Wyndham Worldwide Reports First Quarter 2009 Results
April 30, 2009 // Franchising.com // Parsippany, N.J. — Wyndham Worldwide Corporation (NYSE:WYN) today announced results for the three months ended March 31, 2009.
First quarter 2009 adjusted net income was $74 million, or $0.41 diluted earnings per share (EPS), compared with adjusted net income of $62 million, or $0.35 diluted EPS, for the first quarter of 2008.
First quarter 2009 net cash from operating activities was approximately $210 million, compared with $87 million in the first quarter of 2008. The remaining borrowing capacity on the Company's revolving credit facility increased to approximately $355 million compared with approximately $290 million as of December 31, 2008.
"Wyndham Worldwide delivered solid first quarter results despite strong economic headwinds and a significant reduction in revenues due to the realignment of our vacation ownership business," said Stephen P. Holmes, Chairman and CEO, Wyndham Worldwide. "Adjusted EPS was up 17% from last year, and the Company generated net cash from operating activities of approximately $210 million. These results reflect the durability of our businesses and the resilience of our fee–for–service business models, as well as strong execution and continued cost discipline."
First Quarter 2009 Operating Results
First quarter revenues of $901 million declined by 11% from the prior–year period, due to adverse foreign currency effects resulting from the strengthening U.S. dollar in the vacation exchange and rental business, the previously announced initiative to reduce sales in the Company's vacation ownership business as well as an increased loan loss provision. These items were partially offset by the recognition of previously deferred vacation ownership revenue. Under the percentage–of–completion (POC) method of accounting for the sale of vacation ownership interests, the Company recognized $67 million of previously deferred revenue during the first quarter of 2009, while first quarter 2008 reported revenues were reduced by $82 million of deferred revenue.
Reported net income for the first quarter of 2009 was $45 million, or $0.25 diluted EPS, compared with net income of $42 million, or $0.24 diluted EPS, for the first quarter of 2008.
Adjusted net income for the first quarter of 2009 was $74 million, or $0.41 per diluted EPS, an increase of 19%, or 17% per diluted EPS, as compared with adjusted net income of $62 million, or $0.35 per diluted EPS, for the first quarter of 2008. 2009 first quarter adjusted EPS excludes the after–tax impact of $29 million in restructuring costs and legacy items. First quarter 2008 adjusted EPS excludes the after–tax impact of $20 million related to the Company's rebranding initiative and legacy items.
Business Unit Results
Lodging (Wyndham Hotel Group)
Revenues were $154 million in the first quarter of 2009, a decline of 9% compared with the first quarter of 2008, primarily reflecting a decline in worldwide revenue per available room (RevPAR) and lower property management reimbursable revenues.
In constant currency, the first quarter of 2009 system–wide RevPAR decreased 11.3%, reflecting declines of 13.4% and 5.5% in domestic and international RevPAR, respectively. Including the impact of foreign currency, system–wide RevPAR declined 14.0% in the first quarter of 2009.
First quarter 2009 EBITDA was $35 million, a 24% decline from the first quarter of 2008, primarily driven by the decline in worldwide RevPAR and $3 million of restructuring costs, partly offset by lower marketing expenses. Excluding restructuring costs, first quarter 2009 adjusted EBITDA would have been $38 million, a 17% decrease from the prior year.
As of March 31, 2009, the Company's hotel system consisted of approximately 7,000 properties and 588,500 rooms, of which 21% were international. The development pipeline included approximately 1,000 hotels and 108,600 rooms, of which 54% were new construction and 39% were international.
Vacation Exchange and Rentals (Group RCI)
Revenues were $287 million in the first quarter of 2009, a 16% decrease compared with the first quarter of 2008, primarily related to the impact of a stronger U.S. dollar. In constant currency, revenues decreased 5%, reflecting lower rental and ancillary revenues.
Annual dues and exchange revenues were $127 million, a 7% decline from the first quarter of 2008, or relatively flat in constant currency. The revenues in constant currency reflect a 4% increase in the average number of members and a 5% decline in revenue per member.
Vacation rental revenues were $130 million, a 19% decrease from the first quarter of 2008. In constant currency, revenues generated from rental transactions and related services decreased $5 million, or 3%. The revenues in constant currency were driven by a 3% decrease in the average net price per rental. Rental transaction volume was flat compared with the first quarter of 2008.
Other ancillary revenues were $30 million, a 32% decrease from the first quarter of 2008. In constant currency, revenues decreased 25% due to lower miscellaneous fees and our termination of a low margin travel service contract.
First quarter 2009 EBITDA was $76 million, compared with $93 million in the first quarter of 2008. Excluding $4 million of restructuring costs, first quarter adjusted EBITDA was $80 million, a 14% decline from the prior year period. Excluding the unfavorable net effect of foreign currency translations of $12 million, adjusted EBITDA would have decreased $1 million, or 1%, from the first quarter of 2008.
Vacation Ownership (Wyndham Vacation Ownership)
Gross Vacation Ownership Interest (VOI) sales were $280 million for the first quarter of 2009, down 39% from the first quarter of 2008. This decrease was driven by the previously announced initiative to reduce sales in response to the disjointed capital markets that included a refocusing of the business' sales and marketing efforts that resulted in fewer tours.
Total segment revenues were $462 million in the first quarter of 2009, down 8% from the first quarter of 2008, reflecting the previously mentioned lower tour flow and a higher provision for loan losses. This was partially offset by the recognition of revenue that was previously deferred under the POC method of accounting and a higher volume per guest (VPG), which increased 12% from the first quarter of 2008.
EBITDA for the first quarter of 2009 was $44 million, compared with $7 million in the first quarter of 2008, driven by a $70 million impact from the net increase in the recognition of revenue previously deferred under the POC method of accounting, offset by the net impact related to the planned reduction of VOI sales volume as well as restructuring costs. Excluding $35 million of restructuring costs, first quarter 2009 adjusted EBITDA was $79 million, compared to adjusted EBITDA of $35 million in the first quarter of 2008, which excludes a $28 million non–cash impairment charge relating to the Company's rebranding initiative.
Interest expense in the first quarter of 2009 was $19 million, unchanged from the first quarter of 2008. Depreciation and amortization declined $1 million to $43 million.
Balance Sheet Information as of March 31, 2009:
- Cash and cash equivalents of approximately $135 million, unchanged from December 31, 2008
- Vacation ownership contract receivables, net, of $3.2 billion compared with $3.3 billion at December 31, 2008
- Vacation ownership and other inventory of approximately $1.3 billion, unchanged from December 31, 2008
- Securitized vacation ownership debt of $1.7 billion compared with $1.8 billion at December 31, 2008
Other debt of $1.9 billion, compared with $2.0 billion at December 31, 2008; remaining borrowing capacity on revolving credit facility was approximately $355 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 second quarter of 2009, the Company expects adjusted EPS of $0.36 – $0.41.
The Company reaffirms full–year 2009 guidance:
- Revenues of $3.5 — $3.9 billion
- Adjusted EBITDA of $760 — $810 million
- Depreciation and amortization expense of $185— $195 million
- Interest expense, net of $80 — $90 million
- Effective tax rate of approximately 39%
- Adjusted net income of $289 — $331 million
- Adjusted EPS of $1.61 — $1.85 based on weighted average shares of approximately 179 million
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.
Conference Call Information
Wyndham Worldwide Corporation will hold a conference call with investors to discuss this news on Wednesday, April 29, 2009 at 8:30 a.m. EDT. Listeners may access the webcast live through the Company's website at www.wyndhamworldwide.com/investors/. An archive of this webcast will be available at the website for approximately 90 days beginning at noon EDT on April 29, 2009. The conference call may also be accessed by dialing (888) 989–4394 and providing the passcode "Wyndham." Listeners are urged to call at least 10 minutes prior to the scheduled start time. A telephone replay will be available at (866) 359–3793 beginning at noon EDT on April 29, 2009 until 5 p.m. EDT on June 15, 2009; callers must provide the passcode "147852."
Presentation of Financial Information
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 the press release.
About Wyndham Worldwide
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 almost 7,000 franchised hotels and approximately 588,500 hotel rooms worldwide. Group RCI offers its 3.8 million members access to more than 73,000 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 over 150 vacation ownership resorts serving over 830,000 owners throughout North America, the Caribbean and the South Pacific. Wyndham Worldwide, headquartered in Parsippany, N.J., employs approximately 25,500 employees globally.
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.
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 Annual Report on Form 10–K, filed with the SEC on February 27, 2009. 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.