☑	ANNUAL 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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Adjusted EBITDA

A non-GAAP measure, defined by the Company as Net income before Depreciation and amortization, Interest expense (excluding Consumer financing interest), Early extinguishment of debt, Interest income (excluding Consumer financing revenues) and income taxes. Adjusted EBITDA also excludes stock-based compensation costs, separation and restructuring costs, transaction costs, impairments, gains and losses on sale/disposition of business, and items that meet the conditions of unusual and/or infrequent.

AOCL	Accumulated Other Comprehensive Loss

ARDA	American Resort Development Association

ARN	Alliance Reservations Network

AUD	Australian Dollar

Board	Board of Directors

CCPA	California Consumer Privacy Act of 2018

Code	Internal Revenue Code of 1986

Company	Wyndham Destinations, Inc. and its subsidiaries

Compass	Compass IV Limited, an affiliate of Platinum Equity, LLC

Distribution	Pro rata distribution of Wyndham Hotels’ stock to Wyndham Destinations’ shareholders

Distribution Date	May 31, 2018, the date we completed the Spin-off of our hotel business

EPS	Earnings Per Share

Exchange Act	Securities Exchange Act of 1934

FASB	Financial Accounting Standards Board

FICO	Fair Isaac Corporation

FTC	Federal Trade Commission

GAAP	Generally Accepted Accounting Principles in the United States

GDPR	General Data Protection Regulation

IRS	United States Internal Revenue Service

IRS Ruling	A private letter ruling from the IRS regarding certain U.S. federal income tax aspects of transactions related to the Spin-off of Wyndham Hotels & Resorts, Inc.

La Quinta	La Quinta Holdings Inc.

LIBOR	London Interbank Offered Rate

Moody’s	Moody’s Investors Service, Inc.

NQ	Non-Qualified stock options

NYSE	New York Stock Exchange

NZD	New Zealand Dollar

PCAOB	Public Company Accounting Oversight Board

PSU	Performance-vested restricted Stock Units

RSU	Restricted Stock Unit

S&P	Standard & Poor’s Rating Services

SEC	Securities and Exchange Commission

SOFR	Secured Overnight Financing Rate

SPE	Special Purpose Entity

SpinCo Assets	The assets that have been retained by or transferred to Wyndham Hotels & Resorts, Inc.

SpinCo Liabilities	The liabilities that have been retained by or transferred to Wyndham Hotels & Resorts, Inc.

Spin-off	Spin-off of Wyndham Hotels & Resorts, Inc.

SSAR	Stock-Settled Appreciation Rights

U.S.	United States of America

USD	United States of America Dollar

U.S. tax reform	Tax Cuts and Jobs Act

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.

Wyndham Destinations	Wyndham Destinations, Inc.

Wyndham Worldwide	Wyndham Worldwide Corporation

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•	Vacation Ownership is the world’s largest timeshare business with 230 resorts and 878,000 owners. We develop and market vacation ownership interests (“VOIs”) to individual consumers, provide consumer financing in connection with the sale of VOIs, and provide property management services at resorts.

•	Vacation Exchange operates the world’s largest vacation exchange network with 3.9 million members. Our vacation exchange business has relationships with over 4,200 vacation ownership resorts located in approximately 110 countries and territories. This is primarily a Fee-for-Service business that provides stable revenue streams and produces strong cash flow.

1.	Customer Obsession

•	Make It Easy reminds us of the fact that simple is better. Not only will it be easy to do business with us, but we will also pursue synergies within the company that benefit our customers. The alignment of our team, systems, and operations enables us to deliver better customer experiences.

•	Know Our Customers reflects our priority to understand customer preferences, personalize engagement, and fulfill expectations. By leveraging integrated data to tailor the content and channels of customer communications, we will customize connections at every opportunity.

•	Customer, Customer, Customer is all about keeping the customer at the center of our focus. Our commitment to listen and respond to feedback ensures that the voice of the customer drives our decisions.

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2.	Best-in-Class Sales & Marketing

•	Blue Thread is our connection to Wyndham Hotels and Wyndham Rewards loyalty program customers. The demographics of this significant consumer group are strongly aligned to our owner demographics, enabling us to fill our sales pipeline and deliver new vacation experiences to Wyndham loyalists.

•	Partnership Pipeline enables us to leverage the expertise of strategic partners to accelerate our growth and deliver enhanced benefits to our owners and members. We will strengthen and extend existing relationships, while developing new partners to reach untapped segments.

•	Digital & Customer Relationship Marketing will bring timeshare to the next generation. We will optimize technology to be relevant and compelling to meet our customers’ expectations and we will infuse transparency, speed, and accuracy into our processes.

•	Sales Experience relates to the evolution of the places and processes that mark the journey of ownership. We will invest in bold transformations to revitalize the customer experience and drive customer engagement about vacations.

3.	Leading Brands & Offerings

•	Brand Transformation shows our commitment to become even better at articulating the value proposition of each of our brands and making them relevant and enticing to our diverse owners, members, and prospects.

•	Network Expansion means growing our portfolio to meet the needs of our customers. Not only is this about adding more locations, it’s also about keeping our products and services refreshed and cutting edge.

•	RCI Re-ignition will focus on expanding the business into the broader travel market to become a leading travel membership provider, and leveraging RCI’s legacy of innovation, technology, and analytics to deliver more travel opportunities to our members.

4.	Operating Excellence

•	Resort Operating Excellence sustains our ability to provide great vacation experiences to our owners, members and guests. The strategic deployment of capital and reserves to maintain top quality resorts, combined with our optimal use of inventory, drives this cycle of excellence.

•	Prioritization reflects our disciplined operation as an integrated company. Our alignment around prioritized work and our management of general, administrative and overhead expenses relative to revenue growth fuels efficiency and effectiveness.

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•	saving money on future vacation costs;

•	location of resorts;

•	overall flexibility by allowing them the ability to use different locations, unit types, and times of year;

•	certainty of vacations; and

•	certainty of quality accommodations.

•	Gross vacation ownership interest sales or VOIs - Sales of VOIs including Fee-for-Service sales, before the effect of loan loss provisions.

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•	Tours - Number of tours taken by guests in our efforts to sell VOIs.

•	Volume per guest (“VPG”) - Gross VOI sales (excluding tele-sales upgrades, which are non-tour upgrade sales) divided by the number of tours. We have excluded non-tour upgrade sales in the calculation of VPG because non-tour upgrade sales are generated by a different marketing channel.

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•	self-developed inventory;

•	Just-in-Time inventory;

•	Fee-for-Service;

•	consumer loan defaults; and

•	inventory reclaimed from owners’ associations or owners.

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•	Average number of members - Represents paid members in our vacation exchange programs who are current on their annual membership dues or within the allowed grace period.

•	Exchange revenue per member - Represents total revenue from fees associated with memberships, exchange transactions, and other services for the period divided by the average number of vacation exchange members during the period.

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•	The assets that have been retained by or transferred to Wyndham Hotels (“SpinCo assets”) include, but are not limited to:

•	all of the equity interests of Wyndham Hotels;

•	any and all assets reflected on the audited combined balance sheet of the Wyndham Hotels businesses;

•	any and all contracts primarily relating to the Wyndham Hotels businesses; and

•	all rights in the “Wyndham” trademark and “The Registry Collection” trademark, and certain intellectual property related thereto.

•	The liabilities that have been retained by or transferred to Wyndham Hotels (“SpinCo liabilities”) include, but are not limited to:

•	any and all liabilities (whether accrued, contingent or otherwise, and subject to certain exceptions) to the extent primarily related to, arising out of or resulting from (i) the operation or conduct of the Wyndham Hotels businesses or (ii) the SpinCo assets;

•

any and all liabilities (whether accrued, contingent or otherwise) relating to, arising out of or resulting from any form, registration statement, schedule or similar disclosure document filed or furnished with the SEC, to the extent such filing is either made by Wyndham Hotels or made by the Company in connection with the Spin-off, subject to each party’s indemnification obligations under the Separation and Distribution Agreement with respect to any misstatement of or omission to state a material fact contained in any such filing to the extent the misstatement or omission is based upon information that was furnished by such party;

•	any and all liabilities relating to, arising out of, or resulting from any indebtedness of Wyndham Hotels or any indebtedness secured exclusively by any of the Wyndham Hotels assets; and

•	any and all liabilities (whether accrued, contingent or otherwise) reflected on the audited combined balance sheet of the Wyndham Hotels businesses.

•

Wyndham Hotels assumes one-third and Wyndham Destinations assumes two-thirds of certain contingent and other corporate liabilities of the Company and Wyndham Hotels (“shared contingent liabilities”) in each case incurred prior to the Distribution, including liabilities of the Company related to, arising out of or resulting from (i) certain terminated or divested businesses, (ii) certain general corporate matters of the Company, and (iii) any actions with respect to the separation plan or the Distribution made or brought by any third party;

•

Wyndham Hotels is entitled to receive one-third and Wyndham Destinations is entitled to receive two-thirds of the proceeds (or, in certain cases, a portion thereof) from certain contingent and other corporate assets of the Company and Wyndham Hotels (“shared contingent assets”) arising or accrued prior to the Distribution, including assets of the Company related to, arising from or involving (i) certain terminated or divested businesses, and (ii) certain general corporate matters of the Company;

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In connection with the sale of the Company’s European vacation rentals business, Wyndham Hotels assumed one-third and Wyndham Destinations assumed two-thirds of certain shared contingent liabilities and certain shared contingent assets. Such shared contingent assets and shared contingent liabilities include: (i) any amounts paid or received by Wyndham Destinations in respect of any indemnification claims made in connection with such sale, (ii) any losses actually incurred by Wyndham Destinations or Wyndham Hotels in connection with its provision of post-closing credit support to the European vacation rentals business, in the form of an unsecured guarantee, letter of credit or otherwise, in a fixed amount to be determined, to ensure that the European vacation rentals business meets the requirements of certain service providers and regulatory authorities, and (iii) any tax assets or liabilities related to such sale;

•

Except as otherwise provided in the Separation and Distribution Agreement or any ancillary agreement, the corporate costs and expenses relating to the Spin-off will be paid by the party with whom such costs were incurred, from a separate account maintained by each of Wyndham Hotels and Wyndham Destinations and established prior to completion of the Spin-off on terms agreed upon by Wyndham Hotels and Wyndham Destinations and, to the extent the funds in such separate account are not sufficient to satisfy such costs and expenses, be treated as shared contingent liabilities (as described above); and

•

All assets and liabilities of the Company (whether accrued, contingent or otherwise) other than the SpinCo assets and SpinCo liabilities, subject to certain exceptions (including the shared contingent assets and shared contingent liabilities), have been retained by or transferred to Wyndham Destinations, except as set forth in the Separation and Distribution Agreement or one of the other agreements described below.

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•	the liabilities each such party assumed or retained pursuant to the Separation and Distribution Agreement;

•	any misstatement of or omission to state a material fact contained in any party’s public filings, only to the extent the misstatement or omission is based upon information that was furnished by the indemnifying party (or incorporated by reference from a filing of such indemnifying party) and then only to the extent the statement or omission was made or occurred after the Spin-off; and

•	any breach by such party of the Separation and Distribution Agreement or any ancillary agreement unless such ancillary agreement expressly provides for separate indemnification therein, in which case any such indemnification claims will be made thereunder.

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•	consumer travel and vacation patterns and consumer preferences;

•	increased or unanticipated operating costs, including as a result of inflation, energy costs and labor costs such as minimum wage increases and unionization, workers' compensation and health-care related costs and insurance which may not be fully offset by price or fee increases in our business or otherwise;

•	desirability of geographic regions where resorts in our business are located;

•	the supply and demand for vacation ownership services and products and exchange services and products;

•	seasonality in our businesses, which may cause fluctuations in our operating results;

•	geographic concentrations of our operations and customers;

•	the availability of acceptable financing and the cost of capital as they apply to us, our customers, our RCI affiliates and other developers of vacation ownership resorts and timeshare property owner associations;

•	the quality of the services provided by affiliated resorts and properties in our exchange business or resorts in which we sell vacation ownership interests or participants in the Wyndham Rewards loyalty program, which may adversely affect our image, reputation and brand value;

•	overbuilding or excess capacity in one or more segments of the timeshare industry or in one or more geographic regions;

•	our ability to develop and maintain positive relations and contractual arrangements with vacation ownership interest owners, current and potential vacation exchange members, resorts with units that are exchanged through our exchange business and timeshare property owner associations;

•	organized labor activities and associated litigation;

•	the bankruptcy or insolvency of customers, which could impair our ability to collect outstanding fees or other amounts due or otherwise exercise our contractual rights;

•	our effectiveness in keeping pace with technological developments, which could impair our competitive position;

•	disruptions, including non-renewal or termination of agreements, in relationships with third parties including marketing alliances and affiliations with e-commerce channels;

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•	owners or other developers that have development advance notes with, or who have received loans or other financial arrangements incentives from us may experience financial difficulties;

•	consolidation of developers could adversely affect our exchange business;

•	decrease in the supply of available exchange accommodations due to, among other reasons, a decrease in inventory included in the system or resulting from ongoing property renovations or a decrease in member deposits could adversely affect our exchange business;

•	decrease in or delays or cancellations of planned or future development or refurbishment projects;

•	the viability of property owners' associations that we manage and the maintenance and refurbishment of vacation ownership properties, which depend on property owners associations levying sufficient maintenance fees and the ability of members to pay such maintenance fees;

•	increases in maintenance fees, which could cause our product to become less attractive or less competitive;

•	our ability to securitize the receivables that we originate in connection with sales of vacation ownership interests;

•	defaults on loans to purchasers of vacation ownership interests who finance the purchase price of such vacation ownerships;

•	the level of unlawful or deceptive third-party vacation ownership interest resale schemes, which could damage our reputation and brand value;

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the availability of and competition for desirable sites for the development of vacation ownership properties, difficulties associated with obtaining required approvals to develop vacation ownership properties, liability under state and local laws with respect to any construction defects in the vacation ownership properties we develop, and risks related to real estate project development costs and completion;

•	private resale of vacation ownership interests and the sale of vacation ownership interests on the secondary market, which could adversely affect our vacation ownership resorts and exchange business;

•	disputes with owners of vacation ownership interests, property owners associations, and vacation exchange affiliation partners, which may result in litigation and the loss of management contracts;

•	laws, regulations and legislation internationally and domestically, and on a federal, state or local level, concerning the timeshare industry, which may make the operation of our business more onerous, more expensive or less profitable;

•	our failure or inability to adequately protect and maintain our trademarks and other intellectual property rights; and

•	market perception of the timeshare industry and negative publicity from online social media postings and related media reports, which could damage our brands.

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•	our cash flows from operations or available lines of credit may be insufficient to meet required payments of principal and interest, which could result in a default and acceleration of the underlying debt and other debt instruments that contain cross-default provisions;

•	we may be unable to comply with the terms of the financial covenants under our revolving credit facility or other debt, including a breach of the financial ratio tests, which could result in a default and acceleration of the underlying revolver debt and under other debt instruments that contain cross-default provisions;

•	our leverage may adversely affect our ability to obtain additional financing on favorable terms or at all;

•	our leverage may require the dedication of a significant portion of our cash flows to the payment of principal and interest thus reducing the availability of cash flows to fund working capital, capital expenditures, dividends, share repurchases or other operating needs;

•	increases in interest rates may adversely affect our financing costs and the costs of our vacation ownership interest financing and associated increases in hedging costs;

•	rating agency downgrades of our debt could increase our borrowing costs and prevent us from obtaining additional financing on favorable terms or at all;

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•	failure or non-performance of counterparties to foreign exchange and interest rate hedging transactions could result in losses;

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an inability to securitize our vacation ownership loan receivables on terms acceptable to us because of, among other factors, the performance of the vacation ownership loan receivables, adverse conditions in the market for vacation ownership loan-backed notes and asset-backed notes in general and the risk that the actual amount of uncollectible accounts on our securitized vacation ownership loan receivables and other credit we extend is greater than expected;

•	breach of portfolio performance triggers under securitization transactions which if violated may result in a disruption or loss of cash flow from such transactions;

•	a reduction in commitments from surety bond providers, which may impair our vacation ownership business by requiring us to escrow cash in order to meet regulatory requirements of certain states;

•	prohibitive cost, or inadequate availability, of capital could restrict the development or acquisition of vacation ownership resorts by us and the financing of purchases of vacation ownership interests;

•	the inability of developers of vacation ownership properties that have received mezzanine and other loans from us to pay back such loans;

•	increases in interest rates, which may prevent us from passing along the full amount of such increases to purchasers of vacation ownership interests to whom we provide financing; and

•

disruptions in the financial markets, including potential financial uncertainties surrounding the United Kingdom’s withdrawal from the European Union, commonly referred to as “Brexit,” and the failure of financial institutions that support our credit facilities, general economic conditions and market liquidity factors outside of our control, which may limit our access to short- and long-term financing, credit and capital.

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ITEM 1B.	UNRESOLVED STAFF COMMENTS

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ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(a)	Includes 57,000 shares purchased for which the trade date occurred in December 2019 while settlement occurred in January 2020.

(b)

On August 20, 2007, our Board of Directors (“Board”) authorized the repurchase of the Company’s common stock (the “Share Repurchase Program”). Under the Share Repurchase Program, the Company is authorized to repurchase shares through open market purchases, privately-negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Exchange Act. The Share Repurchase Program has no time limit and may be suspended or discontinued completely at any time. The Board has since increased the capacity of the Share Repurchase Program eight times, most recently on October 23, 2017, by $1.0 billion, bringing the total authorization under the program to $6.0 billion. Proceeds received from stock option exercises have increased the repurchase capacity by $78 million since the inception of this program. Under our current and prior stock repurchase plans, the total authorization is $6.8 billion. See “Stock Repurchase Program” section included in Item 7 of this Annual Report on Form 10-K for further information on the Share Repurchase Program.

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(a)	Includes Operating, Cost of vacation ownership interests, Consumer financing interest, Marketing, General and administrative, and Restructuring expenses.

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(b)	Represents the portion of gross vacation ownership contract receivables, securitization restricted cash, and related assets that collateralize our non-recourse vacation ownership debt. Refer to Note 17—Variable Interest Entities to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further details.

(c)	Reflects the impact of the adoption of accounting standards issued during 2016 related to the presentation of debt issuance costs.

(d)	For additional details on the Company’s operating statistics see the “Operating Statistics” section included in Item 7 of this Annual Report on Form 10-K.

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ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

•	Vacation Ownership—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.

•	Vacation Exchange—provides vacation exchange services and products to owners of VOIs.

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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. Tele-sales upgrades were $105 million and $108 million during 2019 and 2018. We have excluded tele-sales upgrades in the calculation of VPG because tele-sales upgrades are generated by a different marketing channel. 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 years ended December 31, (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. Fee-for-Service commission revenues were $18 million and $31 million during 2019 and 2018. These commissions are reported within Service and membership fees on the Consolidated Statements of Income.

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•	$149 million of higher revenues in our vacation ownership business due to an increase in net VOI sales, property management, and consumer financing revenues; partially offset by

•	$13 million decrease in revenues in our vacation exchange business driven by the sale of North American vacation rentals in October 2019 and the loss of Wyndham Hotels servicing revenues as a result of the Spin-off; partially offset by increases in ancillary revenues driven by the acquisition of ARN.

•	$178 million decrease in separation costs related to the Spin-off of Wyndham Hotels;

•	$35 million decrease in costs as a result of the sale of the North American vacation rentals business in October 2019;

•	$17 million decrease in depreciation and amortization primarily due to the conveyance of a portion of the Wyndham Worldwide Corporation headquarters to Wyndham Hotels at Spin-off and the designation of North American vacation rentals as held-for-sale and the subsequent sale of this business; partially offset by

•	$67 million increase in marketing costs driven by our Vacation Ownership segment as a result of higher tour volume and an increase in licensing fees for the use of the Wyndham tradename;

•	$31 million increase in non-cash impairment charges driven by a loss on sale of inventory in 2019;

•	$27 million increase in expenses from operating activities primarily driven by higher revenues at our Vacation Ownership segment, partially offset by lower operating costs associated with lower revenues at our Vacation Exchange segment; and

•	$25 million increase in operating expenses related to the ARN acquisition.

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(a)	Includes the elimination of transactions between segments.

(b)	Includes $4 million and $105 million of stock based compensation expenses for the years ended 2019 and 2018.

(c)	Represents the resolution of and adjustment to certain contingent liabilities resulting from our separation from Cendant.

•	$111 million increase in gross VOI sales, net of Fee-for-Service sales, driven by a 4.5% increase in tours, resulting from our continued focus on new owner generation; partially offset by a $23 million increase in our provision for loan losses due to higher gross VOI sales and the impact of higher defaults;

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•	$40 million increase in property management revenues due to higher management fees;

•	$26 million increase in consumer financing revenues due to a higher weighted average interest rate earned on a larger average portfolio balance; and

•	$4 million increase in ancillary revenues; partially offset by

•	$14 million decrease in commission revenues as a result of lower Fee-for-Service VOI sales.

•	$63 million increase in marketing costs due to higher tour volume and an increase in licensing fees for the use of the Wyndham tradename;

•	$34 million of higher sales and commission expenses due to higher gross VOI sales;

•	$17 million increase in consumer financing interest expense resulting from an increase in the weighted average interest rate and a higher average loan balance on our non-recourse debt;

•	$4 million increase in property management expenses;

•	$4 million increase in the cost of VOIs sold driven by higher gross VOI sales; and

•	$3 million increase in maintenance fees on unsold inventory; partially offset by

•	$12 million decrease in commission expenses as a result of lower Fee-for-Service VOI sales.

•	$17 million decrease in vacation rentals revenue as a result of the sale of the North American vacation rentals business in October 2019;

•	$4 million net decrease in exchange and related service revenues driven by a change in customer mix, lower inventory levels, and higher other product revenue; partially offset by

•	$8 million net increase in ancillary revenues driven by $27 million at our newly-acquired ARN business; partially offset by the $13 million loss of ancillary revenue generated by the North American vacations rentals business and the $6 million loss of Wyndham Hotels servicing revenues which were discontinued as a result of the Spin-off.

•	$35 million decrease in costs due to the sale of the North American vacation rentals business in October 2019;

•	$10 million decrease in general and administrative expenses due to lower information technology costs and employee-related costs; and

•	$9 million of cost reductions associated with lower exchange and related service revenues; partially offset by

•	$25 million of increased revenue-related expenses at our newly-acquired ARN business.

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•	$137 million increase in cash primarily related to net proceeds from debt issuance;

•	$83 million increase in Vacation ownership contract receivables, net, due to new VOI originations, partially offset by principal payments and loan loss provision;

•	$68 million increase in Prepaid expenses, primarily for software implementation and other contractual arrangements;

•	$82 million increase in Goodwill and Other intangibles, net mainly due to the acquisition of ARN; and

•	$170 million increase in Other assets primarily due to $136 million of right-of-use assets recorded in 2019 related to the adoption of the new Leases accounting standard, an increase in tax receivables, and non-trade receivables.

•	$184 million increase in Non-recourse vacation ownership debt due to $130 million increase in non-recourse term notes and $54 million increase in conduit borrowings;

•	$153 million increase in Debt due to the issuance of $350 million secured notes, partially offset by repayment of the revolving credit facility; and

•	$79 million increase in Deferred income taxes due to installment sales of VOIs and a decrease in valuation allowances on certain deferred income tax assets.

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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 both debt and non-recourse debt; 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) $1.03 billion for marketing related activities, (ii) $120 million relating to the development of vacation ownership properties, and (iii) $47 million for information technology activities.

(e)

Represents obligations to repurchase completed vacation ownership properties from third-party developers (see Note 11—Inventory to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further detail) of which $43 million was included within Accrued expenses and other liabilities and $6 million was included in Accounts payable on the Consolidated Balance Sheets included in Item 8 of this Annual Report on Form 10-K.

(f)	Represents liabilities which we assumed and are responsible for pursuant to the Cendant separation and Spin-off of the hotel business (See Note 28—Transactions with Former Parent and Former Subsidiaries to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further detail).

(g)	Represents future consideration to be paid for the acquisition of ARN (See Note 5—Acquisitions to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further detail).

(h)	Excludes a $36 million liability for unrecognized tax benefits 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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•

Our primary interest rate exposure as of December 31, 2019, was to interest rate fluctuations in the U.S., specifically LIBOR and asset-backed commercial paper interest rates due to their impact on variable rate borrowings and other interest rate sensitive liabilities. In addition, interest rate movements in one country, as well as relative interest rate movements between countries can impact us. We anticipate that LIBOR and asset-backed commercial paper rates will remain a primary market risk exposure for the foreseeable future.

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We are currently evaluating the impact of the transition from LIBOR as an interest rate benchmark to other potential alternative reference rates, including but not limited to SOFR. Currently, we have debt and derivative instruments in place that reference LIBOR-based rates. The transition from LIBOR is estimated to take place after 2021 and management will continue to actively assess the related opportunities and risks involved in this transition.

•	We have foreign currency rate exposure to exchange rate fluctuations worldwide particularly with respect to the British pound sterling, Euro, Canadian and Australian dollars, and Mexican peso. We anticipate that such foreign currency exchange rate risk will remain a market risk exposure for the foreseeable future.

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ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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•	We tested the effectiveness of controls over the Company’s allowance model, historical loss data, and the calculation of a loss rate.

•	We evaluated the qualitative adjustment to the historical loss rates, including assessing the basis for the adjustments and the reasonableness of the significant assumptions.

•	We tested the accuracy and evaluated the relevance of the historical loss data as an input to the -allowance model.

•	We performed our own independent analyses using alternative assumptions to assess the reasonableness of the specific allowance model used by the Company.

•	We evaluated the predictability of the Company’s allowance model through analyzing the results of a look-back analysis.

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(a)	Represents dividends declared by Wyndham Worldwide Corporation.

(b)	Includes dividends declared by Wyndham Worldwide Corporation during the first quarter of 2018, prior to the Spin-off of Wyndham Hotels & Resorts, Inc. and subsequent dividends declared by Wyndham Destinations, Inc.

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1.	Background and Basis of Presentation

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: Vacation Ownership and Vacation Exchange. The Vacation Ownership 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 Vacation Exchange segment provides vacation exchange services and products to owners of VOIs.

On May 9, 2018, the Company completed the sale of its European vacation rentals business.

On May 31, 2018, the Company completed the spin-off of its hotel business (“Spin-off”) into a separate publicly traded company, Wyndham Hotels & Resorts, Inc. (“Wyndham Hotels”). This transaction was effected through a pro rata distribution of the new hotel entity’s stock to Wyndham Destinations shareholders. In connection with the Spin-off, the Company entered into certain agreements with Wyndham Hotels to implement the legal and structural separation, govern the relationship between the Company and Wyndham Hotels up to and after the completion of the separation, and allocate various assets, liabilities, and obligations, including, among other things, employee benefits, intellectual property, and tax-related assets and liabilities between the Company and Wyndham Hotels. The two public companies have entered into long-term exclusive license agreements to retain their affiliations with one of the industry’s top-rated loyalty programs, Wyndham Rewards, as well as to continue to collaborate on inventory-sharing and customer cross-sell initiatives.

For all periods presented, the Company has classified the results of operations for its hotel business and its European vacation rentals business as discontinued operations. See Note 6—Discontinued Operations for further details.

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 made to accelerate 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 Vacation Exchange segment. See Note 5—Acquisitions for further 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 to Vacasa LLC (“Vacasa”) for $162 million. The assets and liabilities of this business were classified as held-for-sale on the December 31, 2018 Consolidated Balance Sheet. 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 reflected within continuing operations on the Consolidated Statements of Income. See Note 7—Held-for-Sale Business for further details.

Tax Cuts and Jobs Act

On December 22, 2017, the Unites States of America (“U.S.”) enacted the Tax Cuts and Jobs Act. This law, also commonly referred to as “U.S. tax reform,” significantly changed U.S. corporate income tax laws by, among other changes, imposing a one-time mandatory tax on previously deferred earnings of foreign subsidiaries, reducing the U.S. corporate income tax rate from 35% to 21% starting on January 1, 2018, creating a territorial tax system which generally eliminates U.S. federal income taxes on dividends from foreign subsidiaries, eliminating or limiting the deduction of certain expenses, and requiring a minimum tax on earnings generated by foreign subsidiaries. The Tax Cuts and Jobs Act significantly impacted the Company’s effective tax rate, cash tax expenses, and deferred income tax balances.

Basis of Presentation

The Consolidated Financial Statements 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 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 on the Consolidated Financial Statements. In addition, certain prior period amounts have been reclassified to comply with newly adopted accounting standards. See Note 2—Summary of Significant Accounting Policies for further details.

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The Company presents an unclassified balance sheet which conforms to that of the Company’s peers within the timeshare industry. Both the December 31, 2019 and 2018, Consolidated Balance Sheets have been presented in an unclassified format.

In presenting the 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 Consolidated Financial Statements contain all normal recurring adjustments necessary for a fair presentation of annual results reported.

2.	Summary of Significant Accounting Policies

PRINCIPLES OF CONSOLIDATION

When evaluating an entity for consolidation, the Company first determines whether an entity is a variable interest entity (“VIE”). If the entity is deemed to be a VIE, the Company determines whether it would be the entity’s primary beneficiary and consolidates those VIEs for which the Company would be the primary beneficiary. The Company will also consolidate an entity not deemed a VIE upon determination that the Company has a controlling financial interest. For entities where the Company does not have a controlling financial interest, the investments in such entities are accounted for using the equity or cost method, as appropriate.

REVENUE RECOGNITION

During 2018, the Company adopted the Revenue from Contracts with Customers guidance utilizing the full retrospective transition method. Refer to Note 3—Revenue Recognition for full details of the Company’s revenue recognition policies.

CASH AND CASH EQUIVALENTS

The Company considers highly-liquid investments purchased with an original maturity of three months or less to be cash equivalents.

RESTRICTED CASH

The largest portion of the Company’s restricted cash relates to securitizations. The remaining portion is comprised of cash held in escrow accounts.

Securitizations. In accordance with the contractual requirements of the Company’s various vacation ownership contract receivable (“VOCR”) securitizations, a dedicated lockbox account, subject to a blocked control agreement, is established for each securitization. At each month end, the total cash in the collection account from the previous month is analyzed and a monthly servicer report is prepared by the Company, which details how much cash should be remitted to the note holders for principal and interest payments, and any cash remaining is transferred by the trustee back to the Company. Additionally, as required by various securitizations, the Company holds an agreed-upon percentage of the aggregate outstanding principal balances of the VOI contract receivables collateralizing the asset-backed notes in a segregated trust (or reserve) account as credit enhancement. Each time a securitization closes and the Company receives cash from the note holders, a portion of the cash is deposited in the reserve account. As of December 31, 2019 and 2018, restricted cash for securitizations totaled $110 million and $120 million.

Escrow Deposits. Laws in most U.S. states require the escrow of down payments on VOI sales, with the typical requirement mandating that the funds be held in escrow until the rescission period expires. As sales transactions are consummated, down payments are collected and are subsequently placed in escrow until the rescission period has expired. Depending on the state, the rescission period can be as short as three calendar days or as long as 15 calendar days. In certain states, the escrow laws require that 100% of VOI purchaser funds (excluding interest payments, if any) be held in escrow until the deeding process is complete. Where possible, the Company utilizes surety bonds in lieu of escrow deposits. Similarly, laws in certain U.S. states require the escrow of advance deposits received from guests for vacations paid and not yet traveled through the Company’s vacation exchange business. Such amounts are required to be held in escrow until the legal restriction expires, which varies from state to state. Escrow deposits were $37 million and $35 million as of December 31, 2019 and 2018.

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RECEIVABLE VALUATION

Trade receivables

The Company provides for estimated bad debts based on its assessment of the ultimate realizability of receivables, considering historical collection experience, the economic environment, and specific customer information. When the Company determines that an account is not collectible, the account is written-off to the allowance for doubtful accounts.

The following table illustrates the Company’s allowance for doubtful accounts activity from continuing operations for the year ended December 31 (in millions):

	2019				2018				2017
Beginning balance	$	104			$	78			$	68
Bad debt expense	100				75				51
Write-offs	(51		)		(49		)		(42		)
Translation and other adjustments	1				—				1
Ending balance	$	154			$	104			$	78

Vacation ownership contract receivables

In the Vacation Ownership segment, the Company provides for estimated VOCR defaults at the time of VOI sales by recording a provision for loan losses as a reduction of VOI sales on the Consolidated Statements of Income. The Company assesses the adequacy of the allowance for loan losses related to these VOIs using a technique referred to as a static pool analysis. This analysis is based upon the historical performance of similar VOCRs and incorporates more recent history of default information. Management prepares a model to track defaults for each year's sales over the entire life of the contract receivable as a means to project future expected losses. A qualitative assessment is also performed to determine whether any external economic conditions or internal portfolio characteristics indicate an adjustment is necessary to reflect expected impacts on the contract receivables portfolio. If current or expected future conditions differ from the conditions in effect when the historical experience was generated, the Company adjusts the allowance for loan losses to reflect the expected effects of the current environment on the collectability of VOCR.

INVENTORY

Inventory primarily consists of completed VOIs, VOIs under construction, land held for future VOI development, vacation credits, and real estate interests sold subject to conditional repurchase. The Company applies the relative sales value method for relieving VOI inventory and recording the related cost of sales. Under the relative sales value method, cost of sales is recorded using a percentage ratio of total estimated development cost to total estimated VOI revenue, including estimated future revenue and incorporating factors such as changes in prices and the recovery of VOIs generally as a result of contract receivable defaults. The effect of such changes in estimates under the relative sales value method is accounted for in each period using a current-period adjustment to inventory and cost of sales. Inventory is stated at the lower of cost, including capitalized interest, property taxes, and certain other carrying costs incurred during the construction process, or estimated fair value less costs to sell. Capitalized interest was $1 million in both 2019 and 2018, and less than $1 million in 2017.

PROPERTY AND EQUIPMENT

Property and equipment (including leasehold improvements) are recorded at cost, and presented net of accumulated depreciation and amortization. Depreciation, recorded as a component of Depreciation and amortization on the Consolidated Statements of Income, is computed utilizing the straight-line method over the lesser of the lease terms or estimated useful lives of the related assets. Amortization of leasehold improvements, also recorded as a component of Depreciation and amortization, is computed utilizing the straight-line method over the lesser of the estimated benefit period of the related assets or the lease terms. Useful lives are generally 30 years for buildings, up to 20 years for leasehold improvements, up to 30 years for vacation rental properties, and from three to seven years for furniture, fixtures, and equipment.

The Company capitalizes the costs of software developed for internal use in accordance with the guidance for accounting for costs of computer software developed or obtained for internal use. Capitalization of software costs developed for internal use commences during the development phase of the project. The Company amortizes software developed or obtained for internal use on a straight-line basis over its estimated useful life, which is generally three to five years, with the exception of certain enterprise resource planning, reservation, and inventory management software, which is generally 10 years. Such amortization commences when the software is substantially ready for its intended use.

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The net carrying value of software developed or obtained for internal use was $193 million and $166 million as of December 31, 2019 and 2018. Capitalized interest was $2 million during 2019 and $1 million during both 2018 and 2017.

DERIVATIVE INSTRUMENTS

The Company uses derivative instruments as part of its overall strategy to manage its exposure to market risks primarily associated with fluctuations in foreign currency exchange rates and interest rates. As a matter of policy, the Company does not use derivatives for trading or speculative purposes. All derivatives are recorded at fair value either as assets or liabilities. Changes in fair value of derivatives not designated as hedging instruments and of derivatives designated as fair value hedging instruments are recognized in Operating income and net interest expense, based upon the nature of the hedged item, on the Consolidated Statements of Income. The effective portion of changes in fair value of derivatives designated as cash flow hedging instruments is recorded as a component of other comprehensive income. The ineffective portion is reported immediately in earnings as a component of Operating expense, based upon the nature of the hedged item. Amounts included in other comprehensive income are reclassified into earnings in the same period during which the hedged item affects earnings.

INCOME TAXES    

The Company recognizes deferred tax assets and liabilities using the asset and liability method, under which deferred tax assets and liabilities are calculated based upon the temporary differences between the financial statement and income tax bases of assets and liabilities using currently enacted tax rates. These differences are based upon estimated differences between the book and tax basis of the assets and liabilities for the Company as of December 31, 2019 and 2018. The Company recognizes the effects of changes in tax laws, or rates, as a component of income taxes from continuing operations within the period that includes the enactment date.

The Company’s deferred tax assets are recorded net of a valuation allowance when, based on the weight of available evidence, it is more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. Decreases to the valuation allowance are recorded as reductions to the Company’s provision for income taxes and increases to the valuation allowance result in additional provision for income taxes. The realization of the Company’s deferred tax assets, net of the valuation allowance, is primarily dependent on estimated future taxable income. A change in the Company’s estimate of future taxable income may require an addition to or reduction from the valuation allowance.

For tax positions the Company has taken or expects to take in a tax return, the Company applies a more likely than not threshold, under which the Company must conclude a tax position is more likely than not to be sustained, assuming that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information, in order to recognize or continue to recognize the benefit. In determining the Company’s provision for income taxes, the Company uses judgment, reflecting its estimates and assumptions, in applying the more likely than not threshold. The Company classifies interest and penalties associated with unrecognized tax benefits as a component of Provision for income taxes on the Consolidated Statements of Income.

During 2018, the Financial Accounting Standards Board (“FASB”) issued guidance on the accounting for tax on the global intangible low-taxed income provisions of the recently enacted tax law. These provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The guidance indicates that the Company is allowed to make an accounting policy choice of either: (i) treating taxes due on future inclusions in taxable income as a current-period expense when incurred (the “period cost method”), or (ii) factoring such amounts into the Company's measurement of its deferred taxes (the “deferred method”). The Company has elected to account for any potential inclusions under the period cost method.

During the fourth quarter of 2018, in accordance with the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 118 - Income Tax Accounting Implications of the Tax Cuts and Jobs Act, the Company completed its accounting for the tax effects of the U.S. tax reform recorded for 2017.

LOYALTY PROGRAMS

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.

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Revenues relating to the RCI Elite Rewards program, which are recorded in Other revenues on the Consolidated Statements of Income, were $15 million, $12 million, and $11 million during 2019, 2018, and 2017. Expenses related to this program, which are recorded within Operating expenses on the Consolidated Statements of Income, were $9 million, $5 million, and $6 million during 2019, 2018, and 2017. The liabilities associated with the program as of December 31, 2019 and 2018, were $18 million and $13 million, and are included within Deferred income on the Consolidated Balance Sheets.

As a result of the Spin-off, the Company has entered into long-term exclusive license agreements to retain its affiliations with one of the industry’s top-rated loyalty programs, Wyndham Rewards. Wyndham Rewards members accumulate points by staying in hotels franchised under one of the Wyndham Hotels brands, and by purchasing everyday services and products utilizing their co-branded credit cards. Members may redeem their points for hotel stays, airline tickets, rental cars, resort vacations, electronics, sporting goods, movie and theme park tickets, gift certificates, vacation ownership maintenance fees, annual membership dues, and exchange fees for transactions.

ADVERTISING EXPENSE

Advertising costs are generally expensed in the period incurred and are recorded within Marketing expense on the Consolidated Statements of Income. Advertising costs were $37 million, $27 million, and $25 million in 2019, 2018, and 2017.

STOCK-BASED COMPENSATION

In accordance with the guidance for stock-based compensation, the Company measures all stock-based compensation awards using a fair value method and records the related expense in its Consolidated Statements of Income.

LONG-LIVED ASSETS

Assets such as customer lists, management agreements, trademarks, etc., may be acquired by the Company. Identifiable intangible assets are recorded at their fair value as of the date of the acquisition and are categorized as having either a finite life or an indefinite life. Assets deemed to have a finite life are given an appropriate useful life and amortized on a straight-line basis.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company has goodwill and other indefinite-lived intangible assets recorded in connection with business combinations. The Company annually (during the fourth quarter of each year subsequent to completing the Company’s annual forecasting process), or more frequently if circumstances indicate that the value of goodwill may be impaired, reviews the reporting units’ carrying values as required by the guidance for goodwill and other indefinite-lived intangible assets.

Under current accounting guidance, goodwill and other intangible assets with indefinite lives are not subject to amortization. However, goodwill and other intangibles with indefinite lives are subject to fair value-based rules for measuring impairment, and resulting write-downs, if any, are reflected in Operating expense. The Company has goodwill recorded at its vacation ownership and vacation exchange reporting units. The Company completed its annual goodwill impairment test by performing a qualitative analysis for each of its reporting units as of October 1, 2019, and determined that no impairment exists.

The Company also evaluates the recoverability of its other long-lived assets, including property and equipment and amortizable intangible assets, if circumstances indicate impairment may have occurred, pursuant to guidance for impairment or disposal of long-lived assets. This analysis is performed by comparing the respective carrying values of the assets to the current and expected future cash flows, on an undiscounted basis, to be generated from such assets. Property and equipment is evaluated separately within each segment. If such analysis indicates that the carrying value of these assets is not recoverable, the carrying value of such assets is reduced to fair value.

ACCOUNTING FOR RESTRUCTURING ACTIVITIES

The Company’s restructuring activities require it to make significant estimates in several areas including (i) expenses for severance and related benefit costs, (ii) the ability to generate sublease income, as well as its ability to terminate lease obligations, and (iii) contract terminations. The amount that the Company accrued as of December 31, 2019, represents its best estimate of the obligations incurred in connection with these actions, but could change due to various factors including market conditions and the outcome of negotiations with third parties.

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OTHER INCOME

During 2019, the Company recorded $23 million of income related to (i) settlements of various business interruption claims, (ii) value added tax provision releases at its Vacation Exchange segment, and (iii) profit sharing at its Vacation Exchange segment. During 2018, the Company recorded $38 million of income primarily related to (i) value added tax refunds at its Vacation Exchange segment, (ii) settlements of various business interruption claims, and (iii) co-branded revenue at its Vacation Ownership segment. During 2017, the Company recorded $28 million of income related to (i) a non-cash gain resulting from the acquisition of a controlling interest in Love Home Swap at its Vacation Exchange segment, (ii) settlements of various business interruption claims, and (iii) the sale of non-strategic assets at its Vacation Ownership segment.

RECENTLY ISSUED 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 is effective for the Company on January 1, 2020, including interim periods within the fiscal year. The adoption of this guidance will not have a material impact on the Company’s Consolidated Financial Statements. The Company’s current approach in estimating the allowance for loan losses aligns with the expected credit loss model required upon adoption of this guidance.

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 is effective for the Company on January 1, 2020, including interim periods within the fiscal year, and should be applied on a prospective basis. The adoption of this guidance will not have a material impact on the Company’s Consolidated Financial Statements.

Simplifying the Accounting for Income Taxes. In December 2019, the FASB issued guidance to simplify the accounting for income taxes. The guidance amends the accounting for hybrid tax regimes where a tax jurisdiction imposes the greater of tax based on income versus tax based on another measurement basis, addresses the recognition of tax basis in goodwill not generated through a business combination, eliminates certain exceptions to the approach for intraperiod tax allocation when a loss from continuing operations exists, calculating interim period taxes related to enacted changes in tax law, requirements in the recognition of deferred tax liabilities for outside basis differences and exceptions to the ability not to recognize deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary. The issued guidance also 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.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

Leases. In February 2016, the FASB issued guidance for lease accounting. The guidance requires a lessee to recognize right-of-use assets and lease liabilities on the balance sheet for all lease obligations and disclose key information about leasing arrangements, such as the amount, timing, and uncertainty of cash flows arising from leases. The Company adopted this standard using the modified retrospective approach; therefore, the Company used the transition method practical expedient under ASU 2018-11 and prior year financial statements were not recast. As a result of the adoption, on January 1, 2019, the Company recognized $158 million of right-of-use assets and $200 million of related lease liabilities. Right-of-use assets were decreased by $42 million of tenant improvement allowances and deferred rent balances reclassified from other liabilities. Both the right-of-use assets and related lease liabilities recognized upon adoption included $21 million associated with the Company’s held-for-sale business. Right-of-use assets are included within Other assets and the related lease liabilities are included within Accrued expenses and other liabilities on the Consolidated Balance Sheets. The adoption of this standard did not have a material impact to the statements of income related to existing leases; therefore a cumulative-effect adjustment was not recorded. The adoption of this standard did not materially impact consolidated net income, liquidity, or compliance with the Company’s debt covenants under its current agreements. See Note 13— Leases for more information.

Implementation Costs in Cloud Computing Arrangements. In August 2018, the FASB issued guidance on implementation costs incurred in a cloud computing arrangement that is a service contract. This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the guidance on

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capitalizing costs associated with developing or obtaining internal-use software and also adds certain disclosure requirements related to implementation costs incurred for internal-use software and cloud computing arrangements. This guidance is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years, with early adoption permitted. The Company early adopted this guidance as of January 1, 2019, on a prospective basis. The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements and related disclosures.

Stock Compensation - Improvements to Nonemployee Share-Based Payment Accounting. In June 2018, the FASB issued guidance intended to simplify nonemployee share-based payment accounting. This new guidance more closely aligns the accounting for share-based payment awards issued to employees and nonemployees. The Company adopted this guidance as of January 1, 2019, with no material impact to its Consolidated Financial Statements and related disclosures.

3.	Revenue Recognition

Vacation Ownership

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 and incorporates more recent history of default information.

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.

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 the 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 Consolidated Statements of Income. 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 Consolidated Statements of Income. Property management revenues, which are comprised of management fee revenue and reimbursable revenue, were $702 million, $665 million, and $649 million during 2019, 2018, and 2017. Management fee revenues were $394 million, $314 million, and $285 million during 2019, 2018, and 2017. Reimbursable revenues were $308 million, $351 million, and $364 million during 2019, 2018, and 2017. One of the associations that the Company manages paid its Vacation Exchange segment $29 million for exchange services during 2019, 2018, and 2017.

Vacation Exchange

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.

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The Company’s vacation exchange business 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, other related transaction or event.

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. 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 Vacation Ownership and Vacation Exchange 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 December 31, 2019 and 2018, were as follows (in millions):

Contract Liabilities (a)		2019				2018
Deferred subscription revenue		$	206			$	220
Deferred VOI trial package revenue		145				125
Deferred VOI incentive revenue		107				96
Deferred exchange-related revenue (b)		58				56
Deferred co-branded credit card programs revenue		19				14
Deferred other revenue		4				8
Total		$	539			$	519

(a)	There is $42 million of deferred vacation rental revenue which is included in Liabilities of held-for-sale business on the Consolidated Balance Sheet as of December 31, 2018.

(b)	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 Consolidated Balance Sheets.

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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 year ended December 31, 2019, follow (in millions):

		Amount
Contract liabilities as of December 31, 2018		$	519
Additions		387
Revenue recognized		(367		)
Contract liabilities as of December 31, 2019		$	539

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 December 31, 2019 and 2018, these capitalized costs were $53 million and $45 million; and are included within Other assets on the 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 December 31, 2019 and 2018, these capitalized costs were $20 million and $22 million; and are included within Other assets on the 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.

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

		2020				2021				2022				Thereafter				Total
Subscription revenue		$	122			$	50			$	20			$	14			$	206
VOI trial package revenue		145				—				—				—				145
VOI incentive revenue		107				—				—				—				107
Exchange-related revenue		52				4				1				1				58
Co-branded credit card programs revenue		4				3				3				9				19
Other revenue		4				—				—				—				4
Total		$	434			$	57			$	24			$	24			$	539

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):

	Year Ended December 31,
	2019				2018				2017
Vacation Ownership
Vacation ownership interest sales	$	1,848			$	1,769			$	1,684
Property management fees and reimbursable revenues	702				665				649
Consumer financing	515				491				463
Fee-for-Service commissions	18				31				24
Ancillary revenues	68				60				61
Total Vacation Ownership	3,151				3,016				2,881
Vacation Exchange
Exchange revenues	647				658				671
Vacation rental revenues	153				170				172
Ancillary revenues	98				90				84
Total Vacation Exchange	898				918				927
Corporate and other
Ancillary revenues	1				—				—
Eliminations	(7		)		(3		)		(2		)
Total Corporate and other	(6		)		(3		)		(2		)
Net revenues	$	4,043			$	3,931			$	3,806

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4.	Earnings Per Share

The computations of basic and diluted earnings per share (“EPS”) are based on net income attributable to Wyndham Destinations shareholders divided by the basic weighted average number of common shares and diluted weighted average number of common shares. The following table sets forth the computations of basic and diluted EPS (in millions, except per share data):

	Year Ended December 31,
	2019				2018				2017
Net income from continuing operations attributable to Wyndham Destinations shareholders	$	489			$	266			$	645
(Loss)/income from operations of discontinued businesses attributable to Wyndham Destinations shareholders, net of tax	—				(50		)		209
Gain on disposal of discontinued business attributable to Wyndham Destinations shareholders, net of tax	18				456				—
Net income attributable to Wyndham Destinations shareholders	$	507			$	672			$	854
Basic earnings per share
Continuing operations	$	5.31			$	2.69			$	6.26
Discontinued operations	0.19				4.11				2.03
	$	5.50			$	6.80			$	8.29
Diluted earnings per share
Continuing operations	$	5.29			$	2.68			$	6.22
Discontinued operations	0.19				4.09				2.02
	$	5.48			$	6.77			$	8.24
Basic weighted average shares outstanding	92.1				98.9				103.0
Stock-settled appreciation rights (“SSARs”), RSUs (a) and PSUs (b)	0.3				0.3				0.7
Diluted weighted average shares outstanding (c)(d)	92.4				99.2				103.7
Dividends:
Cash dividends per share (e)	$	1.80			$	1.89			$	2.32
Aggregate dividends paid to shareholders	$	166			$	194			$	242

(a)	Excludes 0.4 million and 0.5 million of restricted stock units (“RSUs”) that would have been anti-dilutive to EPS for the years 2019 and 2018. These shares could potentially dilute EPS in the future. The number of anti-dilutive RSUs for the year 2017 was immaterial.

(b)

Excludes performance-vested restricted stock units (“PSUs”) of 0.2 million for the year 2019, as the Company had not met the required performance metrics. As a result of the Spin-off during the second quarter of 2018, the Company accelerated the vesting of outstanding PSUs and there were no outstanding PSUs as of 2018. Excludes PSUs of 0.5 million for the year 2017, as the Company had not met the required performance metrics.

(c)	Excludes 1.2 million and 0.5 million of outstanding stock option awards that would have been anti-dilutive to EPS for the years 2019 and 2018. These outstanding stock option awards could potentially dilute EPS in the future. There were no outstanding stock option awards in 2017.

(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.

(e)

For each of the quarterly periods in 2019, the Company paid cash dividends of $0.45 per share. For the quarterly period ended March 31, 2018, Wyndham Worldwide Corporation paid cash dividends of $0.66 prior to the Spin-off. In each of the following periods ended June 30, September 30, and December 31, 2018, the Company paid cash dividends of $0.41. For each of the quarterly periods in 2017, Wyndham Worldwide Corporation paid cash dividends of $0.58 per share, prior to the Spin-off.

Share Repurchase Program

As of December 31, 2019, the total authorization under the Company’s current share repurchase program was $6.0 billion, of which $476 million remains available. Proceeds received from stock option exercises have increased the repurchase capacity by $78 million since the inception of this program. The following table summarizes stock repurchase activity under the current share repurchase program (in millions):

	Shares			Cost
As of December 31, 2018	100.6			$	5,262
Repurchases	7.6			340
As of December 31, 2019	108.2			$	5,602

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5.	Acquisitions

Assets acquired and liabilities assumed in business combinations were recorded on the Consolidated Balance Sheets as of the respective acquisition dates based upon their estimated fair values at such dates. The results of operations of businesses acquired by the Company have been included in the Consolidated Statements of Income since their respective dates of acquisition. The excess of the purchase price over the estimated fair values of the underlying assets acquired and liabilities assumed was allocated to goodwill. In certain circumstances, the allocations of the excess purchase price are based upon preliminary estimates and assumptions. Accordingly, the allocations may be subject to revision when the Company receives final information, including appraisals and other analyses. Any revisions to the fair values during the measurement period will be recorded by the Company as further adjustments to the purchase price allocations. Although, in certain circumstances, the Company has substantially integrated the operations of its acquired businesses, additional future costs relating to such integration may occur. These costs may result from integrating operating systems, relocating employees, closing facilities, reducing duplicative efforts, and exiting and consolidating other activities. These costs will be recorded on the Consolidated Statements of Income as expenses.

2019 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 made to accelerate 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; (iv) $10 million of contingent consideration based on achieving certain financial and operational metrics; and (v) additional shares of Wyndham Destinations stock valued at $13 million to be paid 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 preliminary purchase price allocation, including the impacts of certain post-closing adjustments, consists of: (i) $20 million of developed software with a weighted average life of 10 years included within Property and equipment, net; (ii) $45 million of Goodwill; (iii) $36 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 Vacation Exchange segment.

Other. During the third quarter of 2019, the Company completed a business acquisition at its Vacation Ownership segment for $13 million ($10 million net of cash acquired). The acquisition resulted in the recognition of (i) $4 million of Inventory, (ii) $7 million of definite-lived intangible assets, and (iii) $1 million of Accrued expenses and other liabilities.

2018 ACQUISITIONS

La Quinta Holdings Inc. (“La Quinta”). In January 2018, the Company entered into an agreement with La Quinta to acquire its hotel franchising and management businesses for $1.95 billion. This acquisition closed on May 30, 2018, prior to the hotel business Spin-off on May 31, 2018. Upon completion of the Spin-off, La Quinta became a wholly-owned subsidiary of Wyndham Hotels.

Other. During 2018, the Company completed one other acquisition at its Vacation Exchange segment for $5 million in cash, net of cash acquired. The preliminary purchase price allocations resulted in the recognition of (i) $1 million of Goodwill, none of which is expected to be deductible for tax purposes, (ii) $4 million of definite-lived intangible assets with a weighted average life of 21 years, (iii) less than $1 million in Other assets, and (iv) less than $1 million of liabilities.

2017 ACQUISITIONS

Love Home Swap. During July 2017, the Company acquired a controlling interest in Love Home Swap, a United Kingdom home exchange company. The Company had convertible notes which, at the time of acquisition, were converted into a 47% equity ownership interest in Love Home Swap and purchased the remaining 53% of equity for $28 million, net of cash acquired. As a result, the Company recognized a non-cash gain of $13 million, net of transaction costs, resulting from the re-measurement of the carrying value of the Company’s 47% ownership interest to its fair value. The purchase price allocations resulted in the recognition of (i) $48 million of Goodwill, none of which was deductible for tax purposes, (ii) $6 million of trademarks, (iii) $5 million of Other assets, and (iv) $6 million of liabilities, all of which were assigned to the Company’s Vacation Exchange segment.

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DAE Global Pty Ltd. During October 2017, the Company completed the acquisition of DAE Global Pty, Ltd, an Australian vacation exchange company, and @Work International, a related software company, for $21 million, net of cash acquired. These acquisitions complement the Company’s existing Vacation Exchange segment. The purchase price allocation resulted in the recognition of (i) $3 million of Property and equipment, net (ii) $8 million of Goodwill, none of which was deductible for tax purposes, (iii) $11 million of definite-lived intangible assets, with a weighted average life of 10 years, (iv) $5 million of Other assets, and (v) $6 million of liabilities, all of which were assigned to the Company’s Vacation Exchange segment.

Other. During 2017, the Company completed one other acquisition at its Vacation Exchange segment for $5 million in cash, net of cash acquired. The preliminary purchase price allocations resulted primarily in the recognition of (i) $3 million of Goodwill, all of which was deductible for tax purposes, (ii) $1 million of definite-lived intangible assets with a life of 12 years, (iii) $12 million in Other assets, and (iv) $11 million of liabilities. This business was included as part of the North American vacation rentals business which was sold during 2019.

The Company completed four other acquisitions, which were included in discontinued operations, for $151 million in cash, net of cash acquired, and $1 million of contingent consideration.

6.	Discontinued Operations

During 2018, the Company completed the Spin-off of its hotel business 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 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.

During 2019, the Company recognized an additional $18 million gain on disposal of discontinued operations. This gain was related to $12 million of tax benefits associated with additional foreign tax credit utilization and lower than anticipated state income taxes, as well as $6 million in returned escrow for an expired guarantee and other changes in expired guarantees related the sale of the European vacation rentals business.

Prior to its classification as a discontinued operation, 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 Vacation Exchange.

The following table presents information regarding certain components of income from discontinued operations, net of income taxes (in millions):

		Year Ended December 31,
		2019				2018				2017
Net revenues		$	—			$	720			$	2,022
Expenses:
Operating		—				343				874
Marketing		—				200				434
General and administrative		—				71				171
Separation and related costs		—				111				40
Asset impairments		—				—				41
Depreciation and amortization		—				52				130
Total expenses		—				777				1,690
Interest expense		—				—				3
Interest (income)		—				—				(3		)
Provision/(benefit) for income taxes		—				(7		)		123
(Loss)/income from operations of discontinued businesses, net of income taxes		—				(50		)		209
Gain on disposal of discontinued business, net of income taxes		18				456				—
Net income from discontinued operations, net of income taxes		$	18			$	406			$	209

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

		Year Ended December 31,
		2019				2018				2017
Cash flows (used in)/provided by operating activities		$	(1	)		$	150			$	486
Cash flows used in investing activities		(22		)		(626		)		(211		)
Cash flows provided by/(used in) financing activities		—				2,066				(22		)
Non-cash items:
Forgiveness of intercompany debt from Wyndham Hotels		—				197				—
Depreciation and amortization		—				52				131
Stock-based compensation		—				22				11
Deferred income taxes		—				(23		)		(11		)
Property and equipment additions		—				(38		)		(81		)
Net assets of business acquired, net of cash acquired		—				(1,696		)		(142		)
Proceeds from sale of businesses and asset sales		—				1,099				9

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. 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 which is included in Gain on sale of business on the Consolidated Statements of Income. The purchase agreement contains customary post-closing adjustments. 

The assets and liabilities of this business were classified as held-for-sale on the December 31, 2018 Consolidated Balance Sheet. 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 reflected within continuing operations on the Consolidated Statements of Income. Prior to sale, this business was reported within the Vacation Exchange segment.

Total assets of this business at December 31, 2018 were $203 million including: $31 million Restricted cash; $82 million Trade receivables, net; $35 million Property and equipment, net; $42 million Goodwill and Other intangibles, net; and $8 million Other assets. Total liabilities of this business at December 31, 2018 were $165 million including: $87 million Accounts payable; $27 million Accrued expenses and other liabilities; and $42 million Deferred income.

8.	Intangible Assets

Intangible assets consisted of (in millions):

	As of December 31, 2019												As of December 31, 2018
	Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount				Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
Unamortized Intangible Assets:
Goodwill	$	970											$	922
Trademarks (a)	$	51											$	51
Amortized Intangible Assets:
Customer lists (b)	$	74			$	19			$	55			$	35			$	13			$	22
Management agreements (c)	52				27				25				45				24				21
Trademarks (d)	8				4				4				4				4				—
Other (e)	9				1				8				16				1				15
	$	143			$	51			$	92			$	100			$	42			$	58

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(a)	Comprised of various trademarks that the Company has acquired. These trademarks are expected to generate future cash flows for an indefinite period of time.

(b)	Amortized between 4 to 15 years with a weighted average life of 13 years.

(c)	Amortized between 10 to 25 years with a weighted average life of 17 years.

(d)	Amortized between 7 to 8 years with a weighted average life of 7 years.

(e)	Includes business contracts, which are amortized between 38 to 69 years with a weighted average life to 63 years.

Goodwill

During the fourth quarters of 2019, 2018, and 2017, the Company performed its annual goodwill impairment test and determined no impairment existed as the fair value of goodwill at its reporting units was in excess of the carrying value.

The changes in the carrying amount of goodwill are as follows (in millions):

	Balance as of December 31, 2018				Goodwill Acquired During 2019				Foreign Exchange				Balance as of December 31, 2019
Vacation Ownership	$	27			$	—			$	—			$	27
Vacation Exchange	895				45				3				943
Total Company	$	922			$	45			$	3			$	970

Amortizable Intangible Assets

Amortization expense relating to amortizable intangible assets is included as a component of Depreciation and amortization on the Consolidated Statements of Income, and was as follows (in millions):

	2019				2018				2017
Customer lists	$	6			$	1			$	2
Management agreements	3				8				8
Other	—				3				1
Total	$	9			$	12			$	11

Based on the Company’s amortizable intangible assets as of December 31, 2019, the Company expects related amortization expense for the next five years as follows (in millions):

	Amount
2020	$	9
2021	9
2022	9
2023	9
2024	8

9.	Income Taxes

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act, which is also commonly referred to as ‘‘U.S. tax reform,’’ and significantly changed U.S. corporate income tax laws by reducing the U.S. corporate income tax rate from 35.0% to 21.0% starting in 2018, and imposing a one-time mandatory deemed repatriation tax on undistributed historic earnings of foreign subsidiaries. Other provisions of the law include, but are not limited to, creating a territorial tax system which generally eliminates U.S. federal income taxes on dividends from foreign subsidiaries, eliminating or limiting the deduction of certain expenses, and imposing a minimum tax on earnings generated by foreign subsidiaries.

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The Company made a reasonable estimate for the impact of U.S. tax reform on December 31, 2017, and finalized the accounting for the tax effects of U.S. tax reform in 2018. The following table presents the impact of the accounting for the enactment of U.S. tax reform on the Company’s provision/benefit for income taxes for the years ended December 31, 2019 and 2018 (in millions):

	2019				2018
Remeasurement of net deferred income tax and uncertain tax liabilities	$	—			$	(24	)
One-time mandatory repatriation tax on undistributed historic earnings of foreign subsidiaries	—				8
Valuation allowance established for the impact of the law on certain tax attributes	—				(13		)
Net (benefit) for income taxes impact	$	—			$	(29	)

Although the one-time mandatory deemed repatriation tax during 2017 and the territorial tax system created as a result of U.S. tax reform generally eliminate U.S. federal income taxes on dividends from foreign subsidiaries, the Company asserts that substantially all of the undistributed foreign earnings of $739 million will be reinvested indefinitely as of December 31, 2019. In the event the Company determines not to continue to assert that all or part of its undistributed foreign earnings are permanently reinvested, such a determination in the future could result in the accrual and payment of additional foreign withholding taxes, as well as U.S. taxes on currency transaction gains and losses, the determination of which is not practicable.

The income tax provision consisted of the following for the years ended December 31 (in millions):

	2019				2018				2017
Current
Federal	$	74			$	(24	)		$	29
State	9				(6		)		6
Foreign	29				38				34
	112				8				69
Deferred
Federal	57				77				(392		)
State	17				44				(3		)
Foreign	5				1				(2		)
	79				122				(397		)
Provision/(benefit) for income taxes	$	191			$	130			$	(328	)

Pre-tax income/(loss) for domestic and foreign operations consisted of the following for the years ended December 31 (in millions):

	2019				2018				2017
Domestic	$	452			$	258			$	343
Foreign	228				138				(25		)
Income before income taxes	$	680			$	396			$	318

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Deferred income tax assets and liabilities, as of December 31, were comprised of the following (in millions):

	2019				2018
Deferred income tax assets:
Net operating loss carryforward	$	33			$	54
Foreign tax credit carryforward	78				81
Tax basis differences in assets of foreign subsidiaries	12				12
Accrued liabilities and deferred income	49				62
Provision for doubtful accounts and loan loss reserves for vacation ownership contract receivables	229				210
Other comprehensive income	64				63
Other	82				34
Valuation allowance (a)	(133		)		(89		)
Deferred income tax assets	414				427
Deferred income tax liabilities:
Depreciation and amortization	189				192
Installment sales of vacation ownership interests	876				802
Estimated VOI recoveries	68				71
Other comprehensive income	47				45
Other	23				24
Deferred income tax liabilities	1,203				1,134
Net deferred income tax liabilities	$	789			$	707
Reported in:
Other assets	$	26			$	29
Deferred income taxes	815				736
Net deferred income tax liabilities	$	789			$	707

(a)

The valuation allowance of $133 million at December 31, 2019, relates to foreign tax credits, net operating loss carryforwards, and certain deferred tax assets of $35 million, $21 million, and $77 million. The valuation allowance of $89 million at December 31, 2018, relates to foreign tax credits, net operating loss carryforwards, and certain deferred tax assets of $34 million, $41 million, and $14 million. The valuation allowance will be reduced when and if the Company determines it is more likely than not that the related deferred income tax assets will be realized.

As of December 31, 2019, the Company’s net operating loss carryforwards primarily relate to state net operating losses which are due to expire at various dates, but no later than 2039. As of December 31, 2019, the Company had $78 million of foreign tax credits. These foreign tax credits expire between 2021 and 2029.

The Company’s effective income tax rate differs from the U.S. federal statutory rate as follows for the years ended December 31:

	2019		2018		2017
Federal statutory rate	21.0%		21.0%		35.0%
State and local income taxes, net of federal tax benefits	6.8		1.7		0.7
Taxes on foreign operations at rates different than U.S. federal statutory rates	1.4		2.1		(0.8)
Taxes on foreign income, net of tax credits	0.4		2.7		(2.3)
Valuation allowance	(2.4)		10.8		(2.5)
Effect of impairment charges	—		—		6.4
Impact of U.S. tax reform	—		(5.5)		(128.2)
Realized foreign currency losses	—		—		(8.3)
Other	0.9		—		(3.1)
	28.1%		32.8%		(103.1)%

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The effective income tax rate for 2019 differed from the statutory U.S. Federal income tax rate of 21.0% primarily due to the effect of state income taxes, which were mainly related to additional taxes resulting from 2019 state legislative changes retroactively applicable to 2018 tax filings. The effective income tax rate for 2018 differed from the statutory U.S. Federal income tax rate of 21.0% primarily due to an increase in the valuation allowance on the Company’s deferred tax assets.

The following table summarizes the activity related to the Company’s unrecognized tax benefits (in millions):

	2019				2018				2017
Beginning balance	$	28			$	28			$	25
Increases related to tax positions taken during a prior period	1				1				4
Increases related to tax positions taken during the current period	4				4				5
Decreases related to settlements with taxing authorities	(1		)		—				(1		)
Decreases as a result of a lapse of the applicable statute of limitations	(2		)		(2		)		(2		)
Decreases related to tax positions taken during a prior period	(1		)		(3		)		(3		)
Ending balance	$	29			$	28			$	28

The gross amount of the unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate was $29 million, $28 million, and $28 million as of December 31, 2019, 2018, and 2017. The Company accrued potential penalties and interest as a component of Provision for income taxes on the Consolidated Statements of Income related to these unrecognized tax benefits of $2 million, $1 million, and $6 million during 2019, 2018, and 2017. The Company had a liability for potential penalties of $4 million as of December 31, 2019, 2018, and 2017, and potential interest of $9 million, $7 million, and $5 million as of December 31, 2019, 2018, and 2017. Such liabilities are reported as a component of Accrued expenses and other liabilities on the Consolidated Balance Sheets. The Company does not expect the unrecognized tax benefits to change significantly over the next 12 months.

The Company files U.S. federal and state, and foreign income tax returns in jurisdictions with varying statutes of limitations. The Company is currently under a U.S. federal exam for the 2016 tax year and generally remains subject to examination by U.S. federal tax authorities for tax years 2016 through 2019. The 2010 through 2019 tax years generally remain subject to examination by many U.S. state tax authorities. In significant foreign jurisdictions, the 2012 through 2019 tax years generally remain subject to examination by their respective tax authorities. The statutes of limitations are scheduled to expire within 12 months of the reporting date in certain taxing jurisdictions, and the Company believes that it is reasonably possible that the total amount of its unrecognized tax benefits could decrease by $3 million to $5 million.

10.	Vacation Ownership Contract Receivables

The Company generates VOCRs by extending financing to the purchasers of its VOIs. As of December 31, Vacation ownership contract receivables, net consisted of (in millions):

	2019				2018
Vacation ownership contract receivables:
Securitized	$	2,984			$	2,883
Non-securitized	883				888
Vacation ownership contract receivables, gross	3,867				3,771
Less: Allowance for loan losses	747				734
Vacation ownership contract receivables, net	$	3,120			$	3,037

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Principal payments due on the Company’s VOCRs during each of the five years subsequent to December 31, 2019, and thereafter are as follows (in millions):

	Securitized				Non - Securitized				Total
2020	$	265			$	85			$	350
2021	290				74				364
2022	314				81				395
2023	334				87				421
2024	323				85				408
Thereafter	1,458				471				1,929
	$	2,984			$	883			$	3,867

During 2019, 2018, and 2017, the Company’s securitized VOCRs generated interest income of $405 million, $363 million, and $340 million. Such interest income is included within Consumer financing revenue on the Consolidated Statements of Income.

During 2019, 2018, and 2017, the Company originated VOCRs of $1.50 billion, $1.51 billion, and $1.39 billion and received principal collections of $937 million, $890 million, and $866 million. The weighted average interest rate on outstanding VOCRs was 14.4%, 14.1%, and 13.9% during 2019, 2018, and 2017.

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

	Amount
Allowance for loan losses as of December 31, 2016	$	621
Provision for loan losses	420
Contract receivables written off, net	(350		)
Allowance for loan losses as of December 31, 2017	691
Provision for loan losses	456
Contract receivables write-offs, net	(413		)
Allowance for loan losses as of December 31, 2018	734
Provision for loan losses	479
Contract receivables write-offs, net	(466		)
Allowance for loan losses as of December 31, 2019	$	747

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 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	$	2,075			$	1,135			$	258			$	145			$	254			$	3,867
	As of December 31, 2018
	700+				600-699				<600				No Score				Asia Pacific				Total
Current	$	1,996			$	1,041			$	166			$	135			$	246			$	3,584
31 - 60 days	22				35				18				6				2				83
61 - 90 days	15				22				13				3				1				54
91 - 120 days	12				17				16				4				1				50
Total	$	2,045			$	1,115			$	213			$	148			$	250			$	3,771

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.

11.	Inventory

Inventory, as of December 31, consisted of (in millions):

	2019				2018
Land held for VOI development	$	3			$	4
VOI construction in process	24				45
Inventory sold subject to repurchase	24				33
Completed VOI inventory	802				797
Estimated VOI recoveries	281				286
Vacation Exchange vacation credits and other	65				59
Total inventory	$	1,199			$	1,224

During 2019, the Company had net transfers of $41 million of property and equipment to VOI inventory and net transfers of $23 million of VOI inventory to property and equipment during 2018.

During 2017, the Company performed an in-depth review of its operations, including its current development pipeline and long-term development plan. In connection with this review, the Company made a decision to no longer pursue future development at certain locations and thus performed a fair value assessment on these locations. As a result, the Company recorded a $135 million non-cash impairment charge primarily related to the write down of land held for VOI development. In addition, the Company recorded a $28 million non-cash impairment charge related to the write down of VOI inventory due to a disruption to VOI sales caused by the impact of the hurricanes on Saint Thomas, U.S. Virgin Islands. See Note 26—Impairments and Other Charges for further details.

Inventory Obligations

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 sales transactions.

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In accordance with the agreements with the 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 a sale.

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

		Avon (a)				Las Vegas (a)				Austin (a)				Other (b)				Total
December 31, 2017		$	22			$	60			$	62			$	6			$	150
Purchases		—				31				1				136				168
Payments		(11		)		(39		)		(32		)		(136		)		(218		)
December 31, 2018		11				52				31				6				100
Purchases		—				27				1				148				176
Payments		(11		)		(36		)		(32		)		(148		)		(227		)
December 31, 2019		$	—			$	43			$	—			$	6			$	49

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

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

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 these commitments was $124 million as of December 31, 2019.

12.	Property and Equipment, net

Property and equipment, net, as of December 31, consisted of (in millions):

	2019				2018
Land	$	28			$	30
Building and leasehold improvements	572				588
Furniture, fixtures and equipment	218				250
Capitalized software	652				604
Finance leases	14				12
Construction in progress	40				81
Total property and equipment	1,524				1,565
Less: Accumulated depreciation and amortization	844				853
Property and equipment, net	$	680			$	712

During 2019, 2018, and 2017, the Company recorded depreciation and amortization expense from continuing operations of $113 million, $126 million, and $125 million related to property and equipment. As of December 31, 2019 and 2018, the Company had accrued capital expenditures of $2 million and $3 million.

The Company adopted the new Leases accounting standard as of January 1, 2019, resulting in the recognition of $158 million of right-of-use assets and $200 million of related lease liabilities. Right-of-use assets were decreased by $42 million of tenant improvement allowances and deferred rent balances reclassified from other liabilities. Both the right-of-use assets and related lease liabilities recognized upon adoption included $21 million associated with the Company’s held-for-sale business. The new standard requires a lessee to recognize right-of-use assets and lease liabilities on the balance sheet for all lease obligations and disclose key information about leasing arrangements, such as the amount, timing, and uncertainty of cash flows arising from leases. The Company adopted the standard using the modified retrospective approach; therefore, prior year financial statements were not recast. The Company elected the package of transition provisions available for expired or existing contracts, which allowed the Company to carryforward its historical assessments of (i) whether contracts are leases or contain leases, (ii) lease classification, and (iii) initial direct costs.

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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.

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.

As of December 31, 2019, the Company had right-of-use assets of $136 million and related lease liabilities of $180 million. Right-of-use assets are included within Other assets, and the related lease liabilities are included within Accrued expenses and other liabilities on the Consolidated Balance Sheets.

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

	December 31,
	2019
Operating lease cost	$	37
Short-term lease cost	$	23
Finance lease cost:
Amortization of right-of-use assets	$	2
Interest on lease liabilities	—
Total finance lease cost	$	2

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

	December 31,
	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	48
Operating cash flows from finance leases	—
Financing cash flows from finance leases	2
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	8
Finance leases	3

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

	Balance Sheet Classification		December 31, 2019
Operating Leases (in millions):
Operating lease right-of-use assets	Other assets		$	136
Operating lease liabilities	Accrued expenses and other liabilities		$	180
Finance Leases (in millions):
Finance lease assets (a)	Property and equipment, net		$	5
Finance lease liabilities	Debt		$	5
Weighted Average Remaining Lease Term:
Operating leases			7.8 years
Finance leases			2.8 years
Weighted Average Discount Rate:
Operating leases (b)			6.2		%
Finance leases			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 December 31, 2019 (in millions):

	Operating Leases				Finance Leases
2020	$	39			$	2
2021	34				2
2022	30				1
2023	27				—
2024	26				—
Thereafter	76				—
Total minimum lease payments	232				5
Less: Amount of lease payments representing interest	(52		)		—
Present value of future minimum lease payments	$	180			$	5

The table below presents future minimum lease payments required under non-cancelable operating leases as reported in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on February 26, 2019 (in millions):

	December 31, 2018
2019	$	34
2020	30
2021	26
2022	24
2023	22
Thereafter	99
Future minimum lease payments	$	235

During 2018, the Company incurred total rental expense of $61 million for continuing operations and $9 million for discontinued operations.

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14.	Other Assets

Other assets, as of December 31, consisted of (in millions):

	2019				2018
Right-of-use assets	$	136			$	—
Deferred costs	106				110
Non-trade receivables, net	82				63
Investments	35				25
Tax receivables	34				6
Deferred tax asset	26				29
Deposits	15				24
Marketable securities	10				—
Other	30				47
	$	474			$	304

15.	Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities, as of December 31, consisted of (in millions):

	2019				2018
Accrued payroll and related costs	$	205			$	263
Lease liabilities	180				—
Accrued taxes	86				117
Guarantees	72				74
Accrued advertising and marketing	54				54
Deferred consideration	44				—
Inventory sale obligation (a)	43				94
Accrued interest	41				39
Payables associated with separation and sale of business activities	41				102
Accrued legal and professional fees	22				14
Customer advances	20				13
Accrued VOI maintenance fees	19				31
Accrued separation costs	14				17
Accrued legal settlements	13				14
Restructuring liabilities	7				12
Deferred rent	—				43
Derivative contract liabilities	—				9
Accrued other	112				108
	$	973			$	1,004

^(a)    See Note 11—Inventory for details

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16.	Debt

The Company’s indebtedness, as of December 31, consisted of (in millions):

	2019				2018
Non-recourse vacation ownership debt: (a)
Term notes (b)	$	1,969			$	1,839
USD bank conduit facility (due August 2021) (c)	508				518
AUD/NZD bank conduit facility (due September 2021) (d)	64				—
Total	$	2,541			$	2,357
Debt: (e)
$1.0 billion secured revolving credit facility (due May 2023) (f)	$	—			$	181
$300 million secured term loan B (due May 2025)	293				296
$40 million 7.375% secured notes (due March 2020)	40				40
$250 million 5.625% secured notes (due March 2021)	249				249
$650 million 4.25% secured notes (due March 2022) (g)	649				649
$400 million 3.90% secured notes (due March 2023) (h)	404				405
$300 million 5.40% secured notes (due April 2024)	298				297
$350 million 6.35% secured notes (due October 2025) (i)	342				341
$400 million 5.75% secured notes (due April 2027) (j)	409				388
$350 million 4.625% secured notes (due March 2030)	345				—
Finance leases	5				3
Other	—				32
Total	$	3,034			$	2,881

(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 $3.12 billion and $3.03 billion of underlying gross VOCRs and related assets (which legally are not assets of the Company) as of December 31, 2019 and 2018.

(b)	The carrying amounts of the term notes are net of debt issuance costs of $23 million and $21 million as of December 31, 2019 and 2018.

(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.

(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 $12 million and $11 million as of December 31, 2019 and 2018, and net of unamortized debt financing costs of $7 million and $6 million as of December 31, 2019 and 2018.

(f)	The weighted average effective interest rate on borrowings from this facility was 5.19% and 4.42% as of December 31, 2019 and 2018.

(g)	Includes $1 million of unamortized gains from the settlement of a derivative as of December 31, 2019 and 2018.

(h)	Includes $5 million and $6 million of unamortized gains from the settlement of a derivative as of December 31, 2019 and 2018.

(i)	Includes $6 million and $7 million of unamortized losses from the settlement of a derivative as of December 31, 2019 and 2018.

(j)	Includes $13 million of unamortized gains from the settlement of a derivative as of December 31, 2019, and $8 million decrease in the carrying value resulting from a fair value hedge derivative as of December 31, 2018.

Maturities and Capacity

The Company’s outstanding debt as of December 31, 2019 matures as follows (in millions):

	Non-recourse Vacation Ownership Debt				Debt				Total
Within 1 year	$	216			$	42			$	258
Between 1 and 2 years	717				251				968
Between 2 and 3 years	220				650				870
Between 3 and 4 years	223				404				627
Between 4 and 5 years	237				298				535
Thereafter	928				1,389				2,317
	$	2,541			$	3,034			$	5,575

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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 vacation ownership contract receivable obligors.

As of December 31, 2019, the available capacity under the Company’s borrowing arrangements was as follows (in millions):

	Non-recourse Conduit Facilities (a)				Revolving Credit Facilities (b)
Total capacity	$	1,011			$	1,000
Less: Outstanding borrowings	572				—
Less: Letters of credit	—				17
Available capacity	$	439			$	983

(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.

Non-recourse Vacation Ownership Debt

As discussed in Note 17—Variable Interest Entities, the Company issues debt through the securitization of VOCRs.

Sierra Timeshare 2019-1 Receivables Funding, LLC. On March 20, 2019, the Company closed on a private placement of a series of term notes payable, issued by Sierra Timeshare 2019-1 Receivables Fundings LLC, with an initial principal amount of $400 million, which are secured by VOCRs and bear interest at a weighted average coupon rate of 3.57%. The advance rate for this transaction was 98%. As of December 31, 2019, the Company had $258 million of outstanding borrowings under these term notes, net of debt issuance costs.

Sierra Timeshare 2019-2 Receivables Funding LLC. On July 24, 2019, the Company closed on a placement of a series of term notes payable, issued by Sierra Timeshare 2019-2 Receivables Funding LLC, with an initial principal amount of $450 million, which are secured by VOCRs and bear interest at a weighted average coupon rate of 2.96%. The advance rate for this transaction was 98%. As of December 31, 2019, the Company had $355 million of outstanding borrowings under these term notes, net of debt issuance costs.

Sierra Timeshare 2019-3 Receivables Funding LLC. On October 23, 2019, the Company closed on a placement of a series of term notes payable, issued by Sierra Timeshare 2019-3 Receivables Fundings LLC, with an initial principal amount of $300 million, which are secured by VOCRs and bear interest at a weighted average coupon rate of 2.76%. The advance rate for this transaction was 98%. As of December 31, 2019, the Company had $275 million of outstanding borrowings under these term notes, net of debt issuance costs.

Term Notes. In addition to the 2019 term notes described above, as of December 31, 2019, the Company had $1.08 billion of outstanding non-recourse borrowings, net of debt issuance costs, under term notes entered into prior to December 31, 2018. The Company’s non-recourse term notes include fixed and floating rate term notes for which the weighted average interest rate was 4.5%, 4.1%, and 3.7% during 2019, 2018, and 2017.

USD bank conduit facility. The Company has a non-recourse timeshare receivables conduit facility with a total capacity of $800 million and bears interest at variable rates based on the base rate or the London Interbank Offered Rate (“LIBOR”) rate plus a spread. On April 24, 2019, the Company renewed the facility, extending the end of the commitment period from April 6, 2020 to August 30, 2021. Borrowings under this facility are required to be repaid as the collateralized receivables amortize, no later than September 2022. As of December 31, 2019, the Company had $508 million of outstanding borrowings under these term notes.

AUD/NZD bank conduit facility. On October 2, 2019, the Company closed on a non-recourse timeshare receivables conduit facility for a two year term through September 30, 2021, issued by JP Morgan Chase, N.A. and Bank of America, N.A, with a principal amount of A$255 million and NZ$48 million, which is secured by VOCRs and bears interest at variable rates based on the Bank Bill Swap Bid Rate plus 1.50%. The advance rate for this transaction was 88%. Borrowings under this facility are required to be repaid no later than September 2023. As of December 31, 2019, the Company had $64 million of outstanding borrowings under these term notes.

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As of December 31, 2019, the Company’s non-recourse vacation ownership debt of $2.54 billion was collateralized by $3.12 billion of underlying gross VOCRs and related assets. Additional usage of the capacity of the Company’s non-recourse bank conduit facilities are subject to the Company’s ability to provide additional assets to collateralize such facilities. The combined weighted average interest rate on the Company’s total non-recourse vacation ownership debt was 4.4%, 4.2%, and 3.6% during 2019, 2018, and 2017.

Debt

$1.0 billion Revolving Credit Facility and $300 million Term Loan B. In 2018, the Company entered into a credit agreement with Bank of America, N.A. as administrative agent and collateral agent. The agreement provides for new senior secured credit facilities in the amount of $1.3 billion, consisting of secured term loan B of $300 million maturing in 2025 and a new secured revolving facility of $1.0 billion maturing in 2023. The interest rate per annum applicable to term loan B is equal to, at the Company’s option, either a base rate plus a margin of 1.25% or LIBOR plus a margin of 2.25%. The interest rate per annum applicable to borrowings under the revolving credit facility is equal to, at the Company’s option, either a base rate plus a margin ranging from 0.75% to 1.25% or LIBOR plus a margin ranging from 1.75% to 2.25%, in either case based upon the first-lien leverage ratio of Wyndham Destinations and its restricted subsidiaries. The LIBOR rate with respect to either term loan B or the revolving credit facility borrowings are subject to a “floor” of 0.00%.

In connection with this credit agreement, the Company entered into a security agreement with Bank of America, N.A., as collateral agent, as defined in the security agreement, for the secured parties. The security agreement granted a security interest in the collateral of the Company and added the holders of Wyndham Destinations’ outstanding 7.375% notes due 2020, 5.625% notes due 2021, 4.25% notes due 2022, 3.90% notes due 2023, 5.40% notes due 2024, 6.35% notes due 2025, and 5.75% notes due 2027, as “secured parties,” as defined in the security agreement, that share equally and ratably in the collateral owned by the Company for so long as indebtedness under the credit agreement is secured by such collateral.

Separation and related debt activity. In connection with the Spin-off and the entry into the credit facilities described above, on May 31, 2018, the Company used net proceeds from the secured term loan B and $220 million of borrowings under the $1.0 billion revolving credit facility to repay outstanding principal borrowings under its previous revolving credit facility maturing in 2020, 364-day credit facility maturing in 2018, and term loan maturing in 2021.

In January 2018, the Company entered into an agreement with La Quinta to acquire its hotel franchising and management businesses for $1.95 billion. At the time the Company entered into this agreement, it obtained financing commitments of $2.0 billion in the form of an unsecured bridge term loan, which was subsequently replaced with net cash proceeds from the issuance of $500 million unsecured notes, a $1.6 billion term loan, and a $750 million revolving credit facility, which was undrawn. This acquisition closed on May 30, 2018, prior to the Spin-off of Wyndham Hotels. Upon completion of the Spin-off, La Quinta became a wholly-owned subsidiary of Wyndham Hotels and the associated debt remained debt of Wyndham Hotels for which the Company is not liable.

Following the Spin-off, the Company’s corporate notes were downgraded by Standard & Poor’s Ratings Services (“S&P”) and 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 series of notes, the 4.15% Notes due 2024 (the “2024 Notes”) were increased to 5.40%, the 5.10% Notes due 2025 (the “2025 Notes”) were increased to 6.35%, and the 4.50% Notes due 2027 (the “2027 Notes”) were increased to 5.75% per annum. 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 S&P, Moody’s, or a substitute rating agency.

Commercial Paper. The Company terminated its European and U.S. commercial paper programs during 2018. Prior to termination, the U.S. and European commercial paper programs had total capacities of $750 million and $500 million. As of December 31, 2019 and 2018, the Company had no outstanding borrowings under these programs.

Secured Notes. During December 2019, the Company issued secured notes, with a face value of $350 million and an interest rate of 4.625%, for net proceeds of $345 million. Debt discount and deferred financing costs were $4 million and $1 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 March 1, 2030, 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. These notes rank equally in right of payment with all of the Company’s other secured indebtedness.

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As of December 31, 2019, the Company had $2.39 billion of outstanding secured notes issued prior to December 31, 2018. Interest is payable semi-annually in arrears on the notes. The notes 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 of the notes, plus, in each case, accrued and unpaid interest. These notes rank equally in right of payment with all of the Company’s other secured indebtedness.

Other. 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 a SPE. The SPE financed the development and construction with a mortgage note. During the fourth quarter of 2017, the economics of the transaction changed, and as a result, the Company determined that it was the primary beneficiary, and as such, the Company consolidated the assets and liabilities of the SPE within its Consolidated Financial Statements. During 2019, the Company made its final purchase of VOI inventory from the SPE and the debt was extinguished. See Note 17—Variable Interest Entities for further details.

Deferred Financing Costs

The Company classifies debt issuance costs related to its revolving credit facilities and the bank conduit facilities within Other assets on the Consolidated Balance Sheets.

Fair Value Hedges

During 2017, the Company entered into pay-variable/receive-fixed interest rate swap agreements on its 5.75% secured notes with notional amounts of $400 million. The fixed interest rates on these notes were effectively modified to a variable LIBOR-based index. During 2019, the Company terminated these swap agreements resulting in a gain of $13 million which will be amortized over the remaining life of the secured notes as a reduction to Interest expense on the Consolidated Statements of Income. The Company had $13 million of deferred gains associated with this transaction as of December 31, 2019, which are included within Debt on the Consolidated Balance Sheets.

During 2013, the Company entered into pay-variable/receive-fixed interest rate swap agreements on its 3.90% and 4.25% senior unsecured notes with notional amounts of $400 million and $100 million. The fixed interest rates on these notes were effectively modified to a variable LIBOR-based index. During May 2015, the Company terminated the swap agreements resulting in a gain of $17 million, which is being amortized over the remaining life of the senior unsecured notes as a reduction to Interest expense on the Consolidated Statements of Income. The Company had $6 million and $7 million of deferred gains as of December 31, 2019 and 2018, which are included within Debt on the Consolidated Balance Sheets.

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 of at least 2.5 to 1.0 as of the measurement date and a maximum first lien leverage ratio not to exceed 4.25 to 1.0 as of the measurement date. 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. As of December 31, 2019, the Company’s interest coverage ratio was 6.5 to 1.0. 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. As of December 31, 2019, the Company’s first lien leverage ratio was 2.7 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 December 31, 2019, the Company was in compliance with all of 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 VOCR 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 December 31, 2019, 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 $162 million during 2019. Such amount consisted primarily of interest on debt, excluding non-recourse vacation ownership debt, and included an offset of $3 million of capitalized interest. Cash paid related to such interest was $158 million.

The Company incurred interest expense of $170 million during 2018. Such amount consisted primarily of interest on debt, excluding non-recourse vacation ownership debt, and included an offset of $2 million of capitalized interest. Cash paid related to such interest was $159 million.

The Company incurred interest expense of $155 million during 2017. Such amount consisted primarily of interest on debt, excluding non-recourse vacation ownership debt, and included an offset of $2 million of capitalized interest. Cash paid related to such interest was $152 million.

Interest expense incurred in connection with the Company’s non-recourse vacation ownership debt was $106 million, $88 million, and $74 million during 2019, 2018, and 2017, and is reported within Consumer financing interest on the Consolidated Statements of Income. Cash paid related to such interest was $81 million, $58 million, and $49 million during 2019, 2018, and 2017.

17.	Variable Interest Entities

In accordance with the applicable accounting guidance for the consolidation of a 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 Consolidated 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):

	December 31, 2019				December 31, 2018
Securitized contract receivables, gross (a)	$	2,984			$	2,883
Securitized restricted cash (b)	110				120
Interest receivables on securitized contract receivables (c)	25				23
Other assets (d)	4				3
Total SPE assets	3,123				3,029
Non-recourse term notes (e)(f)	1,969				1,839
Non-recourse conduit facilities (e)	572				518
Other liabilities (g)	4				3
Total SPE liabilities	2,545				2,360
SPE assets in excess of SPE liabilities	$	578			$	669

(a)	Included in Vacation ownership contract receivables, net on the Consolidated Balance Sheets.

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

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

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

(f)	Includes deferred financing costs of $23 million and $21 million as of December 31, 2019 and 2018, 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 Consolidated Balance Sheets.

In addition, the Company has VOCRs that have not been securitized through bankruptcy-remote SPEs. Such gross receivables were $883 million and $888 million as of December 31, 2019 and 2018. 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):

	December 31, 2019				December 31, 2018
SPE assets in excess of SPE liabilities	$	578			$	669
Non-securitized contract receivables	883				888
Less: Allowance for loan losses	747				734
Total, net	$	714			$	823

Midtown 45, NYC Property

During January 2013, the Company entered into an agreement with a third-party partner whereby the partner acquired the Midtown 45 property in New York City through an SPE. The Company managed and operated the property for rental purposes while converting it into VOI inventory. The SPE financed the acquisition and renovations with a four-year mortgage note and mandatorily redeemable equity provided by related parties of such partner. The Company was considered to be the primary beneficiary of the SPE and therefore, the Company consolidated the SPE within its financial statements. During 2017, the Company made its final purchase of VOI inventory from the SPE, and the mortgage note and redeemable equity were extinguished.

Clearwater, FL Property

During 2015, the Company entered into an agreement with a third-party partner whereby the partner would develop and construct VOI inventory through an SPE. The Company is considered to be the primary beneficiary for specified assets and liabilities of the SPE and, therefore, during 2017 the Company consolidated $51 million of both its Property and equipment, net and Debt on its Consolidated Balance Sheets. During 2018, the Company made its final purchase of VOI inventory from the SPE, and the mortgage note was extinguished.

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 has 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 has 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 $64 million of Property and equipment, net and $104 million of Debt on its Consolidated Balance Sheets. As a result of this consolidation, the Company incurred a non-cash $37 million loss due to a write-down of property and equipment to fair value. Such loss is presented within Asset impairments on the Consolidated Statements of Income. See Note 26—Impairments and Other Charges for further details. During 2019, the Company made its final purchase of VOI inventory from the SPE and the debt was extinguished.

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The assets and liabilities of the Saint Thomas property SPEs were as follows (in millions):

	December 31, 2018
Property and equipment, net	$	23
Total SPE assets	23
Debt (a)	32
Total SPE liabilities	32
SPE deficit	$	(9	)

(a)	Included $32 million relating to mortgage notes, which are included in Debt on the Consolidated Balance Sheets as of December 31, 2018.

18.	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 and foreign exchange forward contracts. See Note 19—Financial Instruments for additional details.

As of December 31, 2019, the Company had foreign exchange contracts resulting in less than $1 million of assets which are included within Other assets and less than $1 million of liabilities which are included in Accrued expenses and other liabilities on the Consolidated Balance Sheets. On a recurring basis, such assets and liabilities are remeasured at estimated fair value (all of which are Level 2) 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.

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

	December 31, 2019								December 31, 2018
	Carrying Amount				Estimated Fair Value				Carrying  Amount				Estimated Fair Value
Assets
Vacation ownership contract receivables, net (Level 3)	$	3,120			$	3,907			$	3,037			$	3,662
Liabilities
Debt (Level 2)	$	5,575			$	5,709			$	5,238			$	4,604

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).

19.	Financial Instruments

The designation of a derivative instrument as a hedge and its ability to meet the hedge accounting criteria determine how the change in fair value of the derivative instrument will be reflected on the Consolidated Financial Statements. A derivative qualifies for hedge accounting if, at inception, the derivative is expected to be highly effective in offsetting the underlying hedged cash flows or fair value, and the hedge documentation standards are fulfilled at the time the Company enters into the derivative contract. A hedge is designated as a cash flow hedge based on the exposure being hedged. The asset or liability value of the derivative will change in tandem with its fair value. Changes in fair value, for the effective portion of qualifying cash flow hedges, are recorded in Accumulated other comprehensive loss (“AOCL”). The derivative’s gain or loss is released from AOCL to match the timing of the underlying hedged cash flows effect on earnings. A hedge is designated as a fair value hedge when the derivative is used to manage an exposure to changes in the fair value of a recognized asset or liability. For fair value hedges, the portion of the gain or loss on the derivative instrument designated as a fair value hedge will be recognized in earnings. The Company concurrently records changes in the value of the hedged asset or liability via a basis adjustment to the hedged item. These two changes in fair value offset one another in whole or in part and are reported in the same statement of income line item as the hedged risk.

The Company reviews the effectiveness of its hedging instruments on an ongoing basis, recognizes current period hedge ineffectiveness immediately in earnings and discontinues hedge accounting for any hedge that it no longer considers to be highly effective. The Company recognizes changes in fair value for derivatives not designated as hedges or those not qualifying for hedge accounting in current period earnings. Upon termination of cash flow hedges, the Company releases gains and losses from AOCL based on the timing of the underlying cash flows, unless the termination results from the failure of the intended transaction to occur in the expected time frame. Such untimely transactions require the Company to immediately recognize in earnings gains and losses previously recorded in AOCL.

Changes in interest rates and foreign exchange rates expose the Company to market risk. The Company has used cash flow and fair value hedges as part of its overall strategy to manage its exposure to market risks associated with fluctuations in interest rates and foreign currency exchange rates. As a matter of policy, the Company only enters into transactions that it believes will be highly effective at offsetting the underlying risk and it does not use derivatives for trading or speculative purposes.

The Company uses the following derivative instruments to mitigate its foreign currency exchange rate and interest rate risks:

Foreign Currency Risk

The Company has foreign currency rate exposure to exchange rate fluctuations worldwide with particular exposure to the British pound sterling, Euro, Canadian and Australian dollars, and Mexican peso. The Company uses freestanding foreign

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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 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 December 31, 2019, the Company did not have any interest rate derivatives designated as cash flow hedges.

The following table summarizes information regarding the losses recognized in AOCL for the years ended December 31 (in millions):

	2019				2018				2017
Designated hedging instruments
Foreign exchange contracts	$	—			$	(1	)		$	(2	)

The following table summarizes information regarding the gains recognized in income on the Company’s freestanding derivatives for the years ended December 31 (in millions):

	2019				2018				2017
Non-designated hedging instruments
Foreign exchange contracts (a)	$	1			$	2			$	1

(a)	Included within Operating expenses on the Consolidated Statements of Income, which is primarily offset by changes in the value of the underlying assets and liabilities.

Credit Risk and Exposure

The Company is exposed to counterparty credit risk in the event of nonperformance by counterparties to various agreements and sales transactions. The Company manages such risk by evaluating the financial position and creditworthiness of such counterparties and by requiring collateral in instances in which financing is provided. The Company mitigates counterparty credit risk associated with its derivative contracts by monitoring the amounts at risk with each counterparty to such contracts, periodically evaluating counterparty creditworthiness and financial position, and where possible, dispersing its risk among multiple counterparties.

As of December 31, 2019, there were no significant concentrations of credit risk with any individual counterparty or groups of counterparties. However, 17% of the Company’s outstanding VOCRs portfolio relates to customers who reside in California. With the exception of the financing provided to customers of its vacation ownership businesses, the Company does not normally require collateral or other security to support credit sales.

Market Risk

The Company is subject to risks relating to the geographic concentrations of (i) areas in which the Company is currently developing and selling vacation ownership properties, (ii) sales offices in certain vacation areas, and (iii) customers of the Company’s vacation ownership business, which in each case, may result in the Company’s results of operations being more sensitive to local and regional economic conditions and other factors, including competition, natural disasters, and economic downturns, than the Company’s results of operations would be, absent such geographic concentrations. Local and regional economic conditions and other factors may differ materially from prevailing conditions in other parts of the world. Florida and Nevada are examples of areas with concentrations of sales offices. For the year ended December 31, 2019, 16% and 15% of the Company’s VOI sales revenues were generated in sales offices located in Florida and Nevada.

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Included within the Consolidated Statements of Income are net revenues generated from transactions in the state of Florida of 19% during 2019 and 16% during both 2018 and 2017. There were 11% of net revenues generated from transactions in the state of California during both 2019 and 2018, and 12% during 2017.

20.	Commitments and Contingencies

COMMITMENTS

Leases

The Company is committed to making finance and operating lease payments covering various facilities and equipment. Total future minimum lease obligations are $237 million, including finance leases, operating leases, leases signed but not yet commenced, and leases with a lease term of less than 12 months. See Note 13—Leases for additional detail.

Purchase Commitments

In the normal course of business, the Company makes various commitments to purchase goods or services from specific suppliers, including those related to vacation ownership resort development and other capital expenditures. Purchase commitments made by the Company as of December 31, 2019, aggregated to $1.26 billion, of which $1.03 billion were for marketing-related activities, $120 million were related to the development of vacation ownership properties, and $47 million were for information technology activities.

Inventory Sold Subject to Conditional Repurchase

In the normal course of business, the Company makes various commitments to repurchase completed vacation ownership properties from third-party developers. Inventory sold subject to conditional repurchase made by the Company as of December 31, 2019, aggregated to $124 million. See Note 11—Inventory for additional detail.

Letters of Credit

As of December 31, 2019, the Company had $60 million of irrevocable standby letters of credit outstanding, of which $17 million were under its revolving credit facilities. As of December 31, 2018, the Company had $70 million of irrevocable standby letters of credit outstanding, of which $35 million were under its revolving credit facilities. Such letters of credit issued during 2019 and 2018 primarily supported the securitization of VOCR fundings, certain insurance policies, and development activity at the Company’s vacation ownership business.

Surety Bonds

A portion of the Company’s vacation ownership sales and developments are supported by surety bonds provided by affiliates of certain insurance companies in order to meet regulatory requirements of certain states. In the ordinary course of the Company’s business, it has assembled commitments from 13 surety providers in the amount of $2.4 billion, of which the Company had $301 million outstanding as of December 31, 2019. The availability, terms and conditions, and pricing of bonding capacity are dependent on, among other things, continued financial strength and stability of the insurance company affiliates providing the bonding capacity, general availability of such capacity and the Company’s corporate credit rating. If the bonding capacity is unavailable or, alternatively, the terms and conditions and pricing of the bonding capacity are unacceptable to the Company, its vacation ownership business could be negatively impacted.

LITIGATION

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.

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 vacation exchange business — breach of contract, fraud and

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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 and $14 million as of December 31, 2019 and 2018. 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 28—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 December 31, 2019, the potential exposure resulting from adverse outcomes of such legal proceedings could, in the aggregate, range up to $48 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 December 31, 2019, the potential exposure resulting from adverse outcomes of such legal proceedings could, in the aggregate, range up to $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.

Other Guarantees and Indemnifications

Vacation Ownership

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 11—Inventory for additional details.

In connection with the Company’s vacation ownership inventory sale transactions, for which it has conditional rights and conditional obligations to repurchase the completed properties, the Company was required to maintain an investment-grade credit rating from at least one rating agency. As a result of the Spin-off, the Company failed to maintain an investment-grade credit rating with at least one rating agency, which triggered a default. During 2018, the Company agreed to pay $8 million in fees in lieu of posting collateral in favor of the development partner in an amount equal to the remaining

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obligations under the agreements.

As part of the Fee-for-Service program, the Company may guarantee to reimburse the developer a certain payment or to purchase inventory from the developer, for a percentage of the original sale price if certain future conditions exist. As of December 31, 2019, the maximum potential future payments that the Company may be required to make under these guarantees is $38 million. As of December 31, 2019 and 2018, the Company had no recognized liabilities in connection with these guarantees. For information on guarantees and indemnifications related to the Company’s former parent and subsidiaries see Note 28—Transactions with Former Parent and Former Subsidiaries.

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21.	Accumulated Other Comprehensive Income/(Loss)

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

Pretax	Foreign Currency Translation Adjustments				Unrealized Gains/(Losses) on Cash Flow Hedges				Defined Benefit Pension Plans				Accumulated Other Comprehensive Income/(Loss)
Balance as of December 31, 2016	$	(217	)		$	—			$	(7	)		$	(224	)
Other comprehensive income/(loss)	121				(2		)		2				121
Balance as of December 31, 2017	(96		)		(2		)		(5		)		(103		)
Other comprehensive income/(loss) before reclassifications	(75		)		—				1				(74		)
Amount reclassified to earnings	24				—				6				30
Balance as of December 31, 2018	(147		)		(2		)		2				(147		)
Other comprehensive (loss) before reclassifications	(1		)		—				(1		)		(2		)
Amount reclassified to earnings	—				1				—				1
Balance as of December 31, 2019	$	(148	)		$	(1	)		$	1			$	(148	)

Tax	Foreign Currency Translation Adjustments				Unrealized Gains/(Losses) on Cash Flow Hedges				Defined Benefit Pension Plans				Accumulated Other Comprehensive Income/(Loss)
Balance as of December 31, 2016	$	115			$	—			$	2			$	117
Other comprehensive income/(loss)	(26		)		2				(1		)		(25		)
Balance as of December 31, 2017	89				2				1				92
Other comprehensive income before reclassifications	13				—				—				13
Amount reclassified to earnings	—				—				(2		)		(2		)
Effect of adoption of new accounting principle (a)	(8		)		—				—				(8		)
Balance as of December 31, 2018	94				2				(1		)		95
Other comprehensive income/(loss) before reclassifications	1				(1		)		1				1
Amount reclassified to earnings	—				—				—				—
Balance as of December 31, 2019	$	95			$	1			$	—			$	96

Net of Tax	Foreign Currency Translation Adjustments				Unrealized Gains/(Losses) on Cash Flow Hedges				Defined Benefit Pension Plans				Accumulated Other Comprehensive Loss
Balance as of December 31, 2016	$	(102	)		$	—			$	(5	)		$	(107	)
Other comprehensive income	95				—				1				96
Balance as of December 31, 2017	(7		)		—				(4		)		(11		)
Other comprehensive income/(loss) before reclassifications	(62		)		—				1				(61		)
Amount reclassified to earnings	24				—				4				28
Other comprehensive income/(loss)	(38		)		—				5				(33		)
Effect of adoption of new accounting principle (a)	(8		)		—				—				(8		)
Balance as of December 31, 2018	(53		)		—				1				(52		)
Other comprehensive (loss) before reclassifications	—				(1		)		—				(1		)
Amount reclassified to earnings	—				1				—				1
Balance as of December 31, 2019	$	(53	)		$	—			$	1			$	(52	)

(a)	Impact of the Company’s adoption of new accounting guidance 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 Consolidated Statements of Income (in millions):

	Year Ended December 31,
	2019				2018
Foreign currency translation adjustments, net
Gain on disposal of discontinued business, net of income taxes	$	—			$	(24	)
Net income attributable to Wyndham Destinations shareholders	$	—			$	(24	)
Unrealized losses on cash flow hedge, net
Gain on disposal of discontinued business, net of income taxes	$	(1	)		$	—
Net income attributable to Wyndham Destinations shareholders	$	(1	)		$	—
Defined benefit pension plans, net
Gain on disposal of discontinued business, net of income taxes	$	—			$	(4	)
Net income attributable to Wyndham Destinations shareholders	$	—			$	(4	)

22.	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 December 31, 2019, 13.9 million shares remain available.

Incentive Equity Awards Granted by the Company

During the year ended December 31, 2019, the Company granted incentive equity awards to key employees and senior officers totaling $26 million in the form of RSUs, $7 million in the form of PSUs, and $5 million in the form of stock options. Of these awards, the NQs and the majority of 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.

During 2018, the Company granted incentive equity awards totaling $58 million in the form of RSUs and $7 million in the form of stock options to the Company’s key employees and senior officers. During 2017, the Company granted incentive equity awards to key employees and senior officers totaling $66 million in the form of RSUs and $22 million in the form of PSUs.

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The activity related to incentive equity awards granted to the Company’s key employees and senior officers by the Company for the year ended December 31, 2019, consisted of the following (in millions, except grant prices):

		Balance at December 31, 2018				Granted				Vested/Exercised				Forfeitures(a)				Balance at December 31, 2019
RSUs
Number of RSUs		0.9				0.6				(0.4		)		(0.1		)		1.0			(b)
Weighted average grant price		$	50.54			$	44.36			$	53.56			$	47.25			$	46.32
PSUs
Number of PSUs		—				0.2				—				—				0.2			(c)
Weighted average grant price		$	—			$	44.38			$	—			$	—			$	44.38
SSARs
Number of SSARs		0.2				—				—				—				0.2			(d)
Weighted average grant price		$	34.24			$	—			$	—			$	—			$	34.24
NQs
Number of NQs		0.8				0.6				—				(0.1		)		1.3			(e)
Weighted average grant price		$	48.71			$	44.38			$	—			$	47.20			$	46.84

(a)	The Company recognizes forfeitures as they occur.

(b)	Aggregate unrecognized compensation expense related to RSUs was $36 million as of December 31, 2019, which is expected to be recognized over a weighted average period of 2.8 years.

(c)	Maximum aggregate unrecognized compensation expense related to PSUs was $10 million as of December 31, 2019, which is expected to be recognized over a weighted average period of 3.2 years.

(d)	There were 0.2 million SSARs that were exercisable as of December 31, 2019. There was no unrecognized compensation expense related to SSARs as of December 31, 2019, as all SSARS were vested.

(e)	Unrecognized compensation expense for NQs was $7 million as of December 31, 2019, which is expected to be recognized over a period of 2.8 years.

The fair value of stock options granted by the Company during 2019 and 2018 were estimated on the dates of these grants 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	2019				2018
Grant date fair value	$	8.98			$	8.48
Grant date strike price	$	44.38			$	48.71
Expected volatility	29.97		%		26.01		%
Expected life	6.25 years				4.25 years
Risk-free interest rate	2.59		%		2.73		%

Stock-Based Compensation Expense

The Company recorded stock-based compensation expense of $24 million, $151 million, and $70 million during 2019, 2018, and 2017, related to the incentive equity awards granted to key employees, senior officers, and non-employee directors. Such stock-based compensation expense included expense related to discontinued operations of $22 million for 2018 and $11 million for 2017. Stock-based compensation expense for 2019, 2018, and 2017 included $4 million, $105 million, and $4 million of expense which has been classified within Separation and related costs in continuing operations. Additionally, $1 million of stock-based compensation expense was recorded within Restructuring expense during 2017.

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The Company paid $4 million, $60 million, and $39 million of taxes for the net share settlement of incentive equity awards that vested during 2019, 2018, and 2017. Such amounts are included within Financing activities on the Consolidated Statements of Cash Flows.

Employee Stock Purchase Plan

During 2019, the Company implemented an employee stock purchase plan. This plan allows eligible employees to purchase common shares of Company stock through payroll deductions at a 10% discount off the fair market value at the grant date. The Company issued 0.2 million shares and recognized $1 million of compensation expense related to the grants under this plan in 2019.

23.	Employee Benefit Plans

Defined Contribution Benefit Plans

Wyndham Destinations sponsors domestic defined contribution savings plans and a domestic deferred compensation plan that provide eligible employees of the Company an opportunity to accumulate funds for retirement. The Company matches the contributions of participating employees on the basis specified by each plan. The Company’s cost for these plans was $33 million during both 2019 and 2018, and $35 million during 2017.

In addition, the Company contributes to several foreign employee benefit contributory plans which also provide eligible employees with an opportunity to accumulate funds for retirement. The Company’s contributory cost for these plans was $8 million during 2019, $10 million during 2018, and $11 million during 2017.

Defined Benefit Pension Plans

The Company sponsors defined benefit pension plans for certain foreign subsidiaries, which were primarily part of the Company’s European vacation rentals business, which is presented as discontinued operations. Under these plans, benefits are based on an employee’s years of credited service and a percentage of final average compensation or as otherwise described by the plan. During 2018, the Company recognized a $4 million loss related to the settlement of its obligation under these plans for the European vacation rentals business which was included as a component of the Gain on disposal of discontinued business, net of income taxes on the Consolidated Statements of Income. The Company had $4 million of net pension liability as of December 31, 2019 and 2018, included within Accrued expenses and other liabilities. As of December 31, 2019 and 2018, the Company had less than $1 million and $1 million of unrecognized gains included within Accumulated other comprehensive loss on the Consolidated Balance Sheets.

The Company’s policy is to contribute amounts sufficient to meet minimum funding requirements as set forth in employee benefit and tax laws and additional amounts that the Company determines to be appropriate. The Company had no pension expense related to these plans during 2019 and 2018. During 2017, the Company recorded pension expense of $1 million which is included in discontinued operations.

24.	Segment Information

The Company has two operating segments: Vacation Ownership and Vacation Exchange. The Vacation Ownership 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 Vacation Exchange segment provides vacation exchange services and products to owners of VOIs. During 2018, the Company decided to explore strategic alternatives for its North American vacation rentals business, which was part of its Vacation Exchange 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 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 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, 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

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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):

		Year Ended December 31,
Net revenues		2019				2018				2017
Vacation Ownership		$	3,151			$	3,016			$	2,881
Vacation Exchange		898				918				927
Total reportable segments		4,049				3,934				3,808
Corporate and other (a)		(6		)		(3		)		(2		)
Total Company		$	4,043			$	3,931			$	3,806
		Year Ended December 31,
Reconciliation of Net income to Adjusted EBITDA		2019				2018				2017
Net income attributable to Wyndham Destinations shareholders		$	507			$	672			$	854
Net income attributable to noncontrolling interest		—				—				1
Loss/(income) from operations of discontinued businesses, net of income taxes		—				50				(209		)
Gain on disposal of discontinued business, net of income taxes		(18		)		(456		)		—
Provision/(benefit) for income taxes		191				130				(328		)
Depreciation and amortization		121				138				136
Interest expense		162				170				155
Interest (income)		(7		)		(5		)		(6		)
Gain on sale of business		(68		)		—				—
Separation and related costs (b)		45				223				26
Restructuring (c)		9				16				14
Asset impairments		27				(4		)		205
Legacy items (d)		1				1				(6		)
Acquisition and divestiture related costs		1				—				(13		)
Stock-based compensation		20				23				53
Value-added tax refund		—				(16		)		—
Adjusted EBITDA		$	991			$	942			$	882
		Year Ended December 31,
Adjusted EBITDA		2019				2018				2017
Vacation Ownership		$	756			$	731			$	709
Vacation Exchange		289				278				268
Total reportable segments		1,045				1,009				977
Corporate and other (a)		(54		)		(67		)		(95		)
Total Company		$	991			$	942			$	882

(a)	Includes the elimination of transactions between segments.

(b)	Includes $4 million, $105 million, and $4 million of stock-based compensation expenses for 2019, 2018, and 2017.

(c)	Includes $1 million of stock-based compensation expense for 2017.

(d)	Represents the net benefit from the resolution of and adjustment to certain contingent liabilities resulting from the Company’s separation from Cendant.

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		Year Ended December 31,
Segment Assets (a)		2019				2018
Vacation Ownership		$	5,582			$	5,421
Vacation Exchange		1,482				1,376
Total reportable segments		7,064				6,797
Corporate and other		389				158
Assets held-for-sale		—				203
Total Company		$	7,453			$	7,158

(a)	Excludes investment in consolidated subsidiaries.

	Year Ended December 31,
Capital Expenditures	2019				2018				2017
Vacation Ownership	$	69			$	66			$	72
Vacation Exchange	27				25				27
Total reportable segments	96				91				99
Corporate and other	12				8				8
Total Company	$	108			$	99			$	107

The geographic segment information provided below is classified based on the geographic location of the Company’s subsidiaries (in millions):

		Year Ended December 31,												Year Ended December 31,
		Net Revenues												Net Long-lived Assets
		2019				2018				2017				2019				2018
United States		$	3,513			$	3,500			$	3,359			$	1,497			$	1,471
All other countries		530				431				447				296				272
Total		$	4,043			$	3,931			$	3,806			$	1,793			$	1,743

25.	Separation and Transaction Costs

During 2019, the Company incurred $45 million of expenses in connection with the Spin-off completed on May 31, 2018, which are reflected within continuing operations. These separation costs were related to stock compensation, severance and other employee costs, as well as impairment charges due to the write-off of right-of-use assets and furniture, fixtures and equipment as a result of the Company abandoning portions of its administrative offices in New Jersey. This decision was part of the Company’s continued focus on rationalizing existing facilities in order to reduce its corporate footprint. These expenses also include additional impairment charges associated with the write-off of assets and liabilities related to the early termination of an operating lease in Chicago, Illinois, offset by an indemnification receivable from Wyndham Hotels. Refer to Note 13—Leases for additional detail regarding these impairments.

During 2018, the Company incurred $223 million of expenses in connection with the Spin-off which are reflected within continuing operations and include related costs of the Spin-off, of which $217 million were related to stock compensation modification expense, severance and other employee costs offset, in part, by favorable foreign currency. In addition, these costs include certain impairment charges related to the separation including property sold to Wyndham Hotels.

Additionally, during 2018, the Company incurred $111 million of separation related expenses in connection with the Spin-off and sale of the European vacation rentals business which are reflected within discontinued operations. These expenses include legal, consulting and auditing fees, stock compensation modification expense, severance and other employee-related costs.

During 2017, the Company incurred $26 million of expenses associated with the planned Spin-off and the exploration of strategic alternatives for the European vacation rentals business which are reflected within continuing operations. Additionally, during 2017 the Company also incurred $40 million of separation related costs that are included within

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26.	Impairments and Other Charges

Impairments

During 2019, the Company sold certain property for $52 million in cash and a note receivable of $4 million. The Company recorded a loss of $27 million, which is recorded within Asset impairments on the Consolidated Statements of Income.

During May 2017, the Company performed an in-depth review of its operations, including its current development pipeline and long-term development plan. In connection with such review, the Company updated its current and long-term development plan to focus on (i) selling existing finished inventory, and (ii) procuring inventory from efficient sources such as Just-in-Time inventory in new markets and reclaiming inventory from owners’ associations or owners. As a result, the Company’s management performed a review of its land held for VOI development. Such review consisted of an assessment on 19 locations to determine its plan for future VOI development at those sites. As a result of this assessment, the Company concluded that no future development would occur at 17 locations, of which 16 were deemed to be impaired.

The Company performed a fair value assessment on the land held for VOI development which resulted in a $121 million non-cash impairment charge during 2017. In addition, the Company also recorded a $14 million non-cash impairment charge relating to the write-off of construction in process costs at six of the 16 impaired locations. As a result, the Company reported a total non-cash impairment charge of $135 million, which is included within Asset impairments on the Consolidated Statements of Income.

In conjunction with this review and impairment, the Company sold three of the 17 locations, as well as non-core revenue generating assets to a former executive of the Company for $2 million of cash consideration, which resulted in a $7 million loss. The Company also has an agreement with the former executive to sell an additional two of the 17 locations for $2 million, resulting in a $13 million non-cash impairment charge. Such transaction is to be completed within six months of the Company meeting certain transferability requirements. The $7 million loss and $13 million non-cash impairment charge on the expected sale were included within the total non-cash impairment charge of $135 million.

During 2018, the Company sold a property which was previously impaired by $27 million as part of the aforementioned fair value assessment on the land held for VOI development during 2017. The Company received net proceeds of $11 million, resulting in a gain on sale of $8 million, which is included within Asset impairments on the Consolidated Statements of Income. Also, as a result of changes in market conditions, the Company updated its long-term development goals during 2018 which resulted in $4 million of additional impairment charges on previously impaired properties. This additional impairment expense and the aforementioned reversal, resulted in a net impairment reversal of $4 million during 2018.

During 2017, the Company incurred a $5 million non-cash impairment charge related to the write-down of assets resulting from the decision to abandon a new product initiative at the Company’s vacation ownership business. Such charge is included within Asset impairments on the Consolidated Statements of Income.

During 2017, the Company incurred $65 million of non-cash impairment charges resulting from a disruption to VOI sales caused by the impact of the hurricanes on Saint Thomas, U.S. Virgin Islands, at its vacation ownership business. The charges included a $37 million write-down of property and equipment to fair value resulting from the consolidation of the Saint Thomas SPE and a $28 million write-down of VOI inventory to its fair value. Such charges are included within Asset impairments on the Consolidated Statements of Income.

Other Charges

Refer to Note 25—Separation and Transaction Costs, for discussion of the additional 2019 and 2018 impairments associated with the Spin-off of Wyndham Hotels.

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27.	Restructuring

2019 Restructuring Plans

During 2019, the Company recorded $5 million of charges related to restructuring initiatives, most of which are personnel-related resulting from a reduction of approximately 100 employees. This action is primarily focused on enhancing organizational efficiency and rationalizing operations. The charges consisted of (i) $2 million at the Vacation Ownership segment, (ii) $2 million at the Vacation Exchange 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. The remaining 2019 restructuring liability of $4 million is expected to be paid by the end of 2021.

2018 Restructuring Plans

During 2018, the Company recorded $16 million of charges related to restructuring initiatives, all of which are personnel-related resulting from a reduction of approximately 500 employees. This action was primarily focused on enhancing organizational efficiency and rationalizing operations. The charges consisted of (i) $11 million at the Vacation Ownership segment, (ii) $4 million at the Vacation Exchange segment, and (iii) $1 million at the Company’s corporate operations. During 2019, the Company incurred an additional $3 million of restructuring expenses at its Vacation Ownership segment and an additional $1 million at its corporate operations. The Company reduced its restructuring liability by $13 million and $4 million of cash payments during 2019 and 2018. The remaining 2018 restructuring liability of $3 million is expected to be paid by the end of 2021.

2017 Restructuring Plans

During 2017, the Company recorded $14 million of charges related to restructuring initiatives, all of which were personnel-related resulting from a reduction of approximately 200 employees. The charges consisted of (i) $8 million at its Vacation Exchange segment which primarily focused on enhancing organizational efficiency and rationalizing its operations, and (ii) $6 million at the Company’s corporate operations which focused on rationalizing its sourcing function and outsourcing certain information technology functions. During 2017, the Company reduced its restructuring liability by $11 million, of which $10 million was in cash payments and $1 million was through the issuance of Wyndham Worldwide Corporation stock. During 2018, the Company further reduced its restructuring liability by $3 million of cash payments. The 2017 restructuring liability was paid in full as of December 31, 2018.

The Company has additional restructuring plans which were implemented prior to 2017. As of December 31, 2019, the remaining liability of less than $1 million, all of which is related to leased facilities, is expected to be paid by 2020.

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

	Liability as of				2017 Activity												Liability as of
	December 31, 2016				Costs Recognized				Cash Payments				Other (a)				December 31, 2017
Personnel-related	$	4			$	14			$	(13	)		$	(1	)		$	4
Facility-related	3				—				(2		)		—				1
	$	7			$	14			$	(15	)		$	(1	)		$	5
	Liability as of				2018 Activity												Liability as of
	December 31, 2017				Costs Recognized				Cash Payments				Other				December 31, 2018
Personnel-related	$	4			$	16			$	(8	)		$	—			$	12
Facility-related	1				—				(1		)		—				—
	$	5			$	16			$	(9	)		$	—			$	12
	Liability as of				2019 Activity												Liability as of
	December 31, 2018				Costs Recognized				Cash Payments				Other				December 31, 2019
Personnel-related	$	12			$	9			$	(14	)		$	—			$	7
	$	12			$	9			$	(14	)		$	—			$	7

 

(a)Primarily represents the issuance of Wyndham Worldwide stock.

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28.	Transactions with Former Parent and Former Subsidiaries

Matters Related to Cendant

Pursuant to the Cendant Separation and Distribution Agreement, 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 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 settled the majority of the lawsuits pending on the date of the separation.

As of December 31, 2019, 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, 2018, the Company had $18 million of Cendant separation-related liabilities. These liabilities were recorded within Accrued expenses and other liabilities on the 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 Agreements, 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.

During 2018, the Company conveyed the lease for its former corporate headquarters located in Parsippany, New Jersey, to Wyndham Hotels, which resulted in the removal of a $66 million capital lease obligation and a $43 million asset from the Consolidated Balance Sheets.

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 2019, transition service agreement expenses of $3 million were included in General and administrative expense, and $2 million were included in Separation and related costs on the Consolidated Statements of Income. Transition service agreement income of $1 million was included in Other revenue on the Consolidated Statements of Income. During 2018, transition service agreement expenses were $8 million and transition service agreement income was $6 million. As of December 31, 2019, the majority of these transition services have ended with the exception of certain tax and treasury services which are expected to be completed in the second quarter of 2020.

As a result of the sale of the North American vacation rentals business to Vacasa, the Company paid Wyndham Hotels $5 million for a tradename royalty buy-out. The related expense was recorded as a reduction to Gain on sale of business on the Consolidated Statements of Income.

Matters Related to the European Vacation Rentals Business

In connection with the sale of the Company’s European vacation rentals business, 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. Compass IV Limited, an affiliate of Platinum Equity, LLC (“Compass”) 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.

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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 of $46 million. The estimated fair value of the guarantee was $22 million at December 31, 2019. The Company established a $7 million receivable from Wyndham Hotels for its portion of the guarantee.

During 2019, the Company reached an agreement with Compass 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, respectively, in the European vacation rentals business’ final net proceeds (as defined by the sales agreement). The Company paid $40 million to Wyndham Hotels in 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 Compass 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 increased by $2 million to a total of $45 million at December 31, 2019. The Company has a $15 million receivable from Wyndham Hotels for its portion of the guarantee.

Wyndham Hotels provided certain post-closing credit support primarily for the benefit of a British travel association in the form of guarantees which are primarily 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 December 31, 2019. Wyndham Destinations is responsible for two-thirds of these guarantees. Wyndham Hotels is required to maintain minimum credit ratings of Ba2 for Moody’s and BB for S&P. If Wyndham Hotels drops below these minimum credit ratings, Wyndham Destinations would be required to post a letter of credit (or equivalent support) for the amount of the Wyndham Hotels guarantee.  

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 at December 31, 2019. Total receivables of $23 million were included in Other assets on the Consolidated Balance Sheets at December 31, 2019, representing the portion of these guarantees and indemnifications for which Wyndham Hotels is responsible. The total change in expired guarantees and returned escrow offset by increased tax liabilities increased the gain on sale of the European vacation rentals business by $6 million during 2019.

During 2019, Compass 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. While the Company intends to vigorously dispute these proposed adjustments, at this time the Company cannot reasonably estimate the probability or amount of the potential liability owed to Compass, if any. Any actual liability would be split two-thirds and one-third between the Company and Wyndham Hotels and the impact would be included in discontinued operations.

Wyndham Destinations entered into a transition service agreement with Compass, 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 2019, transition service agreement expenses were $2 million and transition service agreement income was $2 million. During 2018, transition service agreement expenses were $3 million and transition service agreement income was $3 million. Transition service agreement expenses were included in General and administrative expense and transition service income was included in Net revenues on the Consolidated Statements of Income.

Matters 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 accrued as a reduction to the Gain on sale of business on the Consolidated Statements of Income as of December 31, 2019.

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Wyndham Destinations entered into a transition service agreement with Vacasa, pursuant to which the companies agreed to provide each other certain transitional services including human resources, facilities, payroll, information technology, information management and related services, treasury, and finance on an interim, transitional basis. During 2019, transition service agreement expenses were $3 million and transition service agreement income was $3 million. Transition service agreement expenses were included in General and administrative expense and transition service income was included in Other revenue on the Consolidated Statements of Income.

29.	Selected Quarterly Financial Data - (unaudited)

Provided below is selected unaudited quarterly financial data for 2019 and 2018.

	2019
	First				Second				Third				Fourth
(in millions, except per share data)
Net revenues	$	918			$	1,039			$	1,105			$	981
Total expenses	778				841				891				790
Gain on sale of business	—				—				—				(68		)
Operating income	140				198				214				259
Income from continuing operations	81				118				135				155
(Loss)/gain on disposal of discontinued business, net of income taxes	(1		)		6				—				12
Net income attributable to Wyndham Destinations shareholders	80				124				135				167
Basic earnings per share
Continuing operations	$	0.86			$	1.27			$	1.48			$	1.73
Discontinued operations	(0.01		)		0.06				—				0.14
	$	0.85			$	1.33			$	1.48			$	1.87
Diluted earnings per share
Continuing operations	$	0.85			$	1.26			$	1.47			$	1.73
Discontinued operations	—				0.06				—				0.14
	$	0.85			$	1.32			$	1.47			$	1.87
Weighted average shares outstanding
Basic	94.4				93.0				91.7				89.5
Diluted	94.7				93.3				92.0				89.8

Note:	The sum of the quarters may not agree to the Consolidated Statements of Income for the year ended December 31, 2019, due to rounding.

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	2018
	First (a)				Second				Third				Fourth
(in millions, except per share data)
Net revenues	$	907			$	1,007			$	1,062			$	956
Total expenses	804				942				865				797
Operating income	103				65				197				159
Income/(loss) from continuing operations	41				(12		)		131				106
(Loss)/income from operations of discontinued businesses, net of income taxes	(7		)		(42		)		(3		)		2
Gain on disposal of discontinued business, net of income taxes	—				432				20				4
Net income attributable to Wyndham Destinations shareholders	34				378				148				112
Basic earnings per share
Continuing operations	$	0.41			$	(0.12	)		$	1.32			$	1.10
Discontinued operations	(0.07		)		3.90				0.17				0.06
	$	0.34			$	3.78			$	1.49			$	1.16
Diluted earnings per share
Continuing operations	$	0.41			$	(0.12	)		$	1.31			$	1.10
Discontinued operations	(0.07		)		3.89				0.18				0.06
	$	0.34			$	3.77			$	1.49			$	1.16
Weighted average shares outstanding
Basic	100.1				100.0				99.1				96.3
Diluted	100.8				100.3				99.5				96.7

Note:     The sum of the quarters may not agree to the Consolidated Statements of Income for the year ended December 31, 2018, due to rounding.

(a)	Amounts vary from those disclosed in the Company’s Quarterly report on form 10-Q for the quarter ended March 31, 2018, due to the results of its former hotel business being classified as discontinued operations in connection with the Spin-off of Wyndham Hotels on May 31, 2018.

30.	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. Subject to the property meeting the Company’s vacation ownership resort standards and provided that the property has not been sold to another party, the maximum potential future payments that the Company may be required to make under this commitment is $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, and in 2019 incurred less than $1 million of expenses associated with these transactions.

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ITEM 9.	CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9B.	OTHER INFORMATION

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ITEM 11.	EXECUTIVE COMPENSATION

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

(a)	Consists of shares issuable upon exercise of stock-settled appreciation rights, non-qualified stock options, performance-vested restricted stock units, and restricted stock units.

(b)	Consists of weighted-average exercise price of outstanding stock-settled appreciation rights, and non-qualified stock options. The weighted-average exercise price does not reflect the shares that will be issued in connection with the settlement of performance-vested restricted stock units or restricted stock units, as these units have no exercise price.

(c)	Consists of shares available for future grants under the 2006 Equity and Incentive Plan, as amended.

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ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES

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ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES

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**	Furnished with this report.

ITEM 16.	FORM 10-K SUMMARY

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