Travel & Leisure Co. [TNL] Filings

10-Q 1 wyn-20210930.htm 10-Q wyn-20210930

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, 2021

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

For the transition period from to

Commission file number 001-32876

TRAVEL + LEISURE CO.

(Exact Name of Registrant as Specified in Its Charter)


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

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

(407) 626-5200

(Registrant’s Telephone Number, Including Area Code)

None

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

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


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

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

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

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

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

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

86,356,226 shares of common stock outstanding as of September 30, 2021.

Table of Contents


		Page
PART I	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Report of Independent Registered Public Accounting Firm	3
	Condensed Consolidated Statements of Income/(Loss)	4
	Condensed Consolidated Statements of Comprehensive Income/(Loss)	5
	Condensed Consolidated Balance Sheets	6
	Condensed Consolidated Statements of Cash Flows	7
	Condensed Consolidated Statements of Deficit	8
	Notes to Condensed Consolidated Financial Statements	10
	Note 1 - Background and Basis of Presentation	10
	Note 2 - New Accounting Pronouncements	11
	Note 3 - Revenue Recognition	12
	Note 4 - Earnings/(Loss) Per Share	16
	Note 5 - Acquisitions	17
	Note 6 - Discontinued Operations	17
	Note 7 - Vacation Ownership Contract Receivables	17
	Note 8 - Inventory	20
	Note 9 - Property and Equipment	21
	Note 10 - Debt	21
	Note 11 - Variable Interest Entities	24
	Note 12 - Fair Value	25
	Note 13 - Derivative Instruments and Hedging Activities	26
	Note 14 - Income Taxes	26
	Note 15 - Leases	27
	Note 16 - Commitments and Contingencies	29
	Note 17 - Accumulated Other Comprehensive (Loss)/Income	30
	Note 18 - Stock-Based Compensation	31
	Note 19 - Segment Information	33
	Note 20 - COVID-19 Related Items	35
	Note 21 - Impairments	37
	Note 22 - Restructuring	37
	Note 23 - Transactions with Former Parent and Former Subsidiaries	38
	Note 24 - Related Party Transactions	40
	Note 25 - Subsequent Events	40
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
	Forward-Looking Statements	41
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	59
Item 4.	Controls and Procedures	59
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	60
Item 1A.	Risk Factors	60
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3.	Defaults Upon Senior Securities	60
Item 4.	Mine Safety Disclosures	60
Item 5.	Other Information	61
Item 6.	Exhibits	62
	Signatures	63

Table of Contents

GLOSSARY OF TERMS

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


Adjusted EBITDA			A non-GAAP measure, defined by the Company as Net income/(loss) from continuing operations 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, legacy items, transaction costs for acquisitions and divestitures, impairments, gains and losses on sale/disposition of business, and items that meet the conditions of unusual and/or infrequent. Legacy items include the resolution of and adjustments to certain contingent liabilities related to acquisitions of continuing businesses and dispositions, including the separation of Wyndham Hotels and Cendant, and the sale of the vacation rentals businesses.
AOCL			Accumulated Other Comprehensive Loss
ARN			Alliance Reservations Network
ARPA			American Rescue Plan Act of 2021
AUD			Australian Dollar
Awaze			Awaze Limited, formerly Compass IV Limited, an affiliate of Platinum Equity, LLC
Board			Board of Directors
CARES Act			Coronavirus Aid, Relief, and Economic Security Act
Company			Travel + Leisure Co. and its subsidiaries
COVID-19			Novel coronavirus global pandemic
Credit Agreement Amendment			The first amendment to the Company’s credit agreement governing its revolving credit facility and term loan B
EPS			Earnings/(loss) Per Share
FASB			Financial Accounting Standards Board
GAAP			Generally Accepted Accounting Principles in the United States
LIBOR			London Interbank Offered Rate
Meredith			Meredith Corporation

NQ			Non-Qualified stock options
NZD			New Zealand Dollar
PCAOB			Public Company Accounting Oversight Board
PSU			Performance-vested restricted Stock Units
Relief Period			Relief period of the Credit Agreement Amendment
RSU			Restricted Stock Unit
S&P			Standard & Poor’s Rating Services
SEC			Securities and Exchange Commission
SPE			Special Purpose Entity
Spin-off			Spin-off of Wyndham Hotels & Resorts, Inc.
SSAR			Stock-Settled Appreciation Rights
Travel + Leisure Co.			Travel + Leisure Co. and its subsidiaries
Vacasa			Vacasa LLC
VIE			Variable Interest Entity
VOCR			Vacation Ownership Contract Receivable
VOI			Vacation Ownership Interest
VPG			Volume Per Guest
Wyndham Hotels			Wyndham Hotels & Resorts, Inc.

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited).

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Travel + Leisure Co.

Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed consolidated balance sheet of Travel + Leisure Co. and subsidiaries (the "Company") as of September 30, 2021, the related condensed consolidated statements of income/(loss), comprehensive income/(loss), and deficit for the three-month and nine-month periods ended September 30, 2021 and 2020, and cash flows for the nine-month periods ended September 30, 2021 and 2020, and the related notes (collectively referred to as the "interim financial statements"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2020, and the related consolidated statements of (loss)/income, comprehensive (loss)/income, cash flows and equity/(deficit) for the year then ended (not presented herein); and in our report dated February 24, 2021, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

The interim financial statements are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ Deloitte & Touche LLP

Tampa, FL

October 27, 2021

Table of Contents

TRAVEL + LEISURE CO.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS)

(In millions, except per share amounts)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Net revenues
Service and membership fees	$	378	$	291	$	1,114	$	845
Vacation ownership interest sales	344		196		810		273
Consumer financing	103		115		304		360
Other	14		12		36		37
Net revenues	839		614		2,264		1,515
Expenses
Operating	352		263		992		861
Cost/(recovery) of vacation ownership interests	43		22		105		(26)
Consumer financing interest	19		26		63		76
General and administrative	106		101		325		295
Marketing	101		84		261		247
Depreciation and amortization	31		32		93		94
COVID-19 related costs	1		14		3		81
Asset impairments	—		6		—		50
Restructuring	—		2		(1)		27

Total expenses	653		550		1,841		1,705
Operating income/(loss)	186		64		423		(190)
Other (income), net	—		(5)		(2)		(11)
Interest expense	47		52		147		138
Interest (income)	(1)		(2)		(1)		(5)
Income/(loss) before income taxes	140		19		279		(312)
Provision/(benefit) for income taxes	39		(21)		76		(54)
Net income/(loss) from continuing operations	101		40		203		(258)

Loss on disposal of discontinued business, net of income taxes	—		—		(2)		—


Net income/(loss) attributable to Travel + Leisure Co. shareholders	$	101	$	40	$	201	$	(258)

Basic earnings/(loss) per share
Continuing operations	$	1.16	$	0.47	$	2.35	$	(3.00)
Discontinued operations	—		—		(0.02)		—
	$	1.16	$	0.47	$	2.33	$	(3.00)
Diluted earnings/(loss) per share
Continuing operations	$	1.15	$	0.47	$	2.33	$	(3.00)
Discontinued operations	—		—		(0.03)		—
	$	1.15	$	0.47	$	2.30	$	(3.00)

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

TRAVEL + LEISURE CO.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(In millions)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Net income/(loss) attributable to Travel + Leisure Co. shareholders	$	101	$	40	$	201	$	(258)
Other comprehensive (loss)/income, net of tax
Foreign currency translation adjustments, net of tax	(15)		21		(26)		(4)


Other comprehensive (loss)/income, net of tax	(15)		21		(26)		(4)
Comprehensive income/(loss)	$	86	$	61	$	175	$	(262)

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

TRAVEL + LEISURE CO.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

(Unaudited)


	September 30, 2021		December 31, 2020
Assets
Cash and cash equivalents	$	346	$	1,196
Restricted cash (VIE - $94 as of 2021 and $92 as of 2020)	128		121
Trade receivables, net	125		115
Vacation ownership contract receivables, net (VIE - $2,136 as of 2021 and $2,458 as of 2020)	2,292		2,482
Inventory	1,270		1,347
Prepaid expenses	196		204
Property and equipment, net	678		666
Goodwill	962		964
Other intangibles, net	222		131
Other assets	382		387

Total assets	$	6,601	$	7,613
Liabilities and (deficit)
Accounts payable	$	60	$	62
Accrued expenses and other liabilities	953		929
Deferred income	394		447
Non-recourse vacation ownership debt (VIE)	1,957		2,234
Debt	3,386		4,184
Deferred income taxes	700		725

Total liabilities	7,450		8,581
Commitments and contingencies (Note 16)
Stockholders' (deficit):
Preferred stock, $0.01 par value, authorized 6,000,000 shares, none issued and outstanding	—		—
Common stock, $0.01 par value, 600,000,000 shares authorized, 222,180,902 issued as of 2021 and 221,755,960 as of 2020	2		2
Treasury stock, at cost – 135,824,676 shares as of 2021 and 2020	(6,508)		(6,508)
Additional paid-in capital	4,180		4,157
Retained earnings	1,511		1,390
Accumulated other comprehensive loss	(42)		(16)
Total stockholders’ (deficit)	(857)		(975)
Noncontrolling interest	8		7
Total (deficit)	(849)		(968)
Total liabilities and (deficit)	$	6,601	$	7,613

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

TRAVEL + LEISURE CO.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Nine Months Ended
	September 30,
	2021		2020
Operating activities
Net income/(loss)	$	201	$	(258)

Loss on disposal of discontinued business, net of income taxes	2		—
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Depreciation and amortization	93		94
Provision for loan losses	120		391
Deferred income taxes	(27)		(134)
Stock-based compensation	24		14
Asset impairments	—		50
Non-cash lease expense	13		19
Non-cash interest	17		16
Other, net	5		(2)
Net change in assets and liabilities, excluding the impact of acquisitions and dispositions:
Trade receivables	(9)		24
Vacation ownership contract receivables	60		205
Inventory	(14)		(107)
Deferred income	(58)		(60)
Accounts payable, accrued expenses, prepaid expenses, other assets and other liabilities	8		(28)


Net cash provided by operating activities	435		224
Investing activities
Property and equipment additions	(40)		(56)
Acquisitions	(37)		—

Purchase of investments	—		(50)

Other, net	—		8


Net cash used in investing activities	(77)		(98)
Financing activities
Proceeds from non-recourse vacation ownership debt	930		1,462
Principal payments on non-recourse vacation ownership debt	(1,202)		(1,556)
Proceeds from debt	10		1,065
Principal payments on debt	(561)		(521)

Proceeds from notes issued	—		643
Repayment of notes	(252)		(42)
Repayments of vacation ownership inventory arrangement	—		(10)

Payment of deferred acquisition consideration	(30)		(11)
Dividends to shareholders	(79)		(112)
Proceeds from issuance of common stock	7		4
Repurchase of common stock	—		(128)
Debt issuance/modification costs	(9)		(17)
Net share settlement of incentive equity awards	(9)		(2)



Net cash (used in)/provided by financing activities	(1,195)		775
Effect of changes in exchange rates on cash, cash equivalents and restricted cash	(6)		(5)
Net change in cash, cash equivalents and restricted cash	(843)		896
Cash, cash equivalents and restricted cash, beginning of period	1,317		502
Cash, cash equivalents and restricted cash, end of period	474		1,398
Less: Restricted cash	128		122

Cash and cash equivalents	$	346	$	1,276

See Notes to Condensed Consolidated Financial Statements.

TRAVEL + LEISURE CO.

CONDENSED CONSOLIDATED STATEMENTS OF DEFICIT

(In millions)

(Unaudited)


	Common Shares Outstanding	Common Stock		Treasury Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Non-controlling Interest		Total Deficit
Balance as of December 31, 2020	86	$	2	$	(6,508)	$	4,157	$	1,390	$	(16)	$	7	$	(968)
Net income	—	—		—		—		29		—		—		29
Other comprehensive loss	—	—		—		—		—		(13)		—		(13)
Stock option exercises	—	—		—		3		—		—		—		3
Net share settlement of stock-based compensation	—	—		—		(7)		—		—		—		(7)
Change in stock-based compensation	—	—		—		7		—		—		—

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10-Q	[2021-04-28]
10-K	[2021-02-24]
10-Q	[2020-10-28]
10-Q	[2020-07-30]
10-Q	[2020-05-06]
10-K	[2020-02-26]
10-Q	[2019-10-30]
10-Q	[2019-07-30]
10-Q	[2019-05-01]
10-K	[2019-02-26]
10-Q	[2018-11-01]
10-Q	[2018-08-09]
10-Q	[2018-05-02]
10-K	[2018-02-20]
10-Q	[2017-10-25]
10-Q	[2017-08-03]
10-Q	[2017-04-26]
10-K	[2017-02-17]
10-Q	[2016-10-26]
10-Q	[2016-07-27]
10-Q	[2016-04-26]
10-K	[2016-02-12]
10-Q	[2015-10-27]
10-Q	[2015-07-28]
10-Q	[2015-04-28]
10-K	[2015-02-13]
10-Q	[2014-10-24]
10-Q	[2014-07-24]
10-Q	[2014-04-24]
10-K	[2014-02-14]
10-Q	[2013-10-23]
10-Q	[2013-07-24]
10-Q	[2013-04-24]
10-K	[2013-02-15]
10-Q	[2012-10-24]
10-Q	[2012-07-25]
10-Q	[2012-04-25]
10-K	[2012-02-17]