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

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

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1.	Background and Basis of Presentation

Background

Wyndham Destinations, Inc. and its subsidiaries (collectively, “Wyndham Destinations” or the “Company”), is a global provider of hospitality services and products. The Company operates in two segments: Wyndham Vacation Clubs (“WVC”, formerly Vacation Ownership) and Panorama (formerly Vacation Exchange). The Company elected to update the segment names to better align with how the segments are referred to internally and externally.

The WVC segment develops, markets and sells vacation ownership interests (“VOIs”) to individual consumers, provides consumer financing in connection with the sale of VOIs, and provides property management services at resorts. The Panorama segment provides leisure travelers with flexibility and access to a wide variety of global travel options through its membership platforms, including timeshare exchange, closed user group, and home exchange.

The results of operations for 2020 include impacts related to the novel coronavirus global pandemic (“COVID-19”), which have been significantly negative for the travel industry, the Company, its customers, and employees. In response to COVID-19, the Company temporarily closed its resorts in mid-March across the globe and suspended its sales and marketing operations. As a result, the Company significantly reduced its workforce and furloughed thousands of employees. Given these significant events, the Company’s revenues were negatively impacted and it incurred $31 million and $377 million of charges related to COVID-19 during the three and nine months ended September 30, 2020, which are discussed in further detail in Note 22—COVID-19 Related Items. As a precautionary measure to enhance liquidity, the Company drew down its $1.0 billion revolving credit facility at the end of the first quarter, and suspended its share repurchase activity. As of September 30, 2020, the Company has reopened 85% of its United States of America (“U.S.”) resorts (97% as of the date of this filing) and restarted 77% of its U.S. sales and marketing operations (79% as of the date of this filing). The Company estimates that the remaining suspended operations will resume in early 2021.

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

During 2018, the Company decided to explore strategic alternatives for its North American vacation rentals business and on October 22, 2019, completed the sale of this business for $162 million. The assets and liabilities of this business were classified as held-for-sale as of September 30, 2019. This business did not meet the criteria to be classified as a discontinued operation; therefore, the results of operations through the date of sale were reflected within continuing operations on the Condensed Consolidated Statements of Income/(Loss). See Note 7—Held-for-Sale Business for further details.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q include the accounts and transactions of Wyndham Destinations, as well as the entities in which Wyndham Destinations directly or indirectly has a controlling financial interest. The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the U.S. 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 reported amounts of assets, liabilities, revenues and expenses, and related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ from those estimates and assumptions. In management’s opinion, the Condensed Consolidated Financial Statements contain all normal recurring adjustments necessary for a fair presentation of interim results reported. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire year or any subsequent interim period. These Condensed Consolidated Financial Statements should be read in conjunction with the Company’s 2019 Consolidated Financial Statements included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2020.

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2.	New Accounting Pronouncements

Recently Issued Accounting Pronouncements

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

Reference Rate Reform. In March 2020, the FASB issued guidance which provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued. This guidance is effective as of March 12, 2020, and will apply through December 31, 2022. The transition from LIBOR as an interest rate benchmark is estimated to take place after 2021. The Company is currently evaluating the impact of the transition from LIBOR on its financial statements and related disclosures and the related impact of this guidance on the transition. On October 27, 2020 the Company closed on the renewal of its U.S. Dollar (“USD”) bank conduit facility (see Note 27—Subsequent Events for additional details) and adopted appropriate LIBOR disclosures for asset-backed securities (“ABS”) financing structures as part of the renewal. The Company intends to adopt such language, as appropriate, in its other relevant agreements prior to the end 2021.

Recently Adopted Accounting Pronouncements

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 was effective for the Company on January 1, 2020, including interim periods within the fiscal year. The adoption of this guidance did not have a material impact on the Company’s financial statements and related disclosures as the Company’s prior approach in estimating the allowance for loan losses generally aligned with the expected credit loss model required upon adoption of this guidance. The Company has included additional disclosures in accordance with the adoption of this guidance, which are included in Note 8—Vacation Ownership Contract Receivables.

Simplifying the Test for Goodwill Impairment. In January 2017, the FASB issued guidance which simplifies the current two-step goodwill impairment test by eliminating step two of the test. The guidance requires a one-step impairment test in which an entity compares the fair value of a reporting unit with its carrying amount and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. This guidance was effective for the Company on January 1, 2020, including interim periods within the fiscal year, and was applied on a prospective basis. The adoption of this guidance did not have a material impact on the Company’s financial statements and related disclosures.

3.	Revenue Recognition

Wyndham Vacation Clubs

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

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

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

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The Company provides day-to-day property management services including oversight of housekeeping services, maintenance, and certain accounting and administrative services for property owners’ associations and clubs. These services may also include reservation and resort renovation activities. Such agreements are generally for terms of one year or less, and are renewed automatically on an annual basis. The Company’s management agreements contain cancellation clauses, which allow for either party to cancel the agreement, by either a majority board vote or a majority vote of non-developer interests. The Company receives fees for such property management services which are collected monthly in advance and are based upon total costs to operate such resorts (or as services are provided in the case of resort renovation activities). Fees for property management services typically approximate 10% of budgeted operating expenses. The Company is entitled to consideration for reimbursement of costs incurred on behalf of the property owners’ association in providing management services (“reimbursable revenue”). These reimbursable costs principally relate to the payroll costs for management of the associations, club and resort properties where the Company is the employer and are reflected as a component of Operating expenses on the Condensed Consolidated Statements of Income/(Loss). The Company reduces its management fees for amounts it has paid to the property owners’ association that reflect maintenance fees for VOIs for which it retains ownership, as the Company has concluded that such payments are consideration payable to a customer.

Property management fee revenues are recognized when the services are performed and are recorded as a component of Service and membership fees on the Condensed Consolidated Statements of Income/(Loss). Property management revenues, which are comprised of management fee revenue and reimbursable revenue, were $149 million and $178 million during the three months ended September 30, 2020 and 2019, and $447 million and $519 million during the nine months ended September 30, 2020 and 2019. Management fee revenues were $86 million and $100 million during the three months ended September 30, 2020 and 2019, and $258 million and $294 million during the nine months ended September 30, 2020 and 2019. Reimbursable revenues were $63 million and $78 million during the three months ended September 30, 2020 and 2019, and $189 million and $225 million during the nine months ended September 30, 2020 and 2019. One of the associations that the Company manages paid its Panorama segment $7 million and $8 million for exchange services during the three months ended September 30, 2020 and 2019, and $20 million and $22 million during the nine months ended September 30, 2020 and 2019.

Panorama

As a provider of vacation exchange services, the Company enters into affiliation agreements with developers of vacation ownership properties to allow owners of VOIs to trade their intervals for intervals at other properties affiliated with the Company’s vacation exchange network and, for some members, for other leisure-related services and products.

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

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

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

Prior to the sale of the vacation rental businesses, the Company’s vacation rental brands derived revenue from fees associated with the rental of vacation properties managed and marketed by the Company on behalf of independent owners.

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The Company remitted the rental fee received from the renter to the independent owner, net of the Company’s agreed-upon fee. The related revenue from such fees, net of expected refunds, was recognized over the renter’s stay. The Company’s vacation rental brands also derived revenues from additional services delivered to independent owners, vacation rental guests, and property owners’ associations which were generally recognized when the service was delivered.

Other Items

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

Contract Liabilities

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

Contract Liabilities		September 30, 2020				December 31, 2019
Deferred subscription revenue		$	180			$	206
Deferred VOI trial package revenue		126				145
Deferred VOI incentive revenue		89				107
Deferred exchange-related revenue (a)		64				58
Deferred co-branded credit card programs revenue		17				19
Deferred other revenue		8				4
Total		$	484			$	539

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

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

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

Changes in contract liabilities for the nine months ended September 30, 2020 and 2019, follow (in millions):

		Amount
Contract liabilities as of December 31, 2019		$	539
Additions		180
Revenue recognized		(235		)
Contract liabilities as of September 30, 2020		$	484

		Amount
Contract liabilities as of December 31, 2018		$	519
Additions		305
Revenue recognized		(279		)
Contract liabilities as of September 30, 2019		$	545

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Capitalized Contract Costs

The Company’s vacation ownership business incurs certain direct and incremental selling costs in connection with VOI trial package and incentive revenues. Such costs are capitalized and subsequently amortized over the utilization period, which is typically within one year of the sale. As of September 30, 2020 and December 31, 2019, these capitalized costs were $47 million and $53 million and are included within Other assets on the Condensed Consolidated Balance Sheets.

The Company’s vacation exchange business incurs certain direct and incremental selling costs to obtain contracts with customers in connection with subscription revenues and exchange–related revenues. Such costs, which are primarily comprised of commissions paid to internal and external parties and credit card processing fees, are deferred at the inception of the contract and recognized when the benefit is transferred to the customer. As of September 30, 2020 and December 31, 2019, these capitalized costs were $17 million and $20 million; and are included within Other assets on the Condensed Consolidated Balance Sheets.

Practical Expedients

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

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

Performance Obligations

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

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

		10/1/2020 - 9/30/2021				10/1/2021 - 9/30/2022				10/1/2022 - 9/30/2023				Thereafter				Total
Subscription revenue		$	111			$	39			$	16			$	14			$	180
VOI trial package revenue		126				—				—				—				126
VOI incentive revenue		89				—				—				—				89
Exchange-related revenue		58				4				1				1				64
Co-branded credit card programs revenue		4				3				6				4				17
Other revenue		8				—				—				—				8
Total		$	396			$	46			$	23			$	19			$	484

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Disaggregation of Net Revenues

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

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2020				2019				2020				2019
Wyndham Vacation Clubs
Property management fees and reimbursable revenues	$	149			$	178			$	447			$	519
Consumer financing	114				132				360				385
Vacation ownership interest sales (a)	196				528				273				1,384
Fee-for-Service commissions	6				—				10				12
Ancillary revenues	12				20				35				51
Total Wyndham Vacation Clubs	477				858				1,125				2,351
Panorama
Exchange revenues	122				158				352				498
Vacation rental revenues	—				60				—				146
Ancillary revenues	16				32				41				72
Total Panorama	138				250				393				716
Corporate and other
Ancillary revenues	—				(1		)		—				1
Eliminations	(1		)		(2		)		(3		)		(6		)
Total Corporate and other	(1		)		(3		)		(3		)		(5		)
Net revenues	$	614			$	1,105			$	1,515			$	3,062

(a)	The Company increased its loan loss allowance by $225 million in the first quarter of 2020, due to an expected increase in defaults driven by higher unemployment associated with COVID-19, which is reflected as a reduction to Vacation ownership interest sales on the Condensed Consolidated Statements of Income/(Loss).

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4.	Earnings/(Loss) Per Share

The computation of basic and diluted earnings/(loss) per share (“EPS”) are based on Net income/(loss) attributable to Wyndham Destinations shareholders divided by the basic weighted average number of common shares and diluted weighted average number of common shares outstanding. 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,
	2020				2019				2020				2019
Net income/(loss) from continuing operations attributable to Wyndham Destinations shareholders	$	40			$	135			$	(258	)		$	334
Gain on disposal of discontinued businesses attributable to Wyndham Destinations shareholders, net of tax	—				—				—				5
Net income/(loss) attributable to Wyndham Destinations shareholders	$	40			$	135			$	(258	)		$	339
Basic earnings/(loss) per share
Continuing operations	$	0.47			$	1.48			$	(3.00	)		$	3.59
Discontinued operations	—				—				—				0.05
	$	0.47			$	1.48			$	(3.00	)		$	3.64
Diluted earnings/(loss) per share
Continuing operations	$	0.47			$	1.47			$	(3.00	)		$	3.58
Discontinued operations	—				—				—				0.06
	$	0.47			$	1.47			$	(3.00	)		$	3.64
Basic weighted average shares outstanding	85.9				91.7				86.1				93.0
Stock-settled appreciation rights (“SSARs”), RSUs (a) and PSUs (b)	0.2				0.3				—				0.3
Diluted weighted average shares outstanding (c)(d)	86.1				92.0				86.1				93.3
Dividends:
Aggregate dividends paid to shareholders	$	26			$	41			$	112			$	125

(a)

Excludes 1.0 million and 1.1 million restricted stock units (“RSUs”) that would have been anti-dilutive to EPS for the three and nine months ended September 30, 2020, of which 0.1 million would have been dilutive for the nine months ended September 30, 2020 had the Company not been in a net loss position during this period. Excludes 0.3 million and 0.8 million of anti-dilutive RSUs for the three and nine months ended September 30, 2019. These shares could potentially dilute EPS in the future.

(b)	Excludes 0.3 million performance-vested restricted stock units (“PSUs”) for the three and nine months ended September 30, 2020, as the Company has not met the required performance metrics. Excludes 0.2 million PSUs for the three and nine months ended September 30, 2019, as the Company has not met the required performance metrics. These PSUs could potentially dilute EPS in the future.

(c)

Excludes 2.3 million and 2.1 million of outstanding stock option awards that would have been anti-dilutive to EPS for the three and nine months ended September 30, 2020. Excludes 1.1 million and 1.0 million of outstanding stock option awards that would have been anti-dilutive to EPS for the three and nine months ended September 30, 2019. These outstanding stock option awards could potentially dilute EPS in the future.

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

Stock Repurchase Program

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

	Shares Repurchased			Cost
As of December 31, 2019	108.2			$	5,602
Repurchases	3.1			125
As of September 30, 2020	111.3			$	5,727

The Company had $351 million of remaining availability under its program as of September 30, 2020. In March 2020, the Company suspended its share repurchase activity due to the uncertainty resulting from COVID-19. On July 15, 2020, the Company amended the credit agreement for its revolving credit facility and term loan B. Among other changes, the

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amendment places the Company into a relief period from July 15, 2020 through April 1, 2022 that prohibits the use of cash for share repurchases unless the first lien leverage ratio is below 4.25 to 1.0 after the share repurchase.

5.	Acquisitions

Alliance Reservations Network. On August 7, 2019, the Company acquired all of the equity of ARN. ARN provides private-label travel booking technology solutions. This acquisition was undertaken for the purpose of accelerating growth at RCI by increasing the offerings available to its members and affiliates. ARN was acquired for $102 million ($97 million net of cash acquired), subject to customary post-closing adjustments based on final valuation information and additional analysis. The fair value of purchase consideration was comprised of: (i) $48 million delivered at closing; (ii) Wyndham Destinations stock valued at $10 million (253,350 shares at $39.29 per share) delivered at closing; (iii) $21 million to be paid over 24 months post-closing ($11 million of which was paid on August 7, 2020); (iv) $10 million of contingent consideration based on achieving certain financial and operational metrics; and (v) additional shares of Wyndham Destinations stock valued at $14 million (468,100 shares at $28.84 per share) delivered on August 7, 2020.

The Company has recognized the assets and liabilities of ARN based on estimates of their acquisition date fair values. The determination of the fair values of the acquired assets and assumed liabilities, including goodwill and other intangible assets, requires significant judgment. The purchase price allocation, including the impacts of certain post-closing adjustments, consists of: (i) $27 million of developed software with a weighted average life of 10 years included within Property and equipment, net; (ii) $38 million of Goodwill; (iii) $35 million of definite-lived intangible assets with a weighted average life of 12 years primarily consisting of customer relationships; and (iv) $4 million of Accounts payable. All of the goodwill and other intangible assets are expected to be deductible for income tax purposes. ARN is reported within the Panorama segment.

The Company completed purchase accounting for this transaction during the third quarter of 2020. The details above reflect the following final purchase accounting adjustments: $7 million increase in developed software and $7 million decrease in Goodwill.

Given the significant impact of COVID-19 on the travel industry, the Company performed a quantitative assessment of the goodwill acquired as part of the ARN acquisition during the third quarter of 2020. The quantitative assessment resulted in a fair value that exceeded the carrying amount by approximately 18%; therefore, the Company determined that the goodwill of ARN is not impaired.

Although the Company has determined that the goodwill of ARN is not impaired at this time, to the extent estimated discounted cash flows are revised downward, whether as a result of continued and worsening COVID-19 impacts or if management’s current negotiations to expand ARN programs both internally and externally do not materialize as expected, the Company may be required to write-down all or a portion of this goodwill, which would negatively impact earnings.

As a result of the impacts of COVID-19, the Company also performed an interim impairment analysis of ARN’s property and equipment and other intangible assets during the third quarter of 2020, and determined that it is more likely than not that these assets were not impaired.

6.	Discontinued Operations

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

Prior to their classification as discontinued operations, the hotel business comprised the Hotel Group segment and the European vacation rentals business was part of the former Destination Network segment, now known as Panorama.

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The following table presents information regarding certain components of income from discontinued operations, net of income taxes (in millions) for the nine months ended September 30, 2020 and 2019, as there were no such amounts for the quarterly periods ended September 30, 2020 and 2019:

	Nine Months Ended
	September 30,
	2020				2019
Gain on disposal of discontinued businesses, net of income taxes	$	—			$	5
Net income/(loss) attributable to Wyndham Destinations shareholders	$	—			$	5

The following table presents information regarding certain components of cash flows from discontinued operations (in millions):

	Nine Months Ended
	September 30,
	2020				2019
Net cash used in operating activities	$	—			$	(1	)
Net cash used in investing activities	—				(22		)
Net cash provided by/(used in) financing activities	—				—

7.	Held-for-Sale Business

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

The assets and liabilities of this business were classified as held-for-sale as of September 30, 2019. The business did not meet the criteria to be classified as a discontinued operation; therefore, the results of operations through the date of sale were reflected within continuing operations during the three and nine months ended September 30, 2019, on the Condensed Consolidated Statements of Income/(Loss). Prior to its sale, this business was reported within the Panorama segment.

8.	Vacation Ownership Contract Receivables

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

	September 30, 2020				December 31, 2019
Vacation ownership contract receivables:
Securitized	$	2,737			$	2,984
Non-securitized	572				883
Vacation ownership contract receivables, gross	3,309				3,867
Less: Allowance for loan losses	788				747
Vacation ownership contract receivables, net	$	2,521			$	3,120

During the three and nine months ended September 30, 2020, the Company’s securitized VOCRs generated interest income of $92 million and $303 million. During the three and nine months ended September 30, 2019, the Company’s securitized VOCRs generated interest income of $103 million and $303 million. Such interest income is included within Consumer financing revenue on the Condensed Consolidated Statements of Income/(Loss).

During the nine months ended September 30, 2020 and 2019, the Company originated VOCRs of $338 million and $1.16 billion, and received principal collections of $543 million and $696 million. The weighted average interest rate on outstanding VOCRs was 14.4% as of September 30, 2020 and December 31, 2019.

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

	Amount
Allowance for loan losses as of December 31, 2019	$	747
Provision for loan losses	391
Contract receivables write-offs, net	(350		)
Allowance for loan losses as of September 30, 2020	$	788

	Amount
Allowance for loan losses as of December 31, 2018	$	734
Provision for loan losses	373
Contract receivables write-offs, net	(340		)
Allowance for loan losses as of September 30, 2019	$	767

The Company recorded a provision for loan losses of $45 million and $391 million as a reduction of net revenues during the three and nine months ended September 30, 2020, and $135 million and $373 million for the three and nine months ended September 30, 2019. Due to the current economic downturn resulting from COVID-19, the Company evaluated the potential impact of COVID-19 on its owners’ ability to repay their contract receivables and as a result of current and projected unemployment rates, the Company increased its loan loss allowance. This was reflected as a $225 million reduction to Vacation ownership interest sales and a $55 million reduction to Cost/(recovery) of vacation ownership interests on the Condensed Consolidated Statements of Income/(Loss) recorded during the first quarter of 2020.

Estimating the amount of the additional loan loss allowance for COVID-19 involved the use of significant estimates and assumptions. Management based its estimates on the Company’s historical data during the most recent recession in 2008 utilizing the relationship between unemployment rates and net new defaults. Specifically, historical data indicated that net new defaults did not return to prior levels until 15-20 months after the peak in unemployment. Given the significant amount of government assistance provided to consumers in the early stages of the pandemic, the Company expects defaults to remain elevated at or just beyond the later end of that range. The Company will continue to monitor this reserve as more information becomes available.

Credit Quality for Financed Receivables and the Allowance for Credit Losses

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

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

	As of September 30, 2020
	700+				600-699				<600				No Score				Asia Pacific				Total
Current	$	1,749			$	902			$	195			$	104			$	213			$	3,163
31 - 60 days	19				23				13				4				1				60
61 - 90 days	14				16				13				3				1				47
91 - 120 days	10				14				11				3				1				39
Total (a)	$	1,792			$	955			$	232			$	114			$	216			$	3,309
	As of December 31, 2019
	700+				600-699				<600				No Score				Asia Pacific				Total
Current	$	2,019			$	1,049			$	196			$	134			$	250			$	3,648
31 - 60 days	25				37				21				5				2				90
61 - 90 days	18				28				17				3				1				67
91 - 120 days	13				21				24				3				1				62
Total (a)	$	2,075			$	1,135			$	258			$	145			$	254			$	3,867

(a)	Includes contracts under temporary deferment (up to 180 days). As of September 30, 2020 and December 31, 2019, contracts under deferment total $86 million and $8 million.

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.

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

	As of September 30, 2020
	700+				600-699				<600				No Score				Asia Pacific				Total
2020	$	336			$	142			$	12			$	16			$	41			$	547
2019	530				314				75				30				73				1,022
2018	369				202				59				23				37				690
2017	238				125				38				17				22				440
2016	137				70				19				11				16				253
Prior	182				102				29				17				27				357
Total	$	1,792			$	955			$	232			$	114			$	216			$	3,309
	As of December 31, 2019
	700+				600-699				<600				No Score				Asia Pacific				Total
2019	$	866			$	454			$	54			$	53			$	119			$	1,546
2018	486				285				80				32				49				932
2017	303				166				51				23				29				572
2016	173				89				29				14				20				325
2015	99				56				17				9				14				195
Prior	148				85				27				14				23				297
Total	$	2,075			$	1,135			$	258			$	145			$	254			$	3,867

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9.	Inventory

Inventory consisted of (in millions):

	September 30, 2020				December 31, 2019
Land held for VOI development	$	1			$	3
VOI construction in process	26				24
Inventory sold subject to repurchase	19				24
Completed VOI inventory	997				802
Estimated VOI recoveries	278				281
Vacation exchange credits and other	10				65
Total inventory	$	1,331			$	1,199

The Company had net transfers of VOI inventory to property and equipment of $28 million and less than $1 million during the nine months ended September 30, 2020 and 2019.

In the first quarter of 2020, as a result of resort closures and cancellations surrounding COVID-19, the Company recorded a $38 million reduction of exchange inventory consisting of costs previously incurred by RCI to provide enhanced out-of-network travel options to members. During the third quarter of 2020, the Company recorded an additional $10 million reduction to exchange inventory. These write-offs are included within Operating expenses on the Condensed Consolidated Statements of Income/(Loss). The Company anticipates that remaining inventory will be fully utilized to maximize exchange supply for its members in 2020 and beyond.

Inventory Sale Transactions

During the third quarter of 2020, the Company acquired properties located in Orlando, Florida, and Moab, Utah, from third-party developers for vacation ownership inventory and property and equipment.

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

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 sale transactions.

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

Inventory Obligations

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

	Avon (a)				Las Vegas (a)				Austin (a)				Orlando (a)				Moab (a)				Other (b)				Total
December 31, 2019	$	—			$	43			$	—			$	—			$	—			$	6			$	49
Purchases	—				15				—				44				37				87				183
Payments	—				(39		)		—				(22		)		—				(83		)		(144		)
September 30, 2020	$	—			$	19			$	—			$	22			$	37			$	10			$	88
December 31, 2018	$	11			$	52			$	31			$	—			$	—			$	6			$	100
Purchases	—				13				1				—				—				93				107
Payments	(11		)		(36		)		(32		)		—				—				(86		)		(165		)
September 30, 2019	$	—			$	29			$	—			$	—			$	—			$	13			$	42

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

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

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The Company has committed to repurchase the completed property located in Las Vegas, Nevada, from third-party developers subject to the property meeting the Company’s vacation ownership resort standards and provided that the third-party developers have not sold the property to another party. The maximum potential future payments that the Company may be required to make under this commitment was $86 million as of September 30, 2020.

10.	Property and Equipment

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

	September 30, 2020				December 31, 2019
Land	$	30			$	28
Building and leasehold improvements	591				572
Furniture, fixtures and equipment	229				218
Capitalized software	685				652
Finance leases	14				14
Construction in progress	36				40
Total property and equipment	1,585				1,524
Less: Accumulated depreciation and amortization	906				844
Property and equipment, net	$	679			$	680

11.	Debt

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

	September 30, 2020				December 31, 2019
Non-recourse vacation ownership debt: (a)
Term notes (b)	$	2,190			$	1,969
USD bank conduit facility (due August 2021) (c)	106				508
AUD/NZD bank conduit facility (due September 2021) (d)	161				64
Total	$	2,457			$	2,541
Debt: (e)
$1.0 billion secured revolving credit facility (due May 2023) (f)	$	547			$	—
$300 million secured term loan B (due May 2025)	292				293
$40 million 7.375% secured notes (due March 2020)	—				40
$250 million 5.625% secured notes (due March 2021)	250				249
$650 million 4.25% secured notes (due March 2022) (g)	649				649
$400 million 3.90% secured notes (due March 2023) (h)	403				404
$300 million 5.40% secured notes (due April 2024)	298				298
$350 million 6.35% secured notes (due October 2025) (i)	343				342
$650 million 6.625% secured notes (due July 2026)	641				—
$400 million 5.75% secured notes (due April 2027) (j)	408				409
$350 million 4.625% secured notes (due March 2030)	345				345
Finance leases	8				5
Total	$	4,184			$	3,034

(a)

Represents non-recourse debt that is securitized through bankruptcy-remote special purpose entities (“SPEs”), the creditors of which have no recourse to the Company for principal and interest. These outstanding borrowings (which legally are not liabilities of the Company) are collateralized by $2.85 billion and $3.12 billion of underlying gross VOCRs and related assets (which legally are not assets of the Company) as of September 30, 2020 and December 31, 2019.

(b)	The carrying amounts of the term notes are net of deferred financing costs of $25 million and $23 million as of September 30, 2020 and December 31, 2019.

(c)

The Company has a borrowing capability of $800 million under the USD bank conduit facility through August 2021. Borrowings under this facility are required to be repaid as the collateralized receivables amortize but no later than September 2022. On October 27, 2020 the Company renewed this facility, extending the end of the commitment period from August 30, 2021 to October 31, 2022. See Note 27—Subsequent Events for additional details.

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

(e)	The carrying amounts of the secured notes and term loan are net of unamortized discounts of $17 million and $12 million as of September 30, 2020 and December 31, 2019, and net of unamortized debt financing costs of $8 million and $7 million as of September 30, 2020 and December 31, 2019.

(f)

The weighted average effective interest rate on borrowings from this facility were 3.01% and 5.19% as of September 30, 2020 and December 31, 2019. In late March 2020, the Company drew down its $1.0 billion secured revolving credit facility as a precautionary measure due to COVID-19. The Company had $1.28 billion in Cash and cash equivalents on the Condensed Consolidated Balance Sheet at September 30, 2020.

(g)	Includes $1 million of unamortized gains from the settlement of a derivative as of September 30, 2020 and December 31, 2019.

(h)	Includes $4 million and $5 million of unamortized gains from the settlement of a derivative as of September 30, 2020 and December 31, 2019.

(i)	Includes $5 million and $6 million of unamortized losses from the settlement of a derivative as of September 30, 2020 and December 31, 2019.

(j)	Includes $11 million and $13 million of unamortized gains from the settlement of a derivative as of September 30, 2020 and December 31, 2019.

Sierra Timeshare 2020-1 Receivables Funding LLC

On April 29, 2020, the Company closed a private securitization financing, issued by Sierra Timeshare 2020-1 Receivables Fundings LLC, with an initial principal amount of $325 million, secured by VOCRs and bearing a floating interest rate of 3.50% as of September 30, 2020. The advance rate for this transaction was 85%.

Sierra Timeshare 2020-2 Receivables Funding LLC

On August 13, 2020, the Company closed on a placement of a series of term notes payable, issued by Sierra Timeshare 2020-2 Receivables Fundings LLC, with an initial principal amount of $575 million, which are secured by VOCRs and bear interest at a weighted average coupon rate of 2.81%. The advance rate for this transaction was 90%.

Debt

On May 6, 2020, the Company’s corporate notes were downgraded by Moody’s Investors Service, Inc. (“Moody’s”). As a result of such notes being downgraded, pursuant to the terms of the indentures governing the Company’s 5.40% notes due 2024, the 6.35% notes due 2025, and the 5.75% notes due 2027, the interest rates applicable to such series of notes were all increased by 0.25% per annum, effective October 1, 2020. Pursuant to the terms of the indentures governing such series of notes, the interest rate on each such series of notes may be subject to future increases or decreases, as a result of future downgrades or upgrades to the credit ratings of such notes by Standard & Poor’s Rating Services (“S&P”), Moody’s, or a substitute rating agency.

Secured Notes. On July 24, 2020, the Company issued secured notes, with a face value of $650 million and an interest rate of 6.625%, for net proceeds of $643 million. Debt discount and deferred financing costs were $7 million and $2 million, which will be amortized over the life of the notes. Interest is payable semi-annually in arrears on the notes. The notes will mature on July 31, 2026, 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. The proceeds will be used for general corporate purposes, which may include the repayment of outstanding indebtedness under its secured revolving credit facility, the future repayment of the Company’s 5.625% secured notes due March 2021 and the payment of related fees and expenses. In the third quarter, the Company used a portion of the secured notes proceeds to repay $350 million of its indebtedness under the secured revolving credit facility.

Maturities and Capacity

The Company’s outstanding debt as of September 30, 2020, matures as follows (in millions):

	Non-recourse Vacation Ownership Debt				Debt				Total
Within 1 year	$	366			$	253			$	619
Between 1 and 2 years	316				652				968
Between 2 and 3 years	254				951				1,205
Between 3 and 4 years	256				299				555
Between 4 and 5 years	270				291				561
Thereafter	995				1,738				2,733
	$	2,457			$	4,184			$	6,641

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

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As of September 30, 2020, available capacity under the Company’s borrowing arrangements was as follows (in millions):

	Non-recourse Conduit Facilities (a)				Revolving Credit Facilities (b)
Total capacity	$	1,014			$	1,000
Less: Outstanding borrowings	267				547
Less: Letters of credit	—				60
Available capacity	$	747			$	393

(a)	Consists of the Company’s USD bank conduit facility and AUD/NZD bank conduit facility. The capacity of these facilities is subject to the Company’s ability to provide additional assets to collateralize additional non-recourse borrowings.

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

Debt Covenants

The revolving credit facilities and term loan B are subject to covenants including the maintenance of specific financial ratios as defined in the credit agreement. The financial ratio covenants consist of a minimum interest coverage ratio and a maximum first lien leverage ratio. The interest coverage ratio is calculated by dividing consolidated EBITDA (as defined in the credit agreement) by consolidated interest expense (as defined in the credit agreement), both as measured on a trailing 12-month basis preceding the measurement date. The first lien leverage ratio is calculated by dividing consolidated first lien debt (as defined in the credit agreement) as of the measurement date by consolidated EBITDA (as defined in the credit agreement) as measured on a trailing 12-month basis preceding the measurement date.

On July 15, 2020, the Company entered into an amendment to the Company’s credit agreement (“Credit Agreement Amendment”). The Credit Agreement Amendment establishes a relief period with respect to the Company’s secured revolving credit facility, which commenced on July 15, 2020, and will end on April 1, 2022, or the termination by the Company of the relief period, subject to certain conditions (“Relief Period”). The Credit Agreement Amendment increases the existing leverage-based financial covenant of 4.25 to 1.0 by varying levels for each applicable quarter during the Relief Period. During the third quarter of 2020, the Credit Agreement Amendment increased the maximum first lien leverage ratio to 6.50 to 1.0. Following the Relief Period, the Credit Agreement Amendment reestablishes the existing leverage-based financial covenant of 4.25 to 1.0, tested on the basis of trailing 12-month consolidated EBITDA (as defined in the credit agreement). In addition, the Credit Agreement Amendment, among other things, increases the interest rate applicable to borrowings under the Company’s secured revolving credit facility based on the Company’s first lien leverage ratio in any quarter it exceeds 4.25 to 1.0, until the end of the Relief Period; adds a new minimum liquidity covenant, tested quarterly until the end of the Relief Period, of (i) $250 million plus (ii) 50% of the aggregate amount of dividends paid after the effective date of the Credit Agreement Amendment and on or prior to the last day of the relevant fiscal quarter; and requires the Company and its subsidiaries to maintain an interest coverage ratio (as defined in the Credit Agreement) of not less than 2.00 to 1.0, which shall increase to 2.50 to 1.0 after the Relief Period, the level existing prior to the effective date of the Credit Agreement Amendment. Finally, the Credit Agreement Amendment amends the definition of “Material Adverse Effect” in the Credit Agreement to take into consideration the impacts of the COVID-19 pandemic during the Relief Period, to the extent disclosed prior to July 15, 2020, in the Company’s public filings and certain other specified materials. The Relief Period includes certain restrictions on the use of cash including the prohibition of share repurchases unless the first lien leverage ratio is below the original ratio of 4.25 to 1.0 after the share repurchase. The Company has the option to terminate the Relief Period at any time it can demonstrate compliance with the 4.25 to 1.0 first lien leverage ratio.

As of September 30, 2020, the Company’s first lien leverage ratio was 4.1 to 1.0 and the Company’s interest coverage ratio was 4.2 to 1.0. These ratios do not include interest expense or indebtedness related to any qualified securitization financing (as defined in the credit agreement). As of September 30, 2020, the Company was in compliance with the financial covenants described above.

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

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Interest Expense

The Company incurred interest expense of $52 million and $138 million during the three and nine months ended September 30, 2020. Such amounts consisted primarily of interest on debt, excluding non-recourse vacation ownership debt, and included an offset of less than $1 million and $1 million of capitalized interest during the three and nine months ended September 30, 2020. Cash paid related to such interest was $126 million during the nine months ended September 30, 2020.

The Company incurred interest expense of $40 million and $122 million during the three and nine months ended September 30, 2019. Such amounts consisted primarily of interest on debt, excluding non-recourse vacation ownership debt, and included an offset of $1 million and $2 million of capitalized interest in each period. Cash paid related to such interest was $119 million during the nine months ended September 30, 2019.

Interest expense incurred in connection with the Company’s non-recourse vacation ownership debt was $26 million and $76 million during the three and nine months ended September 30, 2020, $26 million and $78 million during the three and nine months ended September 30, 2019, and is recorded within Consumer financing interest on the Condensed Consolidated Statements of Income/(Loss). Cash paid related to such interest was $56 million and $61 million for the nine months ended September 30, 2020 and 2019.

12.	Variable Interest Entities

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

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

	September 30, 2020				December 31, 2019
Securitized contract receivables, gross (a)	$	2,737			$	2,984
Securitized restricted cash (b)	88				110
Interest receivables on securitized contract receivables (c)	26				25
Other assets (d)	3				4
Total SPE assets	2,854				3,123
Non-recourse term notes (e) (f)	2,190				1,969
Non-recourse conduit facilities (e)	267				572
Other liabilities (g)	1				4
Total SPE liabilities	2,458				2,545
SPE assets in excess of SPE liabilities	$	396			$	578

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

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

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

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

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

(f)	Includes deferred financing costs of $25 million and $23 million as of September 30, 2020 and December 31, 2019, related to non-recourse debt.

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

In addition, the Company has VOCRs that have not been securitized through bankruptcy-remote SPEs. Such gross receivables were $572 million and $883 million as of September 30, 2020 and December 31, 2019. A summary of total vacation ownership receivables and other securitized assets, net of securitized liabilities and the allowance for loan losses, is as follows (in millions):

	September 30, 2020				December 31, 2019
SPE assets in excess of SPE liabilities	$	396			$	578
Non-securitized contract receivables	572				883
Less: Allowance for loan losses	788				747
Total, net	$	180			$	714

Saint Thomas, U.S. Virgin Islands Property

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

As a result of a disruption to VOI sales caused by the impact of the hurricanes on Saint Thomas, U.S. Virgin Islands, in 2017, there was a change in the economics of the transaction due to a reduction in the fair value of the assets of the SPE. As such, the Company is now considered the primary beneficiary for specified assets and liabilities of the SPE, and therefore consolidated this SPE. During the first quarter of 2019, the Company made its final purchase of VOI inventory from the SPE, and the debt was extinguished.

13.	Fair Value

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

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

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

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

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

The Company’s derivative instruments currently consist of interest rate caps, foreign exchange forward contracts, foreign exchange spots, and foreign exchange swaps.

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

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

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

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

	September 30, 2020								December 31, 2019
	Carrying Amount				Estimated Fair Value				Carrying  Amount				Estimated Fair Value
Assets
Vacation ownership contract receivables, net (Level 3)	$	2,521			$	3,162			$	3,120			$	3,907
Liabilities
Debt (Level 2)	$	6,641			$	6,675			$	5,575			$	5,709

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

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

14.	Derivative Instruments and Hedging Activities

Foreign Currency Risk

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

Interest Rate Risk

A portion of the debt used to finance the Company’s operations is exposed to interest rate fluctuations. The Company periodically uses financial derivatives to strategically adjust its mix of fixed to floating rate debt. The derivative instruments utilized include interest rate swaps which convert 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 fair value of the derivatives are recorded in income, with offsetting adjustments to the carrying amount of the hedged debt. As of

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September 30, 2020, the Company had no fair value interest rate hedges.

Losses on derivatives recognized in AOCL for the three and nine months ended September 30, 2020 and 2019, were not material.

15.	Income Taxes

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

The Company’s effective tax rate was (110.5)% and 25.4% for the three months ended September 30, 2020 and 2019. The Company’s effective tax rate was 17.3% and 26.4% for the nine months ended September 30, 2020 and 2019. The change in the effective tax rate is primarily due to the change in the Company’s updated forecasts for taxable earnings for the full year, which have been significantly impacted by COVID-19. The jurisdictional composition of the forecast resulted in profits within higher tax rate jurisdictions and losses in many lower tax rate jurisdictions, which significantly impacted the overall effective tax rate of the Company. The Company reported a tax benefit on pre-tax income for the third quarter of 2020 resulting from the true-up of applying the revised forecasted effective tax rate to the prior quarter’s losses.

The Company made income tax payments, net of tax refunds, of $47 million and $82 million during the nine months ended September 30, 2020 and 2019. The Company also made income tax payments of $39 million during the nine months ended September 30, 2019, resulting from the sale of the Company’s European vacation rentals business.

Tax positions are reviewed at least quarterly and adjusted as new information becomes available. The recoverability of deferred tax assets is evaluated by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, available tax planning strategies and forecasted operating earnings. These estimates of future taxable income inherently require significant judgment. To the extent it is considered more likely than not that a deferred tax asset will be not recovered, a valuation allowance is established. The significant negative impacts of COVID-19 resulted in the establishment of additional valuation allowances during the nine months ended September 30, 2020 of $8 million related to foreign tax credits. 

16.	Leases

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

When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of its leases do not provide a readily determinable implicit rate. Therefore, the Company must estimate its incremental

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borrowing rate to discount the lease payments based on information available at lease commencement. The majority of the Company’s leases have remaining lease terms of one to 20 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within one year.

The Company had right-of-use assets of $104 million and $136 million and related lease liabilities of $171 million and $180 million as of September 30, 2020 and December 31, 2019. Right-of-use assets are included within Other assets, and the related lease liabilities are included within Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets.

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

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2020				2019				2020				2019
Operating lease cost	$	7			$	9			$	24			$	28
Short-term lease cost	$	4			$	6			$	11			$	18
Finance lease cost:
Amortization of right-of-use assets	$	1			$	—			$	2			$	1
Interest on lease liabilities	—				—				—				—
Total finance lease cost	$	1			$	—			$	2			$	1

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

	Nine Months Ended
	September 30,
	2020				2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	28			$	35
Operating cash flows from finance leases	—				—
Financing cash flows from finance leases	3				2
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	9			$	17
Finance leases	6				2

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

	Balance Sheet Classification		September 30, 2020				December 31, 2019
Operating leases (in millions):
Operating lease right-of-use assets	Other assets		$	104			$	136
Operating lease liabilities	Accrued expenses and other liabilities		171				180
Finance leases (in millions):
Finance lease assets (a)	Property and equipment, net		$	8			$	5
Finance lease liabilities	Debt		8				5
Weighted average remaining lease term:
Operating leases			7.3 years				7.8 years
Finance leases			2.8 years				2.8 years
Weighted average discount rate:
Operating leases (b)			6.2		%		6.2		%
Finance leases			5.6		%		4.2		%

(a)Presented net of accumulated depreciation.

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

The table below presents maturities of lease liabilities as of September 30, 2020 (in millions):

	Operating Leases				Finance Leases
Three months ending December 31, 2020	$	9			$	1
2021	35				4
2022	31				3
2023	30				1
2024	29				—
Thereafter	78				—
Total minimum lease payments	212				9
Less: Amount of lease payments representing interest	(41		)		(1		)
Present value of future minimum lease payments	$	171			$	8

Subsequent to the Spin-off and in accordance with the Company’s decision to further reduce its corporate footprint, the Company focused on rationalizing existing facilities which included abandoning portions of its administrative offices in New Jersey. As a result, during the nine months ended September 30, 2019, the Company recorded $12 million of impairment charges associated with the write-off of right-of-use assets and furniture, fixtures and equipment. These impairment charges are included within Separation and related costs on the Condensed Consolidated Statements of Income/(Loss).

17.	Commitments and Contingencies

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

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Wyndham Destinations Litigation

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

The Company records an accrual for legal contingencies when it determines, after consultation with outside counsel, that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In making such determinations, the Company evaluates, among other things, the degree of probability of an unfavorable outcome and, when it is probable that a liability has been incurred, the Company’s ability to make a reasonable estimate of loss. The Company reviews these accruals each fiscal quarter and makes revisions based on changes in facts and circumstances including changes to its strategy in dealing with these matters. The Company believes that it has adequately accrued for such matters with reserves of $13 million as of September 30, 2020 and December 31, 2019. Such reserves are exclusive of matters relating to the Company’s separation from Cendant, matters relating to the Spin-off, matters relating to the sale of the European vacation rentals business, and matters relating to the sale of the North American vacation rentals business, which are discussed in Note 25—Transactions with Former Parent and Former Subsidiaries. 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. As of September 30, 2020, the potential exposure resulting from adverse outcomes of such legal proceedings could, in the aggregate, range up to $33 million in excess of recorded accruals. However, the Company does not believe that the impact of such litigation should result in a material liability to the Company in relation to its consolidated financial position and/or liquidity.

For matters deemed reasonably possible, therefore not requiring accrual, the Company believes that such matters will not have a material effect on its results of operations, financial position or cash flows based on information currently available. As of September 30, 2020, the potential exposure resulting from adverse outcomes of such legal proceedings could, in the aggregate, range to an amount that is less than $1 million.

GUARANTEES/INDEMNIFICATIONS

Standard Guarantees/Indemnifications

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

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Other Guarantees and Indemnifications

Wyndham Vacation Clubs

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

18.	Accumulated Other Comprehensive (Loss)/Income

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

	Foreign				Unrealized				Defined				Accumulated
	Currency				(Losses)/Gains				Benefit				Other
	Translation				on Cash Flow				Pension				Comprehensive
Pretax	Adjustments				Hedges				Plans				(Loss)/Income
Balance, December 31, 2019	$	(148	)		$	(1	)		$	1			$	(148	)
Other comprehensive loss	(6		)		—				—				(6		)
Balance, September 30, 2020	$	(154	)		$	(1	)		$	1			$	(154	)

Tax
Balance, December 31, 2019	$	95			$	1			$	—			$	96
Other comprehensive income	2				—				—				2
Balance, September 30, 2020	$	97			$	1			$	—			$	98

Net of Tax
Balance, December 31, 2019	$	(53	)		$	—			$	1			$	(52	)
Other comprehensive loss	(4		)		—				—				(4		)
Balance, September 30, 2020	$	(57	)		$	—			$	1			$	(56	)

	Foreign				Unrealized				Defined				Accumulated
	Currency				(Losses)/Gains				Benefit				Other
	Translation				on Cash Flow				Pension				Comprehensive
Pretax	Adjustments				Hedges				Plans				(Loss)/Income
Balance, December 31, 2018	$	(147	)		$	(2	)		$	2			$	(147	)
Other comprehensive loss before  reclassifications	(26		)		—				—				(26		)
Amount reclassified to earnings	—				1				—				1
Balance, September 30, 2019	$	(173	)		$	(1	)		$	2			$	(172	)

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

Net of Tax
Balance, December 31, 2018	$	(53	)		$	—			$	1			$	(52	)
Other comprehensive loss before reclassifications	(25		)		(1		)		—				(26		)
Amount reclassified to earnings	—				1				—				1
Balance, September 30, 2019	$	(78	)		$	—			$	1			$	(77	)

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

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

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

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2020				2019				2020				2019
Unrealized losses on cash flow hedge, net
Gain on disposal of discontinued businesses, net of income taxes	$	—			$	—			$	—			$	(1	)
Net income/(loss) attributable to Wyndham Destinations shareholders	$	—			$	—			$	—			$	(1	)

19.	Stock-Based Compensation

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

The Wyndham Worldwide Corporation 2006 Equity and Incentive Plan was originally adopted in 2006 and was amended and restated in its entirety and approved by shareholders on May 17, 2018, (the “Amended and Restated Equity Incentive Plan”). Under the Amended and Restated Equity Incentive Plan, a maximum of 15.7 million shares of common stock may be awarded. As of September 30, 2020, 11.9 million shares remain available.

Incentive Equity Awards Granted by the Company

During the nine months ended September 30, 2020, the Company granted incentive equity awards to key employees and senior officers totaling $35 million in the form of RSUs, $8 million in the form of PSUs, and $8 million in the form of stock options. Of these awards, the majority of NQs and RSUs will vest ratably over a period of four years. The PSUs will cliff vest on the third anniversary of the grant date, contingent upon the Company achieving certain performance metrics.

The activity related to incentive equity awards granted to the Company’s key employees and senior officers by the Company for the nine months ended September 30, 2020, consisted of the following (in millions, except grant prices):

		Balance, December 31, 2019				Granted				Vested/Exercised				Forfeitures(a)				Balance, September 30, 2020
RSUs
Number of RSUs		1.0				1.0				(0.3		)		(0.1		)		1.6			(b)
Weighted average grant price		$	46.32			$	33.60			$	46.43			$	43.07			$	38.34
PSUs
Number of PSUs		0.2				0.1				—				—				0.3			(c)
Weighted average grant price		$	44.38			$	41.04			$	—			$	—			$	42.57
SSARs
Number of SSARs		0.2				—				—				—				0.2			(d)
Weighted average grant price		$	34.24			$	—			$	—			$	—			$	34.52
NQs
Number of NQs		1.3				1.1				—				(0.1		)		2.3			(e)
Weighted average grant price		$	46.84			$	41.04			$	—			$	42.89			$	44.16

(a)	The Company recognizes forfeitures as they occur.

(b)	Aggregate unrecognized compensation expense related to RSUs was $51 million as of September 30, 2020, which is expected to be recognized over a weighted average period of 2.7 years.

(c)	There was no unrecognized compensation expense related to PSUs as of September 30, 2020.

(d)	There were 0.2 million SSARs that were exercisable as of September 30, 2020. There was no unrecognized compensation expense related to SSARs

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as of September 30, 2020, as all SSARs are vested.

(e)	Unrecognized compensation expense for NQs was $12 million as of September 30, 2020, which is expected to be recognized over a weighted average period of 3.0 years.

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

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

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

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

Stock-Based Compensation Expense

The Company recorded stock-based compensation expense of $6 million and $14 million during the three and nine months ended September 30, 2020, and $5 million and $17 million during the three and nine months ended September 30, 2019, related to incentive equity awards granted to key employees, senior officers, and non-employee directors. Stock based compensation expense includes $4 million for the nine months ended September 30, 2019, which has been classified within Separation and related costs on the Condensed Consolidated Statements of Income/(Loss).

The Company paid $2 million of taxes for the net share settlement of incentive equity awards that vested during the nine months ended September 30, 2020, and $4 million during the nine months ended September 30, 2019.

Employee Stock Purchase Plan

20.	Segment Information

The Company has two operating segments: WVC and Panorama. The WVC segment develops, markets and sells VOIs to individual consumers, provides consumer financing in connection with the sale of VOIs, and provides property management services at resorts. The Panorama segment provides leisure travelers with flexibility and access to a wide variety of global travel options through its membership platforms, including timeshare exchange, closed user group, and home exchange. During 2018, the Company decided to explore strategic alternatives for its North American vacation rentals business, which was part of its Panorama segment, and completed the sale of this business on October 22, 2019. The assets and liabilities of this business were classified as held-for-sale until the sale was completed. This business did not meet the criteria to be classified as a discontinued operation; therefore, the results of operations through the date of sale are included in the 2019 results presented in the tables below. The reportable segments presented below represent the Company’s operating segments for which discrete financial information is available and which are utilized on a regular basis by its chief operating decision maker to assess performance and to allocate resources. In identifying its reportable segments, the Company also considers the nature of services provided by its operating segments. Management uses net revenues and Adjusted EBITDA to assess the performance of the reportable segments. Adjusted EBITDA is defined by the Company as Net income/(loss) before Depreciation and amortization, Interest expense (excluding Consumer financing interest), early extinguishment of debt, Interest income (excluding Consumer financing revenues) and income taxes. Adjusted EBITDA also excludes stock-based compensation costs, separation and restructuring costs, transaction costs,

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impairments, gains and losses on sale/disposition of business, and items that meet the conditions of unusual and/or infrequent. The Company believes that Adjusted EBITDA is a useful measure of performance for its segments which, when considered with GAAP measures, the Company believes gives a more complete understanding of its operating performance. The Company’s presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.

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

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
Net revenues	2020				2019				2020				2019
Wyndham Vacation Clubs	$	477			$	858			$	1,125			$	2,351
Panorama	138				250				393				716
Total reportable segments	615				1,108				1,518				3,067
Corporate and other (a)	(1		)		(3		)		(3		)		(5		)
Total Company	$	614			$	1,105			$	1,515			$	3,062
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
Reconciliation of Net income/(loss) to Adjusted EBITDA	2020				2019				2020				2019
Net income/(loss) attributable to Wyndham Destinations shareholders	$	40			$	135			$	(258	)		$	339
Gain on disposal of discontinued businesses, net of income taxes	—				—				—				(5		)
(Benefit)/provision for income taxes	(21		)		46				(54		)		120
Depreciation and amortization	32				31				94				90
Interest expense	52				40				138				122
Interest (income)	(2		)		(1		)		(5		)		(6		)
Asset impairments (b)	6				—				54				—
COVID-19 related costs (c)	13				—				51				—
Exchange inventory write-off	10				—				48				—
Restructuring	2				—				27				4
Stock-based compensation	6				5				14				13
Legacy items (d)	1				—				2				1
Acquisition and divestiture related costs	—				4				—				4
Separation and related costs (e)	—				7				—				44
Adjusted EBITDA	$	139			$	267			$	111			$	726
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
Adjusted EBITDA	2020				2019				2020				2019
Wyndham Vacation Clubs	$	96			$	203			$	6			$	534
Panorama	60				83				142				234
Total reportable segments	156				286				148				768
Corporate and other (a)	(17		)		(19		)		(37		)		(42		)
Total Company	$	139			$	267			$	111			$	726

(a)	Includes the elimination of transactions between segments.

(b)	Includes $5 million of bad debt expense related to a note receivable for the nine months ended September 30, 2020, included in Operating expenses on the Condensed Consolidated Statements of Income/(Loss).

(c)	Reflects severance and other employee costs associated with layoffs due to the COVID-19 workforce reduction offset in part by employee retention credits received in connection with the U.S. CARES Act and similar international programs for wages paid to certain employees despite having operations suspended.

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

(e)	Includes $4 million of stock based compensation expense for the nine months ended September 30, 2019.

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Segment Assets (a)	September 30, 2020				December 31, 2019
Wyndham Vacation Clubs	$	5,064			$	5,582
Panorama	1,365				1,482
Total reportable segments	6,429				7,064
Corporate and other	1,393				389
Total Company	$	7,822			$	7,453

(a)	Excludes investment in consolidated subsidiaries.

21.	Separation and Related Costs

22.	COVID-19 Related Items

During the three and nine months ended September 30, 2020, the Company incurred $14 million and $81 million of expenses in connection with COVID-19 which are included within COVID-19 related costs on the Condensed Consolidated Statements of Income/(Loss). A reduction in workforce in March resulted in the layoff or furlough of approximately 9,000 employees. As of September 30, 2020, there were approximately 5,700 employees that were laid off or remained furloughed. Of the COVID-19 related costs, $9 million and $68 million were recognized during the three and nine months ended September 30, 2020, related to severance and other employee costs resulting from the layoffs, salary and benefits continuation for certain employees while operations are suspended, and vacation payments associated with furloughed employees. These charges consisted of (i) $7 million and $53 million at the WVC segment, (ii) $1 million and $6 million at the Panorama segment, and (iii) $1 million and $9 million at the Company’s corporate operations during the three and nine months ended September 30, 2020.

The COVID-19 employee-related costs during the three and nine months ended September 30, 2020 included $3 million and $24 million of employee retention credits earned in connection with government programs, primarily the CARES Act. This provision of the CARES Act has no additional requirements or restrictions.

As of September 30, 2020, the Company had liabilities of $12 million for COVID-19 employee-related costs included within Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets. The activity associated with the Company’s COVID-19 related liabilities is summarized as follows (in millions):

	Liability as of																Liability as of
	December 31, 2019				Costs Recognized				Cash Payments				Other (a)				September 30, 2020
COVID-19 employee-related	$	—			$	68			$	(55	)		$	(1	)		$	12
	$	—			$	68			$	(55	)		$	(1	)		$	12

(a)	Includes employee-related write-offs.

In the first quarter of 2020, the Company evaluated the potential impact of COVID-19 on its owners’ ability to repay their contract receivables and as a result of higher unemployment, the Company increased its loan loss allowance. This was reflected as a $225 million reduction to Vacation ownership interest sales and a $55 million reduction to Cost/(recovery) of vacation ownership interests on the Condensed Consolidated Statements of Income/(Loss). The net negative impact of the additional provision related to COVID-19 on Adjusted EBITDA was $170 million for the nine months ended September 30, 2020. The Company will continue to monitor this reserve as more information becomes available. Refer to Note 8—Vacation Ownership Contract Receivables for additional details.

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As a result of the impact on the business from COVID-19, the Company performed impairment analyses resulting in $6 million and $50 million of impairments for the three and nine months ended September 30, 2020. These impairments include: (i) $6 million of impairments during the third quarter at the WVC segment driven by right-to-use leases and related fixed assets due to sales center closures; (ii) a $24 million impairment during the second quarter related to the New Jersey lease discussed in Note 24—Restructuring; (iii) $9 million of impairments during the second quarter related to other assets including equity investments and furniture, fixtures and equipment; and (iv) $10 million of impairments recognized during the first quarter of 2020 related to prepaid development costs and undeveloped land and the Love Home Swap tradename. Refer to Note 23 —Impairments for additional details.

Other impairments include $48 million of exchange inventory write-offs during the nine months ended September 30, 2020 as discussed in Note 9—Inventory, and $5 million of bad debt expense related to a note receivable recorded in the second quarter of 2020. These impairments are included in Operating expenses on the Condensed Consolidated Statements of Income/(Loss).

The Company also recognized $24 million of restructuring charges during the nine months ended September 30, 2020. This was driven by $22 million related to the New Jersey lease discussed in Note 24—Restructuring recognized during the second quarter of 2020.

The tables below present the COVID-19 related impacts to the Company’s results of operations for the three and nine months ended September 30, 2020, and the related classification on the Condensed Consolidated Statements of Income/(Loss) (in millions):

Three Months Ended		Wyndham Vacation Clubs				Panorama				Corporate				Consolidated				Income Statement Classification
Employee compensation related and other		$	11			$	1			$	2			$	14			COVID-19 related costs
Asset impairments		6				—				—				6				Asset impairments
Exchange inventory write-off		—				10				—				10				Operating expenses
Lease related		1				—				—				1				Restructuring
Total COVID-19		$	18			$	11			$	2			$	31

Nine Months Ended		Wyndham Vacation Clubs				Panorama				Corporate				Consolidated				Income Statement Classification
Allowance for loan losses:
Provision		$	225			$	—			$	—			$	225			Vacation ownership interest sales
Recoveries		(55		)		—				—				(55		)		Cost/(recovery) of vacation ownership interests
Employee compensation related and other		62				6				13				81				COVID-19 related costs
Asset impairments		20				34				—				54				Asset impairments/Operating expenses
Exchange inventory write-off		—				48				—				48				Operating expenses
Lease related		2				22				—				24				Restructuring
Total COVID-19		$	254			$	110			$	13			$	377

23.	Impairments

The Company recognized $6 million and $50 million of impairments during the three and nine months ended September 30, 2020. During the first quarter of 2020, there were $6 million of impairments at the WVC segment related to prepaid development costs and undeveloped land and $4 million at the Panorama segment related to the Love Home Swap

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tradename. In the second quarter, the Company recorded a $24 million impairment at the Panorama segment related to the New Jersey lease discussed in Note 24—Restructuring and the associated furniture, fixtures and equipment, a $6 million impairment for equity investments held at the Panorama segment, and a $3 million impairment at the WVC segment related to lease assets and furniture, fixtures and equipment. During the third quarter, $6 million of impairments were driven by right-to-use leases and related fixed assets within the WVC operating segment due to sales center closures.

24.	Restructuring

2020 Restructuring Plans

During the nine months ended September 30, 2020, the Company recorded $24 million of COVID-19 related restructuring charges. Due to the impact of COVID-19, the Company decided in the second quarter of 2020 to abandon the remaining portion of its administrative offices in New Jersey. The Company was notified in the second quarter that Wyndham Hotels exercised its early termination rights under the sublease agreement. As a result, the Company recorded $22 million of restructuring charges associated with non-lease components of the office space and $24 million of impairment charges associated with the write-off of right-of-use assets and furniture, fixtures and equipment at its Panorama segment. The Company also recognized $2 million of facility-related restructuring charges and $6 million of impairment charges associated with closed sales centers at its WVC segment. The Company reduced the 2020 restructuring liability by less than $1 million of cash payments during the nine months ended September 30, 2020. The remaining 2020 restructuring liability of $24 million is expected to be paid by the end of 2029.

2019 Restructuring Plans

During 2019, the Company recorded $5 million of charges related to restructuring initiatives, most of which were personnel-related resulting from a reduction of approximately 100 employees. This action was primarily focused on enhancing organizational efficiency and rationalizing operations. The charges consisted of (i) $2 million at the WVC segment, (ii) $2 million at the Panorama segment, and (iii) $1 million at the Company’s corporate operations. The Company reduced its restructuring liability by $1 million of cash payments during 2019. During the nine months ended September 30, 2020, the Company incurred an additional $2 million of restructuring expenses at its Panorama segment and $1 million at its corporate operations. The Company reduced this restructuring liability by $5 million of cash payments during the nine months ended September 30, 2020. The remaining 2019 restructuring liability of $2 million is expected to be paid by the end of 2021.

The Company implemented additional restructuring plans prior to 2019 for which the Company reduced the liabilities by $3 million of cash payments during the nine months ended September 30, 2020. The remaining liability of less than $1 million as of September 30, 2020, is mostly personnel-related and is expected to be paid by the end of 2021.

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

	Liability as of												Liability as of
	December 31, 2019				Costs Recognized				Cash Payments				September 30, 2020
Personnel-related	$	7			$	3			$	(8	)		$	2
Facility-related	—				24				—				24
	$	7			$	27			$	(8	)		$	26

25.	Transactions with Former Parent and Former Subsidiaries

Matters Related to Cendant

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

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As of September 30, 2020, the Cendant separation and related liabilities of $13 million are comprised of $12 million for tax liabilities and $1 million for other contingent and corporate liabilities. As of December 31, 2019, the Company had $13 million of Cendant separation-related liabilities. These liabilities are included within Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets.

Matters Related to Wyndham Hotels

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

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

Wyndham Destinations entered into a transition service agreement with Wyndham Hotels, pursuant to which the companies agreed to provide each other certain transitional services including human resources, facilities, payroll, tax, information technology, information management and related services, treasury, finance, sourcing, and employee benefits administration on an interim, transitional basis. During the three and nine months ended September 30, 2020, transition service agreement expenses of less than $1 million were included in General and administrative expense. For the three and nine months ended September 30, 2019, transition service agreement expenses included $1 million and $2 million within General and administrative expense, and less than $1 million and $2 million within Separation and related costs on the Condensed Consolidated Statements of Income/(Loss). Transition service agreement income during the nine months ended September 30, 2019, was $1 million, included in Other revenue. As of September 30, 2020, these transition services have ended.

Matters Related to the European Vacation Rentals Business

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

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

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

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

In addition, the Company agreed to indemnify Awaze against certain claims and assessments, including income tax, value-added tax and other tax matters, related to the operations of the European vacation rentals business for the periods prior to the transaction. The estimated fair value of the indemnifications was $45 million at September 30, 2020. The Company has a $15 million receivable from Wyndham Hotels for its portion of the guarantee.

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Wyndham Hotels provided certain post-closing credit support primarily for the benefit of a British travel association in the form of guarantees which are mainly denominated in pound sterling of up to an approximate $81 million on a perpetual basis. The estimated fair value of such guarantees was $39 million at September 30, 2020. Wyndham Destinations is responsible for two-thirds of these guarantees.

As part of this agreement Wyndham Hotels is required to maintain minimum credit ratings which increased to Ba1 for Moody’s and BB+ for S&P on May 9, 2020. In April 2020, S&P downgraded Wyndham Hotels’ credit rating from BB+ to BB. Although any ultimate exposure relative to indemnities retained from the European vacation rentals sale will be shared two-thirds by Wyndham Destinations and one-third by Wyndham Hotels, as the selling entity, Wyndham Destinations is responsible for administering additional security to enhance corporate guarantees in the event either company falls below a certain credit rating threshold. As a result of the Wyndham Hotels credit ratings downgrade, during the third quarter, the Company posted a £58 million surety bond and a £36 million letter of credit ($75 million and $46 million as of September 30, 2020) which will be maintained until such time that either companies’ S&P and Moody’s credit rating improves to BB+/Ba1.

The estimated fair value of the guarantees and indemnifications for which Wyndham Destinations is responsible related to the sale of the European vacation rentals business, including the two-thirds portion related to guarantees provided by Wyndham Hotels, totaled $95 million and was recorded in Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets at September 30, 2020. Total receivables of $23 million were included in Other assets on the Condensed Consolidated Balance Sheets at September 30, 2020, representing the portion of these guarantees and indemnifications for which Wyndham Hotels is responsible.

During 2019, Awaze proposed certain post-closing adjustments of $44 million which could serve to reduce the net consideration received from the sale of the European vacation rentals business. The Company finds no basis for such adjustments, and at this time the Company cannot reasonably estimate the probability or amount of the potential liability that may be owed to Awaze, if any. Any potential liability would be shared two-thirds and one-third between the Company and Wyndham Hotels and the impact would be included in discontinued operations. After the close of the second quarter, Awaze filed its claim with the high courts of England and Wales. The Company filed its defense on September 25, 2020 setting forth its disagreement with the claim and rebuttal of any obligation for the amounts claimed.

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

Matter Related to the North American Vacation Rentals Business

In connection with the sale of the North American vacation rentals business, the Company agreed to indemnify Vacasa against certain claims and assessments, including income tax and other tax matters related to the operations of the North American vacations rentals business for the periods prior to the transaction. The estimated fair value of the indemnifications was $2 million, which was included in Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets at September 30, 2020.

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26.	Related Party Transactions

In March 2019, the Company entered into an agreement with a former executive of the Company whereby the former executive through an SPE would develop and construct VOI inventory located in Orlando, Florida. On July 8, 2020, the Company acquired the completed vacation ownership property for $45 million.

In August 2018, the Company provided notification to the owner trustee of the Company’s leased aircraft of its intent to exercise the purchase option for such aircraft at fair market value. In connection with that purchase, the Company entered into an agreement to sell the Company aircraft to its former CEO and current Chairman of the Board of Directors at a price equivalent to the purchase price. In January 2019, the transaction to purchase the aircraft and sell the aircraft for $16 million was closed. The Company occasionally sublets this aircraft for business travel through a timesharing arrangement, and incurred less than $1 million of expenses as of September 30, 2020 and 2019.

27.	Subsequent Events

Sierra Timeshare Conduit Renewal

On October 27, 2020 Sierra Timeshare Conduit Receivables Funding II, LLC (the “Issuer”), an indirect, wholly-owned subsidiary of Wyndham Destinations, Inc., renewed its securitized timeshare receivables conduit facility, extending the end of the commitment period from August 30, 2021 to October 31, 2022 and making certain other amendments, including to the advance rate, the LIBOR replacement mechanism, certain default and delinquency triggers, the applicable commercial paper rate and certain concentration limits. The facility bears interest based on variable commercial paper rates plus a spread or LIBOR (or a successor rate), plus a spread.

The renewal involved execution of (i) a Tenth Amendment, dated as of October 27, 2020, to the Amended and Restated Indenture and Servicing Agreement, dated as of October 1, 2010, by and among the Issuer, Wyndham Consumer Finance, Inc., as Servicer, Wells Fargo Bank, National Association, as Trustee and U.S. Bank National Association, as Collateral Agent and (ii) a Tenth Amendment, dated as of October 27, 2020 to the Amended and Restated Note Purchase Agreement, dated as of October 1, 2010, by and among the Issuer, Wyndham Consumer Finance, Inc., as Servicer, Wyndham Destinations, Inc. and JPMorgan Chase Bank N.A., as Deal Agent.

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

•	Panorama— provides leisure travelers with flexibility and access to a wide variety of global travel options through its membership platforms, including timeshare exchange, closed user group, and home exchange.

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

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

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

(d)	VPG is calculated by dividing Gross VOI sales (excluding tele-sales upgrades, which are non-tour upgrade sales) by the number of tours. We believe that VPG provides an enhanced understanding of the performance of our vacation ownership business because it directly measures the efficiency of this business’s tour selling efforts during a given reporting period.

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

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

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

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

(1)

Represents total sales of VOIs through our Fee-for-Service programs where inventory is sold through our sales and marketing channels for a commission. There were $6 million Fee-for-Service commission revenues for the three months ended September 30, 2020, and no Fee-for-Service commission revenues for the three months ended September 30, 2019. These commissions are reported within Service and membership fees on the Condensed Consolidated Statements of Income/(Loss).

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•	$382 million of decreased revenues at our WVC segment primarily due to a decrease in net VOI sales as a result of the temporary closure of our resorts and suspension of sales and marketing operations directly related to COVID-19, as well as decreased property management revenues, and consumer financing revenues; and

•	$111 million of decreased revenues at our Panorama segment driven by absence of vacation rentals revenue as a result of the sale of the North American vacation rentals business in October 2019, as well as the negative impact of COVID-19.

•	$106 million decrease in sales and commission expenses primarily due to lower gross VOI sales as a result of COVID-19;

•	$101 million decrease in marketing costs primarily due to the temporary suspension of sales and marketing operations;

•	$65 million decrease in costs due to the sale of the North American vacation rentals business;

•	$38 million decrease in the cost of VOIs sold primarily due to lower gross VOI sales; and

•	$27 million decrease in property management expenses primarily due to lower management fees;

•	$19 million decrease in Panorama operating expenses associated with lower exchange and related service revenues driven by COVID-19 impacts;

•	$16 million decrease in general administrative expenses related to COVID-19 impacts; and

•	$7 million decrease in separation costs; partially offset by

•	$14 million increase for COVID-19 related costs primarily due to workforce reduction;

•	$10 million increase due to the write-down of exchange inventory; and

•	$6 million increase in impairments directly related to COVID-19.

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(a)	Includes the elimination of transactions between segments.

(b)	Reflects severance and other costs associated with layoffs due to the COVID-19 workforce reduction offset in part by employee retention credits received in connection with the U.S. CARES Act and similar international programs for wages paid to certain employees despite having operations suspended.

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

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•	$422 million decrease in gross VOI sales, net of Fee-for-Service sales, primarily driven by a 70.3% decrease in tours resulting from the negative impact on our sales and marketing operations directly related to COVID-19; partially offset by a $89 million decrease in our provision for loan losses primarily due to lower gross VOI sales;

•	$30 million decrease in property management revenues primarily due to lower management fees and reimbursable revenues;

•	$18 million decrease in consumer financing revenues primarily due to a lower weighted average interest rate earned on a lower average portfolio balance; and

•	$7 million decrease in ancillary revenues primarily due to a decrease in trial vacation package revenue and our co-branded credit card program; partially offset by

•	$6 million increase in commission revenues as a result of higher Fee-for-Service VOI sales.

•	$106 million decrease in sales and commission expenses primarily due to lower gross VOI sales;

•	$98 million decrease in marketing costs primarily due to the temporary suspension of sales and marketing operations;

•	$38 million decrease in the cost of VOIs sold primarily due to lower gross VOI sales;

•	$27 million decrease in property management expenses primarily due to lower management fees and lower reimbursable expenses;

•	$11 million decrease in general and administrative expenses primarily due to lower employee-related costs; and

•	$1 million decrease in consumer financing interest expense primarily due to a decrease in the weighted average interest rate on our non-recourse debt; partially offset by

•	$4 million increase in commission expense as a result of higher Fee-for-Service VOI sales; and

•	$2 million increase in maintenance fees on unsold inventory primarily due to the temporary closure of our resorts resulting in the inability to recover a portion of these costs.

•	$60 million decrease in vacation rentals revenue as a result of the sale of the North American vacation rentals business in October 2019;

•	$36 million decrease in exchange and related service revenues driven by the negative impact of COVID-19, which drove an increase in cancellations and a decrease in third quarter bookings; and

•	$15 million net decrease in ancillary revenues primarily driven by the sale of the North American vacation rentals business in October 2019, partially offset by increased ancillary revenue from the acquisition of ARN in August 2019.

•	$65 million decrease in costs due to the sale of the North American vacation rentals business in October 2019; and

•	$27 million of decreased costs primarily associated with lower exchange and related service revenues; partially offset by

•	$3 million of increased expenses from the ARN business.

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•	$1.22 billion of decreased revenues at our WVC segment primarily due to decreased net VOI sales as a result of the temporary closure of our resorts and suspension of sales and marketing operations directly related to COVID-19 and decreased property management revenues, consumer financing revenues, and ancillary revenues; and

•	$320 million of decreased revenues at our Panorama segment driven by absence of vacation rentals revenue as a result of the sale of the North American vacation rentals business in October 2019, as well as the negative impact of COVID-19, partially offset by an increase in revenue at ARN, which was acquired in August 2019.

•	$250 million decrease in sales and commission expenses primarily due to lower gross VOI sales as a result of COVID-19;

•	$249 million decrease in marketing costs primarily due to the temporary suspension of sales and marketing operations;

•	$181 million decrease in costs due to the sale of the North American vacation rentals business;

•	$167 million decrease in the cost of VOIs sold primarily due to lower gross VOI sales, including the $55 million benefit representing estimated recoveries related to the additional provision for loan losses associated with COVID-19;

•	$63 million decrease in property management expenses primarily due to lower management fees; and

•	$48 million decrease in Panorama operating expenses associated with lower exchange and related service revenues driven by COVID-19 impacts;

•	$44 million decrease in separation costs; and

•	$44 million decrease in general administrative expenses related to COVID-19 impacts; partially offset by

•	$81 million increase for COVID-19 related costs primarily due to workforce reduction;

•	$54 million increase in impairments directly related to COVID-19;

•	$48 million increase due to the write-down of exchange inventory;

•	$24 million of increased revenue-related expenses from the ARN business; and

•	$23 million increase in restructuring expense primarily due to facility-related COVID-19 impacts.

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(a)	Includes the elimination of transactions between segments.

(b)	Includes $5 million of bad debt expense related to a note receivable for the nine months ended September 30, 2020, included in Operating expenses on the Condensed Consolidated Statements of Income/(Loss) included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

(c)	Reflects severance and other costs associated with layoffs due to the COVID-19 workforce reduction offset in part by employee retention credits received in connection with the U.S. CARES Act and similar international programs for wages paid to certain employees despite having operations suspended.

(d)	Represents the resolution of and adjustment to certain contingent liabilities resulting from the Spin-off, the sale of the European vacation rentals business, and our separation from Cendant.

(e)	Includes $4 million of stock based compensation expense for the nine months ended September 30, 2019.

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•	$1.09 billion decrease in gross VOI sales, net of Fee-for-Service sales, primarily driven by a 65.1% decrease in tours resulting from the temporary closure of our resorts and suspension of sales and marketing operations directly related to COVID-19; partially offset by a $207 million decrease in our provision for loan losses primarily due to lower gross VOI sales;

•	$72 million decrease in property management revenues primarily due to lower management fees and reimbursable revenues;

•	$25 million decrease in consumer financing revenues primarily due to a lower weighted average interest rate earned on a lower average portfolio balance;

•	$16 million decrease in ancillary revenues primarily due to a decrease in trial vacation package revenue and our co-branded credit card program; and

•	$2 million decrease in commission revenues as a result of lower Fee-for-Service VOI sales.

•	$250 million decrease in sales and commission expenses primarily due to lower gross VOI sales;

•	$243 million decrease in marketing costs primarily due to the temporary suspension of sales and marketing operations;

•	$112 million decrease in the cost of VOIs sold primarily due to lower gross VOI sales and increased estimated inventory recoveries associated with our provision for loan losses;

•	$63 million decrease in property management expenses primarily due to lower management fees and lower reimbursable expenses;

•	$31 million decrease in general and administrative expenses primarily due to lower employee-related costs; and

•	$3 million decrease in consumer financing interest expense primarily due to a decrease in the weighted average interest rate on our non-recourse debt; partially offset by

•	$35 million increase in maintenance fees on unsold inventory primarily due to the temporary closure of our resorts resulting in the inability to recover a portion of these costs; and

•	$30 million increase in COVID-19 related costs primarily due to workforce reduction.

•	$146 million decrease in vacation rentals revenue as a result of the sale of the North American vacation rentals business in October 2019;

•	$143 million net decrease in exchange and related service revenues driven by the negative impact of COVID-19 which resulted in higher cancellations and lower bookings; and

•	$31 million net decrease in ancillary revenues primarily due to the $51 million decrease of ancillary revenue generated by the North American vacations rentals business which was sold in October 2019, partially offset by an increase in revenue of $24 million from ARN, which was acquired in August 2019.

•	$181 million decrease in costs due to the sale of the North American vacation rentals business; and

•	$72 million of decreased costs primarily associated with lower exchange and related service revenues; partially offset by

•	$24 million of increased revenue-related expenses from the ARN business.

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•	$921 million increase in Cash and cash equivalents primarily due to net cash proceeds from debt borrowings, partially offset by treasury share repurchases, dividend payments, and short-term investments included within Other assets; and

•	$132 million increase in Inventory primarily due to an increase in completed inventory partially offset by net COVID-19 impacts of exchange inventory write-offs. These increases were partially offset by

•	$25 million decrease in Restricted cash primarily due to net pay downs on our non-recourse debt;

•	$22 million decrease in Trade receivables, net primarily due to lower VOI trial package sales and timing of annualized subscription billings;

•	$599 million decrease in Vacation ownership contract receivables, net, primarily due to lower VOI sales and an increase in the loan loss provision driven by the economic downturn as a result of COVID-19; and

•	$23 million decrease in Goodwill and other intangibles related to ARN purchase revaluation, exchange rate fluctuations on goodwill, and the impairment of the Love Home Swap tradename at our Panorama segment.

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•	$1.15 billion increase in Debt due to $987 million increased borrowing under our revolving credit facility and issuance of the $650 million 6.625% secured notes during the third quarter, partially offset by $440 million of repayments on our revolving credit facility and $40 million repayment of our 7.375% secured notes. This increase was partially offset by

•	$60 million decrease in Deferred income primarily due to lower VOI trial package sales and lower upfront subscription payments associated with reduced member acquisition as a result of COVID-19;

•	$84 million decrease in Non-recourse vacation ownership debt primarily due to net repayments; and

•	$132 million decrease in deferred taxes primarily driven by a reduction of the liability for installment sale income recognition and increased loan loss provision related to COVID-19 impacts.

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

(b)	Includes interest on debt, non-recourse debt, and finance leases; estimated using the stated interest rates on our debt and non-recourse debt.

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

(d)	Includes (i) $1.0 billion for marketing-related activities; (ii) $153 million relating to the development of vacation ownership properties, of which $59 million is included within Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets included in Part I, Item 1 of this Quarterly Report on Form 10-Q; and (iii) $31 million for information technology activities.

(e)

Represents obligations to repurchase completed vacation ownership properties from third-party developers (See Note 9—Inventory to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further detail) of which $19 million was included within Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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

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

(h)	Excludes a $40 million liability for unrecognized tax benefits associated with the accounting guidance for uncertainty in income taxes since it is not reasonably estimable to determine the periods in which such liability would be settled with the respective tax authorities.

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(a)

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

(b)

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

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*	Filed with this report

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