WYNDHAM WORLDWIDE REPORTS STRONG FOURTH QUARTER AND FULL YEAR 2007 RESULTS
Delivers Double-Digit Top- and Bottom-Line Growth for Full Year 2007
Announces Full Year 2007 Adjusted EPS Growth of 25%
Affirms 2008 Guidance
PARSIPPANY, N.J. (February 12, 2008) –
Wyndham Worldwide Corporation (NYSE:WYN) today announced results for the three months and year ended December 31, 2007.
Download and view the Wyndham Worldwide Fourth Quarter 2007 Financial Tables (MS Excel File)
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.
FOURTH QUARTER AND 2007 HIGHLIGHTS:
- Fourth quarter 2007 revenues increased 6% to $1.0 billion
- Fourth quarter 2007 net income was $104 million or $0.58 diluted earnings per share. Adjusted net income was $83 million or $0.46 diluted earnings per share.
- Revenues for full year 2007 increased 13% to $4.4 billion compared to full year 2006, with strong, top-line growth across the Company’s three businesses
- Net income for full year 2007 increased 40% to $403 million, or $2.20 per diluted share, compared to 2006 net income of $287 million, or $1.44 per diluted share
- Adjusted net income for full year 2007 increased to $387 million, or $2.12 per diluted share, up 14% and 25%, respectively, compared to 2006 Adjusted net income of $339 million, or $1.70 per diluted share
- Vacation Ownership posted strong full-year results, with 2007 revenues and gross vacation ownership sales increasing 17% and 14%, respectively, compared to 2006
- Vacation Ownership resort count continued to expand, adding over 1,500 units to the portfolio during the year
- Comparable revenue per available room (RevPAR) rose 5.9% in the fourth quarter of 2007 compared to the fourth quarter of 2006, while system-wide RevPAR increased 5.3% over the prior year period
- Lodging opened nearly 19,000 rooms in the fourth quarter of 2007, while ending the year with a hotel pipeline of over 105,000 rooms
- Average number of vacation exchange members increased 5% for full year 2007 compared to 2006, reaching a Company record of more than 3.5 million members
- Average net price per vacation rental increased 14% for full year 2007 compared to 2006, or 6% excluding the favorable effect of currency translations
- During 2007, Wyndham Worldwide repurchased approximately 14.8 million shares. At December 31, 2007, approximately $163 million remained under the Company’s previously announced share repurchase program.
“Wyndham Worldwide posted strong financial and operating results in 2007, concluding our first full year as a public company with double-digit revenue and EBITDA growth as each of our business units delivered within our expectations,” said Stephen P. Holmes, Wyndham Worldwide chairman and chief executive officer. “Our company continues to benefit from a global portfolio of economically resilient businesses and brands and from our multiple revenue sources, with more than half of our revenue generated from fee-for-service businesses. We continue to believe that our business model solidly positions us for continued growth, even in what looks like a tougher economic environment in 2008.”
FULL YEAR 2007 OPERATING RESULTS
Revenues for full year 2007 increased to $4.4 billion, up 13% over the same period in 2006, reflecting strong organic growth:
- Lodging revenues grew 10% primarily due to solid RevPAR gains, increased property management reimbursable revenues and the continued strength and positioning of our portfolio of brands worldwide
- Vacation Exchange and Rentals revenues increased 9% due to strength in vacation rentals and solid growth in the vacation exchange member base, as well as favorable currency translations
- Vacation Ownership posted terrific results, with full year 2007 revenues and gross vacation ownership sales increasing 17% and 14%, respectively, driven by increases in both tour flow and volume per guest
Net income for full year 2007 was $403 million or $2.20 diluted earnings per share, compared to 2006 net income of $287 million or $1.44 diluted earnings per share. Net income for 2007 includes $10 million after-tax of separation and related costs and $26 million in after-tax net benefit from the resolution of and adjustment to certain legacy items. Excluding these items, Adjusted net income for full year 2007 was $387 million or $2.12 diluted earnings per share, up 14% and 25%, respectively, from full year 2006. Adjusted net income for full year 2006 was $339 million, or $1.70 diluted earnings per share.
FOURTH QUARTER 2007 OPERATING RESULTS
Revenues for the fourth quarter of 2007 were $1.0 billion, up 6% over the same period in 2006, reflecting continued organic growth.
Net income for the fourth quarter of 2007 was $104 million or $0.58 diluted earnings per share, compared to $92 million or $0.48 diluted earnings per share for the fourth quarter of 2006.
Excluding $21 million in after-tax net benefit from the resolution of and adjustment to certain legacy items, primarily related to a previously disclosed litigation settlement agreement by our former parent company, Adjusted net income for the fourth quarter of 2007 was $83 million, or $0.46 diluted earnings per share.
Excluding $22 million after-tax of separation and related costs and excluding $30 million in after-tax net benefit from the resolution of and adjustment to certain legacy items, Adjusted net income for the fourth quarter of 2006 was $84 million, or $0.44 diluted earnings per share.
BUSINESS UNIT RESULTS
Lodging (Wyndham Hotel Group)
Revenues increased 16% to $176 million in the fourth quarter of 2007 compared with the fourth quarter of 2006, reflecting strong RevPAR gains and increased property management reimbursable revenues. Comparable RevPAR increased 5.9% in the fourth quarter of 2007 and system-wide RevPAR increased 5.3% over the prior year period. For the quarter, Days Inn and Super 8, which collectively represent almost 60% of the Company’s U.S. lodging portfolio -- continued to experience industry-leading comparable RevPAR growth for their segments. The Company’s top five international lodging markets, Canada, China, the U.K., Germany and Mexico, which collectively represent 75% of the Company’s international lodging portfolio, enjoyed RevPAR growth of almost 19% in the fourth quarter.
Property management reimbursable revenues were $28 million and marketing/reservation revenues, including TripRewards revenues, were $65 million in the fourth quarter of 2007, compared to $16 million and $61 million, respectively, in the fourth quarter of 2006; these items contribute little, if any, margin.
Fourth quarter 2007 EBITDA grew to $49 million compared to $47 million in the fourth quarter of 2006 (which included $1 million of separation and related costs). The EBITDA growth was muted by the timing of approximately $5 million of incremental marketing expenses.
As of December 31, 2007, the Company’s hotel system consisted of approximately 550,600 rooms and 6,540 properties, with a development pipeline of approximately 930 hotels and over 105,000 rooms, of which 44% were new construction and 32% were international.
Vacation Exchange and Rentals (Group RCI)
Revenues increased to $280 million in the fourth quarter of 2007, a 5% increase compared with the fourth quarter of 2006, reflecting growth in both vacation exchange and vacation rentals, as well as favorable currency translations, partially offset by a decline in other ancillary revenue. Excluding the favorable effect of currency translations of $14 million, revenues were flat compared to the fourth quarter of 2006.
Vacation exchange revenues were $112 million, up 2% compared to the fourth quarter of 2006, primarily driven by a 5% increase in the average number of members, partially offset by a 3% decrease in annual dues and exchange revenue per member primarily related to the timing and mix of exchange deposits.
Vacation rentals revenues were $125 million, a 20% increase compared to the fourth quarter of 2006, or a 9% increase excluding the favorable effect of currency translations. These results reflect a 20% increase in the average net price per vacation rental, or 9% excluding favorable currency translations, primarily due to the mix of activity at premium locations and the conversion of existing Landal parks from franchised to managed properties.
Other ancillary revenues generated primarily from additional products and services provided to affiliates and members were $43 million in the fourth quarter of 2007, compared with $51 million in the fourth quarter of 2006, primarily due to the absence of $4 million of revenues recorded during the fourth quarter of 2006 relating to consulting activities in Asia Pacific and $3 million of other marketing program revenues.
Fourth quarter 2007 EBITDA was $56 million, compared to fourth quarter 2006 EBITDA of $59 million, dampened by the impact of the consulting activities mentioned above and other marketing revenues in the fourth quarter of 2006 that were not repeated in 2007.
Vacation Ownership (Wyndham Vacation Ownership)
Revenues increased 4% to $576 million in the fourth quarter of 2007 compared to the fourth quarter of 2006, reflecting continued success in marketing and sales, incremental property management revenues and growing consumer finance revenues. Fourth quarter 2007 revenues included a $21 million reduction in revenues as a result of deferred vacation ownership revenue under the percentage-of-completion method of accounting compared with an $11 million reduction in the fourth quarter of 2006.
Gross Vacation Ownership Interest sales (which exclude the effect of deferred revenues) were $488 million for the fourth quarter of 2007, up 4% compared to the fourth quarter of 2006, driven by marketing efforts resulting in increases in tour flow and volume per guest based on strong performance by our sales force and continued strength in transaction pricing.
Consumer finance revenues increased $17 million or 22% for the fourth quarter of 2007 compared to the fourth quarter of 2006, which was partially offset in EBITDA due to improved borrowing efficiency against vacation ownership receivables. This shifted approximately $4 million of what would have been interest expense below EBITDA into interest expense reflected within EBITDA.
EBITDA for the fourth quarter of 2007 increased 11% to $99 million, compared to $89 million in the fourth quarter of 2006, which included $15 million of separation and related costs. Fourth quarter 2007 EBITDA reflects a net reduction of approximately $6 million due to the increase in deferred vacation ownership revenue compared with the fourth quarter of 2006.
By the end of the quarter, Wyndham Vacation Ownership had largely completed its program of rebranding its properties under the Wyndham flag.
Other Items
Corporate results were positively affected by lower legal fees and transition service expenses in fourth quarter 2007 compared to the prior year period. Interest expense for the fourth quarter of 2007 was $17 million, unchanged from the fourth quarter of 2006. Interest income for the quarter was $2 million, a $1 million decrease from the comparable prior year period. Depreciation and amortization rose $3 million to $44 million.
Balance Sheet Information as of December 31, 2007:
- Cash and cash equivalents of approximately $210 million compared to approximately $270 million at December 31, 2006
- Vacation ownership contract receivables, net, of $2.9 billion compared to $2.4 billion at December 31, 2006
- Vacation ownership and other inventory of approximately $1.2 billion compared to approximately $955 million at December 31, 2006
- Securitized vacation ownership debt of $2.1 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 970,000 shares of stock during the fourth quarter of 2007 at an average price of $27.92. For full year 2007, the Company repurchased 14.8 million shares of stock at an average price of $34.32. At December 31, 2007, approximately $163 million remained under the Company’s previously announced share repurchase program.
Through February 11, the Company repurchased an additional 473,000 shares of stock at an average price of $22.19 and had approximately $154 million remaining under the current share repurchase authorization.
Outlook and Guidance
Wyndham Worldwide affirms guidance as follows:
Full Year 2008:
- Revenues of $4,800 – $4,900 million
- EBITDA of $920 – $945 million
- Depreciation and amortization expense of $175 – $185 million
- Interest expense, net of $75 – $85 million
- Effective tax rate of 38.25%
- Net income of $401 – $429 million
- EPS of $2.23 – $2.38 based on weighted average shares of approximately 180 million
First Quarter 2008:
- EPS of $0.30 – $0.35 based on weighted average shares of approximately 180 million
- EPS guidance reflects a reduction for the estimated impact of deferred vacation ownership revenue of $0.12 - $0.15 per share that will be recognized in future quarters
All guidance excludes legacy items which may have a positive or negative impact on reported results.
“I am pleased with our performance in 2007 and believe we are well-positioned to generate substantial long-term value for our shareholders,” said Mr. Holmes. “While we see no current evidence of a slowdown in our businesses, we are watching consumer sentiment and the overall economy very carefully. That said, we believe 2008 will be a year of opportunity for Wyndham Worldwide, in large part because of the resiliency and flexibility inherent in our business model. We believe that Wyndham Worldwide can successfully compete and perform even in a slowing macro-economic environment.”
Conference Call Information
Wyndham Worldwide Corporation will provide a webcast of its conference call to discuss the Company’s fourth quarter and full year 2007 financial results on Tuesday, February 12, 2008 at 8:30 a.m. EST. Listeners may access the webcast live through the Company’s Web site at www.wyndhamworldwide.com/investors/. An archive of this webcast will be available at the Web site for approximately 90 days beginning at noon EST on February 12. The conference call also may be accessed by dialing (517) 308-9108 and providing the pass code "Wyndham." Listeners are urged to call at least 10 minutes prior to the scheduled start time. A telephone replay will be available at (203) 369-0767 beginning at noon EST on February 12 until 5 p.m. EST on February 17.
About Wyndham Worldwide
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 more than 6,500 franchised hotels and approximately 550,000 hotel rooms worldwide. Group RCI offers its more than 3.6 million members access to more than 67,000 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 approximately 145 vacation ownership resorts serving over 800,000 owners throughout North America, the Caribbean and the South Pacific. Wyndham Worldwide, headquartered in Parsippany, N.J., employs more than 33,000 employees globally.
For more information about Wyndham Worldwide, please visit the Company’s web site at www.wyndhamworldwide.com.
Forward-Looking Statements
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 trends for the Company’s revenues, earnings and related financial and operating measures and the number of hotels the Company intends to add in future periods.
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 markets, the economic environment for the hospitality industry, the impact of war and terrorist activity, operating risks associated with the hotel, vacation exchange and rentals and vacation ownership businesses, as well as those in the Company’s 2006 Annual Report on Form 10-K, filed with the SEC on March 7, 2007. 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.
Investor Contact:
Margo C. Happer
Senior Vice President,
Investor Relations
Wyndham Worldwide Corporation
(973) 753-6472
Margo.Happer@wyndhamworldwide.com
Press Contact:
Betsy O’Rourke
Senior Vice President,
Marketing and Communications
Wyndham Worldwide Corporation
(973) 753-7422
Betsy.O’Rourke@wyndhamworldwide.com