Other Expenses and Charges |
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| Other Expenses [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Expenses and Charges |
Impairments, net
As a result of COVID-19 and the significant negative impact it has had on travel demand, the Company reviewed its intangible assets for potential impairment and determined that the carrying value of certain intangible assets were in excess of their fair values. Accordingly, the Company recorded impairment charges of $205 million, in the second quarter of 2020, primarily related to certain trademarks and goodwill associated with its owned hotel reporting unit. See Note 6 - Long-Lived Assets for more information. Additionally, in the second quarter of 2020, the Company incurred a $4 million non-cash impairment charge for the write-off of a receivable as a result of the Company’s notice of termination of an unprofitable
management agreement. See Note 11 - Commitments and Contingencies for more information. In the second quarter of 2020, the Company also received $3 million of cash related to a previously impaired asset. These charges were all reported within impairments, net on the Condensed Consolidated Statement of Income.
During the second quarter of 2019, the Company incurred a non-cash net impairment charge associated with the planned termination of a hotel-management arrangement, which is comprised of a $48 million write-off of receivables, a $10 million write-off of a guarantee asset and the derecognition of a $13 million guarantee liability.
Restructuring
The Company incurred $29 million of charges during the nine months ended September 30, 2020, related to three restructuring initiatives implemented in response to COVID-19. The first quarter of 2020 plan resulted in a reduction of 262 employees for a charge of $13 million. During the second quarter of 2020, the Company initiated another plan to further reduce headcount by 180 employees and to consolidate its corporate facilities resulting in a charge of $16 million. During the third quarter of 2020, the Company initiated another restructuring plan to further reduce headcount by 186 full and part-time employees, primarily at the Company's owned hotels, resulting in a charge of less than $1 million. In addition, during the fourth quarter of 2019, the Company had implemented restructuring initiatives, primarily focused on enhancing its organizational efficiency and rationalizing its operations. Below is the activity for the nine months ended September 30, 2020 relating to restructuring activities by plan:
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(a)Represents non-cash payments in Company stock.
Restructuring charges by segment for the nine months ended September 30, 2020 were as follows:
Transaction-related, net
Transaction-related expenses incurred by the Company were not material during the three months ended September 30, 2020 and $12 million during the three months ended September 30, 2019. For the nine months ended September 30, 2020 and 2019, the Company incurred transaction-related expenses of $13 million and $30 million, respectively. These expenses were primarily related to La Quinta integration activities during 2020 and in 2019, reflects costs associated with La Quinta integration activities as well as tax matters associated with the 2018 acquisition of La Quinta.
Separation-related
Separation-related costs associated with the Company's spin-off from Wyndham Worldwide were $1 million and $22 million for the nine months ended September 30, 2020 and 2019, respectively. These costs primarily consist of severance, stock-based compensation and other employee-related costs.
Contract termination
During the second quarter of 2019, the Company incurred a contract termination charge of $9 million in connection with an obligation associated with the expected termination of a hotel-management agreement, which was paid in the second quarter of 2020.
During the third quarter of 2019, the Company entered into an agreement to terminate a hotel-management agreement which contained operating performance guarantees and covered eight hotel properties. In conjunction with this termination, the Company incurred a contract termination charge of $34 million.
CorePoint agreement
In October 2019, the Company entered into an agreement with CorePoint Lodging Inc. ("CorePoint"), a franchisee with which the Company also has hotel-management agreements, to resolve open issues between the two companies. As part of the agreement, the Company recorded a $20 million fee credit for past services in the third quarter of 2019, representing payments it was required to make to CorePoint pursuant to the agreement. Such charge is reflected as a reduction to hotel management revenues on the Condensed Consolidated Statements of Income. In addition, the two companies also agreed to finalize outstanding tax matters related to the acquisition of La Quinta. As a result, the Company also recorded a $6 million charge in the third quarter of 2019 related to the resolution of the tax matters, which is reflected in transaction-related costs on the Condensed Consolidated Statements of Income. The Company paid $5 million and $18 million to CorePoint in the nine months ended September 30, 2020 and the full year 2019, respectively, related to such charges; the remaining amounts are expected to be paid through 2021.
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