Wyndham Worldwide: free cash flow may meaningfully increase EBITDA

By Jennifer Lanning Drey

Savannah, Ga., Feb. 9 - Wyndham Worldwide Corp. expects to generate between $600 million and $700 million of free cash flow in 2011 and beyond, which the company believes could meaningfully increase its baseline EBTIDA and earnings growth on a per-share basis, Thomas Conforti, its chief financial officer, said Wednesday during the company's fourth-quarter earnings conference call.

Wyndham intends to maintain a stable leverage ratio, which means the company will likely add debt as its EBITDA increases, he later added.

The company generated $603 million of free cash flow in 2010, which was just above the top end of its projected range. Free cash flow was $541 million in 2009.

"We believe that cash is the great enabler of our long-term business goals and that our sustainable annual free cash flow of $600 million to $700 million will accelerate our EPS growth and enhance shareholder value by supporting further investment in the business, paying dividends and through share repurchase, Conforti said.

In 2010, Wyndham used $212 million to repurchase about 50% of its convertible notes and related warrants, Stephen Holmes, the company's chief executive officer, said during the call.

During the fourth quarter of 2010, Wyndham repurchased $22 million face value of its 3.50% convertible notes and retired the proportionate share of the call options and warrants associated with the notes.

Additionally, the company commenced a tender offer on Wednesday to purchase the remaining 3.50% convertible notes due 2012.

At Dec. 31, Wyndham had cash and cash equivalents of $155 million, which was unchanged from its cash balance at the end of 2009, according to its earnings release.

Additionally, the company reported securitized vacation ownership debt of $1.7 billion at Dec. 31 and other debt of $2.1 billion.

The remaining borrowing capacity on the revolving credit facility was $788 million, compared with $869 million at Dec. 31, 2009.

Wyndham reported fourth-quarter revenues of $937 million, representing a 3% increase over the comparable prior-year period. Fourth-quarter net income increased by 15% to $84 million, compared with $73 million in the same period of 2009.

Wyndham is a Parsippany, N.J.-based provider of hospitality products and services.

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