PARSIPPANY, New Jersey--Wyndham Worldwide Corporation (NYSE: WYN) today announced results for the three months ended September 30, 2011.
Highlights:
- Third quarter 2011 adjusted diluted earnings per share (EPS) was $0.94, compared with $0.68 in the third quarter of 2010, an increase of 38%. Third quarter 2011 reported diluted EPS was $1.08, an increase of 29%, compared with the same period in 2010.
- Free cash flow increased 24% to $699 million for the first three quarters of 2011, compared with $564 million during the same period in 2010. The Company defines free cash flow as net cash provided by operating activities less capital expenditures, equity investments and development advances and excludes a 2010 cash payment related to contingent IRS tax liabilities.
- During the quarter, the Company repurchased approximately 10.2 million shares of its common stock at an average price of $29.75 for $304 million.
“I am pleased once again with our strong results, which reflect outstanding operating performance and the resiliency of our businesses,” said Stephen P. Holmes, chairman and CEO, Wyndham Worldwide. “In addition, we continued to thoughtfully deploy our free cash flow to repurchase our common shares and invest in our company.”
THIRD QUARTER 2011 OPERATING RESULTS
Third quarter revenues increased 14% from the prior year period to $1.2 billion. The revenue growth reflects strong RevPAR growth of 6.3% in our hotel business, increased rental revenues including contributions from acquisitions of vacation rentals businesses and higher sales in the vacation ownership business.
For the third quarter of 2011, adjusted net income increased 22% to $153 million, compared with $125 million in the third quarter of 2010. On a per share basis, adjusted net income grew 38% to $0.94 per diluted share, compared with $0.68 per diluted share in the same period in 2010. The increase reflects strong operational performance and the benefit from the Company’s share repurchase program, partially offset by a higher tax rate compared with the third quarter of 2010. Adjusted net income for the third quarter of 2011 excludes a tax benefit of $13 million related to the reversal of a tax valuation allowance, $7 million, after tax, of interest income related to a refund of value added taxes and a $6 million after-tax net benefit related to the adjustment and resolution of certain contingent liabilities and assets. These adjustments were partially offset by a $4 million after-tax loss related to the write-off of foreign exchange translation adjustments resulting from the liquidation of a foreign entity.
Including the above adjustments, third quarter 2011 net income grew 12% to $175 million, or $1.08 per diluted share, compared with net income of $156 million or $0.84 per diluted share, a 29% increase per share from the third quarter of 2010.
Free cash flow increased 24% to $699 million for the first nine months of 2011, compared with $564 million during the same period in 2010. The growth in free cash flow reflects higher cash earnings, more efficient working capital utilization and a refund of value added taxes and related interest income. For the first nine months, cash provided by operating activities was $860 million, compared with $528 million in the
prior year period, which included a $145 million cash payment related to contingent IRS tax liabilities.
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BUSINESS UNIT RESULTS
Lodging (Wyndham Hotel Group)
Revenues were $222 million in the third quarter of 2011, an increase of 9%, compared with the third quarter of 2010, primarily reflecting improved RevPAR performance, an increase in system size and a $12 million reclassification of certain reservation fees, which had no impact on EBITDA. In the third quarter of 2011, system-wide RevPAR increased 6.3%, or 4.8% in constant currency.
Third quarter 2011 EBITDA of $67 million, was flat, compared with the same period in 2010, primarily reflecting the timing of $3 million in marketing and reservation expenses as well as $3 million of pre-opening costs for the Wyndham Grand Orlando Resort Bonnet Creek.
As of September 30, 2011, the Company’s hotel system consisted of approximately 7,190 properties and 611,200 rooms. The development pipeline included approximately 870 hotels and 115,000 rooms, of which 58% were new construction. International rooms accounted for 62% of the development pipeline.
Vacation Exchange and Rentals (Wyndham Exchange & Rentals)
Revenues were $436 million in the third quarter of 2011, an increase of 32% compared with the third quarter of 2010, reflecting incremental revenues from acquisitions and the favorable impact from foreign currency.
Exchange revenues were $161 million, flat compared with the third quarter of 2010. In constant currency, exchange revenues decreased 3%, reflecting a 2.2% decrease in exchange revenue per member. The average number of members was flat.
Vacation rental revenues were $260 million, which included $83 million of incremental revenues related to acquisitions, compared with $161 million in the third quarter of 2010. In constant currency, excluding the impact of the incremental revenues from acquisitions, net revenues generated from rental transactions and related services increased 2%, reflecting a 1.4% increase in the average net price per vacation
rental, while rental transaction volume was flat.
Adjusted EBITDA for the third quarter of 2011 was $135 million, a 30% increase compared with $104 million in the prior year period. The increase reflects incremental contributions from acquisitions and the favorable impact from foreign currency. Third quarter 2011 adjusted EBITDA excludes a $4 million loss related to the write-off of foreign exchange translation adjustments resulting from the liquidation of a
foreign entity.
Vacation Ownership (Wyndham Vacation Ownership)
Revenues for the third quarter of 2011 were $559 million, a 5% increase compared with $533 million in the third quarter of 2010, reflecting an increase in Vacation Ownership Interest (VOI) sales and commissions under the Wyndham Asset Affiliation Model (WAAM).
Gross VOI sales were $455 million in the third quarter of 2011, up 10% from the third quarter of 2010, reflecting a 5.6% increase in volume per guest and a 5.3% increase in tour flow.
EBITDA for the third quarter of 2011 increased 21% to $149 million, compared with EBITDA of $123 million in the third quarter of 2010, reflecting the increase in VOI sales and a decrease in cost of sales.
Other Items
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The Company repurchased approximately 10.2 million shares of its common stock during the third quarter of 2011 at an average price of $29.75 for $304 million and an additional 1.4 million shares at an average price of $29.19 for $40 million through October 25,
2011. -
Net interest expense in the third quarter of 2011 was $15 million, compared with $45 million in the same period in 2010. Third quarter 2011 net interest expense included $16 million of interest income related to a refund of value added taxes and third quarter
2010 net interest expense included $11 million of costs incurred for the early extinguishment of debt.
Balance Sheet Information as of September 30, 2011:
- Cash and cash equivalents of $175 million, compared with approximately $155 million at December 31, 2010.
- Vacation ownership contract receivables, net, of $2.9 billion, compared with $3.0 billion at December 31, 2010.
- Vacation ownership and other inventory of $1.1 billion, compared with $1.2 billion at December 31, 2010.
- Securitized vacation ownership debt of $1.7 billion, unchanged from December 31, 2010.
- Other debt of $2.1 billion, unchanged from December 31, 2010. The remaining borrowing capacity on the revolving credit facility was $820 million, compared with $788 million as of December 31, 2010.
A schedule of debt is included in the financial tables section of this press release.
Outlook
The Company is increasing fullyear 2011 adjusted EPS guidance from $2.32 – $2.40 to $2.41 – $2.45, based on a diluted share count of 167 million.
For the fourth quarter of 2011, the Company expects adjusted EPS of $0.40 – $0.44 based on a diluted share count of 158 million.
The Company’s preliminary guidance for the fullyear 2012 is as follows:
- Revenues of approximately $4.425 – $4.600 billion
- Adjusted EBITDA of approximately $1.030 – $1.055 billion
- Adjusted EPS of approximately $2.72 – $2.82 based on a diluted share count of 160 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 our guidance may change materially.