Company Results

Starwood Reports Fourth Quarter 2013 Net Income Dropped to $128 Million from $142 Million

Starwood Hotels & Resorts Worldwide, Inc. today reported EPS from continuing operations for the fourth quarter of 2013 of $0.67 compared to $0.33 in the fourth quarter of 2012. Excluding special items, EPS from continuing operations was $0.73 for the fourth quarter of 2013 compared to $0.70 in the fourth quarter of 2012.

Starwood

Starwood Hotels & Resorts Worldwide, Inc. (NYSE:HOT) today reported fourth quarter 2013 financial results.

Fourth Quarter 2013 Highlights

  • Excluding special items, EPS from continuing operations was $0.73. Including special items, EPS from continuing operations was $0.67.
  • Adjusted EBITDA was $314 million, which included $12 million of EBITDA from the St. Regis Bal Harbour residential project.
  • Excluding special items, income from continuing operations was $141 million. Including special items, income from continuing operations was $128 million.
  • Worldwide Systemwide REVPAR for Same-Store Hotels increased 5.3% in constant dollars (4.3% in actual dollars) compared to 2012. Systemwide REVPAR for Same-Store Hotels in North America increased 6.1% in constant dollars (5.6% in actual dollars).
  • Management fees, franchise fees and other income increased 7.7% compared to 2012.
  • Worldwide Same-Store Company-Operated gross operating profit margins increased approximately 116 basis points compared to 2012.
  • Worldwide REVPAR for Starwood Same-Store Owned Hotels increased 5.8% in constant dollars (4.8% in actual dollars) compared to 2012.
  • Margins at Starwood Same-Store Owned Hotels Worldwide increased approximately 100 basis points compared to 2012.
  • Earnings from Starwood’s vacation ownership and residential business decreased approximately $31 million compared to 2012, including a $20 million decrease in earnings from the St. Regis Bal Harbour residential project which was substantially sold out.
  • During the quarter, the Company signed 58 hotel management and franchise contracts, representing approximately 11,700 rooms, and opened 23 hotels and resorts with approximately 5,400 rooms.
  • During the quarter, the Company completed sales of hotels for gross cash proceeds of approximately $125 million, paid an annual dividend of $1.35 per share, and repurchased 1.18 million shares at a total cost of $78.6 million and an average price of $66.80 per share.

Full Year 2013 Highlights

  • Excluding special items, EPS from continuing operations was $2.99. Including special items, EPS from continuing operations was $2.92.
  • Adjusted EBITDA was $1.263 billion, which included $119 million of EBITDA from the St. Regis Bal Harbour residential project.
  • Excluding special items, income from continuing operations was $579 million. Including special items, income from continuing operations was $565 million.
  • Worldwide Systemwide REVPAR for Same-Store Hotels increased 4.9% in constant dollars (4.2% in actual dollars) compared to 2012. Systemwide REVPAR for Same-Store Hotels in North America increased 6.0% in constant dollars (5.7% in actual dollars).
  • Management fees, franchise fees and other income increased 8.7% compared to 2012.
  • Worldwide Same-Store Company-Operated gross operating profit margins increased approximately 79 basis points compared to 2012.
  • Worldwide REVPAR for Starwood Same-Store Owned Hotels increased 5.0% in constant dollars (4.2% in actual dollars) compared to 2012.
  • Margins at Starwood Same-Store Owned Hotels Worldwide increased approximately 110 basis points compared to 2012.
  • Earnings from Starwood’s vacation ownership and residential business decreased approximately $34 million compared to 2012, including a $38 million decrease in earnings from the St. Regis Bal Harbour residential project which was substantially sold out.
  • During the year, the Company signed 152 hotel management and franchise contracts, representing approximately 32,200 rooms, and opened 74 hotels and resorts with approximately 16,200 rooms.
  • During the year, the Company completed sales of hotels for gross cash proceeds of approximately $251 million, paid an annual dividend of $1.35 per share, and repurchased 4.9 million shares at a total cost of $315.6 million and an average price of $64.98 per share.

Fourth Quarter 2013 Earnings Summary

Starwood Hotels & Resorts Worldwide, Inc. today reported EPS from continuing operations for the fourth quarter of 2013 of $0.67 compared to $0.33 in the fourth quarter of 2012. Excluding special items, EPS from continuing operations was $0.73 for the fourth quarter of 2013 compared to $0.70 in the fourth quarter of 2012.

Special items in the fourth quarter of 2013, which totaled an after-tax charge of $13 million, included a pre-tax charge of $19 million related to certain technology development costs that the Company no longer intends to recover from its managed and franchised properties and a pre-tax impairment charge of $17 million associated with a wholly-owned hotel. Special items also included $8 million of net tax benefits primarily associated with the tax law change in Mexico in late 2013 and reversal of tax reserves associated with tax assets which are now deemed realizable. Special items in the fourth quarter of 2012, which totaled an after-tax charge of $72 million, included a pre-tax charge of $113 million primarily related to the early redemption of $725 million senior notes as well as pre-tax charges of $14 million associated with the impairment of certain hotels and investments. Excluding special items, the effective income tax rate in the fourth quarter of 2013 was 33.0% compared to 35.7% in the fourth quarter of 2012.

Income from continuing operations was $128 million in the fourth quarter of 2013, compared to $65 million in the fourth quarter of 2012. Excluding special items, income from continuing operations was $141 million in the fourth quarter of 2013, compared to $137 million in the fourth quarter of 2012.

Net income was $128 million and $0.67 per share in the fourth quarter of 2013, compared to $142 million and $0.72 per share in the fourth quarter of 2012.

Frits van Paasschen, CEO, said, “Starwood had a strong year in 2013. We exceeded our profit expectations, despite a tepid global business environment, exchange rate headwinds and the effect of having sold six hotels. Occupancies in North America reached record levels for the third straight quarter, and in a weak economic environment occupancies in Europe remained high. In Latin America, Asia Pacific, Africa, and the Middle East, we delivered strong footprint and fee growth.

“We made good progress towards our asset-light goals in 2013. Beyond selling six hotels in the year, we recently announced the sale of the St. Regis Bal Harbour. Our portfolio of managed and franchised hotels grew at a healthy clip, as we opened 74 new hotels. In addition, we signed over 150 new hotel agreements – more than any year since 2007.

“We ended 2013 with a balance sheet in the best shape it’s ever been, and during the year we returned over half a billion in capital to shareholders through share repurchases and our dividend.

“From what we are seeing, the year 2014 looks to be a better version of 2013. Early indications are that our U.S. and European hotels will see continued strong rate growth. In the fast-growing markets, our view is that – in spite of today's market uncertainty – the long-term trends in urbanization and rising wealth will fuel secular growth in demand for travel. As such, we remain bullish on the long term growth of the industry and on our ability to capture more than our fair share of that growth.”

Year Ended December 31, 2013 Earnings Summary

Income from continuing operations was $565 million for the year ended December 31, 2013 compared to $470 million in 2012. Excluding special items, income from continuing operations was $579 million for the year ended December 31, 2013, compared to $513 million in 2012. In addition to the fourth quarter special items discussed above, the results for the year ended December 31, 2013 included a favorable adjustment of $22 million to a legal reserve. Excluding special items, the effective income tax rate for the year ended December 31, 2013 was 32.4% compared to 32.1% in the same period in 2012.

Net income was $635 million and $3.28 per share for the year ended December 31, 2013 compared to $562 million and $2.86 per share for the year ended December 31, 2012.

Adjusted EBITDA was $1.263 billion for the year ended December 31, 2013, compared to $1.220 billion in the same period in 2012. Adjusted EBITDA in 2013 includes $119 million of EBITDA from the St. Regis Bal Harbour Resort residential project (“Bal Harbour”), compared to $157 million in 2012.

Fourth Quarter 2013 Operating Results

Management and Franchise Revenues

Worldwide Systemwide REVPAR for Same-Store Hotels increased 5.3% in constant dollars (4.3% in actual dollars) compared to the fourth quarter of 2012. International Systemwide REVPAR for Same-Store Hotels increased 4.4% in constant dollars (increased 2.6% in actual dollars).

Changes in REVPAR for Worldwide Systemwide Same-Store Hotels by region:

 
              REVPAR
              Constant       Actual
Region             Dollars       Dollars
Americas                      
North America             6.1%       5.6%
Latin America             2.3%       2.3%
Asia Pacific:                      
Greater China             3.5%       5.2%
Rest of Asia             8.0%       (3.0)%
Europe, Africa & Middle East:                      
Europe             3.9%       7.2%
Africa & Middle East             2.0%       0.8%
 

Changes in REVPAR for Worldwide Systemwide Same-Store Hotels by brand:

 
                REVPAR
                Constant       Actual
Brand               Dollars       Dollars
St. Regis/Luxury Collection               11.2%       10.3%
W Hotels               6.1%       5.6%
Westin               5.6%       4.4%
Sheraton               3.9%       2.4%
Le Méridien               3.4%       4.0%
Four Points by Sheraton               5.3%       3.9%
Aloft               6.0%       5.8%
 

Worldwide Same-Store Company-Operated gross operating profit margins increased approximately 116 basis points compared to the fourth quarter of 2012. International gross operating profit margins for Same-Store Company-Operated properties increased 111 basis points. North American Same-Store Company-Operated gross operating profit margins increased approximately 131 basis points.

Management fees, franchise fees and other income were $265 million, up $19 million, or 7.7% compared to the fourth quarter of 2012. Management and franchise revenues increased 8.4% to $258 million. Management fees increased 11.6% to $163 million and franchise fees increased 8.0% to $54 million.

For the full year 2013, Worldwide Systemwide REVPAR for Same-Store Hotels increased 4.9% in constant dollars (4.2% in actual dollars) compared to the full year 2012. Worldwide Same-Store Company-Operated gross operating profit margins increased 79 basis points. Management fees, franchise fees and other income were $965 million, up $77 million, or 8.7% compared to the full year 2012. Management and franchise revenues increased 9.3% to $941 million. Management fees increased 10.0% to $560 million and franchise fees increased 7.0% to $214 million.

Development

During the fourth quarter of 2013, the Company signed 58 hotel management and franchise contracts, representing approximately 11,700 rooms, of which 46 are new builds and 12 are conversions from other brands. At December 31, 2013, the Company had approximately 450 hotels in the active pipeline representing approximately 105,000 rooms.

During the fourth quarter of 2013, 23 new hotels and resorts (representing approximately 5,400 rooms) entered the system, including Le Méridien Zhengzhou (China, 350 rooms), Sheraton Bloomington Hotel (Minnesota, 282 rooms), Le Méridien Cairo Airport (Egypt, 349 rooms), W Verbier (Switzerland, 131 rooms), and The Westin Puntacana Resort & Club (Dominican Republic, 200 rooms). During the quarter, 17 properties (representing approximately 4,700 rooms) were removed from the system.

For the full year 2013, the Company signed 152 hotel management and franchise contracts (representing approximately 32,200 rooms). For the full year 2013, 74 new hotels and resorts (representing approximately 16,200 rooms) entered the system and 32 properties (representing approximately 7,500 rooms) left the system.

Owned, Leased and Consolidated Joint Venture Hotels

Worldwide REVPAR at Starwood Same-Store Owned Hotels increased 5.8% in constant dollars (4.8% in actual dollars) when compared to the fourth quarter of 2012. REVPAR at Starwood Same-Store Owned Hotels in North America increased 5.7% in constant dollars (4.2% in actual dollars). Internationally, Starwood Same-Store Owned Hotel REVPAR increased 5.9% in constant dollars (5.3% in actual dollars).

Revenues at Starwood Same-Store Owned Hotels Worldwide increased 5.1% in constant dollars (3.9% in actual dollars) while costs and expenses increased 3.5% in constant dollars (2.6% in actual dollars) when compared to the fourth quarter of 2012. Margins at these hotels increased approximately 100 basis points.

Revenues at Starwood Same-Store Owned Hotels in North America increased 5.2% in constant dollars (3.7% in actual dollars) while costs and expenses increased 3.5% in constant dollars (2.1% in actual dollars) when compared to the fourth quarter of 2012. Margins at these hotels increased approximately 130 basis points.

Internationally, revenues at Starwood Same-Store Owned Hotels increased 4.9% in constant dollars (4.1% in actual dollars) while costs and expenses increased 3.6% in constant dollars (3.0% in actual dollars) when compared to the fourth quarter of 2012. Margins at these hotels increased approximately 80 basis points.

Revenues at owned, leased and consolidated joint venture hotels were $416 million, compared to $418 million in the fourth quarter of 2012. Expenses at owned, leased and consolidated joint venture hotels were $326 million compared to $334 million in the fourth quarter of 2012. Fourth quarter results were impacted by asset sales since the fourth quarter of 2012.

For the full year 2013, Worldwide REVPAR at Starwood Same-Store Owned Hotels increased 5.0% in constant dollars (4.2% in actual dollars) when compared to the full year 2012. Margins at these hotels increased approximately 110 basis points.

Vacation Ownership

Total vacation ownership revenues decreased 0.7% to $145 million in the fourth quarter of 2013 when compared to 2012. Originated contract sales of vacation ownership intervals and the number of contracts signed decreased 2.4% and 2.2%, respectively, primarily due to lower tour flow partially offset by an increase in closing efficiency. The average price per vacation ownership unit sold increased 0.2% to approximately $14,000, driven by price increases and inventory mix.

For the full year 2013, total vacation ownership revenues increased 8.7% to $638 million when compared to the full year 2012, primarily due to increased revenues from resort operations, which included the transfer of the Westin St. John’s revenues from owned hotels to vacation ownership. Originated contract sales of vacation ownership intervals and number of contracts signed increased 0.6% and 0.3%, respectively, and the average price per vacation ownership unit sold increased 0.3% to approximately $15,000.

Residential

During the fourth quarter of 2013, the Company’s residential revenues were $31 million compared to $103 million in 2012. The Company realized residential revenues from Bal Harbour of $23 million and generated EBITDA of $12 million, compared to revenues of $99 million and EBITDA of $32 million in the fourth quarter of 2012. During the fourth quarter of 2013, the Company closed sales of six units at Bal Harbour and realized incremental cash proceeds of $23 million associated with these units. From project inception through December 31, 2013, the Company has closed contracts on approximately 99% of the total residential units available at Bal Harbour, and realized residential revenue of $1.1 billion and EBITDA of $280 million.

Selling, General, Administrative and Other

During the fourth quarter of 2013, selling, general, administrative and other expenses increased 5.0% to $106 million compared to $101 million in 2012 primarily due to legal settlement costs and the impact of foreign exchange rates. For the full year 2013, selling, general, administrative and other expenses increased 3.8% to $384 million compared to $370 million in the full year 2012.

Capital

Gross capital spending during the quarter included approximately $61 million of maintenance capital and $85 million of development capital.

For the full year 2013, capital spending included $142 million of maintenance capital and $284 million of development capital.

Asset Sales

During the fourth quarter of 2013, the Company completed the sales of the Aloft San Francisco Airport and the Westin San Francisco Airport, for gross cash proceeds of approximately $125 million. These hotels were sold subject to franchise contracts and the Company recorded a net gain of $7.4 million associated with these sales. In January 2014, the Company sold The St. Regis Bal Harbour Resort in Miami Beach, FL for gross cash proceeds of $213 million subject to a long-term management contract.

Dividend

The Company’s Board of Directors increased its annual dividend by 8.0% to $1.35 per share. The dividend was paid by the Company on December 27, 2013 to holders of record on December 13, 2013. As previously announced, the Company intends to pay dividends to stockholders on a quarterly basis beginning in 2014.

Share Repurchase

In the fourth quarter of 2013, the Company repurchased 1.18 million shares at a total cost of approximately $78.6 million and an average price of $66.80 per share. For the full year 2013, the Company repurchased 4.9 million shares at a total cost of approximately $315.6 million and an average price of $64.98 per share. As of December 31, 2013, approximately $614 million remained available under the Company’s share repurchase authorization.

Balance Sheet

At December 31, 2013, the Company had gross debt of $1.3 billion, cash and cash equivalents of $739 million (including $123 million of restricted cash) and net debt of $528 million, compared to net debt of $448 million as of September 30, 2013, in each case, excluding debt and restricted cash associated with securitized vacation ownership notes receivable. Net debt at December 31, 2013, including $355 million of debt and $14 million of restricted cash associated with securitized vacation ownership notes receivables, was $869 million.

At December 31, 2013, debt was approximately 81% fixed rate and 19% floating rate and its weighted average maturity was 5.4 years with a weighted average interest rate of 5.59%, excluding the securitized debt. The Company had cash (including current restricted cash) and availability under the revolving credit facilities of approximately $1.75 billion.

Outlook

For the full year 2014:

  • Adjusted EBITDA is expected to be approximately $1.200 billion to $1.225 billion (based on the assumptions below).
    • REVPAR increases at Same-Store Company-Operated Hotels Worldwide of 5% to 7% in constant dollars (approximately 25 basis points lower in actual dollars at current exchange rates).
    • REVPAR increases at Same-Store Owned Hotels Worldwide of 4% to 6% in constant dollars (approximately 50 basis points lower in actual dollars at current exchange rates).
    • Margins at Same-Store Owned Hotels Worldwide increase 75 to 125 basis points.
    • Management fees, franchise fees and other income increase approximately 8% to 10%.
    • Earnings from the Company’s vacation ownership and residential business of approximately $160 million to $170 million.
    • Selling, general and administrative expenses increase approximately 3% to 5%.
    • Full year owned earnings are negatively impacted by approximately $30 million due to asset sales completed in 2013, the recent sale of the St. Regis Bal Harbour hotel and a leased hotel that will be converted to a managed hotel in 2014.
  • Depreciation and amortization is expected to be approximately $310 million.
  • Interest expense is expected to be approximately $115 million.
  • Full year effective tax rate is expected to be approximately 33%, and cash taxes from operating earnings are expected to be approximately $160 million.
  • EPS before special items is expected to be approximately $2.69 to $2.78 (based on the assumptions above).
  • Full year capital expenditures (excluding vacation ownership and residential inventory) are expected to be approximately $200 million for maintenance, renovation and technology. In addition, in-flight investment projects and prior commitments for joint ventures and other investments are expected to total approximately $200 million.
  • Vacation ownership is expected to generate approximately $300 million in positive cash flow, including proceeds from the securitization of receivables the company anticipates completing in the second half of 2014.

For the three months ended March 31, 2014:

  • Adjusted EBITDA is expected to be approximately $260 million to $270 million (based on the assumptions below).
    • REVPAR increases at Same-Store Company-Operated Hotels Worldwide of 5% to 7% in constant dollars (approximately 100 basis points lower in actual dollars at current exchange rates).
    • REVPAR increases at Same-Store Company Owned Hotels Worldwide of 4% to 6% in constant dollars (approximately 200 basis points lower in actual dollars at current exchange rates).
    • Management fees, franchise fees and other income increase approximately 10% to 12%.
    • Earnings from the Company’s vacation ownership and residential business of approximately $40 million to $45 million.
  • Depreciation and amortization is expected to be approximately $78 million.
  • Interest expense is expected to be approximately $30 million.
  • The effective tax rate for the quarter is expected to be approximately 33% (based on the assumptions above).
  • EPS is expected to be approximately $0.53 to $0.56 (based on the assumptions above).

Special Items

The Company’s special items netted to a pre-tax charge of $42 million ($13 million after-tax) in the fourth quarter of 2013 compared to a pre-tax charge of $126 million ($72 million after-tax) in the same period of 2012.

The following represents a reconciliation of income from continuing operations before special items to income from continuing operations including special items (in millions, except per share data):

 

Three Months Ended

December 31,

                 

Year Ended

December 31,

2013

       

2012

   2013   

       

   2012   

 
$ 141   $ 137   Income from continuing operations before special items $ 579   $ 513  
$ 0.73   $ 0.70   EPS before special items $ 2.99   $ 2.61  
Special Items
(24 ) 1 Restructuring and other special (charges) credits, net (a) (1 ) 12
(18 ) (14 ) Gain (loss) on asset dispositions and impairments, net (b) (23 ) (21 )
Impairment of unconsolidated joint venture hotel (c) (4 )
      (113 ) Loss on early extinguishment of debt, net (d)       (128 )
(42 ) (126 ) Total special items – pre-tax (28 ) (137 )
21 48 Income tax benefit (expense) for special items (e) 14 96
  8     6   Income tax benefit (expense) – other non-recurring items (f)       (2 )
  (13 )   (72 ) Total special items – after-tax   (14 )   (43 )
 
$ 128   $ 65   Income from continuing operations $ 565   $ 470  
$ 0.67   $ 0.33   EPS including special items $ 2.92   $ 2.39  
 
(a)   During the three months ended December 2013, the Company decided to absorb certain technology related costs and expenses that it previously intended to collect from its managed and franchised properties. As a result, the Company recorded a $19 million charge, representing the costs and expenses incurred through the end of 2013 that are no longer intended to be recovered. The three months ended December 31, 2013 also include approximately $5 million in severance costs related to a hotel the Company plans to exit in the near future. The full year ended December 31, 2013 includes a favorable adjustment to a legal reserve of approximately $22 million.
 
During the year ended December 31, 2012, the Company recorded a favorable adjustment of $11 million to reverse a portion of a litigation reserve established in 2011.
 
(b) During the three months ended December 31, 2013, the net loss primarily related to a $17 million impairment charge associated with a wholly-owned hotel, asset disposals at certain owned hotels partially offset by the gain on the sales of two hotels and insurance proceeds relating to an owned hotel that suffered damages as a result of a cyclone. The full year ended December 31, 2013 includes losses related to the sale of three wholly-owned hotels.
 
During the three months ended December 31, 2012, the net loss primarily relates to the impairment of a preferred equity investment. The year ended December 31, 2012 also includes a net loss primarily relating to the sale of one wholly-owned hotel.
 
(c) During the year ended December 31, 2013, the net loss related to an impairment charge associated with a hotel in which the Company owns a non-controlling interest.
 
(d) During the three months ended December 31, 2012, the net charges primarily related to tender premiums associated with the early redemption of $725 million of the Company’s long-term debt. The year ended December 31, 2012 also includes a net charge associated with the early redemption of approximately $495 million of the Company’s long-term debt.
 
(e) During the three months and year ended December 31, 2013, the benefit primarily related to tax benefits on the special items at the statutory tax rate. The year ended December 31, 2013 also includes a tax benefit primarily relating to the sale of three hotels with high tax bases.
 
During the three months and year ended December 31, 2012, the benefit primarily relates to a tax benefit on the special items at the statutory tax rate. The year ended December 31, 2012 also includes a tax benefit primarily relating to the sale of two hotels with high tax bases.
 
(f) During the three months and year ended December 31, 2013, the net benefit primarily represents tax benefits associated with the tax law change in Mexico in late 2013 and the reversal of tax reserves associated with tax assets which are now deemed realizable.
 

During the three months and year ended December 31, 2012, the net benefit and expense primarily represents adjustments to deferred income taxes.

 

The Company has included the above supplemental information concerning special items to assist investors in analyzing Starwood’s financial position and results of operations. The Company has chosen to provide this information to investors to enable them to perform meaningful comparisons of past, present and future operating results and as a means to emphasize the results of core ongoing operations.

Definitions

All references to EPS, unless otherwise noted, reflect earnings per diluted share from continuing operations attributable to Starwood’s common stockholders. All references to continuing operations, discontinued operations and net income reflect amounts attributable to Starwood’s common stockholders (i.e., excluding amounts attributable to noncontrolling interests). All references to “net capital expenditures” mean gross capital expenditures for timeshare and fractional inventory net of cost of sales. EBITDA represents net income before interest expense, taxes, depreciation and amortization. The Company believes that EBITDA is a useful measure of the Company’s operating performance due to the significance of the Company’s long-lived assets and level of indebtedness. EBITDA is a commonly used measure of performance in its industry which, when considered with GAAP measures, the Company believes gives a more complete understanding of the Company’s operating performance. It also facilitates comparisons between the Company and its competitors. The Company’s management has historically adjusted EBITDA (i.e., “Adjusted EBITDA”) when evaluating operating performance for the Company, as well as for individual properties or groups of properties, because the Company believes that the inclusion or exclusion of certain recurring and non-recurring items, such as restructuring, goodwill impairment and other special charges and gains and losses on asset dispositions and impairments, is necessary to provide the most accurate measure of core operating results and as a means to evaluate comparative results. The Company’s management also uses Adjusted EBITDA as a measure in determining the value of acquisitions and dispositions and it is used in the annual budget process. The Company has historically reported this measure to its investors and believes that the continued inclusion of Adjusted EBITDA provides consistency in its financial reporting and enables investors to perform more meaningful comparisons of past, present and future operating results and provides a means to evaluate the results of its core ongoing operations. EBITDA and Adjusted EBITDA are not intended to represent cash flow from operations as defined by GAAP and such metrics 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 and Adjusted EBITDA may be different from the calculations used by other companies and, therefore, comparability may be limited.

All references to Same-Store Owned Hotels reflect the Company’s owned, leased and consolidated joint venture hotels, excluding condo hotels, hotels sold to date and hotels undergoing significant repositionings or for which comparable results are not available (i.e., hotels not owned during the entire periods presented or closed due to seasonality or natural disasters). References to Company-Operated Hotel metrics (e.g., REVPAR) reflect metrics for the Company’s owned, leased and managed hotels. References to Systemwide metrics (e.g., REVPAR) reflect metrics for the Company’s owned, managed and franchised hotels. REVPAR is defined as revenue per available room. ADR is defined as average daily rate.

All references to revenues in constant dollars represent revenues, excluding the impact of the movement of foreign exchange rates. The Company calculates revenues in constant dollars by calculating revenues for the current year using the prior year’s exchange rates. The Company uses this revenue measure to better understand the underlying results and trends of the business, excluding the impact of movements in foreign exchange rates.

All references to contract sales or originated sales reflect vacation ownership sales before revenue adjustments for percentage of completion accounting methodology. All references to earnings from vacation ownership and residential represents operating income before depreciation expense. All references to management and franchise revenues represent base and incentive fees, franchise fees, amortization of deferred gains resulting from the sales of hotels subject to long-term management contracts and termination fees.

Starwood Hotels & Resorts Worldwide, Inc. is one of the leading hotel and leisure companies in the world with nearly 1,200 properties in 100 countries and 181,400 employees at its owned and managed properties. Starwood is a fully integrated owner, operator and franchisor of hotels, resorts and residences with the following internationally renowned brands: St. Regis®, The Luxury Collection®, W®, Westin®, Le Méridien®, Sheraton®, Four Points® by Sheraton, Aloft®, and Element®. The Company boasts one of the industry’s leading loyalty programs, Starwood Preferred Guest (SPG), allowing members to earn and redeem points for room stays, room upgrades and flights, with no blackout dates. Starwood also owns Starwood Vacation Ownership, Inc., a premier provider of world-class vacation experiences through villa-style resorts and privileged access to Starwood brands. For more information, including reconciliations of non-GAAP financial measures to GAAP financial measures, please visit www.starwoodhotels.com or contact Investor Relations at (203) 351-3500.

Note: This press release contains forward-looking statements within the meaning of federal securities regulations. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties and other factors that may cause actual results to differ materially from those anticipated at the time the forward-looking statements are made. Further results, performance and achievements may be affected by general economic conditions including the impact of war and terrorist activity, natural disasters, business and financing conditions (including the condition of credit markets in the U.S. and internationally), foreign exchange fluctuations, cyclicality of the real estate (including residential) and the hotel and vacation ownership businesses, operating risks associated with the hotel, vacation ownership and residential businesses, relationships with associates and labor unions, customers and property owners, the impact of the internet reservation channels, our reliance on technology, domestic and international political and geopolitical conditions, competition, governmental and regulatory actions (including the impact of changes in U.S. and foreign tax laws and their interpretation), travelers’ fears of exposure to contagious diseases, risk associated with the level of our indebtedness, risk associated with potential acquisitions and dispositions and the introduction of new brand concepts and other risks and uncertainties. These risks and uncertainties are presented in detail in our filings with the Securities and Exchange Commission. There can be no assurance as to the development of future hotels in the Company’s pipeline or additional vacation ownership units.

 

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

Unaudited Consolidated Statements of Income

(In millions, except per share data)

 
Three Months Ended

December 31,

                Year Ended

December 31,

   2013   

       

   2012   

        %

Variance

   2013   

       

   2012   

        %

Variance

Revenues
$ 416 $ 418 (0.5 ) Owned, leased and consolidated joint venture hotels $ 1,612 $ 1,698 (5.1 )
176 249 (29.3 ) Vacation ownership and residential sales and services 924 1,287 (28.2 )
265 246 7.7 Management fees, franchise fees and other income 965 888 8.7
  649     620   4.7   Other revenues from managed and franchised properties (a)   2,614     2,448   6.8  
1,506 1,533 (1.8 ) 6,115 6,321 (3.3 )
Costs and Expenses
326 334 2.4 Owned, leased and consolidated joint venture hotels 1,292 1,391 7.1
129 171 24.6 Vacation ownership and residential 632 961 34.2
106 101 (5.0 ) Selling, general, administrative and other 384 370 (3.8 )
24 (1 ) n/m Restructuring and other special charges (credits), net 1 (12 ) n/m
65 58 (12.1 ) Depreciation 239 226 (5.8 )
7 7 Amortization 28 25 (12.0 )
  649     620   (4.7 ) Other expenses from managed and franchised properties (a)   2,614     2,448   (6.8 )
1,306 1,290 (1.2 ) 5,190 5,409 4.0
200 243 (17.7 ) Operating income 925 912 1.4
9 6 50.0 Equity (losses) earnings and gains and (losses) from unconsolidated ventures, net 26 25 4.0
(23 ) (36 ) 36.1 Interest expense, net of interest income of $1, $1, $3 and $2 (100 ) (170 ) 41.2
(113 ) 100.0 Loss on early extinguishment of debt (128 ) 100.0
  (18 )   (14 ) (28.6 ) Gain (loss) on asset dispositions and impairments, net   (23 )   (21 ) (9.5 )
168 86 95.3 Income from continuing operations before taxes and noncontrolling interests 828 618 34.0
  (40 )   (21 ) (90.5 ) Income tax benefit (expense)   (263 )   (148 ) (77.7 )
128 65 96.9 Income (loss) from continuing operations 565 470 20.2
Discontinued Operations:
(1 ) n/m Loss from operations, net of tax



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