Travel + Leisure Co. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Leases

Leases

12 Months Ended

Dec. 31, 2022

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


	Year Ended December 31,
	2022		2021		2020
Operating lease cost	$	23	$	22	$	30

Short-term lease cost	$	13	$	13	$	14

Finance lease cost:
Amortization of right-of-use assets	$	5	$	4	$	3
Interest on lease liabilities	1		—		—
Total finance lease cost	$	6	$	4	$	3

The table below presents the lease-related assets and liabilities recorded on the Consolidated Balance Sheets:


		As of December 31,
	Balance Sheet Classification	2022			2021
Operating Leases (in millions):
Operating lease right-of-use assets	Other assets	$	62		$	79
Operating lease liabilities	Accrued expenses and other liabilities	$	111		$	136

Finance Leases (in millions):
Finance lease assets (a)	Property and equipment, net	$	12		$	10
Finance lease liabilities	Debt	$	11		$	9

Weighted Average Remaining Lease Term:
Operating leases		5.6 years			6.4 years
Finance leases		2.7 years			2.6 years
Weighted Average Discount Rate:
Operating leases (b)		5.9		%	5.8		%
Finance leases		5.4		%	4.4		%

(a)Presented net of accumulated depreciation.

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

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


	Year Ended December 31,
	2022		2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	32	$	36	$	36
Operating cash outflows from finance leases	1		—		—
Financing cash outflows from finance leases	6		4		4
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	2	$	7	$	3
Finance leases	8		6		6

The table below presents maturities of lease liabilities as of December 31, 2022 (in millions):


	Operating Leases		Finance Leases
2023	$	31	$	6
2024	29		4
2025	24		2
2026	14		1
2027	13		—
Thereafter	21		—
Total minimum lease payments	132		13
Less: amount of lease payments representing interest	(21)		(2)
Present value of future minimum lease payments	$	111	$	11

Due to the impact of COVID-19 during 2020, the Company decided to abandon the remaining portion of its administrative offices in New Jersey. In 2020, the Company was also notified that Wyndham Hotels exercised its early termination rights under the sublease agreement for this building. 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 Travel and Membership segment. Additionally during 2020, the Company incurred $5 million of impairment charges related to right-of-use assets at closed sales centers within its Vacation Ownership segment, and $1 million of restructuring charges at each of the Vacation Ownership and corporate segments related to right-of-use assets at its corporate headquarters.