October 30, 2008 // Franchising.com // Parsippany, N.J. — Wyndham Worldwide Corporation (NYSE:WYN) today announced results for the three months ended September 30, 2008.
"We produced solid operating results during the quarter in a difficult global economic environment," said Stephen P. Holmes, Wyndham Worldwide Chairman and Chief Executive Officer. "We are taking the necessary steps to best weather this storm and, if necessary, we will make further adjustments. The diversity and flexibility of our business model enables us to adjust to changes in the marketplace to optimize our performance."
Revenues for the third quarter of 2008 were $1.2 billion, up 1% compared to the third quarter of 2007. The Company also reported year-over-year EBITDA growth in each of its three business units during the third quarter of 2008.
Reported net income for the third quarter of 2008 was $142 million, or $0.80 diluted earnings per share, compared to $117 million, or $0.65 diluted earnings per share, for the third quarter of 2007.
Excluding $2 million in after-tax net expense from the resolution of, and adjustment to, certain legacy items and $4 million in after-tax restructuring costs, adjusted net income for the third quarter of 2008 would have been $148 million, or $0.83 adjusted diluted earnings per share, an 11% increase compared to adjusted net income of $134 million, or adjusted diluted earnings per share of $0.75, in the third quarter of 2007. Adjusted net income in the third quarter of 2007 excludes $2 million in after-tax separation and related costs and $15 million in after-tax net expense from the resolution of, and adjustment to, certain legacy items.
Revenues were $213 million in the third quarter of 2008, up $2 million, or 1%, when compared with the third quarter of 2007. Higher revenues resulting from the Microtel and Hawthorn brands acquisition and incremental properties were partially offset by a decline in worldwide RevPAR.
System-wide RevPAR decreased 2.7% in the third quarter of 2008, reflecting 4.2% and 1.7% declines in domestic and international RevPAR, respectively.
Third quarter 2008 EBITDA grew 3% to $72 million, compared to $70 million in the third quarter of 2007. This increase was driven by cost containment initiatives, the Microtel and Hawthorn brands acquisition, a one-time benefit resulting from the sale of a non-strategic asset and lower marketing expenses due to timing, which were partially offset by $4 million in restructuring costs. Excluding the $4 million restructuring costs, adjusted third quarter 2008 EBITDA would have been $76 million, a 9% increase over 2007.
As of September 30, 2008, the Company's hotel system consisted of 6,970 properties and approximately 583,400 rooms, of which 20% were international, with a development pipeline of approximately 990 hotels and more than 111,000 rooms, of which 51% were new construction and 41% were international.
Revenues were $354 million in the third quarter of 2008, a 5% increase compared with the third quarter of 2007, reflecting growth in vacation rentals and ancillary revenues, partially offset by lower annual dues and exchange revenues. In constant currency, revenues increased 3% compared to the third quarter of 2007.
Vacation rentals revenues were $199 million, up 9% compared to the third quarter of 2007, or a 5% increase in constant currency. The increase reflects a higher average net price per rental and the conversion of an existing Landal park from franchised to a managed property. Rental transaction volume was flat during the third quarter of 2008 compared to the prior year.
Annual dues and exchange revenues were $114 million, down 2% compared to the third quarter of 2007. A 4% increase in the average number of members was more than offset by a 5% decline in the average revenue per member.
Other ancillary revenues were $41 million, up 8% compared to the third quarter of 2007, reflecting increased club servicing revenues, fees from credit card loyalty programs and fees generated from programs with affiliated resorts.
Third quarter 2008 EBITDA was $105 million, compared to third quarter 2007 EBITDA of $103 million. Revenue gains and overhead cost reductions were partially offset by unfavorable foreign exchange impact on expenses, incremental marketing expenditures and higher operational expenses related to a Landal park conversion. In constant currency, EBITDA increased 4% compared to the third quarter of 2007. Excluding $2 million of restructuring costs, in constant currency adjusted third quarter 2008 EBITDA would have been $109 million, a 6% increase over the prior year.
Gross Vacation Ownership Interest sales were $566 million for the third quarter of 2008, up 3% compared to the third quarter of 2007. This increase was principally driven by modest increases in tour flow and volume per guest, as well as higher levels of upgrades.
Consumer finance revenues increased $18 million to $111 million in the third quarter of 2008, up 19% compared to the third quarter of 2007, reflecting continued growth in the portfolio due to higher gross VOI sales.
Reported revenues were $661 million in the third quarter of 2008, down 1% compared to the third quarter of 2007, including a higher provision for loan losses. Third quarter 2008 revenues were also reduced by $2 million as a result of deferred vacation ownership revenue recorded under the percentage-of-completion method of accounting, while the Company recognized $1 million of previously deferred revenue in the third quarter of 2007.
EBITDA for the third quarter of 2008 increased 10% to $128 million, compared to $116 million in the third quarter of 2007. The increase was primarily due to cost containment and higher net interest income of $13 million. Third quarter 2007 EBITDA includes a $7 million pre-tax gain on the sale of certain vacation ownership properties.
Interest expense for the third quarter of 2008 was $21 million, up from $20 million in the third quarter of 2007. Interest income for the quarter was $2 million, down from $4 million from the comparable prior-year period. Depreciation and amortization increased $4 million to $47 million reflecting increased capital investments over the past two years.
The Company also announced that it expects to close on or about November 10, 2008, a new timeshare receivables conduit facility led by J.P. Morgan. The facility is expected to have capacity of at least $800 million.
A schedule of debt is included in the financial tables section of this press release.
Given the disruptions in the global economy and capital markets, and uncertainty about how these will impact employment, consumer spending and other macroeconomic drivers, guidance related to Wyndham Worldwide's performance during the remainder of 2008 and 2009 is subject to higher than normal levels of uncertainty. The following guidance reflects assumptions used for internal planning purposes. If economic conditions improve or deteriorate materially from current levels, these assumptions and our guidance may change materially.
For the fourth quarter 2008, the Company expects adjusted EPS of $0.41 – $0.46 based on weighted average shares of approximately 178 million.
The Company's updated full-year 2008 guidance is:
Management provided preliminary guidance for the full-year 2009:
* All guidance excludes legacy items, rebranding charges and restructuring costs, if any, which may have a positive or negative impact on reported results, as applicable.
On October 6, 2008, the Company announced strategic realignments that would result in estimated pre-tax restructuring costs of approximately $7 million in the third quarter of 2008, $10 – $15 million in the fourth quarter of 2008, and $5 - $10 million in the first quarter of 2009. Based upon more refined plans, the Company now believes it will incur restructuring costs of approximately $25 - $30 million in the fourth quarter of 2008 and approximately $5 – $10 million in the first quarter of 2009.
Wyndham Worldwide Corporation will provide a webcast of its conference call to discuss the Company's third quarter 2008 financial results and outlook for the remainder of 2008 and full-year 2009 on Thursday, October 30, 2008 at 8:30 a.m. EDT. Listeners may access the webcast live through the Company's Web site at www.wyndhamworldwide.com/investors/. An archive of this webcast will be available at the Web site for approximately 90 days beginning at noon EDT on October 30. The conference call also may be accessed by dialing (888) 395-6878 and providing the pass code "Wyndham." Listeners are urged to call at least 10 minutes prior to the scheduled start time. A telephone replay will be available at (800) 280-4691 beginning at noon EDT on October 30 until 5 p.m. EST on December 15, 2008.
Financial information discussed in this press release includes both GAAP and non-GAAP measures, which include or exclude certain items. These non-GAAP measures differ from reported results and are intended to illustrate what management believes are relevant period-over-period comparisons. A complete reconciliation of reported GAAP results to the comparable non-GAAP information appears in the financial tables section of this press release.
As one of the world's largest hospitality companies, Wyndham Worldwide offers individual consumers and business-to-business customers a broad suite of hospitality products and services across various accommodation alternatives and price ranges through its premier portfolio of world-renowned brands. Wyndham Hotel Group encompasses 6,970 franchised hotels and approximately 583,400 hotel rooms worldwide. Group RCI offers its nearly 3.7 million members access to more than 67,000 vacation properties located in approximately 100 countries. Wyndham Vacation Ownership develops, markets and sells vacation ownership interests and provides consumer financing to owners through its network of approximately 145 vacation ownership resorts serving over 800,000 owners throughout North America, the Caribbean and the South Pacific. Wyndham Worldwide, headquartered in Parsippany, N.J., employs more than 32,000 employees globally.
For more information about Wyndham Worldwide, please visit the Company's web site at www.wyndhamworldwide.com.
This press release contains "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, conveying management's expectations as to the future based on plans, estimates and projections at the time the Company makes the statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements contained in this press release include statements related to the Company's revenues, earnings and related financial and operating measures, financing transactions, restructuring plans, and the number of hotel rooms the Company intends to add in future periods.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Factors that could cause actual results to differ materially from those in the forward-looking statements include general economic conditions, the performance of the financial and credit markets, the economic environment for the hospitality industry, the impact of war and terrorist activity, operating risks associated with the hotel, vacation exchange and rentals and vacation ownership businesses, as well as those described in the Company's 2007 Annual Report on Form 10-K, filed with the SEC on February 29, 2008. Except for the Company's ongoing obligations to disclose material information under the federal securities laws, it undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.