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|
þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
|
|
For the quarterly period ended June 30, 2011 |
||
|
OR
|
||
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
|
|
For the transition period from to |
||
|
Delaware
|
20-0052541 | |
|
(State or other jurisdiction
of incorporation or organization) |
(I.R.S. Employer
Identification No.) |
|
|
22 Sylvan Way
Parsippany, New Jersey (Address of principal executive offices) |
07054
(Zip Code) |
| Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
1
| Item 1. | Financial Statements (Unaudited). |
2
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Net revenues
|
||||||||||||||||
|
Service and membership fees
|
$ | 499 | $ | 409 | $ | 995 | $ | 833 | ||||||||
|
Vacation ownership interest sales
|
313 | 271 | 535 | 488 | ||||||||||||
|
Franchise fees
|
134 | 120 | 235 | 211 | ||||||||||||
|
Consumer financing
|
103 | 106 | 206 | 211 | ||||||||||||
|
Other
|
41 | 57 | 70 | 106 | ||||||||||||
|
Net revenues
|
1,090 | 963 | 2,041 | 1,849 | ||||||||||||
|
Expenses
|
||||||||||||||||
|
Operating
|
458 | 387 | 868 | 769 | ||||||||||||
|
Cost of vacation ownership interests
|
48 | 49 | 79 | 86 | ||||||||||||
|
Consumer financing interest
|
23 | 29 | 46 | 53 | ||||||||||||
|
Marketing and reservation
|
153 | 138 | 290 | 261 | ||||||||||||
|
General and administrative
|
126 | 146 | 266 | 293 | ||||||||||||
|
Asset impairment
|
— | — | 13 | — | ||||||||||||
|
Restructuring
|
7 | — | 6 | — | ||||||||||||
|
Depreciation and amortization
|
45 | 42 | 90 | 85 | ||||||||||||
|
Total expenses
|
860 | 791 | 1,658 | 1,547 | ||||||||||||
|
Operating income
|
230 | 172 | 383 | 302 | ||||||||||||
|
Other income, net
|
(1 | ) | (3 | ) | (7 | ) | (5 | ) | ||||||||
|
Interest expense
|
37 | 36 | 81 | 86 | ||||||||||||
|
Interest income
|
(2 | ) | (2 | ) | (3 | ) | (2 | ) | ||||||||
|
Income before income taxes
|
196 | 141 | 312 | 223 | ||||||||||||
|
Provision for income taxes
|
82 | 46 | 126 | 78 | ||||||||||||
|
Net income
|
$ | 114 | $ | 95 | $ | 186 | $ | 145 | ||||||||
|
Earnings per share
|
||||||||||||||||
|
Basic
|
$ | 0.68 | $ | 0.53 | $ | 1.10 | $ | 0.81 | ||||||||
|
Diluted
|
0.67 | 0.51 | 1.07 | 0.78 | ||||||||||||
|
Cash dividends declared per share
|
$ | 0.15 | $ | 0.12 | $ | 0.30 | $ | 0.24 | ||||||||
3
|
June 30,
|
December 31,
|
|||||||
| 2011 | 2010 | |||||||
|
Assets
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$ | 296 | $ | 156 | ||||
|
Trade receivables, net
|
390 | 425 | ||||||
|
Vacation ownership contract receivables, net
|
297 | 295 | ||||||
|
Inventory
|
344 | 348 | ||||||
|
Prepaid expenses
|
118 | 104 | ||||||
|
Deferred income taxes
|
172 | 179 | ||||||
|
Other current assets
|
286 | 245 | ||||||
|
Total current assets
|
1,903 | 1,752 | ||||||
|
Long-term vacation ownership contract receivables, net
|
2,601 | 2,687 | ||||||
|
Non-current inventory
|
777 | 833 | ||||||
|
Property and equipment, net
|
1,106 | 1,041 | ||||||
|
Goodwill
|
1,500 | 1,481 | ||||||
|
Trademarks, net
|
735 | 731 | ||||||
|
Franchise agreements and other intangibles, net
|
431 | 440 | ||||||
|
Other non-current assets
|
276 | 451 | ||||||
|
Total assets
|
$ | 9,329 | $ | 9,416 | ||||
|
Liabilities and Stockholders’ Equity
|
||||||||
|
Current liabilities:
|
||||||||
|
Securitized vacation ownership debt
|
$ | 190 | $ | 223 | ||||
|
Current portion of long-term debt
|
43 | 11 | ||||||
|
Accounts payable
|
385 | 274 | ||||||
|
Deferred income
|
486 | 401 | ||||||
|
Due to former Parent and subsidiaries
|
27 | 47 | ||||||
|
Accrued expenses and other current liabilities
|
619 | 619 | ||||||
|
Total current liabilities
|
1,750 | 1,575 | ||||||
|
Long-term securitized vacation ownership debt
|
1,498 | 1,427 | ||||||
|
Long-term debt
|
2,001 | 2,083 | ||||||
|
Deferred income taxes
|
1,083 | 1,021 | ||||||
|
Deferred income
|
194 | 206 | ||||||
|
Due to former Parent and subsidiaries
|
28 | 30 | ||||||
|
Other non-current liabilities
|
161 | 157 | ||||||
|
Total liabilities
|
6,715 | 6,499 | ||||||
|
Commitments and contingencies (Note 11)
|
||||||||
|
Stockholders’ equity:
|
||||||||
|
Preferred stock, $.01 par value, authorized
6,000,000 shares, none issued and outstanding
|
— | — | ||||||
|
Common stock, $.01 par value, authorized
600,000,000 shares, issued 212,148,150 shares in 2011
and 209,943,159 shares in 2010
|
2 | 2 | ||||||
|
Treasury stock, at cost—48,359,379 shares in 2011 and
36,555,242 shares in 2010
|
(1,480 | ) | (1,107 | ) | ||||
|
Additional paid-in capital
|
3,798 | 3,892 | ||||||
|
Retained earnings/(accumulated deficit)
|
109 | (25 | ) | |||||
|
Accumulated other comprehensive income
|
185 | 155 | ||||||
|
Total stockholders’ equity
|
2,614 | 2,917 | ||||||
|
Total liabilities and stockholders’ equity
|
$ | 9,329 | $ | 9,416 | ||||
4
|
Six Months Ended
|
||||||||
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Operating Activities
|
||||||||
|
Net income
|
$ | 186 | $ | 145 | ||||
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
||||||||
|
Depreciation and amortization
|
90 | 85 | ||||||
|
Provision for loan losses
|
159 | 174 | ||||||
|
Deferred income taxes
|
52 | 41 | ||||||
|
Stock-based compensation
|
21 | 20 | ||||||
|
Excess tax benefits from stock-based compensation
|
(17 | ) | (13 | ) | ||||
|
Asset impairment
|
13 | — | ||||||
|
Non-cash interest
|
15 | 39 | ||||||
|
Net change in assets and liabilities, excluding the impact of
acquisitions:
|
||||||||
|
Trade receivables
|
53 | 63 | ||||||
|
Vacation ownership contract receivables
|
(63 | ) | (86 | ) | ||||
|
Inventory
|
59 | 23 | ||||||
|
Prepaid expenses
|
(13 | ) | (13 | ) | ||||
|
Other current assets
|
4 | 17 | ||||||
|
Accounts payable, accrued expenses and other current liabilities
|
97 | 78 | ||||||
|
Due to former Parent and subsidiaries, net
|
(15 | ) | (2 | ) | ||||
|
Deferred income
|
64 | (5 | ) | |||||
|
Other, net
|
(9 | ) | (9 | ) | ||||
|
Net cash provided by operating activities
|
696 | 557 | ||||||
|
Investing Activities
|
||||||||
|
Property and equipment additions
|
(96 | ) | (63 | ) | ||||
|
Net assets acquired, net of cash acquired
|
— | (105 | ) | |||||
|
Equity investments and development advances
|
(5 | ) | (8 | ) | ||||
|
Proceeds from asset sales
|
18 | 16 | ||||||
|
Decrease/(increase) in securitization restricted cash
|
9 | (20 | ) | |||||
|
Increase in escrow deposit restricted cash
|
(18 | ) | (5 | ) | ||||
|
Other, net
|
(12 | ) | 2 | |||||
|
Net cash used in investing activities
|
(104 | ) | (183 | ) | ||||
|
Financing Activities
|
||||||||
|
Proceeds from securitized borrowings
|
770 | 749 | ||||||
|
Principal payments on securitized borrowings
|
(733 | ) | (710 | ) | ||||
|
Proceeds from long-term debt
|
1,002 | 621 | ||||||
|
Principal payments on long-term debt
|
(1,087 | ) | (1,059 | ) | ||||
|
Proceeds from note issuances
|
245 | 247 | ||||||
|
Repurchase of convertible notes
|
(262 | ) | — | |||||
|
Proceeds from call options
|
155 | — | ||||||
|
Repurchase of warrants
|
(112 | ) | — | |||||
|
Dividends to shareholders
|
(53 | ) | (44 | ) | ||||
|
Repurchase of common stock
|
(370 | ) | (69 | ) | ||||
|
Proceeds from stock option exercises
|
10 | 16 | ||||||
|
Excess tax benefits from stock-based compensation
|
17 | 13 | ||||||
|
Debt issuance costs
|
(10 | ) | (24 | ) | ||||
|
Other, net
|
(29 | ) | (23 | ) | ||||
|
Net cash used in financing activities
|
(457 | ) | (283 | ) | ||||
|
Effect of changes in exchange rates on cash and cash equivalents
|
5 | (7 | ) | |||||
|
Net increase in cash and cash equivalents
|
140 | 84 | ||||||
|
Cash and cash equivalents, beginning of period
|
156 | 155 | ||||||
|
Cash and cash equivalents, end of period
|
$ | 296 | $ | 239 | ||||
5
|
Retained
|
Accumulated
|
|||||||||||||||||||||||||||||||
|
Treasury
|
Additional
|
Earnings/
|
Other
|
Total
|
||||||||||||||||||||||||||||
| Common Stock | Stock |
Paid-in
|
(Accumulated
|
Comprehensive
|
Stockholders’
|
|||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit) | Income | Equity | |||||||||||||||||||||||||
|
Balance as of December 31, 2010
|
210 | $ | 2 | (37 | ) | $ | (1,107 | ) | $ | 3,892 | $ | (25 | ) | $ | 155 | $ | 2,917 | |||||||||||||||
|
Comprehensive income
|
||||||||||||||||||||||||||||||||
|
Net income
|
— | — | — | — | — | 186 | — | |||||||||||||||||||||||||
|
Currency translation adjustment, net of tax of $14
|
— | — | — | — | — | — | 28 | |||||||||||||||||||||||||
|
Unrealized gains on cash flow hedges, net of tax of $1
|
— | — | — | — | — | — | 2 | |||||||||||||||||||||||||
|
Total comprehensive income
|
216 | |||||||||||||||||||||||||||||||
|
Exercise of stock options
|
— | — | — | — | 10 | — | — | 10 | ||||||||||||||||||||||||
|
Issuance of shares for RSU vesting
|
2 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
Change in deferred compensation
|
— | — | — | — | (9 | ) | — | — | (9 | ) | ||||||||||||||||||||||
|
Repurchase of warrants
|
— | — | — | — | (112 | ) | — | — | (112 | ) | ||||||||||||||||||||||
|
Repurchase of common stock
|
— | — | (11 | ) | (373 | ) | — | — | — | (373 | ) | |||||||||||||||||||||
|
Change in excess tax benefit on equity awards
|
— | — | — | — | 17 | — | — | 17 | ||||||||||||||||||||||||
|
Dividends
|
— | — | — | — | — | (52 | ) | — | (52 | ) | ||||||||||||||||||||||
|
Balance as of June 30, 2011
|
212 | $ | 2 | (48 | ) | $ | (1,480 | ) | $ | 3,798 | $ | 109 | $ | 185 | $ | 2,614 | ||||||||||||||||
|
Retained
|
Accumulated
|
|||||||||||||||||||||||||||||||
|
Treasury
|
Additional
|
Earnings/
|
Other
|
Total
|
||||||||||||||||||||||||||||
| Common Stock | Stock |
Paid-in
|
(Accumulated
|
Comprehensive
|
Stockholders’
|
|||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit) | Income | Equity | |||||||||||||||||||||||||
|
Balance as of December 31, 2009
|
206 | $ | 2 | (27 | ) | $ | (870 | ) | $ | 3,733 | $ | (315 | ) | $ | 138 | $ | 2,688 | |||||||||||||||
|
Comprehensive income
|
||||||||||||||||||||||||||||||||
|
Net income
|
— | — | — | — | — | 145 | — | |||||||||||||||||||||||||
|
Currency translation adjustment, net of tax benefit of $32
|
— | — | — | — | — | — | (42 | ) | ||||||||||||||||||||||||
|
Reclassification of unrealized loss on cash flow hedge, net of
tax benefit of $6
|
— | — | — | — | — | — | 8 | |||||||||||||||||||||||||
|
Unrealized gains on cash flow hedges, net of tax benefit of $0
|
— | — | — | — | — | — | 1 | |||||||||||||||||||||||||
|
Total comprehensive income
|
112 | |||||||||||||||||||||||||||||||
|
Exercise of stock options
|
1 | — | — | — | 16 | — | — | 16 | ||||||||||||||||||||||||
|
Issuance of shares for RSU vesting
|
2 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
Repurchase of common stock
|
— | — | (3 | ) | (71 | ) | — | — | — | (71 | ) | |||||||||||||||||||||
|
Change in excess tax benefit on equity awards
|
— | — | — | — | 10 | — | — | 10 | ||||||||||||||||||||||||
|
Dividends
|
— | — | — | — | — | (45 | ) | — | (45 | ) | ||||||||||||||||||||||
|
Balance as of June 30, 2010
|
209 | $ | 2 | (30 | ) | $ | (941 | ) | $ | 3,759 | $ | (215 | ) | $ | 105 | $ | 2,710 | |||||||||||||||
6
| 1. | Basis of Presentation |
| · | Lodging —franchises hotels in the upper upscale, upscale, upper midscale, midscale, economy and extended stay segments of the lodging industry and provides hotel management services for full-service hotels globally. | |
| · | Vacation Exchange and Rentals —provides vacation exchange services and products to owners of intervals of vacation ownership interests (“VOIs”) and markets vacation rental properties primarily on behalf of independent owners. | |
| · | Vacation Ownership —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. |
7
| 2. | Earnings Per Share |
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Net income
|
$ | 114 | $ | 95 | $ | 186 | $ | 145 | ||||||||
|
Basic weighted average shares outstanding
|
167 | 180 | 170 | 180 | ||||||||||||
|
Stock options, SSARs and restricted stock units
(“RSUs”)
(a)
|
3 | 4 | 3 | 3 | ||||||||||||
|
Warrants
(b)
|
— | 3 | 1 | 3 | ||||||||||||
|
Diluted weighted average shares outstanding
|
170 | 187 | 174 | 186 | ||||||||||||
|
Earnings per share:
|
||||||||||||||||
|
Basic
|
$ | 0.68 | $ | 0.53 | $ | 1.10 | $ | 0.81 | ||||||||
|
Diluted
|
0.67 | 0.51 | 1.07 | 0.78 | ||||||||||||
| (a) | Includes unvested dilutive RSUs which are subject to future forfeitures. | |
| (b) | Represents the dilutive effect of warrants to purchase shares of the Company’s common stock related to the May 2009 issuance of the Company’s convertible notes (see Note 6 — Long-Term Debt and Borrowing Arrangements). |
8
|
Average
|
||||||||||||
| Shares | Cost | Price | ||||||||||
|
As of December 31, 2010
|
11.4 | $ | 295 | $ | 25.78 | |||||||
|
For the six months ended June 30, 2011
|
11.8 | 373 | 31.60 | |||||||||
|
As of June 30, 2011
|
23.2 | $ | 668 | 28.74 | ||||||||
| 3. | Intangible Assets |
| As of June 30, 2011 | As of December 31, 2010 | |||||||||||||||||||||||
|
Gross
|
Net
|
Gross
|
Net
|
|||||||||||||||||||||
|
Carrying
|
Accumulated
|
Carrying
|
Carrying
|
Accumulated
|
Carrying
|
|||||||||||||||||||
| Amount | Amortization | Amount | Amount | Amortization | Amount | |||||||||||||||||||
|
Unamortized Intangible Assets:
|
||||||||||||||||||||||||
|
Goodwill
|
$ | 1,500 | $ | 1,481 | ||||||||||||||||||||
|
Trademarks
|
$ | 735 | $ | 731 | ||||||||||||||||||||
|
Amortized Intangible Assets:
|
||||||||||||||||||||||||
|
Franchise agreements
|
$ | 634 | $ | 328 | $ | 306 | $ | 634 | $ | 318 | $ | 316 | ||||||||||||
|
Other
|
173 | 48 | 125 | 164 | 40 | 124 | ||||||||||||||||||
| $ | 807 | $ | 376 | $ | 431 | $ | 798 | $ | 358 | $ | 440 | |||||||||||||
|
Balance at
|
Goodwill
|
Balance at
|
||||||||||||||
|
December 31,
|
Acquired
|
Foreign
|
June 30,
|
|||||||||||||
| 2010 | During 2010 | Exchange | 2011 | |||||||||||||
|
Lodging
|
$ | 300 | $ | — | $ | — | $ | 300 | ||||||||
|
Vacation Exchange and Rentals
|
1,181 | (1 | ) (a) | 20 | 1,200 | |||||||||||
|
Total Company
|
$ | 1,481 | $ | (1 | ) | $ | 20 | $ | 1,500 | |||||||
| (a) | Relates to a purchase accounting adjustment from the September 2010 acquisition of ResortQuest. |
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Franchise agreements
|
$ | 5 | $ | 5 | $ | 10 | $ | 10 | ||||||||
|
Other
|
3 | 2 | 6 | 4 | ||||||||||||
|
Total
(*)
|
$ | 8 | $ | 7 | $ | 16 | $ | 14 | ||||||||
| (*) | Included as a component of depreciation and amortization on the Consolidated Statements of Income. |
9
| Amount | ||||
|
Remainder of 2011
|
$ | 15 | ||
|
2012
|
30 | |||
|
2013
|
29 | |||
|
2014
|
28 | |||
|
2015
|
27 | |||
|
2016
|
27 | |||
| 4. | Vacation Ownership Contract Receivables |
|
June 30,
|
December 31,
|
|||||||
| 2011 | 2010 | |||||||
|
Current vacation ownership contract receivables:
|
||||||||
|
Securitized
|
$ | 259 | $ | 266 | ||||
|
Non-securitized
|
75 | 65 | ||||||
| 334 | 331 | |||||||
|
Less: Allowance for loan losses
|
(37 | ) | (36 | ) | ||||
|
Current vacation ownership contract receivables, net
|
$ | 297 | $ | 295 | ||||
|
Long-term vacation ownership contract receivables:
|
||||||||
|
Securitized
|
$ | 2,263 | $ | 2,437 | ||||
|
Non-securitized
|
663 | 576 | ||||||
| 2,926 | 3,013 | |||||||
|
Less: Allowance for loan losses
|
(325 | ) | (326 | ) | ||||
|
Long-term vacation ownership contract receivables, net
|
$ | 2,601 | $ | 2,687 | ||||
| Amount | ||||
|
Allowance for loan losses as of December 31, 2010
|
$ | (362 | ) | |
|
Provision for loan losses
|
(159 | ) | ||
|
Contract receivables write-offs, net
|
159 | |||
|
Allowance for loan losses as of June 30, 2011
|
$ | (362 | ) | |
10
| As of June 30, 2011 | ||||||||||||||||||||
| 700+ | 600-699 | <600 | No Score | Total | ||||||||||||||||
|
Current
|
$ | 1,389 | $ | 978 | $ | 386 | $ | 378 | $ | 3,131 | ||||||||||
|
31—60 days
|
10 | 18 | 27 | 7 | 62 | |||||||||||||||
|
61—90 days
|
6 | 11 | 20 | 3 | 40 | |||||||||||||||
|
91—120 days
|
2 | 7 | 15 | 3 | 27 | |||||||||||||||
|
Total
|
$ | 1,407 | $ | 1,014 | $ | 448 | $ | 391 | (*) | $ | 3,260 | |||||||||
| As of December 31, 2010 | ||||||||||||||||||||
| 700+ | 600-699 | <600 | No Score | Total | ||||||||||||||||
|
Current
|
$ | 1,415 | $ | 990 | $ | 426 | $ | 356 | $ | 3,187 | ||||||||||
|
31—60 days
|
10 | 23 | 34 | 6 | 73 | |||||||||||||||
|
61—90 days
|
7 | 14 | 22 | 4 | 47 | |||||||||||||||
|
91—120 days
|
5 | 10 | 19 | 3 | 37 | |||||||||||||||
|
Total
|
$ | 1,437 | $ | 1,037 | $ | 501 | $ | 369 | (*) | $ | 3,344 | |||||||||
| (*) | The total no score contract receivables balances of $391 million and $369 million as of June 30, 2011 and December 31, 2010, respectively, include $327 million and $309 million, respectively, of contract receivables at Wyndham Vacation Resorts Asia Pacific. |
| 5. | Inventory |
|
June 30,
|
December 31,
|
|||||||
| 2011 | 2010 | |||||||
|
Land held for VOI development
|
$ | 132 | $ | 131 | ||||
|
VOI construction in process
|
194 | 229 | ||||||
|
Completed inventory and vacation credits
(a)(b)
|
795 | 821 | ||||||
|
Total inventory
|
1,121 | 1,181 | ||||||
|
Less: Current portion
|
344 | 348 | ||||||
|
Non-current inventory
|
$ | 777 | $ | 833 | ||||
| (a) | Includes estimated recoveries of $147 million and $148 million at June 30, 2011 and December 31, 2010, respectively. Vacation credits relate to both the Company’s vacation ownership and vacation exchange and rentals businesses. | |
| (b) | Includes $77 million and $80 million as of June 30, 2011 and December 31, 2010, respectively, related to the Company’s vacation exchange and rentals business. |
11
| 6. | Long-Term Debt and Borrowing Arrangements |
|
June 30,
|
December 31,
|
|||||||
| 2011 | 2010 | |||||||
|
Securitized vacation ownership debt:
(a)
|
||||||||
|
Term notes
|
$ | 1,446 | $ | 1,498 | ||||
|
Bank conduit facility
(b)
|
242 | 152 | ||||||
|
Total securitized vacation ownership debt
|
1,688 | 1,650 | ||||||
|
Less: Current portion of securitized vacation ownership debt
|
190 | 223 | ||||||
|
Long-term securitized vacation ownership debt
|
$ | 1,498 | $ | 1,427 | ||||
|
Long-term debt:
|
||||||||
|
Revolving credit facility (due October 2013)
(c)
|
$ | 107 | $ | 154 | ||||
|
6.00% senior unsecured notes (due December 2016)
(d)
|
803 | 798 | ||||||
|
9.875% senior unsecured notes (due May 2014)
(e)
|
242 | 241 | ||||||
|
3.50% convertible notes (due May 2012)
(f)
|
32 | 266 | ||||||
|
7.375% senior unsecured notes (due March 2020)
(g)
|
247 | 247 | ||||||
|
5.75% senior unsecured notes (due February 2018)
(h)
|
247 | 247 | ||||||
|
5.625% senior unsecured notes (due March 2021)
(i)
|
245 | — | ||||||
|
Vacation rentals capital leases
(j)
|
120 | 115 | ||||||
|
Other
|
1 | 26 | ||||||
|
Total long-term debt
|
2,044 | 2,094 | ||||||
|
Less: Current portion of long-term debt
|
43 | 11 | ||||||
|
Long-term debt
|
$ | 2,001 | $ | 2,083 | ||||
| (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 are collateralized by $2,672 million and $2,865 million of underlying gross vacation ownership contract receivables and related assets as of June 30, 2011 and December 31, 2010, respectively. | |
| (b) | Represents a $600 million, non-recourse vacation ownership bank conduit facility, with a term through June 2013 whose capacity is subject to the Company’s ability to provide additional assets to collateralize the facility. As of June 30, 2011, the total available capacity of the facility was $358 million. | |
| (c) | Total capacity of the revolving credit facility was $980 million, which includes availability for letters of credit. As of June 30, 2011, the Company had $13 million of letters of credit outstanding and, as such, the total available capacity of the revolving credit facility was $860 million. See Note 17—Subsequent Event for additional information. | |
| (d) | Represents senior unsecured notes issued by the Company during December 2006. The balance as of June 30, 2011 represents $800 million aggregate principal less $2 million of unamortized discount, plus a $5 million fair value hedge derivative. | |
| (e) | Represents senior unsecured notes issued by the Company during May 2009. The balance as of June 30, 2011 represents $250 million aggregate principal less $8 million of unamortized discount. |
| (f) | Represents convertible notes issued by the Company during May 2009, which includes debt principal, less unamortized discount, and a liability related to a bifurcated conversion feature. During the first six months of 2011, the Company repurchased a portion of its outstanding 3.50% convertible notes, primarily through the completion of a cash tender offer (see “3.50% Convertible Notes” below for further details). The following table details the components of the convertible notes: |
|
June 30,
|
||||||||
| 2011 | December 31, 2010 | |||||||
|
Debt principal
|
$ | 12 | $ | 116 | ||||
|
Unamortized discount
|
(1 | ) | (12 | ) | ||||
|
Debt less discount
|
11 | 104 | ||||||
|
Fair value of bifurcated conversion feature
(*)
|
21 | 162 | ||||||
|
Convertible notes
|
$ | 32 | $ | 266 | ||||
| (*) | The Company also has an asset with a fair value equal to the bifurcated conversion feature, which represents cash-settled call options that the Company purchased concurrent with the issuance of the convertible notes (“Bifurcated Conversion Feature”). |
| (g) | Represents senior unsecured notes issued by the Company during February 2010. The balance as of June 30, 2011 represents $250 million aggregate principal less $3 million of unamortized discount. | |
| (h) | Represents senior unsecured notes issued by the Company during September 2010. The balance as of June 30, 2011 represents $250 million aggregate principal less $3 million of unamortized discount. |
| (i) | Represents senior unsecured notes issued by the Company during March 2011. The balance as of June 30, 2011 represents $250 million aggregate principal less $5 million of unamortized discount. | |
| (j) | Represents capital lease obligations with corresponding assets classified within property and equipment on the Consolidated Balance Sheets. |
12
13
|
Securitized
|
||||||||||||
|
Vacation
|
||||||||||||
|
Ownership
|
||||||||||||
| Debt | Other | Total | ||||||||||
|
Within 1 year
|
$ | 190 | $ | 43 | (*) | $ | 233 | |||||
|
Between 1 and 2 years
|
202 | 11 | 213 | |||||||||
|
Between 2 and 3 years
|
274 | 361 | 635 | |||||||||
|
Between 3 and 4 years
|
294 | 12 | 306 | |||||||||
|
Between 4 and 5 years
|
173 | 13 | 186 | |||||||||
|
Thereafter
|
555 | 1,604 | 2,159 | |||||||||
| $ | 1,688 | $ | 2,044 | $ | 3,732 | |||||||
| (*) | Includes a liability of $21 million related to the Bifurcated Conversion Feature associated with the Company’s Convertible Notes. |
|
Securitized Bank
|
Revolving Credit
|
|||||||
| Conduit Facility (a) | Facility | |||||||
|
Total Capacity
|
$ | 600 | $ | 980 | ||||
|
Less: Outstanding Borrowings
|
242 | 107 | ||||||
|
Available Capacity
|
$ | 358 | $ | 873 | (b) | |||
| (a) | The capacity of this facility is subject to the Company’s ability to provide additional assets to collateralize additional securitized borrowings. | |
| (b) | The capacity under the Company’s revolving credit facility includes availability for letters of credit. As of June 30, 2011, the available capacity of $873 million was further reduced to $860 million due to the issuance of $13 million of letters of credit. |
14
| 7. | Transfer and Servicing of Financial Assets |
|
June 30,
|
December 31,
|
|||||||
| 2011 | 2010 | |||||||
|
Securitized contract receivables, gross
(a)
|
$ | 2,522 | $ | 2,703 | ||||
|
Securitized restricted cash
(b)
|
128 | 138 | ||||||
|
Interest receivables on securitized contract receivables
(c)
|
20 | 22 | ||||||
|
Other assets
(d)
|
2 | 2 | ||||||
|
Total SPE assets
(e)
|
2,672 | 2,865 | ||||||
|
Securitized term notes
(f)
|
1,446 | 1,498 | ||||||
|
Securitized conduit facilities
(f)
|
242 | 152 | ||||||
|
Other liabilities
(g)
|
17 | 22 | ||||||
|
Total SPE liabilities
|
1,705 | 1,672 | ||||||
|
SPE assets in excess of SPE liabilities
|
$ | 967 | $ | 1,193 | ||||
| (a) | Included in current ($259 million and $266 million as of June 30, 2011 and December 31, 2010, respectively) and non-current ($2,263 million and $2,437 million as of June 30, 2011 and December 31, 2010, respectively) vacation ownership contract receivables on the Consolidated Balance Sheets. | |
| (b) | Included in other current assets ($72 million and $77 million as of June 30, 2011 and December 31, 2010, respectively) and other non-current assets ($56 million and $61 million as of June 30, 2011 and December 31, 2010, respectively) on the Consolidated Balance Sheets. | |
| (c) | Included in trade receivables, net on the Consolidated Balance Sheets. | |
| (d) | Includes interest rate derivative contracts and related assets; included in other non-current assets on the Consolidated Balance Sheets. | |
| (e) | Excludes deferred financing costs of $23 million and $22 million as of June 30, 2011 and December 31, 2010, respectively, related to securitized debt. |
| (f) | Included in current ($190 million and $223 million as of June 30, 2011 and December 31, 2010, respectively) and long-term ($1,498 million and $1,427 million as of June 30, 2011 and December 31, 2010, respectively) securitized vacation ownership debt on the Consolidated Balance Sheets. |
| (g) | Primarily includes interest rate derivative contracts and accrued interest on securitized debt; included in accrued expenses and other current liabilities ($3 million as of both June 30, 2011 and December 31, 2010) and other non-current liabilities ($14 million and $19 million as of June 30, 2011 and December 31, 2010, respectively) on the Consolidated Balance Sheets. |
15
|
June 30,
|
December 31,
|
|||||||
| 2011 | 2010 | |||||||
|
SPE assets in excess of SPE liabilities
|
$ | 967 | $ | 1,193 | ||||
|
Non-securitized contract receivables
|
738 | 641 | ||||||
|
Allowance for loan losses
|
(362 | ) | (362 | ) | ||||
|
Total, net
|
$ | 1,343 | $ | 1,472 | ||||
| 8. | Fair Value |
|
Fair Value Measure on a
|
||||||||||||
| Recurring Basis | ||||||||||||
|
Significant
|
Significant
|
|||||||||||
|
As of
|
Other
|
Unobservable
|
||||||||||
|
June 30,
|
Observable
|
Inputs
|
||||||||||
| 2011 | Inputs (Level 2) | (Level 3) | ||||||||||
|
Assets:
|
||||||||||||
|
Derivatives:
(a)
|
||||||||||||
|
Call Options
|
$ | 21 | $ | — | $ | 21 | ||||||
|
Interest rate contracts
|
12 | 12 | — | |||||||||
|
Foreign exchange contracts
|
5 | 5 | — | |||||||||
|
Securities
available-for-sale
(b)
|
6 | — | 6 | |||||||||
|
Total assets
|
$ | 44 | $ | 17 | $ | 27 | ||||||
|
Liabilities:
|
||||||||||||
|
Derivatives:
(c)
|
||||||||||||
|
Bifurcated Conversion Feature
|
$ | 21 | $ | — | $ | 21 | ||||||
|
Interest rate contracts
|
17 | 17 | — | |||||||||
|
Foreign exchange contracts
|
8 | 8 | — | |||||||||
|
Total liabilities
|
$ | 46 | $ | 25 | $ | 21 | ||||||
| (a) | Included in other current assets ($27 million) and other non-current assets ($11 million) on the Consolidated Balance Sheet. | |
| (b) | Included in other non-current assets on the Consolidated Balance Sheet. | |
| (c) | Included in current portion of long-term debt ($21 million), accrued expenses and other current liabilities ($8 million) and other non-current liabilities ($17 million) on the Consolidated Balance Sheet. |
16
|
Fair Value Measure on a
|
||||||||||||
| Recurring Basis | ||||||||||||
|
Significant
|
Significant
|
|||||||||||
|
As of
|
Other
|
Unobservable
|
||||||||||
|
December 31,
|
Observable
|
Inputs
|
||||||||||
| 2010 | Inputs (Level 2) | (Level 3) | ||||||||||
|
Assets:
|
||||||||||||
|
Derivatives:
(a)
|
||||||||||||
|
Call Options
|
$ | 162 | $ | — | $ | 162 | ||||||
|
Interest rate contracts
|
7 | 7 | — | |||||||||
|
Foreign exchange contracts
|
4 | 4 | — | |||||||||
|
Securities
available-for-sale
(b)
|
6 | — | 6 | |||||||||
|
Total assets
|
$ | 179 | $ | 11 | $ | 168 | ||||||
|
Liabilities:
|
||||||||||||
|
Derivatives:
(c)
|
||||||||||||
|
Bifurcated Conversion Feature
|
$ | 162 | $ | — | $ | 162 | ||||||
|
Interest rate contracts
|
27 | 27 | — | |||||||||
|
Foreign exchange contracts
|
12 | 12 | — | |||||||||
|
Total liabilities
|
$ | 201 | $ | 39 | $ | 162 | ||||||
| (a) | Included in other current assets ($5 million) and other non-current assets ($168 million) on the Consolidated Balance Sheet. | |
| (b) | Included in other non-current assets on the Consolidated Balance Sheet. | |
| (c) | Included in long-term debt ($162 million), accrued expenses and other current liabilities ($12 million) and other non-current liabilities ($27 million) on the Consolidated Balance Sheet. |
|
Fair Value Measurements Using
|
||||||||||||
| Significant Unobservable Inputs (Level 3) | ||||||||||||
|
Derivative
|
||||||||||||
|
Liability-
|
||||||||||||
|
Derivative
|
Bifurcated
|
Securities
|
||||||||||
|
Asset-Call
|
Conversion
|
Available-For-
|
||||||||||
| Options | Feature | Sale | ||||||||||
|
Balance as of December 31, 2010
|
$ | 162 | $ | (162 | ) | $ | 6 | |||||
|
Convertible Notes activity
(*)
|
(156 | ) | 156 | — | ||||||||
|
Change in fair value
|
15 | (15 | ) | — | ||||||||
|
Balance as of June 30, 2011
|
$ | 21 | $ | (21 | ) | $ | 6 | |||||
| (*) | Represents the change in value resulting from the Company’s repurchase of a portion of its Convertible Notes and the settlement of a corresponding portion of the Call Options (see Note 6—Long-Term Debt and Borrowing Arrangements). |
17
| June 30, 2011 | December 31, 2010 | |||||||||||||||
|
Estimated
|
Estimated
|
|||||||||||||||
|
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||
| Amount | Value | Amount | Value | |||||||||||||
|
Assets
|
||||||||||||||||
|
Vacation ownership contract receivables, net
|
$ | 2,898 | $ | 3,246 | $ | 2,982 | $ | 2,782 | ||||||||
|
Debt
|
||||||||||||||||
|
Total debt
(a)
|
3,732 | 3,884 | 3,744 | 3,871 | ||||||||||||
|
Derivatives
|
||||||||||||||||
|
Foreign exchange contracts
(b)
|
||||||||||||||||
|
Assets
|
5 | 5 | 4 | 4 | ||||||||||||
|
Liabilities
|
(8 | ) | (8 | ) | (12 | ) | (12 | ) | ||||||||
|
Interest rate contracts
(b)
|
||||||||||||||||
|
Assets
|
12 | 12 | 7 | 7 | ||||||||||||
|
Liabilities
|
(17 | ) | (17 | ) | (27 | ) | (27 | ) | ||||||||
|
Call Options
|
||||||||||||||||
|
Assets
|
21 | 21 | 162 | 162 | ||||||||||||
| (a) | As of June 30, 2011 and December 31, 2010, includes $21 million and $162 million, respectively, related to the Bifurcated Conversion Feature liability. | |
| (b) | Instruments are in net loss positions as of June 30, 2011 and December 31, 2010. |
| 9. | Derivative Instruments and Hedging Activities |
18
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Derivatives designated as hedging instruments
|
||||||||||||||||
|
Interest rate contracts
|
$ | 1 | $ | 3 | $ | 3 | $ | 2 | ||||||||
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Derivatives not designated as hedging instruments
|
||||||||||||||||
|
Foreign exchange contracts
(a)
|
$ | (4 | ) | $ | 5 | $ | (7 | ) | $ | (3 | ) | |||||
|
Interest rate contracts
|
3 | (b) | 4 | (b) | 6 | (b) | 7 | (c) | ||||||||
|
Call Options
|
4 | (90 | ) | 15 | (13 | ) | ||||||||||
|
Bifurcated Conversion Feature
|
(4 | ) | 90 | (15 | ) | 13 | ||||||||||
|
Total
|
$ | (1 | ) | $ | 9 | $ | (1 | ) | $ | 4 | ||||||
| (a) | Included within operating expenses on the Consolidated Statements of Income. | |
| (b) | Included primarily within interest expense on the Consolidated Statements of Income. | |
| (c) | Included primarily within consumer financing interest expense on the Consolidated Statements of Income. |
| Assets | Liabilities | |||||||||||
| Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | |||||||||
|
Derivatives designated as hedging instruments
|
||||||||||||
|
Interest rate contracts
|
Other non-current assets | $ | 5 | Other non-current liabilities | $ | 15 | ||||||
|
Derivatives not designated as hedging instruments
|
||||||||||||
|
Interest rate contracts
|
Other non-current assets | $ | 7 | Other non-current liabilities | $ | 2 | ||||||
|
Foreign exchange contracts
|
Other current assets | 5 | Accrued exp. & other current liabs. | 8 | ||||||||
|
Call Options
(*)
|
Other current assets | 21 | — | |||||||||
|
Bifurcated Conversion Feature
(*)
|
— | Current portion of long-term debt | 21 | |||||||||
|
Total derivatives not designated as hedging instruments
|
$ | 33 | $ | 31 | ||||||||
| (*) | See Note 6—Long-Term Debt and Borrowing Arrangements for further detail. |
19
| Assets | Liabilities | |||||||||||
| Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | |||||||||
|
Derivatives designated as hedging instruments
|
||||||||||||
|
Interest rate contracts
|
Other non-current liabilities | $ | 18 | |||||||||
|
Derivatives not designated as hedging instruments
|
||||||||||||
|
Interest rate contracts
|
Other non-current assets | $ | 7 | Other non-current liabilities | $ | 9 | ||||||
|
Foreign exchange contracts
|
Other current assets | 4 | Accrued exp. & other current liabs. | 12 | ||||||||
|
Call Options
(*)
|
Other non-current assets | 162 | — | |||||||||
|
Bifurcated Conversion Feature
(*)
|
— | Long-term debt | 162 | |||||||||
|
Total derivatives not designated as hedging instruments
|
$ | 173 | $ | 183 | ||||||||
| (*) | See Note 6—Long-Term Debt and Borrowing Arrangements for further detail. |
| 10. | Income Taxes |
| 11. | Commitments and Contingencies |
20
| 12. | Accumulated Other Comprehensive Income |
|
Unrealized
|
Minimum
|
|||||||||||||||
|
Currency
|
Gains/(Losses)
|
Pension
|
||||||||||||||
|
Translation
|
on Cash Flow
|
Liability
|
||||||||||||||
| Adjustments | Hedges, Net | Adjustment | AOCI | |||||||||||||
|
Balance, December 31, 2010, net of tax benefit of $40
|
$ | 171 | $ | (15 | ) | $ | (1 | ) | $ | 155 | ||||||
|
Current period change
|
28 | 2 | — | 30 | ||||||||||||
|
Balance, June 30, 2011, net of tax benefit of $25
|
$ | 199 | $ | (13 | ) | $ | (1 | ) | $ | 185 | ||||||
|
Unrealized
|
Minimum
|
|||||||||||||||
|
Currency
|
Gains/(Losses)
|
Pension
|
||||||||||||||
|
Translation
|
on Cash Flow
|
Liability
|
||||||||||||||
| Adjustments | Hedges, Net | Adjustment | AOCI | |||||||||||||
|
Balance, December 31, 2009, net of tax benefit of $32
|
$ | 166 | $ | (27 | ) | $ | (1 | ) | $ | 138 | ||||||
|
Current period change
|
(42 | ) | 9 | (*) | — | (33 | ) | |||||||||
|
Balance, June 30, 2010, net of tax benefit of $58
|
$ | 124 | $ | (18 | ) | $ | (1 | ) | $ | 105 | ||||||
| (*) | Primarily represents the reclassification of an after-tax unrealized loss associated with the termination of an interest rate swap agreement in connection with the early extinguishment of the term loan facility (see Note 6—Long-Term Debt and Borrowing Arrangements). |
| 13. | Stock-Based Compensation |
21
| RSUs | SSARs | |||||||||||||||
|
Weighted
|
Weighted
|
|||||||||||||||
|
Number
|
Average
|
Number
|
Average
|
|||||||||||||
| of RSUs | Grant Price | of SSARs | Exercise Price | |||||||||||||
|
Balance as of December 31, 2010
|
6.9 | $ | 12.35 | 2.2 | $ | 21.28 | ||||||||||
|
Granted
|
1.5 | (b) | 30.66 | 0.1 | (b) | 30.61 | ||||||||||
|
Vested/exercised
|
(2.8 | ) | 11.59 | — | — | |||||||||||
|
Canceled
|
(0.4 | ) | 14.23 | — | — | |||||||||||
|
Balance as of June 30,
2011
(a)
|
5.2 | (c) | 17.83 | 2.3 | (d) | 21.78 | ||||||||||
| (a) | Aggregate unrecognized compensation expense related to RSUs and SSARs was $84 million as of June 30, 2011 which is expected to be recognized over a weighted average period of 2.9 years. | |
| (b) | Primarily represents awards granted by the Company on February 24, 2011. | |
| (c) | Approximately 5 million RSUs outstanding as of June 30, 2011 are expected to vest over time. | |
| (d) | Approximately 1.7 million of the 2.3 million SSARs are exercisable as of June 30, 2011. The Company assumes that all unvested SSARs are expected to vest over time. SSARs outstanding as of June 30, 2011 had an intrinsic value of $28 million and have a weighted average remaining contractual life of 3 years. |
|
SSARs Issued on
|
||||
| February 24, 2011 | ||||
|
Grant date fair value
|
$ | 11.22 | ||
|
Grant date strike price
|
$ | 30.61 | ||
|
Expected volatility
|
50.83% | |||
|
Expected life
|
4.25 yrs. | |||
|
Risk free interest rate
|
1.85% | |||
|
Projected dividend yield
|
1.96% | |||
22
| 14. | Segment Information |
| Three Months Ended June 30, | ||||||||||||||||
| 2011 | 2010 | |||||||||||||||
|
Net
|
Net
|
|||||||||||||||
| Revenues | EBITDA | Revenues | EBITDA | |||||||||||||
|
Lodging
|
$ | 190 | $ | 66 | $ | 178 | $ | 49 | (e) | |||||||
|
Vacation Exchange and Rentals
|
361 | 106 | (c) | 281 | 78 | |||||||||||
|
Vacation Ownership
|
541 | 130 | 505 | 104 | ||||||||||||
|
Total Reportable Segments
|
1,092 | 302 | 964 | 231 | ||||||||||||
|
Corporate and Other
(a)(b)
|
(2 | ) | (26 | ) | (1 | ) | (14 | ) | ||||||||
|
Total Company
|
$ | 1,090 | 276 | $ | 963 | 217 | ||||||||||
|
Depreciation and amortization
|
45 | 42 | ||||||||||||||
|
Interest expense
|
37 | (d) | 36 | |||||||||||||
|
Interest income
|
(2 | ) | (2 | ) | ||||||||||||
|
Income before income taxes
|
$ | 196 | $ | 141 | ||||||||||||
| (a) | Includes the elimination of transactions between segments. | |
| (b) | Includes (i) $3 million of a net expense related to the resolution of and adjustment to certain contingent liabilities and assets resulting from the Separation during the three months ended June 30, 2011 and (ii) $23 million and $14 million of corporate costs during the three months ended June 30, 2011 and 2010, respectively. | |
| (c) | Includes (i) a $31 million net benefit resulting from a refund of value added taxes and (ii) $7 million of restructuring costs incurred in connection with a strategic initiative commenced by the Company during 2010. | |
| (d) | Includes (i) $3 million of interest related to value added tax accruals and (ii) $1 million of costs incurred for the repurchase of a portion of the Company’s Convertible Notes during the second quarter of 2011. | |
| (e) | Includes $1 million related to costs incurred in connection with the Company’s acquisition of the Tryp brand during June 2010. |
23
| Six Months Ended June 30, | ||||||||||||||||
| 2011 | 2010 | |||||||||||||||
|
Net
|
Net
|
|||||||||||||||
| Revenues | EBITDA | Revenues | EBITDA | |||||||||||||
|
Lodging
|
$ | 339 | $ | 92 | (c) | $ | 322 | $ | 82 | (g) | ||||||
|
Vacation Exchange and Rentals
|
716 | 199 | (d) | 582 | 158 | (h) | ||||||||||
|
Vacation Ownership
|
992 | 227 | (e) | 950 | 186 | |||||||||||
|
Total Reportable Segments
|
2,047 | 518 | 1,854 | 426 | ||||||||||||
|
Corporate and Other
(a)(b)
|
(6 | ) | (38 | ) | (5 | ) | (34 | ) | ||||||||
|
Total Company
|
$ | 2,041 | 480 | $ | 1,849 | 392 | ||||||||||
|
Depreciation and amortization
|
90 | 85 | ||||||||||||||
|
Interest expense
|
81 | (f) | 86 | (i) | ||||||||||||
|
Interest income
|
(3 | ) | (2 | ) | ||||||||||||
|
Income before income taxes
|
$ | 312 | $ | 223 | ||||||||||||
| (a) | Includes the elimination of transactions between segments. | |
| (b) | Includes (i) $8 million of a net benefit and $1 million of a net expense related to the resolution of and adjustment to certain contingent liabilities and assets resulting from the Separation during the six months ended June 30, 2011 and 2010, respectively, and (ii) $47 million and $32 million of corporate costs during the six months ended June 30, 2011 and 2010, respectively. | |
| (c) | Includes a non-cash impairment charge of $13 million related to a write-down of an international joint venture in the Company’s lodging business. | |
| (d) | Includes (i) a $31 million net benefit resulting from a refund of value added taxes and (ii) $7 million of restructuring cost incurred in connection with a strategic initiative commenced by the Company during 2010. | |
| (e) | Includes a $1 million benefit for the reversal of costs incurred as a result of various strategic initiatives commenced by the Company during 2008. |
| (f) | Includes (i) $12 million of costs incurred for the repurchase of a portion of the Company’s Convertible Notes during the first half of 2011 and (ii) $3 million of interest related to value added tax accruals. |
| (g) | Includes $1 million related to costs incurred in connection with the Company’s acquisition of the Tryp brand during June 2010. | |
| (h) | Includes $4 million related to costs incurred in connection with the Company’s acquisition of Hoseasons during March 2010. |
| (i) | Includes $16 million of costs incurred for the early extinguishment of the Company’s term loan and revolving foreign credit facilities during March 2010. |
| 15. | Restructuring |
24
|
Liability as of
|
Liability as of
|
|||||||||||||||||||
|
December 31,
|
Costs
|
Cash
|
Other
|
June 30,
|
||||||||||||||||
| 2010 | Recognized | Payments | Non-cash | 2011 | ||||||||||||||||
|
Personnel-related
(a)
|
$ | 9 | $ | — | $ | (7 | ) | $ | — | $ | 2 | (c) | ||||||||
|
Facility-related
|
11 | 6 | (b) | (4 | ) | 2 | 15 | (d) | ||||||||||||
| $ | 20 | $ | 6 | $ | (11 | ) | $ | 2 | $ | 17 | ||||||||||
| (a) | As of June 30, 2011, the Company had notified substantially all of the employees related to such costs. | |
| (b) | Includes $7 million of costs incurred at the Company’s vacation exchange and rentals business and $1 million of a reversal of previously recorded expenses at the Company’s vacation ownership business. | |
| (c) | Balance as of June 30, 2011 is recorded at the Company’s vacation exchange and rentals business. | |
| (d) | Approximately $9 million and $6 million is recorded at the Company’s vacation exchange and rentals business and vacation ownership business, respectively, as of June 30, 2011. |
| 16. | Separation Adjustments and Transactions with Former Parent and Subsidiaries |
| 17. | Subsequent Event |
25
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
| · | Lodging —franchises hotels in the upper upscale, upscale, upper midscale, midscale, economy and extended stay segments of the lodging industry and provides hotel management services for full-service hotels globally. | |
| · | Vacation Exchange and Rentals —provides vacation exchange services and products to owners of intervals of vacation ownership interests (“VOIs”) and markets vacation rental properties primarily on behalf of independent owners. | |
| · | Vacation Ownership —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. |
26
| Three Months Ended June 30, | ||||||||||||
| 2011 | 2010 | % Change | ||||||||||
|
Lodging
|
||||||||||||
|
Number of rooms
(a)
|
612,900 | 606,800 | 1.0 | |||||||||
|
RevPAR
(b)
|
$ | 35.38 | $ | 32.25 | 9.7 | |||||||
|
Vacation Exchange and Rentals
|
||||||||||||
|
Average number of members (in 000s)
(c)
|
3,755 | 3,741 | 0.4 | |||||||||
|
Exchange revenue per
member
(d)
|
$ | 178.46 | $ | 172.20 | 3.6 | |||||||
|
Vacation rental transactions (in 000s)
(e)(f)
|
328 | 297 | 10.4 | |||||||||
|
Average net price per vacation rental
(f)(g)
|
$ | 549.09 | $ | 387.01 | 41.9 | |||||||
|
Vacation Ownership
|
||||||||||||
|
Gross VOI sales (in 000s)
(h)(i)
|
$ | 412,000 | $ | 371,000 | 11.1 | |||||||
|
Tours
(j)
|
177,000 | 163,000 | 8.6 | |||||||||
|
Volume Per Guest
(“VPG”)
(k)
|
$ | 2,227 | $ | 2,156 | 3.3 | |||||||
| (a) | Represents the number of rooms at lodging properties at the end of the period which are (i) under franchise and/or management agreements and (ii) for the period ended June 30, 2010, managed under an international joint venture. | |
| (b) | Represents revenue per available room and is calculated by multiplying the percentage of available rooms occupied during the period by the average rate charged for renting a lodging room for one day. The three months ended June 30, 2011 includes the impact from the acquisition of the Tryp hotel brand, which was acquired on June 30, 2010, therefore, such operating statistics for 2011 are not presented on a comparable basis to the 2010 operating statistics. | |
| (c) | Represents members in our vacation exchange programs who pay annual membership dues. For additional fees, such participants are entitled to exchange intervals for intervals at other properties affiliated with our vacation exchange business. In addition, certain participants may exchange intervals for other leisure-related services and products. | |
| (d) | Represents total annualized revenues generated from fees associated with memberships, exchange transactions, member-related rentals and other servicing for the period divided by the average number of vacation exchange members during the period. | |
| (e) | Represents the number of transactions that are generated in connection with customers booking their vacation rental stays through us. One rental transaction is recorded for each standard one-week rental. | |
| (f) | Includes the impact from the acquisitions of ResortQuest (September 2010) and James Villa Holidays (November 2010), therefore, such operating statistics for 2011 are not presented on a comparable basis to the 2010 operating statistics. | |
| (g) | Represents the net rental price generated from renting vacation properties to customers divided by the number of vacation rental transactions. | |
| (h) | Represents total sales of VOIs, including sales under the Wyndham Asset Affiliation Model (“WAAM”), before loan loss provisions. We believe that Gross VOI sales provides 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. | |
| (i) | The following table provides a reconciliation of Gross VOI sales to Vacation ownership interest sales for the three months ended June 30 (in millions): |
| 2011 | 2010 | |||||||
|
Gross VOI sales
|
$ | 412 | $ | 371 | ||||
|
Less: WAAM sales
(*)
|
(19 | ) | (13 | ) | ||||
|
Gross VOI sales, net of WAAM sales
|
393 | 358 | ||||||
|
Less: Loan loss provision
|
(80 | ) | (87 | ) | ||||
|
Vacation ownership interest sales
|
$ | 313 | $ | 271 | ||||
| (*) | Represents total sales of VOIs through our fee-for-service vacation ownership sales model designed to offer turn-key solutions for developers or banks in possession of newly developed inventory, which we will sell for a commission fee through our extensive sales and marketing channels. |
| (j) | Represents the number of tours taken by guests in our efforts to sell VOIs. |
| (k) | 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 $18 million and $20 million during the three months ended June 30, 2011 and 2010, respectively. We have excluded non-tour upgrade sales in the calculation of VPG because non-tour upgrade sales 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’ tour selling efforts during a given reporting period. |
27
| Three Months Ended June 30, | ||||||||||||
| 2011 | 2010 | Change | ||||||||||
|
Net revenues
|
$ | 1,090 | $ | 963 | $ | 127 | ||||||
|
Expenses
|
860 | 791 | 69 | |||||||||
|
Operating income
|
230 | 172 | 58 | |||||||||
|
Other income, net
|
(1 | ) | (3 | ) | 2 | |||||||
|
Interest expense
|
37 | 36 | 1 | |||||||||
|
Interest income
|
(2 | ) | (2 | ) | — | |||||||
|
Income before income taxes
|
196 | 141 | 55 | |||||||||
|
Provision for income taxes
|
82 | 46 | 36 | |||||||||
|
Net income
|
$ | 114 | $ | 95 | $ | 19 | ||||||
| · | $56 million of incremental revenues contributed by acquisitions; | |
| · | $41 million of higher net VOI sales; | |
| · | $19 million of a favorable impact from foreign exchange; and | |
| · | $12 million of higher royalty, marketing and reservation revenues. |
| · | $49 million of higher expenses related to acquisitions; | |
| · | $20 million of an unfavorable impact from foreign exchange; | |
| · | $17 million of higher operating expenses related to VOI sales; and | |
| · | a $31 million favorable impact to general and administrative expenses due to a net benefit resulting from a refund of value added taxes. |
| · | net revenues of approximately $4.2 billion to $4.3 billion; | |
| · | depreciation and amortization of approximately $180 million to $185 million; and | |
| · | interest expense, net (excluding early extinguishment of debt costs) of approximately $130 million to $135 million. |
28
| Net Revenues | EBITDA | |||||||||||||||||||
| 2011 | 2010 | % Change | 2011 | 2010 | % Change | |||||||||||||||
|
Lodging
|
$ | 190 | $ | 178 | 6.7 | $ | 66 | $ | 49 | 34.7 | ||||||||||
|
Vacation Exchange and Rentals
|
361 | 281 | 28.5 | 106 | 78 | 35.9 | ||||||||||||||
|
Vacation Ownership
|
541 | 505 | 7.1 | 130 | 104 | 25.0 | ||||||||||||||
|
Total Reportable Segments
|
1,092 | 964 | 13.3 | 302 | 231 | 30.7 | ||||||||||||||
|
Corporate and Other
(a)
|
(2 | ) | (1 | ) | * | (26 | ) | (14 | ) | * | ||||||||||
|
Total Company
|
$ | 1,090 | $ | 963 | 13.2 | 276 | 217 | 27.2 | ||||||||||||
|
Less: Depreciation and amortization
|
45 | 42 | ||||||||||||||||||
|
Interest expense
|
37 | 36 | ||||||||||||||||||
|
Interest income
|
(2 | ) | (2 | ) | ||||||||||||||||
|
Income before income taxes
|
$ | 196 | $ | 141 | ||||||||||||||||
| (*) | Not meaningful. | |
| (a) | Includes the elimination of transactions between segments. |
| · | RevPAR to be up 6% to 8%; and | |
| · | number of rooms (including Tryp) to increase 1% to 3%. |
29
| · | vacation rental transactions to increase 16% to 18%; | |
| · | average net price per vacation rental to increase 25% to 27%; | |
| · | average number of members to be flat; and | |
| · | exchange revenue per member to increase 1% to 3%. |
| · | $10 million of increased sales costs; | |
| · | $9 million of increased costs associated with maintenance fees on unsold inventory; and | |
| · | $9 million of increased marketing expenses due to increased tours for new owner generation. |
30
| · | gross VOI sales to be $1.5 billion to $1.6 billion (including approximately $100 million to $125 million related to WAAM); | |
| · | tours to increase 5% to 8%; and | |
| · | VPG to increase 2% to 4%. |
| · | $4 million of increased costs primarily related to data security enhancements; | |
| · | $3 million of lower net gains from hedging activities; and | |
| · | $3 million of a net expense related to the resolution of and adjustment to certain contingent liabilities and assets. |
31
| Six Months Ended June 30, | ||||||||||||
| 2011 | 2010 | Change | ||||||||||
|
Net revenues
|
$ | 2,041 | $ | 1,849 | $ | 192 | ||||||
|
Expenses
|
1,658 | 1,547 | 111 | |||||||||
|
Operating income
|
383 | 302 | 81 | |||||||||
|
Other income, net
|
(7 | ) | (5 | ) | (2 | ) | ||||||
|
Interest expense
|
81 | 86 | (5 | ) | ||||||||
|
Interest income
|
(3 | ) | (2 | ) | (1 | ) | ||||||
|
Income before income taxes
|
312 | 223 | 89 | |||||||||
|
Provision for income taxes
|
126 | 78 | 48 | |||||||||
|
Net income
|
$ | 186 | $ | 145 | $ | 41 | ||||||
| · | $89 million of incremental revenues related to acquisitions; | |
| · | $37 million of higher revenues from our vacation ownership business primarily due to increased VOI sales and property management fees, partially offset by the impact of a change in the reporting of fees related to incidental VOI operations; | |
| · | $29 million of increased revenue from our exchange and rentals business primarily due to improved yield at our vacation rentals business, higher rental transactions and the impact of a change in the classification of third-party sales commission fees to operating expenses; | |
| · | $21 million due to a favorable impact from foreign exchange; and | |
| · | $18 million from higher royalty, marketing and reservation revenues at our lodging business. |
| · | $78 million of incremental expenses related to acquisitions; | |
| · | $46 million of higher operating expenses resulting from the revenue increases (excluding acquisitions); | |
| · | $22 million of an unfavorable impact from foreign exchange; and | |
| · | $13 million for a non-cash impairment charge related to a write-down of an international joint venture in the lodging business due to our partner’s indirect relationship with the Libyan government. |
32
| Net Revenues | EBITDA | |||||||||||||||||||
| 2011 | 2010 | % Change | 2011 | 2010 | % Change | |||||||||||||||
|
Lodging
|
$ | 339 | $ | 322 | 5.3 | $ | 92 | $ | 82 | 12.2 | ||||||||||
|
Vacation Exchange and Rentals
|
716 | 582 | 23.0 | 199 | 158 | 25.9 | ||||||||||||||
|
Vacation Ownership
|
992 | 950 | 4.4 | 227 | 186 | 22.0 | ||||||||||||||
|
Total Reportable Segments
|
2,047 | 1,854 | 10.4 | 518 | 426 | 21.6 | ||||||||||||||
|
Corporate and Other
(a)
|
(6 | ) | (5 | ) | * | (38 | ) | (34 | ) | * | ||||||||||
|
Total Company
|
$ | 2,041 | $ | 1,849 | 10.4 | 480 | 392 | 22.4 | ||||||||||||
|
Less: Depreciation and amortization
|
90 | 85 | ||||||||||||||||||
|
Interest expense
|
81 | 86 | ||||||||||||||||||
|
Interest income
|
(3 | ) | (2 | ) | ||||||||||||||||
|
Income before income taxes
|
$ | 312 | $ | 223 | ||||||||||||||||
| (*) | Not meaningful. |
| (a) | Includes the elimination of transactions between segments. |
33
| · | $18 million of increased costs associated with maintenance fees on unsold inventory; | |
| · | $16 million of increased marketing expenses due to increased tours for new owner generation; and | |
| · | $9 million of increased sales costs. |
| · | $18 million of decreased litigation related costs; | |
| · | $6 million of decreased deed recording costs; and | |
| · | $6 million of lower cost of VOI sales due to favorable inventory adjustments and product mix. |
34
| · | $7 million of increased costs primarily for data security enhancements; | |
| · | $4 million of lower net gains from hedging activities; and | |
| · | $3 million of higher employee-related costs. |
| · | a $5 million favorable impact from the resolution of and adjustment to certain contingent liabilities and assets; and | |
| · | a $4 million gain related to the redemption of a preferred stock investment allocated to us in connection with the Separation. |
|
June 30,
|
December 31,
|
|||||||||||
| 2011 | 2010 | Change | ||||||||||
|
Total assets
|
$ | 9,329 | $ | 9,416 | $ | (87 | ) | |||||
|
Total liabilities
|
6,715 | 6,499 | 216 | |||||||||
|
Total stockholders’ equity
|
2,614 | 2,917 | (303 | ) | ||||||||
| · | a $175 million decrease in other non-current assets primarily due to the settlement of a portion of our call options in connection with the repurchase of a portion of our 3.50% convertible notes; | |
| · | an $84 million decrease in vacation ownership contract receivables, net primarily due to an increase in the reserve for loan losses resulting from new loan originations; | |
| · | a $60 million decrease in inventory primarily due to VOI sales during the first half of 2011; and | |
| · | a $35 million decrease in trade receivables, net, primarily due to collections seasonality at our vacation rentals businesses, partially offset by the impact of foreign currency translation and increased receivables due to seasonality at our lodging business. |
| · | an increase of $140 million in cash and cash equivalents primarily due to seasonality of our vacation rentals business; |
35
| · | a $65 million increase in property and equipment primarily related to capital expenditures for information technology enhancements and maintenance, construction of new bungalows at our Landal GreenParks business and construction on our Bonnet Creek Hotel, as well as the impact of foreign currency translation, partially offset by the depreciation of property and equipment; | |
| · | a $41 million increase in other current assets primarily due to increased escrow deposit restricted cash related to advanced booking deposits received on vacation rental transactions; and | |
| · | a $19 million increase in goodwill primarily resulting from foreign currency translation. |
| · | a $111 million increase in accounts payable primarily due to seasonality at our vacation rentals businesses and the impact of foreign currency translation; | |
| · | a $73 million increase in deferred income primarily resulting from higher advance arrival-based bookings within our vacation exchange and rentals business; | |
| · | a $62 million increase in deferred income taxes primarily attributable to higher gross VOI sales and a change in the expected timing of the utilization of alternative minimum tax credits; and | |
| · | a $38 million net increase in our securitized vacation ownership debt (see Note 6—Long-Term Debt and Borrowing Arrangements). |
| · | a net decrease of $50 million in other long-term debt primarily reflecting (i) a $141 million net reduction in our derivative liability related to the bifurcated conversion feature entered into concurrent with the sale of our convertible notes, (ii) a $104 million decrease due to the repurchase of a portion of our 3.50% convertible notes, and (iii) a $47 million net decrease in outstanding borrowings on our corporate revolver, partially offset by the issuance of our $250 million 5.625% senior unsecured notes; and | |
| · | a $22 million decrease in due to former Parent and subsidiaries as a result of the payment and settlement of certain legacy liabilities. |
| · | $373 million of share repurchases; | |
| · | $112 million for the repurchase of warrants; and | |
| · | $52 million of dividends. |
| · | $186 million of net income; | |
| · | $28 million of currency translation adjustments, net of tax; and | |
| · | a $17 million increase to our pool of excess tax benefits available to absorb tax deficiencies due to the vesting of equity awards. |
36
| Six Months Ended June 30, | ||||||||||||
| 2011 | 2010 | Change | ||||||||||
|
Cash provided by/(used in):
|
||||||||||||
|
Operating activities
|
$ | 696 | $ | 557 | $ | 139 | ||||||
|
Investing activities
|
(104 | ) | (183 | ) | 79 | |||||||
|
Financing activities
|
(457 | ) | (283 | ) | (174 | ) | ||||||
|
Effects of changes in exchange rate on cash and cash equivalents
|
5 | (7 | ) | 12 | ||||||||
|
Net change in cash and cash equivalents
|
$ | 140 | $ | 84 | $ | 56 | ||||||
| · | a $51 million refund for value added taxes, of which $13 million is included in net income and $38 million is in working capital; | |
| · | a $69 million increase in deferred income primarily due to (i) higher arrival-based bookings resulting from the 2010 acquisitions of ResortQuest and James Villa Holidays at our vacation exchange and rentals business and (ii) lower recognition of deferred ancillary revenues at our vacation ownership business; | |
| · | $36 million of lower cash used to purchase and construct vacation ownership inventory; and | |
| · | $28 million of higher net income (exclusive of the $13 million refund of value added taxes). |
| · | $301 million of higher share repurchases; and | |
| · | $262 million related to the repurchase of a portion of our convertible notes. |
| · | $353 million of higher net proceeds related to non-securitized borrowings; and | |
| · | $43 million of higher net proceeds resulting from the settlement of a portion of our 2009 convertible note hedge and warrant transactions. |
37
38
|
June 30,
|
December 31,
|
|||||||
| 2011 | 2010 | |||||||
|
Securitized vacation ownership debt:
(a)
|
||||||||
|
Term notes
|
$ | 1,446 | $ | 1,498 | ||||
|
Bank conduit facility
(b)
|
242 | 152 | ||||||
|
Total securitized vacation ownership debt
|
$ | 1,688 | $ | 1,650 | ||||
|
Long-term debt:
|
||||||||
|
Revolving credit facility (due October 2013)
(c)
|
$ | 107 | $ | 154 | ||||
|
6.00% senior unsecured notes (due December 2016)
(d)
|
803 | 798 | ||||||
|
9.875% senior unsecured notes (due May 2014)
(e)
|
242 | 241 | ||||||
|
3.50% convertible notes (due May 2012)
(f)
|
32 | 266 | ||||||
|
7.375% senior unsecured notes (due March 2020)
(g)
|
247 | 247 | ||||||
|
5.75% senior unsecured notes (due February 2018)
(h)
|
247 | 247 | ||||||
|
5.625% senior unsecured notes (due March 2021)
(i)
|
245 | — | ||||||
|
Vacation rentals capital leases
(j)
|
120 | 115 | ||||||
|
Other
|
1 | 26 | ||||||
|
Total long-term debt
|
$ | 2,044 | $ | 2,094 | ||||
| (a) | Represents non-recourse debt that is currently securitized through 13 bankruptcy-remote special purpose entities (“SPEs”), the creditors of which have no recourse to us for principal and interest. These outstanding borrowings are collateralized by $2,672 million and $2,865 million of underlying gross vacation ownership contract receivables and related assets as of June 30, 2011 and December 31, 2010, respectively. |
| (b) | Represents a $600 million, non-recourse vacation ownership bank conduit facility, with a term through June 2013, whose capacity is subject to our ability to provide additional assets to collateralize the facility. As of June 30, 2011, the total available capacity of the facility was $358 million. |
| (c) | The revolving credit facility has a total capacity of $980 million, which includes availability for letters of credit. As of June 30, 2011, we had $13 million of letters of credit outstanding and, as such, the total available capacity of the revolving credit facility was $860 million. During July 2011, we replaced our $980 million revolving credit facility with a five-year revolving credit facility. The new facility has a total capacity of $1 billion and a maturity date of July 15, 2016. |
| (d) | Represents senior unsecured notes we issued during December 2006. The balance as of June 30, 2011 represents $800 million aggregate principal less $2 million of unamortized discount, plus a $5 million fair value hedge derivative. |
| (e) | Represents senior unsecured notes we issued during May 2009. The balance as of June 30, 2011 represents $250 million aggregate principal less $8 million of unamortized discount. |
| (f) | Represents convertible notes we issued during May 2009, which includes debt principal, less unamortized discount, and a liability related to a bifurcated conversion feature. During the first half of 2011, we repurchased a portion of our outstanding 3.50% convertible notes, primarily through the completion of a cash tender offer. The following table details the components of the convertible notes: |
|
June 30,
|
||||||||
| 2011 | December 31, 2010 | |||||||
|
Debt principal
|
$ | 12 | $ | 116 | ||||
|
Unamortized discount
|
(1 | ) | (12 | ) | ||||
|
Debt less discount
|
11 | 104 | ||||||
|
Fair value of bifurcated conversion feature(*)
|
21 | 162 | ||||||
|
Convertible notes
|
$ | 32 | $ | 266 | ||||
| (*) | We also have an asset with a fair value equal to the bifurcated conversion feature, which represents cash-settled call options that we purchased concurrent with the issuance of the convertible notes. |
| (g) | Represents senior unsecured notes we issued during February 2010. The balance as of June 30, 2011 represents $250 million aggregate principal less $3 million of unamortized discount. |
| (h) | Represents senior unsecured notes we issued during September 2010. The balance as of June 30, 2011 represents $250 million aggregate principal less $3 million of unamortized discount. |
| (i) | Represents senior unsecured notes we issued during March 2011. The balance as of June 30, 2011 represents $250 million aggregate principal less $5 million of unamortized discount. |
| (j) | Represents capital lease obligations with corresponding assets classified within property and equipment on our Consolidated Balance Sheets. |
39
|
Securitized
|
||||||||
|
Bank Conduit
|
Revolving Credit
|
|||||||
| Facility (a) | Facility | |||||||
|
Total Capacity
|
$ | 600 | $ | 980 | ||||
|
Less: Outstanding Borrowings
|
242 | 107 | ||||||
|
Available Capacity
|
$ | 358 | $ | 873 | (b) | |||
| (a) | The capacity of this facility is subject to our ability to provide additional assets to collateralize additional securitized borrowings. |
| (b) | The capacity under our revolving credit facility includes availability for letters of credit. As of June 30, 2011, the available capacity of $873 million was further reduced to $860 million due to the issuance of $13 million of letters of credit. |
|
June 30,
|
December 31,
|
|||||||
| 2011 | 2010 | |||||||
|
Securitized contract receivables, gross
|
$ | 2,522 | $ | 2,703 | ||||
|
Securitized restricted cash
|
128 | 138 | ||||||
|
Interest receivables on securitized contract receivables
|
20 | 22 | ||||||
|
Other assets
(a)
|
2 | 2 | ||||||
|
Total SPE assets
(b)
|
2,672 | 2,865 | ||||||
|
Securitized term notes
|
1,446 | 1,498 | ||||||
|
Securitized conduit facilities
|
242 | 152 | ||||||
|
Other liabilities
(c)
|
17 | 22 | ||||||
|
Total SPE liabilities
|
1,705 | 1,672 | ||||||
|
SPE assets in excess of SPE liabilities
|
$ | 967 | $ | 1,193 | ||||
| (a) | Includes interest rate derivative contracts and related assets. |
| (b) | Excludes deferred financing costs of $23 million and $22 million as of June 30, 2011 and December 31, 2010, respectively, related to securitized debt. |
| (c) | Primarily includes interest rate derivative contracts and accrued interest on securitized debt. |
40
|
June 30,
|
||||||||
| 2011 | December 31, 2010 | |||||||
|
SPE assets in excess of SPE liabilities
|
$ | 967 | $ | 1,193 | ||||
|
Non-securitized contract receivables
|
738 | 641 | ||||||
|
Allowance for loan losses
|
(362 | ) | (362 | ) | ||||
|
Total, net
|
$ | 1,343 | $ | 1,472 | ||||
41
42
|
7/1/11-
|
7/1/12-
|
7/1/13-
|
7/1/14-
|
7/1/15-
|
||||||||||||||||||||||||
| 6/30/12 | 6/30/13 | 6/30/14 | 6/30/15 | 6/30/16 | Thereafter | Total | ||||||||||||||||||||||
|
Securitized debt
(a)
|
$ | 190 | $ | 202 | $ | 274 | $ | 294 | $ | 173 | $ | 555 | $ | 1,688 | ||||||||||||||
|
Long-term debt
|
43 | 11 | 361 | 12 | 13 | 1,604 | 2,044 | |||||||||||||||||||||
|
Interest on securitized and long-term debt
(b)
|
218 | 219 | 182 | 137 | 125 | 205 | 1,086 | |||||||||||||||||||||
|
Operating leases
|
76 | 57 | 40 | 35 | 32 | 139 | 379 | |||||||||||||||||||||
|
Other purchase commitments
(c)
|
199 | 28 | 10 | 5 | 1 | 135 | 378 | |||||||||||||||||||||
|
Contingent liabilities
(d)
|
28 | 28 | — | — | — | — | 56 | |||||||||||||||||||||
|
Total
(e)
|
$ | 754 | $ | 545 | $ | 867 | $ | 483 | $ | 344 | $ | 2,638 | $ | 5,631 | ||||||||||||||
| (a) | Represents debt that is securitized through bankruptcy-remote SPEs, the creditors to which have no recourse to us for principal and interest. |
| (b) | Estimated using the stated interest rates on our long-term debt and the swapped interest rates on our securitized debt. |
| (c) | Primarily represents commitments for the development of vacation ownership properties. Total includes approximately $100 million of vacation ownership development commitments, which we may terminate at minimal cost. |
| (d) | Primarily represents certain contingent litigation liabilities, contingent tax liabilities and 37.5% of Cendant contingent and other corporate liabilities, which we assumed and are responsible for pursuant to our separation from Cendant. |
| (e) | Excludes $23 million of our liability for unrecognized tax benefits associated with the guidance for uncertainty in income taxes since it is not reasonably estimable to determine the periods in which such liability would be settled with the respective tax authorities. |
43
| Item 3. | Quantitative and Qualitative Disclosures About Market Risks. |
| Item 4. | Controls and Procedures. |
| (a) | Disclosure Controls and Procedures. Our management, with the participation of our Chairman and Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, our Chairman and Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective. |
| (b) | Internal Control Over Financial Reporting. There have been no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the period to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. |
| Item 1. | Legal Proceedings. |
| Item 1A. | RISK FACTORS. |
44
| · | changes in operating costs, including inflation, energy, labor costs (including minimum wage increases and unionization), workers’ compensation and health-care related costs and insurance; | |
| · | changes in desirability of geographic regions of the hotels or resorts in our business; | |
| · | changes in the supply and demand for hotel rooms, vacation exchange and rental services and vacation ownership services and products; | |
| · | seasonality in our businesses, which may cause fluctuations in our operating results; | |
| · | geographic concentrations of our operations and customers; | |
| · | increases in costs due to inflation that may not be fully offset by price and fee increases in our business; | |
| · | availability of acceptable financing and cost of capital as they apply to us, our customers, current and potential hotel franchisees and developers, owners of hotels with which we have hotel management contracts, our RCI affiliates and other developers of vacation ownership resorts; | |
| · | our ability to securitize the receivables that we originate in connection with sales of vacation ownership interests; | |
| · | the risk that purchasers of vacation ownership interests who finance a portion of the purchase price default on their loans due to adverse macro or personal economic conditions or otherwise, which would increase loan loss reserves and adversely affect loan portfolio performance; that if such defaults occur during the early part of the loan amortization period we will not have recovered the marketing, selling, administrative and other costs associated with such vacation ownership interest; such costs will be incurred again in connection with the resale of the repossessed vacation ownership interest; and the value we recover in a default is not, in all instances, sufficient to cover the outstanding debt; | |
| · | the quality of the services provided by franchisees, our vacation exchange and rentals business, resorts with units that are exchanged through our vacation exchange business and/or resorts in which we sell vacation ownership interests may adversely affect our image and reputation; | |
| · | our ability to generate sufficient cash to buy from third-party suppliers the products that we need to provide to the participants in our points programs who want to redeem points for such products; | |
| · | overbuilding in one or more segments of the hospitality industry and/or in one or more geographic regions; | |
| · | changes in the number and occupancy and room rates of hotels operating under franchise and management agreements; | |
| · | changes in the relative mix of franchised hotels in the various lodging industry price categories; | |
| · | our ability to develop and maintain positive relations and contractual arrangements with current and potential franchisees, hotel owners, vacation exchange members, vacation ownership interest owners, resorts with units that are exchanged through our vacation exchange business and/or owners of vacation properties that our vacation rentals business markets for rental; | |
| · | the availability of and competition for desirable sites for the development of vacation ownership properties; difficulties associated with obtaining entitlements to develop vacation ownership properties; liability under state and local laws with respect to any construction defects in the vacation ownership properties we develop; |
45
| and our ability to adjust our pace of completion of resort development relative to the pace of our sales of the underlying vacation ownership interests; |
| · | our ability to adjust our business model to generate greater cash flow and require less capital expenditures; | |
| · | private resale of vacation ownership interests, which could adversely affect our vacation ownership resorts and vacation exchange businesses; | |
| · | revenues from our lodging business are indirectly affected by our franchisees’ pricing decisions; | |
| · | organized labor activities and associated litigation; | |
| · | maintenance and infringement of our intellectual property; | |
| · | the bankruptcy or insolvency of any one of our customers, which could impair our ability to collect outstanding fees or other amounts due or otherwise exercise our contractual rights; | |
| · | increases in the use of third-party Internet services to book online hotel reservations; and | |
| · | disruptions in relationships with third parties, including marketing alliances and affiliations with e-commerce channels. |
| · | 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; |
46
| · | if we are unable to comply with the terms of the financial covenants under our revolving credit facility, including a breach of the financial ratios or tests, such non-compliance 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; | |
| · | 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 or other operating needs; | |
| · | increases in interest rates; | |
| · | rating agency downgrades for our debt that could increase our borrowing costs; | |
| · | failure or non-performance of counterparties to foreign exchange and interest rate hedging transactions; | |
| · | we may not be able to securitize our vacation ownership contract receivables on terms acceptable to us because of, among other factors, the performance of the vacation ownership contract 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 contract receivables and other credit we extend is greater than expected; | |
| · | our securitizations contain portfolio performance triggers 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 and 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; and | |
| · | if interest rates increase significantly, we may not be able to increase the interest rate offered to finance purchases of vacation ownership interests by the same amount of the increase. |
47
48
49
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
| (c) | Below is a summary of our Wyndham Worldwide common stock repurchases by month for the quarter ended June 30, 2011: |
|
Approximate Dollar
|
||||||||||||||||
|
Total Number of
|
Value of Shares
|
|||||||||||||||
|
Shares Purchased as
|
that May Yet Be
|
|||||||||||||||
|
Total Number of
|
Average Price Paid
|
Part of Publicly
|
Purchased Under
|
|||||||||||||
| Period | Shares Purchased | per Share | Announced Plan | Plan | ||||||||||||
|
April 1—30, 2011
|
3,066,424 | $ | 32.21 | 3,066,424 | $ | 493,258,668 | ||||||||||
|
May 1—31, 2011
|
1,073,941 | $ | 34.19 | 1,073,941 | $ | 459,291,904 | ||||||||||
|
June 1—30,
2011
(*)
|
2,012,176 | $ | 32.04 | 2,012,176 | $ | 394,822,345 | ||||||||||
|
Total
|
6,152,541 | $ | 32.50 | 6,152,541 | $ | 394,822,345 | ||||||||||
| (*) | Includes 153,500 shares purchased for which the trade date occurred during June 2011 while settlement occurred during July 2011. |
| Item 3. | Defaults Upon Senior Securities. |
| Item 5. | Other Information. |
50
| Item 6. | Exhibits. |
| · | were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; | |
| · | may have been qualified in such agreement by disclosures that were made to the other party in connection with the negotiation of the applicable agreement; | |
| · | may apply contract standards of “materiality” that are different from “materiality” under the applicable securities laws; and | |
| · | were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement. |
51
|
Date: August 1, 2011
|
/s/ Thomas
G.
Conforti
Chief Financial Officer |
|
|
Date: August 1, 2011
|
/s/ Nicola
Rossi
Chief Accounting Officer |
52
|
Exhibit No.
|
Description
|
|
|
3.1
|
Amended and Restated Certificate of Incorporation (incorporated by reference to the Registrant’s Form 8-K filed July 19, 2006) | |
|
3.2
|
Amended and Restated By-Laws (incorporated by reference to the Registrant’s Form 8-K filed July 19, 2006) | |
|
10.1*
|
First Amendment, dated as of June 28, 2011, to the Amended and Restated Indenture and Servicing Agreement, dated as of October 1, 2010, by and among Sierra Timeshare Conduit Receivables Funding II, LLC, as Issuer, Wyndham Consumer Finance, Inc., as Servicer, Wells Fargo Bank, National Association, as Trustee and U.S. Bank National Association, as Collateral Agent. | |
|
12*
|
Computation of Ratio of Earnings to Fixed Charges | |
|
14.1**
|
101.INS XBRL Instance document** | |
| 101.SCH XBRL Taxonomy Extension Schema Document** | ||
| 101.CAL XBRL Taxonomy Calculation Linkbase Document** | ||
| 101.DEF XBRL Taxonomy Label Linkbase Document** | ||
| 101.LAB XBRL Taxonomy Presentation Linkbase Document** | ||
| 101.PRE XBRL Taxonomy Extension Definition Linkbase Document** | ||
|
15*
|
Letter re: Unaudited Interim Financial Information | |
|
31.1*
|
Certification of Chairman and Chief Executive Officer Pursuant to Rules 13(a)-14(a) and 15(d)-14(a) Promulgated Under the Securities Exchange Act of 1934, as amended | |
|
31.2*
|
Certification of Chief Financial Officer Pursuant to Rules 13(a)-14(a) and 15(d)-14(a) Promulgated Under the Securities Exchange Act of 1934, as amended | |
|
32**
|
Certification of Chairman and Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| * | Filed with this report | |
| ** | Furnished with this report |
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
No Customers Found
Suppliers
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|