash used in investing activities - continuing operations	(45		)	(52		)
Cash used in investing activities - discontinued operations	(22		)	(672		)
Net cash used in investing activities	(67		)	(724		)
Financing activities
Proceeds from non-recourse vacation ownership debt	913			924
Principal payments on non-recourse vacation ownership debt	(896		)	(931		)
Proceeds from debt	1,350			2,281
Principal payments on debt	(1,196		)	(2,491		)
Repayments of commercial paper, net	—			(147		)
Proceeds from notes issued and term loan	—			300
Repayment of notes	(2		)	(789		)
Repayments of vacation ownership inventory arrangement	(7		)	(7		)
Dividends to shareholders	(84		)	(114		)
Cash transferred to Wyndham Hotels related to spin-off	(69		)	(495		)
Proceeds from issuance of common stock	6			—
Repurchase of common stock	(125		)	(123		)
Debt issuance costs	(8		)	(9		)
Net share settlement of incentive equity awards	(1		)	(67		)
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
Effect of changes in exchange rates on cash, cash equivalents and restricted cash	2			(6		)
Net change in cash, cash equivalents and restricted cash	79			(29		)
Cash, cash equivalents and restricted cash, beginning of period	404			416
Cash, cash equivalents and restricted cash, end of period	483			387
Less: Restricted cash	152			232
Less: Cash and restricted cash included in assets of discontinued operations and held-for-sale business	74			—
Cash and cash equivalents	$	257		$	155

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 (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	)

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	)