Travel & Leisure Co. [TNL] Filings

10-Q 1 wyn-20220930.htm 10-Q wyn-20220930

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, 2022

☐ 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:

81,280,625 shares of common stock outstanding as of September 30, 2022.

Table of Contents


		Page
PART I	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Report of Independent Registered Public Accounting Firm	3
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Balance Sheets	6
	Condensed Consolidated Statements of Cash Flows	7
	Condensed Consolidated Statements of Deficit	8
	Notes to Condensed Consolidated Financial Statements	10
	Note 1 - Background and Basis of Presentation	10
	Note 2 - New Accounting Pronouncements	10
	Note 3 - Revenue Recognition	11
	Note 4 - Earnings Per Share	15
	Note 5 - Acquisitions	16
	Note 6 - Discontinued Operations	16
	Note 7 - Vacation Ownership Contract Receivables	17
	Note 8 - Inventory	19
	Note 9 - Property and Equipment	20
	Note 10 - Debt	21
	Note 11 - Variable Interest Entities	23
	Note 12 - Fair Value	24
	Note 13 - Derivative Instruments and Hedging Activities	25
	Note 14 - Income Taxes	26
	Note 15 - Leases	26
	Note 16 - Commitments and Contingencies	28
	Note 17 - Accumulated Other Comprehensive (Loss)/Income	29
	Note 18 - Stock-Based Compensation	30
	Note 19 - Segment Information	32
	Note 20 - COVID-19 Related Items	34

	Note 21 - Restructuring	35
	Note 22 - Transactions with Former Parent and Former Subsidiaries	36
	Note 23 - Related Party Transactions	38
	Note 24 - Subsequent Event	38
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
	Forward-Looking Statements	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	55
Item 4.	Controls and Procedures	55
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 3.	Defaults Upon Senior Securities	56
Item 4.	Mine Safety Disclosures	56
Item 5.	Other Information	56
Item 6.	Exhibits	57
	Signatures	58

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 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 assets and liabilities related to acquisitions of continuing businesses and dispositions, including the separation of Wyndham Hotels & Resorts, Inc. and Cendant, and the sale of the vacation rentals businesses.
AOCL			Accumulated Other Comprehensive Loss
ARN			Alliance Reservations Network

AUD			Australian Dollar
Awaze			Awaze Limited, formerly Compass IV Limited, an affiliate of Platinum Equity, LLC



Company			Travel + Leisure Co. and its subsidiaries
COVID-19			Novel coronavirus global pandemic
EPS			Earnings Per Share
FASB			Financial Accounting Standards Board
First Amendment			The first amendment to the Company’s credit agreement governing its revolving credit facility and term loan B entered on July 15, 2020
GAAP			Generally Accepted Accounting Principles in the United States
LIBOR			London Interbank Offered Rate


NQ			Non-Qualified stock options
NZD			New Zealand Dollar
PSU			Performance-vested restricted Stock Units
Relief Period			Relief period of the First Amendment, spanning from July 15, 2020 through April 1, 2022, or upon earlier termination by the Company
RSU			Restricted Stock Unit
S&P			Standard & Poor’s Rating Services
SEC			Securities and Exchange Commission
Second Amendment			The renewal of the Company’s credit agreement governing its revolving credit facility and term loan B entered on October 22, 2021
SOFR			Secured Overnight Financing Rate
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, 2022, the related condensed consolidated statements of income, comprehensive income and deficit for the three-month and nine-month periods ended September 30, 2022 and 2021, and cash flows for the nine-month periods ended September 30, 2022 and 2021, 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, 2021, and the related consolidated statements of income/(loss), comprehensive income/(loss), cash flows and deficit for the year then ended (not presented herein); and in our report dated February 23, 2022, 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, 2021, 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, 2022

Table of Contents

TRAVEL + LEISURE CO.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Net revenues
Service and membership fees	$	410	$	378	$	1,222	$	1,114
Vacation ownership interest sales	403		344		1,099		810
Consumer financing	104		103		302		304
Other	20		14		45		36
Net revenues	937		839		2,668		2,264
Expenses
Operating	417		352		1,202		992
Cost of vacation ownership interests	39		43		125		105
Consumer financing interest	20		19		55		63
Marketing	125		101		337		261
General and administrative	117		106		358		325
Depreciation and amortization	30		31		91		93
Restructuring	—		—		8		(1)
COVID-19 related costs	—		1		2		3
Asset recoveries, net	—		—		(1)		—

Total expenses	748		653		2,177		1,841
Operating income	189		186		491		423
Interest expense	48		47		143		147
Interest (income)	(2)		(1)		(3)		(1)
Other (income), net	(19)		—		(16)		(2)
Income before income taxes	162		140		367		279
Provision for income taxes	46		39		101		76
Net income from continuing operations	116		101		266		203

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


Net income attributable to Travel + Leisure Co. shareholders	$	116	$	101	$	266	$	201


Basic earnings per share
Continuing operations	$	1.39	$	1.16	$	3.15	$	2.35
Discontinued operations	—		—		—		(0.02)
	$	1.39	$	1.16	$	3.15	$	2.33
Diluted earnings per share
Continuing operations	$	1.38	$	1.15	$	3.12	$	2.33
Discontinued operations	—		—		—		(0.03)
	$	1.38	$	1.15	$	3.12	$	2.30

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

TRAVEL + LEISURE CO.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Net income attributable to Travel + Leisure Co. shareholders	$	116	$	101	$	266	$	201

Foreign currency translation adjustments, net of tax	(34)		(15)		(64)		(26)


Other comprehensive loss, net of tax	(34)		(15)		(64)		(26)
Comprehensive income	$	82	$	86	$	202	$	175

See Notes to Condensed Consolidated Financial Statements.

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TRAVEL + LEISURE CO.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

(Unaudited)


	September 30, 2022		December 31, 2021
Assets
Cash and cash equivalents	$	169	$	369
Restricted cash (VIE - $85 as of 2022 and $84 as of 2021)	136		128
Trade receivables, net	167		131
Vacation ownership contract receivables, net (VIE - $2,031 as of 2022 and $2,061 as of 2021)	2,358		2,309
Inventory	1,146		1,216
Prepaid expenses	206		227
Property and equipment, net	736		689
Goodwill	950		961
Other intangibles, net	211		219
Other assets	301		339

Total assets	$	6,380	$	6,588
Liabilities and (deficit)
Accounts payable	$	66	$	62
Accrued expenses and other liabilities	852		939
Deferred income	393		382
Non-recourse vacation ownership debt (VIE)	1,882		1,934
Debt	3,391		3,379
Deferred income taxes	699		686

Total liabilities	7,283		7,382
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, 222,763,360 issued as of 2022 and 222,250,970 as of 2021	2		2
Treasury stock, at cost – 141,602,063 shares as of 2022 and 136,320,631 shares as of 2021	(6,778)		(6,534)
Additional paid-in capital	4,227		4,192
Retained earnings	1,750		1,587
Accumulated other comprehensive loss	(112)		(48)
Total stockholders’ (deficit)	(911)		(801)
Noncontrolling interest	8		7
Total (deficit)	(903)		(794)
Total liabilities and (deficit)	$	6,380	$	6,588

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,
	2022		2021
Operating activities
Net income	$	266	$	201

Loss on disposal of discontinued business, net of income taxes	—		2
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	216		120
Depreciation and amortization	91		93
Stock-based compensation	34		24
Deferred income taxes	15		(27)
Non-cash interest	14		17
Non-cash lease expense	12		13
Asset recoveries, net	(1)		—
Other, net	9		5
Net change in assets and liabilities, excluding the impact of acquisitions and dispositions:
Trade receivables	(37)		(9)
Vacation ownership contract receivables	(283)		60
Inventory	(10)		(14)


Accounts payable, accrued expenses, prepaid expenses, other assets and other liabilities	(69)		8
Deferred income	10		(58)


Net cash provided by operating activities	267		435
Investing activities
Property and equipment additions	(36)		(40)


Acquisitions	(2)		(37)
Proceeds from sale of investments	8		—
Other, net	2		—
Net cash used in investing activities - continuing operations	(28)		(77)
Net cash used in investing activities - discontinued operations	(6)		—
Net cash used in investing activities	(34)		(77)
Financing activities
Proceeds from non-recourse vacation ownership debt	1,155		930
Principal payments on non-recourse vacation ownership debt	(1,193)		(1,202)
Proceeds from debt	20		10
Principal payments on debt	(13)		(561)

Repayment of notes	(2)		(252)
Repurchase of common stock	(240)		—
Dividends to shareholders	(103)		(79)
Payment of deferred acquisition consideration	(19)		(30)
Debt issuance/modification costs	(12)		(9)
Net share settlement of incentive equity awards	(7)		(9)
Repayments of vacation ownership inventory arrangement	(6)		—


Proceeds from issuance of common stock	6		7



Net cash used in financing activities	(414)		(1,195)
Effect of changes in exchange rates on cash, cash equivalents and restricted cash	(11)		(6)
Net change in cash, cash equivalents and restricted cash	(192)		(843)
Cash, cash equivalents and restricted cash, beginning of period	497		1,317
Cash, cash equivalents and restricted cash, end of period	305		474
Less: Restricted cash	136		128

Cash and cash equivalents	$	169	$	346

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

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, 2021	85.9	$	2	$	(6,534)	$	4,192	$	1,587	$	(48)	$	7	$	(794)
Net income	—	—		—		—		51		—		—		51
Other comprehensive income	—	—		—		—		—		3		—		3

Issuance of shares for RSU vesting	0.3	—		—		—		—		—		—		—
Net share settlement of stock-based compensation	—	—		—		(5)		—		—		—		(5)
Change in stock-based compensation	—	—		—		12		—		—		—		12
Repurchase of common stock	(0.8)	—		(45)		—		—		—		—		(45)
Dividends ($0.40 per share)	—	—		—		—		(35)		—		—		(35)
Non-controlling interest ownership change	—	—		—		—		—		—		1		1
Other	—	—		—		1		—		—		—		1
Balance as of March 31, 2022	85.4	2		(6,579)		4,200

Travel & Leisure Co. [TNL] Filings
10-Q	[2022-10-27]
10-Q	[2022-07-28]
10-Q	[2022-04-28]
10-K	[2022-02-23]
10-Q	[2021-10-27]
10-Q	[2021-07-28]
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]