Wyndham International Reports First Quarter 2003 Earnings - Company Exceeds Guidance to Post First Quarter Actual EBITDA of $87.9 Million
DALLAS--Wyndham International, Inc. WBR Results Summary: Despite the nation's current economic downturn and start of Operation Iraqi Freedom, Wyndham International, Inc. exceeded its guidance for first quarter 2003, posting actual EBITDA of $87.9 million. The Company had a net loss of $107.4 million, including a non-cash impairment. RevPAR for the Company's comparable owned and leased properties was in-line with expectations at a 2.
Wyndham aggressively focused on pursuing occupancy through building a brand-loyal customer base in Wyndham ByRequest® and maintained its operating margins by enacting its war plans that allowed the Company to generate positive, consistent results. The Company continued to sell non-strategic assets to reduce debt while strategically growing its proprietary Wyndham brand through new management and franchise agreements.
Wyndham International, Inc.
"The lodging industry is still operating in a difficult environment that has been made even more challenging by world events. The flexibility and focus of our operations created the environment that allowed us to manage through these tough times," stated Fred J. Kleisner, Wyndham's chairman and chief executive officer. "We will remain nimble to react to changes in our industry and we intend to make the necessary adjustments to our business operating plan in order to continue generating positive cash flow and maintain a financially sound Company."
Company Performance:
On an actual basis, earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted, was $87.9 million for the three months ending March 31, 2003 versus $114.3 million for the same period in 2002, an increase from the original guidance of $82.0 million to $87.0 million, based on market share gains and strong operating margins. On a pro forma basis, EBITDA, as adjusted, was $87.0 million compared to $99.6 million for the same quarter last year. Wyndham reported a net loss of $107.4 million and a pro forma net loss of $20.6 million for the first quarter, versus a $343.2 million net loss and an $18.7 million pro forma net loss for the same period in 2002. After the effect of the Company's preferred dividend, this resulted in a net loss of $0.87 per share and a pro forma net loss per share of $0.35 for the quarter.
Total Company comparable owned and leased revenue per available room (RevPAR) was $78.03, a decline of 2.0 percent versus the same period in 2002. This decline was comprised of a 6.8 percent decline in average daily rate and a 3.2 percentage point decline in occupancy.
Branded Performance:
The performance of the comparable Wyndham branded owned and leased properties continues to outperform our non-Wyndham branded properties, posting a RevPAR of $88.27, a decline of 0.8 percent versus the first quarter 2002. The results are comprised of a 4.6 percentage point increase in occupancy and a 7.2 percent decline in average daily rate.
Wyndham branded owned and leased properties ended the quarter with a RevPAR penetration index of 101.7 percent, a 360 basis point improvement over the same period last year.
"Given the fact that the first quarter 2002 benefited from pent-up demand from the fourth quarter 2001, we are particularly pleased with how well the Wyndham branded properties performed. Our strategy of continuing to build occupancy and our brand loyal customer base has been a contributing factor in achieving these results," added Kleisner.
Financial Highlights:
At the end of the first quarter, liquidity was approximately $273.0 million. The Company defines liquidity as revolver availability, plus cash in our overnight investment account. As of March 31, 2003, cash and equivalents were $223.1 million inclusive of $146.2 million of restricted cash. Cash and equivalents increased by $42.0 million from the $181.0 million on hand at the end of 2002 due primarily to cash generated from operations and asset sales.
The Company's total debt was $2.8 billion as of March 31, 2003, approximately the same as the end of 2002. The breakdown of the debt at quarter-end was as follows: Revolver $171.4 million; IRL's $447.7 million; Term Loans $1.175 billion; and Mortgage and other indebtedness $1.034 billion.
Said Mr. Kleisner: "We have continued to maintain strong liquidity, overcoming the obstacles the industry has endured over the past year and a half. As we have done in the past, we will continue to manage cash very tightly and make prudent spending decisions given the current economic conditions."
Wyndham is currently in the process of refinancing its 2003 and 2004 mortgage pool maturities and extending the maturity dates by five years. The debt maturities coming due include the $146 million Lehman I pool and the Bear Stearns pool currently at $126 million, maturing in June 2003 and July 2004, respectively. Additionally, four property-specific mortgages totaling $77 million will mature in 2004. The Company fully expects to refinance or extend all remaining 2003 and 2004 maturities.
Future Guidance:
For the second quarter 2003, RevPAR is forecasted to be negative 2.0 to 4.0 percent versus the same period last year and EBITDA, as adjusted, is forecasted to be between $75.0 million and $80.0 million. As stated during the 2002 year-end earnings call, original EBITDA guidance for the full year 2003 was $300.0 million to $305.0 million. Given the effect of asset sales, the guidance for the full year 2003 EBITDA is being adjusted to $290.0 million to $300.0 million. Full year 2003 RevPAR is estimated to be negative 1.0 to 2.0 percent versus full year 2002.
Operating Strategy:
Wyndham maintained its consistent management of expenses to counteract the margin compression associated with revenue growth through occupancy gains. The Company reduced operating expenses and corporate expenses in order to mitigate the increases in fixed costs. Increased fixed costs included property insurance, health insurance and property taxes.
Wyndham was prepared, and when necessary, implemented the "war plans" to neutralize the impact on operations associated with Operation Iraqi Freedom. Since the war began in mid-March, Wyndham had only $7.2 million of cancelled group business, of which, 54 percent rebooked.
Disposition and Development:
Wyndham remains committed to its business plan focused on growing the Wyndham brand, through new franchise and management agreements, as well as to dispose of all non-strategic assets.
"Since June 1999 when we re-capitalized the Company, Wyndham's vision has been very clear: sell all non-strategic assets to reduce debt, and focus on our proprietary brand to build a differentiated hotel experience," stated Kleisner. "With over $1.5 billion in asset sales complete and the Wyndham brand continuing to gain market share due to its award-winning, personalized service approach, we believe our strategy is successful and well positions us for better economic conditions."
Wyndham recently sold, or is in the process of selling, approximately $97 million in assets. Terms of the transactions were not disclosed and the net proceeds from the sales were, or will be, used to pay down debt. The assets include:
-- Eight (8) Wyndham Garden Hotels. The properties, located in
Charlotte, N.C.; Brookfield, Wis.; Novi, Mich.; Dallas;
Pleasanton, Calif., Wood Dale and Schaumberg, both in Ill.;
and Overland Park, Kan., retain the Wyndham flag through a new
franchise agreement, operated by Aimbridge Hospitality.
-- The Bourbon Orleans - A Wyndham Historic Hotel in New Orleans.
The property remains in the Wyndham portfolio pursuant to a
20-year management agreement and will undergo an $11 million
renovation.
-- Marriott Hutchinson Island Beach Resort & Marina in Stuart,
Fla.
-- Twenty-two acres of excess land located at the Wyndham-owned
Boulders Resort & Golden Door(R) Spa in Carefree, Ariz.
-- Meadows del Mar, an 18-hole golf course and hotel/timeshare
development site. Wyndham sold its 50 percent interest.
The Company has continued its strategic growth path to expand the Wyndham brand through new management and franchise agreements. A joint venture between a wholly owned subsidiary of Wyndham International closed on the construction loan for the next phase of Las Casitas Village-A Wyndham Luxury Resort, the only five-diamond Caribbean resort in Puerto Rico. Additionally, Wyndham has entered into an agreement with Cinnamon Hill Club Limited to provide resort amenities and services to a soon-to-be-built equity membership and real estate ownership community, Cinnamon Hill at Rose Hall. The new community will be built on land adjacent to the Wyndham Rose Hall Resort & Country Club in Jamaica.
The brand recently gained three new Wyndham franchise or management agreements, including the Wyndham Phoenix, the Wyndham Martineau Bay Resort & Spa in Vieques, P.R., and the Wyndham Louisville International Airport in Kentucky.
A subsidiary of Wyndham International announced on April 28, the lease termination of 15 Summerfield Suites® by Wyndham properties by Hospitality Properties Trust (HPT). Wyndham is still in negotiations on the final franchise agreement of the 15 Summerfield properties and on the outcome or 12 Wyndham Hotels and Garden Hotels. The financial impact of the lease terminations represents an improvement to the subsidiaries' cash flow on an annualized basis of approximately $14.3 million. The terminations also result in a non-cash write-off of approximately $150 million for the leases' remaining book value, of which $104.3 million was written-off in the first quarter 2003 and the remainder will be written-off in the second quarter 2003.
Wyndham Brand:
The Wyndham brand continued strong performance and gained in market share each month during the first quarter 2003, led by Wyndham ByRequest, which continues to be the driver that defines the brand and builds customer loyalty. Membership grew to approximately 1.4 million active members with year end goals to reach 1.7 million members. The Wyndham ByRequest free long distance call offer continues to be a compelling point of differentiation to the premium business traveler as well as a powerful booking tool with corporate travel accounts.
Reservations at the Company's central reservations office were up year-over-year despite the impact of Operation Iraqi Freedom on the travel industry. The brand's proprietary website,
Moving forward into second and third quarters, Wyndham is building off of the ByRequest momentum with the launch of a summer and fall promotion with Nickelodeon as well as the start of a Kids ByRequest program geared around giving a personalized guest experience to children.
This summer, Wyndham Resorts teams up with the number one kids' show on television, Nickelodeon's SpongeBob SquarePants(TM), to offer families the SpongeBob Splash Party Package, available May 30 through Labor Day at nine participating Wyndham Resort properties throughout the Caribbean and Florida. After Labor Day, a new promotion, SpongeBob Sleepover Package, will be offered on weekends at all Wyndham Hotels & Resorts properties. The Nickelodeon partnership and this fall's launch of Kids ByRequest allows Wyndham to positively position itself to the leisure traveler, which continues to be a strong market for the travel industry.
About Wyndham International:
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
EBITDA:
EBITDA represents earnings before interest, taxes, depreciation and amortization. The Company believes that this metric is useful to investors and management as a measure of the Company's operating performance due to the significance of the Company's long-lived assets and level of indebtedness and because such metric can be used to measure the Company's ability to service debt and fund capital expenditures. EBITDA is not intended to represent cash flow from operations as defined by accounting principles generally accepted in the United States (GAAP) and such metric should not be considered as an alternative to net income, cash flow from operations or any other performance measure prescribed by GAAP. The Company's calculation of EBITDA may be different from the calculation used by other companies and, therefore, comparability may be limited.
WYNDHAM INTERNATIONAL, INC.
2003 OPERATING STATISTICS BY QUARTER
Quarter Ended March 31,
2003
2003 2002 % Change
-------- --------
COMPARABLE WYNDHAM BRANDED HOTELS (a)
Wyndham Hotels & Resorts
Average daily rate $127.88 $136.80 -6.5%
Occupancy 69.9% 66.3% 3.6 ppt
RevPAR $89.38 $90.72 -1.5%
Wyndham Luxury Resorts (b)
Average daily rate $249.38 $267.09 -6.6%
Occupancy 48.2% 48.1% 0.1 ppt
RevPAR $120.11 $128.52 -6.5%
Summerfield by Wyndham
Average daily rate $93.53 $105.53 -11.4%
Occupancy 78.9% 74.3% 4.7 ppt
RevPAR $73.82 $78.36 -5.8%
Wyndham Garden
Average daily rate $82.21 $89.86 -8.5%
Occupancy 69.5% 63.0% 6.5 ppt
RevPAR $57.11 $56.63 0.9%
COMPARABLE OWNED & LEASED HOTELS
Proprietary Branded (c)
Average daily rate $122.20 $131.65 -7.2%
Occupancy 72.2% 67.6% 4.6 ppt
RevPAR $88.27 $89.01 -0.8%
Non-Proprietary Branded (d)
Average daily rate $91.86 $97.93 -6.2%
Occupancy 57.8% 58.1% -0.3 ppt
RevPAR $53.11 $56.93 -6.7%
Total Portfolio
Average daily rate $114.69 $122.85 -6.6%
Occupancy 68.0% 64.8% 3.2 ppt
RevPAR $78.03 $79.66 -2.0%
NOTE: All hotel statistics exclude assets sold to date.
(a) Brand statistics are based on comparable owned, managed and leased
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 by Wyndham and Wyndham Garden Hotels that were branded
as of Jan. 1, 2003.
(d) Non-proprietary brand hotels owned by the Company as of Jan. 1,
2003.
0
WYNDHAM INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
Quarter Ended
March 31,
2003
Pro Comparable
Forma
Actual Adjustments Pro Forma
(1)
----------
Revenues:
Hotel revenues $413,763 $35,758 A $378,005
Management fees and
service fee income 4,420 53 B 4,367
Interest and other
income 1,256 6 C 1,250
---------- ---------
Total revenues 419,439 35,817 383,622
---------- ---------
Expenses:
Hotel expenses 321,391 36,636 D 284,755
General and
administrative costs 12,453 - 12,453
Interest expense 44,989 - 44,989
---------- ---------
Total operating costs
and expenses 378,833 36,636 342,197
---------- ---------
Revenues net of direct expenses 40,606 (819) 41,425
Adjustments:
Professional fees and
other 2,425 - 2,425
Abandoned transaction
costs 126 - 126
Loss (gain) on
derivative instruments 11,668 - 11,668
Impairment of assets
held for sale 4,093 4,093 E
Impairment of assets
HPT 104,292 104,292 F
Loss on sale of assets 4,937 - 4,937
Write-off of
management, leasehold
costs and license
agreements - -
---------- ---------
Total adjustments 127,541 108,385 19,156
---------- ---------
Depreciation and amortization 61,557 3,213 G 58,344
Equity in (earnings) loss from
unconsolidated subsidiaries 574 - 574
Minority interest in
consolidated subsidiaries 289 - 289
---------- ---------
62,420 3,213 59,207
---------- ---------
Loss from continued
before operations before
income taxes
taxes (149,355) (112,417) (36,938)
Income tax benefit 61,340 44,996 H 16,344
---------- ---------
Loss from continued
operations (88,015) (67,421) (20,594)
---------- ---------
Loss from discontinued
operations, net of
taxes and minority
interest (19,398) (19,398)I
---------- ---------
Loss before accounting
change, net of
applicable taxes (107,413) (86,819) (20,594)
Accounting change, net
of applicable taxes - -
---------- ---------
Net loss $(107,413) $(86,819) $(20,594)
========== ========= ===========
EBITDA, as adjusted $87,945 $915 $87,030
========== ========= ===========
Quarter Ended
March 31,
2002
Pro Forma Comparable
Actual Adjustments Pro Forma
(1)
----------
Revenues:
Hotel revenues $435,463 $46,235 L $389,228
Management fees and
service fee income 4,470 441 M 4,029
Interest and other
income 2,105 409 C 1,696
---------- ----------
Total revenues 442,038 47,085 394,953
---------- ----------
Expenses:
Hotel expenses 324,905 43,508 N 281,397
General and
administrative costs 15,040 - 15,040
Interest expense 60,205 355 O 59,850
---------- ----------
Total operating costs
and expenses 400,150 43,863 356,287
---------- ----------
Revenues net of direct expenses 41,888 3,222 38,666
Adjustments:
Professional fees and
other 1,740 - 1,740
Abandoned transaction costs 1,118 - 1,118
Loss (gain) on derivative
instruments (1,334) - (1,334)
Impairment of assets held for
sale 162 - 162
Impairment of assets - HPT - -
Loss on sale of assets 4,770 - 4,770
Write-off of management,
leasehold costs and license
agreements 1,005 - 1,005
---------- ----------
Total adjustments 7,461 - 7,461
---------- ----------
Depreciation and amortization 62,917 3,036 G 59,881
Equity in (earnings) loss from
unconsolidated subsidiaries (844) (521)P (323)
Minority interest in
consolidated subsidiaries 627 - 627
---------- ----------
62,700 2,515 60,185
---------- ----------
Loss from continued
before operations before
income taxes (28,273) 707 (28,980)
Income tax benefit 10,442 129 H 10,313
---------- ----------
Loss from continued
operations (17,831) 836 (18,667)
---------- ----------
Loss from discontinued
operations, net of taxes
and minority interest (1,244) (1,244)I
---------- ----------
Loss before accounting
change, net of applicable
taxes (19,075) (408) (18,667)
Accounting change, net of
applicable taxes (324,102) (324,102)Q
---------- ----------
Net loss $(343,177) $(324,510) $(18,667)
========== ========== ===========
EBITDA, as adjusted $114,321 $14,758 $99,563
========== ========== ===========
(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.
0
WYNDHAM INTERNATIONAL, INC.
EBITDA Reconciliation
(in thousands, except per share
data)
(Unaudited)
Quarter Ended
March 31,
2003 2003 2003
Pro Forma Comparable
Actual Adjustments Pro Forma(1)
----------
EBITDA Reconciliation
Net loss $(107,413) $(86,819) $(20,594)
Interest expense 44,989 - 44,989
Depreciation and amortization 61,557 3,213 G 58,344
Income tax benefit (61,340) (44,996)H (16,344)
Accounting change, net of
applicable taxes - -
---------- -----------
EBITDA (62,207) (128,602) 66,395
Interest, depreciation and
amortization from equity
interest in unconsolidated
subsidiaries 1,513 (63)J 1,576
Interest, depreciation and
amortization attributable
to minority interests (413) (33)K (380)
Professional fees and other 2,283 - 2,283
Abandoned transaction costs - -
Amortization of unearned
compensation 551 - 551
Loss (gain) on derivative
instruments 11,668 - 11,668
Impairment of assets held for
sale 4,093 4,093 E
Impairment of assets - HPT 104,292 104,292 F
Loss on sale of assets 4,937 - 4,937
Write-off of management,
leasehold costs and license
agreements - -
Discontinued operations
adjustments 21,228 21,228 I
---------- -----------
EBITDA, as adjusted $87,945 $915 $87,030
========== =========== ===========
Per Share Calculations:
Loss from continued operations $(88,015) $(20,594)
Loss from discontinued
operations, net of taxes and
minority interest (19,398)
Accounting change, net of
applicable taxes -
----------
Net loss $(107,413) $(20,594)
Adjustment for preferred stock (37,799) (37,799)
----------
Net loss attributable to common
shareholders $(145,212) $(58,393)
----------
Basic and diluted loss per
common share:
Loss from continued operations $(0.75) $(0.35)
Loss from discontinued
operations, net of taxes and
minority interest (0.12)
Accounting change, net of
applicable taxes -
----------
Net loss per common share $(0.87) $(0.35)
========== ===========
Basic and diluted weighted
average common shares and share
equivalents 168,004 168,004
Quarter Ended
March 31,
2002 2002 2002
Pro Forma Comparable
Actual Adjustments Pro Forma (1)
EBITDA Reconciliation
Net loss $(343,177)$(324,510) $(18,667)
Interest expense 60,205 355 59,850
Depreciation and amortization 62,917 3,036 G 59,881
Income tax benefit (10,442) (129)H (10,313)
Accounting change, net of
applicable taxes 324,102 324,102
---------------------
EBITDA 93,605 2,854 90,751
Interest, depreciation and
amortization from equity
interest in unconsolidated
subsidiaries 813 (119) J 932
Interest, depreciation and
amortization attributable
to minority interests (1,503) (1,035) K (468)
Professional fees and other 1,740 - 1,740
Abandoned transaction costs 1,118 - 1,118
Amortization of unearned
compensation 887 - 887
Loss (gain) on derivative
instruments (1,334) - (1,334)
Impairment of assets held for
sale 162 - 162
Impairment of assets - HPT - -
Loss on sale of assets 4,770 - 4,770
Write-off of management,
leasehold costs and license
agreements 1,005 - 1,005
Discontinued operations
adjustments 13,058 13,058 I
---------------------
EBITDA, as adjusted $114,321 $14,758 $99,563
===================== ===========
Per Share Calculations:
Loss from continued operations $(17,831) $(18,667)
Loss from discontinued
operations, net of taxes and
minority interest (1,244)
Accounting change, net of
applicable taxes (324,102)
-----------
Net loss $(343,177) $(18,667)
Adjustment for preferred stock (35,080) (35,080)
-----------
Net loss attributable to common
shareholders $(378,257) $(53,747)
-----------
Basic and diluted loss per
common share:
Loss from continued operations $(0.31) $(0.31)
Loss from discontinued
operations, net of taxes and
minority interest (0.01)
Accounting change, net of
applicable taxes (1.93)
-----------
Net loss per common
share $(2.25) $(0.31)
=========== ===========
Basic and diluted weighted
average common shares and
share equivalents 167,853 167,853
0
WYNDHAM INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Quarters Ended March 31, 2003 and 2002
(Unaudited)
Notes to Pro Forma Adjustments:
A) Reduction of hotel revenues associated with the termination of the
HPT Summerfield lease, the HPT Garden lease and the reduction of
hotel revenues from the sale of eight Wyndham Garden hotels sold
on April 3, 2003, and one hotel sold on April 29, 2003.
B) Reduction of management fees due to the termination of two
management contracts.
C) Reduction of dividend income from a sold investment.
D) Corresponding reduction of hotel expenses for hotels noted in (A)
above.
E) Removal of impairment charge related to Marriott Indian River.
F) Removal of impairment charges related to the HPT Summerfield lease
and HPT Garden lease terminations.
G) Reduction of HPT Summerfield and HPT Garden leasehold cost
amortization.
H) Tax benefit associated with the pro forma adjustments using an
effective tax rate of 40%.
I) Removal of assets sold and assets held for sale.
J) Removal of equity investments sold.
K) Removal of minority interest of hotel held for sale.
L) Reduction of hotel revenues associated with the termination of the
HPT Summerfield lease, the HPT Garden lease and the reduction of
hotel revenues from the sale of eight Wyndham Garden hotels sold
on April 3, 2003, one hotel sold on April 29, 2003, and four
hotels sold in 2003 and 2002.
M) Reduction of management fees due to the termination of eight hotel
management contracts.
N) Corresponding reduction of hotel expenses for hotels noted in (L)
above.
O) Reduction of interest income associated with a sold hotel.
P) Removal of two equity investments.
Q) Removal of accounting change associated with the write-off of
goodwill, in accordance with FAS 142.