EXHIBIT 99.1

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Wyndham Worldwide Reports Fourth Quarter and Full-Year 2017 Results

 

European Vacation Rentals Business Has Been Classified as a Discontinued Operation

 

Increases Dividend 14%

 

Company Also Provides Full-Year 2018 Projections

 

PARSIPPANY, N.J. (February 14, 2018) – Wyndham Worldwide Corporation (NYSE: WYN) today announced results for the fourth quarter and year ended December 31, 2017. The Company’s adjusted results exceeded its most recent projections, published in October, and its reported results were further increased by the favorable impact of U.S. corporate tax reform on fourth quarter earnings.

 

In the fourth quarter, the Company classified its European vacation rentals business, for which it is exploring strategic alternatives, as a discontinued operation. As a result of this reclassification, the Company’s results from continuing operations are not comparable to its previously reported results or its prior projections. The following table highlights results from continuing and discontinued operations:

 

   Three Months Ended December 31, 2017   Twelve Months Ended December 31, 2017 
   Continuing Operations   Discontinued Operations   Combined   Continuing Operations   Discontinued Operations   Combined 
                         
Revenues  $1,246   $148   $1,394   $5,076   $745   $5,821 
                               
Net Income/(Loss)*  $462   $(13)  $449   $818   $53   $871 
                               
Adjusted Net Income/(Loss)*  $152   $(2)  $150   $570   $68   $639 
                               
Adjusted EBITDA  $320   $14   $334   $1,256   $141   $1,397 
                               
Diluted EPS  $4.54   $(0.13)  $4.41   $7.89   $0.51   $8.40 
                               
Adjusted Diluted EPS  $1.49   $(0.02)  $1.47   $5.50   $0.66   $6.16 

 

*Includes non-controlling interests.                                  

 

Full-year adjusted EBITDA from continuing and discontinued operations of $1,397 million compares to the Company’s October projection of $1,380 million to $1,395 million of adjusted EBITDA in 2017. Table 9 of this release provides additional information regarding continuing and discontinued operations for both 2017 and 2016. Full reconciliations of GAAP results to non-GAAP measures for all reported periods appear in the tables to this press release.

 

 

 

 

FOURTH QUARTER 2017 OPERATING RESULTS

 

Fourth quarter revenues from continuing operations were $1.2 billion, up 4% compared with the prior-year period.

 

Net income from continuing operations in the fourth quarter of 2017 was $462 million compared with $164 million for the fourth quarter of 2016. Diluted earnings per share (EPS) from continuing operations was $4.54, versus $1.53 in the prior-year period. Net income from continuing operations was impacted by $426 million ($4.18 per share) of tax benefit recorded primarily as a result of the recently enacted Tax Cuts and Jobs Act and a $4 million after-tax expense ($0.04 per share) from the Act’s impact on long-term incentive awards, $87 million ($0.86 per share) of after-tax impairment expense, $22 million ($0.22 per share) of after-tax separation costs and $2 million ($0.02 per share) of after-tax acquisition costs.

 

Adjusted net income from continuing operations for the fourth quarter of 2017 was $152 million or $1.49 per diluted share, compared with $147 million or $1.36 per diluted share in the fourth quarter of 2016. Adjusted results exclude separation costs, the initial impact of the Tax Cuts and Jobs Act, impairment expense and other items as detailed in Tables 7 and 8 of this press release. The growth in earnings primarily reflects higher revenues in all three of the Company’s operating segments, partially offset by increased interest expense. Adjusted diluted EPS also reflects the benefit of the Company’s share repurchase program.

 

“As we continue the process of separating into two publicly traded companies, our business momentum remains strong,” said Stephen P. Holmes, chairman and CEO. “Our teams have continued to execute against our strategic and operating plans; we continued to return cash to shareholders through dividends and share repurchases; and we have positioned our businesses for future growth.”

 

Fourth quarter EBITDA from continuing operations was $174 million, compared with $308 million in the prior-year period, reflecting asset impairments and separation costs recorded in fourth quarter 2017. Adjusted EBITDA from continuing operations was $320 million, compared with $305 million in the fourth quarter of 2016, an increase of 5%. Results primarily reflect the growth in revenues along with cost containment efforts, partially offset by $16 million of hurricane impacts. The Company’s results have been adjusted to reflect the classification of the European vacation rentals business as a discontinued operation.

 

As previously reported, weather events in the third quarter had an unusually pronounced effect on fourth quarter operating results. The Company estimates that the third quarter hurricanes reduced fourth quarter revenues, net income and EBITDA by $15 million, $10 million, and $16 million, respectively. The reductions primarily reflect the temporary closure of vacation ownership sales centers, particularly in the Caribbean, and remediation efforts at the Company’s Wyndham Rio Mar hotel in Puerto Rico.

 

 

 

 

FULL-YEAR 2017 OPERATING RESULTS

 

Full-year revenues from continuing operations were $5.1 billion, up 3% compared with the prior year.

 

Full-year net income from continuing operations was $819 million compared with $545 million in the prior year. Diluted earnings per share from continuing operations was $7.89, versus $4.93 in the prior year. The growth in earnings is primarily due to the tax benefit recorded as a result of the recently enacted Tax Cuts and Jobs Act, partially offset by impairment expenses and separation costs.

 

Full-year adjusted net income from continuing operations was $570 million or $5.50 per diluted share, compared with $569 million or $5.15 per diluted share in 2016. Adjusted results exclude items as detailed in Tables 7 and 8 of this press release. The growth in revenues was offset by higher year-over-year interest, depreciation and variable compensation expenses along with the impact of the third quarter hurricanes. The growth in adjusted diluted EPS primarily reflects the Company’s repurchase of 6% of its outstanding shares in 2017.

 

Full-year 2017 EBITDA from continuing operations was $952 million, compared with $1,197 million in 2016, primarily reflecting asset impairments and separation costs. Adjusted EBITDA from continuing operations was $1,256 million, compared with $1,239 million in the prior year. The increase in adjusted EBITDA primarily reflects the growth in revenues, partially offset by $26 million of hurricane impacts.

 

The Company estimates that the third quarter weather events reduced full-year revenues, net income and EBITDA by $28 million, $17 million and $26 million, respectively. The reductions primarily reflect the temporary closure of vacation ownership sales centers, particularly in the Caribbean, and remediation efforts at Company’s Wyndham Rio Mar hotel in Puerto Rico.

 

For the twelve months ended December 31, 2017, net cash provided by operating activities from continuing operations was $880 million, compared with $846 million in the prior year. The increase primarily reflects higher net income.

 

Free cash flow from continuing operations was $727 million in 2017, compared with $686 million for the prior year, primarily reflecting the changes in net cash provided by operating activities. Total free cash flow (from continuing and discontinued operations) was $799 million in 2017, compared with $782 million in 2016. The Company defines free cash flow as net cash provided by operating activities less capital expenditures.

 

 

 

 

FOURTH QUARTER 2017 BUSINESS UNIT RESULTS

 

Hotel Group

Revenues increased 5% to $332 million in the fourth quarter of 2017, compared with $316 million in fourth quarter 2016. Results reflect higher royalties and franchise fees as well as higher pass-through marketing, reservation and Wyndham Rewards revenues.

 

EBITDA was $55 million in the fourth quarter compared with $99 million in the prior-year quarter, primarily due to $41 million of impairment expense related to a hotel management contract and the write-down of other intangible assets in 2017. Adjusted EBITDA was $102 million compared with $99 million in the prior-year period, primarily reflecting the revenue increases, partially offset by the adverse impact of Hurricane Maria on the Company’s owned hotel in Puerto Rico.

 

Fourth quarter domestic RevPAR increased 4.5% compared with fourth quarter 2016. In constant currency, global RevPAR increased 4.6%.

 

As of December 31, 2017, the Company’s hotel system consisted of over 8,400 properties and approximately 728,200 rooms, a 4% increase compared with a year earlier, including almost 12,000 rooms we added to the system with the acquisition of AmericInn in October. The development pipeline increased to nearly 1,160 hotels and 148,200 rooms, a 7% year-over-year room increase, of which 58% are international and 68% are new construction.

 

Destination Network

This segment no longer includes the Company’s European vacation rentals business, which is now classified as a discontinued operation. Revenues were $200 million in the fourth quarter of 2017, compared with $190 million in the fourth quarter of 2016, an increase of 5%. Exchange revenue per member increased 7%, driven by favorable pricing, while the average number of members declined 1%.

 

EBITDA was $40 million compared with $39 million in the fourth quarter of 2016, reflecting $8 million of separation costs. Adjusted EBITDA was $48 million compared with $39 million in the prior-year period, an increase of 23%, primarily reflecting favorable pricing as well as cost-saving initiatives.

 

Vacation Ownership

Revenues were $734 million in the fourth quarter of 2017, compared with $705 million in the fourth quarter of 2016, an increase of 4%. The increase reflects a 7% increase in gross VOI sales, despite the negative impact of the hurricanes on VOI sales, as well as higher consumer financing revenues.

 

Tour flow increased 7%, driven by increased tours to new owners. Volume per guest (VPG) increased 2%.

 

 

 

 

EBITDA was $133 million in the fourth quarter of 2017 compared with $182 million in the prior-year quarter, reflecting a $65 million asset impairment directly attributable to the recent hurricanes and their continuing effects on the Caribbean. Adjusted EBITDA was $200 million compared with $191 million in the prior-year quarter. Results reflect higher gross VOI sales and consumer financing revenue, partially offset by a higher provision for loan losses.

 

OTHER ITEMS

·La Quinta Acquisition - The Company recently announced its intention to purchase La Quinta Holdings’ hotel franchising and hotel management operations for $1.95 billion in cash. The transaction will add nearly 900 managed and franchised hotels to our Hotel Group’s portfolio and is expected to close in the second quarter of 2018.

 

·Corporate Tax Reform - The Company recorded a one-time, net tax benefit of $426 million, primarily driven by a reduction in its net deferred tax liability due to the lower corporate tax rate as a result of the Tax Cuts and Jobs Act of 2017.

 

·Impairment Charges - Non-cash impairment charges totaled $106 million in the fourth quarter of 2017. The charges are for the write-down of VOI inventory along with property and equipment at our Vacation Ownership business due to the impact of the third quarter hurricanes, the write-down of a guarantee asset and a note receivable related to a hotel management agreement, and the write-down of certain intangible assets in our Hotel Group business.

 

·Share Repurchases - The Company repurchased 1.4 million shares of common stock for $150 million during the fourth quarter of 2017 at an average price of $110.06. Over the course of 2017, the Company repurchased 6.3 million shares of stock, or 6% of shares outstanding, at a cost of $601 million. From January 1 through February 13, 2018, the Company repurchased an additional 0.2 million shares for $21 million.

 

·Dividend Increase - The Company’s Board of Directors authorized an increase in the quarterly cash dividend to $0.66 from $0.58 per share, beginning with the dividend that is expected to be declared in the first quarter of 2018.

 

·Upcoming Separation - As previously announced, the Company plans to become two publicly traded hospitality companies through the spin-off of the Company’s Hotel Group to shareholders. The process is proceeding as planned, and the Company expects to complete the separation in the second quarter of 2018.

 

 

 

 

OUTLOOK

 

Note to Editors: The Company has classified its European vacation rentals business, for which it is exploring strategic alternatives, as a discontinued operation and is therefore excluded from the outlook below. In addition, the outlook excludes possible future share repurchases. Current analysts’ estimates include projections of the European vacation rentals business and often include projected share repurchases. These factors result in discrepancies between the Company’s projections and database consensus forecasts.

 

The Company projects the following results for full-year 2018:

·Revenues of $5.26 billion to $5.40 billion, an increase of 4% to 6%.
·An effective tax rate applicable to adjusted pretax earnings of approximately 25%.
·Adjusted net income from continuing operations of $702 million to $722 million, an increase of 23% to 27%, approximately 19 points of which is due to a lower effective tax rate.
·Adjusted EBITDA of $1.330 billion to $1.355 billion, which represents year-over-year growth of 6% to 8% and is comprised of:
oHotel Group adjusted EBITDA growth of 7% to 9%
oDestination Network adjusted EBITDA growth of 1% to 5%
oVacation Ownership adjusted EBITDA growth of 6% to 8%
·Adjusted diluted EPS from continuing operations of $6.90 to $7.05, which is an increase of 25% to 28% and is based on a diluted share count of 101.7 million.

 

These projections exclude the impact of the La Quinta acquisition and the financing thereof, exclude any impact from our European vacation rentals business, which is treated as a discontinued operation, exclude costs associated with the Company’s planned separation into two separate publicly-traded companies and are consistent with our historical recognition of revenues, without adjustment for the required 2018 change in revenue recognition accounting. See Table 12 for detailed projections.

 

In determining adjusted net income, adjusted EBITDA and adjusted EPS, the Company excludes certain items which are otherwise included in determining the comparable GAAP financial measures. A description of the adjustments that have been applicable for the reported periods in determining adjusted net income, adjusted EBITDA and adjusted EPS are reflected in Tables 7 and 8 of this press release. The Company is providing an outlook for net income, EBITDA and EPS only on a non-GAAP basis because the Company is unable to predict with reasonable certainty the totality or ultimate outcome or occurrence of these adjustments or other potential adjustments that may arise in the future during the outlook period, which can be dependent on future events that may not be reliably predicted.

 

CONFERENCE CALL INFORMATION

Wyndham Worldwide Corporation will hold a conference call with investors to discuss the Company’s results and outlook on Wednesday, February 14, 2018 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 800-895-1549 and providing the passcode 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 12:00 p.m. ET on February 14, 2018. A telephone replay will be available for approximately 10 days beginning at 12:00 p.m. ET on February 14, 2018 at 800-839-1320.

 

 

 

 

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 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. Full reconciliations of GAAP results to the comparable non-GAAP measures for the reported periods appear in the financial tables section of the 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 and managed home rentals. With a collective inventory of over 22,000 places to stay across 110 countries on six continents, Wyndham Worldwide and its 39,000 associates welcome people to experience travel the way they want. This is enhanced by Wyndham Rewards®, the Company’s award-winning 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. Forward-looking statements are those that convey management’s expectations as to the future based on plans, estimates and projections at the time Wyndham Worldwide makes the statements and may be identified by terminology such as “will,” “expect,” believe,” “plan,” “anticipate,” “goal,” “future,” “outlook,” guidance,” “target,” “estimate” and similar expressions. Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Wyndham Worldwide or the post-spin companies 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, taxes, cash flow and related financial and operating measures, dividends, share repurchases, acquisitions, dispositions and expectations with respect to the spin-off and related transactions, as well as the post-spin companies’ future operating, financial and business performance.

 

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, differences between the actual impact of recently enacted corporate tax reform and our current expectations, uncertainties that may delay or negatively impact the spin-off or cause the spin-off to not occur at all, uncertainties related to the post-spin companies’ ability to realize the anticipated benefits of the spin-off, uncertainties related to Wyndham Worldwide’s ability to successfully complete the spin-off on a tax-free basis within the expected time frame or at all, unanticipated developments that delay or otherwise negatively affect the spin-off, uncertainties related to Wyndham Worldwide’s ability to obtain financing for the two companies or the terms of such financing, unanticipated developments related to the impact of the spin-off on our relationships with our customers, suppliers, employees and others with whom we have relationships, unanticipated developments resulting from possible disruption to our operations resulting from the proposed spin-off, the potential impact of the spin-off and related transactions on Wyndham Worldwide’s credit rating, uncertainties relating to Wyndham Worldwide’s exploration of strategic alternatives for its European vacation rentals business and the outcome and timing of that process, uncertainties relating to Wyndham Worldwide’s pending acquisition of La Quinta Holdings’ hotel franchising and hotel management operations and the outcome and timing of that process, the timing and amount of future share repurchases and dividends, as well as those factors described in Wyndham Worldwide’s Annual Report on Form 10-K, filed with the SEC on February 17, 2017, and in Wyndham Worldwide’s subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Except for Wyndham Worldwide’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 Four - December 31, 2017

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 Financial Data for Continuing and Discontinued Operations 9
   
Non-GAAP Reconciliation for Discontinued Operations 10
   
Non-GAAP Reconciliation of Gross VOI Sales 11
   
Non-GAAP Reconciliation of 2018 Outlook 12
   
Schedule of Summarized Balance Sheet Information 13

 

 

 

 

Table 1

Wyndham Worldwide Corporation

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share data)

(Unaudited)

 

   Three Months Ended   Twelve Months Ended 
   December 31,   December 31, 
   2017   2016   2017   2016 
Net revenues                    
Service and membership fees  $448   $424   $1,895   $1,879 
Vacation ownership interest sales   423    415    1,689    1,606 
Franchise fees   173    164    695    677 
Consumer financing   120    113    463    440 
Other   82    77    334    324 
Net revenues   1,246    1,193    5,076    4,926 
                     
Expenses                    
Operating   545    521    2,194    2,144 
Cost of vacation ownership interests   35    31    150    146 
Consumer financing interest   19    19    74    75 
Marketing and reservation   180    167    773    740 
General and administrative   160    147    648    631 
Separation-related   31    -    51    - 
Impairment   106    -    246    - 
Restructuring   -    1    15    14 
Depreciation and amortization   55    51    213    202 
Total expenses   1,131    937    4,364    3,952 
                     
Operating income   115    256    712    974 
Other income, net   (4)   (1)   (27)   (21)
Interest expense   42    33    156    133 
Early extinguishment of debt   -    -    -    11 
Interest income   (2)   (2)   (7)   (7)
                     
Income before income taxes   79    226    590    858 
(Benefit)/provision for income taxes   (383)   62    (229)   313 
Income from continuing operations   462    164    819    545 
Income/(loss) from discontinued operations, net of income taxes   (13)   -    53    67 
                     
Net income   449    164    872    612 
Net income attributable to noncontrolling interest   -    -    (1)   (1)
Net income attributable to Wyndham shareholders  $449   $164   $871   $611 
                     
Basic Earnings per share                    
Continuing operations  $4.58   $1.54   $7.94   $4.96 
Discontinued operations   (0.13)   -    0.52    0.60 
   $4.45   $1.54   $8.46   $5.56 
                     
Diluted Earnings per share                    
Continuing operations  $4.54   $1.53   $7.89   $4.93 
Discontinued operations   (0.13)   -    0.51    0.60 
   $4.41   $1.53   $8.40   $5.53 
                     
Weighted average shares outstanding                    
Basic   101    107    103    110 
Diluted   102    108    104    111 

 

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 its investors in evaluating its 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 the Company's view do not necessarily reflect ongoing operating performance. The Company also internally uses these measures to assess its 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 Net Income to EBITDA for the three months ended December 31, 2017 and 2016:

 

   Three Months Ended December 31, 
   2017   2016 
   Net Revenues   EBITDA   Net Revenues   EBITDA 
Hotel Group  $332   $55   $316   $99 
Destination Network   200    40    190    39 
Vacation Ownership   734    133    705    182 
Total Reportable Segments   1,266    228    1,211    320 
Corporate and Other (a)   (20)   (54)   (18)   (12)
Total Company  $1,246   $174   $1,193   $308 

 

Reconciliation of Net Income to EBITDA

 

       Three Months Ended December 31, 
       2017       2016 
Net income               $449               $164 
Income from discontinued operations, net of tax        13         - 
(Benefit)/provision for income taxes        (383)        62 
Depreciation and amortization        55         51 
Interest expense        42         33 
Interest income        (2)        (2)
EBITDA       $174        $308 

 

 

Note: Amounts may not add due to rounding.

(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 twelve months ended December 31, 2017 and 2016 (for a description of adjustments and reconciliation by segment, see Table 8):

 

   Three Months Ended December 31, 
   2017   2016 
       Adjusted       Adjusted 
   Net Revenues   EBITDA   Net Revenues   EBITDA 
Hotel Group  $332   $102   $316   $99 
Destination Network   200    48    190    39 
Vacation Ownership   734    200    705    191 
Total Reportable Segments   1,266    350    1,211    329 
Corporate and Other (a)   (20)   (30)   (18)   (24)
Total Company  $1,246   $320   $1,193   $305 

 

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 net income attributable to Wyndham shareholders to EBITDA for the twelve months ended December 31, 2017 and 2016:

 

   Twelve Months Ended December 31, 
   2017   2016 
   Net Revenues   EBITDA   Net Revenues   EBITDA 
Hotel Group  $1,343   $367   $1,309   $391 
Destination Network   912    257    898    222 
Vacation Ownership   2,905    489    2,794    694 
Total Reportable Segments   5,160    1,113    5,001    1,307 
Corporate and Other (a)   (84)   (161)   (75)   (110)
Total Company  $5,076   $952   $4,926   $1,197 

 

Reconciliation of Net income attributable to Wyndham shareholders to EBITDA

 

       Twelve Months Ended December 31, 
       2017       2016 
Net income attributable to Wyndham shareholders          $871               $611 
Net income attributable to noncontrolling interest        1         1 
Income from discontinued operations, net of tax        (53)        (67)
(Benefit)/provision for income taxes        (229)        313 
Depreciation and amortization        213         202 
Interest expense        156         133 
Early extinguishment of debt        -         11 
Interest income        (7)        (7)
EBITDA       $952        $1,197 

 

 

Note: Amounts may not add due to rounding.

(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 twelve months ended December 31, 2017 and 2016 (for a description of adjustments and reconciliation by segment, see Table 8):

 

   Twelve Months Ended December 31, 
   2017   2016 
       Adjusted       Adjusted 
   Net Revenues   EBITDA   Net Revenues   EBITDA 
Hotel Group  $1,343   $416   $1,309   $401 
Destination Network   912    262    898    251 
Vacation Ownership   2,905    696    2,794    708 
Total Reportable Segments   5,160    1,374    5,001    1,360 
Corporate and Other (a)   (84)   (118)   (75)   (121)
Total Company  $5,076   $1,256   $4,926   $1,239 

 

3

 

 

Table 3

(1 of 2)

Wyndham Worldwide Corporation

OPERATING STATISTICS

 

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

 

   Year  Q1   Q2   Q3   Q4   Full Year 
Hotel Group (a)                            
Number of Rooms  2017   699,800    705,700    708,500    728,200    728,200 
   2016   679,100    683,300    689,800    697,600    697,600 
   2015   667,400    668,500    671,900    678,000    678,000 
   2014   646,900    650,200    655,300    660,800    660,800 
                             
RevPAR  2017  $31.73   $39.43   $44.36   $34.88   $37.63 
   2016  $31.59   $39.10   $43.04   $32.92   $36.67 
   2015  $32.84   $39.82   $43.34   $32.98   $37.26 
   2014  $32.30   $40.11   $43.71   $34.06   $37.57 
                             
Destination Network (a)                            
Average Number of Members (in 000s)  2017   3,817    3,791    3,792    3,796    3,799 
   2016   3,841    3,857    3,868    3,843    3,852 
   2015   3,822    3,831    3,835    3,836    3,831 
   2014   3,727    3,748    3,777    3,808    3,765 
                             
Exchange Revenue Per Member  2017  $192.01   $168.27   $166.35   $162.26   $172.25 
   2016  $189.78   $164.61   $164.39   $151.19   $167.48 
   2015  $194.06   $167.81   $163.38   $152.00   $169.29 
   2014  $200.78   $179.17   $171.77   $157.24   $177.12 
                             
Vacation Ownership (a)                            
Gross Vacation Ownership Interest (VOI) Sales (in 000s) (b)  2017  $439,000   $563,000   $602,000   $539,000   $2,144,000 
   2016  $428,000   $518,000   $564,000   $502,000   $2,012,000 
   2015  $390,000   $502,000   $565,000   $507,000   $1,965,000 
   2014  $410,000   $496,000   $513,000   $470,000   $1,889,000 
                             
Tours (in 000s)  2017   176    235    247    210    869 
   2016   179    213    230    197    819 
   2015   168    206    227    200    801 
   2014   170    208    225    191    794 
                             
Volume Per Guest (VPG)  2017  $2,354   $2,302   $2,299   $2,438   $2,345 
   2016  $2,244   $2,328   $2,320   $2,399   $2,324 
   2015  $2,177   $2,353   $2,354   $2,390   $2,326 
   2014  $2,272   $2,280   $2,158   $2,336   $2,257 

 

 

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

(a)Includes the impact of acquisitions from the acquisition dates forward.
(b)Includes Gross VOI sales under the Company's Wyndham Asset Affiliate Model (WAAM) Just-in-Time. (See Table 11 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  2017   8,080    8,140    8,150    8,420    8,420 
   2016   7,830    7,880    7,930    8,040    8,040 
   2015   7,670    7,700    7,760    7,810    7,810 
   2014   7,500    7,540    7,590    7,650    7,650 
                             
Vacation Ownership                            
Provision for Loan Losses (in 000s) (*)  2017  $85,000   $110,000   $123,000   $101,000   $420,000 
   2016  $63,000   $90,000   $104,000   $86,000   $342,000 
   2015  $46,000   $60,000   $78,000   $64,000   $248,000 
   2014  $60,000   $70,000   $70,000   $60,000   $260,000 

 

 

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 the Company's 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 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. The Company believes gross VOI sales provide an enhanced understanding of the performance of its vacation ownership business because it directly measures the sales volume of this business during a given reporting period. See Table 11 for a reconciliation of Gross VOI sales to vacation ownership interest sales.

 

Tours: Represents the number of tours taken by guests in the Company's 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 11 for a detail of tele-sales upgrades for 2014-2017.

 

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:

 

   Twelve Months Ended December 31, 
   2017   2016 
         
Net cash provided by operating activities - Continuing Operations  $880   $846 
Net cash provided by operating activities - Discontinued Operations   107    127 
Net cash provided by operating activities   987    973 
           
Net cash used in investing activities - Continuing Operations   (362)   (259)
Net cash used in investing activities - Discontinued Operations   (32)   (94)
Net cash used in investing activities   (394)   (353)
           
Net cash used in financing activities - Continuing Operations   (538)   (576)
Net cash used in financing activities - Discontinued Operations   (21)   (10)
Net cash used in financing activities   (559)   (586)
           
Effect of changes in exchange rates on cash and cash equivalents   14    (20)
           
Net increase in cash and cash equivalents  $48   $14 

 

Free Cash Flow:

 

The Company defines free cash flow to be net cash provided by operating activities less property and equipment additions which the Company also refers to as capital expenditures. The Company believes free cash flow to be a useful operating performance measure to evaluate the ability of its operations to generate cash for uses other than capital expenditures and, after debt service and other obligations, its ability to grow its business through acquisitions, development advances and equity investments, as well as its 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:

 

   Twelve Months Ended December 31, 
   2017   2016 
Net cash provided by operating activities - Continuing Operations  $880   $846 
Less: Property and equipment additions - Continuing Operations   (153)   (160)
Free cash flow - Continuing Operations  $727   $686 
           
Net cash provided by operating activities - Discontinued Operations  $107   $127 
Less: Property and equipment additions - Discontinued Operations   (35)   (31)
Free cash flow - Discontinued Operations  $72   $96 
           
Total free cash flow  $799   $782 

 

6

 

 

Table 5

Wyndham Worldwide Corporation

REVENUE DETAIL BY REPORTABLE SEGMENT

(In millions)

 

   2017   2016 
   Q1   Q2   Q3   Q4   Year   Q1   Q2   Q3   Q4   Year 
Hotel Group                                                  
Royalties and Franchise Fees  $79   $98   $114   $100   $391   $74   $94   $105   $94   $367 
Marketing, Reservation and Wyndham Rewards Revenues (a)   83    106    120    98    407    83    103    125    92    405 
Hotel Management Reimbursable Revenues (b)   66    69    64    64    264    67    71    67    65    271 
Intersegment Trademark Fees   13    15    16    14    59    13    15    16    14    56 
Owned Hotel Revenues   23    21    16    18    78    27    19    17    17    81 
Ancillary Revenues (c)   34    36    38    38    144    31    32    34    34    129 
Total Hotel Group   298    345    368    332    1,343    295    334    364    316    1,309 
                                                   
Destination Network                                                  
Exchange Revenues   183    159    158    154    654    182    159    159    145    645 
Rental Revenues North America   38    46    63    25    172    39    44    62    25    169 
Ancillary Revenues (d)   19    23    22    21    86    19    22    22    20    84 
Total Destination Network   240    228    243    200    912    240    225    243    190    898 
                                                   
Vacation Ownership                                                  
Vacation Ownership Interest Sales   351    448    467    423    1,689    342    409    441    415    1,606 
Consumer Financing   111    114    119    120    463    107    108    112    113    440 
Property Management Fees and Reimbursable Revenues   175    175    171    172    692    164    161    168    168    660 
WAAM Fee-for-Service Commissions   2    4    8    10    24    17    16    13    -    46 
Ancillary Revenues (e)   9    9    8    9    37    11    11    10    9    42 
Total Vacation Ownership   648    750    773    734    2,905    641    705    744    705    2,794 
Total Reportable Segments  $1,186   $1,323   $1,384   $1,266   $5,160   $1,176   $1,264   $1,351   $1,211   $5,001 

 

   2015   2014 
   Q1   Q2   Q3   Q4   Year   Q1   Q2   Q3   Q4   Year 
Hotel Group                                                  
Royalties and Franchise Fees  $74   $96   $103   $87   $361   $68   $88   $100   $83   $339 
Marketing, Reservation and Wyndham Rewards Revenues (a)   96    108    112    92    407    76    101    117    91    385 
Hotel Management Reimbursable Revenues (b)   61    71    73    68    273    37    39    39    39    154 
Intersegment Trademark Fees   12    15    16    15    57    9    11    11    10    41 
Owned Hotel Revenues   25    20    16    19    79    24    20    18    20    81 
Ancillary Revenues (c)   24    24    37    33    120    23    24    30    24    101 
Total Hotel Group   292    334    357    314    1,297    237    283    315    267    1,101 
                                                   
Destination Network                                                  
Exchange Revenues   185    161    157    146    649    187    168    162    150    667 
Rental Revenues North America   31    40    58    24    152    28    36    49    18    130 
Ancillary Revenues (d)   17    21    22    19    79    15    17    18    16    67 
Total Destination Network   233    222    237    189    880    230    221    229    184    864 
                                                   
Vacation Ownership                                                  
Vacation Ownership Interest Sales   336    417    448    403    1,604    303    382    415    385    1,485 
Consumer Financing   104    105    108    109    427    105    106    108    108    427 
Property Management Fees and Reimbursable Revenues   153    149    159    155    615    143    145    150    142    581 
WAAM Fee-for-Service Commissions   12    19    23    28    83    33    30    18    16    98 
Ancillary Revenues (e)   12    9    12    11    43    9    10    13    17    47 
Total Vacation Ownership   617    699    750    706    2,772    593    673    704    668    2,638 
Total Reportable Segments  $1,142   $1,255   $1,344   $1,209   $4,949   $1,060   $1,177   $1,248   $1,119   $4,603 

 

 

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 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 the Company's 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 December 31, 2017 
Brand  Number of
Properties
   Number of Rooms   Average
Occupancy Rate
   Average Daily
Rate (ADR)
   Average Revenue
Per Available
Room (RevPAR)
 
                     
Hotel Group                         
Super 8   2,867    178,690    54.5%  $45.73   $24.92 
                          
Days Inn   1,773    142,460    46.9%  $67.02   $31.45 
                          
Ramada   850    118,875    52.0%  $68.44   $35.62 
                          
Wyndham Hotels and Resorts   267    58,499    57.8%  $101.96   $58.97 
                          
Howard Johnson   356    42,250    50.4%  $57.48   $29.00 
                          
Baymont   483    38,301    47.6%  $70.10   $33.37 
                          
Travelodge   436    31,615    45.4%  $70.35   $31.94 
                          
Microtel Inns & Suites by Wyndham   337    24,420    53.8%  $70.28   $37.82 
                          
Knights Inn   362    22,006    43.6%  $50.67   $22.09 
                          
TRYP by Wyndham   118    17,131    67.2%  $85.41   $57.41 
                          
Wingate by Wyndham   154    14,104    56.0%  $89.38   $50.06 
                          
AmericInn   202    11,877    47.7%  $91.56   $43.71 
                          
Hawthorn Suites by Wyndham   110    10,690    61.8%  $82.76   $51.12 
                          
Trademark   64    10,429    67.5%  $107.54   $72.54 
                          
Dolce   20    4,621    47.9%  $152.03   $72.81 
                          
Dazzler   13    1,621    77.8%  $89.49   $69.63 
                          
Esplendor   10    606    76.8%  $84.07   $64.59 
                          
Total Hotel Group   8,422    728,195    52.0%  $67.01   $34.88 
                          
Vacation Ownership                         
Wyndham Vacation Ownership resorts   221    24,966    N/A    N/A    N/A 
                          
Total Wyndham Worldwide   8,643    753,161                

 

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.

 

   As of and For the Three Months Ended December 31, 2016 
Brand  Number of
Properties
   Number of Rooms   Average
Occupancy Rate
   Average Daily
Rate (ADR)
   Average Revenue
Per Available
Room (RevPAR)
 
                     
Hotel Group                         
Super 8   2,793    177,191    55.4%  $44.53   $24.69 
                          
Days Inn   1,792    143,610    47.0%  $64.63   $30.36 
                          
Ramada   866    120,809    50.8%  $69.42   $35.29 
                          
Wyndham Hotels and Resorts   247    54,143    54.7%  $102.54   $56.08 
                          
Howard Johnson   369    42,346    49.5%  $56.39   $27.90 
                          
Baymont   436    34,614    48.1%  $67.28   $32.39 
                          
Travelodge   402    29,604    44.6%  $65.75   $29.34 
                          
Microtel Inns & Suites by Wyndham   336    24,224    54.8%  $67.74   $37.13 
                          
Knights Inn   377    22,912    44.9%  $44.79   $20.11 
                          
TRYP by Wyndham   115    16,370    64.6%  $77.53   $50.05 
                          
Wingate by Wyndham   149    13,703    58.0%  $87.16   $50.57 
                          
Hawthorn Suites by Wyndham   111    10,959    61.7%  $81.48   $50.29 
                          
Dolce   21    4,951    49.4%  $152.61   $75.37 
                          
Dazzler   11    1,464    87.2%  $61.21   $53.39 
                          
Esplendor   10    707    66.6%  $77.05   $51.29 
                          
Total Hotel Group   8,035    697,607    51.6%  $63.78   $32.92 
                          
Vacation Ownership                         
Wyndham Vacation Ownership resorts   219    24,665    N/A    N/A    N/A 
                          
Total Wyndham Worldwide   8,254    722,272                

 

 

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 Year Ended December 31, 2017 
Brand  Number of
Properties
   Number of Rooms   Average
Occupancy Rate
   Average Daily
Rate (ADR)
   Average Revenue
Per Available
Room (RevPAR)
 
                     
Hotel Group                         
Super 8   2,867    178,690    57.5%  $48.23   $27.73 
                          
Days Inn   1,773    142,460    51.3%  $69.73   $35.77 
                          
Ramada   850    118,875    54.5%  $71.39   $38.94 
                          
Wyndham Hotels and Resorts   267    58,499    59.1%  $102.02   $60.26 
                          
Howard Johnson   356    42,250    52.0%  $60.47   $31.45 
                          
Baymont   483    38,301    52.6%  $72.61   $38.20 
                          
Travelodge   436    31,615    50.9%  $74.21   $37.80 
                          
Microtel Inns & Suites by Wyndham   337    24,420    57.9%  $71.24   $41.24 
                          
Knights Inn   362    22,006    45.9%  $51.52   $23.67 
                          
TRYP by Wyndham   118    17,131    67.0%  $82.77   $55.49 
                          
Wingate by Wyndham   154    14,104    61.8%  $91.16   $56.37 
                          
AmericInn   202    11,877    47.7%  $91.56   $43.71 
                          
Hawthorn Suites by Wyndham   110    10,690    65.3%  $83.47   $54.52 
                          
Trademark   64    10,429    71.0%  $95.84   $68.02 
                          
Dolce   20    4,621    51.8%  $162.97   $84.37 
                          
Dazzler   13    1,621    70.3%  $90.98   $63.95 
                          
Esplendor   10    606    68.5%  $82.90   $56.76 
                          
Total Hotel Group   8,422    728,195    55.1%  $68.24   $37.63 
                          
Vacation Ownership                         
Wyndham Vacation Ownership resorts   221    24,966    N/A    N/A    N/A 
                          
Total Wyndham Worldwide   8,643    753,161                

 

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.

 

   As of and For the Year Ended December 31, 2016 
Brand  Number of
Properties
   Number of Rooms   Average
Occupancy Rate
   Average Daily
Rate (ADR)
   Average Revenue
Per Available
Room (RevPAR)
 
                     
Hotel Group                         
Super 8   2,793    177,191    57.8%  $48.18   $27.84 
                          
Days Inn   1,792    143,610    50.6%  $68.06   $34.44 
                          
Ramada   866    120,809    53.6%  $73.72   $39.50 
                          
Wyndham Hotels and Resorts   247    54,143    57.2%  $105.60   $60.44 
                          
Howard Johnson   369    42,346    49.7%  $61.32   $30.47 
                          
Baymont   436    34,614    51.8%  $70.63   $36.57 
                          
Travelodge   402    29,604    50.5%  $70.73   $35.74 
                          
Microtel Inns & Suites by Wyndham   336    24,224    57.4%  $68.89   $39.55 
                          
Knights Inn   377    22,912    46.0%  $49.80   $22.90 
                          
TRYP by Wyndham   115    16,370    65.6%  $77.79   $51.06 
                          
Wingate by Wyndham   149    13,703    62.7%  $90.70   $56.84 
                          
Hawthorn Suites by Wyndham   111    10,959    66.3%  $82.39   $54.60 
                          
Dolce   21    4,951    52.4%  $162.59   $85.17 
                          
Dazzler   11    1,464    87.2%  $61.21   $53.39 
                          
Esplendor   10    707    66.6%  $77.05   $51.29 
                          
Total Hotel Group   8,035    697,607    54.4%  $67.44   $36.67 
                          
Vacation Ownership                         
Wyndham Vacation Ownership resorts   219    24,665    N/A    N/A    N/A 
                          
Total Wyndham Worldwide   8,254    722,272                

 

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

(1 of 2)

Wyndham Worldwide Corporation

NON-GAAP RECONCILIATION OF ADJUSTED NET INCOME AND EPS FROM CONTINUING OPERATIONS

(In millions, except per share data)

 

   Location on Consolidated
Statements of Income
  Three Months Ended December 31, 
      2017   2016 
Diluted weighted average shares outstanding      102    108 
              
Diluted EPS from continuing operations     $4.54   $1.53 
              
Income from continuing operations     $462   $164 
              
Adjustments:             
Impairment expense (a)  Impairment   106    - 
Separation-related costs (b)  Separation-related   31    - 
Long-term performance-vested awards (c)  General and administrative   7    - 
Acquisition costs (d)  Operating   2    1 
Legacy benefit (e)  General and administrative   -    (11)
Executive departure costs (f)  General and administrative   -    6 
Restructuring costs (g)  Restructuring   -    1 
Total adjustments before tax      146    (3)
Income tax benefit (h) (i)  (Benefit)/provision for income taxes   (456)   (14)
Total adjustments after tax      (310)   (17)
Adjustments - EPS impact      (3.05)   (0.16)
Adjusted net income from continuing operations attributable to Wyndham shareholders  $152   $147 
              
Adjusted diluted EPS from continuing operations  $1.49   $1.36 

 

 

Note: Amounts may not add due to rounding.

 

(a)Relates to non-cash impairment charges related to (i) the writedown of a guarantee asset and note receivable related to a management agreement at the Company's hotel group business, (ii) the writedown of certain management agreements at the Company's hotel group business and (iii) the write-down of property and equipment and VOI inventory in Saint Thomas, U.S. Virgin Islands due to a reduction in its fair value resulting from the disruption of VOI sales caused by natural disasters impacting the Caribbean.
(b)Represents costs associated with the Company’s planned separation into two separate publicly-traded companies.
(c)Reflects the impact on the performance metrics of the performance-vested restricted stock unit grants resulting from the enactment of the Tax Cuts and Jobs Act.
(d)Represents costs related to acquisitions.
(e)Relates to the net benefit from the resolution of and adjustment to certain contingent liabilities resulting from the Company's 2006 separation from Cendant.
(f)Represents costs associated with the departure of the chief executive officer at the Company's vacation ownership business.
(g)Relates to costs incurred as a result of enhancing organizational efficiency and rationalizing existing facilities across the Company during 2016.
(h)The amount for 2017 relates to (i) the tax effect of the adjustments, (ii) an estimated one-time non-cash tax benefit of approximately $415 million resulting from the enactment of the Tax Cuts and Jobs Act and (iii) an $11 million tax benefit from the release of a valuation allowance.
(i)The amount for 2016 relates to (i) the tax effect of the adjustments, (ii) an $8 million benefit primarily due to the release of a foreign tax credit valuation allowance, and (iii) a $7 million benefit from foreign tax credits.

 

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 its investors in evaluating its 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 the Company's view do not necessarily reflect ongoing performance. The Company also internally uses these measures to assess its 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 7

(2 of 2)

Wyndham Worldwide Corporation

NON-GAAP RECONCILIATION OF ADJUSTED NET INCOME AND EPS FROM CONTINUING OPERATIONS

(In millions, except per share data)

 

   Location on Consolidated
Statements of Income
  Twelve Months Ended December 31, 
      2017   2016 
Diluted weighted average shares outstanding      104    111 
              
Diluted EPS from continuing operations     $7.89   $4.93 
              
Income from continuing operations attributable to Wyndham shareholders     $818   $544 
              
Adjustments:             
Impairment expense (a)  Impairment   246    - 
Separation-related costs (b)  Separation-related   51    - 
Restructuring costs (c)  Restructuring   15    14 
Acquisition gain (d)  Other income, net   (13)   - 
Long-term performance-vested awards (e)  General and administrative   7    - 
Legacy benefit (f)  General and administrative   (6)   (11)
Acquisition costs (g)  Operating   4    1 
Venezuela currency devaluation (h)  Operating   -    24 
Early extinguishment of debt (i)  Early extinguishment of debt   -    11 
Contract termination (j)  Operating   -    7 
Executive departure costs (k)  General and administrative   -    6 
Total adjustments before tax      304    53 
Income tax benefit (l) (m)  (Benefit)/provision for income taxes   (552)   (28)
Total adjustments after tax      (248)   25 
Total adjustments - EPS impact      (2.39)   0.22 
Adjusted net income from continuing operations attributable to Wyndham shareholders  $570   $569 
              
Adjusted diluted EPS  $5.50   $5.15 

 

 

Note: Amounts may not add due to rounding.

 

(a)Represents non-cash impairment charges related to (i) writedown of undeveloped VOI land resulting from the Company's decision to no longer pursue future development at certain locations (ii) the writedown of a guarantee asset and note receivable related to a management agreement at the Company's hotel group business, (iii) the write-down of assets resulting from the decision to abandon a new product initiative at the Company's vacation ownership business, (iv) the writedown of certain management agreements at the Company's hotel group business and (v) the write-down of property and equipment and VOI inventory in Saint Thomas, U.S. Virgin Islands due to a reduction in its fair value resulting from the disruption of VOI sales caused by natural disasters impacting the Caribbean.
(b)Represents costs associated with the Company’s planned separation into two separate publicly-traded companies.
(c)During 2017, expenses relate to restructuring initiatives at the Company's (i) corporate operations which focused on rationalizing its sourcing function and outsourcing certain information technology functions, (ii) hotel group business, which primarily focused on realigning its brand operations, and (iii) destination network business, which primarily focused on enhancing organizational efficiency and rationalizing operations. During 2016, expenses relate to enhancing organizational efficiency and rationalizing existing facilities across the Company.
(d)Represents a gain recorded in connection with the acquisition of a controlling interest in Love Home Swap at the Company's destination network business.
(e)Reflects the impact on the performance metrics of the performance-vested restricted stock unit grants resulting from the enactment of the Tax Cuts and Jobs Act.
(f)Relates to the net benefit from the resolution of and adjustment to certain contingent liabilities resulting from the Company's 2006 separation from Cendant.
(g)Represents costs related to acquisitions.
(h)Represents the impact from the devaluation of the exchange rate of Venezuela at the Company's destination network business.
(i)Represents costs incurred in connection with the Company's early repurchase of its 6.0% senior unsecured notes.
(j)Relates to costs associated with the anticipated termination of a management contract at the Company's hotel group business.
(k)Represents costs associated with the departure of the chief executive officer at the Company's vacation ownership business.
(l)The amount for 2017 relates to (i) the tax effect of the adjustments, (ii) an estimated one-time non-cash tax benefit of approximately $415 million resulting from the enactment of the Tax Cuts and Jobs Act, (iii) a $30 million tax benefit on foreign currency losses recognized from an internal restructuring and (iv) an $11 million tax benefit from the release of a valuation allowance.
(m)The amount for 2016 relates to (i) the tax effect of the adjustments, (ii) an $8 million benefit primarily due to the release of a foreign tax credit valuation allowance, (iii) a $7 million benefit from foreign tax credits, and (iv) a $2 million state tax refund for legacy tax matters during 2016. There was no tax benefit 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 its investors in evaluating its 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 the Company's view do not necessarily reflect ongoing performance. The Company also internally uses these measures to assess its 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.

 

11

 

 

Table 8

(1 of 2)

Wyndham Worldwide Corporation

NON-GAAP RECONCILIATION OF ADJUSTED EBITDA BY REPORTABLE SEGMENT

(In millions)

 

                       Long-term         
               Separation-       Performance-         
       Legacy   Restructuring   related   Impairment   vested   Acquisition-related   Adjusted 
   EBITDA   Benefit, net (b)   Costs (c)    Costs (d)   Expense (e)   Awards (f)   (Gain)/ Loss, net (g)   EBITDA (h) 
Three months ended March 31, 2017                                        
Hotel Group  $85   $-   $1   $-   $-   $-   $-   $85 
Destination Network   76    -    -    -    -    -    -    76 
Vacation Ownership   118    -    -    -    5    -    -    124 
Total Reportable Segments   279    -    1    -    5    -    -    285 
Corporate and Other (a)   (39)   -    6    -    -    -    -    (33)
Total Company  $240   $-   $7   $-   $5   $-   $-   $252 
                                         
Three months ended June 30, 2017                                        
Hotel Group  $106   $-   $-   $-   $-   $-   $-   $106 
Destination Network   61    -    -    -    -    -    -    61 
Vacation Ownership   47    -    -    -    135    -    -    183 
Total Reportable Segments   214    -    -    -    135    -    -    350 
Corporate and Other (a)   (28)   -    -    -    -    -    -    (28)
Total Company  $186   $-   $-   $-   $135   $-   $-   $322 
                                         
Three months ended September 30, 2017                                        
Hotel Group  $121   $-   $-   $-   $-   $-   $1   $122 
Destination Network   81    -    8    -    -    -    (12)   77 
Vacation Ownership   190    -    -    -    -    -    -    190 
Total Reportable Segments   392    -    8    -    -    -    (11)   389 
Corporate and Other (a)   (39)   (7)   -    21    -    -    -    (26)
Total Company  $353   $(7)  $8   $21   $-   $-   $(11)  $363 
                                         
Three months ended December 31, 2017                                        
Hotel Group  $55   $-   $-   $3   $41   $1   $2   $102 
Destination Network   40    -    -    8    -    1    -    48 
Vacation Ownership   133    -    -    1    65    1    -    200 
Total Reportable Segments   228    -    -    12    106    3    2    350 
Corporate and Other (a)   (54)   -    -    19    -    4    -    (30)
Total Company  $174   $-   $-   $31   $106   $7   $2   $320 
                                         
Twelve months ended December 31, 2017                                        
Hotel Group  $367   $-   $1   $3   $41   $1   $3   $416 
Destination Network   257    -    8    8    -    1    (12)   262 
Vacation Ownership   489    -    -    1    205    1    -    696 
Total Reportable Segments   1,113    -    9    12    246    3    (9)   1,374 
Corporate and Other (a)   (161)   (6)   6    39    -    4    -    (118)
Total Company  $952   $(6)  $15   $51   $246   $7   $(9)  $1,256 

 

Note: Amounts may not add down or across due to rounding.

 

(a)Includes the elimination of transactions between segments.
(b)Relates to a net benefit from adjustments to certain contingent liabilities from the Company's 2006 separation from Cendant.
(c)Relates to expenses associated with restructuring initiatives at the Company's (i) corporate operations which focused on rationalizing its sourcing function and outsourcing certain information technology functions, (ii) hotel group business which primarily focused on realigning its brand operations and (iii) destination network business which primarily focused on enhancing organizational efficiency and rationalizing its operations.
(d)Represents costs associated with the Company’s planned separation into two separate publicly-traded companies.
(e)Represents non-cash impairment charges related to (i) writedown of undeveloped VOI land resulting from the Company's decision to no longer pursue future development at certain locations, (ii) the writedown of a guarantee asset and note receivable related to a management agreement at the Company's hotel group business, (iii) the write-down of assets resulting from the decision to abandon a new product initiative at the Company's vacation ownership business, (iv) the writedown of certain management agreements at the Company's hotel group business and (v) the write-down of property and equipment and VOI inventory in Saint Thomas, U.S. Virgin Islands due to a reduction in its fair value resulting from the disruption of VOI sales caused by natural disasters impacting the Caribbean.
(f)Reflects the impact on the performance metrics of the performance-vested restricted stock unit grants resulting from the enactment of the Tax Cuts and Jobs Act.
(g)Represents (i) a gain recorded in connection with the acquisition of a controlling interest in Love Home Swap ($13 million) partially offset by $1 million of acquisition costs, (ii) $2 million of costs related to the Company's planned acquisition of La Quinta Holdings and (iii) $1 million of costs related to the AmericInn acquisition which closed in October 2017.
(h)Adjusted EBITDA for 2017 includes share-based compensation expense of $14 million in each of the first, second and third quarters and $13 million in the fourth quarter and $55 million for the full year.

 

12

 

 

Table 8

(2 of 2)

Wyndham Worldwide Corporation

NON-GAAP RECONCILIATION OF ADJUSTED EBITDA BY REPORTABLE SEGMENT

(In millions)

 

       Venezuela                   Executive     
       Currency   Acquisition   Legacy   Restructuring   Contract   Departure   Adjusted 
   EBITDA   Devaluation (b)   Costs (c)   Costs (d)   Costs (e)   Termination (f)   Costs (g)   EBITDA (h) 
Three months ended March 31, 2016                                        
Hotel Group  $84   $-   $-   $-   $-   $-   $-   $84 
Destination Network   54    24    -    -    -    -    -    78 
Vacation Ownership   136    -    -    -    -    -    -    136 
Total Reportable Segments   274    24    -    -    -    -    -    298 
Corporate and Other (a)   (34)   -    -    -    -    -    -    (34)
Total Company  $240   $24   $-   $-   $-   $-   $-   $264 
                                         
Three months ended June 30, 2016                                        
Hotel Group  $101   $-   $-   $-   $-   $-   $-   $101 
Destination Network   60    -    -    -    -    -    -    60 
Vacation Ownership   187    -    -    -    -    -    -    187 
Total Reportable Segments   348    -    -    -    -    -    -    348 
Corporate and Other (a)   (33)   -    -    -    -    -    -    (33)
Total Company  $315   $-   $-   $-   $-   $-   $-   $315 
                                         
Three months ended September 30, 2016                                        
Hotel Group  $107   $-   $-   $-   $3   $7   $-   $117 
Destination Network   69    -    -    -    4    -    -    73 
Vacation Ownership   189    -    -    -    6    -    -    195 
Total Reportable Segments   365    -    -    -    13    7    -    385 
Corporate and Other (a)   (32)   -    -    (1)   1    -    -    (32)
Total Company  $333   $-   $-   $(1)  $14   $7   $-   $353 
                                         
Three months ended December 31, 2016                                        
Hotel Group  $99   $-   $1   $-   $(1)  $-   $-   $99 
Destination Network   39    -    -    -    -    -    -    39 
Vacation Ownership   182    -    -    -    2    -    6    191 
Total Reportable Segments   320    -    1    -    1    -    6    329 
Corporate and Other (a)   (12)   -    -    (11)   -    -    -    (24)
Total Company  $308   $-   $1   $(11)  $1   $-   $6   $305 
                                         
Twelve months ended December 31, 2016                                        
Hotel Group  $391   $-   $1   $-   $2   $7   $-   $401 
Destination Network   222    24    -    -    4    -    -    251 
Vacation Ownership   694    -    -    -    8    -    6    708 
Total Reportable Segments   1,307    24    1    -    14    7    6    1,360 
Corporate and Other (a)   (110)   -    -    (11)   -    -    -    (121)
Total Company  $1,197   $24   $1   $(11)  $14   $7   $6   $1,239 

 

 

Note: Amounts may not add across due to rounding. The sum of the quarters may not add down 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 acquisitions.
(d)Relates to a benefit from adjustments to certain contingent liabilities from the Company's 2006 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 termination of a management contract.
(g)Represents costs associated with the departure of the chief executive officer at the Company's vacation ownership business.
(h)Adjusted EBITDA for 2016 includes share-based compensation expense of $13 million in the first quarter, $20 million in the second quarter, $14 million in the third quarter and $13 million in the fourth quarter. Share based compensation for the full year of 2016 totaled $61 million.

 

13

 

 

Table 9

Wyndham Worldwide Corporation

NON-GAAP FINANCIAL DATA FOR CONTINUING AND DISCONTINUED OPERATIONS

(In millions)

 

The following tables highlight selected financial data from continuing and discontinued operations:

 

   Three Months Ended December 31, 
   2017   2016 
   Continuing
Operations
   Discontinued
Operations
   Total   Continuing
Operations
   Discontinued
Operations
   Total 
                         
Revenues:                              
Hotel Group  $332   $-   $332   $316   $-   $316 
Destination Network   200    148    348    190    127    317 
Vacation Ownership   734    -    734    705    -    705 
Corporate and Other   (20)   -    (20)   (18)   -    (18)
Total Revenues  $1,246   $148   $1,394   $1,193   $127   $1,320 
                               
Net Income/(Loss)*  $462   $(13)  $449   $164   $-   $164 
                               
Diluted EPS  $4.54   $(0.13)  $4.41   $1.53   $-   $1.53 
                               
Adjusted Net Income/(Loss)*  $152   $(2)  $150   $147   $(1)  $146 
                               
Adjusted Diluted EPS  $1.49   $(0.02)  $1.47   $1.36   $(0.01)  $1.35 
                               
Adjusted EBITDA:                              
Hotel Group  $102   $-   $102   $99   $-   $99 
Destination Network   48    14    62    39    13    52 
Vacation Ownership   200    -    200    191    -    191 
Corporate and Other   (30)   -    (30)   (24)   -    (24)
Total Adjusted EBITDA  $320   $14   $334   $305   $13   $318 

 

   Twelve Months Ended December 31, 
   2017   2016 
   Continuing
Operations
   Discontinued
Operations
   Total   Continuing
Operations
   Discontinued
Operations
   Total 
Revenues:                        
Hotel Group  $1,343   $-   $1,343   $1,309   $-   $1,309 
Destination Network   912    745    1,657    898    673    1,571 
Vacation Ownership   2,905    -    2,905    2,794    -    2,794 
Corporate and Other   (84)   -    (84)   (75)   -    (75)
Total Revenues  $5,076   $745   $5,821   $4,926   $673   $5,599 
                               
Net Income*  $818   $53   $871   $544   $67   $611 
                               
Diluted EPS  $7.89   $0.51   $8.40   $4.93   $0.60   $5.53 
                               
Adjusted Net Income*  $570   $68   $639   $569   $67   $636 
                               
Adjusted Diluted EPS  $5.50   $0.66   $6.16   $5.15   $0.60   $5.75 
                               
Adjusted EBITDA:                              
Hotel Group  $416   $-   $416   $401   $-   $401 
Destination Network (a)   262    141    403    251    134    385 
Vacation Ownership   696    -    696    708    -    708 
Corporate and Other   (118)   -    (118)   (121)   -    (121)
Total Adjusted EBITDA  $1,256   $141   $1,397   $1,239   $134   $1,373 

 

 

Note: Amounts may not add across due to rounding.

(*)Includes non-controlling interests.
(a)Adjusted EBITDA from discontinued operations excludes costs previously allocated to the Company's European vacation rentals business of $8 million in both 2017 and 2016.

 

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Table 10

Wyndham Worldwide Corporation

NON-GAAP RECONCILIATION FOR DISCONTINUED OPERATIONS

ADJUSTED NET INCOME , DILUTED EPS AND ADJUSTED EBITDA FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2017 AND 2016

(In millions, except per share data)

 

Adjusted Net Income/(Loss) and Adjusted Diluted EPS:

 

   Three Months Ended December 31,   Twelve Months Ended December 31, 
   2017   2016   2017   2016 
Diluted weighted average shares outstanding   102    108    104    111 
                     
Diluted EPS from discontinued operations  $(0.13)  $-   $0.51   $0.60 
                     
(Loss)/income from discontinued operations, net of income taxes  $(13)  $-   $53   $67 
                     
Adjustments:                    
Separation-related costs (a)   11    -    15    - 
Bargain purchase gain (b)   -    (2)   -    (2)
Restructuring costs (c)   -    -    -    1 
Acquisition costs (d)   -    1    -    1 
                     
Total adjustments before tax   11    (1)   15    - 
Income tax provision/(benefit)   -    -    -    - 
Total adjustments after tax   11    (1)   15    - 
                     
Adjusted (loss)/income from discontinued operations, net of income taxes  $(2)  $(1)  $68   $67 
                     
Adjusted diluted EPS from discontinued operations  $(0.02)  $(0.01)  $0.66   $0.60 

 

Adjusted EBITDA:

 

   Three Months Ended December 31,   Twelve Months Ended December 31, 
   2017   2016   2017   2016 
(Loss)/income from discontinued operations, net of income taxes  $(13)  $-   $53   $67 
Provision/(benefit) for income taxes   -    (1)   19    15 
Depreciation and amortization   14    14    54    50 
Interest expense   2    1    -    2 
EBITDA from discontinued operations   3    14    126    134 
                     
Adjustments:                    
Separation-related costs (a)   11    -    15    - 
Bargain purchase gain (b)   -    (2)   -    (2)
Restructuring costs (c)   -    -    -    1 
Acquisition costs (d)   -    1    -    1 
Total adjustments   11    (1)   15    - 
                     
Adjusted EBITDA from discontinued operations  $14   $13   $141   $134 

 

 

Note: Amounts may not add due to rounding. All adjustments are reflected in income from discontinued operations, net of tax.

 

(a)Represents costs associated with the Company’s expected disposal of its European vacation rentals business.
(b)Represents a gain from a bargain purchase on an acquisition at the Company's destination network business.
(c)Relates to costs incurred as a result of enhancing organizational efficiency and rationalizing operations at the Company's destination network business during 2017 and 2016.
(d)Represents costs related to acquisitions.

 

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 its investors in evaluating its 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 the Company's view do not necessarily reflect ongoing performance. The Company also internally uses these measures to assess its 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.

 

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Table 11

Wyndham Worldwide Corporation

NON-GAAP RECONCILIATION OF GROSS VOI SALES

(In millions)

 

GROSS VOI SALES  

 

The Company believes gross vacation ownership sales provide an enhanced understanding of the performance of its 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                    
2017  Q1   Q2   Q3   Q4   Full Year 
                     
Gross VOI sales  $439   $563   $602   $539   $2,144 
Less: Sales under WAAM Fee-for-Service   (3)   (5)   (11)   (15)   (35)
Gross VOI sales, net of WAAM Fee-for-Service sales   436    558    590    524    2,108 
Less: Loan loss provision   (85)   (110)   (123)   (101)   (420)
Vacation ownership interest sales  $351   $448   $467   $423   $1,689 
                          
2016                         
                          
Gross VOI sales  $428   $518   $564   $502   $2,012 
Less: Sales under WAAM Fee-for-Service   (23)   (20)   (20)   (1)   (64)
Gross VOI sales, net of WAAM Fee-for-Service sales   405    498    544    501    1,948 
Less: Loan loss provision   (63)   (90)   (104)   (86)   (342)
Vacation ownership interest sales  $342   $409   $441   $415   $1,606 
                          
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)
Less: 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 

 

 

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 
                     
2017  $25   $22   $33   $27   $107 
2016  $25   $22   $31   $30   $108 
2015  $24   $17   $32   $27   $100 
2014  $25   $21   $27   $24   $97 

 

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Table 12

Wyndham Worldwide Corporation

2018 Earnings and Driver Outlook

As of February 14, 2018

(In millions, except per share data)

 

Assumptions:

 

Amounts exclude the Company's European vacation rentals business, which has been classified as a discontinued operation

Amounts exclude the Company's planned acquisition of La Quinta's hotel franchising and hotel management business and the costs of financing such acquisition

Amounts are consistent with the Company's historical recognition of revenues, without adjustment for the required 2018 change in revenue recognition accounting

Amounts exclude costs associated with the Company's planned separation into two separate publicly-traded companies

 

       2018 Outlook   Year-over-Year
   2017 Actual   Low   High   Growth @ Mid-Point
Full-Year (a)                  
Net Revenues                  
Hotel Group  $1,343   $1,365   $1,405   3%
Destination Network   912    935    965   4%
Vacation Ownership   2,905    3,040    3,120   6%
Corporate and Other (c)   (84)   (80)   (90)   
Total Revenues  $5,076   $5,260   $5,400   5%
                   
Adjusted EBITDA                  
Hotel Group  $416   $445   $455   8%
Destination Network   262    265    275   3%
Vacation Ownership   696    735    750   7%
Corporate and Other   (118)   (115)   (125)   
Total Adjusted EBITDA  $1,256   $1,330   $1,355   7%
                   
Depreciation and amortization   (213)   (219)   (224)   
Interest expense, net   (150)   (173)   (177)   
                   
Tax rate   36.1%   25.2%   24.8%   
                   
Adjusted Net Income  $570   $702   $717   25%
                   
Adjusted Diluted Earnings per Share  $5.50   $6.90   $7.05   27%
                   
Diluted Shares   103.7    101.7    101.7    
                   
Full-Year Drivers (a) (d)              EBITDA Impact
of 100bps Change (e)
Hotel Group                  
Global RevPAR   3%   2%   3%  $4.0
Number of Rooms   4%   2%   4%  4.0
                   
Destination Network                  
Average Number of Members   (1)%   1%   3%  4.5
Exchange Revenue Per Member   3%   1%   3%  7.0
                   
Vacation Ownership                  
Tours   6%   5%   7%  6.0
Volume Per Guest   1%   1%   3%  9.0
                   
First Quarter (a) (b)                  
                   
Adjusted EBITDA  $252   $263   $268    
                   
Adjusted Diluted Earnings per Share  $1.03   $1.24   $1.27    
                   
Diluted Shares   106.0    101.3    101.3    

 

 

(a)Outlook is based upon December 31, 2017 foreign exchange rates.
(b)First quarter outlook assumes that interest expense increases $9 million year-over-year.
(c)Primarily reflects elimination of intercompany fees included within the business segments.
(d)A glossary of terms is included in Table 3.
(e)EBITDA sensitivities for revenue drivers are based on average systemwide trends. Operating circumstances including but not limited to brand mix, product mix, geographical concentration or market segment result in variability, which may change the impact.

 

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Table 13

Wyndham Worldwide Corporation

SUMMARIZED BALANCE SHEET INFORMATION

(In millions)

 

   At December 31, 
   2017   2016 
         
Cash and cash equivalents (a)  $100   $113 
Vacation ownership contract receivables, net   2,901    2,777 
Vacation ownership and other inventory   1,249    1,345 
Securitized vacation ownership debt   2,098    2,141 
Corporate debt (b)   3,909    3,300 

 

As of December 31, 2017, the available capacity under the Company's borrowing arrangements was as follows:

 

   Securitized Bank
Conduit Facilities (c)
   Revolving Credit
Facilities
 
Total Capacity  $1,400   $1,900 
Less: Outstanding Borrowings   879    395 
Letters of credit   -    1 
Commercial paper borrowings (d)   -    147 
Available capacity  $521   $1,357 

 

 
(a)Excludes cash and cash equivalents of discontinued operations of $133 million and $72 million at December 31, 2017 and 2016, respectively.
(b)Excludes corporate debt, primarily capital leases, of discontinued operations of $68 million and $71 million at December 31, 2017 and 2016, respectively.
(c)The capacity of these facilities is subject to the Company's ability to provide additional assets to collateralize additional securitized borrowings.
(d)The Company considers outstanding borrowings under its commercial paper programs to be a reduction of the available capacity of its revolving credit facilities.

 

18