|
|
☑
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
|
82-3356232
|
|
(State or Other Jurisdiction
of Incorporation or Organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
|
|
|
22 Sylvan Way
|
|
07054
|
|
Parsippany,
|
New Jersey
|
|
(Zip Code)
|
(Address of Principal Executive Offices)
|
|
|
Title of each class
|
Trading Symbol
|
Name of each exchange on which registered
|
Common Stock
|
WH
|
New York Stock Exchange
|
Large accelerated filer
|
☑
|
|
|
|
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
|
|
|
|
Smaller reporting company
|
☐
|
|
|
|
|
|
|
Emerging growth company
|
☐
|
|
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|
|
Page
|
PART I
|
FINANCIAL INFORMATION
|
|
Item 1.
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
Item 2.
|
||
|
||
Item 3.
|
||
Item 4.
|
||
PART II
|
OTHER INFORMATION
|
|
Item 1.
|
||
Item 1A.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 5.
|
||
Item 6.
|
||
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Net revenues
|
|
|
|
|
|
|
|
||||||||
Royalties and franchise fees
|
$
|
61
|
|
|
$
|
126
|
|
|
$
|
154
|
|
|
$
|
228
|
|
Marketing, reservation and loyalty
|
82
|
|
|
140
|
|
|
188
|
|
|
254
|
|
||||
Management and other fees
|
6
|
|
|
36
|
|
|
38
|
|
|
75
|
|
||||
License and other fees
|
21
|
|
|
33
|
|
|
42
|
|
|
61
|
|
||||
Cost reimbursements
|
66
|
|
|
160
|
|
|
192
|
|
|
315
|
|
||||
Other
|
22
|
|
|
38
|
|
|
53
|
|
|
68
|
|
||||
Net revenues
|
258
|
|
|
533
|
|
|
667
|
|
|
1,001
|
|
||||
Expenses
|
|
|
|
|
|
|
|
||||||||
Marketing, reservation and loyalty
|
85
|
|
|
149
|
|
|
204
|
|
|
278
|
|
||||
Operating
|
23
|
|
|
38
|
|
|
57
|
|
|
81
|
|
||||
General and administrative
|
26
|
|
|
31
|
|
|
54
|
|
|
65
|
|
||||
Cost reimbursements
|
66
|
|
|
160
|
|
|
192
|
|
|
315
|
|
||||
Depreciation and amortization
|
25
|
|
|
27
|
|
|
49
|
|
|
56
|
|
||||
Impairments, net
|
206
|
|
|
45
|
|
|
206
|
|
|
45
|
|
||||
Restructuring
|
16
|
|
|
—
|
|
|
29
|
|
|
—
|
|
||||
Transaction-related, net
|
5
|
|
|
11
|
|
|
13
|
|
|
18
|
|
||||
Separation-related
|
—
|
|
|
1
|
|
|
1
|
|
|
22
|
|
||||
Contract termination
|
—
|
|
|
9
|
|
|
—
|
|
|
9
|
|
||||
Total expenses
|
452
|
|
|
471
|
|
|
805
|
|
|
889
|
|
||||
Operating (loss)/income
|
(194
|
)
|
|
62
|
|
|
(138
|
)
|
|
112
|
|
||||
Interest expense, net
|
28
|
|
|
26
|
|
|
54
|
|
|
50
|
|
||||
(Loss)/income before income taxes
|
(222
|
)
|
|
36
|
|
|
(192
|
)
|
|
62
|
|
||||
(Benefit)/provision for income taxes
|
(48
|
)
|
|
10
|
|
|
(40
|
)
|
|
15
|
|
||||
Net (loss)/income
|
$
|
(174
|
)
|
|
$
|
26
|
|
|
$
|
(152
|
)
|
|
$
|
47
|
|
|
|
|
|
|
|
|
|
||||||||
(Loss)/earnings per share
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(1.86
|
)
|
|
$
|
0.27
|
|
|
$
|
(1.63
|
)
|
|
$
|
0.49
|
|
Diluted
|
(1.86
|
)
|
|
0.27
|
|
|
(1.63
|
)
|
|
0.49
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Net (loss)/income
|
$
|
(174
|
)
|
|
$
|
26
|
|
|
$
|
(152
|
)
|
|
$
|
47
|
|
Other comprehensive loss, net of tax
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
1
|
|
|
1
|
|
|
(2
|
)
|
|
2
|
|
||||
Unrealized losses on cash flow hedges
|
(2
|
)
|
|
(16
|
)
|
|
(38
|
)
|
|
(24
|
)
|
||||
Other comprehensive loss, net of tax
|
(1
|
)
|
|
(15
|
)
|
|
(40
|
)
|
|
(22
|
)
|
||||
Comprehensive (loss)/income
|
$
|
(175
|
)
|
|
$
|
11
|
|
|
$
|
(192
|
)
|
|
$
|
25
|
|
|
June 30,
2020
|
|
December 31, 2019
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
664
|
|
|
$
|
94
|
|
Trade receivables, net
|
314
|
|
|
304
|
|
||
Prepaid expenses
|
51
|
|
|
48
|
|
||
Other current assets
|
49
|
|
|
53
|
|
||
Total current assets
|
1,078
|
|
|
499
|
|
||
Property and equipment, net
|
294
|
|
|
307
|
|
||
Goodwill
|
1,525
|
|
|
1,539
|
|
||
Trademarks, net
|
1,203
|
|
|
1,395
|
|
||
Franchise agreements and other intangibles, net
|
532
|
|
|
551
|
|
||
Other non-current assets
|
216
|
|
|
242
|
|
||
Total assets
|
$
|
4,848
|
|
|
$
|
4,533
|
|
Liabilities and equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Current portion of long-term debt
|
$
|
21
|
|
|
$
|
21
|
|
Accounts payable
|
40
|
|
|
30
|
|
||
Deferred revenues
|
99
|
|
|
132
|
|
||
Accrued expenses and other current liabilities
|
183
|
|
|
279
|
|
||
Total current liabilities
|
343
|
|
|
462
|
|
||
Long-term debt
|
2,826
|
|
|
2,101
|
|
||
Deferred income taxes
|
327
|
|
|
387
|
|
||
Deferred revenues
|
162
|
|
|
151
|
|
||
Other non-current liabilities
|
257
|
|
|
220
|
|
||
Total liabilities
|
3,915
|
|
|
3,321
|
|
||
Commitments and contingencies (Note 11)
|
|
|
|
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, $.01 par value, authorized 6.0 shares, none issued and outstanding
|
—
|
|
|
—
|
|
||
Common stock, $.01 par value, authorized 600.0 shares, 100.8 and 100.6 issued and outstanding at June 30, 2020 and December 31, 2019
|
1
|
|
|
1
|
|
||
Treasury stock, at cost – 7.7 and 6.8 shares at June 30, 2020 and December 31, 2019
|
(408
|
)
|
|
(363
|
)
|
||
Additional paid-in capital
|
1,493
|
|
|
1,488
|
|
||
Retained earnings/(accumulated deficit)
|
(86
|
)
|
|
113
|
|
||
Accumulated other comprehensive loss
|
(67
|
)
|
|
(27
|
)
|
||
Total stockholders’ equity
|
933
|
|
|
1,212
|
|
||
Total liabilities and equity
|
$
|
4,848
|
|
|
$
|
4,533
|
|
|
Six Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
Operating activities
|
|
|
|
||||
Net (loss)/income
|
$
|
(152
|
)
|
|
$
|
47
|
|
Adjustments to reconcile net (loss)/income to net cash used in operating activities:
|
|
|
|
||||
Depreciation and amortization
|
49
|
|
|
56
|
|
||
Impairments, net
|
209
|
|
|
45
|
|
||
Deferred income taxes
|
(47
|
)
|
|
(6
|
)
|
||
Stock-based compensation
|
10
|
|
|
11
|
|
||
Net change in assets and liabilities:
|
|
|
|
||||
Trade receivables
|
(23
|
)
|
|
(55
|
)
|
||
Prepaid expenses
|
(3
|
)
|
|
(20
|
)
|
||
Other current assets
|
(3
|
)
|
|
(22
|
)
|
||
Accounts payable, accrued expenses and other current liabilities
|
(51
|
)
|
|
(12
|
)
|
||
Payment of tax liability assumed in La Quinta acquisition
|
—
|
|
|
(188
|
)
|
||
Deferred income
|
(22
|
)
|
|
16
|
|
||
Payments of development advance notes, net
|
(6
|
)
|
|
(8
|
)
|
||
Other, net
|
(1
|
)
|
|
(1
|
)
|
||
Net cash used in operating activities
|
(40
|
)
|
|
(137
|
)
|
||
Investing activities
|
|
|
|
||||
Property and equipment additions
|
(18
|
)
|
|
(25
|
)
|
||
Issuance of loans, net
|
(1
|
)
|
|
(2
|
)
|
||
Net cash used in investing activities
|
(19
|
)
|
|
(27
|
)
|
||
Financing activities
|
|
|
|
||||
Proceeds from borrowings
|
744
|
|
|
—
|
|
||
Principal payments on long-term debt
|
(18
|
)
|
|
(8
|
)
|
||
Finance lease payments
|
(2
|
)
|
|
(2
|
)
|
||
Capital contribution from former Parent
|
—
|
|
|
68
|
|
||
Dividends to shareholders
|
(38
|
)
|
|
(56
|
)
|
||
Repurchases of common stock
|
(50
|
)
|
|
(95
|
)
|
||
Net share settlement of incentive equity awards
|
(4
|
)
|
|
(4
|
)
|
||
Other, net
|
(2
|
)
|
|
1
|
|
||
Net cash provided by/(used in) financing activities
|
630
|
|
|
(96
|
)
|
||
Effect of changes in exchange rates on cash, cash equivalents and restricted cash
|
(1
|
)
|
|
1
|
|
||
Net increase/(decrease) in cash, cash equivalents and restricted cash
|
570
|
|
|
(259
|
)
|
||
Cash, cash equivalents and restricted cash, beginning of period
|
94
|
|
|
366
|
|
||
Cash, cash equivalents and restricted cash, end of period
|
$
|
664
|
|
|
$
|
107
|
|
|
Common Shares Outstanding
|
|
Common Stock
|
|
Treasury
Stock
|
|
Additional Paid-in Capital
|
|
Retained Earnings/(Accumulated Deficit)
|
|
Accumulated Other Comprehensive Loss
|
|
Total Equity
|
|||||||||||||
Balance as of December 31, 2019
|
94
|
|
|
$
|
1
|
|
|
$
|
(363
|
)
|
|
$
|
1,488
|
|
|
$
|
113
|
|
|
$
|
(27
|
)
|
|
$
|
1,212
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
—
|
|
|
22
|
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(39
|
)
|
|
(39
|
)
|
||||||
Dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30
|
)
|
|
—
|
|
|
(30
|
)
|
||||||
Repurchase of common stock
|
(1
|
)
|
|
—
|
|
|
(45
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(45
|
)
|
||||||
Net share settlement of incentive equity awards
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
Change in deferred compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||||
Cumulative effect of change in accounting standard
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
(10
|
)
|
|||||||
Balance as of March 31, 2020
|
93
|
|
|
1
|
|
|
(408
|
)
|
|
1,490
|
|
|
95
|
|
|
(66
|
)
|
|
1,112
|
|
||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(174
|
)
|
|
—
|
|
|
(174
|
)
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
||||||
Dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
(8
|
)
|
||||||
Net share settlement of incentive equity awards
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
Change in deferred compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
||||||
Balance as of June 30, 2020
|
93
|
|
|
$
|
1
|
|
|
$
|
(408
|
)
|
|
$
|
1,493
|
|
|
$
|
(86
|
)
|
|
$
|
(67
|
)
|
|
$
|
933
|
|
|
Common Shares Outstanding
|
|
Common Stock
|
|
Treasury
Stock
|
|
Additional Paid-in Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Loss
|
|
Total Equity
|
|||||||||||||
Balance as of December 31, 2018
|
98
|
|
|
$
|
1
|
|
|
$
|
(119
|
)
|
|
$
|
1,475
|
|
|
$
|
69
|
|
|
$
|
(8
|
)
|
|
$
|
1,418
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
21
|
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
(7
|
)
|
||||||
Dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(29
|
)
|
|
—
|
|
|
(29
|
)
|
||||||
Repurchase of common stock
|
(1
|
)
|
|
—
|
|
|
(44
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(44
|
)
|
||||||
Change in deferred compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
5
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Balance as of March 31, 2019
|
97
|
|
|
1
|
|
|
(164
|
)
|
|
1,481
|
|
|
61
|
|
|
(15
|
)
|
|
1,364
|
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26
|
|
|
—
|
|
|
26
|
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15
|
)
|
|
(15
|
)
|
||||||
Dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(28
|
)
|
|
—
|
|
|
(28
|
)
|
||||||
Repurchase of common stock
|
(1
|
)
|
|
—
|
|
|
(50
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(50
|
)
|
||||||
Net share settlement of incentive equity awards
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
||||||
Change in deferred compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||
Balance as of June 30, 2019
|
96
|
|
|
$
|
1
|
|
|
$
|
(214
|
)
|
|
$
|
1,484
|
|
|
$
|
59
|
|
|
$
|
(30
|
)
|
|
$
|
1,300
|
|
1. BASIS OF PRESENTATION
|
•
|
Hotel Franchising — licenses the Company’s 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 the Company.
|
2. NEW ACCOUNTING PRONOUNCEMENTS
|
3. REVENUE RECOGNITION
|
|
|
June 30,
2020
|
|
December 31, 2019
|
||||
Deferred initial franchise fee revenues
|
|
$
|
139
|
|
|
$
|
136
|
|
Deferred loyalty program revenues
|
|
78
|
|
|
86
|
|
||
Deferred co-branded credit card program revenues
|
|
21
|
|
|
34
|
|
||
Deferred hotel management fee revenues
|
|
1
|
|
|
—
|
|
||
Deferred other revenues
|
|
22
|
|
|
27
|
|
||
Total
|
|
$
|
261
|
|
|
$
|
283
|
|
|
7/1/2020- 6/30/2021
|
|
7/1/2021- 6/30/2022
|
|
7/1/2022- 6/30/2023
|
|
Thereafter
|
|
Total
|
||||||||||
Initial franchise fee revenues
|
$
|
24
|
|
|
$
|
9
|
|
|
$
|
9
|
|
|
$
|
97
|
|
|
$
|
139
|
|
Loyalty program revenues
|
40
|
|
|
25
|
|
|
11
|
|
|
2
|
|
|
78
|
|
|||||
Co-branded credit card program revenues
|
21
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|||||
Hotel management fee revenues
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||
Other revenues
|
13
|
|
|
2
|
|
|
1
|
|
|
6
|
|
|
22
|
|
|||||
Total
|
$
|
99
|
|
|
$
|
36
|
|
|
$
|
21
|
|
|
$
|
105
|
|
|
$
|
261
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Hotel Franchising
|
|
|
|
|
|
|
|
||||||||
Royalties and franchise fees
|
$
|
59
|
|
|
$
|
124
|
|
|
$
|
144
|
|
|
$
|
223
|
|
Marketing, reservation and loyalty
|
82
|
|
|
139
|
|
|
187
|
|
|
252
|
|
||||
License and other fees
|
21
|
|
|
33
|
|
|
42
|
|
|
61
|
|
||||
Other
|
20
|
|
|
35
|
|
|
52
|
|
|
64
|
|
||||
Total Hotel Franchising
|
182
|
|
|
331
|
|
|
425
|
|
|
600
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Hotel Management
|
|
|
|
|
|
|
|
||||||||
Royalties and franchise fees
|
2
|
|
|
2
|
|
|
10
|
|
|
5
|
|
||||
Marketing, reservation and loyalty
|
—
|
|
|
1
|
|
|
1
|
|
|
2
|
|
||||
Owned hotel revenues
|
2
|
|
|
23
|
|
|
23
|
|
|
49
|
|
||||
Management fees
|
4
|
|
|
13
|
|
|
15
|
|
|
26
|
|
||||
Cost reimbursements
|
66
|
|
|
160
|
|
|
192
|
|
|
315
|
|
||||
Other
|
2
|
|
|
2
|
|
|
1
|
|
|
1
|
|
||||
Total Hotel Management
|
76
|
|
|
201
|
|
|
242
|
|
|
398
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Corporate and Other
|
—
|
|
|
1
|
|
|
—
|
|
|
3
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net revenues
|
$
|
258
|
|
|
$
|
533
|
|
|
$
|
667
|
|
|
$
|
1,001
|
|
4. EARNINGS PER SHARE
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Net (loss)/income
|
$
|
(174
|
)
|
|
$
|
26
|
|
|
$
|
(152
|
)
|
|
$
|
47
|
|
|
|
|
|
|
|
|
|
||||||||
Basic weighted average shares outstanding
|
93.3
|
|
|
97.1
|
|
|
93.5
|
|
|
97.5
|
|
||||
Stock options and restricted stock units (“RSUs”) (a)
|
—
|
|
|
0.3
|
|
|
—
|
|
|
0.3
|
|
||||
Diluted weighted average shares outstanding
|
93.3
|
|
|
97.4
|
|
|
93.5
|
|
|
97.8
|
|
||||
|
|
|
|
|
|
|
|
||||||||
(Loss)/earnings per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(1.86
|
)
|
|
$
|
0.27
|
|
|
$
|
(1.63
|
)
|
|
$
|
0.49
|
|
Diluted
|
(1.86
|
)
|
|
0.27
|
|
|
(1.63
|
)
|
|
0.49
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Dividends:
|
|
|
|
|
|
|
|
||||||||
Cash dividends declared per share
|
$
|
0.08
|
|
|
$
|
0.29
|
|
|
$
|
0.40
|
|
|
$
|
0.58
|
|
Aggregate dividends paid to shareholders
|
$
|
8
|
|
|
$
|
28
|
|
|
$
|
38
|
|
|
$
|
56
|
|
(a)
|
Due to the anti-dilutive effect resulting from the reported net loss for the three and six months ended June 30, 2020, 0.1 million of anti-dilutive shares were omitted from the calculation of weighted average shares outstanding for those periods.
|
|
Shares
|
|
Cost
|
|
Average Price Per Share
|
|||||
As of January 1, 2020
|
6.8
|
|
|
$
|
363
|
|
|
$
|
53.67
|
|
For the six months ended June 30, 2020
|
0.9
|
|
|
45
|
|
|
51.57
|
|
||
As of June 30, 2020
|
7.7
|
|
|
$
|
408
|
|
|
$
|
53.43
|
|
5. ACCOUNTS RECEIVABLE
|
|
June 30, 2020
|
||
Beginning balance
|
$
|
47
|
|
Cumulative effect of change in accounting standard
|
12
|
|
|
Provision for doubtful accounts
|
21
|
|
|
Bad debt write-offs
|
(13
|
)
|
|
Ending balance
|
$
|
67
|
|
6. LONG-LIVED ASSETS
|
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
|
|
(a)
|
Represents the impairments of three of the Company's trademarks.
|
|
June 30, 2020
|
|
December 31, 2019
|
||||||||||||||||||||
|
Gross
Carrying Amount |
|
Accumulated
Impairment |
|
Net
Carrying Amount |
|
Gross
Carrying Amount |
|
Accumulated
Impairment |
|
Net
Carrying Amount |
||||||||||||
Goodwill
|
$
|
1,539
|
|
|
$
|
(14
|
)
|
|
$
|
1,525
|
|
|
$
|
1,539
|
|
|
$
|
—
|
|
|
$
|
1,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
June 30, 2020
|
|
December 31, 2019
|
||||||||||||||||||||
|
Gross
Carrying Amount |
|
Accumulated
Amortization |
|
Net
Carrying Amount |
|
Gross
Carrying Amount |
|
Accumulated
Amortization |
|
Net
Carrying Amount |
||||||||||||
Unamortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Trademarks
|
|
|
|
|
$
|
1,202
|
|
|
|
|
|
|
$
|
1,393
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Franchise agreements
|
$
|
895
|
|
|
$
|
473
|
|
|
$
|
422
|
|
|
$
|
895
|
|
|
$
|
460
|
|
|
$
|
435
|
|
Management agreements
|
136
|
|
|
27
|
|
|
109
|
|
|
137
|
|
|
23
|
|
|
114
|
|
||||||
Trademarks
|
2
|
|
|
1
|
|
|
1
|
|
|
3
|
|
|
1
|
|
|
2
|
|
||||||
Other
|
2
|
|
|
1
|
|
|
1
|
|
|
3
|
|
|
1
|
|
|
2
|
|
||||||
|
$
|
1,035
|
|
|
$
|
502
|
|
|
$
|
533
|
|
|
$
|
1,038
|
|
|
$
|
485
|
|
|
$
|
553
|
|
7. FRANCHISING, MARKETING AND RESERVATION ACTIVITIES
|
(a)
|
Included within other non-current assets.
|
Condensed Consolidated Statements of Income:
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Forgiveness of notes (a)
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
4
|
|
|
$
|
4
|
|
Bad debt expense related to notes
|
—
|
|
|
1
|
|
|
1
|
|
|
2
|
|
(a)
|
Amounts are recorded as a reduction of royalties and franchise fees and marketing, reservation and loyalty revenues.
|
8. INCOME TAXES
|
9. LONG-TERM DEBT AND BORROWING ARRANGEMENTS
|
|
June 30, 2020
|
|
December 31, 2019
|
||||||||||
Long-term debt: (a)
|
Amount
|
|
Weighted Average Rate (b)
|
|
Amount
|
|
Weighted Average Rate (b)
|
||||||
$750 million revolving credit facility (due May 2023)
|
$
|
734
|
|
|
2.44
|
%
|
|
$
|
—
|
|
|
|
|
Term loan (due May 2025)
|
1,561
|
|
|
3.23
|
%
|
|
1,568
|
|
|
4.00
|
%
|
||
5.375% senior unsecured notes (due April 2026)
|
495
|
|
|
5.38
|
%
|
|
494
|
|
|
5.38
|
%
|
||
Finance leases
|
57
|
|
|
4.50
|
%
|
|
60
|
|
|
4.50
|
%
|
||
Total long-term debt
|
2,847
|
|
|
|
|
2,122
|
|
|
|
||||
Less: Current portion of long-term debt
|
21
|
|
|
|
|
21
|
|
|
|
||||
Long-term debt
|
$
|
2,826
|
|
|
|
|
$
|
2,101
|
|
|
|
(a)
|
The carrying amount of the term loan and senior unsecured notes are net of deferred debt issuance costs of $16 million and $18 million as of June 30, 2020 and December 31, 2019, respectively.
|
(b)
|
Weighted average interest rates are based on period-end balances, including the effects from hedging.
|
|
Long-Term Debt
|
||
Within 1 year
|
$
|
21
|
|
Between 1 and 2 years
|
21
|
|
|
Between 2 and 3 years
|
755
|
|
|
Between 3 and 4 years
|
22
|
|
|
Between 4 and 5 years
|
1,503
|
|
|
Thereafter
|
525
|
|
|
Total
|
$
|
2,847
|
|
|
Revolving Credit Facility
|
||
Total capacity
|
$
|
750
|
|
Less: Borrowings
|
734
|
|
|
Less: Letters of credit
|
15
|
|
|
Available capacity
|
$
|
1
|
|
10. FAIR VALUE
|
|
June 30, 2020
|
||||||
|
Carrying Amount
|
|
Estimated Fair Value
|
||||
Debt
|
$
|
2,847
|
|
|
$
|
2,768
|
|
11. COMMITMENTS AND CONTINGENCIES
|
12. STOCK-BASED COMPENSATION
|
|
RSUs
|
|
PSUs
|
||||||||||
|
Number of
RSUs |
|
Weighted
Average Grant Price |
|
Number
of PSUs |
|
Weighted
Average Grant Price |
||||||
Balance as of December 31, 2019
|
0.8
|
|
|
$
|
55.75
|
|
|
0.1
|
|
|
$
|
52.44
|
|
Granted (a)
|
0.6
|
|
|
53.01
|
|
|
0.1
|
|
|
53.40
|
|
||
Vested
|
(0.3
|
)
|
|
56.15
|
|
|
—
|
|
|
—
|
|
||
Canceled
|
(0.2
|
)
|
|
54.81
|
|
|
—
|
|
|
—
|
|
||
Balance as of June 30, 2020
|
0.9
|
|
(b)
|
$
|
54.15
|
|
|
0.2
|
|
(c)
|
$
|
52.93
|
|
(a)
|
Represents awards granted by the Company primarily in February 2020.
|
(b)
|
RSUs outstanding as of June 30, 2020 are expected to vest over time and have an aggregate unrecognized compensation expense of $45 million, which is expected to be recognized over a weighted average period of 3.1 years.
|
(c)
|
PSUs outstanding as of June 30, 2020 are expected to vest over time and have an aggregate unrecognized compensation expense of $9 million, which may be recognized over a weighted average period of 2.9 years.
|
|
Number of Options
|
|
Weighted Average Exercise Price
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
Aggregate Intrinsic Value (in millions)
|
|||||
Outstanding as of December 31, 2019
|
0.9
|
|
|
$
|
56.96
|
|
|
|
|
|
||
Granted
|
0.6
|
|
|
53.40
|
|
|
|
|
|
|||
Exercised
|
—
|
|
|
—
|
|
|
|
|
|
|||
Canceled
|
(0.1
|
)
|
|
54.72
|
|
|
|
|
|
|||
Expired
|
—
|
|
|
—
|
|
|
|
|
|
|||
Outstanding as of June 30, 2020
|
1.4
|
|
|
$
|
55.57
|
|
|
6.0
|
|
$
|
—
|
|
Unvested as of June 30, 2020
|
1.0
|
|
(a)
|
$
|
54.54
|
|
|
6.2
|
|
$
|
—
|
|
Exercisable as of June 30, 2020
|
0.4
|
|
|
$
|
57.94
|
|
|
5.6
|
|
$
|
—
|
|
(a)
|
Unvested options as of June 30, 2020 are expected to vest over time and have an aggregate unrecognized compensation expense of $9 million, which is expected to be recognized over a weighted average period of 3.1 years.
|
|
2020
|
|
2019
|
Grant date fair value
|
$8.59
|
|
$10.46
|
Grant date strike price
|
$53.40
|
|
$52.44
|
Expected volatility
|
24.30%
|
|
22.24%
|
Expected life
|
4.25 years
|
|
6.25 years
|
Risk-free interest rate
|
1.21%
|
|
2.63%
|
Projected dividend yield
|
2.40%
|
|
2.21%
|
13. SEGMENT INFORMATION
|
|
Three Months Ended June 30,
|
||||||||||||||
|
2020
|
|
2019
|
||||||||||||
|
Net Revenues
|
|
Adjusted EBITDA
|
|
Net Revenues
|
|
Adjusted EBITDA
|
||||||||
Hotel Franchising
|
$
|
182
|
|
|
$
|
83
|
|
|
$
|
331
|
|
|
$
|
162
|
|
Hotel Management
|
76
|
|
|
(4
|
)
|
|
201
|
|
|
16
|
|
||||
Total Reportable Segments
|
258
|
|
|
79
|
|
|
532
|
|
|
178
|
|
||||
Corporate and Other
|
—
|
|
|
(16
|
)
|
|
1
|
|
|
(19
|
)
|
||||
Total Company
|
$
|
258
|
|
|
$
|
63
|
|
|
$
|
533
|
|
|
$
|
159
|
|
|
Three Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
Net (loss)/income
|
$
|
(174
|
)
|
|
$
|
26
|
|
(Benefit)/provision for income taxes
|
(48
|
)
|
|
10
|
|
||
Depreciation and amortization
|
25
|
|
|
27
|
|
||
Interest expense, net
|
28
|
|
|
26
|
|
||
Stock-based compensation expense
|
5
|
|
|
4
|
|
||
Impairments, net
|
206
|
|
|
45
|
|
||
Restructuring costs
|
16
|
|
|
—
|
|
||
Transaction-related expenses, net
|
5
|
|
|
11
|
|
||
Separation-related expenses
|
—
|
|
|
1
|
|
||
Contract termination costs
|
—
|
|
|
9
|
|
||
Adjusted EBITDA
|
$
|
63
|
|
|
$
|
159
|
|
|
Six Months Ended June 30, 2020
|
||||||||||||||
|
2020
|
|
2019
|
||||||||||||
|
Net Revenues
|
|
Adjusted EBITDA
|
|
Net Revenues
|
|
Adjusted EBITDA
|
||||||||
Hotel Franchising
|
$
|
425
|
|
|
$
|
191
|
|
|
$
|
600
|
|
|
$
|
275
|
|
Hotel Management
|
242
|
|
|
13
|
|
|
398
|
|
|
31
|
|
||||
Total Reportable Segments
|
667
|
|
|
204
|
|
|
998
|
|
|
306
|
|
||||
Corporate and Other
|
—
|
|
|
(34
|
)
|
|
3
|
|
|
(36
|
)
|
||||
Total Company
|
$
|
667
|
|
|
$
|
170
|
|
|
$
|
1,001
|
|
|
$
|
270
|
|
|
Six Months Ended June 30, 2020
|
||||||
|
2020
|
|
2019
|
||||
Net (loss)/income
|
$
|
(152
|
)
|
|
$
|
47
|
|
(Benefit)/provision for income taxes
|
(40
|
)
|
|
15
|
|
||
Depreciation and amortization
|
49
|
|
|
56
|
|
||
Interest expense, net
|
54
|
|
|
50
|
|
||
Stock-based compensation expense
|
9
|
|
|
7
|
|
||
Impairments, net
|
206
|
|
|
45
|
|
||
Restructuring costs
|
29
|
|
|
—
|
|
||
Transaction-related expenses, net
|
13
|
|
|
18
|
|
||
Separation-related expenses
|
1
|
|
|
22
|
|
||
Contract termination costs
|
—
|
|
|
9
|
|
||
Foreign currency impact of highly inflationary countries
|
1
|
|
|
1
|
|
||
Adjusted EBITDA
|
$
|
170
|
|
|
$
|
270
|
|
14. OTHER EXPENSES AND CHARGES
|
|
|
|
|
2020 Activity
|
|
|
||||||||||||||
|
|
Liability as of December 31, 2019
|
|
Costs Recognized
|
|
Cash Payments
|
|
Other (a)
|
|
Liability as of
June 30,
2020
|
||||||||||
2019 Plan
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Personnel-related
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
(6
|
)
|
|
$
|
(1
|
)
|
|
$
|
1
|
|
2020 Plans
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Personnel-related
|
|
—
|
|
|
23
|
|
|
(12
|
)
|
|
(1
|
)
|
|
10
|
|
|||||
Facility-related
|
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|||||
Other
|
|
—
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|||||
Total 2020 Plans
|
|
—
|
|
|
29
|
|
|
(13
|
)
|
|
(1
|
)
|
|
15
|
|
|||||
Total accrued restructuring
|
|
$
|
8
|
|
|
$
|
29
|
|
|
$
|
(19
|
)
|
|
$
|
(2
|
)
|
|
$
|
16
|
|
(a)
|
Represents non-cash payments in Company stock.
|
|
Three Months Ended June 30, 2020
|
|
Six Months Ended June 30, 2020
|
||||
Hotel Franchising
|
$
|
8
|
|
|
$
|
15
|
|
Hotel Management
|
1
|
|
|
2
|
|
||
Corporate and Other
|
7
|
|
|
12
|
|
||
Total
|
$
|
16
|
|
|
$
|
29
|
|
15. TRANSACTIONS WITH FORMER PARENT
|
16. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
|
Net of Tax
|
|
Foreign Currency Translation Adjustments
|
|
Cash Flow Hedges
|
|
Accumulated Other Comprehensive Income/(Loss)
|
||||||
Balance as of December 31, 2019
|
|
$
|
(1
|
)
|
|
$
|
(26
|
)
|
|
$
|
(27
|
)
|
Period change
|
|
(3
|
)
|
|
(36
|
)
|
|
(39
|
)
|
|||
Balance as of March 31, 2020
|
|
(4
|
)
|
|
(62
|
)
|
|
(66
|
)
|
|||
Period change
|
|
1
|
|
|
(2
|
)
|
|
(1
|
)
|
|||
Balance as of June 30, 2020
|
|
$
|
(3
|
)
|
|
$
|
(64
|
)
|
|
$
|
(67
|
)
|
|
|
|
|
|
|
|
||||||
Net of Tax
|
|
|
|
|
|
|
||||||
Balance as of December 31, 2018
|
|
$
|
(4
|
)
|
|
$
|
(4
|
)
|
|
$
|
(8
|
)
|
Period change
|
|
1
|
|
|
(8
|
)
|
|
(7
|
)
|
|||
Balance as of March 31, 2019
|
|
(3
|
)
|
|
(12
|
)
|
|
(15
|
)
|
|||
Period change
|
|
1
|
|
|
(16
|
)
|
|
(15
|
)
|
|||
Balance as of June 30, 2019
|
|
$
|
(2
|
)
|
|
$
|
(28
|
)
|
|
$
|
(30
|
)
|
BUSINESS AND OVERVIEW
|
•
|
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.
|
RESULTS OF OPERATIONS
|
•
|
Suspended our share repurchase program as of March 17, 2020;
|
•
|
Workforce reductions, including the elimination of 442 team members across the globe;
|
•
|
Advertising reductions;
|
•
|
Reduced our quarterly cash dividend per share to $0.08 per share from $0.32 per share in the first quarter of 2020;
|
•
|
Capital expenditures reductions to focus on only the highest priority projects;
|
•
|
Elimination of all discretionary spend;
|
•
|
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 of Directors ("Board") elected to forgo the cash portion of their fees for a portion of the year.
|
•
|
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;
|
•
|
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 Act ("CARES") and its evolving guidance and urged the government to expand and clarify these loan programs, for which the majority of our owners qualify;
|
•
|
Provided payment relief by deferring receivables and suspending interest charges and late fees through September 1, 2020; and
|
•
|
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.
|
OPERATING STATISTICS
|
|
As of June 30,
|
|
|
|||||||
|
2020
|
|
2019
|
|
% Change
|
|||||
Rooms
|
|
|
|
|
|
|||||
United States
|
502,000
|
|
|
508,300
|
|
|
(1
|
%)
|
||
International
|
310,900
|
|
|
308,300
|
|
|
1
|
%
|
||
Total rooms
|
812,900
|
|
|
816,600
|
|
|
—
|
%
|
||
|
|
|
|
|
|
|||||
|
Three Months Ended June 30,
|
|
|
|||||||
|
2020
|
|
2019
|
|
% Change
|
|||||
RevPAR
|
|
|
|
|
|
|||||
United States
|
$
|
23.19
|
|
|
$
|
50.98
|
|
|
(55
|
%)
|
International (a)
|
7.96
|
|
|
32.47
|
|
|
(75
|
%)
|
||
Total RevPAR (a)
|
17.31
|
|
|
44.06
|
|
|
(61
|
%)
|
||
|
|
|
|
|
|
|||||
|
Six Months Ended June 30,
|
|
|
|||||||
|
2020
|
|
2019
|
|
% Change
|
|||||
RevPAR
|
|
|
|
|
|
|||||
United States
|
$
|
28.33
|
|
|
$
|
45.83
|
|
|
(38
|
%)
|
International (b)
|
13.20
|
|
|
30.71
|
|
|
(57
|
%)
|
||
Total RevPAR (b)
|
22.50
|
|
|
40.17
|
|
|
(44
|
%)
|
(a)
|
Excluding currency effects, international RevPAR decreased 75% and total RevPAR decreased 60%.
|
(b)
|
Excluding currency effects, international RevPAR decreased 55% and total RevPAR decreased 43%.
|
THREE MONTHS ENDED JUNE 30, 2020 VS. THREE MONTHS ENDED JUNE 30, 2019
|
|
Three Months Ended June 30,
|
|
|
||||||||
|
2020
|
|
2019
|
|
Change
|
||||||
Net revenues
|
$
|
258
|
|
|
$
|
533
|
|
|
$
|
(275
|
)
|
Expenses
|
452
|
|
|
471
|
|
|
(19
|
)
|
|||
Operating (loss)/income
|
(194
|
)
|
|
62
|
|
|
(256
|
)
|
|||
Interest expense, net
|
28
|
|
|
26
|
|
|
2
|
|
|||
(Loss)/income before income taxes
|
(222
|
)
|
|
36
|
|
|
(258
|
)
|
|||
(Benefit)/provision for income taxes
|
(48
|
)
|
|
10
|
|
|
(58
|
)
|
|||
Net (loss)/income
|
$
|
(174
|
)
|
|
$
|
26
|
|
|
$
|
(200
|
)
|
•
|
$94 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;
|
•
|
$65 million of lower royalty and franchise fees reflecting a 61% decline in RevPAR due to lower travel demand as a result of COVID-19;
|
•
|
$58 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;
|
•
|
$30 million of lower management and other fees primarily due to the temporary closure of our two owned hotels for April and May and due to the RevPAR decline; and
|
•
|
$12 million of lower license and other fees due to lower travel demand resulting from COVID-19.
|
•
|
$94 million of lower cost reimbursement expenses as discussed above;
|
•
|
$64 million of lower marketing, reservation and loyalty expenses, primarily due to cost reductions in response to COVID-19;
|
•
|
$20 million of lower operating expenses and general and administrative costs, primarily due to cost containment efforts in response to COVID-19;
|
•
|
$9 million of lower contract termination costs;
|
•
|
$6 million of lower transaction-related expenses; partially offset by
|
•
|
$161 million of higher impairment charges, driven by the $206 million of impairment charges during the second quarter of 2020, primarily related to certain of our trademarks, principally La Quinta, as well as goodwill for our owned hotel reporting unit. Such 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
|
•
|
$16 million of restructuring charges due to cost saving initiatives implemented in response to COVID-19.
|
|
Three Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
Net (loss)/income
|
$
|
(174
|
)
|
|
$
|
26
|
|
(Benefit)/provision for income taxes
|
(48
|
)
|
|
10
|
|
||
Depreciation and amortization
|
25
|
|
|
27
|
|
||
Interest expense, net
|
28
|
|
|
26
|
|
||
Stock-based compensation expense
|
5
|
|
|
4
|
|
||
Impairments, net
|
206
|
|
|
45
|
|
||
Restructuring costs
|
16
|
|
|
—
|
|
||
Transaction-related expenses, net
|
5
|
|
|
11
|
|
||
Separation-related expenses
|
—
|
|
|
1
|
|
||
Contract termination costs
|
—
|
|
|
9
|
|
||
Adjusted EBITDA
|
$
|
63
|
|
|
$
|
159
|
|
|
Net Revenues
|
|
|
|
Adjusted EBITDA
|
|
|
||||||||||||||
|
2020
|
|
2019
|
|
% Change
|
|
2020
|
|
2019
|
|
% Change
|
||||||||||
Hotel Franchising
|
$
|
182
|
|
|
$
|
331
|
|
|
(45
|
%)
|
|
$
|
83
|
|
|
$
|
162
|
|
|
(49
|
%)
|
Hotel Management
|
76
|
|
|
201
|
|
|
(62
|
%)
|
|
(4
|
)
|
|
16
|
|
|
(125
|
%)
|
||||
Corporate and Other
|
—
|
|
|
1
|
|
|
n/a
|
|
|
(16
|
)
|
|
(19
|
)
|
|
n/a
|
|
||||
Total Company
|
$
|
258
|
|
|
$
|
533
|
|
|
(52
|
%)
|
|
$
|
63
|
|
|
$
|
159
|
|
|
(60
|
%)
|
|
Three Months Ended June 30,
|
|
|
|||||||
|
2020
|
|
2019
|
|
% Change
|
|||||
Rooms
|
|
|
|
|
|
|||||
United States
|
460,200
|
|
|
457,600
|
|
|
1
|
%
|
||
International
|
294,500
|
|
|
293,700
|
|
|
—
|
%
|
||
Total rooms
|
754,700
|
|
|
751,300
|
|
|
—
|
%
|
||
RevPAR
|
|
|
|
|
|
|||||
United States
|
$
|
23.19
|
|
|
$
|
48.65
|
|
|
(52
|
%)
|
International (a)
|
7.66
|
|
|
31.59
|
|
|
(76
|
%)
|
||
Total RevPAR (a)
|
17.05
|
|
|
42.04
|
|
|
(59
|
%)
|
(a)
|
Excluding currency effects, international RevPAR decreased 75% and total RevPAR decreased 59%.
|
•
|
$65 million of lower royalty and franchise fees due to the 59% decline in RevPAR primarily as a result of COVID-19 on travel demand;
|
•
|
$57 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 lower RevPAR; and
|
•
|
$12 million of lower license and other fees as a result of the travel demand.
|
•
|
$62 million of lower marketing, reservation and loyalty expenses primarily due to cost reductions in response to COVID-19; and
|
•
|
$9 million of lower operating expenses and general and administrative costs primarily due to cost containment efforts in response to COVID-19.
|
|
Three Months Ended June 30,
|
|
|
|||||||
|
2020
|
|
2019
|
|
% Change
|
|||||
Rooms
|
|
|
|
|
|
|||||
United States
|
41,800
|
|
|
50,700
|
|
|
(18
|
%)
|
||
International
|
16,400
|
|
|
14,500
|
|
|
13
|
%
|
||
Total rooms
|
58,200
|
|
|
65,200
|
|
|
(11
|
%)
|
||
RevPAR
|
|
|
|
|
|
|||||
United States
|
$
|
23.21
|
|
|
$
|
71.61
|
|
|
(68
|
%)
|
International (a)
|
13.78
|
|
|
49.53
|
|
|
(72
|
%)
|
||
Total RevPAR (a)
|
20.67
|
|
|
66.67
|
|
|
(69
|
%)
|
(a)
|
Excluding currency effects, international RevPAR decreased 72% and total RevPAR decreased 69%.
|
•
|
$94 million of lower cost-reimbursement revenues as discussed above, which have no impact on adjusted EBITDA;
|
•
|
$21 million of lower owned hotel revenues due to the temporary closure of our owned hotels and lower travel demand as a result of COVID-19; and
|
•
|
$9 million of lower management fees primarily due to the 69% decline in RevPAR primarily as a result of COVID-19 on travel demand.
|
SIX MONTHS ENDED JUNE 30, 2020 VS. SIX MONTHS ENDED JUNE 30, 2019
|
|
Six Months Ended June 30,
|
|
|
||||||||
|
2020
|
|
2019
|
|
Change
|
||||||
Net revenues
|
$
|
667
|
|
|
$
|
1,001
|
|
|
$
|
(334
|
)
|
Expenses
|
805
|
|
|
889
|
|
|
(84
|
)
|
|||
Operating (loss)/income
|
(138
|
)
|
|
112
|
|
|
(250
|
)
|
|||
Interest expense, net
|
54
|
|
|
50
|
|
|
4
|
|
|||
(Loss)/income before income taxes
|
(192
|
)
|
|
62
|
|
|
(254
|
)
|
|||
(Benefit)/provision for income taxes
|
(40
|
)
|
|
15
|
|
|
(55
|
)
|
|||
Net (loss)/income
|
$
|
(152
|
)
|
|
$
|
47
|
|
|
$
|
(199
|
)
|
•
|
$123 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;
|
•
|
$74 million of lower royalty and franchise fees reflecting a 44% decline in RevPAR due to lower travel demand as a result of COVID-19;
|
•
|
$66 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;
|
•
|
$37 million of lower management and other fees primarily due to the temporary closure of our two owned hotels for April and May and due to the RevPAR decline; and
|
•
|
$19 million of lower license and other fees due to lower travel demand resulting from COVID-19.
|
•
|
$123 million of lower cost reimbursement expenses as discussed above;
|
•
|
$74 million of lower marketing, reservation and loyalty expenses, primarily due to cost reductions in response to COVID-19;
|
•
|
$35 million of lower operating expenses and general and administrative costs, primarily due to cost containment efforts in response to COVID-19;
|
•
|
$21 million of lower separation-related expenses; partially offset by
|
•
|
$161 million of higher impairment charges, driven by the $206 million of impairment charges during the second quarter of 2020, primarily related to certain of our trademarks, principally La Quinta, as well as goodwill for our owned hotel reporting unit. Such 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
|
•
|
$29 million of higher restructuring charges due to cost saving initiatives implemented in response to COVID-19.
|
|
Six Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
Net (loss)/income
|
$
|
(152
|
)
|
|
$
|
47
|
|
(Benefit)/provision for income taxes
|
(40
|
)
|
|
15
|
|
||
Depreciation and amortization
|
49
|
|
|
56
|
|
||
Interest expense, net
|
54
|
|
|
50
|
|
||
Stock-based compensation expense
|
9
|
|
|
7
|
|
||
Impairments, net
|
206
|
|
|
45
|
|
||
Restructuring costs
|
29
|
|
|
—
|
|
||
Transaction-related expenses, net
|
13
|
|
|
18
|
|
||
Separation-related expenses
|
1
|
|
|
22
|
|
||
Contract termination costs
|
—
|
|
|
9
|
|
||
Foreign currency impact of highly inflationary countries
|
1
|
|
|
1
|
|
||
Adjusted EBITDA
|
$
|
170
|
|
|
$
|
270
|
|
|
Net Revenues
|
|
|
|
Adjusted EBITDA
|
|
|
||||||||||||||
|
2020
|
|
2019
|
|
% Change
|
|
2020
|
|
2019
|
|
% Change
|
||||||||||
Hotel Franchising
|
$
|
425
|
|
|
$
|
600
|
|
|
(29
|
%)
|
|
$
|
191
|
|
|
$
|
275
|
|
|
(31
|
%)
|
Hotel Management
|
242
|
|
|
398
|
|
|
(39
|
%)
|
|
13
|
|
|
31
|
|
|
(58
|
%)
|
||||
Corporate and Other
|
—
|
|
|
3
|
|
|
n/a
|
|
|
(34
|
)
|
|
(36
|
)
|
|
n/a
|
|
||||
Total Company
|
$
|
667
|
|
|
$
|
1,001
|
|
|
(33
|
%)
|
|
$
|
170
|
|
|
$
|
270
|
|
|
(37
|
%)
|
|
Six Months Ended June 30,
|
|
|
|||||||
|
2020
|
|
2019
|
|
% Change
|
|||||
RevPAR
|
|
|
|
|
|
|||||
United States
|
$
|
27.31
|
|
|
$
|
43.24
|
|
|
(37
|
%)
|
International (a)
|
12.52
|
|
|
29.60
|
|
|
(58
|
%)
|
||
Total RevPAR (a)
|
21.47
|
|
|
37.95
|
|
|
(43
|
%)
|
(a)
|
Excluding currency effects, international RevPAR decreased 56% and total RevPAR decreased 43%.
|
•
|
$79 million of lower royalty and franchise fees due to the 43% decline in RevPAR primarily as a result of COVID-19 on travel demand;
|
•
|
$65 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 lower RevPAR; and
|
•
|
$19 million of lower license and other fees due to lower travel demand.
|
•
|
$73 million of lower marketing, reservation and loyalty expenses primarily due to cost reductions in response to COVID-19; and
|
•
|
$18 million of lower operating expenses and general and administrative costs primarily due to cost containment efforts in response to COVID-19.
|
|
Six Months Ended June 30,
|
|||||||||
|
2020
|
|
2019
|
|
% Change
|
|||||
RevPAR
|
|
|
|
|
|
|||||
United States
|
$
|
39.11
|
|
|
$
|
68.60
|
|
|
(43
|
%)
|
International (a)
|
26.12
|
|
|
52.31
|
|
|
(50
|
%)
|
||
Total RevPAR (a)
|
35.63
|
|
|
64.97
|
|
|
(45
|
%)
|
(a)
|
Excluding currency effects, international RevPAR decreased 47% and total RevPAR decreased 44%.
|
•
|
$123 million of lower cost-reimbursement revenues as discussed above, which have no impact on adjusted EBITDA;
|
•
|
$26 million of lower owned hotel revenues due to lower travel demand as a result of COVID-19;
|
•
|
$11 million of management fees primarily due to the 45% decline in RevPAR primarily as a result of COVID-19 on travel demand; partially offset by
|
•
|
$7 million of higher termination fees related to CorePoint Lodging asset sales.
|
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
|
|
June 30,
2020 |
|
December 31,
2019 |
|
Change
|
||||||
Total assets
|
$
|
4,848
|
|
|
$
|
4,533
|
|
|
$
|
315
|
|
Total liabilities
|
3,915
|
|
|
3,321
|
|
|
594
|
|
|||
Total stockholders’ equity
|
933
|
|
|
1,212
|
|
|
(279
|
)
|
CASH FLOW
|
|
Six Months Ended June 30,
|
||||||||||
|
2020
|
|
2019
|
|
Change
|
||||||
Cash (used in)/provided by
|
|
|
|
|
|
||||||
Operating activities
|
$
|
(40
|
)
|
|
$
|
(137
|
)
|
|
$
|
97
|
|
Investing activities
|
(19
|
)
|
|
(27
|
)
|
|
8
|
|
|||
Financing activities
|
630
|
|
|
(96
|
)
|
|
726
|
|
|||
Effects of changes in exchange rates on cash, cash equivalents and restricted cash
|
(1
|
)
|
|
1
|
|
|
(2
|
)
|
|||
Net change in cash, cash equivalents and restricted cash
|
$
|
570
|
|
|
$
|
(259
|
)
|
|
$
|
829
|
|
LONG-TERM DEBT COVENANTS
|
SEASONALITY
|
COMMITMENTS AND CONTINGENCIES
|
CRITICAL ACCOUNTING POLICIES
|
(a)
|
Disclosure Controls and Procedures. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive and principal financial officers, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13(a)-15(e) of the Exchange Act). Based on such evaluation, our principal executive and principal financial officers concluded that our disclosure controls and procedures were effective and operating to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
|
(b)
|
Internal Control Over Financial Reporting. There have been no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the period to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As of June 30, 2020, we utilized the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
|
•
|
Revenues and Expenses: Due to the spread of COVID-19, we have experienced significant decreases in demand and RevPAR. The negative effects of COVID-19 have and will continue to negatively impact our revenues and profitability and the amount of management and franchise fees revenues we are able to generate from our franchised and managed properties. In addition, the impact of COVID-19 is making it difficult for our franchisees and property owners to satisfy operating needs and could make it difficult for them to satisfy their debt obligations to us or others or obtain financing on favorable terms, or at all, which could generally impact their cost and our ability to increase revenue in the future. In addition, if a significant number of hotels exit our system as a result of COVID-19, our revenues and liquidity could be adversely affected. COVID-19 could also materially impact other non-hotel related sources of revenues for us, including, for example, our fees from our co-branded credit card arrangement or our license fee revenues. We could be further required to test our intangible assets or goodwill for impairments due to reduced revenues or cash flows.
|
•
|
Operations: Due to the significant decrease in travel demand, we have taken actions and continue to evaluate opportunities for managing our operating expenses and conserving our financial resources, including the actions described under "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Report. Given the uncertainty relating to COVID-19, we may have to take additional actions in the future, which cannot be predicted.
|
•
|
Financial Condition and Indebtedness: In March 2020, we borrowed $734 million, representing substantially all of our outstanding availability under our revolving credit facility. We do not currently have additional borrowing capacity and our liquidity is limited to cash on hand. In April 2020, we amended our credit facility to, among other things, waive the quarterly-tested leverage ratio financial covenant until the second quarter of 2021 and tighten certain covenants, including with respect to share repurchases and certain investments. In addition, we are subject to a minimum liquidity covenant of $200 million, tested on a monthly basis, during such period, and must use the proceeds from certain asset sales and debt issuances to repay outstanding revolving loans during such period. See "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and capital resources." An event of default enables our lenders to terminate their commitments and would trigger consequences under other indebtedness or financial instruments. Additionally, any failure to meet required payments of principal and interest under our outstanding indebtedness could result in a default and acceleration of the underlying debt and under other indebtedness that contains cross-default provisions.
|
•
|
Growth: Our plans for growth may be negatively impacted by COVID-19. This environment could result in difficulties for our franchisees and property owners to obtain financing on reasonable terms. In addition, our development pipeline is subject to a number of risks, including that developers are experiencing construction delays as a result of restrictions on business activity and supply chain interruptions which could cause delays in the completion and development of new hotels, impacting our net rooms growth and/or slowing the rate of our pipeline growth.
|
•
|
Capital Markets Impact: The global stock markets have, and may continue to, experience volatility as a result of COVID-19. The price of our common stock has been volatile in recent months and has experienced periods of significant declines. The significant uncertainty created by the impact of COVID-19 has caused the global economy, business confidence and consumer confidence to have, and likely continue to have, a significant effect on the market price of securities generally, including on our common stock. In addition, we are restricted in our ability to repurchase shares and limited in our ability to make dividend payments.
|
•
|
the scope and duration of the pandemic, including any additional resurgence in the number of COVID-19 cases, and its impact on our business operations, financial results, outlook, plans, growth, cash flows and liquidity, as well as the impact on our franchisees and property owners and their operations, our guests and our team members, the hospitality industry and the overall demand for travel;
|
•
|
new information which may emerge concerning the severity and impact of COVID-19;
|
•
|
the actions necessary to contain COVID-19 or respond to its impact, including the need for us or our franchisees and property owners to quarantine team members, employees of our franchisees or our guests or impacted areas that may be affected;
|
•
|
the impact of the resurgence of the number of COVID-19 cases and the potential resulting re-implementation of restrictions and a renewed or greater unwillingness of guests to travel and stay in hotels due to actual or perceived risks of contracting COVID-19;
|
•
|
the timing and availability of vaccinations and other treatments for COVID-19;
|
•
|
general economic and competitive conditions;
|
•
|
the continuation or worsening of the effects from COVID-19;
|
•
|
the success of mitigation efforts in response to COVID-19 by our franchisees, property owners, and us, including the actions described under "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Report;
|
•
|
actions governments, businesses and individuals take in response to the pandemic, including stay-in-place directives and other travel restrictions and the success of those actions;
|
•
|
our performance in any recovery from COVID-19 or any resurgence;
|
•
|
our relationships with franchisees and property owners;
|
•
|
continued access to liquidity, capital and financing as a result of COVID-19 and the terms and cost thereof, as well as our credit rating;
|
•
|
potential exposure to additional impairments to certain intangible assets, such as our trademarks and our franchised and managed goodwill;
|
•
|
our ability to maintain our financial reporting processes and related controls since many team members are working remotely;
|
•
|
the diversion of management’s attention from the business if any key team member becomes ill from COVID-19 or unable to work;
|
•
|
the size and length of the resulting unemployment rates and changes in consumer preferences, discretionary spending and confidence;
|
•
|
the ability of our franchisees and property owners to successfully respond to the adverse effects of the pandemic and our and their ability to comply with our respective agreements;
|
•
|
the potential of our franchisees and property owners to declare bankruptcy or cause their lenders to declare a default, accelerate debt or foreclose on the property, which could result in the termination of our franchise or management agreements and impact our current earnings, future earnings and overall financial condition;
|
•
|
potential exposure to make payments to third-parties to whom we made financial guarantees;
|
•
|
the length of the recovery period after the COVID-19 pandemic abates, including the time it takes for demand and pricing to stabilize and normal economic and operating conditions to resume;
|
•
|
the impact on our contracts with our partners, including force majeure provisions;
|
•
|
labor markets and activities or additional demands or requests from labor unions or labor disputes or disruptions;
|
•
|
unexpected additional costs and expenses incurred by us, franchisees and property owners related to the effects of COVID-19 and steps taken to counteract future outbreaks, including enhanced health and hygiene or social distancing requirements;
|
•
|
the effects of any steps we take to reduce operating costs as a result of COVID-19, which may affect, among other things, our brand reputation, our ability to operate the company, our ability to attract and retain team members and guest experience and loyalty; and the effect of any steps we, franchisees and property owners take to counteract future outbreaks of COVID-19 or other pandemics and epidemics;
|
•
|
potential exposure related to guests or team members who may contract COVID-19.
|
|
|
WYNDHAM HOTELS & RESORTS, INC.
|
|
|
|
Date: July 29, 2020
|
By:
|
/s/ Michele Allen
|
|
|
Michele Allen
|
|
|
Chief Financial Officer
|
|
|
|
Date: July 29, 2020
|
By:
|
/s/ Nicola Rossi
|
|
|
Nicola Rossi
|
|
|
Chief Accounting Officer
|
Exhibit No.
|
Description
|
3.1
|
|
3.2
|
|
10.1*
|
|
15.1*
|
|
31.1*
|
|
31.2*
|
|
32**
|
|
101.INS*
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
104
|
Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
|
1.
|
Release.
|
•
|
Title VII of the Civil Rights Act of 1964;
|
•
|
Sections 1981 through 1988 of Title 42 of the United States Code;
|
•
|
The Employee Retirement Income Security Act of 1974 ("ERISA") (as modified below);
|
•
|
The Immigration Reform and Control Act;
|
•
|
The Americans with Disabilities Act of 1990;
|
•
|
The Age Discrimination in Employment Act of 1967 (“ADEA”);
|
•
|
The Worker Adjustment and Retraining Notification Act;
|
•
|
The Fair Credit Reporting Act;
|
•
|
The Family and Medical Leave Act;
|
•
|
The Equal Pay Act;
|
•
|
The Genetic Information Nondiscrimination Act of 2008;
|
•
|
The Occupational Safety and Health Act;
|
•
|
The Family First Coronavirus Response Act;
|
•
|
The New Jersey Law Against Discrimination;
|
•
|
The New Jersey Civil Rights Act;
|
•
|
The New Jersey Family Leave Act;
|
•
|
The New Jersey State Wage and Hour Law;
|
•
|
The Millville Dallas Airmotive Plant Job Loss Notification Act;
|
•
|
The New Jersey Conscientious Employee Protection Act;
|
•
|
The New Jersey Equal Pay Law;
|
•
|
The New Jersey Occupational Safety and Health Law;
|
•
|
The New Jersey Smokers’ Rights Law;
|
•
|
The New Jersey Genetic Privacy Act;
|
•
|
The New Jersey Fair Credit Reporting Act;
|
•
|
The New Jersey Paid Sick Leave Act;
|
•
|
The New Jersey Statutory Provision Regarding Retaliation/Discrimination for Filing A Workers' Compensation Claim;
|
•
|
The New Jersey Public Employees' Occupational Safety and Health Act;
|
•
|
New Jersey laws regarding Political Activities of Employees, Lie Detector Tests, Jury Duty, Employment Protection, and Discrimination;
|
•
|
any other federal, state or local law, rule, regulation, or ordinance;
|
•
|
any public policy, contract, tort, or common law; or
|
•
|
any basis for recovering costs, fees, or other expenses including attorneys' fees incurred in these matters.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Wyndham Hotels & Resorts, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: July 29, 2020
|
|
|
/S/ GEOFFREY A. BALLOTTI
|
|
PRESIDENT AND CHIEF EXECUTIVE OFFICER
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Wyndham Hotels & Resorts, Inc.;
|
2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: July 29, 2020
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/S/ MICHELE ALLEN
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CHIEF FINANCIAL OFFICER
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(1.)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2.)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ GEOFFREY A. BALLOTTI
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GEOFFREY A. BALLOTTI
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PRESIDENT AND CHIEF EXECUTIVE OFFICER
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July 29, 2020
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/s/ MICHELE ALLEN
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MICHELE ALLEN
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CHIEF FINANCIAL OFFICER
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July 29, 2020
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