Wyndham International Reports Fourth Quarter and Year End 2002 Results - $590 Million in Asset Sales in 2002 - Fourth Quarter Results Exceed Guidance
DALLAS--Wyndham International, Inc. WBR today reported results for the fourth quarter and full year ending Dec. 31, 2002.
Business Performance
On a comparable pro forma basis, which reflects adjustments for acquisitions and dispositions, earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted, was $55.7 million for the fourth quarter versus $54.4 million for the same period in 2001. For the full year of 2002, pro forma EBITDA, as adjusted, was $301.3 million, versus $398.5 million in 2001. The pro forma results have been adjusted to remove the operating results of all assets sold during 2002, as if sold on Jan. 1, 2001.
Wyndham reported a net loss of $37 million and a pro forma net loss of $43.1 million for the fourth quarter, versus a $57.1 million net loss and $61.7 million pro forma net loss for the same period in 2001. After the effect of the Company's preferred dividend, this resulted in a net loss of $0.44 per share and a pro forma net loss per share of $0.48 for the quarter. For the full year 2002, the net loss was $500 million and the pro forma net loss was $513.8 million, versus a $139 million net loss and $492.9 million pro forma net loss for the prior year. Significant components of the difference between the pro forma net loss of $513.8 million and the pro forma EBITDA, as adjusted, of $301.3 million include $324.1 million of goodwill write-off, $267.1 million of depreciation and amortization, $227.8 million of interest expense, and $84.8 million of derivative losses offset by a $122.4 million tax benefit. (See attached schedule for complete reconciliation between net loss and EBITDA.)
Revenue per available room (RevPAR) continued to improve each quarter of the year. RevPAR for the Company's comparable owned and leased hotels improved from a decline of 23.1 percent in the fourth quarter 2001 to an increase of 7.6 percent in the fourth quarter of 2002, which exceeded the Company's guidance of 5.0 to 7.0 percent. The increase for the fourth quarter was comprised of a 7.1 percentage point increase in occupancy and a 4.2 percent reduction in average daily rate (ADR) for a RevPAR of $67.82.
"Given the challenging climate for the lodging industry, we made a strategic decision to grow our market share through a focus on occupancy. Our strategy paid off as RevPAR improved steadily throughout the year," said Wyndham International Chairman and Chief Executive Officer Fred J. Kleisner.
Branded Performance
For the fourth quarter 2002, comparable owned and operated Wyndham hotels and resorts had a RevPAR of $75.75, a 14.2 percent increase from the fourth quarter of 2001. For the year, these hotels and resorts experienced a RevPAR decline of only 2.4 percent, derived from a 3.1 percentage point increase in occupancy and a 6.7 percent decline in ADR. RevPAR on all comparable Wyndham owned and leased properties declined 6.8 percent during the year, which was comprised of a 1.1 percentage point increase in occupancy and an 8.3 percent decline in rate compared to 2001. Wyndham-branded owned and leased properties increased their RevPAR penetration index within its competitive set each month of the fourth quarter versus the prior year:
October +150 bps
November +230 bps
December +620 bps
Further, these properties ended the year with a RevPAR index of over 100 percent.
Mr. Kleisner stated: "The marked improvement of our branded properties compared to our total owned and leased portfolio underscores our core strategy to focus on proprietary-branded operations and, specifically, reflects the strength of Wyndham ByRequest®, our guest loyalty program. Wyndham ByRequest is a unique program that has helped us grow market share by treating our guests as individuals. The market response has been outstanding; we have tripled membership since June 2002 with almost 1.2 million members."
The operating margins for Wyndham-branded properties remained strong despite occupancy gains from guests paying lower rates, creating margin compression. For the fourth quarter, hotel gross operating profit margins at Wyndham-branded owned and operated hotels and resorts maintained the same margins as in the prior year even with significant cost increases in property and casualty insurance. These fixed cost increases were offset by variable cost reductions reflecting the effectiveness of proactive business planning.
Financial Highlights
Cash and equivalents were $181.1 million as of Dec. 31, 2002, inclusive of $143.8 million of restricted cash. Cash and equivalents increased by $15.7 million from the $165.4 million on hand at the end of the third quarter 2002.
During the fourth quarter, debt decreased by $460 million due primarily to the application of net asset sale proceeds. As of Dec. 31, 2002, the Company's total debt was $2.827 billion. The breakdown of the debt at year-end was as follows: Revolver $156.4 million; IRLs $447.7 million; Term Loans $1.183 billion; and Mortgage and other indebtedness $1.039 billion. At the end of the fourth quarter, liquidity was approximately $256 million. The Company defines liquidity as revolver availability, plus cash available at the corporate level.
Said Mr. Kleisner: "Since the beginning of 2000, we have maintained a strong liquidity position, notwithstanding the sluggish economy that began in 2001 and continues into 2003. We will continue to manage cash very tightly and make prudent spending decisions in light of the current economic conditions."
Wyndham began 2002 with approximately $280 million of mortgage loans coming due in the year. Through extensions and refinancings, the Company eliminated its 2002 maturities. In addition, it is currently in the process of receiving bids to refinance its 2003 and 2004 mortgage pool maturities and to push the maturity dates by at least five years.
Additionally, during the quarter, the Company spent approximately $23 million on capital expenditures. For the full year of 2003, Wyndham expects to commit approximately $83 million in maintenance capital expenditures.
Strategic Plan
In 2002, the Company sold 20 hotel properties and its investment in Shula's Steakhouse for gross proceeds of approximately $590 million, including the sale of 14 non-strategic assets to Westbrook Hotel Partners for gross proceeds of approximately $517 million.
In total, since 1999, the Company has sold 102 assets for approximately $1.5 billion. Wyndham has 34 non-strategic assets remaining to be sold. The Company expects to generate gross proceeds in the range of $750 million to $900 million from the sale of these remaining non-strategic assets. The net proceeds will be used to reduce debt.
Wyndham has and will continue to focus its business development in the acquisition of management and franchise contracts with little to no capital investment as well as the conversion of non-proprietary-branded hotels to the Wyndham flag.
During 2002, Wyndham signed seven new franchise agreements. The largest franchise agreement was the 850-room Wyndham Nassau located in the Bahamas. The property was converted from Marriott on Nov. 1, 2002. On Dec. 1, 2002, the Company converted the Hilton Little Rock to a Wyndham Hotel. In addition, during the year, the Company has, or is in the process of, converting three other owned, non-proprietary hotels to the Wyndham brand: the Condado Plaza in Puerto Rico, the Hilton Ft. Lauderdale in Florida and the Hilton Columbus in Georgia.
2003 Guidance
For the first quarter of 2003, RevPAR is forecasted to be negative 1 to 2 percent as compared to the first quarter of 2002, and EBITDA, as adjusted, is forecasted to be between $82 and $87 million. For the full year of 2003, the Company is estimating RevPAR to be flat to slightly positive, and full year EBITDA, as adjusted, is expected to be essentially flat as compared to 2002, in the range of $300-$305 million.
Said Mr. Kleisner: "Our 2003 projections assume that there is no measurable recovery in the economy until the end of 2003, there are no major terrorist attacks against the US, and we have not built in any impact of a potential war with Iraq. When Sept. 11 happened, it took us 14 days to implement a plan; in the event of war in Iraq, we will be ready to implement our plan within 24 hours."
Mr. Kleisner continued: "Wyndham will remain nimble to react to changes in our industry and make the necessary adjustments to our business operating plan to maintain a financially sound company."
The Company has also taken additional expense reductions to offset the increases in fixed expenses such as property, health and directors and officers insurance. These additional measures include the reduction in the workforce and a wage freeze for all non-hourly employees in both the field and the corporate office. The Company expects these actions will help keep 2003 operating margins slightly above 2002 levels.
Wyndham International, Inc. offers upscale and luxury hotel and resort accommodations through proprietary lodging brands and a management services division. Based in Dallas, Wyndham owns, leases, manages and franchises hotels and resorts in the United States, Canada, Mexico, the Caribbean and Europe. For more information, visit www.wyndham.com. For reservations, call 800-WYNDHAM.
Cautionary Statement - This press release contains certain forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including projections about future operating results. The company's results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause a difference include, but are not limited to, risks associated with the availability of equity or debt financing at terms and conditions favorable to Wyndham; risks associated with the course of litigation; Wyndham's ability to effect sales of assets on favorable terms and conditions and the ability to negotiate and execute definitive sale agreements; Wyndham's ability to integrate acquisitions into its operations and management; risks associated with the hotel industry and real estate markets in general; competition within the lodging industry; the impact of general economic conditions; risks associated with debt financing; the impact of terrorists' activity, threats of terrorist activity, war and responses thereto on the economy in general and the travel and hotel industries in particular; and other risks and uncertainties set forth in the company's annual, quarterly and current reports, and proxy statements.
WYNDHAM INTERNATIONAL, INC. 2002 OPERATING STATISTICS BY QUARTER Twelve Months Ended Fourth Quarter December 31, 2002 --------------------------- 2002 2001 % Change 2002 2001 % Change -------- -------- --------- -------- -------- COMPARABLE WYNDHAM BRANDED OWNED AND OPERATED HOTELS (a) Wyndham Branded Owned and Operated Average daily rate $110.50 $114.54 -3.5% $114.96 $125.16 -8.1% Occupancy 66.4% 57.5% 8.9 ppt 69.3% 66.6% 2.7 ppt RevPAR $73.39 $65.86 11.4% $79.66 $83.30 -4.4% Wyndham Hotels & Resorts Average daily rate $114.90 $117.09 -1.9% $119.12 $127.68 -6.7% Occupancy 65.9% 56.6% 9.3 ppt 69.1% 66.0% 3.1 ppt RevPAR $75.75 $66.31 14.2% $82.30 $84.31 -2.4% Wyndham Luxury Resorts (b) Average daily rate $222.45 $226.24 -1.7% $225.40 $247.11 -8.8% Occupancy 58.3% 54.5% 3.8 ppt 56.5% 55.5% 1.0 ppt RevPAR $129.71 $123.30 5.2% $127.44 $137.28 -7.2% Summerfield by Wyndham Average daily rate $93.85 $105.81 -11.3% $100.82 $119.05 -15.3% Occupancy 77.2% 69.3% 7.9 ppt 79.7% 77.3% 2.4 ppt RevPAR $72.48 $73.34 -1.2% $80.32 $91.93 -12.6% Wyndham Garden Average daily rate $75.40 $83.10 -9.3% $79.30 $90.79 -12.7% Occupancy 59.2% 51.3% 7.9 ppt 61.2% 60.4% 0.8 ppt RevPAR $44.67 $42.68 4.7% $48.54 $54.82 -11.5% COMPARABLE OWNED & LEASED HOTELS Proprietary Branded (c) Average daily rate $110.17 $114.83 -4.1% $114.54 $126.17 -9.2% Occupancy 67.7% 59.1% 8.6 ppt 70.5% 67.9% 2.6 ppt RevPAR $74.54 $67.76 10.0% $80.76 $85.65 -5.7% Non-Proprietary Branded (d) Average daily rate $89.69 $95.19 -5.8% $92.76 $99.31 -6.6% Occupancy 57.7% 54.2% 3.5 ppt 60.3% 62.9% -2.6 ppt RevPAR $51.74 $51.62 0.2% $55.92 $62.41 -10.4% Total Portfolio Average daily rate $104.80 $109.41 -4.2% $108.88 $118.78 -8.3% Occupancy 64.7% 57.6% 7.1 ppt 67.5% 66.4% 1.1 ppt RevPAR $67.82 $63.02 7.6% $73.53 $78.89 -6.8% NOTE: All hotel statistics exclude assets sold to date. (a) Brand statistics are based on comparable owned and operated hotels for respective periods. (b) Reflects results of the Boulders, Carmel Valley Ranch, the Lodge at Ventana Canyon, and Isla Navidad. (c) Reflects Wyndham Hotels & Resorts, Wyndham Luxury Resorts, Summerfield Suites by Wyndham and Wyndham Garden Hotels that were branded as of January 1, 2001. (d) Non-proprietary brand hotels owned by the Company as of January 1, 2001.
WYNDHAM INTERNATIONAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (in thousands) (Unaudited) Quarter Ended December 31, 2002 2001 2002 2001 Comparable Comparable Pro Forma Pro Forma Actual Actual (1) (1) ----------- ----------- --------- Revenues: Hotel revenues $404,487 $377,060 $415,388 $390,765 Management fees and service fee income 4,162 3,847 4,235 4,680 Interest and other income 1,529 2,129 1,534 2,295 ----------- ----------- --------- Total revenues 410,178 383,036 421,157 397,740 ----------- ----------- --------- Expenses: Hotel expenses 345,284 312,198 351,442 318,185 General and administrative costs 10,767 16,558 10,766 17,483 Interest expense 53,583 64,767 53,631 65,327 ----------- ----------- --------- Total operating costs and expenses 409,634 393,523 415,839 400,995 ----------- ----------- --------- Revenues net of direct expenses 544 (10,487) 5,318 (3,255) Adjustments (2): Professional fees and other 4,179 2,803 4,179 2,891 Bond offering costs (754) – (754) Abandoned transaction costs 669 2,414 669 2,414 Pre-opening and conversion costs 53 3,481 55 3,482 Loss on derivative instruments 15,474 18,004 15,474 18,004 Impairment of assets held for sale – 24,159 – 24,159 Gain on sale of assets (11,599) (3,436) (14,209) (3,436) Write-off of management, leasehold costs and license agreements 4,229 4,204 4,229 3,287 ----------- ----------- --------- Total adjustments 12,251 51,629 9,643 50,801 ----------- ----------- --------- Depreciation and amortization 69,417 69,732 66,179 73,489 Equity in earnings from unconsolidated subsidiaries (72) (220) (71) (369) Minority interest in consolidated subsidiaries 59 1,145 58 1,145 ----------- ----------- --------- 69,404 70,657 66,166 74,265 ----------- ----------- --------- Loss from continued operations before taxes (81,111) (132,773) (70,491) (128,321) Benefit for income taxes 38,018 71,034 33,812 67,872 ----------- ----------- --------- Loss from continued operations (43,093) (61,739) (36,679) (60,449) ----------- ----------- --------- Income from discontinued operations, net of taxes and minority interest – -- 1,355 3,366 Loss from discontinued operations, net of taxes and minority interest – -- (1,652) ----------- ----------- --------- Income (loss) from discontinued operations, net of taxes and minority interest – -- (297) 3,366 ----------- ----------- --------- Net loss $(43,093) $(61,739) $(36,976) $(57,083) =========== =========== ========= ========= EBITDA, as adjusted $55,675 $54,449 $69,054 $75,222 =========== =========== ========= ========= (1) The Comparable Pro Forma financial statements have been adjusted to remove the operations of hotels sold and related interest expense from corresponding retired debt and management contract revenue from terminated management contracts. (2) Adjustments exclude unusual and infrequent expenses to provide a comparable anaylsis of hotel operations. WYNDHAM INTERNATIONAL, INC. EBITDA Reconciliation (in thousands, except per share data) (Unaudited) Quarter Ended December 31, 2002 2001 2002 2001 Comparable Comparable Pro Forma Pro Forma Actual Actual ----------- ----------- --------- EBITDA Reconciliation Net loss $(43,093) $(61,739) $(36,976) $(57,083) Interest expense 53,583 64,767 53,631 65,327 Depreciation and amortization 69,417 69,732 66,179 73,489 Benefit for income taxes (38,018) (71,034) (33,812) (67,872) ----------- ----------- --------- EBITDA 41,889 1,726 49,022 13,861 Interest, depreciation and amortization from equity interest in unconsolidated subsidiaries 1,681 1,778 1,682 1,805 Interest, depreciation and amortization attributable to minority interests (861) (421) (1,479) (1,173) Professional fees and other 4,179 2,803 4,179 2,891 Bond offering costs (754) – (754) Abandoned transaction costs 669 2,414 669 2,414 Pre-opening and conversion costs 53 3,481 55 3,482 Amortization of unearned compensation 715 654 715 654 Loss on derivative instruments 15,474 18,004 15,474 18,004 Impairment of assets held for sale – 24,159 – 24,159 Gain on sale of assets (11,599) (3,436) (14,209) (3,436) Write-off of management, leasehold costs and license agreements 4,229 3,287 4,229 3,287 Discontinued operations EBITDA – -- 9,471 9,274 ----------- ----------- --------- EBITDA, as adjusted $55,675 $54,449 $69,054 $75,222 =========== =========== ========= ========= Per Share Calculations: Loss from continued operations $(43,093) $(61,739) $(36,679) $(60,449) Income (loss) from discontinued operations, net of taxes and minority interest – -- (297) 3,366 ----------- ----------- --------- Net loss $(43,093) $(61,739) $(36,976) $(57,083) Adjustment for preferred stock (37,081) (40,092) (37,081) (40,092) ----------- ----------- --------- Net loss attributable to common shareholders $(80,174) $(101,831) $(74,057) $(97,175) =========== =========== ========= ========= Basic and diluted loss per common share: Loss from continued operations $(0.48) $(0.61) $(0.44) $(0.60) Income from discontinued operations, net of taxes and minority interest – -- – 0.02 ----------- ----------- --------- Net loss per common share $(0.48) $(0.61) $(0.44) $(0.58) =========== =========== ========= ========= Basic and diluted weighted average common shares and share equivalents 167,999 167,860 167,999 167,860
WYNDHAM INTERNATIONAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (in thousands) (Unaudited) Twelve Months Ended December 31, 2002 2001 2002 2001 Comparable Comparable Pro Forma Pro Forma Actual Actual (1) (1) ----------- ----------- ----------- Revenues: Hotel revenues $1,651,376 $1,741,454 $1,691,583 $1,848,950 Management fees and service fee income 16,366 13,829 17,639 20,240 Interest and other income 6,668 9,369 6,922 9,902 ----------- ----------- ----------- Total revenues 1,674,410 1,764,652 1,716,144 1,879,092 ----------- ----------- ----------- Expenses: Hotel expenses $1,325,941 $1,310,814 $1,356,624 $1,397,107 General and administrative costs 52,707 53,726 52,694 59,204 Interest expense 227,838 288,120 227,899 294,409 ----------- ----------- ----------- Total operating costs and expenses 1,606,486 1,652,660 1,637,217 1,750,720 ----------- ----------- ----------- Revenues net of direct expenses 67,924 111,992 78,927 128,372 Adjustments(2): Reductions in reservation and marketing funds – 5,239 – 5,239 Professional fees and other 7,530 14,257 7,530 14,482 Bond offering costs 3,750 – 3,750 Abandoned transaction costs 2,803 3,921 2,803 3,921 Pre-opening and conversion costs 1,011 12,098 1,011 12,117 Interstate Spin-off costs – -- – 3 Loss on derivative instruments 84,844 47,600 84,844 47,600 Impairment of assets held for sale 162 24,159 162 24,159 Loss (gain) on sale of assets 6,641 11,202 (10,701) 11,202 Write-off of management, leasehold costs and license agreements 6,126 21,988 6,445 16,466 ----------- ----------- ----------- Total adjustments 112,867 140,464 95,844 135,189 ----------- ----------- ----------- Depreciation and amortization 267,121 230,259 263,884 243,063 Equity in earnings from unconsolidated subsidiaries (730) (2,690) (1,039) (3,500) Minority interest in consolidated subsidiaries 765 4,975 765 8,257 ----------- ----------- ----------- 267,156 232,544 263,610 247,820 ----------- ----------- ----------- Loss from continued operations before taxes (312,099) (261,016) (280,527) (254,637) Benefit for income taxes 122,367 115,653 110,678 107,993 ----------- ----------- ----------- Loss from continued operations (189,732) (145,363) (169,849) (146,644) ----------- ----------- ----------- Income from discontinued operations, net of taxes and minority interest – -- 5,212 19,907 Gain from discontinued operations, net of taxes and minority interest – -- (10,977) ----------- ----------- ----------- Income (loss) from discontinued operations, net of taxes and minority interest – -- (5,765) 19,907 ----------- ----------- ----------- Loss before cumulative effect of accounting change and extraordinary item, net of taxes (189,732) (145,363) (175,614) (126,737) Accounting change, net of applicable taxes (324,102) (346,412) (324,102) (10,365) Extraordinary item, net of applicable taxes – (1,119) – (1,838) ----------- ----------- ----------- Net loss $(513,834) $(492,894) $(499,716) $(138,940) =========== =========== =========== =========== EBITDA, as adjusted $301,258 $398,498 $356,403 $479,981 =========== =========== =========== =========== (1) The Comparable Pro Forma financial statements have been adjusted to remove the operations of hotels sold and related interest expense from corresponding retired debt and management contract revenue from terminated management contracts. (2) Adjustments exclude unusual and infrequent expenses to provide a comparable analysis of hotel operations. WYNDHAM INTERNATIONAL, INC. EBITDA Reconciliation (in thousands, except per share data) (Unaudited) Twelve Months Ended December 31, 2002 2001 2002 2001 Comparable Comparable Pro Forma Pro Forma Actual Actual ----------- ----------- ----------- EBITDA Reconciliation Net loss $(513,834) $(492,894) $(499,716) $(138,940) Interest expense 227,838 288,120 227,899 294,409 Depreciation and amortization 267,121 230,259 263,884 243,063 Benefit for income taxes (122,367) (115,653) (110,678) (107,993) Accounting change, net of applicable taxes 324,102 346,412 324,102 10,365 Extraordinary item, net of applicable taxes – 1,119 – 1,838 ----------- ----------- ----------- EBITDA 182,860 257,363 205,491 302,742 Interest, depreciation and amortization from equity interest in unconsolidated subsidiaries 5,694 5,368 5,705 5,670 Interest, depreciation and amortization attributable to minority interests (3,528) (2,195) (6,160) (5,965) Reductions in reservation and marketing funds – 5,239 – 5,239 Professional fees and other 7,530 14,257 7,530 14,482 Bond offering costs 3,750 – 3,750 Abandoned transaction costs 2,803 3,921 2,803 3,921 Pre-opening and conversion costs 1,011 12,098 1,011 12,117 Interstate Spin-off costs – -- – 3 Amortization of unearned compensation 3,365 2,104 3,365 2,104 Loss on derivative instruments 84,844 47,600 84,844 47,600 Impairment of assets held for sale 162 24,159 162 24,159 Non-recurring fees included in G&A – 916 – 916 Loss (gain) on sale of assets 6,641 11,202 (10,701) 11,202 Write-off of management, leasehold costs and license agreements 6,126 16,466 6,445 16,466 Discontinued operations EBITDA – -- 52,158 39,325 ----------- ----------- ----------- EBITDA, as adjusted $301,258 $398,498 $356,403 $479,981 =========== =========== =========== =========== Per Share Calculations: Loss from continued operations (189,732) (145,363) (169,849) (146,644) Income (loss) from discontinued operations, net of taxes and minority interest – -- (5,765) 19,907 Accounting change, net of applicable taxes (324,102) (346,412) (324,102) (10,365) Extraordinary item, net of applicable taxes – (1,119) – (1,838) ----------- ----------- ----------- Net loss $(513,834) $(492,894) $(499,716) $(138,940) Adjustment for preferred stock (144,217) (122,621) (144,217) (122,621) ----------- ----------- ----------- Net loss attributable to common shareholders $(658,051) $(615,515) $(643,933) $(261,561) =========== =========== =========== =========== Basic and diluted loss per common share: Loss from continued operations $(1.99) $(1.60) $(1.87) $(1.61) Income (loss) from discontinued operations, net of taxes and minority interest – -- (0.03) 0.12 Income from discontinued operations, net of taxes and minority interest (1.93) (2.07) (1.93) (0.06) Extraordinary item, net of applicable taxes – (0.01) – (0.01) ----------- ----------- ----------- Net loss per common share $(3.92) $(3.68) $(3.83) $(1.56) =========== =========== =========== =========== Basic and diluted weighted average common shares and share equivalents 167,943 167,698 167,943 167,698