Wyndham Worldwide Reports Strong Fourth Quarter and Full Year 2010 Earnings Increases Dividend 25%
PARSIPPANY, N.J. - Wyndham Worldwide Corporation (NYSE:WYN) today announced results for the three months and year ended December 31, 2010.
* Fourth quarter adjusted diluted earnings per share (EPS) was $0.46, compared with $0.40 in the fourth quarter of 2009, an increase of 15%. Fourth quarter 2010 reported diluted EPS was $0.43, an increase of 8% from the same period in 2009.
* Free cash flow increased 11% to $603 million for the year ended December 31, 2010, compared with $541 million in 2009. The Company defines free cash flow as net cash provided by operating activities less capital expenditures, equity investments and development advances and excluding a previously announced cash payment related to contingent IRS tax liabilities.
* The Company’s Board of Directors authorized an increase of the quarterly cash dividend to $0.15 from $0.12 per share, beginning with the dividend that is expected to be declared in the first quarter of 2011.
* During the quarter, the Company repurchased approximately 1.6 million shares of its common stock at an average price of $29.20. For the full-year 2010, the Company repurchased approximately 9.3 million shares of its common stock at an average price of $25.52.
“We are pleased to report these results, which are further evidence of the strength of our business models and great execution throughout the company,” said Stephen P. Holmes, chairman and CEO, Wyndham Worldwide. “We delivered strong cash flow and look to continue to deploy free cash flow to create more value for our shareholders in 2011 through acquisitions, share repurchases and dividends.”
FOURTH QUARTER 2010 OPERATING RESULTS
Fourth quarter revenues increased 3% from the prior year period to $937 million. Excluding the $47 million of Vacation Ownership revenue associated with the percentage-of-completion (POC) accounting method in the fourth quarter of 2009, fourth quarter 2010 adjusted revenue growth was 8%. The adjusted revenue growth reflects continued sales momentum across the Company’s three business units and incremental contributions from acquisitions.
For the fourth quarter of 2010, adjusted net income increased by 15% to $84 million, compared with $73 million for the same period in 2009. The increase primarily reflects higher RevPAR in the Lodging business, strong operational performance by the Vacation Ownership business and a lower effective tax rate. Adjusted net income for the fourth quarter of 2010 excludes a $6 million after-tax restructuring charge, a $2 million after-tax loss incurred for the repurchase of a portion of the Company’s 3.50% convertible notes and a $3 million after-tax net benefit related to the adjustment and resolution of certain contingent liabilities and assets.
Reported net income for the fourth quarter of 2010 was $78 million, or $0.43 per diluted share, compared with net income of $73 million, or $0.40 per diluted share, for the fourth quarter of 2009.
FULL YEAR 2010 OPERATING RESULTS
Reported revenues for full year 2010 were $3.9 billion, an increase of 3% over the prior-year period. Excluding the $187 million of Vacation Ownership revenue associated with the POC accounting method for the full year 2009, full year 2010 adjusted revenue growth was 8%. The adjusted revenue growth reflects continued sales momentum across the Company’s three business units and incremental contributions from acquisitions.
Adjusted net income for the full year 2010 increased by 13% to $368 million, compared with $327 million for the prior-year period. The increase primarily reflects higher RevPAR in the Lodging business, strong operational performance by the Vacation Ownership business, contributions from acquisitions in the Exchange and Rentals and Lodging businesses and a lower effective tax rate. Adjusted net income for the full year 2010 excludes a $41 million after-tax net benefit principally related to the resolution of the IRS examination of taxable years 2003 through 2006, an $18 million after-tax charge for the early extinguishment of debt, a $6 million after-tax charge for acquisition costs and a $6 million after-tax restructuring charge.
Reported net income for full year 2010 was $379 million, or $2.05 per diluted share, compared with net income of $293 million, or $1.61 per diluted share, for the prior-year period.
Free cash flow increased 11% to $603 million in the twelve-month period ended December 31, 2010 compared with $541 million in the same period in 2009. The growth of free cash flow reflects higher cash earnings and more efficient working capital utilization. For the twelve months ended December 31, 2010, cash provided by operating activities was $635 million, or $780 million excluding the previously announced one-time payment of $145 million related to a contingent IRS tax liability. Cash provided by operating activities was $689 million for the prior-year period.
BUSINESS UNIT RESULTS
Lodging (Wyndham Hotel Group)
Revenues were $163 million in the fourth quarter of 2010, an increase of 9%, compared with the fourth quarter of 2009 reflecting RevPAR improvement of 10% as well as incremental revenue from the recently acquired Tryp hotel brand and higher fees generated from ancillary services provided to franchisees.
EBITDA was $40 million, an increase of 25%, compared with the fourth quarter of 2009 reflecting the RevPAR improvement and the absence of a $6 million impairment charge recorded in 2009, partially offset by higher operating costs.
As of December 31, 2010, the Company’s hotel system consisted of approximately 7,210 properties and 612,700 rooms. The development pipeline included over 900 hotels and approximately 103,000 rooms, of which 55% were new construction and 51% were international.
Vacation Exchange and Rentals (Wyndham Exchange & Rentals)
Revenues were $282 million in the fourth quarter of 2010, an increase of 9% compared with the fourth quarter of 2009. In constant currency, revenues increased by 12%.
Exchange revenues were $153 million, relatively flat compared with the fourth quarter of 2009. Exchange revenue per member and the average number of members were flat.
Vacation rental revenues were $114 million, a 16% increase compared with the fourth quarter of 2009. In constant currency, vacation rental revenues increased 24% from the fourth quarter of 2009, primarily reflecting the contribution of incremental revenues from acquired businesses.
Excluding restructuring costs of $9 million and costs related to the acquisition of James Villa Holidays of $1 million, fourth quarter 2010 adjusted EBITDA decreased 13% compared with the prior-year period, reflecting the seasonality of the acquired rental businesses. Excluding the impact of acquisitions, adjusted EBITDA for the fourth quarter of 2010 was flat compared with the fourth quarter of 2009.
Wyndham Exchange & Rentals acquired James Villa Holidays on November 30, 2010, resulting in the addition of approximately 2,300 villas and unique vacation rental properties in over 50 destinations across Mediterranean vacation locations. This acquisition enhances the Company’s leading position as the world’s largest serviced vacation rentals business, providing access to approximately 97,000 vacation properties worldwide.
Vacation Ownership (Wyndham Vacation Ownership)
Gross Vacation Ownership Interest (VOI) sales were $373 million in the fourth quarter of 2010, up 9% from the fourth quarter of 2009, reflecting a 13% increase in tour flow. Volume per guest was flat compared with the prior year.
Total segment revenues were $497 million in the fourth quarter of 2010, compared with $508 million in the fourth quarter of 2009, which included the recognition of $47 million of previously deferred POC revenues. The absence of these revenues in the fourth quarter of 2010 was partially offset by an increase in gross VOI sales, a lower provision for loan losses and incremental sales under the Wyndham Asset Affiliation Model (WAAM).
EBITDA for the fourth quarter of 2010 was $131 million, compared with EBITDA of $132 million in the fourth quarter of 2009. Excluding an estimated $22 million impact from the POC method of accounting in the fourth quarter of 2009, fourth quarter 2010 adjusted EBITDA growth was 19%. This growth reflected the lower provision for loan losses and the increase in VOI sales.
* The Company repurchased approximately 1.6 million shares of its common stock during the fourth quarter of 2010 at an average price of $29.20 and an additional 455,000 shares at an average price of $29.51 through February 8, 2011.
* During the fourth quarter of 2010, the Company repurchased $22 million face value of its 3.50% convertible notes and retired the proportionate share of the call options and warrants associated with these notes.
* Net interest expense in the fourth quarter of 2010 was $34 million, an increase of $1 million from the fourth quarter of 2009, primarily reflecting a $3 million loss incurred for the repurchase of a portion of the Company’s 3.50% convertible notes during the fourth quarter of 2010.
Balance Sheet Information as of December 31, 2010:
* Cash and cash equivalents of approximately $155 million, unchanged from 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 $1.2 billion, compared with $1.3 billion at December 31, 2009
* Securitized vacation ownership debt of $1.7 billion, compared with $1.5 billion at December 31, 2009
* Other debt of $2.1 billion, compared with $2.0 billion at December 31, 2009. The remaining borrowing capacity on the revolving credit facility was $788 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.
The Company’s full-year 2011 guidance is:
* Revenues of approximately $4.0 – $4.2 billion
* Adjusted EBITDA of approximately $925 – $955 million
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. 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, February 9, 2011 at 8:30 a.m. EST. 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 EST on February 9, 2011. The conference call may also be accessed by dialing (800) 369-2052 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 EST on February 9, 2011, at (800) 294-7481.
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.
About Wyndham Worldwide Corporation
As one of the world’s largest hospitality companies, Wyndham Worldwide offers individual consumers and business-to-business customers a broad suite of hospitality products and services across various accommodation alternatives and price ranges through its premier portfolio of world-renowned brands. Wyndham Hotel Group encompasses approximately 7,210 franchised hotels and approximately 612,700 hotel rooms worldwide. Wyndham Exchange & Rentals offers leisure travelers, including its 3.8 million members, access to approximately 97,000 vacation properties located in approximately 100 countries. Wyndham Vacation Ownership develops, markets and sells vacation ownership interests and provides consumer financing to owners through its network of over 160 vacation ownership resorts serving nearly 815,000 owners throughout North America, the Caribbean and the South Pacific. Wyndham Worldwide, headquartered in Parsippany, N.J., employs approximately 26,000 employees globally.
For more information about Wyndham Worldwide, please visit the Company’s website at www.wyndhamworldwide.com.
This press release contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, conveying management’s expectations as to the future based on plans, estimates and projections at the time the Company makes the statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements contained in this press release include statements related to the Company’s revenues, earnings, dividends and related financial and operating measures.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Factors that could cause actual results to differ materially from those in the forward-looking statements include general economic conditions, the performance of the financial and credit markets, the economic environment for the hospitality industry, the impact of war, terrorist activity or political strife, operating risks associated with the hotel, vacation exchange and rentals and vacation ownership businesses, as well as those described in the Company’s Quarterly Report on Form 10-Q, filed with the SEC on October 28, 2010. Except for the Company’s ongoing obligations to disclose material information under the federal securities laws, it undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.
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