Wyndham Worldwide Reports Third Quarter 2012 Earnings

Third Quarter Adjusted EPS Up 20% Year-Over-Year
Provides Preliminary 2013 Outlook

October 24, 2012 // Franchising.com // PARSIPPANY, N.J. – Wyndham Worldwide Corporation (NYSE:WYN) today announced results for the three months ended September 30, 2012.

Highlights:

  • Third quarter adjusted diluted earnings per share (EPS) was $1.13, compared with $0.94 in the third quarter of 2011, an increase of 20%. Third quarter 2012 reported diluted EPS was $1.11, compared with $1.08 from the same period in 2011, which included a $22 million benefit from adjustments.
  • Third quarter adjusted net income increased 6% compared with the third quarter of 2011. A stronger US dollar had an adverse effect on net income and EPS. In constant currency, third quarter adjusted net income increased 9% and adjusted EPS increased 24% compared with the third quarter of 2011.
  • During the quarter, the Company repurchased 2.6 million shares of its common stock for $133 million.

"The third quarter was highlighted by exceptional performance from our Hotel Group", said Stephen P. Holmes, chairman and CEO. "Our timeshare business delivered another quarter of solid performance and I'm pleased with the ability of our exchange and rentals group to mitigate the impact of economic headwinds in Europe. Our share repurchase program continues to reduce our share count and contribute to strong adjusted EPS growth."

Third Quarter 2012 Operating Results

Third quarter revenues were $1.3 billion, an increase of 4% from the prior year period. The increase reflected growth in the Lodging and Vacation Ownership businesses, partially offset by unfavorable currency effects in the Vacation Exchange and Rentals business.

For the third quarter of 2012, adjusted net income was $162 million, or $1.13 per diluted share, compared with $153 million, or $0.94 per diluted share for the same period in 2011. The increase in adjusted net income primarily reflected stronger operating results in the Lodging and Vacation Ownership businesses. EPS also benefited from the Company's share repurchase program, which decreased weighted average share count by 11%.

Reported net income for the third quarter of 2012 was $159 million, or $1.11 per diluted share, compared with net income of $175 million, or $1.08 per diluted share, for the third quarter of 2011. Reported net income included several items not included in adjusted net income. The third quarter of 2012 included $3 million of acquisition costs, legacy adjustments and debt transaction fees. The third quarter of 2011 included a $22 million benefit from adjustments. Full reconciliations of adjusted results to GAAP results appear in Table 8 of this press release.

Free cash flow was $682 million for the nine months ended September 30, 2012, compared to $703 million for the same period in 2011. Excluding a $67 million benefit from a refund of value added taxes and related interest income received in 2011, free cash flow increased by 7%. The Company defines free cash flow as net cash provided by operating activities less capital expenditures and development advances. For the nine months ended September 30, 2012, net cash provided by operating activities was $808 million, compared with $860 million in the prior year period, which included the benefit from the refund of value added taxes and related interest income.

Business Unit Results

Lodging (Wyndham Hotel Group)

Revenues were $249 million in the third quarter of 2012, an increase of 12% compared with the third quarter of 2011. The increase primarily reflected RevPAR gains, revenues associated with the Wyndham Grand hotel in Orlando, which opened at the beginning of the fourth quarter of 2011, and higher intersegment licensing fees for use of the Wyndham brand trade name.

EBITDA was $86 million, an increase of 28% compared with the third quarter of 2011, reflecting the revenue increases.

Domestic RevPAR increased 5% compared with the third quarter of 2011. Total system-wide RevPAR increased 2%, or 3% in constant currency.

As of September 30, 2012, the Company's hotel system consisted of nearly 7,260 properties and approximately 618,100 rooms. The development pipeline included approximately 950 hotels and 108,300 rooms, of which 55% were new construction and 47% were international.

Vacation Exchange and Rentals (Wyndham Exchange & Rentals)

Revenues were $420 million in the third quarter of 2012, compared to $436 million in the third quarter of 2011. In constant currency and excluding the impact of acquisitions, revenues were flat.

Exchange revenues were $157 million, a decrease of 2% compared with the third quarter of 2011. In constant currency, exchange revenues were flat, as a 2% decline in the average number of members was offset by a 1% increase in exchange revenue per member. The decline in the average number of members was due to the non-renewal of an affiliation agreement at the beginning of 2012.

Vacation rental revenues were $248 million, a 5% decrease compared with the third quarter of 2011. In constant currency and excluding acquisitions, vacation rental revenues were flat, reflecting a 3% increase in transaction volume offset by a 2% decrease in the average net price per vacation rental.

Adjusted EBITDA for the third quarter of 2012 was $123 million, down 9% compared with the prior-year period. Adjusted EBITDA was flat excluding the impact of acquisitions and the net effect of foreign currency.

Vacation Ownership (Wyndham Vacation Ownership)

Revenues were $608 million in the third quarter of 2012, a 9% increase over the third quarter of 2011, primarily reflecting increased vacation ownership interest (VOI) sales.

Gross VOI sales were $502 million in the third quarter of 2012, up 10% from the third quarter of 2011, primarily reflecting a 5% increase in both volume per guest and tour flow.

Adjusted EBITDA for the third quarter of 2012 was $155 million, a 4% increase compared with the third quarter of 2011. The increase primarily reflects the revenue increases, partially offset by higher sales and marketing expenses related to the increase in VOI sales and higher intersegment licensing fees for use of the Wyndham brand trade name.

Other Items

  • The Company repurchased 2.6 million shares of common stock for $133 million during the third quarter of 2012. From October 1 through October 23, 2012, the Company repurchased an additional 915,000 shares for $49 million. The Company has $608 million remaining on its current share repurchase authorization.
  • Net interest expense in the third quarter of 2012 was $30 million, compared to $15 million in the third quarter of 2011, which included $16 million of interest income associated with a refund of value added taxes.

Balance Sheet Information as of September 30, 2012:

  • Cash and cash equivalents of approximately $230 million, compared with $142 million at December 31, 2011
  • Vacation ownership contract receivables, net, of $2.9 billion, compared with $2.8 billion at December 31, 2011
  • Vacation ownership and other inventory of approximately $1.1 billion, unchanged from December 31, 2011
  • Securitized vacation ownership debt of $1.9 billion, unchanged from December 31, 2011
  • Long-term debt of $2.5 billion, compared with $2.2 billion at December 31, 2011. The remaining borrowing capacity on the revolving credit facility was $720 million as of September 30, 2012, compared with $771 million as of December 31, 2011

A schedule of debt is included in Table 5 of this press release.

Outlook

For the full year 2012, the Company:

  • Revises Revenues to $4.5 – $4.6 billion from $4.425 - $4.6 billion

Revises Adjusted EBITDA guidance to $1.045 - $1.055 billion from $1.040 – $1.055 billion

  • Revises Adjusted EPS Guidance to $3.15 - $3.20 from $3.10 - $3.20
  • Reduces diluted shares to 146 million from 147 million

The Company's preliminary guidance for the full-year 2013 is as follows:

  • Revenues of approximately $4.9 - $5.05 billion
  • Adjusted EBITDA of approximately $1.125 - $1.150 billion
  • Adjusted EPS of approximately $3.50 - $3.60 based on a diluted share count of 143 million.

The guidance reflects assumptions used for internal planning purposes. Guidance may exclude non-recurring or special items, which may have a positive or negative impact on reported results. If economic conditions change materially from current levels, these assumptions and guidance may change materially.

Conference Call Information

Wyndham Worldwide Corporation will hold a conference call with investors to discuss this news on Wednesday, October 24, 2012 at 8:30 a.m. EDT. Listeners may access the webcast live through the Company's website atwww.wyndhamworldwide.com/investors/. An archive of this webcast will be available at the website for approximately 90 days beginning at noon EDT on October 24, 2012. The conference call may also be accessed by dialing (888) 942-9868 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 24, 2012, at (866) 395-9153.

Presentation of Financial Information

Financial information discussed in this press release includes non-GAAP measures, which include or exclude certain items. These non-GAAP measures differ from reported GAAP 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. It is not practicable to provide a reconciliation of forecasted adjusted EBITDA and EPS 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 the Company's reported results.

About Wyndham Worldwide Corporation

One of the world's largest hospitality companies, Wyndham Worldwide (NYSE: WYN) provides a wide range of hospitality products and services through its global portfolio of world-renowned brands. The world's largest hotel company based on the number of properties, Wyndham Hotel Group is home to many of the world's best-known hotel brands, with approximately 7,260 franchised hotels and 618,100 hotel rooms worldwide. Wyndham Exchange & Rentals is the worldwide leader in vacation exchange and the world's largest professionally managed vacation rentals business, providing more than 5 million leisure-bound families annually with access to approximately 100,000 vacation properties in 100 countries through its prominent exchange and vacation rental brands. The industry and timeshare ownership market leader, Wyndham Vacation Ownership develops, markets, and sells vacation ownership interests and provides consumer financing to owners through its network of over 180 vacation ownership resorts serving more than 915,000 owners throughout the United States, Canada, Mexico, the Caribbean, and the South Pacific. Based in Parsippany, NJ, Wyndham Worldwide employs approximately 27,800 associates globally. For more information, please visit www.wyndhamworldwide.com.

Forward-Looking Statements

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, terrorist activity or political strife, 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 25, 2012. 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.

Investor and Media Contacts:

Margo C. Happer
Senior Vice President, Investor Relations
Wyndham Worldwide Corporation
(973) 753-6472
margo.happer@wyn.com

Barry Goldschmidt
Vice President, Investor Relations
Wyndham Worldwide Corporation
(973) 753-7703
barry.goldschmidt@wyn.com

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