Wyndham Worldwide Reiterates Second Quarter and Full Year Guidance
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Wyndham Worldwide Reiterates Second Quarter and Full Year Guidance
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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 2009-07-29
Company to Report Second Quarter 2009 Earnings on July 29, 2009
Wyndham Worldwide Corporation (NYSE: WYN) today announced results for the three months ended June 30, 2009.
SECOND QUARTER 2009 HIGHLIGHTS:
* The Company generated diluted adjusted earnings per share (EPS) of $0.41, compared with Company-issued guidance of $0.36 - $0.41
* The Company reaffirms full-year 2009 revenue and adjusted EBITDA guidance
* Wyndham Hotel Group's concentration in the economy and mid-scale segments led it to outperform the overall industry average domestic revenue per available room (RevPAR), posting a decline of 13.6% compared with a decline of 19.5%, as reported by Smith Travel Research
* Group RCI adjusted EBITDA, excluding the net effect of foreign currency impacts, increased 30%
* Volume per guest (VPG) at Wyndham Vacation Ownership increased 17%, reflecting strong pricing and higher close rates
* In May 2009, the Company successfully completed $480 million of debt issuances maturing in 2012 and 2014; increasing available capacity on its revolving credit facility to approximately $840 million as of June 30, 2009
"Wyndham Worldwide delivered strong second quarter results," said Stephen P. Holmes, chairman and CEO, Wyndham Worldwide. "Our diversified business model has proved to be flexible and efficient. In addition, we are well positioned to capitalize on an economic recovery."
SECOND QUARTER 2009 OPERATING RESULTS
Second quarter revenues of $920 million declined by 19% from the prior-year period, due to continued weakness in the global lodging industry; unfavorable foreign exchange rate movements which negatively impacted the vacation exchange and rental business; and the previously announced initiative to reduce sales in the Company's vacation ownership business.
Reported net income for the second quarter of 2009 was $71 million, or $0.39 diluted EPS, compared with net income of $98 million, or $0.55 diluted EPS, for the second quarter of 2008.
Adjusted net income for the second quarter of 2009 was $75 million, or $0.41 diluted EPS, compared with adjusted net income of $94 million, or $0.53 diluted EPS, for the second quarter of 2008. Second quarter 2009 adjusted EPS excludes the after-tax impact of $4 million in restructuring costs and legacy items. Second quarter 2008 adjusted EPS excludes the after-tax net benefit of $4 million related to legacy items.
BUSINESS UNIT RESULTS
Lodging (Wyndham Hotel Group)
Revenues were $174 million in the second quarter of 2009, a decline of 13% compared with the second quarter of 2008, primarily reflecting a worldwide decline in RevPAR and lower property management reimbursable revenues.
In constant currency, second quarter 2009 system-wide RevPAR decreased 14.7%, reflecting declines of 13.6% and 18.1% in domestic and international RevPAR, respectively. Including the impact of foreign currency, system-wide RevPAR declined 16.7% in the second quarter of 2009.
Second quarter 2009 EBITDA was $50 million, a 19% decline from the second quarter of 2008, primarily driven by the decline in worldwide RevPAR and lower other franchise fees, partly offset by the timing of marketing expenses.
As of June 30, 2009, the Company's hotel system consisted of over 7,000 properties and 590,200 rooms, of which 21% were international. The development pipeline included approximately 1,000 hotels and 111,000 rooms, of which 50% were new construction and 41% were international.
Vacation Exchange and Rentals (Group RCI)
Revenues were $280 million in the second quarter of 2009, an 11% decrease compared with the second quarter of 2008, primarily related to the impact of unfavorable foreign currency movements. In constant currency, revenues decreased only 1%, as favorability in vacation rental revenues was offset by lower ancillary revenues.
Annual dues and exchange revenues were $112 million, relatively flat in constant currency compared with the second quarter of 2008 reflecting a 3% increase in the average number of members and a 4% decline in revenue per member. Including the impact of foreign currency, revenues declined 6% from the second quarter of 2008.
Vacation rental revenues were $137 million, an increase of $7 million, or 5%, in constant currency compared with the second quarter of 2008, driven by a 3% increase in the average net price per rental and a 2% increase in rental transaction volume. Including the impact of foreign currency, revenues decreased 10% from the prior year period.
Second quarter 2009 EBITDA increased 4% to $56 million, compared with $54 million in the second quarter of 2008. Excluding $2 million of restructuring costs, second quarter adjusted EBITDA was $58 million, a 7% increase from the prior year period. Excluding a $12 million unfavorable net effect of foreign currency, adjusted EBITDA would have increased $16 million, or 30%, from the second quarter of 2008, reflecting cost savings.
Vacation Ownership (Wyndham Vacation Ownership)
Gross Vacation Ownership Interest (VOI) sales were $327 million for the second quarter of 2009, a 39% decline from the second quarter of 2008. This decrease was primarily driven by the previously announced initiative to scale down our sales in response to the disjointed capital markets, which included a refocusing of sales and marketing efforts that resulted in fewer tours.
Total segment revenues were $467 million in the second quarter of 2009, down 25% from the second quarter of 2008, primarily reflecting the previously mentioned lower tour flow. This was partially offset by a $42 million favorable gross impact from the recognition of revenue that was previously deferred under the percentage-of-completion (POC) method of accounting and a 17% increase in VPG from the second quarter of 2008. Under the POC method of accounting for the sale of vacation ownership interests, the Company recognized $37 million of previously deferred revenue during the second quarter of 2009, while second quarter 2008 reported revenues were reduced by $5 million of deferred revenue.
EBITDA for the second quarter of 2009 was $107 million, down 4% from the second quarter of 2008, reflecting a $20 million impact from the net increase in the recognition of revenue previously deferred under the POC method of accounting, offset by the net impact of the planned reduction of VOI sales volume. Excluding $1 million of restructuring costs, second quarter 2009 adjusted EBITDA was $108 million, compared to adjusted EBITDA of $112 million in the second quarter of 2008.
Other Items
Net interest expense in the second quarter of 2009 was $24 million, a $9 million increase from the second quarter of 2008 due to higher interest rates, primarily reflecting the impact of the long-term debt issuances in May 2009, the proceeds of which were used to reduce revolving credit facility borrowings, and lower capitalized interest. Depreciation and amortization declined $1 million year-over-year to $45 million in the second quarter of 2009.
Balance Sheet Information as of June 30, 2009:
* Cash and cash equivalents of approximately $175 million compared with $135 million from December 31, 2008
* Vacation ownership contract receivables, net, of $3.1 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 $1.6 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 $840 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.
Guidance
For the third quarter of 2009, the Company expects adjusted EPS of $0.53 - $0.57, based on weighted average shares of 182 million.
The Company reaffirms full-year 2009 guidance:
* Revenues of $3.5 - $3.9 billion
* Adjusted EBITDA of $760 - $810 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. It is not practicable to provide a reconciliation of forecasted adjusted EBITDA 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 our financial results.
Conference Call Information
Wyndham Worldwide Corporation will hold a conference call with investors to discuss this news on Wednesday, July 29, 2009 at 8:30 a.m. EDT. Listeners can access the webcast live through the Company's website at www.wyndhamworldwide.com/investors/. The conference call also may be accessed by dialing (800) 369-1781 and providing the pass code "Wyndham." Listeners are urged to call at least 10 minutes prior to the scheduled start time. An archive of this webcast will be available at the website for approximately 90 days beginning at 12:00 p.m. EDT on July 29, 2009. A telephone replay will be available at (800) 229-6292 beginning at 12:00 p.m. EDT on July 29, 2009, until 5:00 p.m. EDT on September 15, 2009; callers must provide the pass code "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.
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