Wyndham Worldwide Reports Solid Second Quarter 2008 Results
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Wyndham Worldwide Reports Solid Second Quarter 2008 Results
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Category: Worldwide - Industry economy -
Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2008-08-01
Net revenues increased 3% to $1.1 billion
EBITDA growth in all three businesses
Adjusted EPS up 8% to $0.53
Wyndham Worldwide Corporation (NYSE:WYN) today announced results for the three months ended June 30, 2008.
SECOND QUARTER 2008 HIGHLIGHTS:
* Second quarter 2008 revenues were $1.1 billion, an increase of 3% from second quarter 2007.
o System-wide revenue per available room (RevPAR) increased 1.4% in the second quarter of 2008 compared to the second quarter of 2007.
o Average number of vacation exchange members increased 5%, or 176,000 members, compared to the second quarter of 2007, reaching nearly 3.7 million members.
o Average net price per vacation rental increased 15% for the second quarter of 2008 compared to the second quarter of 2007, or 5% in constant currency.
o Gross Vacation Ownership Interest sales increased 2% compared to the second quarter of 2007.
* Second quarter reported EPS grew by 6%, or 8% on an adjusted basis. Second quarter 2008 net income was $98 million or $0.55 diluted earnings per share. Adjusted net income excluding legacy items was $94 million or $0.53 adjusted diluted earnings per share.
* As previously announced, the Company completed two securitization transactions involving the issuance of investment grade asset-backed notes in the amount of $200 million by Sierra Timeshare 2008-1 Receivables Funding, LLC and $450 million by Sierra Timeshare 2008-2 Receivables Funding, LLC.
* The Company completed the acquisition of the Microtel Inns & Suites ® and Hawthorn Suites ® hotel brands for a purchase price of $131 million.
“We delivered solid earnings this quarter despite a challenging global economic environment, reflecting the strength and resilience of our business model,” said Stephen P. Holmes, Wyndham Worldwide chairman and chief executive officer. “While we continue to experience pressure in our industry, the diversity and flexibility of our business model allows us to tailor and execute on our sales and marketing initiatives to navigate this difficult environment. I remain confident in our growth prospects.”
SECOND QUARTER 2008 OPERATING RESULTS
Revenues for the second quarter of 2008 were $1.1 billion, up 3% compared to the second quarter of 2007. The Company also reported EBITDA growth in each of its three business units during the second quarter of 2008, compared to the second quarter of 2007.
Net income for the second quarter of 2008 was $98 million or $0.55 diluted earnings per share, compared to $96 million or $0.52 diluted earnings per share for the second quarter of 2007.
Excluding $4 million in after-tax net benefit from the resolution of, and adjustment to, certain legacy items, adjusted net income for the second quarter of 2008 would have been $94 million, or $0.53 adjusted diluted earnings per share, an 8% increase compared to $89 million, or adjusted diluted earnings per share of $0.49 in the second quarter of 2007. Adjusted net income in the second quarter of 2007 excluded $4 million in after-tax separation and related costs and $11 million in after-tax net benefit from the resolution of, and adjustment to, certain legacy items.
On May 1, 2008, the Company provided second quarter EPS guidance of $0.46-0.48, which assumed $25-$35 million in percentage-of-completion (POC) related deferred revenue. Actual results included $5 million in POC related deferred revenue.
BUSINESS UNIT RESULTS
Lodging (Wyndham Hotel Group)
Revenues increased 8% to $200 million in the second quarter of 2008 compared with the second quarter of 2007, reflecting higher international revenues, incremental property management reimbursable revenues and increased revenue generated by the Company’s loyalty program.
System-wide RevPAR increased 1.4% in the second quarter of 2008, reflecting strong international growth of 15.2%, or 8.4% in constant currency, and a decline in domestic RevPAR of 3.7%. Comparable RevPAR increased 0.6% over the prior year period.
Property management reimbursable revenues were $26 million and marketing/reservation revenues, including Wyndham Rewards revenues, were $77 million in the second quarter of 2008, compared to $22 million and $75 million, respectively, in the second quarter of 2007; these items contribute little, if any, EBITDA.
Second quarter 2008 EBITDA grew to $62 million compared to $59 million in the second quarter of 2007.
As of June 30, 2008, the Company’s hotel system consisted of approximately 6,560 properties and 551,500 rooms, of which 20% were international, with a development pipeline of approximately 930 hotels and approximately 109,000 rooms, of which 50% were new construction and over 40% were international.
Vacation Exchange and Rentals (Group RCI)
Revenues increased to $314 million in the second quarter of 2008, a 9% increase compared with the second quarter of 2007, reflecting growth in the average number of members and an increase in the average net price per vacation rental, including favorable currency translations. In constant currency, revenues increased 4% compared to the second quarter of 2007.
Vacation rentals revenues were $153 million, up 12% compared to the second quarter of 2007, or a 3% increase in constant currency. These results reflect a 15% increase in the average net price per vacation rental, or 5% in constant currency, primarily due to favorable mix, and the conversion of an existing Landal park from franchised to a managed property. The gains in the average net price per vacation rental were partially offset by a 2% decline in rental transaction volume which we believe is due to customers booking their vacations closer to the actual travel dates.
Annual dues and exchange revenues were $119 million, up 2% compared to the second quarter of 2007, or a 1% increase in constant currency. The increase was primarily driven by a 5% increase in the average number of members, partially offset by a 3% decrease in the average revenue per member.
Other ancillary revenues were $42 million, up 17% compared to the second quarter of 2007. The increase was primarily due to an adjustment recorded during the second quarter of 2007 that reduced Asia Pacific consulting revenue by $5 million and EBITDA by $6 million.
Second quarter 2008 EBITDA was $54 million, compared to second quarter 2007 EBITDA of $49 million. In constant currency, EBITDA increased $5 million compared to the second quarter of 2007.
Vacation Ownership (Wyndham Vacation Ownership)
Gross Vacation Ownership Interest sales were $532 million for the second quarter of 2008, up 2% compared to the second quarter of 2007. This increase was primarily driven by a 3% increase in tour flow.
Consumer finance revenues increased $16 million to $104 million in the second quarter of 2008, up 18% compared to the second quarter of 2007, reflecting continued growth in the portfolio due to higher gross VOI sales.
Reported revenues were $621 million in the second quarter of 2008, down 1% compared to the second quarter of 2007, reflecting a higher provision for loan losses. Deferred revenue under the POC method of accounting was $5 million during both the 2008 and 2007 periods.
EBITDA for the second quarter of 2008 was $112 million, compared to $100 million in the second quarter of 2007, which included $5 million of separation and related costs.
Other Items
Interest expense for the second quarter of 2008 was $18 million, unchanged from the second quarter of 2007. Interest income for the quarter was $3 million, up $1 million from the comparable prior year period. Depreciation and amortization increased $5 million to $46 million reflecting increased capital investments over the past two years.
Balance Sheet Information as of June 30, 2008:
* Cash and cash equivalents of approximately $240 million compared to approximately $210 million at December 31, 2007
* Vacation ownership contract receivables, net, of $3.1 billion compared to $2.9 billion at December 31, 2007
* Vacation ownership and other inventory of approximately $1.3 billion compared to $1.2 billion at December 31, 2007
* Securitized vacation ownership debt of $2.1 billion, unchanged since December 31, 2007
* Other debt of $1.6 billion, compared to $1.5 billion at December 31, 2007
A schedule of debt is included in the financial tables section of this press release.
Share Repurchase
The Company repurchased approximately 108,000 shares of stock during the second quarter of 2008 at an average price of $19.74. At June 30, 2008, approximately $155 million remained under the Company’s previously announced share repurchase program.
Outlook
For the third quarter 2008, the Company expects EPS of $0.80 – $0.82 based on weighted average shares of approximately 178 million.
The Company is updating the full-year 2008 guidance as follows:
* Revenues of $4,525 – $ 4,625 million
* Adjusted* EBITDA of $900 – $920 million
* Depreciation and amortization expense of $175 – $185 million
* Interest expense, net of $75 – $85 million
* Adjusted* net income of $388 – $414 million
* Adjusted* EPS of $2.18 – $2.32 based on weighted average shares of approximately 178 million
* Deferred POC revenue of $70 - $100 million
* All guidance excludes legacy items, which may have a positive or negative impact on reported results, and rebranding charges.
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 this press release.
Conference Call Information
Wyndham Worldwide Corporation will provide a webcast of its conference call to discuss the Company’s second quarter 2008 financial results and outlook for the remainder of 2008 on Thursday, July 31, 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 July 31. 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 (888) 402-8740 beginning at noon EDT on July 31 until 5 p.m. EDT on August 4.
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