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

Quarterly report pursuant to Section 13 or 15(d)

Long-Lived Assets

Long-Lived Assets

9 Months Ended

Sep. 30, 2021


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 nine months ended September 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 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 September 30, 2021 and December 31, 2020 was $259 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 Company’s results during 2020, the Company performed multiple qualitative assessments on its goodwill throughout 2020, a quantitative assessment in the second quarter of 2020 and its annual quantitative assessment as of October 1, 2020. With the exception of the assessment performed in the second quarter of 2020, the Company determined that it was more likely than not that the fair value of its reporting units continued to substantially exceed their carrying values. In connection with the Company’s assessment in the second quarter of 2020, the Company incurred a $14 million charge in the second quarter of 2020 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 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 nine months ended September 30, 2021.

Other Intangibles

As a result of the impact COVID-19 had on the Company’s results, during 2020 the Company performed multiple assessments on the carrying value of each of its other indefinite-lived intangible assets compared to their respective estimated fair values in addition to its annual assessment as of October 1, 2020. With the exception of the assessment performed in the second quarter of 2020, the Company determined that it was more likely than not that the fair value of its other indefinite-lived intangible assets continued to substantially exceed their carrying values. During the second quarter of 2020, the Company determined through such assessment 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 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 quarterly qualitative assessments of its other indefinite-lived intangible assets during 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.

During 2020, the Company also performed multiple assessments on the recoverability of each of its definite-lived intangible assets to determine if circumstances indicated that impairment may have occurred. 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 nine months ended September 30, 2021.

The Company does not anticipate the pandemic to further materially impact the results from operations, however 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 September 30, 2021 and December 31, 2020 consisted of the following:


	September 30, 2021						December 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

	September 30, 2021						December 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	$	507	$	388	$	895	$	487	$	408
Management agreements	136		40		96		136		33		103
Trademarks	2		1		1		2		1		1
Other	1		1		—		1		—		1
	$	1,034	$	549	$	485	$	1,034	$	521	$	513

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


Intangible Asset	Book Value		Impairment Charges		Adjusted Fair Value
Owned hotel reporting unit goodwill	$	14	$	(14)	$	—
La Quinta trademark	710		(155)		555
Other trademarks (a)	103		(36)		67
Total	$	827	$	(205)	$	622

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(a) Represents the impairments of three of the Company’s trademarks.