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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
or
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from         to        
Commission File Number: 001-38432
wh-20210630_g1.jpg
Wyndham Hotels & Resorts, Inc.
(Exact name of registrant as specified in its charter)
Delaware
82-3356232
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer
Identification No.)
22 Sylvan Way
07054
Parsippany,
New Jersey
(Zip Code)
(Address of principal executive offices)
(973753-6000
(Registrant’s telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock
WHNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ      No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ     No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the last practicable date:
93,523,120 shares of common stock outstanding as of June 30, 2021.


Table of Contents
TABLE OF CONTENTS
Page
PART I
FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II
OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


Table of Contents
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Wyndham Hotels & Resorts, Inc.
Results of Review of Interim Financial Statements
We have reviewed the accompanying condensed consolidated balance sheet of Wyndham Hotels & Resorts, Inc. and subsidiaries (the “Company”) as of June 30, 2021, the related condensed consolidated statements of income/(loss), comprehensive income/(loss), and equity for the three-month and six-month periods ended June 30, 2021 and 2020, and of cash flows for the six-month periods ended June 30, 2021 and 2020, and the related notes (collectively referred to as the “interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2020, and the related consolidated and combined statements of income/(loss), comprehensive income/(loss), cash flows, and equity for the year then ended (not presented herein); and in our report dated February 12, 2021, we expressed an unqualified opinion (which included an emphasis of a matter paragraph relating to expense allocations for certain corporate functions and services historically provided by Wyndham Worldwide Corporation) on those consolidated and combined financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

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

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



/s/ Deloitte & Touche LLP
New York, New York
July 29, 2021



Table of Contents
WYNDHAM HOTELS & RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS)
(In millions, except per share amounts)
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Net revenues
Royalties and franchise fees$122 $61 $200 $154 
Marketing, reservation and loyalty119 82 204 188 
Management and other fees30 6 50 38 
License and other fees20 21 40 42 
Other
30 22 60 53 
Fee-related and other revenues321 192 554 475 
Cost reimbursements85 66 155 192 
Net revenues
406 258 709 667 
Expenses
Marketing, reservation and loyalty105 85 198 204 
Operating31 23 58 57 
General and administrative27 26 51 54 
Cost reimbursements85 66 155 192 
Depreciation and amortization24 25 47 49 
Separation-related1  3 1 
Impairments, net  206  206 
Restructuring  16  29 
Transaction-related, net 5  13 
Total expenses
273 452 512 805 
Operating income/(loss)133 (194)197 (138)
Interest expense, net
22 28 51 54 
Early extinguishment of debt18  18  
Income/(loss) before income taxes93 (222)128 (192)
Provision for/(benefit from) income taxes
25 (48)35 (40)
Net income/(loss)
$68 $(174)$93 $(152)
Earnings/(loss) per share
Basic$0.73 $(1.86)$0.99 $(1.63)
Diluted0.73 (1.86)0.99 (1.63)

See Notes to Condensed Consolidated Financial Statements.
2


Table of Contents
WYNDHAM HOTELS & RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(In millions)
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Net income/(loss)$68 $(174)$93 $(152)
Other comprehensive income/(loss), net of tax
Foreign currency translation adjustments
1 1 2 (2)
Unrealized gains/(losses) on cash flow hedges
4 (2)17 (38)
Other comprehensive income/(loss), net of tax
5 (1)19 (40)
Comprehensive income/(loss)
$73 $(175)$112 $(192)

See Notes to Condensed Consolidated Financial Statements.
3


Table of Contents
WYNDHAM HOTELS & RESORTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
(Unaudited)
June 30, 2021December 31, 2020
Assets
Current assets:
Cash and cash equivalents
$103 $493 
Trade receivables, net
298 295 
Prepaid expenses
52 45 
Other current assets
63 67 
Total current assets
516 900 
Property and equipment, net
267 278 
Goodwill
1,525 1,525 
Trademarks, net
1,202 1,203 
Franchise agreements and other intangibles, net
493 512 
Other non-current assets
238 226 
Total assets
$4,241 $4,644 
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt
$21 $21 
Accounts payable
33 28 
Deferred revenues
80 71 
Accrued expenses and other current liabilities
227 226 
Total current liabilities361 346 
Long-term debt2,071 2,576 
Deferred income taxes
368 359 
Deferred revenues
160 158 
Other non-current liabilities
221 242 
Total liabilities
3,181 3,681 
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.01 par value, authorized 6.0 shares, none issued and outstanding
  
Common stock, $0.01 par value, authorized 600.0 shares, 101.2 and 100.8 issued and outstanding at June 30, 2021 and December 31, 2020
1 1 
Treasury stock, at cost – 7.7 shares at June 30, 2021 and December 31, 2020
(408)(408)
Additional paid-in capital
1,519 1,504 
Accumulated deficit(19)(82)
Accumulated other comprehensive loss
(33)(52)
Total stockholders’ equity
1,060 963 
Total liabilities and stockholders' equity
$4,241 $4,644 

See Notes to Condensed Consolidated Financial Statements.
4


Table of Contents
WYNDHAM HOTELS & RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Six Months Ended June 30,
20212020
Operating activities
Net income/(loss)$93 $(152)
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
Depreciation and amortization47 49 
Provision for doubtful accounts14 21 
Impairments, net
 209 
Deferred income taxes
3 (47)
Stock-based compensation
13 10 
Loss on early extinguishment of debt18  
Net change in assets and liabilities:
Trade receivables
(16)(44)
Prepaid expenses
(7)(3)
Other current assets
4 (3)
Accounts payable, accrued expenses and other current liabilities
6 (51)
Deferred revenues11 (22)
Payments of development advance notes, net(16)(6)
Other, net
10 (1)
Net cash provided by/(used in) operating activities
180 (40)
Investing activities
Property and equipment additions
(17)(18)
Issuance of loans, net
 (1)
Other, net
(1) 
Net cash used in investing activities
(18)(19)
Financing activities
Proceeds from borrowings 45 744 
Principal payments on long-term debt
(566)(18)
Dividends to shareholders
(30)(38)
Repurchases of common stock
 (50)
Net share settlement of incentive equity awards
(6)(4)
Other, net
5 (4)
Net cash (used in)/provided by financing activities
(552)630 
Effect of changes in exchange rates on cash, cash equivalents and restricted cash
 (1)
Net (decrease)/increase in cash, cash equivalents and restricted cash(390)570 
Cash, cash equivalents and restricted cash, beginning of period
493 94 
Cash, cash equivalents and restricted cash, end of period
$103 $664 
See Notes to Condensed Consolidated Financial Statements.
5


Table of Contents
WYNDHAM HOTELS & RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In millions)
(Unaudited)
Common Shares Outstanding
Common Stock
Treasury
Stock
Additional Paid-in Capital
Accumulated Deficit
Accumulated Other Comprehensive Loss
Total Equity
Balance as of December 31, 202093 $1 $(408)$1,504 $(82)$(52)$963 
Net income— — — — 24 — 24 
Other comprehensive income
— — — — — 14 14 
Dividends— — — — (15)— (15)
Net share settlement of incentive equity awards
— — — (5)— — (5)
Change in deferred compensation
— — — 5 — — 5 
Exercise of stock options— — — 4 — — 4 
Other— — — — 1 — 1 
Balance as of March 31, 2021
93 1 (408)1,508 (72)(38)991 
Net income— — — — 68 — 68 
Other comprehensive income
— — — — — 5 5 
Dividends— — — — (15)— (15)
Net share settlement of incentive equity awards
— — — (1)— — (1)
Change in deferred compensation
— — — 8 — — 8 
Exercise of stock options— — — 4 — — 4 
Issuance of shares for restricted stock units vesting1 — — — — —  
Balance as of June 30, 2021
94 $1 $(408)$1,519 $(19)$(33)$1,060 
Common Shares Outstanding
Common Stock
Treasury
Stock
Additional Paid-in Capital
Retained Earnings/(Accumulated Deficit)
Accumulated Other Comprehensive Loss
Total Equity
Balance as of December 31, 201994 $1 $(363)$1,488 $113 $(27)$1,212 
Net income— — — — 22 — 22 
Other comprehensive loss
— — — — — (39)(39)
Dividends— — — — (30)— (30)
Repurchase of common stock
(1)— (45)— — — (45)
Net share settlement of incentive equity awards
— — — (2)— — (2)
Change in deferred compensation
— — — 4 — — 4 
Cumulative effect of change in accounting standard
— — — — (10)— (10)
Balance as of March 31, 202093 1 (408)1,490 95 (66)1,112 
Net loss— — — — (174)— (174)
Other comprehensive loss
— — — — — (1)(1)
Dividends— — — — (8)— (8)
Net share settlement of incentive equity awards
— — — (2)— — (2)
Change in deferred compensation
— — — 6 — — 6 
Other— — — (1)1 —  
Balance as of June 30, 202093 $1 $(408)$1,493 $(86)$(67)$933 
See Notes to Condensed Consolidated Financial Statements.
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WYNDHAM HOTELS & RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise noted, all amounts are in millions, except share and per share amounts)
(Unaudited)

1. BASIS OF PRESENTATION
Wyndham Hotels & Resorts, Inc. (collectively with its consolidated subsidiaries, “Wyndham Hotels” or the “Company”) is a leading global hotel franchisor, licensing its renowned hotel brands to hotel owners in nearly 95 countries around the world.
The Condensed Consolidated Financial Statements have been prepared on a stand-alone basis. The Condensed Consolidated Financial Statements include Wyndham Hotels’ assets, liabilities, revenues, expenses and cash flows and all entities in which Wyndham Hotels has a controlling financial interest. The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany balances and transactions have been eliminated in the Condensed Consolidated Financial Statements.
In presenting the Condensed Consolidated Financial Statements, management makes estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ from those estimates. In management’s opinion, the Condensed Consolidated Financial Statements contain all normal recurring adjustments necessary for a fair presentation of interim results reported. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire year or any subsequent interim period. These Condensed Consolidated Financial Statements should be read in conjunction with the Company’s 2020 Consolidated and Combined Financial Statements included in its most recent Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) and any subsequent reports filed with the SEC.
Business description
Wyndham Hotels operates in the following segments:
•    Hotel Franchising — licenses the Company’s lodging brands and provides related services to third-party hotel owners and others.
•    Hotel Management — provides hotel management services for full-service and limited-service hotels as well as two hotels that are owned by the Company.

2. NEW ACCOUNTING PRONOUNCEMENTS
Recently adopted accounting pronouncements
Simplifying the Accounting for Income Taxes. On December 18, 2019, the Financial Accounting Standards Board (“FASB”) issued guidance which simplifies the accounting standards for income taxes. The amendment clarifies and simplifies aspects of the accounting for income taxes to help promote consistent application of U.S. GAAP by eliminating certain exceptions to the general principles of ASC 740, Income Taxes. This guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, with early adoption permitted. The Company adopted the guidance on January 1, 2021, as required. There was no material impact on the Company's Condensed Consolidated Financial Statements and related disclosures as a result of adopting this new standard.


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3. REVENUE RECOGNITION
Deferred revenues
Deferred revenues, or contract liabilities, generally represent payments or consideration received in advance for goods or services that the Company has not yet provided to the customer. Deferred revenues as of June 30, 2021 and December 31, 2020 are as follows:
June 30, 2021December 31, 2020
Deferred initial franchise fee revenues
$143 $136 
Deferred loyalty program revenues
76 75 
Deferred other revenues
21 18 
Total
$240 $229 

Deferred initial franchise fees represent payments received in advance from prospective franchisees upon the signing of a franchise agreement and are generally recognized to revenue within 12 years. Deferred loyalty revenues represent the portion of loyalty program fees charged to franchisees, net of redemption costs, that have been deferred and will be recognized over time based upon loyalty point redemption patterns.

As a result of the negative impact that the coronavirus pandemic (“COVID-19”) had on travel demand in 2020, the Company’s assumptions related to redemptions, including estimated member redemption rate, member redemption pattern, and the estimated cost to satisfy such redemptions, changed. Accordingly, the Company recognized a $16 million cumulative adjustment, which resulted in an increase to loyalty revenues during the second quarter of 2020. Such increase is included within marketing, reservation and loyalty and other revenues on the Condensed Consolidated Statement of Income/(Loss) during the three and six months ended June 30, 2020.
Performance obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to a 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. The following table summarizes the Company’s remaining performance obligations for the twelve-month periods set forth below:
7/1/2021 - 6/30/20227/1/2022 - 6/30/20237/1/2023 - 6/30/2024

Thereafter

Total
Initial franchise fee revenues
$23 $9 $8 $103 $143 
Loyalty program revenues
44 22 8 2 76 
Other revenues
13 1 1 6 21 
Total
$80 $32 $17 $111 $240 
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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:
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Hotel Franchising
Royalties and franchise fees
$115 $59 $190 $144 
Marketing, reservation and loyalty
119 82 204 187 
License and other fees
20 21 40 42 
Other
29 20 58 52 
Total Hotel Franchising
283 182 492 425 
Hotel Management
Royalties and franchise fees
7 2 10 10 
Marketing, reservation and loyalty
— — — 1 
Owned hotel revenues
21 2 34 23 
Management fees
9 4 16 15 
Cost reimbursements
85 66 155 192 
Other
1 2 2 1 
Total Hotel Management
123 76 217 242 
Net revenues
$406 $258 $709 $667 

Capitalized contract costs
The Company incurs certain direct and incremental sales commissions costs in order to obtain hotel franchise and management contracts. Such costs are capitalized and subsequently amortized beginning upon hotel opening over the first non-cancellable period of the agreement. In the event an agreement is terminated prior to the end of the first non-cancellable period, any unamortized cost is immediately expensed. In addition, the Company also capitalizes costs associated with the sale and installation of property management systems to its franchisees, which are amortized over the remaining non-cancellable period of the franchise agreement. As of June 30, 2021 and December 31, 2020, capitalized contract costs were $33 million, of which $7 million for both periods was included in other current assets and $26 million for both periods, was included in other non-current assets on its Condensed Consolidated Balance Sheets.

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4. EARNINGS PER SHARE
The computation of basic and diluted earnings/(loss) per share (“EPS”) is based on net income divided by the basic weighted average number of common shares and diluted weighted average number of common shares, respectively.
The following table sets forth the computation of basic and diluted EPS (in millions, except per share data):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Net income/(loss)$68 $(174)$93 $(152)
Basic weighted average shares outstanding93.693.393.593.5
Stock options and restricted stock units (“RSUs”) (a)
0.50.4
Diluted weighted average shares outstanding
94.193.393.993.5
Earnings/(loss) per share:
Basic
$0.73 $(1.86)$0.99 $(1.63)
Diluted
0.73 (1.86)0.99 (1.63)
Dividends:
Cash dividends declared per share
$0.16 $0.08 $0.32 $0.40 
Aggregate dividends paid to shareholders
$15 $8 $30 $38 
_____________________
(a)    Due to the anti-dilutive effect resulting from the reported net loss for the three and six months ended June 30, 2020, 0.1 million of anti-dilutive shares were omitted from the calculation of weighted average shares outstanding for those periods.

Stock repurchase program
The following table summarizes stock repurchase activity under the current stock repurchase program (in millions, except per share data):
SharesCostAverage Price Per Share
As of December 31, 2020
7.7 $408 $53.43 
For the six months ended June 30, 2021
   
As of June 30, 20217.7 $408 $53.43 

The Company had $191 million of remaining availability under its program as of June 30, 2021.

5. ACCOUNTS RECEIVABLE
Allowance for doubtful accounts
The Company generates trade receivables in the ordinary course of its business and provides for estimated bad debts on such receivables. The Company adopted the new accounting guidance, ASU 2016-13, Measurement of Credit Losses on Financial Instruments on January 1, 2020. As a result of adopting the new guidance, the Company recorded a $10 million (net of a $2 million income tax benefit) cumulative effect adjustment to retained earnings at January 1, 2020.
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The following table sets forth the activity in the Company's allowance for doubtful accounts on trade accounts receivables for the six months ended:
20212020
Balance as of January 1,$72$47
Cumulative effect of change in accounting standard12
Provision for doubtful accounts1421
Bad debt write-offs(8)(13)
Balance as of June 30,$78$67

6. LONG-LIVED ASSETS
Property and equipment
As a result of the impact COVID-19 had on the Company’s results during 2020, the Company evaluated the recoverability of its net property and equipment associated with its two owned hotels for impairment in 2020 and believed that it was more likely than not that the carrying value of those assets were recoverable from future expected cash flows, on an undiscounted basis, from such assets. Due to the ongoing recovery of travel demand in 2021 and the favorable impact it had on the Company's operations, the Company believes there were no events that would indicate that an impairment to such property and equipment may have occurred in the six months ended June 30, 2021.
Although the Company believes that it is more likely than not that the carrying values of its net property and equipment for its two owned hotels are not impaired, the impact of COVID-19 and the ultimate duration remains highly uncertain. Should there be a resurgence of the virus which results in new government restrictions and slows the ongoing recovery from the effects of the pandemic, the Company's results of operations may be negatively impacted and the property and equipment associated with its owned hotels may be exposed to impairment.
Property and equipment, net as of June 30, 2021 and December 31, 2020 was $267 million and $278 million, respectively.
Intangible assets
Goodwill

The Company evaluates the carrying value of its goodwill in each of its reporting units (i) hotel franchising, (ii) hotel management and (iii) owned hotels, compared to their respective estimated fair values on an annual basis during the fourth quarter of every year, or more frequently if circumstances indicate that the fair value of goodwill may be impaired, to the reporting units’ carrying values as required by guidance. As a result of the impact COVID-19 had on the hospitality industry during 2020, the Company performed a quantitative impairment analysis on its goodwill in the second quarter of 2020. As a result of such analyses, during the second quarter of 2020, the Company incurred a $14 million charge to fully write-down the goodwill balance for its owned hotel reporting unit. Such charge was reported within impairments, net on the Condensed Consolidated Statement of Income/(Loss) and was charged to the hotel management segment. The Company performed its annual impairment assessment of its goodwill as of October 1, 2020 and determined that no impairments existed and that the fair values of its hotel franchising and hotel management reporting units substantially exceeded their carrying values.

As a result of the impact COVID-19 had on the hospitality industry during 2020, the Company performed a qualitative assessment of its remaining goodwill for its hotel franchising and hotel management reporting units as of March 31, September 30, and December 31, 2020. Through such assessments, the Company determined that it was more likely than not that the fair value of its hotel franchising and hotel management reporting units continued to significantly exceed their carrying values. Due to the ongoing recovery of travel demand in 2021 and the favorable impact it had on the Company's operations, the Company believes there were no events that would indicate that an impairment may have occurred to its goodwill for its hotel franchising or hotel management reporting units in the six months ended June 30, 2021.

Other Intangibles

As a result of the impact COVID-19 had on the Company’s results during 2020, the Company evaluated the carrying value of each of its other indefinite-lived intangible assets compared to their respective estimated fair values in 2020. During the second quarter of 2020, the Company determined through such analyses that certain of its trademarks were impaired. Accordingly, the Company recorded impairment charges of $191 million to reduce the carrying value of those trademarks to
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their estimated fair values. Such charges were reported within impairments, net on the Condensed Consolidated Statement of Income/(Loss) and were charged to the hotel franchising segment. Additionally, the Company performed its annual impairment assessment of its other indefinite-lived intangible assets as of October 1, 2020 and determined that no additional impairments exist. Additionally, the Company performed a qualitative assessment of its other indefinite-lived intangible assets as of March 31, and June 30, 2021 and determined through such assessments, that it was more likely than not that the fair value of such indefinite-lived intangible assets were in excess of their carrying values.
The Company also evaluated the recoverability of each of its definite-lived intangible assets by performing a qualitative assessment during each of the quarters in 2020 to determine if circumstances indicated that impairment may have occurred in 2020 and performed a quantitative impairment assessment for a management contract and certain franchise agreements during the fourth quarter of 2020. As a result of these assessments, the Company determined these assets were not impaired. Due to the ongoing recovery of travel demand in 2021 and the favorable impact it had on the Company's operations, the Company believes there were no events that would indicate that an impairment may have occurred to its franchise agreements or management contracts in the six months ended June 30, 2021.

The following table details impairment charges related to intangible assets recorded in the second quarter of 2020:

Intangible AssetBook ValueImpairment ChargesAdjusted Fair Value
Owned hotel reporting unit goodwill$14 $(14)$ 
La Quinta trademark710 (155)555 
Other trademarks (a)
103 (36)67 
Total$827 $(205)$622 
_____________________
(a)    Represents the impairments of three of the Company's trademarks.
Should there be a resurgence of the virus which results in new government restrictions and slows the ongoing recovery from the effects of the pandemic, the Company's results of operations may be negatively impacted and its intangible assets within its hotel franchising and hotel management reporting units may be exposed to future impairments. To the extent estimated market-based valuation multiples and/or discounted cash flows are revised downward, the Company may be required to write-down all or a portion of its remaining goodwill, trademarks, franchise agreements and management contracts, which would adversely impact earnings.
Intangible assets as of June 30, 2021 and December 31, 2020 consisted of the following:
June 30, 2021December 31, 2020
Gross
Carrying
Amount
Accumulated
Impairment
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Impairment
Net
Carrying
Amount
Goodwill
$1,539 $14 $1,525 $1,539 $14 $1,525 
June 30, 2021December 31, 2020
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Unamortized intangible assets:
Trademarks$1,201 $1,202 
Amortized intangible assets:
Franchise agreements$895 $500 $395 $895 $487 $408 
Management agreements136 38 98 136 33 103 
Trademarks2 1 1 2 1 1 
Other
1 1  1  1 
$1,034 $540 $494 $1,034 $521 $513 

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7. FRANCHISING, MARKETING AND RESERVATION ACTIVITIES
Royalties and franchise fee revenues on the Condensed Consolidated Statements of Income/(Loss) include initial franchise fees of $4 million and $5 million for the three months ended June 30, 2021 and 2020, respectively, and $7 million and $8 million for the six months ended June 30, 2021 and 2020, respectively.
In accordance with its franchise agreements, generally the Company is contractually obligated to expend the marketing and reservation fees it collects from franchisees for the operation of an international, centralized, brand-specific reservation system and for marketing purposes such as advertising, promotional and co-marketing programs, and training for the respective franchisees.
Development advance notes
The Company may, at its discretion, provide development advance notes to certain franchisees or hotel owners in order to assist them in converting to one of its brands, in building a new hotel to be flagged under one of its brands or in assisting in other franchisee expansion efforts. Provided the franchisee/hotel owner is in compliance with the terms of the franchise/management agreement, all or a portion of the development advance notes may be forgiven by the Company over the period of the franchise/management agreement, which typically ranges from 10 to 20 years. Otherwise, the related principal is due and payable to the Company. In certain instances, the Company may earn interest on unpaid franchisee development advance notes.
The Company recorded the following related to development advance notes on the Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets:
June 30, 2021December 31, 2020
Development advance notes (a)
$101 $92 
_____________________
(a)    Included within other non-current assets.

Condensed Consolidated Statements of Income/(Loss):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Forgiveness of notes (a)
$2 $2 $4 $4 
Bad debt expense related to notes
   1 
______________________
(a)    Amounts are recorded as a reduction of royalties and franchise fees and marketing, reservation and loyalty revenues.

Condensed Consolidated Statements of Cash Flows:
Six Months Ended June 30,
20212020
Payments of development advance notes$(17)$(6)
Proceeds from development advance notes
1  
Payments of development advance notes, net
$(16)$(6)

8. INCOME TAXES
The Company files income tax returns in the U.S. federal and state jurisdictions, as well as in foreign jurisdictions. Through May 31, 2018, the Company was part of a consolidated U.S. federal income tax return and consolidated and combined state returns with Wyndham Worldwide (“former Parent”). The Company is no longer subject to U.S. federal income tax examinations for years prior to 2015. The Company is no longer subject to state and local, or foreign, income tax examinations for years prior to 2010.
The Company made cash income tax payments, net of refunds, of $13 million and $2 million for the six months ended June 30, 2021 and 2020, respectively.
The Company’s effective tax rates were a 26.9% tax provision on pre-tax income and a 21.6% tax benefit on pre-tax loss during the three months ended June 30, 2021 and 2020, respectively. The Company’s effective tax rates were a 27.3% tax provision on pre-tax income and a 20.8% tax benefit on pre-tax loss during the six months ended June 30, 2021 and 2020,
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respectively. The increases in both periods were primarily related to goodwill impairment charges that are nondeductible for tax purposes in 2020 and the absence in 2021 of nonrecurring foreign and state tax benefits.
La Quinta Holdings, Inc. (“LQ”) and then affiliated entities in existence prior to their acquisition by the Company are currently under audit by the Internal Revenue Service (“IRS”) for tax years ended December 31, 2010 to December 31, 2016. The IRS has proposed adjustments for tax years 2010 to 2013 relating to entities that rem