Transactions With Former Parent |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transactions With Former Parent |
Transactions with Former Parent
Wyndham Hotels has a number of arrangements with its former Parent for services provided between both parties as described below.
License Agreement and Other Agreements with Former Parent
In connection with the Company’s spin-off, Wyndham Hotels and Wyndham Worldwide entered into long-term exclusive license agreements to retain Wyndham Destinations’ affiliations with one of the hospitality industry’s top-rated loyalty programs, Wyndham Rewards, as well as to continue to collaborate on inventory-sharing and customer cross-sell initiatives.
Wyndham Hotels also entered into several agreements with Wyndham Destinations that govern the relationship of the parties following the spin-off, including a separation and distribution agreement, an employee matters agreement, a tax matters agreement and a transition services agreement. In connection with these agreements, the Company recorded $1 million and $5 million of revenues for the three months ended September 30, 2019 and 2018, respectively, and $4 million and $5 million of revenues for the nine months ended September 30, 2019 and 2018, respectively, which are reported within other revenues on the Condensed Consolidated and Combined Statements of Income.
In addition, Wyndham Hotels recorded revenues from Wyndham Destinations in the amount of $31 million and $30 million for the three months ended September 30, 2019 and 2018, respectively, and $82 million and $63 million for the nine months ended September 30, 2019 and 2018, respectively, for a license, development and non-competition agreement. Further, the Company recorded revenues of $4 million and $6 million for the three months ended September 30, 2019 and 2018, respectively, and $15 million and $16 million for the nine months ended September 30, 2019 and 2018, respectively, for activities associated with the Wyndham Rewards program. Such fees are recorded within license and other revenues from former Parent on the Condensed Consolidated and Combined Statements of Income. Wyndham Hotels also incurred $9 million of expense during the second quarter of 2019 as a result of an indemnification obligation to Wyndham Destinations related to the expected termination of a hotel-management agreement and an associated lease. Such expense is recorded within contract termination expenses on the Condensed Consolidated and Combined Statement of Income.
These agreements have either not existed historically, or may be on different terms than the terms of the arrangement or agreements that existed prior to the spin-off. The Condensed Consolidated and Combined Financial Statements do not reflect the effect of these new and/or revised agreements for periods prior to the spin-off.
Transfer of Former Parent Liabilities and Issuances of Guarantees to Former Parent and Affiliates
Upon the distribution of the Company’s common stock to Wyndham Worldwide shareholders, the Company entered into certain guarantee commitments with its former Parent. These guarantee arrangements relate to certain former Parent contingent tax and other corporate liabilities. The Company assumed and is responsible for one-third of such contingent liabilities while its former Parent is responsible for the remaining two-thirds. The amount of liabilities assumed by the Company in connection with the spin-off was $22 million and $24 million as of September 30, 2019 and December 31, 2018, respectively, which were included within other non-current liabilities. The Company also had a $2 million and $11 million liability due to its former Parent primarily related to taxes which was included within current liabilities on its Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018, respectively. In addition, the Company had $7 million and $44 million of tax-related receivables due from former Parent as of September 30, 2019 and December 31, 2018, respectively, which were included within current assets on its Condensed Consolidated Balance Sheets. During the second quarter of 2019, the Company received $28 million from its former Parent related to net tax refunds, which was included within capital contribution from former Parent on its Condensed Consolidated and Combined Statement of Cash Flows.
Cash Management
Former Parent used a centralized cash management process. Prior to the Company’s spin-off, the majority of Wyndham Hotels’ daily cash receipts were transferred to former Parent and former Parent funded Wyndham Hotels’ operating and investing activities as needed. Accordingly, the cash and cash equivalents held by former Parent were not allocated to Wyndham Hotels prior to the spin-off. During such periods, Wyndham Hotels reflected transfers of cash between the Company and former Parent as a component of Due to former Parent, net on its Condensed Consolidated Balance Sheets.
Net Transfer to and Net Contribution from Former Parent
The components of net transfers to and net contribution from former Parent in the Condensed and Combined Statements of former Parent’s Net Investment were as follows:
Services Provided by Former Parent
Prior to the Company’s spin-off, Wyndham Hotels’ Condensed Consolidated and Combined Financial Statements included costs for services that its former Parent provided to the Company, including, but not limited to, information technology support, financial services, human resources and other shared services. Historically, these costs were charged to Wyndham Hotels on a basis determined by its former Parent to reflect a reasonable allocation of actual costs incurred to perform the services. During the nine months ended September 30, 2018, Wyndham Hotels was charged $13 million for such services, which were included in operating and general and administrative expenses in Wyndham Hotels’ Condensed Consolidated and Combined Statements of Income.
Additionally, former Parent allocated indirect general corporate overhead costs to Wyndham Hotels for certain functions and services provided, including, but not limited to, executive facilities, shared service technology platforms, finance and other administrative support. Accordingly, the Company recorded $12 million of expenses for indirect general corporate overhead from former Parent during the nine months ended September 30, 2018, which are included in general and administrative expenses within its Condensed Consolidated and Combined Statements of Income.
These allocations may not, however, reflect the expense Wyndham Hotels would have incurred as an independent, publicly traded company for the periods presented. Actual costs that may have been incurred had Wyndham Hotels been a stand-alone company would depend on a number of factors, including the chosen organizational structure, the functions Wyndham Hotels might have performed itself or outsourced and strategic decisions Wyndham Hotels might have made in areas such as information technology and infrastructure. Following the Company’s spin-off, Wyndham Hotels performed these functions using its own resources or purchased services from either former Parent or third parties.
Insurance
Prior to the Company’s spin-off, former Parent provided the Company with insurance coverage for general liability, property, business interruption and other risks with respect to business operations and charged the Company a fee based on estimates of claims. Wyndham Hotels was charged $1 million for the nine months ended September 30, 2018, which was included in the Condensed Consolidated and Combined Statements of Income.
Defined Contribution Benefit Plans
Prior to the Company’s spin-off, former Parent administered and maintained defined contribution savings plans and a deferred compensation plan that provided eligible employees of Wyndham Hotels an opportunity to accumulate funds for retirement. Former Parent matched the contributions of participating employees on the basis specified by each plan. Wyndham Hotels’ cost for these plans was $2 million for the nine months ended September 30, 2018. Subsequent to the Company’s spin-off, Wyndham Hotels administers and maintains its own defined contribution savings plans and deferred compensation plan.
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