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Wyndham Worldwide Reports Third Quarter 2012 Earnings

2012-10-24

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Wyndham 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.

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.

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.

					Table 1
					(1 of 2)
Wyndham Worldwide Corporation
OPERATING RESULTS OF REPORTABLE SEGMENTS
(In millions)


In addition to other measures, management evaluates the operating results of each of its reportable segments based upon net revenues and "EBITDA," which is defined as net income before depreciation and amortization, interest expense (excluding consumer financing interest), early extinguishment of debt, interest income (excluding consumer financing interest) and income taxes, each of which is presented on the Company's Consolidated Statements of Income. The Company believes that EBITDA is a useful measure of performance for the Company's industry segments which, when considered with GAAP measures, the Company believes gives a more complete understanding of its operating performance. The Company's presentation of EBITDA may not be comparable to similarly-titled measures used by other companies. The following tables summarize net revenues and EBITDA for reportable segments, as well as reconcile EBITDA to net income attributable to Wyndham shareholders for the three months ended September 30, 2012 and 2011:





		Three Months Ended September 30,
		2012			2011
		Net Revenues	EBITDA		Net Revenues	EBITDA
Lodging		$ 249	$ 86		$ 222	$ 67
Vacation Exchange and Rentals		420	123		436	131	(e)
Vacation Ownership		608	154	(b)	559	149
Total Reportable Segments		1,277	363		1,217	347
Corporate and Other ^(a)		(12)	(30)	(c)	(5)	(18)	(c)
Total Company		$ 1,265	$ 333		$ 1,212	$ 329

Reconciliation of EBITDA to Net Income Attributable to Wyndham shareholders

EBITDA			$ 333			$ 329
Depreciation and amortization			45			43
Interest expense			32			34
Early extinguishment of debt			2	(d)		-
Interest income			(2)			(19)	(f)
Income before income taxes			256			271
Provision for income taxes			97			96
Net income			159			175
Net loss attributable to noncontrolling interest			-			-
Net income attributable to Wyndham shareholders			$ 159			$ 175

__________
^(a)	Includes the elimination of transactions between segments.
^(b)	Includes $1 million of costs incurred in connection with the Company's acquisition of Shell Vacations during September 2012.
^(c)	Includes $1 million of a net expense and $8 million of a net benefit during the three months ended September 30, 2012 and 2011, respectively, related to the resolution of and adjustment to certain contingent liabilities and assets resulting from our separation from Cendant.
^(d)	Represents costs incurred in connection with the early repurchase of a portion of the Company's 9.875% senior unsecured notes and 6.00% senior unsecured notes.
^(e)	Includes a $4 million charge related to the write-off of foreign exchange translation adjustment associated with liquidation of a foreign entity.
^(f)	Includes $16 million of interest income related to a refund of value added taxes.

The following tables summarize net revenues and Adjusted EBITDA for reportable segments for the three months ended September 30, 2012 and 2011 (for a description of adjustments by segment, see Table 7):

		Three Months Ended September 30,
		2012			2011
			Adjusted			Adjusted
		Net Revenues	EBITDA		Net Revenues	EBITDA
Lodging		$ 249	$ 86		$ 222	$ 67
Vacation Exchange and Rentals		420	123		436	135
Vacation Ownership		608	155		559	149
Total Reportable Segments		1,277	364		1,217	351
Corporate and Other		(12)	(29)		(5)	(26)
Total Company		$ 1,265	$ 335		$ 1,212	$ 325

					Table 1
					(2 of 2)
Wyndham Worldwide Corporation
OPERATING RESULTS OF REPORTABLE SEGMENTS
(In millions)


The following tables summarize net revenues and EBITDA for reportable segments, as well as reconcile EBITDA to net income attributable to Wyndham shareholders for the nine months ended September 30, 2012 and 2011:

		Nine Months Ended September 30,
		2012			2011
		Net Revenues	EBITDA		Net Revenues	EBITDA
Lodging		$ 667	$ 210	(b)	$ 561	$ 160	(g)
Vacation Exchange and Rentals		1,129	300	(c)	1,152	330	(h)
Vacation Ownership		1,679	407	(d)	1,550	376	(i)
Total Reportable Segments		3,475	917		3,263	866
Corporate and Other ^(a)		(35)	(76)	(e)	(10)	(57)	(e)
Total Company		$ 3,440	$ 841		$ 3,253	$ 809

Reconciliation of EBITDA to Net Income Attributable to Wyndham shareholders

EBITDA			$ 841			$ 809
Depreciation and amortization			136			133
Interest expense			98			103	(j)
Early extinguishment of debt			108	(f)		12	(k)
Interest income			(7)			(22)	(l)
Income before income taxes			506			583
Provision for income taxes			187			222
Net income			319			361
Net loss attributable to noncontrolling interest			1			-
Net income attributable to Wyndham shareholders			$ 320			$ 361

__________
^(a)	Includes the elimination of transactions between segments.
^(b)	Includes a $1 million benefit from the recovery of a previously recorded impairment charge.
^(c)	Includes a $2 million benefit related to the reversal of an allowance associated with a previously divested asset.
^(d)	Includes $1 million of costs incurred in connection with the Company's acquisition of Shell Vacations during September 2012.
^(e)	Includes $3 million and $16 million of a net benefit during the nine months ended September 30, 2012 and 2011, respectively, related to the resolution of and adjustment to certain contingent liabilities and assets resulting from our separation from Cendant.
^(f)	Represents costs incurred for the early repurchase of a portion of the Company's 9.875% senior unsecured notes and 6.00% senior unsecured notes.
^(g)	Includes a non-cash impairment charge of $13 million to reduce the value of an international joint venture.
^(h)	Includes (i) a $31 million net benefit resulting from a refund of value added taxes, (ii) $7 million of restructuring costs incurred in connection with a strategic initiative commenced by the Company during 2010 and (iii) a $4 million charge related to the write-off of foreign exchange translation adjustments associated with the liquidation of a foreign entity.
⁽ⁱ⁾	Includes a $1 million benefit for the reversal of costs incurred as a result of various strategic initiatives commenced by the Company during 2008.
^(j)	Includes $3 million of interest related to value added tax accruals.
^(k)	Represents costs incurred for the early repurchase of a portion of the Company's convertible notes.
^(l)	Includes $16 million of interest income related to a refund value added taxes.

The following tables summarize net revenues and Adjusted EBITDA for reportable segments for the nine months ended September 30, 2012 and 2011 (for a description of adjustments by segment, see Table 7):

		Nine Months Ended September 30,
		2012			2011
			Adjusted			Adjusted
		Net Revenues	EBITDA		Net Revenues	EBITDA
Lodging		$ 667	$ 209		$ 561	$ 173
Vacation Exchange and Rentals		1,129	298		1,152	310
Vacation Ownership		1,679	408		1,550	375
Total Reportable Segments		3,475	915		3,263	858
Corporate and Other		(35)	(79)		(10)	(73)
Total Company		$ 3,440	$ 836		$ 3,253	$ 785

						Table 2
Wyndham Worldwide Corporation
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2012		2011		2012		2011
Net revenues
	Service and membership fees	$ 566		$ 584		$ 1,558		$ 1,579
	Vacation ownership interest sales	373		320		987		855
	Franchise fees	168		160		449		395
	Consumer financing	106		105		311		310
	Other	52		43		135		114
Net revenues		1,265		1,212		3,440		3,253

Expenses
	Operating	495	^(b)	490	^(d)	1,389	^(b)	1,358	^(d)
	Cost of vacation ownership interests	45		35		115		115
	Consumer financing interest	23		21		69		67
	Marketing and reservation	197		182		554		472
	General and administrative^(a)	172		157		481		422	⁽ⁱ⁾
	Asset impairments	-		-		-		13	^(j)
	Restructuring	-		-		-		6	^(k)
	Depreciation and amortization	45		43		136		133
Total expenses		977		928		2,744		2,586

Operating income		288		284		696		667
Other income, net		-		(2)		(9)	^{(g) (h)}	(9)	^(l)
Interest expense		32		34		98		103	^(m)
Early extinguishment of debt		2	^(c)	-		108	^(c)	12	⁽ⁿ⁾
Interest income		(2)		(19)	^(e)	(7)		(22)	^(e)

Income before income taxes		256		271		506		583
Provision for income taxes		97		96	^(f)	187		222	^(f)

Net income		159		175		319		361
Net loss attributable to noncontrolling interest		-		-		1		-

Net income attributable to Wyndham shareholders		$ 159		$ 175		$ 320		$ 361

Earnings per share
	Basic	$ 1.13		$ 1.10		$ 2.20		$ 2.17
	Diluted	1.11		1.08		2.16		2.12

Weighted average shares outstanding
	Basic	141		159		145		166
	Diluted	144		162		148		170
__________
^(a)	Includes $1 million of a net expense and $8 million of a net benefit during the three months ended September 30, 2012 and 2011, respectively, and $3 million and $12 million of a net benefit during the nine months ended September 30, 2012 and 2011, respectively, related to the resolution of and adjustment to certain contingent liabilities and assets resulting from our separation from Cendant.
^(b)	Includes $1 million of costs incurred in connection with the Company's acquisition of Shell Vacations (September 2012).
^(c)	Represents costs incurred for the early repurchase of a portion of the Company's 9.875% senior unsecured notes and 6.00% senior unsecured notes.
^(d)	Includes a $4 million charge related to the write-off of foreign exchange translation adjustments associated with the liquidation of a foreign entity.
^(e)	Includes $16 million of interest income related to the refund of value added taxes.
^(f)	Includes a benefit of $13 million related to the reversal of a tax valuation allowance.
^(g)	Includes a $1 million benefit from the recovery of a previously recorded impairment charge.
^(h)	Includes a $2 million benefit related to the reversal of an allowance associated with a previously divested asset.
⁽ⁱ⁾	Includes a $31 million net benefit resulting from a refund of value added taxes.
^(j)	Represents a non-cash impairment charge related to a write-down of an international joint venture.
^(k)	Includes $7 million of costs incurred as a result of a strategic initiative commenced by the Company during 2010 and a $1 million benefit for the reversal of costs incurred as a result of various strategic initiatives commenced by the Company during 2008.
^(l)	Includes $4 million of a gain related to the redemption of a preferred stock investment allocated to the Company in connection with our separation from Cendant.
^(m)	Includes $3 million of interest related to value added tax accruals.
⁽ⁿ⁾	Represents costs incurred for the early repurchase of a portion of the Company's convertible notes.

							Table 3
							(1 of 3)
Wyndham Worldwide Corporation
OPERATING STATISTICS



		Year	Q1	Q2	Q3	Q4	Full Year
Lodging ^(a)
	Number of Rooms	2012	609,300	608,300	618,100	N/A	N/A
		2011	609,600	612,900	611,200	613,100	N/A
		2010	593,300	606,800	605,700	612,700	N/A
		2009	588,500	590,200	590,900	597,700	N/A

	RevPAR	2012	$ 29.73	$ 37.23	$ 40.39	N/A	N/A
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