WYNDHAM HOTELS & RESORTS, INC. (Unless otherwise noted, all amounts are in millions, except share and per share amounts) References herein to "Wyndham Hotels ," the "Company," "we," "our" and "us" refer to both (i)Wyndham Hotels & Resorts, Inc. and its consolidated subsidiaries for time periods following the consummation of the spin-off and (ii) theWyndham Hotels & Resorts businesses for time periods prior to the consummation of our spin-off fromWyndham Worldwide . Unless the context otherwise suggests, references herein to "Wyndham Worldwide ," "Wyndham Destinations" and "former Parent" refer toWyndham Worldwide Corporation and its consolidated subsidiaries. BUSINESS AND OVERVIEWWyndham Hotels & Resorts is a leading global hotel franchisor, licensing its renowned hotel brands to hotel owners in nearly 95 countries around the world.Wyndham Hotels operates in the following segments: •Hotel Franchising - licenses our 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 us. The Consolidated and Combined Financial Statements presented herein have been prepared on a stand-alone basis and prior toMay 31, 2018 are derived from the consolidated financial statements and accounting records ofWyndham Worldwide . The Consolidated and Combined Financial Statements includeWyndham Hotels' assets, liabilities, revenues, expenses and cash flows and all entities in whichWyndham Hotels has a controlling financial interest. 28
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RESULTS OF OPERATIONS
Discussed below are our key operating statistics, combined results of operations
and the results of operations for each of our reportable segments. The
reportable segments presented below represent our operating segments for which
discrete financial information is available and used on a regular basis by our
chief operating decision maker to assess performance and to allocate resources.
In identifying our reportable segments, we also consider the nature of services
provided by our operating segments. Management evaluates the operating results
of each of our reportable segments based upon net revenues and adjusted EBITDA.
Adjusted EBITDA is defined as net income (loss) excluding net interest expense,
depreciation and amortization, impairment charges, restructuring and related
charges, contract termination costs, transaction-related items (acquisition-,
disposition- or separation-related), foreign currency impacts of highly
inflationary countries, stock-based compensation expense and income taxes. We
believe that adjusted EBITDA is a useful measure of performance for our segments
and, when considered with U.S. Generally Accepted Accounting Principles ("GAAP")
measures, gives a more complete understanding of our operating performance. We
use this measure internally to assess operating performance, both absolutely and
in comparison to other companies, and to make day to day operating decisions,
including in the evaluation of selected compensation decisions. Adjusted EBITDA
is not a recognized term under U.S. GAAP and should not be considered as an
alternative to net income (loss) or other measures of financial performance or
liquidity derived in accordance with U.S. GAAP. Our presentation of adjusted
EBITDA may not be comparable to similarly-titled measures used by other
companies.
We generate royalties and franchise fees, management fees and other revenues
from hotel franchising and hotel management activities, as well as fees from
licensing our "Wyndham" trademark, certain other trademarks and intellectual
property. In addition, pursuant to our franchise and management contracts with
third-party hotel owners, we generate marketing, reservation and loyalty fee
revenues and cost-reimbursement revenues that over time are offset,
respectively, by the marketing, reservation and loyalty costs and property
operating costs that we incur. We completed our acquisition of La Quinta
Holdings, Inc. in May 2018 , and, as a result certain comparisons of operating
and financial metrics for the year ended December 31, 2019 compared to 2018
include significant acquisition impacts.
COVID-19
During 2020, the hotel industry experienced a sharp decline in travel demand due
to the coronavirus pandemic, ("COVID-19") and the related government
preventative and protective actions to slow the spread of the virus, including
travel restrictions. We and the entire industry experienced significant revenue
losses as a result of steep RevPAR declines, which may continue for some time.
As a result of the financial impact of COVID-19, we undertook a number of
preventative measures to conserve our liquidity, strengthen our balance sheet
and support our franchisees through these unprecedented times, including:
•Issuing $500 million of senior unsecured notes at 4.375% due in August 2028 ;
•Suspending our share repurchase program as of March 17, 2020 ;
•Reducing our quarterly cash dividend per share to $0.08 per share from $0.32
per share, beginning with the dividend that was declared by the Board of
Directors ("Board") during the second quarter of 2020;
•Workforce reductions, including the elimination of 846 team members across the
globe;
•Advertising reductions and elimination of all discretionary spend;
•Capital expenditures reductions to focus on only the highest priority projects;
•Temporary closure of our two owned hotels for April and May 2020 ; and
•Our Chief Executive Officer elected to forgo his base salary and our Board
elected to forgo the cash portion of their fees for a portion of the year.
Our franchisees' financial health and long-term success is a top priority for
us, and we have taken the following proactive steps to help them preserve cash
during this period:
•Suspended non-room revenue related fees, such as Wyndham Rewards retraining
fees;
•Deferred property improvement plans and certain non-essential brand standards
requiring cash outlays, such as hot breakfast requirements;
•Provided payment relief by deferring receivables and suspending interest
charges and late fees through September 1, 2020 ;
•Partnered with industry associations to advocate for government relief for our
franchisees and their employees;
•Guided owners through the Coronavirus Aid, Relief, and Economic Security
("CARES") Act and its evolving guidance and urged the government to expand and
clarify these loan programs, for which the majority of our owners qualify;
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•Revised cleaning protocols and secured critical cleaning and disinfection
supplies pursuant to new U.S. Centers for Disease Control and Prevention ("CDC")
guidelines through our procurement network at reduced costs for our franchisees
as well as funding and deferring repayment of these costs to help our
franchisees conserve cash during this pandemic; and
•Continued marketing and sales efforts during the higher demand summer travel
season to drive bookings for our hotel owners.
For our guests whose travel plans have changed, we have modified cancellation
policies, paused Wyndham Rewards point expirations until June 30, 2021 and are
maintaining loyalty member level status through the end of 2021. Over 99% of our
domestic and approximately 97% of our global portfolio remain open today.
Nearly 90% of our domestic hotels are located along highways and in suburban and
small metro areas. Our portfolio generates approximately 70% of bookings from
leisure customers and 30% from business travel. Our business customers are
substantially comprised of truckers, contractors, construction workers,
healthcare workers, emergency crews and others who must travel for work and do
not have the ability to conduct their work remotely. These travelers are looking
for well-known and high quality brands they can depend on for quality and
enhanced safety measures. Less than 5% of our bookings come from corporate
business travel or group business. As a result of the strength of leisure
demand, these traveling everyday workers and our continued investment in sales
and marketing efforts, our economy and midscale brands have outperformed the
industry's higher-end chain scales throughout the pandemic. While we believe our
hotels will be able to quickly recover once the pandemic abates, the ultimate
timing of any recovery remains uncertain. In the meantime, our results of
operations may continue to be negatively impacted and certain intangible assets,
such as our trademarks, and our franchised and managed goodwill may be exposed
to additional impairments. For further discussion on the effect of COVID-19 on
our financial condition and liquidity, see the section below Financial
Condition, Liquidity and Capital Resources.
OPERATING STATISTICS - 2020 VS. 2019
The table below presents our operating statistics for the years ended December
31, 2020 and 2019. "Rooms" represent the number of hotel rooms at the end of the
period which are either under franchise and/or management agreements, or are
Company-owned, and properties under affiliation agreements for which we receive
a fee for reservation and/or other services provided. "RevPAR" represents
revenue per available room and is calculated by multiplying average occupancy
rate by average daily rate. These operating statistics are drivers of our
revenues and therefore provide an enhanced understanding of our business. Refer
to the section below for a discussion as to how these operating statistics
affected our business for the periods presented.
Year Ended December 31,
2020 2019 % Change
Rooms
United States 487,300 510,200 (4 %)
International 308,600 320,800 (4 %)
Total rooms 795,900 831,000 (4 %)
RevPAR
United States $ 30.20 $ 46.39 (35 %)
International (a) 15.35 31.85 (52 %)
Global RevPAR (a) 24.51 40.92 (40 %)
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(a)Excluding currency effects, international RevPAR decreased 51% and global
RevPAR decreased 40%.
Rooms as of December 31, 2020 decreased 4% compared to the prior year reflecting
our previously announced strategic termination plan as well as the unforeseen
sale of certain hotels by a strategic partner which triggered the termination of
that underlying license agreement. As a result of these unusual termination
events, we removed approximately 26,700 hotel rooms during 2020, which adversely
impacted net room growth by 300 basis points.
Global RevPAR for the year ended December 31, 2020 decreased 40% to $24.51 ,
compared to the prior year due to COVID-19 and its impact on travel demand.
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YEAR ENDED
Year Ended December 31,
2020 2019 Change % Change
Net revenues $ 1,300 $ 2,053 $ (753) (37 %)
Expenses 1,346 1,746 (400) (23 %)
Operating (loss)/income (46) 307 (353) (115 %)
Interest expense, net 112 100 12 12 %
(Loss)/income before income taxes (158) 207 (365) (176 %)
(Benefit from)/provision for income taxes (26) 50 (76) (152 %)
Net (loss)/income $ (132) $ 157 $ (289) (184 %)
Net revenues during 2020 decreased $753 million , or 37%, compared to the prior
year, primarily driven by:
•$273 million of lower cost-reimbursement revenues in our hotel management
business as a result of CorePoint Lodging asset sales and the termination of
unprofitable hotel-management agreements during 2019;
•$152 million of lower royalty and franchise fees reflecting a 40% decline in
RevPAR due to lower travel demand as a result of COVID-19;
•$192 million of lower marketing, reservation and loyalty fees (inclusive of a
$13 million benefit in loyalty revenues from a change in our member redemption
assumption) due to the RevPAR decline;
•$61 million of lower management and other fees due to a (i) $52 million
reduction in owned hotel revenues and (ii) $29 million of lower management fees
resulting from a decline in RevPAR primarily due to lower travel demand from
COVID-19, partially offset by the absence of a $20 million fee credit for past
services with a customer in 2019; and
•$47 million of lower license and other fees due to lower travel demand
resulting from COVID-19.
Total expenses during 2020, decreased $400 million , or 23%, compared to the
prior year, primarily driven by:
• $273 million of lower cost-reimbursement expenses consistent with the revenue
decline discussed above;
•$144 million of lower marketing, reservation and loyalty expenses primarily due
to cost reductions in response to COVID-19;
•$69 million of lower operating and general and administrative expenses
primarily due to cost containment efforts in response to COVID-19;
•$48 million of lower separation and transaction-related expenses;
•$42 million of lower contract termination costs; partially offset by
•$161 million of higher impairment charges, driven by the $206 million of
impairment charges during 2020, primarily related to certain of our trademarks,
principally La Quinta, as well as goodwill for our owned hotel reporting unit,
partially offset by the absence of a $45 million impairment charge in 2019. The
2020 trademark impairments were primarily due to a higher discount rate as a
result of increased share price volatility, consistent with the lodging sector
and broader equity markets; and
• $26 million of higher restructuring charges due to cost saving initiatives
implemented in response to COVID-19.
Our effective tax rate decreased to 16.5% on pre-tax loss from 24.2% on pre-tax
income during 2020 and 2019, respectively. The effective tax rate in 2020 was
lower primarily due to valuation allowances established for certain tax
attributes. In 2019, the Company had higher foreign taxes on international
operations, which was partially offset by a one-time state tax benefit resulting
from a change in the Company's state income tax filing position due to its
spin-off from Wyndham Worldwide .
As a result of these items, net income during 2020, decreased $289 million
compared to the prior year.
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Table of Contents A reconciliation of net income (loss) to adjusted EBITDA is represented below:
Year Ended
2020 2019
Net (loss)/income $ (132) $ 157
(Benefit from)/provision for income taxes (26) 50
Depreciation and amortization 98 109
Interest expense, net 112 100
Stock-based compensation expense 19 15
Impairments, net 206 45
Restructuring costs 34 8
Transaction-related expenses, net 12 40
Separation-related expenses 2 22
Contract termination costs - 42
Transaction-related item - 20
Foreign currency impact of highly inflationary countries 2 5
Adjusted EBITDA $ 327 $ 613 Following is a discussion of the results of each of our segments and Corporate and Other for 2020 compared to 2019:
Net Revenues Adjusted EBITDA
2020 2019 % Change 2020 2019 % Change
Hotel Franchising $ 863 $ 1,279 (33 %) $ 383 $ 622 (38 %)
Hotel Management 437 768 (43 %) 13 66 (80 %)
Corporate and Other - 6 n/a (69) (75) n/a
Total Company $ 1,300 $ 2,053 (37 %) $ 327 $ 613 (47 %)
Hotel Franchising
Year Ended December 31,
2020 2019 % Change
Rooms
United States 452,600 464,600 (3 %)
International 293,900 305,600 (4 %)
Total rooms 746,500 770,200 (3 %)
RevPAR
United States $ 29.50 $ 44.09 (33 %)
International (a) 14.75 30.80 (52 %)
Global RevPAR (a) 23.74 38.91 (39 %)
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(a) Excluding currency effects, international RevPAR decreased 52% and global RevPAR decreased 39%. Net revenues during 2020 decreased$416 million , or 33% compared to the prior year, primarily driven by: •$190 million of lower marketing, reservation and loyalty revenues (inclusive of a$13 million benefit in loyalty revenues from a change in our member redemption assumption) due primarily to a 39% decline in RevPAR due to lower travel demand as a result of COVID-19; •$156 million of lower royalty and franchise fees due to the decline in RevPAR; and •$47 million of lower license and other fees due to lower travel demand as a result of COVID-19. Adjusted EBITDA during 2020 decreased$239 million , or 38%, compared to the prior year, primarily driven by the changes in net revenues discussed above, partially offset by: •$145 million of lower marketing, reservation and loyalty expenses primarily due to cost reductions in response to COVID-19; and 32
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Table of Contents •$34 million of lower operating and general and administrative expenses primarily due to cost containment efforts in response to COVID-19.Hotel Management Year Ended December 31, 2020 2019 % Change Rooms United States 34,700 45,600 (24 %) International 14,700 15,200 (3 %) Total rooms 49,400 60,800 (19 %) RevPAR (a) United States$ 37.97 $ 67.32 (44 %) International (b) 26.21 52.69 (50 %) Global RevPAR (b) 34.67 64.01 (46 %)
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(a) Excluding currency effects, international RevPAR decreased 49% and global RevPAR decreased 45%. Net revenues during 2020 decreased$331 million , or 43%, compared to the prior year, primarily driven by: •$273 million of lower cost-reimbursement revenues as discussed above, which have no impact on adjusted EBITDA; •$61 million of lower management and other fees due to a (i)$52 million reduction in owned hotel revenues and (ii)$29 million of lower management fees resulting from a decline in RevPAR primarily due to lower travel demand from COVID-19, partially offset by the absence of a$20 million fee credit for past services with a customer in 2019; partially offset by •$6 million of higher termination fees related to CorePoint Lodging asset sales. Adjusted EBITDA during 2020 decreased$53 million , or 80%, compared to the prior year, primarily driven by the revenue decreases discussed above, excluding the absence of a$20 million fee credit for past services with a customer in 2019 which had no impact on adjusted EBITDA, partially offset by$28 million in lower operating expenses primarily due to cost containment efforts in response to COVID-19. Corporate and Other Corporate and Other revenues decreased$6 million during 2020 compared to 2019, due to the completion of transition services previously in place following our separation fromWyndham Worldwide . Adjusted EBITDA during 2020 increased$6 million compared to the prior year, primarily due to$10 million in lower operating and general and administrative costs primarily due to cost containment efforts in response to COVID-19, partially offset by the$6 million decrease in net revenues discussed above. 33
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OPERATING STATISTICS - 2019 VS. 2018
The table below presents our operating statistics for the years ended December
31, 2019 and 2018. "Rooms" represent the number of hotel rooms at the end of the
period which are either under franchise and/or management agreements, or are
Company-owned, and properties under affiliation agreements for which we receive
a fee for reservation and/or other services provided. "RevPAR" represents
revenue per available room and is calculated by multiplying average occupancy
rate by average daily rate. These operating statistics are drivers of our
revenues and therefore provide an enhanced understanding of our business. Refer
to the section below for a discussion as to how these operating statistics
affected our business for the periods presented.
Year Ended December 31,
2019 2018 % Change
Rooms
United States 510,200 506,100 1 %
International 320,800 303,800 6 %
Total rooms 831,000 809,900 3 %
RevPAR (a)
United States $ 46.39 $ 45.30 2 %
International (b) 31.85 33.31 (4 %)
Global RevPAR (b) 40.92 40.80 - %
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(a)Includes the impact of acquisition and disposition from their respective dates forward. (b)Excluding currency effects, international RevPAR increased 1% and global RevPAR increased 2%.
YEAR ENDED DECEMBER 31, 2019 VS. YEAR ENDED DECEMBER 31, 2018
Year Ended December 31,
2019 2018 Change % Change
Net revenues $ 2,053 $ 1,868 $ 185 10 %
Expenses 1,746 1,585 161 10 %
Operating income 307 283 24 8 %
Interest expense, net 100 60 40 67 %Income before income taxes 207 223 (16) (7
%)
Provision for income taxes 50 61 (11) (18 %) Net income$ 157 $ 162 $ (5) (3 %) During 2019, net revenues increased 10% compared with the prior-year, which included$267 million of incremental revenues from La Quinta (acquired inMay 2018 ) of which$152 million reflected cost-reimbursement revenues. Excluding the incremental impact from the La Quinta acquisition and a$5 million unfavorable impact from currency translation, net revenues decreased 4% primarily reflecting: •lower cost-reimbursement revenues due to a change in our responsibility from being the principal for certain property-related activities to being an agent, and therefore, these costs are no longer reflected in our Consolidated and Combined Statements of Income (Loss) and property terminations; and •a$20 million fee credit for past services with a customer, which is reflected as a reduction to hotel-management revenues. Such decreases were partially offset by higher license and other fees, an increase in marketing, reservation and loyalty fees and an increase in owned-hotel revenues. During 2019, total expenses increased 10%, which included an estimated$204 million of incremental expenses associated with the La Quinta acquisition and a$45 million non-cash impairment charge and$42 million of contract termination costs, both associated with the termination of unprofitable hotel-management guarantee arrangements. The increases were partially offset by$55 million of lower separation-related costs year-over-year. 34 -------------------------------------------------------------------------------- Table of Contents Excluding cost-reimbursement revenues and the incremental impact from the La Quinta acquisition, during 2019: • Marketing, reservation and loyalty expenses increased to 39.6% of revenues from 37.9% during 2018, primarily due to higher marketing spend to support our "by Wyndham" campaign and the relaunch of the Wyndham Rewards program with La Quinta integrated, as well as a change in classification of certain costs from operating expenses, partially offset by higher net revenues; • Operating expenses decreased to 12.3% of revenues from 14.3% during 2018, primarily due to a change in classification of certain costs to our marketing, reservation and loyalty funds; and • General and administrative expenses were 9.2% of revenues during 2019 and 2018. During 2019, net interest expense increased$40 million primarily due to the borrowings made by us in the second quarter of 2018 to fund the La Quinta acquisition. Our effective tax rates were 24.2% and 27.4% for 2019 and 2018, respectively. The decrease was primarily due to one-time state tax benefits resulting from a settlement with state taxing authorities and from a change in our state income tax filing position due to our spin-off fromWyndham Worldwide . This was partially offset by higher foreign taxes on the Company's international operations in 2019 and the absence of a net tax benefit in 2019 from the impact ofU.S. tax reform. As a result of these items, net income decreased$5 million compared with 2018. A reconciliation of net income to adjusted EBITDA is represented below: Year Ended December 31, 2019 2018 Net income $ 157$ 162 Provision for income taxes 50 61 Depreciation and amortization 109 99 Interest expense, net 100 60 Stock-based compensation expense 15 9 Impairment, net 45 - Contract termination costs 42 - Transaction-related expenses, net 40 36 Separation-related expenses 22 77 Transaction-related item 20 - Restructuring costs 8 - Foreign currency impact of highly inflationary countries 5 3 Adjusted EBITDA $ 613$ 507
Following is a discussion of the results of each of our segments and Corporate and Other for 2019 compared to 2018:
Net Revenues Adjusted EBITDA
2019 2018 % Change 2019 2018 % Change
Hotel Franchising $ 1,279 $ 1,135 13 % $ 622 $ 515 21 %
Hotel Management 768 726 6 % 66 47 40 %
Corporate and Other 6 7 n/a (75) (55) n/a
Total Company $ 2,053 $ 1,868 10 % $ 613 $ 507 21 %
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Table of ContentsHotel Franchising Year Ended December 31, 2019 2018 % Change Rooms United States 464,600 453,900 2 % International 305,600 288,900 6 % Total rooms 770,200 742,800 4 % RevPAR (a) United States$ 44.09 $ 43.04 2 % International (b) 30.80 32.09 (4 %) Global RevPAR (b) 38.91 38.86 - %
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(a)Includes the impact of acquisition and disposition from their respective dates forward. (b) Excluding currency effects, international RevPAR increased 1% and global RevPAR increased 2%. Net revenues increased 13% during 2019, which included$97 million of incremental revenues from La Quinta (acquired inMay 2018 ) and a$5 million unfavorable impact from foreign currency translation. Excluding such items, net revenues increased 5%, primarily due to higher license and other fee revenues and an increase in marketing, reservation and loyalty fees. Adjusted EBITDA increased 21% during 2019 which included an estimated incremental impact from the acquisition and integration of La Quinta of$50 million and a$4 million unfavorable impact from foreign currency. Excluding such items, adjusted EBITDA grew 13%, reflecting the growth in revenues and lower general and administrative spend, partially offset by higher net marketing, reservation and loyalty expenses, which reduced adjusted EBITDA by$19 million . Excluding the incremental impact from the acquisition of La Quinta, during 2019: • Marketing, reservation and loyalty expenses increased to 42.3% of revenues from 41.2% during the prior year primarily due to marketing spend to support our "by Wyndham" campaign and the relaunch of the Wyndham Rewards program with La Quinta integrated, as well as a change in classification of certain costs from operating expenses, partially offset by higher net revenues; • Operating expenses decreased to 6.7% of revenue compared to 9.6% during the prior year primarily due to a change in classification of certain costs to our marketing, reservation and loyalty funds; and • General and administrative expenses decreased to 2.3% of revenues from 3.6% during the prior year, primarily due to the impact of reorganizing certain functions into our Corporate and Other segment as a result of our spin-off to a stand-alone public company.Hotel Management Year Ended December 31, 2019 2018 % Change Rooms United States 45,600 52,200 (13 %) International 15,200 14,900 2 % Total rooms 60,800 67,100 (9 %) RevPAR (a) United States$ 67.32 $ 72.76 (7 %) International (b) 52.69 57.84 (9 %) Global RevPAR (b) 64.01 68.72 (7 %) ______________________ (a) Includes the impact of acquisition and disposition from their respective dates forward. (b) Excluding currency effects, international RevPAR decreased 1% and global RevPAR decreased 5%. Net revenues increased$42 million or 6% during 2019, reflecting$170 million of incremental revenues from the La Quinta acquisition which included$152 million of cost-reimbursement revenues. Excluding the incremental impact from the acquisition of La Quinta, net revenues decreased$128 million primarily due to lower cost-reimbursement revenues as discussed above, which have no impact on adjusted EBITDA and a$20 million fee credit for past services with a customer, 36 -------------------------------------------------------------------------------- Table of Contents which is reflected as a reduction to hotel-management revenues. Such decreases were partially offset by higher termination fees and an increase in owned hotel revenues. Adjusted EBITDA increased$19 million or 40% in 2019, primarily reflecting an estimated$13 million of incremental adjusted EBITDA from La Quinta. Corporate and Other Corporate and Other revenues were$6 million and$7 million during 2019 and 2018, respectively, which represents fees earned under a transition services agreement with our former Parent. Adjusted EBITDA decreased$20 million during 2019 compared to the prior year, primarily due to a reorganization of certain functions into our Corporate and Other segment in connection with our spin-off to a stand-alone public company. RESTRUCTURING We incurred$34 million of charges related to restructuring initiatives implemented in response to COVID-19 during 2020. These initiatives resulted in a reduction of 846 employees and are comprised primarily of employee separation and facility closure costs. In addition, during 2019, the Company had implemented restructuring initiatives, primarily focused on enhancing its organizational efficiency and rationalizing its operations. During 2020, we paid$30 million in restructuring payments relating to our 2019 and 2020 plans. As ofDecember 31, 2020 , we had a$10 million liability related to our 2020 restructuring plans which is expected to be primarily paid by the end of 2021. We expect that annual savings realized will be$50 to$55 million . FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Financial condition Year Ended December 31, 2020 2019 Change Total assets$ 4,644 $ 4,533 $ 111 Total liabilities 3,681 3,321 360 Total stockholders' equity 963 1,212 (249) Total assets increased$111 million fromDecember 31, 2019 toDecember 31, 2020 primarily driven by an increase in cash principally due to issuance of our$500 million 4.375% senior unsecured notes, partially offset by impairments of certain intangible assets. Total liabilities increased$360 million fromDecember 31, 2019 toDecember 31, 2020 primarily due to the new senior unsecured notes, partially offset by a decrease in accrued liabilities due to timing of payments. Total equity decreased$249 million fromDecember 31, 2019 toDecember 31, 2020 primarily due to our net loss for the year, stock repurchases during the first quarter and dividend payments. Liquidity and capital resources As ofDecember 31, 2020 , we had approximately$1.2 billion in cash and additional available borrowing capacity through our revolving credit facility. Historically, our business generates sufficient cash flow to not only support our current operations as well as our future growth needs and dividend payments to our shareholders, but also to create additional value for our stockholders in the form of share repurchases. However, due to the negative impact that COVID-19 is currently having on the travel industry, we've taken a number of preventative steps to conserve our liquidity and strengthen our balance sheet: •InMarch 2020 , we suspended share repurchase activity and draw down the entirety of our revolving credit facility; •InApril 2020 , we amended our revolving credit facility agreement to waive the quarterly-tested leverage covenant untilApril 1, 2021 . The covenant was also modified for the second, third and potentially fourth quarters of 2021 to use a form of annualized EBITDA, as defined in the credit agreement, rather than the last twelve months EBITDA, as previously required. In return for this modification, we agreed to temporarily maintain minimum liquidity of$200 million , which is defined in the credit agreement as the total of unrestricted cash on hand and available capacity under our revolving credit facility, pay a higher interest rate on outstanding borrowings, restrict share repurchases and reduce payment of dividends, or restrict dividends to$0.01 per share in the event our liquidity is below$300 million ; 37 -------------------------------------------------------------------------------- Table of Contents •InMay 2020 , we assembled a comprehensive cost containment plan identifying$255 million of targeted saving opportunities and immediately began executing on this plan to delivering those savings. We also decreased our quarterly cash dividend to$0.08 per share inMay 2020 ; •InAugust 2020 , we issued$500 million of senior unsecured notes, which mature in 2028 and bear interest at a rate of 4.375% per year, for net proceeds of$492 million , which were used to repay a portion of the outstanding borrowings under our revolving credit facility; and •InNovember 2020 , we repaid the remaining$234 million of borrowings under our revolving credit facility. Given the minimal capital needs of our business, the flexible cost infrastructure and the mitigation measures taken, we believe that our existing cash, cash equivalents, cash generated through operations and our expected access to financing facilities, together with funding through our revolving credit facility, will be sufficient to fund our operating activities, anticipated capital expenditures and growth needs. As ofDecember 31, 2020 , we were in compliance with the financial covenants of our credit agreements and expect to remain in such compliance with no additional waivers or amendments required. As ofDecember 31, 2020 , we had a term loan with an aggregate principal amount of$1.6 billion maturing in 2025 and a five-year revolving credit facility maturing in 2023 with an aggregate principal amount of$750 million , of which none was outstanding and$15 million was allocated to outstanding letters of credit. The interest rate per annum applicable to our term loan is equal to, at our option, either a base rate plus a margin of 0.75% or LIBOR plus a margin of 1.75%. The revolving credit facility is subject to an interest rate per annum equal to, at our option, either a base rate plus a margin ranging from 0.50% to 1.00% or LIBOR plus a margin ranging from 1.50% to 2.00%, in either case based upon the total leverage ratio of the Company and its restricted subsidiaries. During the amendment period as discussed above, the revolving credit facility is subject to an interest rate per annum equal to, at our option, either a base rate plus a margin of 1.25% or LIBOR plus a margin of 2.25% with the LIBOR rate subject to a 0.50% floor. As ofDecember 31, 2020 ,$1.1 billion of our$1.6 billion term loan is hedged with pay-fixed/receive-variable interest rate swaps hedging of our term loan interest rate exposure. The aggregate fair value of these interest rate swaps was a$71 million liability as ofDecember 31, 2020 . TheFederal Reserve has established the Alternative Reference Rates Committee to identify alternative reference rates in the event thatU.S. dollar LIBOR ceases to exist afterJune 2023 . Our credit facility, which includes our revolving credit facility and term loan, gives us the option to use LIBOR as a base rate and our interest rate swaps are based on the one-monthU.S. dollar LIBOR rate. In the event that LIBOR is no longer published, the credit facility allows us and the administrative agent of the facility to replace LIBOR with an alternative benchmark rate, subject to the right of the majority of the lenders to object thereto.The International Swaps and Derivatives Association issued protocols to allow swap parties to amend their existing contracts, though the Company's existing swaps will continue to reference LIBOR for the foreseeable future. As ofDecember 2020 , our credit rating was Ba1 from Moody's Investors Service and BB from Standard and Poor'sRating Agency . A credit rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal by the assigning rating organization. Reference in this report to any such credit rating is intended for the limited purpose of discussing or referring to aspects of our liquidity and of our costs of funds. Any reference to a credit rating is not intended to be any guarantee or assurance of, nor should there be any undue reliance upon, any credit rating or change in credit rating, nor is any such reference intended as any inference concerning future performance, future liquidity or any future credit rating. Our liquidity and access to capital may be impacted by our credit ratings, financial performance and global credit market conditions. Our industry has seen a significant decline in travel demand due to COVID-19 and if the effects of COVID-19 persist for a prolonged duration, our credit ratings, financial performance and access to credit markets may be negatively impacted. We may not be able to obtain future borrowings on terms as favorable as our existing terms or at all. We believe that our existing cash, cash equivalents, cash generated through operations and our expected access to financing facilities, together with funding through our revolving credit facility, will be sufficient to fund our operating activities, anticipated capital expenditures and growth needs. 38
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CASH FLOW
The following table summarizes the changes in cash, cash equivalents and
restricted cash during the years ended
Year Ended December 31,
2020 2019 2018
Cash provided by/(used in)
Operating activities $ 67 $ 100 $ 231
Investing activities (31) (53) (1,728)
Financing activities 363 (320) 1,808
Effects of changes in exchange rates on cash,
cash equivalents and restricted cash - 1 (4)
Net change in cash, cash equivalents and
restricted cash $ 399 $ (272) $ 307
During 2020, net cash provided by operating activities decreased $33 million
compared to the prior year primarily due to lower net income (excluding non-cash
impairment and depreciation expenses) in 2020 and timing of deferred revenues
associated with our co-branded credit card program, partially offset by the
absence of payment of $195 million of tax liabilities assumed in the La Quinta
acquisition during 2019. 2020 also included $66 million of cash outlays related
to restructuring, contract termination costs and transaction and separation
related costs, while 2019 included $113 million of such costs. Net cash used in
investing activities decreased $22 million compared to the prior year, primarily
due to lower capital expenditures in connection with our COVID-19 cost
containment initiative. As a result of the impact of COVID-19 on travel demand,
we prioritized our capital projects to focus on guest-facing projects with the
higher return potential. Net cash provided by financing activities increased
$683 million compared to the prior year, primarily due to the issuance of our
$500 million 4.375% senior unsecured notes due in 2028, suspension of our share
repurchase activity in March 2020 and reduction of our quarterly cash dividend
in the second quarter of 2020 and throughout the remainder of the year from
$0.32 per share to $0.08 per share.
During 2019, net cash provided by operating activities decreased $131 million
compared to the prior year primarily due to the incremental payment of tax
liabilities assumed in the La Quinta acquisition in 2018, partially offset by a
decrease in cash used for separation and transaction-related costs. 2019 net
cash provided by operating activities included a $195 million payment of tax
liabilities assumed in the La Quinta acquisition, $78 million of separation and
transaction related costs and $35 million of contract termination costs. 2018
net cash provided by operating activities included a $35 million payment of tax
liabilities assumed in the La Quinta acquisition and $98 million of separation
and transaction related costs. Net cash used in investing activities decreased
$1.7 billion compared to the prior year, primarily due to the purchase price for
our acquisition of La Quinta in 2018. Net cash used in financing activities
increased $2.1 billion compared to the prior year, primarily due to the absence
of the proceeds from borrowings used to fund the La Quinta acquisition in 2018.
Capital deployment
We expect to maintain discipline in our capital allocation approach. We expect
to maintain a regular dividend payment, invest in select technology improvements
across our business that further our strategic objectives and deploy capital to
increase our system size. Excess cash generated beyond these needs will be used
for either acquisitions that are accretive and strategically enhancing to our
business, potential debt reduction or stock repurchases with the amount going to
each depending largely on the opportunities that are available.
During 2020, we spent $33 million on capital expenditures, primarily related to
information technology. During 2021, we anticipate spending approximately $40
million on capital expenditures.
In addition, during 2020, we spent $16 million on net development advance notes
to acquire new hotel franchise agreements and hotel-management contracts. In an
effort to support growth in our business, we expect to increase development
advance spend to approximately $40 million in 2021. We may also continue to
provide other forms of financial support.
During 2020, we paid $66 million of restructuring, separation, transaction and
contract termination costs incurred in 2019 as well as severance costs relating
to restructuring initiatives implemented in 2020 in response to COVID-19, net of
cash proceeds of a previously impaired asset. We do not expect any meaningful
special item cash outlays in 2021.
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We expect all our cash needs to be funded from cash on hand and cash generated
through operations, and/or availability under our revolving credit facility.
Stock repurchase program
In May 2018 , our Board approved a share repurchase plan pursuant to which we
were authorized to purchase up to $300 million of our common stock. In August
2019 , the Board increased the capacity of the program by another $300 million .
Under the plan, we may, from time to time, purchase our common stock through
various means, including, without limitation, open market transactions,
privately negotiated transactions or tender offers, subject to the terms of the
tax matters agreement entered into in connection with our spin-off. In March
2020 , given the impact of COVID-19 was expected to have on travel demand at that
time, we suspended share repurchase activity.
Under our current stock repurchase program, we repurchased 0.9 million shares at
an average price of $51.57 per share for a cost of $45 million during 2020, all
of which was repurchased on or before March 17, 2020 , the date we suspended our
share repurchase activity due to COVID-19. Since inception, we repurchased 7.7
million shares at an average price of $53.43 per share for a cost of $408
million . As of December 31, 2020 , we had $191 million of remaining availability
under our program.
As a condition of the amendment to our revolving credit agreement, we are
restricted from repurchasing shares of our stock until the waiver amendment
expires at the beginning of the second quarter of 2021 unless we elect to
terminate the amendment earlier.
Dividend policy
We declared cash dividends of $0.32 per share in the first quarter of 2020 and
$0.08 per share in the second, third and fourth quarters of 2020 ($53 million in
aggregate for the year). The declaration and payment of future dividends to
holders of our common stock is at the discretion of our Board and depends upon
many factors, including the impact of COVID-19 on travel demand, our financial
condition, earnings, capital requirements of our business, covenants associated
with certain debt obligations, legal requirements, regulatory constraints,
industry practice and other factors that our Board deems relevant.
Due to the adverse impact on the global economy and travel demand resulting from
COVID-19, our Board approved a reduction in the quarterly cash dividend policy
from $0.32 per share to $0.08 per share, beginning with the dividend that was
declared by the Board during the second quarter of 2020. On February 10, 2021 ,
the Company announced the Board's approval of an increase in the quarterly cash
dividend policy to $0.16 per share. While we believe some form of reduced future
dividend is supportable from a financial profile, we cannot make any assurances
as the economic environment remains fluid. As a condition of our amended
revolving credit agreement, we may be restricted in future dividend payments to
$0.01 per share in the event that our liquidity is below $300 million and we are
constrained to $0.16 per share otherwise during the restriction period. We
estimate our liquidity will remain above $300 million through the end of the
restriction period. Upon termination of the amendment on April 1, 2021 or
earlier at the Company's option, these restrictions will be lifted and our
quarterly first lien leverage ratio limit will be reinstated.
Foreign earnings
Although the one-time mandatory deemed repatriation tax during 2017 and the
territorial tax system created as a result of U.S. tax reform generally
eliminate U.S. federal income taxes on dividends from foreign subsidiaries, we
continue to assert that all of our undistributed foreign earnings of $34 million
will be reinvested indefinitely as of December 31, 2020 . In the event the
Company determines not to continue to assert that all or part of its
undistributed foreign earnings are permanently reinvested, such a determination
in the future could result in the accrual and payment of additional foreign
withholding taxes and U.S. taxes on currency transaction gains and losses, the
determination of which is not practicable due to the complexities associated
with the hypothetical calculation.
LONG-TERM DEBT COVENANTS
Our credit facilities contain customary covenants that, among other things,
impose limitations on indebtedness; liens; mergers, consolidations, liquidations
and dissolutions; dispositions, restricted debt payments, restricted payments
and transactions with affiliates. Events of default in these credit facilities
include, among others, failure to pay interest, principal and fees when due;
breach of a covenant or warranty; acceleration of or failure to pay other debt
in excess of a threshold amount; unpaid judgments in excess of a threshold
amount; insolvency matters; and a change of control. The credit facilities
require us to comply with a financial covenant to be tested quarterly,
consisting of a maximum first-lien leverage ratio of 5.0 times. The ratio is
calculated by dividing consolidated first lien indebtedness (as defined in the
credit agreement) net of
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consolidated unrestricted cash as of the measurement date by consolidated EBITDA
(as defined in the credit agreement), as measured on a trailing
four-fiscal-quarter basis preceding the measurement date.
In April 2020 , we completed an amendment to our revolving credit facility
agreement to waive the quarterly-tested leverage covenant until April 1, 2021 .
The covenant was also modified for the second, third and potentially fourth
quarters of 2021 to use a form of annualized EBITDA, as defined in the credit
agreement, rather than the last twelve months EBITDA, as previously required. In
exchange, we agreed to restrict share repurchases through the amendment period
and to restrict quarterly dividend payments to $0.01 per share through the
amendment period in the event our liquidity falls below $300 million or
constrained to $0.16 per share otherwise. We are also subject to a minimum
liquidity covenant of $200 million during the amendment period.
The indenture, as supplemented, under which the senior notes due 2026 and senior
notes due 2028 were issued contains covenants that limit, among other things,
Wyndham Hotels & Resorts, Inc.'s ability and that of certain of its subsidiaries
to (i) create liens on certain assets; (ii) enter into sale and leaseback
transactions; and (iii) merge, consolidate or sell all or substantially all of
Wyndham Hotels & Resorts, Inc.'s assets. These covenants are subject to a number
of important exceptions and qualifications.
As of December 31, 2020 , we were in compliance with the financial covenants
described above.
SEASONALITY
While the hotel industry is seasonal in nature, periods of higher revenues vary
property-by-property and performance is dependent on location and guest base.
Based on historical performance, prior to 2020, revenues from franchise and
management contracts are generally higher in the second and third quarters than
in the first or fourth quarters due to increased leisure travel during the
spring and summer months. Our cash provided by operating activities tends to be
lower in the first half of the year and substantially higher in the second half
of the year. However, given the impact of COVID-19, the historical seasonality
of our business is not relevant to 2020 operating results. Our second quarter
was the most severely impacted and as such, we had higher revenues and cash
flows in the third and fourth quarters. While we believe in many cases our
select service hotels have performed more favorably than hotels in other chain
scales, and we believe we will be among the first to recover once the pandemic
abates, the ultimate timing of any recovery remains uncertain. In the meantime,
our results of operations may continue to be negatively impacted and we are
unable to predict when our operations will resume the normal hotel industry
seasonality.
COMMITMENTS AND CONTINGENCIES
We are involved in claims, legal and regulatory proceedings and governmental
inquiries related to our business. Litigation is inherently unpredictable and,
although we believe that our accruals are adequate and/or that we have valid
defenses in these matters, unfavorable results could occur. As such, an adverse
outcome from such proceedings for which claims are awarded in excess of the
amounts accrued, if any, could be material to us with respect to earnings and/or
cash flows in any given reporting period. As of December 31, 2020 , the potential
exposure resulting from adverse outcomes of such legal proceedings could, in the
aggregate, range up to approximately $6 million in excess of recorded accruals.
However, we do not believe that the impact of such litigation should result in a
material liability to us in relation to our financial position or liquidity. For
a more detailed description of our commitments and contingencies see Note 14 -
Commitments and Contingencies to the Consolidated and Combined Financial
Statements contained in Part IV of this report.
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CONTRACTUAL OBLIGATIONS
The following table summarizes our future contractual obligations for the years
set forth below:
2021 2022 2023 2024 2025 Thereafter Total
Long-term debt $ 21 $ 21 $ 22 $ 22 $ 1,496 $ 1,015 $ 2,597
Interest on debt (a) 108 101 100 80 67 82 538
Operating leases 4 4 3 2 1 3 17
Purchase commitments 54 38 30 21 21 28 192
Total (b) $ 187 $ 164 $ 155 $ 125 $ 1,585 $ 1,128 $ 3,344 ______________________
(a)Includes interest on long-term debt; estimated using the stated interest rates on our senior notes and the swapped interest rates on our term loan. (b)Excludes a$10 million liability for unrecognized tax benefits associated with the accounting guidance for uncertainty in income taxes since it is not reasonably estimable to determine the periods in which such liability would be settled with the respective tax authorities. CRITICAL ACCOUNTING ESTIMATES AND POLICIES In presenting our financial statements in conformity withU.S. GAAP, we are required to make estimates and assumptions that affect the amounts reported therein. Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. However, events that are outside of our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. If there is a significant unfavorable change to current conditions, it could result in a material impact to our consolidated and combined results of operations, financial position and liquidity. We believe that the estimates and assumptions we used when preparing our financial statements were the most appropriate at that time. Presented below are those accounting policies that we believe require subjective and complex judgments that could potentially affect reported results. However, the majority of our business activities are in environments where we are paid a fee for a service performed, and therefore the results of the majority of our recurring operations are recorded in our financial statements using accounting policies that are not particularly subjective, nor complex. Impairment of long-lived assetsGoodwill is reviewed annually (during the fourth quarter of each year subsequent to completing our annual forecasting process), or more frequently if circumstances indicate that the value of goodwill may be impaired, to the reporting units' carrying values as required by the guidance. This is done either by performing a qualitative assessment or utilizing the one-step impairment test, with an impairment being recognized only where the fair value is less than carrying value. In any given year, we can elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is in excess of its carrying value. If it is not more likely than not that the fair value is in excess of the carrying value, or we elect to bypass the qualitative assessment, we would use the one-step impairment test. The qualitative factors evaluated include macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, our historical share price as well as other industry-specific considerations. We also determine whether the carrying values of other indefinite-lived intangible assets are impaired on an annual basis or more frequently if indicators of potential impairment exist. Application of the other indefinite-lived intangible assets impairment test requires judgment in the assumptions underlying the approach used to determine fair value. The fair value of each other indefinite-lived intangible asset is estimated using a discounted cash flow methodology. This analysis requires significant judgments, including estimation of future cash flows, which are dependent on internal forecasts, discount rates and to a lesser extent, estimation of long-term rates of growth. The estimates used to calculate the fair value of other indefinite-lived intangible assets change from year to year based on operating results and market conditions. Changes in these estimates and assumptions could materially affect the determination of fair value and the other indefinite-lived intangible assets' impairment. As a result of COVID-19 and the significant negative impact it has had on travel demand, we, with the assistance of a third-party valuation firm, performed a quantitative impairment analysis on all our indefinite-lived intangible assets in the second quarter of 2020. We evaluated the carrying value of each of our indefinite-lived intangible assets compared to their respective estimated fair values. The fair value of each of our indefinite-lived intangible assets is estimated using a discounted cash flow methodology. We determined through such analyses that certain of our trademarks, as well as, goodwill associated with our owned hotel reporting unit were impaired. Accordingly, we recorded impairment charges totaling$205 million in the second quarter of 2020 to reduce the carrying value of those assets to their estimated fair values. We performed 42 -------------------------------------------------------------------------------- Table of Contents our annual impairment assessment of our indefinite-lived intangible assets as ofOctober 1, 2020 and determined that no additional impairments exist. Additionally, we performed a qualitative assessment of our indefinite-lived intangible assets as ofMarch 31 ,September 30 , andDecember 31, 2020 and determined through such assessments, that it was more likely than not that the fair value of such indefinite-live intangible assets were in excess of their carrying values. We also evaluate the recoverability of each of our definite-lived intangible assets by performing a qualitative assessment to determine if circumstances indicate that impairment may have occurred. If such circumstances exist, we perform a quantitative assessment by comparing the respective carrying value of the assets to the expected future cash flows, on an undiscounted basis, to be generated from such assets. We 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, we determined these assets were not impaired. Additionally, we also performed a qualitative assessment of all our definite-lived intangible assets as ofMarch 31 ,June 30 ,September 30 , andDecember 31, 2020 and determined through such assessments, that it was more likely than not that the future expected cash flows on an undiscounted basis were in excess of the carrying value of such assets. Should the current effects of COVID-19 persist for a prolonged duration, our results of operations may continue to be negatively impacted and our intangible assets within our 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, we may be required to write-down all or a portion of our remaining goodwill, trademarks, franchise agreements and management contracts, which would adversely impact earnings. We also evaluate the recoverability of our other long-lived assets, including property and equipment and amortizable intangible assets, if circumstances indicate impairment may have occurred, pursuant to guidance for impairment or disposal of long-lived assets. This analysis is performed by comparing the respective carrying values of the assets to the current and expected future cash flows, on an undiscounted basis, to be generated from such assets. Property and equipment is evaluated separately within each segment. If such analysis indicates that the carrying value of these assets is not recoverable, the carrying value of such assets is reduced to fair value. Loyalty program We operate the Wyndham Rewards loyalty program. Wyndham Rewards members primarily accumulate points by staying in hotels operated under one of our brands. Wyndham Rewards members may also accumulate points by purchasing everyday services and products with their co-branded credit card. We earn revenue from these programs (i) when a member stays at a participating hotel or club resort from a fee charged by us to the franchisee, which is based upon a percentage of room revenues generated from such stay which we recognize, net of redemptions, over time based upon loyalty point redemption patterns, including an estimate of loyalty points that will expire or will never be redeemed, and (ii) based upon a percentage of the member's spending on the co-branded credit cards for which revenues are paid to us by a third-party issuing bank which we primarily recognize over time based upon the redemption patterns of the loyalty points earned under the program, including an estimate of loyalty points that will expire or will never be redeemed. As members earn points through the Wyndham Rewards loyalty program, we record a liability for the estimated future redemption costs, which is calculated based on (i) an estimated cost per point and (ii) an estimated redemption rate of the overall points earned, which is determined with the assistance of a third-party actuarial firm through historical experience, current trends and the use of an actuarial analysis. As a result of the negative impact that COVID-19 has had on travel demand, our assumptions related to redemptions, including estimated member redemption rate, member redemption pattern, and the estimated cost to satisfy such redemptions, have changed. Accordingly, we 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 Consolidated and Combined Statement of Income (Loss) for the year endedDecember 31, 2020 . 43 -------------------------------------------------------------------------------- Table of Contents Income taxes We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities using currently enacted tax rates. We regularly review our deferred tax assets to assess their potential realization and establish a valuation allowance for portions of such assets that we believe will not be ultimately realized. In performing this review, we make estimates and assumptions regarding projected future taxable income, the expected timing of the reversals of existing temporary differences and the implementation of tax planning strategies. A change in these assumptions may increase or decrease our valuation allowance resulting in an increase or decrease in our effective tax rate, which could materially impact our results of operations. For tax positions we have taken or expect to take in our tax return, we apply a more likely than not threshold, under which we must conclude a tax position is more likely than not to be sustained, assuming that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information, in order to recognize or continue to recognize the benefit. In determining our provision for income taxes, we use judgment, reflecting our estimates and assumptions, in applying the more likely than not threshold. RECENTLY ADOPTED AND NEW ACCOUNTING PRONOUNCEMENTS For a detailed description of recently adopted and new accounting pronouncements see Note 2 - Summary of Significant Accounting Policies to the Consolidated and Combined Financial Statements contained in Part IV of this report. OFF-BALANCE SHEET ARRANGEMENTS There were no off-balance sheet transactions, arrangements or other relationships with unconsolidated entities or other persons in 2020, 2019 and 2018 that have, or are reasonably likely to have, a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
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