EX-99.4 19 a18-14563_2ex99d4.htm EX-99.4

Exhibit 99.4

 

WYNDHAM DESTINATIONS, INC.

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Overview

 

On May 31, 2018, Wyndham Worldwide Corporation (“Wyndham Worldwide” or “our”) completed the previously announced separation of its hotel group into a separate publicly-traded company (the “Separation”).  Wyndham Worldwide completed the Separation by distributing 100% of the common stock of its wholly-owned subsidiary, Wyndham Hotels & Resorts, Inc. (“Wyndham Hotels”), to the shareholders of Wyndham Worldwide. For each share of Wyndham Worldwide common stock owned as of May 18, 2018, the record date, shareholders received one share of Wyndham Hotels common stock. The common stock of Wyndham Hotels, now a separate public company, trades on the New York Stock Exchange (“NYSE”) under the ticker symbol “WH.”  In conjunction with the Separation, Wyndham Worldwide changed its name to Wyndham Destinations, Inc. (“Wyndham Destinations” or the “Company”).  The common stock of Wyndham Destinations now trades on the NYSE under the ticker symbol “WYND.”  Following the Separation, the Company does not beneficially own any shares of Wyndham Hotels.

 

In connection with the Separation, a series of internal reorganization transactions were undertaken to transfer certain assets and liabilities of the Company to Wyndham Hotels.

 

Basis of Pro Forma Presentation

 

The following unaudited pro forma condensed consolidated financial information is presented to illustrate the estimated effects of the Separation of Wyndham Hotels from the pre-separation combined company. The unaudited pro forma condensed consolidated financial information is based on information currently available, including certain assumptions and estimates. The information is intended for informational purposes only, and does not purport to represent the Company’s financial position and results of operations had the Separation occurred on the dates indicated, or to project the Company’s financial position or results of operations for any future date or period. Each of the following unaudited pro forma consolidated statement of income is presented as if the Separation occurred at the beginning of each respective reporting period. The following unaudited pro forma consolidated balance sheet as of March 31, 2018 is presented as if the Separation occurred on March 31, 2018. The unaudited pro forma condensed consolidated financial information should be read in conjunction with our historical audited consolidated financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our most recent annual report on Form 10-K for the year ended December 31, 2017, and our unaudited condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, and accompanying notes, in each case, which are available on the United States Securities and Exchange Commission’s website at www.sec.gov and the Company’s website (http://investor.wyndhamworldwide.com).

 

The information in the “Wyndham Worldwide Corporation- Historical” columns in the Unaudited Pro Forma Condensed Consolidated Statements of Income for the years ended December 31, 2017, 2016, and 2015 was derived from our Audited Consolidated Statement of Income for each of those same three years contained in our most recent Annual Report on Form 10-K for the year ended December 31, 2017, prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”) and unadjusted for the retrospective adoption of Accounting Standards Codification No. 606, Revenue from Contracts with Customers (“ASC 606”), on January 1, 2018.  The information in the “Wyndham Worldwide Corporation-Historical” column in the Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2018 and the Unaudited Pro Forma Condensed Consolidated Statement of Income for the three-month period ended March 31, 2018 was derived from our unaudited condensed consolidated financial statements contained in our most recent Quarterly Report on Form 10-Q as of and for the three-month period ended March 31, 2018, prepared in accordance with GAAP and reflective of the retrospective adoption of ASC 606.  Other pro forma adjustments are described in the accompanying notes to unaudited pro forma condensed consolidated financial statements.

 

1



 

Wyndham Destinations, Inc.  (formerly Wyndham Worldwide Corporation)

Unaudited Pro Forma Condensed Consolidated Statement of Income

For the Three Months Ended March 31, 2018

(In millions, except per share amounts)

 

 

 

Wyndham
Worldwide
Corporation-
Historical

 

Wyndham Hotels
& Resorts
Historical (a)

 

Wyndham Hotels
& Resorts
adjustments (a)

 

Pro Forma
adjustments (b)

 

Pro Forma

 

Net revenues

 

 

 

 

 

 

 

 

 

 

 

Service and membership fees

 

$

487

 

$

(69

)

$

2

 

$

 

$

420

 

Vacation ownership interest sales

 

358

 

 

 

 

358

 

Franchise fees

 

151

 

(168

)

17

 

 

 

Consumer financing

 

118

 

 

 

 

118

 

Other

 

76

 

(65

)

 

2

 

13

 

Net revenues

 

1,190

 

(302

)

19

 

2

 

909

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

Operating

 

513

 

(107

)

(1

)

 

405

 

Cost of vacation ownership interests

 

31

 

 

 

 

31

 

Consumer financing interest

 

19

 

 

 

 

19

 

Marketing and reservation

 

188

 

(84

)

26

 

8

 

138

 

General and administrative

 

173

 

(22

)

3

 

 

154

 

Separation-related

 

51

 

(12

)

 

(39

)

 

Transaction-related

 

 

(2

)

 

 

(2

)

Depreciation and amortization

 

56

 

(19

)

 

(1

)

36

 

Total expenses

 

1,031

 

(246

)

28

 

(32

)

781

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

159

 

(56

)

(9

)

34

 

128

 

Other income, net

 

(6

)

 

 

 

(6

)

Interest expense

 

45

 

(2

)

 

2

 

45

 (d)

Interest income

 

(1

)

1

 

 

 

 

Income before income taxes

 

121

 

(55

)

(9

)

32

 

89

 

Provision/(benefit) for income taxes

 

40

 

(16

)

(1

)

8

 

31

 

Income from continuing operations

 

81

 

(39

)

(8

)

24

 

58

 

Loss from discontinued operations, net of income taxes

 

(47

)

 

 

 

(47

)

Net income

 

$

34

 

$

(39

)

$

(8

)

$

24

 

$

11

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.81

 

 

 

 

 

 

 

$

0.58

 

Discontinued operations

 

(0.47

)

 

 

 

 

 

 

(0.47

)

 

 

$

0.34

 

 

 

 

 

 

 

$

0.11

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.80

 

 

 

 

 

 

 

$

0.57

 

Discontinued operations

 

(0.46

)

 

 

 

 

 

 

(0.46

)

 

 

$

0.34

 

 

 

 

 

 

 

$

0.11

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares

 

 

 

 

 

 

 

 

 

 

 

Basic

 

100.1

 

 

 

 

 

 

 

100.1

 

Diluted

 

100.8

 

 

 

 

 

 

 

100.8

 

 

2



 

Wyndham Destinations, Inc.  (formerly Wyndham Worldwide Corporation)

Unaudited Pro Forma Condensed Consolidated Statement of Income

For the Year Ended December 31, 2017

(In millions, except per share amounts)

 

 

 

Wyndham
Worldwide
Corporation-
Historical

 

Wyndham Hotels
& Resorts
Historical (a)

 

Wyndham Hotels &
Resorts adjustments
(a)

 

Pro Forma adjustments
(b)

 

Pro Forma

 

Net revenues

 

 

 

 

 

 

 

 

 

 

 

Service and membership fees

 

$

1,895

 

$

(277

)

$

11

 

$

 

$

1,629

 

Vacation ownership interest sales

 

1,689

 

 

 

 

1,689

 

Franchise fees

 

695

 

(798

)

103

 

 

 

Consumer financing

 

463

 

 

 

 

463

 

Other

 

334

 

(272

)

(28

)

9

 

43

 

Net revenues

 

5,076

 

(1,347

)

86

 

9

 

3,824

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

Operating

 

2,194

 

(472

)

(51

)

 

1,671

 

Cost of vacation ownership interests

 

150

 

 

 

 

150

 

Consumer financing interest

 

74

 

 

 

 

74

 

Marketing and reservation

 

773

 

(406

)

159

 

32

 

558

 

General and administrative

 

648

 

(88

)

7

 

 

567

 

Separation-related

 

51

 

(3

)

 

(48

)

 

Impairment

 

246

 

(41

)

 

 

205

 

Restructuring

 

15

 

(1

)

 

 

14

 

Depreciation and amortization

 

213

 

(75

)

(1

)

(6

)

131

 

Total expenses

 

4,364

 

(1,086

)

114

 

(22

)

3,370

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

712

 

(261

)

(28

)

31

 

454

 

Other income, net

 

(27

)

 

 

 

(27

)

Interest expense

 

156

 

(6

)

 

8

 

158

 (d)

Interest income

 

(7

)

 

 

 

(7

)

Income before income taxes

 

590

 

(255

)

(28

)

23

 

330

 

(Benefit)/provision for income taxes

 

(229

)

(12

)

(11

)

5

 

(247

)

Income from continuing operations

 

819

 

(243

)

(17

)

18

 

577

 

Income from discontinued operations, net of income taxes

 

53

 

 

 

 

53

 

Net income

 

872

 

(243

)

(17

)

18

 

630

 

Net income attributable to non-controlling interest

 

(1

)

 

 

 

(1

)

Net income attributable to Wyndham shareholders

 

$

871

 

$

(243

)

$

(17

)

$

18

 

$

629

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

7.94

 

 

 

 

 

 

 

$

5.59

 

Discontinued operations

 

0.52

 

 

 

 

 

 

 

0.52

 

 

 

$

8.46

 

 

 

 

 

 

 

$

6.11

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

7.89

 

 

 

 

 

 

 

$

5.56

 

Discontinued operations

 

0.51

 

 

 

 

 

 

 

0.51

 

 

 

$

8.40

 

 

 

 

 

 

 

$

6.07

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares

 

 

 

 

 

 

 

 

 

 

 

Basic

 

103.0

 

 

 

 

 

 

 

103.0

 

Diluted

 

103.7

 

 

 

 

 

 

 

103.7

 

 

3



 

Wyndham Destinations, Inc.  (formerly Wyndham Worldwide Corporation)

Unaudited Pro Forma Condensed Combined Statement of Income

For the Year Ended December 31, 2016

(In millions, except per share amounts)

 

 

 

Wyndham
Worldwide
Corporation-
Historical 

 

Wyndham
Hotels &
Resorts
Historical (a)

 

Wyndham
Hotels &
Resorts
adjustments
(a)

 

Pro Forma
adjustments
(b)

 

Pro Forma

 

Net revenues

 

 

 

 

 

 

 

 

 

 

 

Service and membership fees

 

$

1,879

 

$

(283

)

$

8

 

$

 

$

1,604

 

Vacation ownership interest sales

 

1,606

 

 

 

 

1,606

 

Franchise fees

 

677

 

(772

)

95

 

 

 

Consumer financing

 

440

 

 

 

 

440

 

Other

 

324

 

(257

)

(23

)

9

 

53

 

Net revenues

 

4,926

 

(1,312

)

80

 

9

 

3,703

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

Operating

 

2,144

 

(459

)

(48

)

 

1,637

 

Cost of vacation ownership interests

 

146

 

 

 

 

146

 

Consumer financing interest

 

75

 

 

 

 

75

 

Marketing and reservation

 

740

 

(407

)

147

 

30

 

510

 

General and administrative

 

631

 

(83

)

10

 

 

558

 

Restructuring

 

14

 

(2

)

 

 

12

 

Depreciation and amortization

 

202

 

(73

)

(1

)

(6

)

122

 

Total expenses

 

3,952

 

(1,024

)

108

 

24

 

3,060

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

974

 

(288

)

(28

)

(15

)

643

 

Other income, net

 

(21

)

 

 

 

(21

)

Interest expense

 

133

 

(1

)

 

1

 

133

 (d)

Early extinguishment of debt expense

 

11

 

 

 

 

11

 

Interest income

 

(7

)

 

 

 

(7

)

Income before income taxes

 

858

 

(287

)

(28

)

(16

)

527

 

Provision/(benefit) for income taxes

 

313

 

(115

)

(7

)

(6

)

185

 

Income from continuing operations

 

545

 

(172

)

(21

)

(10

)

342

 

Income from discontinued operations, net of income taxes

 

67

 

 

 

 

67

 

Net income

 

612

 

(172

)

(21

)

(10

)

409

 

Net income attributable to non-controlling interest

 

(1

)

 

 

 

(1

)

Net income attributable to Wyndham shareholders

 

$

611

 

$

(172

)

$

(21

)

$

(10

)

$

408

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

4.96

 

 

 

 

 

 

 

$

3.11

 

Discontinued operations

 

0.60

 

 

 

 

 

 

 

0.60

 

 

 

$

5.56

 

 

 

 

 

 

 

$

3.71

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

4.93

 

 

 

 

 

 

 

$

3.09

 

Discontinued operations

 

0.60

 

 

 

 

 

 

 

0.60

 

 

 

$

5.53

 

 

 

 

 

 

 

$

3.69

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares

 

 

 

 

 

 

 

 

 

 

 

Basic

 

109.9

 

 

 

 

 

 

 

109.9

 

Diluted

 

110.6

 

 

 

 

 

 

 

110.6

 

 

4



 

Wyndham Destinations, Inc.  (formerly Wyndham Worldwide Corporation)

Unaudited Pro Forma Condensed Consolidated Statement of Income

For the Year Ended December 31, 2015

(In millions, except per share amounts)

 

 

 

Wyndham
Worldwide
Corporation-
Historical 

 

Wyndham
Hotels &
Resorts
Historical
(a)

 

Wyndham
Hotels &
Resorts
Adjustments
(a)

 

Pro Forma
adjustments
(b)

 

Pro Forma

 

Net revenues

 

 

 

 

 

 

 

 

 

 

 

Service and membership fees

 

$

1,861

 

$

(284

)

$

1

 

$

 

$

1,578

 

Vacation ownership interest sales

 

1,604

 

 

 

 

1,604

 

Franchise fees

 

674

 

(770

)

96

 

 

 

Consumer financing

 

427

 

 

 

 

427

 

Other

 

312

 

(247

)

(20

)

9

 

54

 

Net revenues

 

4,878

 

(1,301

)

77

 

9

 

3,663

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

Operating

 

2,096

 

(466

)

(46

)

 

1,584

 

Cost of vacation ownership interests

 

165

 

 

 

 

165

 

Consumer financing interest

 

74

 

 

 

 

74

 

Marketing and reservation

 

723

 

(418

)

147

 

30

 

482

 

General and administrative

 

685

 

(89

)

8

 

 

604

 

Impairment

 

7

 

(7

)

 

 

 

Restructuring

 

6

 

(4

)

 

 

2

 

Depreciation and amortization

 

187

 

(67

)

(1

)

(6

)

113

 

Total expenses

 

3,943

 

(1,051

)

108

 

24

 

3,024

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

935

 

(250

)

(31

)

(15

)

639

 

Other income, net

 

(16

)

 

 

 

(16

)

Interest expense

 

122

 

(1

)

 

(2

)

119

 (d)

Interest income

 

(8

)

 

 

 

(8

)

Income before income taxes

 

837

 

(249

)

(31

)

(13

)

544

 

Provision/(benefit) for income taxes

 

285

 

(100

)

(11

)

(5

)

169

 

Income from continuing operations

 

552

 

(149

)

(20

)

(8

)

375

 

Income from discontinued operations, net of income taxes

 

60

 

 

 

 

60

 

Net income

 

$

612

 

$

(149

)

$

(20

)

$

(8

)

$

435

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

4.67

 

 

 

 

 

 

 

$

3.18

 

Discontinued operatins

 

0.51

 

 

 

 

 

 

 

0.51

 

 

 

$

5.18

 

 

 

 

 

 

 

$

3.69

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

4.63

 

 

 

 

 

 

 

$

3.15

 

Discontinued operatins

 

0.51

 

 

 

 

 

 

 

0.51

 

 

 

$

5.14

 

 

 

 

 

 

 

$

3.66

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares

 

 

 

 

 

 

 

 

 

 

 

Basic

 

118.0

 

 

 

 

 

 

 

118.0

 

Diluted

 

119.0

 

 

 

 

 

 

 

119.0

 

 

5



 

Wyndham Destinations, Inc.  (formerly Wyndham Worldwide Corporation)

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of March 31, 2018

(In millions, except per share amounts)

 

 

 

Wyndham
Worldwide
Corporation-
Historical

 

Wyndham
Hotels & Resorts
Historical (a)

 

Wyndham Hotels
& Resorts
Adjustments (a)

 

Pro Forma
Adjustments (c)

 

Pro Forma

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

291

 

$

(71

)

$

6

 

$

 

$

226

 

Trade receivables, net

 

450

 

(205

)

5

 

 

250

 

Vacation ownership contract receivables, net

 

268

 

 

 

 

268

 

Inventory

 

337

 

 

 

 

337

 

Prepaid expenses

 

186

 

(40

)

 

 

146

 

Other current assets

 

424

 

(63

)

(8

)

 

353

 

Assets held for sale

 

1,726

 

 

 

 

1,726

 (d)

Total current assets

 

3,682

 

(379

)

3

 

 

3,306

 

Long-term vacation ownership contract receivables, net

 

2,608

 

 

 

 

2,608

 

Non-current inventory

 

888

 

 

 

 

888

 

Property and equipment, net

 

1,112

 

(251

)

(8

)

(56

)

797

 

Goodwill

 

1,330

 

(421

)

7

 

 

916

 

Trademarks, net

 

741

 

(692

)

 

 

49

 

Franchise agreements and other intangibles, net

 

344

 

(246

)

 

 

98

 

Other non-current assets

 

394

 

(173

)

11

 

 

232

 

Total assets

 

$

11,099

 

$

(2,162

)

$

13

 

$

(56

)

$

8,894

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Securitized vacation ownership debt

 

$

198

 

$

 

$

 

$

 

$

198

 

Current portion of long-term debt

 

91

 

(116

)

15

 

97

 

87

 

Accounts payable

 

245

 

(36

)

12

 

 

221

 

Deferred income

 

566

 

(83

)

 

 

483

 

Accrued expenses and other current liabilities

 

753

 

(192

)

(38

)

 

523

 

Liabilities held for sale

 

1,246

 

 

 

 

1,246

 (d)

Total current liabilities

 

3,099

 

(427

)

(11

)

97

 

2,758

 

Long-term securitized vacation ownership debt

 

1,779

 

 

 

 

1,779

 

Long-term debt

 

4,193

 

(81

)

 

17

 

4,129

 (d)

Deferred income taxes

 

802

 

(175

)

10

 

(3

)

634

 

Deferred income

 

283

 

(159

)

 

 

124

 

Other non-current liabilities

 

293

 

(47

)

10

 

 

256

 

Total liabilities

 

10,449

 

(889

)

9

 

111

 

9,680

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, $.01 par value, authorized 6,000,000 shares, none issued and outstanding

 

 

 

 

 

 

Common stock, $.01 par value, authorized 600,000,000 shares, issued 219,249,183 shares in 2018 and 218,796,817 shares in 2017

 

2

 

 

 

 

2

 

Treasury stock, at cost — 119,536,306 shares in 2018 and 118,887,441 shares in 2017

 

(5,795

)

 

 

 

(5,795

)

Additional paid-in capital

 

3,986

 

 

 

 

3,986

 

Retained earnings

 

2,449

 

(1,267

)

4

 

(167

)

1,019

 

Accumulated other comprehensive (loss)/income

 

3

 

(6

)

 

 

(3

)

Total stockholders’ equity

 

645

 

(1,273

)

4

 

(167

)

(791

)

Noncontrolling interest

 

5

 

 

 

 

5

 

Total equity

 

650

 

(1,273

)

4

 

(167

)

(786

)

Total liabilities and equity

 

$

11,099

 

$

(2,162

)

$

13

 

$

(56

)

$

8,894

 

 

6



 

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

The unaudited pro forma condensed consolidated financial statements include the following pro forma adjustments:

 

(a)         The sum of the amounts in the columns “Wyndham Hotels & Resorts Historical” and “Wyndham Hotels & Resorts Adjustments” reflects the discontinued operations of the Hotel Group. These amounts were previously included in the Company’s historical consolidated financial statements.  These adjustments include reclassifications; intercompany segment revenues and expenses that no longer eliminate in consolidation; and certain corporate allocations which do not meet the requirement to be reported as discontinued operations. The “Wyndham Hotels & Resorts” column is intended to correspond to current and future financial information that is expected to be provided by Wyndham Hotels & Resorts, lnc.

 

(b)         Reflects:

 

(i) additional revenue associated with a revenue share agreement from the Wyndham co-branded credit card, which the Company entered into with Wyndham Hotels upon completion of the spin-off, of approximately $2 million for the three-month period ended March 31, 2018 and approximately $9 million for each of the years 2017, 2016, and 2015;

 

(ii) an increase in fee expenses related to license, development, and noncompetition agreements, which the Company entered into with Wyndham Hotels upon completion of the spin-off, of approximately $8 million, $32 million, $32 million, and $30 million for the three-month period ended March 31, 2018 and the years 2017, 2016, and 2015, respectively;

 

(iii) the removal of separation costs related to the spin-off transaction of approximately $39 million and $48 million for the three-month period ended March 31, 2018 and the year 2017, respectively;

 

(iv) an adjustment to depreciation and amortization expense associated with the capital lease and leasehold assets described in Note (c) below of approximately $1 million for the three-month period ended March 31, 2018 and approximately $6 million for each of the years 2017, 2016, and 2015;

 

(v) the removal of interest expense associated with the capital lease described in Note (c) below of approximately $1 million for the three-month period ended March 31, 2018 and approximately $3 million for each of the years 2017, 2016, and 2015;

 

(vi) an increase in interest expense of approximately $3 million, $11 million, $4 million, and $1 million for the three-month period ended March 31, 2018, and the years 2017, 2016, and 2015, respectively, due to the downgrade of the Company’s debt to non-investment-grade for select tranches due to the spin-off transaction; and

 

(vii) the tax impact for the pro forma adjustments, using the Wyndham Worldwide effective income tax rate.

 

(c)          Reflects (i) the $4 million current and $64 million non-current portions of a capital lease obligation associated with Wyndham Worldwide’s former headquarters office in Parsippany, New Jersey, which was assigned to Wyndham Hotels as the primary obligor; (ii) $56 million net of leasehold assets and $3 million of related deferred income taxes related to the former headquarters office, which was assigned to Wyndham Hotels; and (iii) the reclassification of $197 million of intercompany debt due to parent to additional paid-in capital.

 

(d)         The pro forma statements do not reflect proceeds of approximately $1.3 billion received from the sale of the Company’s European vacation rentals business on May 9, 2018, which were used to pay down existing debt of $1.1 billion and pay approximately $200 million of transaction expenses and tax payments. Upon sale of the European vacation rentals business on May 9, 2018 and completion of the spin-off transaction, the Company has approximately $3 billion of total indebtedness, excluding securitized time-share debt.  Interest expense related to the paid debt was approximately $8 million for the three-month period ended March 31, 2018 and approximately $33 million for each of the years 2017, 2016, and 2015.

 

7