Wyndham International, Inc. (NYSE:WYN) today reported third quarter earnings and outlined plans for next year that include a greater focus on its Wyndham Hotels & Resorts brand.
Wyndham International reported that its loss in the third quarter narrowed over the prior year. For the quarter, the company had a net loss of $44.6 million, or $0.41 per share (diluted) compared with a loss of $59.4 million or $1.02 per share (diluted) for the same period last year. Third quarter results this year included $12.4 million in non-recurring charges primarily related to the company`s restructuring.
The company said although its third quarter was paced by a strong performance of its core proprietary brands, performance of its non-proprietary branded assets fell short of expectations. The company attributed the shortfall to the conversion of assets related to the Interstate/Marriott transaction and assets listed for sale. The company also announced financial projections for 2000.
“As we transform the company, we are experiencing short-term disruptions mostly in our non-proprietary branded assets, which are impacting our operating results to a far greater extent than anticipated.” said James D. Carreker, chairman and chief executive officer. “However, our focus is to grow long term shareholder value by growing Wyndham Hotels & Resorts to first tier status. A more focused business plan and greater scale is enhancing the performance of our branded portfolio, as indicated by our third quarter results.”
The growth of the brand will focus on flagship properties in major cities and resort areas as well as greater distribution in suburban locations. The suburban locations will include new construction and, in addition, the company said it will invest capital and convert many of the high-rise, suburban Wyndham Garden products into full-service Wyndham Hotels.
In outlining the company`s financial projections, Carreker said: “We recognize that we are operating in an economic cycle of moderating growth, increased supply and more competition for occupancy and revenue. Nevertheless, we are confident that our company is well positioned. For this year, we expect to achieve EBITDA, as adjusted, in the range of $620 million to $625 million. For the year 2000, we estimate EBITDA growth, as adjusted, of eight to 10 percent, with total comparable owned RevPAR growth of 2% to 3% and capital expenditures of approximately $190 million.”
p>Third Quarter Performance: In reporting third quarter earnings before interest, taxes, depreciation and amortization including certain one-time non-recurring charges (EBITDA), the company said prior year quarterly EBITDA, as adjusted, includes the results for assets that have since been sold, including the Bay Meadows racetrack, 15 hotels and the spin-off of the Interstate Hotels Corporation. EBITDA, as adjusted, from comparable owned and leased hotels for the quarter was approximately equal to that of the prior year. Actual EBITDA, as adjusted, was $126.0 million, compared to $152.1 million for the third quarter 1998.
Performance of the company`s proprietary-branded hotels was led by the Wyndham Hotels & Resorts brand, in which comparable hotels realized RevPAR growth of 6.5% in the third quarter over the same period a year ago. The company`s luxury resort collection, Grand Bay, grew RevPAR by 3.9%. RevPAR for the Summerfield Suites division increased 1.2%.
The company`s owned and leased hotels generated a 1.6% RevPAR increase in the quarter. On a comparable basis, proprietary branded owned and leased hotels had RevPAR growth of 3.7% for the quarter and 2.4% for the year, proprietary branded EBITDA, as adjusted, increased 5.9% and 7.4%, respectively. These results were led by the core Wyndham brand, which posted RevPAR growth of 4.7% and EBITDA, as adjusted, growth of 10.6%. RevPAR for non-proprietary branded owned hotels fell 0.2% for the quarter and increased 0.4% year to date, largely reflecting the significant number of hotels in transition following the Interstate spin-off and other asset dispositions. Non-proprietary branded hotels experienced a decline in EBITDA, as adjusted, of 1.9% for the quarter and 2.7% for the year.
“Non-proprietary branded assets and assets in transition continued to experience weakness in RevPAR and EBITDA, as adjusted, growth, largely reflecting short-term disruptions and costs associated with converting some of these properties to Wyndham hotels or to third party managers. Additionally, approximately 60 non-proprietary branded hotels experienced changes in either property level management or franchise, or have been listed for sale. These disruptions are expected to be short-term,” Carreker said. “These moves are important to the maximization of long term earnings and shareholder value.”
Frederick J. Kleisner, president and chief operating officer, said, “During the third quarter, we continued to streamline and simplify the organization, including combining our luxury and resort divisions into a single organization to take advantage of the company`s operating and national sales capabilities. We also opened the Wyndham Boston—following new openings in Chicago and Atlanta earlier in the year—and converted the Wyndham Casa Marina Resort & Beach Club in Key West. In addition, a new Summerfield Suites Hotel opened at the Miami Airport and a new Wyndham hotel opened in the Denver Tech center.”
Nine Months Performance: For the nine months, Wyndham reported a net loss of $921.0 million, or $6.19 per share, including $907.5 million of largely non-cash, non-recurring charges in the second quarter related principally to the company`s restructuring and recapitalization. EBITDA, as adjusted, for the nine months increased 16.3% to $480.8 million from $413.3 million last year.
The company said that it intends to commence its previously announced rights offering shortly. The Delaware Chancery Court last week approved the settlement of a consolidated class action lawsuit related to the $1 billion equity investment and related restructuring of the company. The company intends to request the Securities and Exchange Commission to declare the registration statement effective later today. Holders of Class A common stock and holders of certain outstanding limited partnerships units as of the close of business on September 30, 1999 will receive rights to purchase up to $300 million of the company`s series A convertible preferred stock.