PARSIPPANY, New Jersey—Wyndham Worldwide Corporation today announced results for the three months ended March 31, 2012.
First quarter adjusted diluted earnings per share (EPS) was $0.60, compared with $0.44 in the first quarter of 2011, an increase of 36%. First quarter 2012 reported diluted EPS was $0.21, a decrease of 49% from the same period in 2011, reflecting early extinguishment charges related to $650 million of debt tender offers.
First quarter Adjusted EBITDA increased 8% to $220 million.
Free cash flow increased to $193 million for the quarter ended March 31, 2012, compared with $185 million from the same period in 2011.
During the quarter, the Company repurchased 3.6 million shares of its common stock for $150 million at an average price of $42.05.
The Company announced today that its Board of Directors approved a $750 million increase to the share repurchase authorization.
“First quarter results were strong, reflecting the power of our fee-for-service business model across economic cycles, continuing innovation throughout the Company, robust free cash flow and disciplined capital allocation,” said Stephen P. Holmes, chairman and CEO, Wyndham Worldwide. “Furthermore, consumers are traveling. Our Vacation Ownership and Hotel businesses are showing great momentum and our Exchange and Rentals business proved resilient despite the difficult economic climate in Europe. As always, we will continue to focus on driving operational improvements in 2012 and beyond.”
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FIRST QUARTER 2012 OPERATING RESULTS
First quarter revenues were $1.0 billion, an increase of 9% from the prior year period. The increase reflects growth in all of our business units led by the Company’s Lodging and Vacation Ownership businesses.
For the first quarter of 2012, adjusted net income was $90 million, or $0.60 per diluted share, compared with $79 million, or $0.44 per diluted share for the same period in 2011. The increase in adjusted net income primarily reflects stronger operating results in our Lodging and Vacation Ownership businesses. Adjusted net income for the first quarter of 2012 excludes a $62 million early extinguishment charge related to $650 million of debt tender offers and $4 million of benefits related to legacy and other adjustments. Full reconciliations of adjusted results to GAAP results appear in Table 8 of this press release.
Including the early extinguishment charge and legacy benefits, reported net income for the first quarter of 2012 was $32 million, or $0.21 per diluted share, compared with net income of $72 million, or $0.41 per diluted share, for the first quarter of 2011.
Free cash flow increased 4% to $193 million for the quarter ended March 31, 2012, compared with $185 million during the same period in 2011. The growth in free cash flow primarily reflects reduced capital expenditures. The Company defines free cash flow as net cash provided by operating activities less capital expenditures, equity investments and development advances. For the quarter ended March 31, 2012, cash provided by operating activities was $228 million, compared with $229 million in the prior year period.
BUSINESS UNIT RESULTS
Lodging (Wyndham Hotel Group) Revenues were $185 million in the first quarter of 2012, an increase of 24%, compared with the first quarter of 2011. The increase reflects domestic RevPAR gains of 9%, as part of a total system RevPAR improvement of 7%, revenues associated with the recently opened Wyndham Grand hotel in Orlando, and higher inter-segment licensing fees for use of the Wyndham brand trade name. The revenue increase also includes $10 million of reclassifications, primarily related to certain reservation fees, which had no impact on Adjusted EBITDA.
Adjusted EBITDA was $49 million, an increase of 23% compared with the first quarter of 2011, largely reflecting the revenue increases discussed above, partially offset by the operating costs associated with the recently opened Wyndham Grand hotel and higher marketing costs. Excluding the higher inter-segment licensing fees, Adjusted EBITDA increased by 13%.
As of March 31, 2012, the Company’s hotel system consisted of over 7,150 properties and approximately 609,300 rooms. The development pipeline included approximately 840 hotels and 108,200 rooms, of which 56% were new construction and 55% were international.
Vacation Exchange and Rentals (Wyndham Exchange & Rentals)
Revenues were $361 million in the first quarter of 2012, compared to $356 million in the first quarter of 2011. In constant currency and excluding the impact of acquisitions, revenues were flat.
Exchange revenues were $188 million, a decrease of 3% compared with the first quarter of 2011, primarily due to a 2% decline in the average number of members resulting from the non-renewal of an affiliation agreement. In constant currency, exchange revenues were down 2% and exchange revenue per member was flat.
Vacation rental revenues were $159 million, a 6% increase compared with the first quarter of 2011. Excluding the impact of foreign currency and acquisitions, vacation rental revenues were up 3% primarily due to a 2% increase in vacation rental transactions. Average net price per vacation rental remained flat.
Adjusted EBITDA for the first quarter of 2012 was $93 million, flat compared with the prior-year period. Excluding the impact of foreign currency and acquisitions, Adjusted EBITDA declined by 2%, reflecting the continued economic challenges in Europe.
Vacation Ownership (Wyndham Vacation Ownership)
Revenues were $501 million in the first quarter of 2012, an 11% increase over the first quarter of 2011, primarily reflecting increased vacation ownership interest (VOI) sales.
Gross VOI sales were $384 million in the first quarter of 2012, up 20% from the first quarter of 2011, primarily reflecting a 10% increase in volume per guest and an 8% increase in tour flow.
Adjusted EBITDA for the first quarter of 2012 was $103 million, a 7% increase compared with the first quarter of 2011. Excluding the higher inter-segment licensing fee paid for the use of the Wyndham brand trade name, Adjusted EBITDA increased by 11%, reflecting contributions from increased VOI sales.
The Board of Directors approved a $750 million increase in the Company’s share repurchase program.
The Company repurchased approximately 3.6 million shares of common stock for $150 million during the first quarter of 2012 at an average price of $42.05, and an additional 850,000 shares for $40 million at an average price of $46.85 through April 24, 2012. The Company has $940 million remaining on its current share repurchase authorization, including the $750 million increase mentioned above.
Net interest expense in the first quarter of 2012 was $31 million, compared to $30 million in the first quarter of 2011.
During the quarter, the Company purchased $207 million of our 9.875% 2014 senior notes and $443 million of our 6.0% 2016 senior notes. We also issued $300 million of 5 year notes at 2.95% and $650 million of 10 year notes at 4.25%. A portion of the proceeds was used to reduce revolver borrowings by approximately $170 million.
Balance Sheet Information as of March 31, 2012:Cash and cash equivalents of approximately $240 million, compared with $142 million at December 31, 2011
Vacation ownership contract receivables, net, of $2.8 billion, unchanged from December 31, 2011
Vacation ownership and other inventory of approximately $1.1 billion, unchanged from December 31, 2011
Securitized vacation ownership debt of $2.0 billion, compared with $1.9 billion at December 31, 2011
Long-term debt of $2.3 billion, compared with $2.2 billion at December 31, 2011. The remaining borrowing capacity on the revolving credit facility was $942 million, compared with $771 million as of December 31, 2011
A schedule of debt is included in Table 5 of this press release.
OutlookFor the full year 2012, the Company:
Reiterates Revenues of approximately $4.425 – $4.6 billion
Reiterates Adjusted EBITDA of approximately $1.030 – $1.055 billion
Raises Adjusted EPS Guidance to $3.00 - $3.15 from $2.85 - $3.00
Reduces diluted shares to 149 million from 153 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.
Conference Call InformationWyndham Worldwide Corporation will hold a conference call with investors to discuss this news on Wednesday, April 25, 2012 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 April 25, 2012. 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 EDT on April 25, 2012, at (800) 839-5569.
Presentation of Financial InformationFinancial information discussed in this press release includes non-GAAP measures, which include or exclude certain items. These non-GAAP measures differ from reported GAAP 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. It is not practicable to provide a reconciliation of forecasted adjusted EBITDA and EPS 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 reported results.
About Wyndham Worldwide CorporationAs 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 over 7,150 hotels with approximately 609,300 rooms worldwide. Wyndham Exchange & Rentals offers leisure travelers, including its 3.7 million members, access to approximately 100,000 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 over 813,000 owners throughout North America, the Caribbean and the South Pacific. Wyndham Worldwide, headquartered in Parsippany, N.J., employs approximately 27,800 employees globally.
For more information about Wyndham Worldwide, please visit www.wyndhamworldwide.com.
Forward-Looking StatementsThis 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, share repurchases 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 Annual Report on Form 10-K, filed with the SEC on February 17, 2012. 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.