Wyndham Hotels & Resorts, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Leases

Leases

6 Months Ended

Jun. 30, 2019

The Company adopted the new accounting guidance for leases using the modified retrospective approach as of January 1, 2019. Prior-year financial statements were not recast under the new standard, and therefore those amounts are not presented in the tables below. The Company elected the package of transition provisions available for expired or existing contracts, which allowed the Company to carry forward its historical assessments of (i) whether contracts are or contain leases, (ii) lease classification and (iii) initial direct costs. The adoption of the new accounting guidance for leases resulted in the recognition of an operating right-of-use asset and operating lease liability of $12 million. Assets of $41 million and liabilities of $59 million related to finance leases were already reflected on the Company’s Condensed Consolidated Balance Sheet as of December 31, 2018, under the previous accounting standard for leases.

The Company leases property and equipment under finance and operating leases. For leases with terms greater than one-year, the Company records the related asset and obligation at the present value of lease payments over the term. The Company does not separate lease and nonlease components of equipment leases.

The table below presents the lease-related assets and liabilities recorded on the Condensed Consolidated Balance Sheets.



	Classification on the Balance Sheet	June 30, 2019
Assets
Operating lease assets	Other non-current assets	$	34
Finance lease assets	Property and equipment, net	40
Total lease assets		$	74

Liabilities
Current
Operating lease liabilities	Accrued expenses and other current liabilities	$	6
Finance lease liabilities	Current portion of long-term debt	5
Non-current
Operating lease liabilities	Other non-current liabilities	28
Finance lease liabilities	Long-term debt	58
Total lease liabilities		$	97

During the second quarter of 2019, the Company entered into new leases related to its corporate headquarters and call center, which resulted in an increase of $22 million in operating lease assets and lease liabilities.

The table below presents the remaining lease term and discount rates for finance and operating leases.



	June 30, 2019
Weighted-average remaining lease term
Operating leases	7.7 years
Finance leases	10.2 years
Weighted-average discount rate
Operating leases ^(a)	4.8	%
Finance leases	4.5	%

(a) Upon adoption of the new lease guidance, discount rates used for existing leases were established on January 1, 2019.

Undiscounted Cash Flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the Company’s Condensed Consolidated Balance Sheet as of June 30, 2019.



	Operating Leases		Finance Leases
Remainder of 2019	$	4	$	4
2020	7		7
2021	6		7
2022	4		7
2023	3		7
2024	3		7
Thereafter	13		38
Total minimum lease payments	40		77
Less: amount of lease payments representing interest	6		14
Present value of future minimum lease payments	34		63
Less: current obligations under leases	6		5
Long-term lease obligations	$	28	$	58

Other Information

For the six months ended June 30, 2019, the Company made cash payments totaling $4 million related to its operating and finance leases which was included within operating activities, and $2 million of cash payments related to its finance leases which was included within financing activities on the Condensed Consolidated Statement of Cash Flows.

For the three months ended June 30, 2019, the Company incurred finance lease expense of $1 million for each of amortization of the right-of-use assets and interest expense and incurred $1 million of expense related to its operating leases.

For the six months ended June 30, 2019, the Company incurred finance lease expense of $2 million for each of amortization of right-of-use assets and interest expense and incurred $3 million of expense related to its operating leases.