Wyndham Worldwide Corporation (NYSE:WYN) today announced results for the three months ended September 30, 2009.
• Wyndham Worldwide generated diluted adjusted earnings per share (EPS) of $0.58, compared with Company-issued guidance of $0.53 - $0.57. Reported EPS was $0.57.
• The Company raises full-year 2009 adjusted EBITDA guidance to $775 - $825 million, compared with prior guidance of $760 - $810 million.
• For the nine months ended September 30, 2009, the Company generated net cash from operating activities of approximately $570 million, compared with $146 million in 2008.
• Wyndham Worldwide recently completed two term securitization transactions totaling $350 million.
• The Company announces the renewal of its asset-backed vacation ownership receivables conduit. The 364-day facility bears interest at variable commercial paper rates plus a spread with a capacity of $600 million.
"Wyndham Worldwide delivered solid results in the third quarter, once again demonstrating the benefits of a strong, resilient business model and excellent execution" said Stephen P. Holmes, chairman and CEO, Wyndham Worldwide. "We continue to transform the Company by rebalancing our worldwide business portfolio to increase the contribution of fee-for-service businesses and drive strong cash flow."
THIRD QUARTER 2009 COMPANY OPERATING RESULTS
Third quarter revenues of $1,016 million declined by 17% from the prior-year period due to the previously announced initiative to reduce the deployment of capital in the Company's vacation ownership business; continued weakness in the global lodging industry; and unfavorable foreign exchange rate movements which negatively impacted the Company's exchange and rentals business.
Net income for the third quarter of 2009 was $104 million, or $0.57 diluted EPS, compared with third quarter 2008 net income of $142 million, or $0.80 diluted EPS.
Adjusted net income for the third quarter of 2009 was $106 million, or $0.58 diluted adjusted EPS, compared with third quarter 2008 adjusted net income of $148 million, or $0.83 diluted adjusted EPS. Third quarter 2009 includes the after-tax impact of $2 million, or $0.01 diluted EPS, of legacy items. Third quarter 2008 net income includes the after-tax impact of $6 million, or $0.03 diluted EPS, of restructuring costs and legacy items.
THIRD QUARTER 2009 BUSINESS UNIT RESULTS
Wyndham Hotel Group
Revenues were $183 million in the third quarter of 2009, a decline of 14% compared with the third quarter of 2008, primarily reflecting a decline in worldwide RevPAR.
Third quarter 2009 system-wide RevPAR decreased 17.0%, reflecting declines of 16.0% and 21.9% in domestic and international RevPAR, respectively.
Third quarter 2009 EBITDA was $58 million compared with $72 million in the third quarter of 2008, which included $4 million of restructuring costs. The reduction in EBITDA reflects the decline in worldwide RevPAR and other franchise fees, partly offset by lower marketing expenses.
As of September 30, 2009, the Company's hotel system consisted of approximately 7,040 properties and 590,900 rooms, of which 21% were international. The development pipeline included approximately 1,000 hotels and 110,800 rooms, of which 50% were new construction and 41% were international.
Wyndham Exchange and Rentals
The Company has renamed Group RCI to Wyndham Exchange and Rentals to more accurately reflect the two very profitable fee-based businesses where Wyndham Worldwide has leadership positions.
Revenues were $327 million in the third quarter of 2009, an 8% decrease compared with the third quarter of 2008, primarily resulting from the impact of unfavorable foreign currency movements. Excluding the impact of foreign currency, revenues were flat.
Excluding the impact of foreign currency annual dues and exchange revenues were flat compared with the third quarter of 2008, reflecting a 3% increase in the average number of members and a 3% decline in revenue per member. Including the impact of foreign currency, revenues were $110 million, a 4% decrease from the prior year period.
Excluding the impact of foreign currency vacation rental revenues increased $5 million, or 3%, compared with the third quarter of 2008, primarily driven by a 2% increase in rental transaction volume and a 1% increase in average price per vacation rental. Including the impact of foreign currency, revenues were $185 million, a 7% decrease from the prior year period.
Third quarter 2009 EBITDA increased 2% to $107 million, compared with $105 million in the third quarter of 2008, which included $2 million of restructuring costs. Excluding an unfavorable net effect of foreign currency of $14 million and restructuring costs, adjusted EBITDA would have increased $14 million, or 13%, from the third quarter of 2008, primarily reflecting cost savings.
Wyndham Vacation Ownership
Gross Vacation Ownership Interest (VOI) sales were $366 million for the third quarter of 2009, a 35% decline from the third quarter of 2008. This decrease was primarily driven by the previously announced initiative to reduce the capital deployed in this business, which included sales office closures and a reduction of marketing efforts that resulted in fewer tours.
Total segment revenues were $508 million in the third quarter of 2009, down 23% from the third quarter of 2008, primarily reflecting the planned reduction in tour flow which was partially offset by a 25% increase in volume per guest and a $38 million favorable impact from the percentage-of-completion (POC) method of accounting from the third quarter of 2008. Under the POC method of accounting for the sale of vacation ownership interests, the Company recognized $36 million of previously deferred revenue during the third quarter of 2009, while third quarter 2008 reported revenues were reduced by $2 million of deferred revenue.
EBITDA for the third quarter of 2009 was $104 million, down 19% from the third quarter of 2008, reflecting the net impact of the planned reduction of VOI sales volume, partially offset by an $18 million impact from the net increase in the recognition of revenue previously deferred under the POC method of accounting.
Net interest expense in the third quarter of 2009 was $33 million, a $14 million increase from the third quarter of 2008 due to higher interest rates, primarily reflecting the impact of the long-term debt issuances in May 2009, the proceeds of which were used to reduce revolving credit facility borrowings and lower capitalized interest.
Balance Sheet Information as of September 30, 2009:
• Cash and cash equivalents of approximately $170 million compared with $135 million from December 31, 2008
• Vacation ownership contract receivables, net, of $3.1 billion compared with $3.3 billion at December 31, 2008
• Vacation ownership and other inventory of $1.3 billion unchanged from December 31, 2008
• Securitized vacation ownership debt of $1.6 billion compared with $1.8 billion at December 31, 2008
• Other debt of $2.0 billion, unchanged from December 31, 2008; remaining borrowing capacity on the revolving credit facility was approximately $850 million compared with approximately $290 million as of December 31, 2008
A schedule of debt is included in the financial tables section of this press release.
For the fourth quarter of 2009, the Company expects adjusted EPS of $0.35 - $0.38, based on weighted average shares of 184 million.
The Company updates full-year 2009 guidance:
• Revenues of $3.5 - $3.9 billion
• The Company now expects adjusted EBITDA of $775 - $825 million, compared with prior guidance of $760 - $810 million.
"For full year 2010, we expect that revenue and adjusted EBITDA will be consistent with the current guidance ranges for 2009. We believe this reflects significant strength in our business, given that 2009 results will benefit from approximately $90 million of EBITDA related to vacation ownership deferred revenue roll-in that will be absent in 2010," said Mr. Holmes. Management also expects that interest expense will be higher than 2009 levels due to financings completed in 2009 and lower capitalized interest in 2010.
The guidance reflects assumptions used for internal planning purposes. All guidance excludes legacy items and restructuring costs, if any, which may have a positive or negative impact on reported results. If economic conditions improve or deteriorate materially from current levels, these assumptions and our guidance may change materially. It is not practicable to provide a reconciliation of forecasted adjusted EBITDA to the most directly comparable GAAP measure because certain items cannot be reasonably estimated or predicted at this time. Any such items could be significant to our financial results.
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