Wyndham Worldwide Reports Second Quarter 2010 Earnings
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Wyndham Worldwide Reports Second Quarter 2010 Earnings
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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 2010-07-29
Wyndham Worldwide Reports Second Quarter 2010 Earnings Results Exceed Expectations Increases Full-Year Guidance Board Increases Share Repurchase Authorization By $300 Million
Wyndham Worldwide Corporation (NYSE:WYN) today announced results for the three months ended June 30, 2010.
HIGHLIGHTS:
* Second quarter 2010 diluted earnings per share (EPS) was $0.51, compared with Company-issued guidance of $0.38 – $0.42 and $0.39 in the second quarter of 2009.
* Free cash flow, which the Company defines as net cash from operations less capital expenditures, equity investments and development advances, increased 32% to $486 million in the first half of 2010, compared with $368 million during the same period in 2009.
* The Company's Board of Directors authorized an increase to the current share repurchase program by $300 million. For the quarter, the Company repurchased approximately 2.2 million shares of its common stock at an average price of $24.33.
* The Company announced on July 26, 2010 that it completed a term securitization transaction involving the issuance of $350 million of investment-grade asset-backed notes at an advance rate of 83.25% and an all-in yield of 4.15%.
"Continued strong operating performance in each of our businesses in the second quarter, combined with a lower overall tax rate, enables us to increase our full-year earnings guidance," said Stephen P. Holmes, chairman and CEO, Wyndham Worldwide. "We continue to generate significant levels of sustainable free cash flow that we are deploying to drive shareholder value."
SECOND QUARTER 2010 OPERATING RESULTS
Second quarter revenues of $963 million increased 5% from the prior-year period. The revenue growth primarily reflected continued sales momentum across the Company's three business units. Excluding the $37 million of Vacation Ownership revenue associated with the percentage-of-completion (POC) accounting method in the second quarter of 2009, second quarter 2010 adjusted revenue growth was 9%.
Net income for the second quarter of 2010 grew 34% to $95 million, or $0.51 per diluted share, compared with net income of $71 million, or $0.39 per diluted share, for the second quarter of 2009. The increase in net income from 2009 primarily reflected the year-over-year improvement in the Exchange and Rentals business, a lower effective tax rate and the favorable net effect of foreign currency.
BUSINESS UNIT RESULTS
Lodging (Wyndham Hotel Group)
Revenues were $178 million in the second quarter of 2010, an increase of 2%, compared with the second quarter of 2009, reflecting increased royalty, marketing and reservation revenues primarily from room growth. In constant currency, second quarter 2010 system-wide RevPAR decreased 1.2%. Including the impact of foreign currency, system-wide RevPAR remained flat in the second quarter of 2010. Second quarter 2010 adjusted EBITDA was $50 million, consistent with 2009.
As of June 30, 2010, the Company's hotel system consisted of approximately 7,160 properties and 606,800 rooms, of which 24% were international. The development pipeline included approximately 980 hotels and 107,600 rooms, of which 54% were new construction and 49% were international.
Wyndham Hotel Group acquired the Tryp hotel brand from Sol Meliá Hotels & Resorts on June 30th. The acquisition of the midmarket international brand adds 92 hotels or approximately 13,200 rooms concentrated in cosmopolitan cities such as Madrid, Barcelona and Paris.
Vacation Exchange and Rentals (Wyndham Exchange & Rentals)
Revenues were $281 million in the second quarter of 2010, consistent with the second quarter of 2009. In constant currency, revenues increased by 3%.
Exchange revenues were $161 million, a 2% decline compared with the second quarter of 2009. In constant currency, exchange revenues decreased 3% from the second quarter of 2009 reflecting a 2% decline in exchange revenue per member and a 1% decline in the average number of members.
Vacation rental revenues were $115 million, a 6% increase compared with the second quarter of 2009. In constant currency, vacation rental revenues increased 12% from the second quarter of 2009, reflecting the contribution of incremental revenues from the recently acquired Hoseasons brand.
Second quarter 2010 Exchange and Rentals EBITDA was $78 million, compared with adjusted EBITDA of $58 million in the second quarter of 2009. Excluding a favorable net effect of foreign currency of $10 million, second quarter 2010 adjusted EBITDA increased 17% from the second quarter of 2009, due to the impact of the Hoseasons acquisition and continued cost management efforts.
Vacation Ownership (Wyndham Vacation Ownership)
Gross Vacation Ownership Interest (VOI) sales were $371 million in the second quarter of 2010, up 13% from the second quarter of 2009, reflecting an increase of 16% in volume per guest (VPG), while tour flow remained relatively flat.
Total segment revenues were $505 million in the second quarter of 2010, compared with $467 million in the second quarter of 2009, which included the recognition of $37 million of previously deferred POC revenues. The absence of these revenues in the second quarter of 2010 was more than offset by the reduction in the provision for loan losses of $35 million primarily related to improved credit metrics of the portfolio and a $31 million increase in gross VOI sales.
EBITDA for the second quarter of 2010 was $104 million, compared with adjusted EBITDA of $108 million in the second quarter of 2009. Excluding an estimated $17 million impact from the POC method of accounting in the second quarter of 2009, second quarter 2010 adjusted EBITDA growth was 14%. This growth reflected the lower provision for loan losses and the increase in VOI sales.
Other Items
* The Company repurchased approximately 2.2 million shares of its common stock during the second quarter of 2010 at an average price of $24.33 and an additional 525,000 shares at an average price of $21.39 through July 27, 2010.
* Interest expense in the second quarter of 2010 was $36 million, an increase of $10 million from the second quarter of 2009, reflecting higher interest expense related to long-term debt issuances in May 2009 and February 2010.
Balance Sheet Information as of June 30, 2010:
* Cash and cash equivalents of approximately $240 million, compared with $155 million at December 31, 2009
* Vacation ownership contract receivables, net, of $3.0 billion, compared with $3.1 billion at December 31, 2009
* Vacation ownership and other inventory of approximately $1.3 billion, unchanged from December 31, 2009
* Securitized vacation ownership debt of $1.5 billion, unchanged from December 31, 2009
* Other debt of $1.8 billion, compared with $2.0 billion at December 31, 2009, reflecting the repayment of the outstanding balance on the revolving credit facility and a decrease in fair value of the conversion feature related to the Company's convertible notes. The remaining borrowing capacity on the revolving credit facility was $919 million, compared with $869 million as of December 31, 2009.
A schedule of debt is included in the financial tables section of this press release.
Outlook
The Company increased full-year 2010 guidance:
* Revenues increased to $3.7 – $4.0 billion from $3.6 – $3.9 billion
* Adjusted EBITDA increased to $825 – $860 million from $805 – $840 million
* Adjusted diluted EPS increased to $1.78 – $1.88 from $1.56 – $1.71
* Lodging RevPAR of 0% – 3% from (3%) – 0%
* Vacation Ownership VPG of 10% – 14% from 6% – 9%
For the third quarter of 2010, the Company expects adjusted diluted EPS of $0.60 – $0.64.
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.
Board Increases Share Repurchase Authorization
The Company's Board of Directors has increased the authorization for the stock repurchase program by $300 million. As of July 27, 2010, $91 million remained unused under the previous $200 million authorization. The amount and timing of specific repurchases is subject to market conditions, applicable legal requirements and other factors. Repurchases may be conducted in the open market or in privately negotiated transactions.
Completed $350 Million Term Securitization
On July 26, 2010, the Company announced that it completed a term securitization transaction involving the issuance of $350 million of investment-grade, asset-backed notes with an advance rate of 83.25%. Sierra Timeshare 2010-2 Receivables Funding LLC issued $286 million of A rated and $64 million of BBB rated notes, with coupons of 3.84% and 5.31%, respectively, backed by vacation ownership loans.
Conference Call Information
Wyndham Worldwide Corporation will hold a conference call with investors to discuss this news on Wednesday, July 28, 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 July 28, 2010. The conference call may also be accessed by dialing (800) 369-2052 begin_of_the_skype_highlighting (800) 369-2052 end_of_the_skype_highlighting 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 July 28, 2010, at (800) 876-5258 begin_of_the_skype_highlighting (800) 876-5258 end_of_the_skype_highlighting.
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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