October 26, 2010 // Franchising.com // PARSIPPANY, N.J. — Wyndham Worldwide Corporation (NYSE:WYN) today announced results for the three months ended September 30, 2010.
"This quarter's strong results reflect continued superior execution throughout our company and further strengthening of business fundamentals," said Stephen P. Holmes, chairman and CEO, Wyndham Worldwide. "We continue to deploy free cash flow in a disciplined manner to drive growth and deliver shareholder value, balancing tuck-in acquisitions, share repurchases, convertible debt retirement and dividends."
Third quarter revenues increased 5% from the prior year period to $1,065 million. Excluding the $36 million of Vacation Ownership revenue associated with the percentage-of-completion (POC) accounting method in the third quarter of 2009, third quarter 2010 adjusted revenue growth was 9%. The adjusted revenue growth primarily reflects continued sales momentum across the Company's business units.
For the third quarter of 2010, adjusted net income increased by 18% to $125 million, compared with $106 million for the same period in 2009. The increase primarily reflects strong operational performance by the Vacation Ownership business, higher RevPAR in the Lodging business and a lower effective tax rate.
Reported net income for the third quarter of 2010 grew 50% to $156 million, or $0.84 per diluted share, compared with net income of $104 million, or $0.57 per diluted share, for the third quarter of 2009. The increase in reported net income from 2009 primarily reflects an after-tax $38 million net benefit principally related to the resolution of the IRS examination of taxable years 2003 through 2006 of Cendant (Wyndham Worldwide's former parent), partially offset by a $6 million after-tax loss incurred for the repurchase of a portion of the Company's 3.50% convertible notes.
Free cash flow totaled $564 million in the nine-month period ended September 30, 2010 compared with $454 million in the same period in 2009. The growth of free cash flow reflects higher cash earnings and more efficient working capital utilization. Cash provided by operating activities was $528 million for the nine months ended September 30, 2010, compared with $569 million for the prior-year period.
Revenues were $203 million in the third quarter of 2010, an increase of 11%, compared with the third quarter of 2009, reflecting an increase in RevPAR and other franchise fees as well as higher fees generated from ancillary services provided to franchisees, which are substantially offset in EBITDA by related costs.
In the third quarter of 2010, RevPAR increased 6.7%, or 6.4% in constant currency. Third quarter 2010 EBITDA was $67 million, an increase of 16%, compared with third quarter of 2009.
As of September 30, 2010, the Company's hotel system consisted of approximately 7,150 properties and 605,700 rooms, flat from the second quarter of 2010. Approximately 25% of the Company's hotel system is international. The development pipeline included approximately 930 hotels and 107,500 rooms, of which 54% were new construction and 47% were international.
Revenues were $330 million in the third quarter of 2010, an increase of 1% compared with the third quarter of 2009. In constant currency, revenues increased by 5%.
Exchange revenues were $163 million, relatively flat compared with the third quarter of 2009. Exchange revenue per member and the average number of members were flat.
Vacation rental revenues were $161 million, a 3% increase compared with the third quarter of 2009. In constant currency, vacation rental revenues increased 11% from the third quarter of 2009, reflecting the contribution of incremental revenues from the recently acquired Hoseasons brand and favorable pricing for bookings made close to arrival dates.
Third quarter 2010 Exchange and Rentals EBITDA was $103 million, a decrease of 4%, compared with EBITDA of $107 million in the third quarter of 2009. Excluding an unfavorable net effect of foreign currency of $2 million and $1 million of costs related to the acquisition of ResortQuest during September 2010, third quarter 2010 adjusted EBITDA was relatively flat compared with the prior-year period. This performance reflects the contribution of Hoseasons offset by increases in operating expenses including value-added taxes.
Wyndham Exchange & Rentals acquired ResortQuest on September 30th. ResortQuest is a leading provider of full-service vacation rentals in the U.S. and adds approximately 6,000 vacation rental properties. With this acquisition, Wyndham Worldwide enters the U.S. vacation rental market and becomes the world's largest full-service vacation rental business, providing access to more than 85,000 vacation properties in approximately 100 countries.
Gross Vacation Ownership Interest (VOI) sales were $412 million in the third quarter of 2010, up 13% from the third quarter of 2009, reflecting an 8% increase in tour flow and a 7% increase in volume per guest.
Total segment revenues were $533 million in the third quarter of 2010, compared with $508 million in the third quarter of 2009, which included the recognition of $36 million of previously deferred POC revenues. The absence of these revenues in the third quarter of 2010 was more than offset by an increase in gross VOI sales and a lower provision for loan losses.
EBITDA for the third quarter of 2010 was $123 million, compared with EBITDA of $104 million in the third quarter of 2009. Excluding an estimated $17 million impact from the POC method of accounting in the third quarter of 2009, third quarter 2010 adjusted EBITDA growth was 41%. This growth reflected the lower provision for loan losses and the increase in VOI sales.
A schedule of debt is included in the financial tables section of this press release.
The Company increased full-year 2010 guidance:
For the fourth quarter of 2010, the Company expects adjusted diluted EPS of $0.40 – $0.44, including an estimated tax rate of 24%.
Management provided preliminary guidance for the full-year 2011:
The guidance reflects assumptions used for internal planning purposes. All guidance excludes legacy items, restructuring costs, debt extinguishment and acquisition costs, if any, which may have a positive or negative impact on reported results. If economic conditions change materially from current levels, these assumptions and our guidance may change materially. It is not practicable to provide a reconciliation of forecasted adjusted EBITDA and EPS to the most directly comparable GAAP measures because certain items cannot be reasonably estimated or predicted at this time. Any such items could be significant to our financial results.
Wyndham Worldwide Corporation will hold a conference call with investors to discuss this news on Tuesday, October 26, 2010 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 October 26, 2010. The conference call may also be accessed by dialing (800) 369-2052 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 for approximately 90 days beginning at noon EDT on October 26, 2010, at (800) 395-6236.
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.
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 approximately 7,150 franchised hotels and approximately 605,700 hotel rooms worldwide. Wyndham Exchange & Rentals offers leisure travelers, including its 3.8 million members, access to over 85,000 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 155 vacation ownership resorts serving over 820,000 owners throughout North America, the Caribbean and the South Pacific. Wyndham Worldwide, headquartered in Parsippany, N.J., employs approximately 25,000 employees globally.
For more information about Wyndham Worldwide, please visit the Company's website 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, related financial and operating measures and debt repurchases.
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 Quarterly Report on Form 10-Q, filed with the SEC on July 30, 2010. 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.