Delivers Double-Digit Top- and Bottom-Line Growth for Quarter
- Announces a $455 Million Vacation Ownership Receivables Securitization
- Renews and Upsizes Vacation Ownership Receivables Conduit Facility to $1.2 Billion
- Affirms 2007 Guidance and Provides Preliminary 2008 Outlook
Wyndham Worldwide Corporation (NYSE:WYN) today announced results for the three months ended September 30, 2007.
Financial information discussed in this press release includes both GAAP and non-GAAP measures, which include or exclude certain items, or reflect pro forma adjustments, related to the Company's spin-off effective July 31, 2006. These non-GAAP measures differ from reported results and are intended to illustrate what management believes are relevant period-over-period comparisons. Non-GAAP measures are indicated as "Adjusted." A complete reconciliation of reported GAAP results to the comparable Adjusted information appears in the financial tables section of this press release.
HIGHLIGHTS:
• Revenues for the third quarter of 2007 increased to over $1.2 billion, up 16% compared to the third quarter of 2006
• Net income for the third quarter of 2007 increased 27% to $117 million, or $0.65 per diluted share, compared to third quarter 2006 net income of $92 million, or $0.45 per diluted share
• Adjusted net income for the third quarter of 2007 increased 17% to $134 million, or $0.75 per diluted share, compared to third quarter 2006 Adjusted net income of $115 million, or $0.56 per diluted share
• Vacation Ownership continued to post strong results for the third quarter of 2007, with revenues and gross vacation ownership sales increasing 22% and 15%, respectively, compared to the third quarter of 2006
• Comparable revenue per available room (RevPAR) in the third quarter of 2007 increased 6.2% compared to the third quarter of 2006 and system- wide RevPAR increased 5.6% from the prior year period
• Hotel pipeline was over 104,000 rooms as of September 30, 2007
• Average number of vacation exchange members increased 5% in the third quarter of 2007 compared to the third quarter of 2006
• Average net price per vacation rental increased 14% in the third quarter of 2007 compared to the third quarter of 2006, or 7% excluding the favorable effect of currency translations
• Wyndham Worldwide repurchased approximately 560,000 shares of stock during the third quarter of 2007 at an average price of $31.08. At September 30, 2007, approximately $187 million remained under the Company's previously announced share repurchase program.
• The Company announced that $455 million of insured investment grade asset-backed notes are expected to be issued by Sierra Timeshare 2007-2 Receivables Funding, LLC, an indirect subsidiary of Wyndham Vacation Ownership
• The Company announced that its asset-backed commercial paper facility, Sierra Timeshare Conduit Receivables Funding, was renewed through October 2008 and upsized to $1.2 billion.
"Wyndham Worldwide continues to perform well despite the uncertainties in the macroeconomic environment, demonstrating our strong portfolio of brands and the resilience of our model, which is focused on the leisure traveler," said Stephen P. Holmes, Wyndham Worldwide chairman and chief executive officer. "Our businesses are positioned to take advantage of favorable demographics as the baby-boomer generation begins to retire and spends more time on leisure travel. We look forward to a strong finish in 2007 and continued growth in 2008."
The Company also announced that Kenneth N. May, President and Chief Executive Officer of Wyndham's Vacation Exchange and Rentals (Group RCI) business unit, will leave the Company effective November 2, 2007 to pursue new interests.
Mr. Holmes said, "Ken has been an integral part of shaping the vision for Group RCI, and I thank him for his many valuable contributions and wish him all the best. As we search for his successor, we will be looking at candidates who have strong and deep experience in global operations, relationship management, and online distribution and marketing, in order to best execute on that vision and drive results."
THIRD QUARTER 2007 OPERATING RESULTS
Revenues for the third quarter of 2007 were $1.2 billion, up 16% over the same period in 2006, reflecting strong organic growth.
Net income for the third quarter of 2007 was $117 million or $0.65 diluted earnings per share, compared to $92 million or $0.45 diluted earnings per share for the third quarter of 2006.
Net income for the third quarter of 2007 includes $2 million after-tax of separation and related costs associated with Wyndham Worldwide's spin-off from Cendant Corporation (now Avis Budget Group) and $15 million of an after-tax net charge from the resolution of and adjustments to certain legacy items primarily related to a previously disclosed increase in the legacy litigation reserve. Excluding these items, Adjusted net income for the third quarter of 2007 was $134 million, or $0.75 diluted earnings per share.
Third quarter 2006 included $43 million after-tax of separation and related costs and a $15 million tax benefit related to refinements of the Company's 2005 state effective tax rates. Excluding these items and including $5 million after-tax of estimated incremental stand-alone costs (assuming Wyndham Worldwide had been a stand-alone, public company in July 2006), Adjusted net income for the third quarter of 2006 was $115 million, or $0.56 diluted earnings per share.
BUSINESS UNIT RESULTS
Lodging (Wyndham Hotel Group)
Revenues increased 12% to $211 million in the third quarter of 2007 compared with the third quarter of 2006, reflecting increased property management reimbursable revenues and strong RevPAR gains both domestically and internationally. Comparable RevPAR increased 6.2% in the third quarter of 2007 and system-wide RevPAR increased 5.6% from the prior year period.
Property management reimbursable revenues were $26 million and marketing/reservation revenues, including TripRewards revenues, were $85 million, these items contribute little, if any, margin. Lodging EBITDA grew to $70 million compared to $67 million in the third quarter of 2006, which included $1 million of separation and related costs.
As of September 30, 2007, the Company's hotel system consisted of 540,900 rooms and 6,460 properties with a development pipeline of over 104,000 rooms and approximately 940 hotels, of which 45% were new construction and 30% were international.
Vacation Exchange and Rentals (Group RCI)
Revenues increased to $336 million in the third quarter of 2007, an 8% increase compared with the third quarter of 2006, reflecting growth in both vacation exchange and vacation rentals as well as favorable currency translations. Excluding the favorable effect of currency translations of $14 million, revenues grew 4% compared to the third quarter of 2006.
Vacation exchange revenues were $116 million, a 4% increase compared to the third quarter of 2006, primarily driven by a 5% increase in the average number of members.
Vacation rentals revenues were $182 million, up 16% compared to the third quarter of 2006, or up 8% excluding the favorable effect of currency translations. These results reflected a 14% increase in the average net price per vacation rental and a 1% increase in rental transactions.
Other ancillary revenues generated primarily from additional products and services provided to affiliates and members were $38 million in the third quarter of 2007 compared with $40 million in the third quarter of 2006.
Third quarter 2007 EBITDA was $103 million, compared to third quarter 2006 EBITDA of $97 million, which included $1 million of separation and related costs. Excluding the favorable effect of currency translations of $7 million during 2007 and the separation and related costs during 2006, Adjusted EBITDA was down $2 million compared to the third quarter of 2006. Third quarter 2007 EBITDA included marginally higher costs consistent with increased rentals, severance expense, and incremental investment in information technology infrastructure.
Vacation Ownership (Wyndham Vacation Ownership)
Revenues increased 22% to $671 million in the third quarter of 2007 compared with the third quarter of 2006 reflecting continued success in marketing and sales.
Gross Vacation Ownership Interest sales were $552 million for the third quarter of 2007, up 15% compared to the third quarter of 2006, driven by marketing efforts resulting in 6% growth in tour flow and an 8% increase in volume per guest from strong performance by our sales force and continued strength in transaction pricing. Results continue to reflect the strength of our marketing, sales and new locations added in the second half of 2006.
Consumer finance revenues increased 21% for the third quarter of 2007 compared to the third quarter of 2006 reflecting continued Vacation Ownership sales growth.
EBITDA for the third quarter of 2007 increased 32% to $116 million, which includes $1 million of separation and related costs, compared to $88 million in the third quarter of 2006, which also included $1 million of separation and related costs. Third quarter 2007 EBITDA also reflects a $7 million pre-tax gain on the sale of certain vacation ownership properties that were no longer consistent with the Company's development plans.
On October 24, 2007, the Company priced a term securitization transaction involving the issuance of $455 million of insured investment grade asset- backed notes by Sierra Timeshare 2007-2 Receivables Funding, LLC, an indirect subsidiary of Wyndham Vacation Ownership. The notes are backed by vacation ownership receivables originated by subsidiaries of Wyndham Vacation Ownership. The transaction is expected to close on or about November 1, 2007.
Other Items
Interest expense for the third quarter of 2007 was $20 million, an increase of $3 million from the third quarter of 2006. This increase is primarily due to higher average borrowings primarily due to differences in the Company's capital structure since the spin-off. Interest income for the quarter was $4 million, a $1 million decrease from the third quarter of 2006, primarily due to differences in the Company's capital structure since the spin-off. Depreciation and amortization rose $6 million to $43 million.
Balance Sheet Information as of September 30, 2007:
• Cash and cash equivalents of approximately $230 million compared to approximately $270 million at December 31, 2006
• Vacation ownership and other inventory of approximately $1.1 billion compared to approximately $955 million at December 31, 2006
• Vacation ownership contract receivables, net, of $2.8 billion compared to $2.4 billion at December 31, 2006
• Securitized vacation ownership debt of $1.9 billion compared to $1.5 billion at December 31, 2006
• Other debt of $1.5 billion, compared to $1.4 billion at December 31, 2006
A schedule of debt is included in the financial tables section of this press release.
Share Repurchase
The Company repurchased 560,000 shares of stock during the third quarter of 2007 at an average price of $31.08 and an additional 235,000 shares at an average price of $32.69 through October 30, 2007.
Outlook and Guidance
"We are confident, based on Wyndham Worldwide's third quarter performance, that 2007 full year results will be within the upper end of our plan of $4,340 - $4,480 million in revenues and full year Adjusted EPS of $2.02 - $2.13," said Mr. Holmes.
"We anticipate fourth quarter Adjusted EPS of $0.44 - $0.46, excluding separation and related costs and legacy matters, based on weighted average shares of approximately 180 million." Mr. Holmes noted that the Company's expectations for the fourth quarter assumes approximately $25 million in deferred vacation ownership revenue, or $0.04 per share, that will be recognized in future quarters.
Looking ahead to 2008, management provided preliminary guidance for the full-year 2008:
• Revenues of approximately $4.8 - $4.9 billion
• EBITDA, excluding legacy matters, of approximately $920 - $945 million.
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