Exhibit 99.1

 

WW_Logo_1clr_Spot

 

Wyndham Worldwide Reports Third Quarter 2016 Results

 

PARSIPPANY, N.J. (October 26, 2016) – Wyndham Worldwide Corporation (NYSE:WYN) today announced results for the three months ended September 30, 2016.

 

Third quarter revenues were $1.6 billion, up 1% compared with the prior year period. In constant currency and excluding acquisitions, revenues also increased 1%. Full reconciliations of GAAP results to non-GAAP measures appear in the tables to this press release.

 

Net income for the third quarter of 2016 was $196 million, or $1.78 per diluted share, compared with $190 million, or $1.61 per diluted share, for the third quarter of 2015. Adjusted net income for the third quarter of 2016 was $207 million, or $1.89 per diluted share, compared with $210 million, or $1.78 per diluted share, for the third quarter of 2015. EPS benefited from the Company’s share repurchase program.

 

Third quarter EBITDA was $402 million, compared with $382 million in the prior year period, an increase of 5%. Adjusted EBITDA, which excludes charges in both 2016 and 2015 as detailed in Table 8 of this press release, was $423 million, compared with $412 million in the prior year period, an increase of 3%. On a currency-neutral basis and excluding acquisitions, adjusted EBITDA increased 5%.

 

"Wyndham continues to deliver solid earnings and strong cash flow,” said Stephen P. Holmes, chairman and CEO. “These results reflect successful execution of our strategy, a resilient portfolio of complementary, fee-based businesses, and disciplined capital allocation.”

 

For the nine months ended September 30, 2016, net cash provided by operating activities was $786 million, compared with $817 million in the prior year period. The decrease reflects unfavorable currency movements of $34 million, including a $24 million devaluation of the Venezuelan bolivar in the first quarter of 2016.

 

 

 

 

Free cash flow was $650 million for the nine months ended September 30, 2016, compared with $660 million for the same period in 2015, reflecting the currency movements referenced above partially offset by lower capital expenditures. The Company defines free cash flow as net cash provided by operating activities less capital expenditures.

 

 

THIRD QUARTER 2016 BUSINESS UNIT RESULTS

 

Hotel Group

Revenues were $364 million in the third quarter of 2016, compared with $357 million in the third quarter of 2015. Revenues reflected higher royalties, growth in the Company’s Wyndham Rewards credit card program and fees associated with the Company’s global franchise conference, partially offset by lower reimbursable property management revenues.

 

EBITDA was $107 million in the third quarter compared with $83 million in the prior year quarter. Adjusted EBITDA, which excludes charges and benefits during both 2016 and 2015 as detailed in Table 8 of this press release, grew 8% to $117 million. This reflects higher royalties, growth in the Company’s Wyndham Rewards credit card program and expense management.

 

Third quarter domestic RevPAR increased 1.9%. In constant currency, total system-wide same store RevPAR increased 1.4% compared with the third quarter of 2015, which reflects ongoing pressure in domestic and Canadian oil markets and decelerating industry RevPAR trends.

 

As of September 30, 2016, the Company’s hotel system consisted of approximately 7,930 properties and approximately 689,800 rooms, a 2.7% net room increase compared with the third quarter of 2015. The development pipeline included nearly 1,100 hotels and approximately 133,800 rooms, of which 60% were international and 66% were new construction.

 

 

 

 

Destination Network

Revenues were $486 million in the third quarter of 2016, compared with $476 million in the third quarter of 2015, an increase of 2%. In constant currency and excluding acquisitions, revenues increased 5%.

 

Exchange revenues were $159 million compared with $157 million in the prior year quarter. In constant currency, exchange revenues grew 2% as exchange revenue per member increased 1.4% and the average number of members increased 0.9%.

 

Vacation rental revenues were $304 million compared with $296 million in the prior year quarter. In constant currency and excluding the impact of acquisitions, vacation rental revenues were up 6%, reflecting an 8.0% increase in transaction volume, partially offset by a 1.7% decrease in average net price per vacation rental. Transaction growth benefited from our dynamic pricing initiative as well as capacity increases. Faster growth in our more moderately priced products decreased the average net price per rental.

 

EBITDA was $138 million during the third quarter compared with $134 million in the prior year quarter. Adjusted EBITDA, which excludes restructuring costs, was $142 million for the third quarter of 2016, a 4% increase compared with the prior year quarter. On a currency-neutral basis and excluding the impact of acquisitions, adjusted EBITDA increased 8% compared with the prior year period.

 

Vacation Ownership

Revenues were $744 million in the third quarter of 2016, compared with $750 million in the third quarter of 2015.

 

Net VOI sales in the third quarter of 2016 declined 2% due to a higher provision for loan losses and flat Gross VOI sales. Results reflect tour flow growth of 1.3%, offset by a volume per guest (VPG) decline of 1.4%, reflecting proportionally higher sales to new owners. The number of new owners added increased 10% from the third quarter of 2015.

 

EBITDA was $189 million during the third quarter compared with $200 million in the prior year quarter. Adjusted EBITDA, which excludes restructuring costs, was $195 million for the third quarter of 2016, a decline of 3% compared with the prior year quarter. This reflects a higher loan loss provision and higher marketing costs, partially offset by higher property management fees, increased consumer financing income and expense management.

 

 

 

 

OTHER ITEMS

·The Company repurchased 2.1 million shares of common stock for $150 million during the third quarter of 2016. From October 1 through October 25, 2016, the Company repurchased an additional 0.7 million shares for $50 million.
·Net interest expense in the third quarter of 2016 was $32 million, compared with $31 million in the third quarter of 2015.
·Depreciation and amortization in the third quarter of 2016 was $63 million, compared with $59 million in the third quarter of 2015, reflecting new projects that were placed into service.

 

Balance Sheet Information as of September 30, 2016:

·Cash and cash equivalents of $332 million, compared with $171 million at December 31, 2015
·Vacation ownership contract receivables, net, of $2.8 billion, compared with $2.7 billion at December 31, 2015
·Vacation ownership and other inventory of $1.3 billion, unchanged from December 31, 2015
·Securitized vacation ownership debt of $2.1 billion, unchanged from December 31, 2015
·Long-term debt of $3.4 billion, compared with $3.1 billion at December 31, 2015. The remaining borrowing capacity on the revolving credit facility, net of commercial paper borrowings, was $1.1 billion as of September 30, 2016, compared with $1.4 billion at December 31, 2015.

 

A schedule of debt is included in Table 12 of this press release.

 

 

 

 

OUTLOOK

 

Note to Editors: The guidance excludes possible future share repurchases, while analysts’ estimates often include share repurchases. This results in discrepancies between Company guidance and database consensus forecasts.

 

Full reconciliations of the outlook for adjusted net income, adjusted EBITDA and adjusted EPS to GAAP results appear in Table 10 of this press release.

 

The Company provides the following guidance for the full year 2016:

·Revenues of approximately $5.650 billion.
·Adjusted net income of approximately $630 million.
·Adjusted EBITDA of approximately $1.375 billion.
·Adjusted diluted EPS of approximately $5.68 - $5.71 based on a diluted share count of 111 million.

 

The Company will post guidance information on its website following the conference call.

 

CONFERENCE CALL INFORMATION

Wyndham Worldwide Corporation will hold a conference call with investors to discuss the Company’s results, outlook and guidance on Wednesday, October 26, 2016 at 8:30 a.m. ET. Listeners can access the webcast live through the Company’s website at http://www.wyndhamworldwide.com/investors/. The conference call may also be accessed by dialing 888-632-3384 and providing the pass code "WYNDHAM." Listeners are urged to call at least 10 minutes prior to the scheduled start time. An archive of this webcast will be available on the website for approximately 90 days beginning at 12:00pm ET on October 26, 2016. A telephone replay will be available for approximately 10 days beginning at 12:00pm ET on October 26, 2016 at 800-388-6197.

 

 

 

 

PRESENTATION OF FINANCIAL INFORMATION

Financial 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 and are helpful to investors as an additional tool for further understanding and assessing the Company’s ongoing core operating performance. Exclusion of items in the Company’s non-GAAP presentation should not be considered an inference that these items are unusual, infrequent or non-recurring. A reconciliation of reported GAAP results to the comparable non-GAAP information appears in the financial tables section of the press release. A reconciliation of forecasted adjusted net income, adjusted EBITDA and adjusted EPS to the most directly comparable GAAP measures is provided in Table 10 of this press release.

 

ABOUT WYNDHAM WORLDWIDE

Wyndham Worldwide (NYSE: WYN) is one of the largest global hospitality companies, providing travelers with access to a collection of trusted hospitality brands in hotels, vacation ownership, and unique accommodations including vacation exchange, holiday parks, and managed home rentals. With a collective inventory of more than 120,000 places to stay across 100 countries on six continents, Wyndham Worldwide and its 38,000 associates welcomes people to experience travel the way they want. This is enhanced by Wyndham Rewards®, the Company’s re-imagined guest loyalty program across its businesses, which is making it simpler for members to earn more rewards and redeem their points faster. For more information, please visit 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 the Company’s revenues, earnings, cash flow 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 12, 2016. 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 and Media Contacts:

Margo C. Happer

Senior Vice President, Investor Relations

Wyndham Worldwide Corporation

(973) 753-6472

margo.happer@wyn.com

 

Barry Goldschmidt

Vice President, Investor Relations

Wyndham Worldwide Corporation

(973) 753-7703

barry.goldschmidt@wyn.com

 

 

 

 

Wyndham Worldwide Corporation

Earnings Release Schedules

Quarter Three - September 30, 2016

Table of Contents

 

  Table No.
   
Consolidated Statements of Income (Unaudited) 1
   
Operating Results of Reportable Segments 2
   
Operating Statistics 3
   
Condensed Consolidated Statements of Cash Flows and Reconciliation of Free Cash Flows (Unaudited) 4
   
Revenue Detail by Reportable Segment 5
   
Brand System Details 6
   
Non-GAAP Reconciliation of Adjusted Net Income and EPS 7
   
Non-GAAP Reconciliation of Adjusted EBITDA by Reportable Segment 8
   
Non-GAAP Reconciliation of Gross VOI Sales 9
   
Non-GAAP Reconciliation of 2016 Outlook 10
   
Non-GAAP Reconciliation - Constant Currency and Currency Neutral 11
   
Schedule of Debt 12

 

 

 

 

Table 1

Wyndham Worldwide Corporation

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share data)

(Unaudited)

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2016   2015   2016   2015 
Net revenues                    
Service and membership fees  $735   $734   $2,001   $1,957 
Vacation ownership interest sales   441    448    1,191    1,201 
Franchise fees   203    192    513    517 
Consumer financing   112    108    327    318 
Other   82    82    247    231 
Net revenues   1,573    1,564    4,279    4,224 
                     
Expenses                    
Operating   679    691    1,915    1,865 
Cost of vacation ownership interests   47    43    115    123 
Consumer financing interest   19    18    55    55 
Marketing and reservation   242    218    645    624 
General and administrative   173    200    545    562 
Asset impairments   -    7    -    7 
Restructuring   14    8    14    8 
Depreciation and amortization   63    59    187    173 
Total expenses   1,237    1,244    3,476    3,417 
                     
Operating income   336    320    803    807 
Other (income)/expense, net   (3)   (3)   (19)   (11)
Interest expense   34    33    102    89 
Early extinguishment of debt   -    -    11    - 
Interest income   (2)   (2)   (6)   (7)
                     
Income before income taxes   307    292    715    736 
Provision for income taxes   110    102    267    265 
Net income   197    190    448    471 
Net income attributable to noncontrolling interest   (1)   -    (1)   - 
Net income attributable to Wyndham shareholders  $196   $190   $447   $471 
                     
Earnings per share                    
Basic  $1.79   $1.62   $4.03   $3.96 
Diluted   1.78    1.61    4.01    3.93 
                     
Weighted average shares outstanding                    
Basic   109    117    111    119 
Diluted   110    118    112    120 

 

 

 

Note: For a description of adjustments to Net Income, see Table 7.

 

 1 

 

 

Table 2

(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 revenues) and income taxes, each of which is presented on the Company’s Consolidated Statements of Income. The Company also uses adjusted EBITDA as a financial measure of its operating performance. The Company believes that EBITDA and Adjusted EBITDA are useful measures of assessing performance of the Company and for the Company's segments which, when considered with GAAP measures, give a more complete understanding of its operating performance and assist our investors in evaluating our ongoing operating performance for the current reporting period and, where provided, over different reporting periods, by adjusting for certain items which may be recurring or nonrecurring and which in our view do not necessarily reflect ongoing operating performance. We also internally use these measures to assess our operating performance, both in absolute terms and in comparison to other companies, and in evaluating or making selected compensation decisions. These supplemental disclosures are in addition to GAAP reported measures. The Company’s presentation of EBITDA and Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.

 

The following tables summarize net revenues and EBITDA for the Company's reportable segments, as well as reconcile EBITDA to Net income attributable to Wyndham shareholders for the three months ended September 30, 2016 and 2015:

 

   Three Months Ended September 30, 
   2016   2015 
   Net Revenues   EBITDA   Net Revenues   EBITDA 
Hotel Group  $364   $107   $357   $83 
Destination Network   486    138    476    134 
Vacation Ownership   744    189    750    200 
Total Reportable Segments   1,594    434    1,583    417 
Corporate and Other (a)   (21)   (32)   (19)   (35)
Total Company  $1,573   $402   $1,564   $382 

 

Reconciliation of EBITDA to Net income attributable to Wyndham shareholders

 

   Three Months Ended September 30, 
   2016   2015 
EBITDA  $402   $382 
Depreciation and amortization   63    59 
Interest expense   34    33 
Interest income   (2)   (2)
Income before income taxes   307    292 
Provision for income taxes   110    102 
Net income   197    190 
Net income attributable to noncontrolling interest   (1)   - 
Net income attributable to Wyndham shareholders  $196   $190 

 

 

(a)Includes the elimination of transactions between segments.

 

The following tables summarize net revenues and Adjusted EBITDA for the Company's reportable segments for the three months ended September 30, 2016 and 2015 (for a description of adjustments and reconciliation by segment, see Table 8):

 

   Three Months Ended September 30, 
   2016   2015 
       Adjusted       Adjusted 
   Net Revenues   EBITDA   Net Revenues   EBITDA 
Hotel Group  $364   $117   $357   $108 
Destination Network   486    142    476    137 
Vacation Ownership   744    195    750    201 
Total Reportable Segments   1,594    454    1,583    446 
Corporate and Other   (21)   (31)   (19)   (34)
Total Company  $1,573   $423   $1,564   $412 

 

 2 

 

 

Table 2

(2 of 2)

Wyndham Worldwide Corporation

OPERATING RESULTS OF REPORTABLE SEGMENTS

(In millions)

 

The following tables summarize net revenues and EBITDA for the Company's reportable segments, as well as reconcile EBITDA to Net income attributable to Wyndham shareholders for the nine months ended September 30, 2016 and 2015:

 

   Nine Months Ended September 30, 
   2016   2015 
   Net Revenues   EBITDA   Net Revenues   EBITDA 
Hotel Group  $993   $291   $983   $255 
Destination Network   1,255    303    1,228    323 
Vacation Ownership   2,089    512    2,067    513 
Total Reportable Segments   4,337    1,106    4,278    1,091 
Corporate and Other (a)   (58)   (97)   (54)   (100)
Total Company  $4,279   $1,009   $4,224   $991 

 

Reconciliation of EBITDA to Net income attributable to Wyndham shareholders

 

   Nine Months Ended September 30, 
   2016   2015 
EBITDA  $1,009   $991 
Depreciation and amortization   187    173 
Interest expense   102    89 
Early extinguishment of debt   11    - 
Interest income   (6)   (7)
Income before income taxes   715    736 
Provision for income taxes   267    265 
Net income   448    471 
Net income attributable to noncontrolling interest   (1)   - 
Net income attributable to Wyndham shareholders  $447   $471 

 

 

(a)Includes the elimination of transactions between segments.

 

The following tables summarize net revenues and Adjusted EBITDA for the Company's reportable segments for the nine months ended September 30, 2016 and 2015 (for a description of adjustments and reconciliation by segment, see Table 8):

 

   Nine Months Ended September 30, 
   2016   2015 
       Adjusted       Adjusted 
   Net Revenues   EBITDA   Net Revenues   EBITDA 
Hotel Group  $993   $301   $983   $284 
Destination Network   1,255    333    1,228    326 
Vacation Ownership   2,089    518    2,067    514 
Total Reportable Segments   4,337    1,152    4,278    1,124 
Corporate and Other   (58)   (97)   (54)   (101)
Total Company  $4,279   $1,055   $4,224   $1,023 

 

 3 

 

 

Table 3

(1 of 2)

Wyndham Worldwide Corporation

OPERATING STATISTICS

 

The following operating statistics are the drivers of our revenues and therefore provide an enhanced understanding of our businesses:

 

   Year  Q1   Q2   Q3   Q4   Full Year 
Hotel Group (a)                            
Number of Rooms  2016   679,100    683,300    689,800     N/A      N/A  
   2015   667,400    668,500    671,900    678,000     N/A  
   2014   646,900    650,200    655,300    660,800     N/A  
   2013   631,800    635,100    638,300    645,400     N/A  
                             
RevPAR  2016  $31.59   $39.10   $43.04     N/A      N/A  
   2015  $32.84   $39.82   $43.34   $32.98   $37.26 
   2014  $32.30   $40.11   $43.71   $34.06   $37.57 
   2013  $31.05   $38.00   $41.78   $33.07   $36.00 
                             
Destination Network                            
Average Number of Members (in 000s)  2016   3,841    3,857    3,868     N/A      N/A  
   2015   3,822    3,831    3,835    3,836    3,831 
   2014   3,727    3,748    3,777    3,808    3,765 
   2013   3,668    3,686    3,711    3,728    3,698 
                             
Exchange Revenue Per Member  2016  $189.78   $164.61   $164.39     N/A      N/A  
   2015  $194.06   $167.81   $163.38   $152.00   $169.29 
   2014  $200.78   $179.17   $171.77   $157.24   $177.12 
   2013  $210.96   $182.42   $169.95   $161.21   $181.02 
                             
Vacation Rental Transactions (in 000s) (a) (b)  2016   500    409    508     N/A      N/A  
   2015   459    390    462    319    1,630 
   2014   429    376    455    293    1,552 
   2013   423    355    433    273    1,483 
                             
Average Net Price Per Vacation Rental (a) (b)  2016  $366.08   $492.83   $599.59     N/A      N/A  
   2015  $361.20   $513.14   $642.00   $452.19   $494.92 
   2014  $410.04   $577.13   $727.40   $492.25   $558.95 
   2013  $392.64   $540.38   $677.81   $506.62   $532.11 
                             
Vacation Ownership (a)                            
Gross Vacation Ownership Interest (VOI) Sales (in 000s) (c)  2016  $428,000   $518,000   $564,000     N/A      N/A  
   2015  $390,000   $502,000   $565,000   $507,000   $1,965,000 
   2014  $410,000   $496,000   $513,000   $470,000   $1,889,000 
   2013  $384,000   $481,000   $536,000   $488,000   $1,889,000 
                             
Tours (in 000s)  2016   179    213    230     N/A      N/A  
   2015   168    206    227    200    801 
   2014   170    208    225    191    794 
   2013   163    206    225    195    789 
                             
Volume Per Guest (VPG)  2016  $2,244   $2,328   $2,320     N/A      N/A  
   2015  $2,177   $2,353   $2,354   $2,390   $2,326 
   2014  $2,272   $2,280   $2,158   $2,336   $2,257 
   2013  $2,211   $2,256   $2,278   $2,370   $2,281 

 

 

Note: Full year amounts may not add across due to rounding.

(a)Includes the impact of acquisitions/dispositions from the acquisition/disposition dates forward. Therefore, the operating statistics are not presented on a comparable basis.
(b)The destination network operating statistics excluding our U.K.-based camping business sold in Q4 2014 are as follows:

 

   Year  Q1   Q2   Q3   Q4   Full Year 
Vacation Rental Transactions (in 000s)  2014   429    367    431    292    1,518 
Average Net Price Per Vacation Rental  2014  $410.02   $578.02   $700.56   $492.64   $548.93 

 

(c)Includes Gross VOI sales under the Company's Wyndham Asset Affiliate Model (WAAM) Just-in-Time. (See Table 9 for a reconciliation of Gross VOI sales to vacation ownership interest sales).

 

ADDITIONAL DATA

 

   Year  Q1   Q2   Q3   Q4   Full Year 
Hotel Group                            
Number of Properties  2016   7,830    7,880    7,930     N/A      N/A  
   2015   7,670    7,700    7,760    7,810     N/A  
   2014   7,500    7,540    7,590    7,650     N/A  
   2013   7,380    7,410    7,440    7,490     N/A  
                             
Vacation Ownership                            
Provision for Loan Losses (in 000s) (*)   2016  $63,000   $90,000   $104,000     N/A      N/A  
   2015  $46,000   $60,000   $78,000   $64,000   $248,000 
   2014  $60,000   $70,000   $70,000   $60,000   $260,000 
   2013  $84,000   $90,000   $102,000   $73,000   $349,000 

 

 

Note: Full year amounts may not add across due to rounding.

(*)  Represents provision for estimated losses on vacation ownership contract receivables originated during the period, which is recorded as a contra revenue to vacation ownership interest sales on the Consolidated Statements of Income.

 

 4 

 

 

Table 3

(2 of 2)

 

Wyndham Worldwide Corporation

OPERATING STATISTICS

 

GLOSSARY OF TERMS

 

Hotel Group

 

Number of Rooms: Represents the number of rooms at hotel group properties at the end of the period which are either (i) under franchise and/or management agreements, or company owned and (ii) properties under affiliation agreements for which the Company receives a fee for reservation and/or other services provided.

 

Average Occupancy Rate: Represents the percentage of available rooms occupied during the period.

 

Average Daily Rate (ADR): Represents the average rate charged for renting a lodging room for one day.

 

RevPAR: Represents revenue per available room and is calculated by multiplying average occupancy rate by ADR. Comparable RevPAR represents RevPAR of hotels which are included in both periods.

 

Destination Network

 

Average Number of Members: Represents members in our vacation exchange programs who paid annual membership dues as of the end of the period or who are within the allowed grace period. For additional fees, such participants are entitled to exchange intervals for intervals at other properties affiliated with the Company's vacation exchange business. In addition, certain participants may exchange intervals for other leisure-related services and products.

 

Exchange Revenue Per Member: Represents total annualized revenues generated from fees associated with memberships, exchange transactions, member-related rentals and other servicing for the period divided by the average number of vacation exchange members during the period.

 

Vacation Rental Transactions: Represents the number of transactions that are generated in connection with customers booking their vacation rental stays through one of our vacation brands. One rental transaction is recorded for each standard one-week rental.

 

Average Net Price Per Vacation Rental: Represents the net rental price generated from renting vacation properties to customers and other related rental servicing fees divided by the number of vacation rental transactions.

 

Vacation Ownership

 

Gross Vacation Ownership Interest Sales: Represents sales of vacation ownership interest (VOIs), including WAAM sales, before the net effect of percentage-of-completion accounting and loan loss provisions. We believe gross VOI sales provide an enhanced understanding of the performance of our vacation ownership business because it directly measures the sales volume of this business during a given reporting period. See Table 9 for a reconciliation of Gross VOI sales to vacation ownership interest sales.

 

Tours: Represents the number of tours taken by guests in our efforts to sell VOIs.

 

Volume per Guest (VPG): Represents Gross VOI sales (excluding tele-sales upgrades, which are non-tour upgrade sales) divided by the number of tours. The Company has excluded non-tour upgrade sales in the calculation of VPG because non-tour upgrade sales are generated by a different marketing channel. See Table 9 for a detail of tele-sales upgrades for 2013-2016.

 

General

 

Constant Currency: Represents a comparison eliminating the effects of foreign exchange rate fluctuations between periods (foreign currency translation).

 

Currency-Neutral: Represents a comparison eliminating the effects of foreign exchange rate fluctuations between periods (foreign currency translation) and the impact caused by any foreign exchange related activities (i.e., hedges, balance sheet remeasurements and/or adjustments).

 

 5 

 

 

Table 4

Wyndham Worldwide Corporation

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND RECONCILIATION OF FREE CASH FLOWS

(In millions)

(Unaudited)

 

Condensed Consolidated Statements of Cash Flows:

 

   Nine Months Ended September 30, 
   2016   2015 
Net cash provided by operating activities  $786   $817 
           
Net cash used in investing activities   (172)   (244)
           
Net cash used in financing activities   (442)   (477)
           
Effect of changes in exchange rates on cash and cash equivalents   (11)   (20)
           
Net increase in cash and cash equivalents  $161   $76 

 

Free Cash Flow:

 

We define free cash flow to be net cash provided by operating activities less property and equipment additions which we also refer to as capital expenditures.

 

We believe free cash flow to be a useful operating performance measure to evaluate the ability of our operations to generate cash for uses other than capital expenditures and, after debt service and other obligations, our ability to grow our business through acquisitions, development advances and equity investments, as well as our ability to return cash to shareholders through dividends and share repurchases. A limitation of using free cash flow versus the GAAP measures of net cash provided by operating activities, net cash used in investing activities and net cash used in financing activities as a means for evaluating Wyndham Worldwide is that free cash flow does not represent the total cash movement for the period as detailed in the consolidated statement of cash flows.

 

The following table provides more details on the GAAP financial measure that is most directly comparable to the non-GAAP financial measure and the related reconciliation between these financial measures:

 

   Nine Months Ended September 30, 
   2016   2015 
Net cash provided by operating activities  $786   $817 
Less: Property and equipment additions   (136)   (157)
Free cash flow  $650   $660 

 

 6 

 

 

Table 5

 

Wyndham Worldwide Corporation

REVENUE DETAIL BY REPORTABLE SEGMENT

(In millions)

 

   2016   2015 
   Q1   Q2   Q3   Q4   Year   Q1   Q2   Q3   Q4   Year 
Hotel Group                                                  
Royalties and Franchise Fees  $74   $94   $105     N/A      N/A    $74   $96   $103   $87   $361 
Marketing, Reservation and Wyndham Rewards Revenues (a)   83    103    125     N/A      N/A     96    108    112    92    407 
Hotel Management Reimbursable Revenues (b)   67    71    67     N/A      N/A     61    71    73    68    273 
Intersegment Trademark Fees   13    15    16     N/A      N/A     12    15    16    15    57 
Owned Hotel Revenues   27    19    17     N/A      N/A     25    20    16    19    79 
Ancillary Revenues (c)   31    32    34     N/A      N/A     24    24    37    33    120 
Total Hotel Group   295    334    364     N/A      N/A     292    334    357    314    1,297 
                                                   
Destination Network                                                  
Exchange Revenues   182    159    159     N/A      N/A     185    161    157    146    649 
Rental Revenues   183    202    304     N/A      N/A     166    200    296    144    807 
Ancillary Revenues (d)   20    23    23     N/A      N/A     18    22    23    20    82 
Total Destination Network   385    384    486     N/A      N/A     369    383    476    310    1,538 
                                                   
Vacation Ownership                                                  
Vacation Ownership Interest Sales   342    409    441     N/A      N/A     336    417    448    403    1,604 
Consumer Financing   107    108    112     N/A      N/A     104    105    108    109    427 
Property Management Fees and Reimbursable Revenues   164    161    168     N/A      N/A     153    149    159    155    615 
WAAM Fee-for-Service Commissions   17    16    13     N/A      N/A     12    19    23    28    83 
Ancillary Revenues (e)   11    11    10     N/A      N/A     12    9    12    11    43 
Total Vacation Ownership   641    705    744     N/A      N/A     617    699    750    706    2,772 
Total Reportable Segments  $1,321   $1,423   $1,594     N/A      N/A    $1,278   $1,416   $1,583   $1,330   $5,607 

 

   2014   2013 
   Q1   Q2   Q3   Q4   Year   Q1   Q2   Q3   Q4   Year 
Hotel Group                                                  
Royalties and Franchise Fees  $68   $88   $100   $83   $339   $64   $79   $91   $75   $309 
Marketing, Reservation and Wyndham Rewards Revenues (a)   76    101    117    91    385    73    92    118    83    365 
Hotel Management Reimbursable Revenues (b)   37    39    39    39    154    25    38    37    35    135 
Intersegment Trademark Fees   9    11    11    10    41    8    10    11    10    39 
Owned Hotel Revenues   24    20    18    20    81    26    20    18    19    84 
Ancillary Revenues (c)   23    24    30    24    101    26    23    22    23    95 
Total Hotel Group   237    283    315    267    1,101    222    262    297    245    1,027 
                                                   
Destination Network                                                  
Exchange Revenues   187    168    162    150    667    193    168    158    150    669 
Rental Revenues   176    217    331    144    868    166    192    293    138    789 
Ancillary Revenues (d)   16    17    19    17    69    15    16    19    17    68 
Total Destination Network   379    402    512    311    1,604    374    376    470    305    1,526 
                                                   
Vacation Ownership                                                  
Vacation Ownership Interest Sales   303    382    415    385    1,485    263    347    384    384    1,379 
Consumer Financing   105    106    108    108    427    105    106    107    108    426 
Property Management Fees   143    145    150    142    581    146    141    143    137    567 
WAAM Fee-for-Service Commissions   33    30    18    16    98    24    30    33    20    107 
Ancillary Revenues (e)   9    10    13    17    47    11    6    10    9    36 
Total Vacation Ownership   593    673    704    668    2,638    549    630    677    658    2,515 
Total Reportable Segments  $1,209   $1,358   $1,531   $1,246   $5,343   $1,145   $1,268   $1,444   $1,208   $5,068 

 

 

Note: Full year amounts may not add across due to rounding.

(a)Marketing and reservation revenues represent fees the Company receives from franchised and managed hotels that are to be expended for marketing purposes or the operation of a centralized, brand-specific reservation system. These fees are typically based on a percentage of the gross room revenues of each hotel. Wyndham Rewards revenues represent fees the Company receives relating to its loyalty program.
(b)Primarily represents payroll costs in the hotel management business that the Company pays on behalf of property owners and for which it is reimbursed by the property owners. During 2014, reimbursable revenues of $2 million in each of Q1, Q2 and Q3 and $1 million in Q4 which were charged to the Company's vacation ownership business and were eliminated in consolidation. During 2013, such amounts include reimbursable revenues of $1 million, $3 million and $2 million, in Q2, Q3 and Q4 respectively, which were charged to the Company's vacation ownership business and were eliminated in consolidation.
(c)Primarily includes additional services provided to franchisees and managed properties and fees related to our co-branded credit card program.
(d)Primarily includes fees generated from programs with affiliated resorts and homeowners.
(e)Primarily includes revenues associated with bonus points/credits that are provided as purchase incentives on VOI sales and fees generated from other non-core operations.

 

 7 

 

 

Table 6

(1 of 2)

Wyndham Worldwide Corporation

BRAND SYSTEM DETAILS

 

   As of and For the Three Months Ended September 30, 2016 
                   Average Revenue 
   Number of       Average   Average Daily   Per Available 
Brand  Properties   Number of Rooms   Occupancy Rate   Rate (ADR)   Room (RevPAR) 
                     
Hotel Group                         
Super 8   2,747    175,094    63.7%  $52.27   $33.28 
                          
Days Inn   1,784    142,789    57.5%  $73.31   $42.15 
                          
Ramada   850    120,092    58.0%  $78.30   $45.39 
                          
Wyndham Hotels and Resorts   235    51,898    57.4%  $109.11   $62.66 
                          
Howard Johnson   376    43,226    55.5%  $67.43   $37.41 
                          
Baymont   425    33,732    58.9%  $75.52   $44.49 
                          
Travelodge   406    30,012    59.0%  $79.62   $46.99 
                          
Microtel Inns & Suites by Wyndham   337    24,325    63.7%  $73.28   $46.70 
                          
Knights Inn   375    22,841    49.3%  $54.80   $27.00 
                          
TRYP by Wyndham   114    16,322    73.7%  $79.77   $58.75 
                          
Wingate by Wyndham   149    13,568    68.4%  $94.68   $64.75 
                          
Hawthorn Suites by Wyndham   109    10,743    71.1%  $82.32   $58.49 
                          
Dolce   22    5,110    58.8%  $170.72   $100.43 
                          
Total Hotel Group   7,929    689,752    59.9%  $71.80   $43.04 
                          
Vacation Ownership                         
Wyndham Vacation Ownership resorts   218    24,582    N/A    N/A    N/A 
                          
Total Wyndham Worldwide   8,147    714,334                

 

   As of and For the Three Months Ended September 30, 2015 
                   Average Revenue 
   Number of       Average   Average Daily   Per Available 
Brand  Properties   Number of Rooms   Occupancy Rate   Rate (ADR)   Room (RevPAR) 
                     
Hotel Group                         
Super 8   2,600    166,656    65.1%  $52.68   $34.29 
                          
Days Inn   1,785    142,613    58.1%  $71.39   $41.48 
                          
Ramada   838    117,044    59.0%  $76.94   $45.42 
                          
Wyndham Hotels and Resorts   210    45,537    65.5%  $108.30   $70.92 
                          
Howard Johnson   403    43,803    59.0%  $62.54   $36.88 
                          
Baymont   396    31,480    60.0%  $72.04   $43.20 
                          
Travelodge   414    30,692    59.8%  $74.56   $44.56 
                          
Microtel Inns & Suites by Wyndham   333    23,960    64.2%  $72.00   $46.20 
                          
Knights Inn   383    23,464    49.2%  $52.00   $25.58 
                          
TRYP by Wyndham   122    17,641    70.3%  $84.05   $59.05 
                          
Wingate by Wyndham   148    13,450    70.4%  $91.42   $64.39 
                          
Hawthorn Suites by Wyndham   101    10,053    70.1%  $81.67   $57.28 
                          
Dolce   24    5,530    58.8%  $160.45   $94.40 
                          
Total Hotel Group   7,757    671,923    61.4%  $70.63   $43.34 
                          
Vacation Ownership                         
Wyndham Vacation Ownership resorts   211    24,095    N/A    N/A    N/A 
                          
Total Wyndham Worldwide   7,968    696,018                

 

 

Note: A glossary of terms is included in Table 3 (2 of 2); RevPAR may not recalculate by multiplying average occupancy rate by ADR due to rounding.

 

 8 

 

 

Table 6

(2 of 2)

Wyndham Worldwide Corporation

BRAND SYSTEM DETAILS

 

   As of and For the Nine Months Ended September 30, 2016 
                   Average Revenue 
   Number of       Average   Average Daily   Per Available 
Brand  Properties   Number of Rooms   Occupancy Rate   Rate (ADR)   Room (RevPAR) 
                     
Hotel Group                         
Super 8   2,747    175,094    58.6%  $49.38   $28.93 
                          
Days Inn   1,784    142,789    51.8%  $69.10   $35.80 
                          
Ramada   850    120,092    54.5%  $75.09   $40.94 
                          
Wyndham Hotels and Resorts   235    51,898    58.1%  $106.62   $61.99 
                          
Howard Johnson   376    43,226    49.8%  $62.94   $31.32 
                          
Baymont   425    33,732    53.0%  $71.67   $38.01 
                          
Travelodge   406    30,012    52.5%  $72.15   $37.88 
                          
Microtel Inns & Suites by Wyndham   337    24,325    58.3%  $69.26   $40.36 
                          
Knights Inn   375    22,841    46.3%  $51.42   $23.83 
                          
TRYP by Wyndham   114    16,322    66.0%  $77.88   $51.40 
                          
Wingate by Wyndham   149    13,568    64.2%  $91.77   $58.96 
                          
Hawthorn Suites by Wyndham   109    10,743    67.8%  $82.68   $56.09 
                          
Dolce   22    5,110    53.4%  $165.67   $88.44 
                          
Total Hotel Group   7,929    689,752    55.3%  $68.60   $37.95 
                          
Vacation Ownership                         
Wyndham Vacation Ownership resorts   218    24,582    N/A    N/A    N/A 
                          
Total Wyndham Worldwide   8,147    714,334                

 

   As of and For the Nine Months Ended September 30, 2015 
                   Average Revenue 
   Number of       Average   Average Daily   Per Available 
Brand  Properties   Number of Rooms   Occupancy Rate   Rate (ADR)   Room (RevPAR) 
                     
Hotel Group                         
Super 8   2,600    166,656    59.2%  $51.01   $30.17 
                          
Days Inn   1,785    142,613    52.5%  $68.20   $35.83 
                          
Ramada   838    117,044    55.5%  $75.78   $42.08 
                          
Wyndham Hotels and Resorts   210    45,537    61.8%  $111.39   $68.87 
                          
Howard Johnson   403    43,803    51.1%  $62.91   $32.15 
                          
Baymont   396    31,480    54.5%  $69.23   $37.72 
                          
Travelodge   414    30,692    52.9%  $69.14   $36.55 
                          
Microtel Inns & Suites by Wyndham   333    23,960    59.8%  $69.81   $41.73 
                          
Knights Inn   383    23,464    46.9%  $48.56   $22.79 
                          
TRYP by Wyndham   122    17,641    62.4%  $80.87   $50.42 
                          
Wingate by Wyndham   148    13,450    65.4%  $89.70   $58.66 
                          
Hawthorn Suites by Wyndham   101    10,053    68.5%  $81.16   $55.62 
                          
Dolce   24    5,530    57.5%  $149.84   $86.20 
                          
Total Hotel Group   7,757    671,923    56.1%  $68.97   $38.72 
                          
Vacation Ownership                         
Wyndham Vacation Ownership resorts   211    24,095    N/A    N/A    N/A 
                          
Total Wyndham Worldwide   7,968    696,018                

 

 

Note: A glossary of terms is included in Table 3 (2 of 2); RevPAR may not recalculate by multiplying average occupancy rate by ADR due to rounding.

 

 9 

 

 

Table 7

 

Wyndham Worldwide Corporation

NON-GAAP RECONCILIATION OF ADJUSTED NET INCOME AND EPS

(In millions, except per share data)

 

   Location on Consolidated
Statements of Income
  Three Months Ended September 30, 
      2016   2015 
Diluted weighted average shares outstanding      110    118 
              
Diluted EPS     $1.78   $1.61 
              
Net income attributable to Wyndham shareholders     $196   $190 
              
Adjustments:             
Legacy costs (b)  General and administrative   (1)   1 
Restructuring costs (c)  Operating   14    8 
Asset impairments (d)  Operating   -    7 
Contract termination (e)  Operating   7    14 
Total adjustments before tax      20    30 
Income tax benefit/(expense) on adjustments (f)  Provision for income taxes   (9)   (10)
Total adjustments after tax      11    20 
              
Adjustments - EPS impact     $0.11   $0.17 
              
Adjusted net income attributable to Wyndham shareholders     $207   $210 
              
Adjusted diluted EPS     $1.89   $1.78 

 

      Nine Months Ended September 30, 
      2016   2015 
Diluted weighted average shares outstanding      112    120 
              
Diluted EPS     $4.01   $3.93 
              
Net income attributable to Wyndham shareholders     $447   $471 
              
Adjustments:             
Venezuela currency devaluation (g)  Operating   24    - 
Acquisition costs (a)  Operating   1    3 
Restructuring costs (c)  Operating   14    8 
Early extinguishment of debt (h)  Interest expense   11    - 
Asset impairments (d)  Operating   -    7 
Contract termination (e)  Operating   7    14 
Total adjustments before tax      57    32 
Income tax benefit/(expense) on adjustments (i)  Provision for income taxes   (14)   (9)
Total adjustments after tax      43    23 
              
Total adjustments - EPS impact     $0.39   $0.19 
              
Adjusted net income attributable to Wyndham shareholders     $490   $494 
              
Adjusted diluted EPS     $4.40   $4.12 

 

 

Note: Amounts may not add due to rounding.

 

(a)The amount for 2016 represents costs related to an acquisition that closed on July 1, 2016 at the Company's destination network business. The amount for 2015 relates primarily to costs incurred in connection with the acquisition of Dolce Hotels and Resorts at the Company's hotel group business during 2015.
(b)Relates to the net (benefit)/expense from the resolution of and adjustment to certain contingent liabilities and assets resulting from the Company's separation from Cendant.
(c)Relates to costs incurred as a result of (i) enhancing organizational efficiency and rationalizing existing facilities during the three and nine months ended September 30, 2016 and (ii) various organization realignment initiatives across the Company during the three and nine months ended September 30, 2015.
(d)Relates to a non-cash impairment charge related to the write-down of terminated in-process technology projects resulting from the decision to outsource its reservation system to a third-party provider at the Company's hotel group business.
(e)Relates to costs associated with the anticipated termination of a management contract at the Company's hotel group business during both the three and nine months ended September 30, 2016 and 2015.
(f)Relates to (i) the tax effect of the adjustments during both 2016 and 2015 and (ii) a $2 million state tax refund for legacy tax matters during 2016.
(g)Represents the impact from the devaluation of the exchange rate of Venezuela at the Company's destination network business during 2016.
(h)Represents costs incurred in connection with the Company's early repurchase of its 6.0% senior unsecured notes during 2016.
(i)Relates to (i) the tax effect of the adjustments during both 2016 and 2015; (ii) a valuation allowance established in connection with the acquisition of Dolce Hotels and Resorts during 2015 and (iii) a $2 million state tax refund for legacy tax matters during 2016. There was no tax impact associated with the $24 million Venezuela currency devaluation adjustment.

 

The above tables reconcile certain non-GAAP financial measures. The presentation of these adjustments is intended to permit the comparison of particular adjustments as they appear in the income statement in order to assist investors' understanding of the overall impact of such adjustments. In addition to GAAP financial measures, the Company provides adjusted net income and adjusted EPS financial measures to assist our investors in evaluating our ongoing operating performance for the current reporting period and, where provided, over different reporting periods, by adjusting for certain items which may be recurring or non-recurring and which in our view do not necessarily reflect ongoing performance. We also internally use these measures to assess our operating performance, both absolutely and in comparison to other companies, and in evaluating or making selected compensation decisions. These supplemental disclosures are in addition to GAAP reported measures. This non-GAAP reconciliation table should not be considered a substitute for, nor superior to, financial results and measures determined or calculated in accordance with GAAP.

 

 10 

 

 

Table 8

(1 of 3)

Wyndham Worldwide Corporation

NON-GAAP RECONCILIATION OF ADJUSTED EBITDA BY REPORTABLE SEGMENT

(In millions)

 

       Venezuela                     
       Currency   Acquisition   Legacy   Restructuring   Contract   Adjusted 
   EBITDA   Devaluation (b)   Costs (c)   Costs (d)   Costs (e)   Termination (f)   EBITDA 
Three months ended March 31, 2016                                   
Hotel Group  $84   $-   $-   $-   $-   $-   $84 
Destination Network   81    24    -    -    -    -    105 
Vacation Ownership   136    -    -    -    -    -    136 
Total Reportable Segments   301    24    -    -    -    -    325 
Corporate and Other (a)   (34)   -    -    -    -    -    (34)
Total Company  $267   $24   $-   $-   $-   $-   $291 
                                    
Three months ended June 30, 2016                                   
Hotel Group  $101   $-   $-   $-   $-   $-   $101 
Destination Network   85    -    1         -    -    85 
Vacation Ownership   187    -    -    -    -    -    187 
Total Reportable Segments   373    -    1    -    -    -    373 
Corporate and Other (a)   (33)   -    -    -    -    -    (33)
Total Company  $340   $-   $1   $-   $-   $-   $340 
                                    
Three months ended September 30, 2016                                   
Hotel Group  $107   $-   $-   $-   $3   $7   $117 
Destination Network   138    -    -    -    4    -    142 
Vacation Ownership   189    -    -    -    6    -    195 
Total Reportable Segments   434    -    -    -    13    7    454 
Corporate and Other (a)   (32)   -         (1)   1    -    (31)
Total Company  $402   $-   $-   $(1)  $14   $7   $423 

 

 

Note: Amounts may not add across due to rounding.

 

(a)Includes the elimination of transactions between segments.
(b)Represents the impact from the devaluation of the exchange rate of Venezuela.
(c)Represents costs related to an acquisition that closed on July 1, 2016.
(d)Relates to the net benefit from the resolution of and adjustment to certain contingent liabilities and assets resulting from the Company's separation from Cendant.
(e)Relates to costs incurred due to enhancing organizational efficiency and rationalizing existing facilities across the Company.
(f)Relates to additional costs associated with the anticipated termination of a management contract.

 

 11 

 

 

Table 8

(2 of 3)

Wyndham Worldwide Corporation

NON-GAAP RECONCILIATION OF ADJUSTED EBITDA BY REPORTABLE SEGMENT

(In millions)

 

       Legacy   Acquisition   Restructuring   Asset   Contract   Adjusted 
   EBITDA   Adjustments (b)   Costs (c)   Costs (d)   Impairment (e)   Termination (f)   EBITDA 
Three months ended March 31, 2015                                   
Hotel Group  $76   $-   $3   $-   $-   $-   $79 
Destination Network   105    -    -    (1)   -    -    104 
Vacation Ownership   130    -    -    -    -    -    130 
Total Reportable Segments   311    -    3    (1)   -    -    313 
Corporate and Other (a)   (34)   -    -    -    -    -    (34)
Total Company  $277   $-   $3   $(1)  $-   $-   $279 
                                    
Three months ended June 30, 2015                                   
Hotel Group  $96   $-   $1   $-   $-   $-   $97 
Destination Network   84    -    -    -    -    -    84 
Vacation Ownership   182    -    -    -    -    -    182 
Total Reportable Segments   362    -    1    -    -    -    363 
Corporate and Other (a)   (30)   (1)   -    -    -    -    (31)
Total Company  $332   $(1)  $1   $-   $-   $-   $332 
                                    
Three months ended September 30, 2015                                   
Hotel Group  $83   $-   $-   $4   $7   $14   $108 
Destination Network   134    -    -    3    -    -    137 
Vacation Ownership   200    -    -    1    -    -    201 
Total Reportable Segments   417    -    -    8    7    14    446 
Corporate and Other (a)   (35)   1    -    -    -    -    (34)
Total Company  $382   $1   $-   $8   $7   $14   $412 
                                    
Three months ended December 31, 2015                                   
Hotel Group  $94   $-   $-   $(1)  $-   $-   $93 
Destination Network   44    -    -    (1)   -    -    43 
Vacation Ownership   174    -    -    -    -    -    174 
Total Reportable Segments   312    -    -    (2)   -    -    310 
Corporate and Other (a)   (37)   -    -    -    -    -    (37)
Total Company  $275   $-   $-   $(2)  $-   $-   $273 
                                    
Twelve months ended December 31, 2015                                   
Hotel Group  $349   $-   $3   $3   $7   $14   $376 
Destination Network   367    -    1    2    -    -    370 
Vacation Ownership   687    -    -    1    -    -    688 
Total Reportable Segments   1,403    -    4    6    7    14    1,434 
Corporate and Other (a)   (137)   -    -    -    -    -    (137)
Total Company  $1,266   $-   $4   $6   $7   $14   $1,297 

 

 

Note: The sum of the quarters may not agree to the twelve months ended December 31, 2015 due to rounding.

(a)Includes the elimination of transactions between segments.
(b)Relates to the net (benefit)/expense from the resolution of and adjustment to certain contingent liabilities and assets resulting from the Company's separation from Cendant.
(c)Relates primarily to costs incurred in connection with the acquisition of Dolce Hotels and Resorts (January 2015).
(d)Relates to costs incurred as a result of various organizational realignment initiatives and the reversal of a portion of restructuring reserves that were established in prior periods.
(e)Relates to a non-cash impairment charge related to the write-down of terminated in-process technology projects resulting from the Company's decision to outsource its reservation system to a third-party provider.
(f)Relates to costs associated with the anticipated termination of a management contract.

 

 12 

 

 

Table 8

(3 of 3)

Wyndham Worldwide Corporation

NON-GAAP RECONCILIATION OF ADJUSTED EBITDA BY REPORTABLE SEGMENT

SHARED-BASED COMPENSATION EXPENSE

(In millions)

 

The following tables provide detail regarding share-based compensation expense which is included within adjusted EBITDA:

 

   2016 
   Q1   Q2   Q3   Q4   Full Year 
Adjusted EBITDA  $291   $340   $423     N/A      N/A  
Share-based compensation expense (*)   13    20    14     N/A      N/A  
Adjusted EBITDA excluding share-based compensation expense  $304   $360   $437     N/A      N/A  

 

   2015 
   Q1   Q2   Q3   Q4   Full Year 
Adjusted EBITDA  $279   $332   $412   $273   $1,297 
Share-based compensation expense (*)   15    13    13    15    55 
Adjusted EBITDA excluding share-based compensation expense  $294   $345   $425   $288   $1,352 

 

 

Note: Full year amounts may not add across due to rounding.

(*)Excludes share-based compensation expenses for which there was no impact on EBITDA. Such costs amounted to $1 million during Q1, Q2 and Q3 2016 and $3 million for the full year 2015. The Company believes providing Adjusted EBITDA with the additional exclusion of share-based compensation expense assists our investors and management by providing an additional financial measure to evaluate ongoing operations by excluding the variations among companies in timing, amount and reporting of share-based compensation expense, which may differ significantly among companies.

 

 13 

 

 

Table 9

Wyndham Worldwide Corporation

NON-GAAP RECONCILIATION OF GROSS VOI SALES

(In millions)

 

GROSS VOI SALES

 

We believe gross vacation ownership sales provide an enhanced understanding of the performance of our vacation ownership business because it directly measures the sales volume of this business during a given reporting period.

 

The following table provides a reconciliation of Gross VOI sales (see Table 3) to vacation ownership interest sales (see Table 5):

 

Year                    
2016  Q1   Q2   Q3   Q4   Full Year 
                     
Gross VOI sales  $428   $518   $564     N/A      N/A  
Less: Sales under WAAM Fee-for-Service   (23)   (20)   (20)    N/A      N/A  
Gross VOI sales, net of WAAM Fee-for-Service sales   405    498    544     N/A      N/A  
Less: Loan loss provision   (63)   (90)   (104)    N/A      N/A  
Vacation ownership interest sales  $342   $409   $441     N/A      N/A  
                          
2015                         
                          
Gross VOI sales  $390   $502   $565   $507   $1,965 
Less: Sales under WAAM Fee-for-Service   (21)   (26)   (37)   (42)   (126)
Gross VOI sales, net of WAAM Fee-for-Service sales   369    477    528    464    1,838 
Less: Loan loss provision   (46)   (60)   (78)   (64)   (248)
Plus: Impact of percentage-of-completion accounting   13    -    (2)   2    13 
Vacation ownership interest sales  $336   $417   $448   $403   $1,604 
                          
2014                         
                          
Gross VOI sales  $410   $496   $513   $470   $1,889 
Less: Sales under WAAM Fee-for-Service   (44)   (40)   (27)   (21)   (132)
Gross VOI sales, net of WAAM Fee-for-Service sales   366    456    486    449    1,757 
Less: Loan loss provision   (60)   (70)   (70)   (60)   (260)
Less: Impact of percentage-of-completion accounting   (3)   (4)   (1)   (4)   (12)
Vacation ownership interest sales  $303   $382   $415   $385   $1,485 
                          
2013                         
                          
Gross VOI sales  $384   $481   $536   $488   $1,889 
Less: Sales under WAAM Fee-for-Service   (36)   (44)   (51)   (29)   (160)
Gross VOI sales, net of WAAM Fee-for-Service sales   347    437    486    459    1,729 
Less: Loan loss provision   (84)   (90)   (102)   (73)   (349)
Less: Impact of percentage-of-completion accounting   -    -    -    (1)   (1)
Vacation ownership interest sales  $263   $347   $384   $384   $1,379 

 

 

Note: Amounts may not add due to rounding.

 

The following includes primarily tele-sales upgrades and other non-tour revenues, which are excluded from Gross VOI sales in the Company's VPG calculation (see Table 3):

 

   Q1   Q2   Q3   Q4   Full Year 
                     
2016  $25   $22   $31     N/A      N/A 
2015  $24   $17   $32   $27   $100 
2014  $25   $21   $27   $24   $97 
2013  $24   $18   $22   $25   $89 

 

 14 

 

 

Table 10

 

Wyndham Worldwide Corporation

NON-GAAP RECONCILIATION OF 2016 OUTLOOK

(In millions, except per share data)

                           

           Outlook (a) 
   Outlook (a)       As Adjusted 
   (GAAP)   Adjustments   (Non-GAAP) 
Net revenues  $5,650   $-   $5,650 
                
EBITDA  $1,329   $46(b)  $1,375 
Depreciation and amortization   (252)   -    (252)
Interest expense, net   (139)   11(c)   (128)
Income before taxes   938    57    995 
Income taxes   (348)   (14)(d)   (362)
Net income attributable to noncontrolling interest   (1)   -    (1)
Net income attributable to Wyndham shareholders  $587   $43   $630 
                
Diluted earnings per share   $5.29 - $5.32         $5.68 - $5.71 
                
Diluted shares   111         111 

 

 
(a)  Outlook represents Company's approximate projection of performance for the fourth quarter of 2016. Projections may not total because the Company does not expect the actual results of all items to be at the precise amount simultaneously.
(b)   For a description of such adjustments, see Table 7.
(c)   Adjustment represents early extinguishment of debt in the first quarter of 2016.
(d)   Represents the tax effect of the adjustments and a $2 million state tax refund for legacy tax matters.

   

 15 

 

 

Table 11

Wyndham Worldwide Corporation

NON-GAAP RECONCILIATION - CONSTANT CURRENCY AND CURRENCY NEUTRAL

(In millions, except per share data)

 

The Company reports certain current year period financial measures on a constant currency and currency-neutral basis and excluding the impact of acquisitions. The Company believes providing certain financial measures on a constant currency and currency-neutral basis as well as excluding the impact of acquisitions assists management and investors in better understanding underlying results and trends by excluding the impact of period over period changes in foreign exchange rates and changes resulting from acquisitions.

 

Constant currency results assume foreign results are translated from foreign currencies to the U.S. dollar at exchange rates consistent with those in the comparable period.

 

Currency Neutral results (i) assume foreign results are translated from foreign currencies to the U.S. dollar at exchange rates consistent with those in the comparable period and (ii) eliminating foreign exchange related activities such as foreign exchange hedges, balance sheet remeasurements, currency devaluations and/or other adjustments.

 

Acquisition results are defined as the incremental period over period changes in the Company's results directly attributable to acquisitions.

 

Revenues in Constant Currency and Excluding Acquisitions:  Three months ended September 30, 
   2016   2015   % Change 
Total revenues as reported  $1,573   $1,564    1%
Adjustments:               
Foreign currency - constant currency   18    -    *
Incremental revenues from acquisitions   (7)   -    *
Total revenues in constant currency and excluding acquisitions  $1,584   $1,564    1%
                
Destination Network revenue as reported  $486   $476    2%
Adjustments:               
Foreign currency - constant currency   19    -    *
Incremental revenues from acquisitions   (7)   -    *
Total Destination Network revenues in constant currency and excluding acquisitions  $498   $476    5%
                
Exchange revenue as reported  $159   $157    1%
Adjustments:               
Foreign currency - constant currency   1    -    *
Total Exchange revenues in constant currency and excluding acquisitions  $160   $157    2%
                
Rental revenue as reported  $304   $296    3%
Adjustments:               
Foreign currency - constant currency   18    -    *
Incremental revenues from acquisitions   (7)   -    *
Total Rental revenues in constant currency and excluding acquisitions  $315   $296    6%

 

Currency-neutral Adjusted EBITDA:  Three months ended September 30, 
   2016   2015   % Change 
Adjusted EBITDA (a)  $423   $412    3%
Adjustments:               
Foreign currency - currency-neutral   10    -    *
Incremental EBITDA from acquisitions   (2)   -    *
Currency-neutral Adjusted EBITDA excluding acquisitions  $431   $412    5%
                
Destination Network Adjusted EBITDA (a)  $142   $137    4%
Adjustments:               
Foreign currency - currency-neutral   8    -    *
Incremental EBITDA from acquisitions   (2)   -    *
Destination Network Currency-neutral Adjusted EBITDA excluding acquisitions  $148   $137    8%

 

 

*Not meaningful.
(a)See Table 8 for a reconciliation of EBITDA to Adjusted EBITDA and Table 2 for a reconciliation of EBITDA to Net Income

 

 16 

 

 

Table 12

Wyndham Worldwide Corporation

SCHEDULE OF DEBT

(In millions)

 

   September 30,   December 31,   September 30, 
   2016   2015   2015 
Securitized vacation ownership debt (a)               
Term notes  $1,818   $1,867   $1,819 
Bank conduit facility (b)   280    239    267 
Total securitized vacation ownership debt (c)   2,098    2,106    2,086 
Less: Current portion of securitized vacation ownership debt   200    209    210 
Long-term securitized vacation ownership debt  $1,898   $1,897   $1,876 
                
Debt:               
Revolving credit facility (due July 2020) (d)  $12   $7   $20 
Commercial paper (e)   404    109    87 
Term loan (due March 2021)   323    -    - 
$315 million 6.00% senior unsecured notes (due December 2016)   -    316    316 
$300 million 2.95% senior unsecured notes (due March 2017) (f)   300    299    299 
$14 million 5.75% senior unsecured notes (due February 2018)   14    14    14 
$450 million 2.50% senior unsecured notes (due March 2018)   449    448    448 
$40 million 7.375% senior unsecured notes (due March 2020)   40    40    40 
$250 million 5.625% senior unsecured notes (due March 2021)   247    247    247 
$650 million 4.25% senior unsecured notes (due March 2022)   648    648    648 
$400 million 3.90% senior unsecured notes (due March 2023)   407    408    408 
$350 million 5.10% senior unsecured notes (due October 2025)   338    337    337 
Capital leases   151    153    158 
Other   18    49    48 
Total long-term debt   3,351    3,075    3,070 
Less: Current portion of long-term debt   33    44    44 
Long-term debt  $3,318   $3,031   $3,026 

 

 

(a)The Company's vacation ownership contract receivables are securitized through bankruptcy-remote special purpose entities ("SPEs") that are consolidated within our financial statements. These bankruptcy-remote SPEs are legally separate from the Company. The receivables held by the bankruptcy-remote SPEs are not available to the Company's creditors and legally are not the Company's assets. Additionally, the non-recourse debt that is securitized through the SPEs is legally not a liability of the Company and thus, the creditors of these SPEs have no recourse to the Company for principal and interest.
(b)Represents a non-recourse vacation ownership bank conduit facility with a term through August 2018 and borrowing capacity of $650 million. As of September 30, 2016, this facility had a remaining borrowing capacity of $370 million.
(c)This debt is collateralized by $2,560 million, $2,576 million and $2,582 million, of underlying vacation ownership contract receivables and related assets as of September 30, 2016, December 31, 2015, and September 30, 2015, respectively.
(d)Represents a $1.5 billion revolving credit facility that expires in July 2020. As of September 30, 2016, the Company had $1 million of outstanding letters of credit. After considering outstanding commercial paper borrowings of $404 million, the remaining borrowing capacity was $1.1 billion as of September 30, 2016.
(e)Represents commercial paper programs of $1.25 billion with a remaining borrowing capacity of $846 million as of September 30, 2016.
(f)Classified as long-term as the Company has the intent to refinance such debt on a long-term basis and the ability to do so with its revolving credit facility.

 

 17