Financial

Starwood Reports Third Quarter 2010 Results

Worldwide System-wide REVPAR for Same-Store Hotels increased 10.0% (11.1% in constant dollars) compared to the third quarter of 2009. System-wide REVPAR for Same-Store Hotels in North America increased 10.6% (10.0% in constant dollars).

Starwood

Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT) reported third quarter 2010 financial results.

“We were able to beat expectations thanks to our top-line growth initiatives that powered third quarter REVPAR results. Our distinctive and compelling brands are gaining share, and our strong presence in the key global cities positions us well to benefit from the return of the business traveler.”

Third Quarter 2010 Highlights

  • Excluding special items, EPS from continuing operations was $0.25. Including special items, EPS from continuing operations was a loss of $0.03.
  • Adjusted EBITDA was $205 million.
  • Excluding special items, income from continuing operations was $47 million. Including special items, the loss from continuing operations was $5 million.
  • Worldwide System-wide REVPAR for Same-Store Hotels increased 10.0% (11.1% in constant dollars) compared to the third quarter of 2009. System-wide REVPAR for Same-Store Hotels in North America increased 10.6% (10.0% in constant dollars).
  • Management and franchise revenues increased 7.7% compared to 2009.
  • Worldwide Same-Store company-operated gross operating profit margins increased approximately 140 basis points.
  • Worldwide REVPAR for Starwood branded Same-Store Owned Hotels increased 10.8% (12.5% in constant dollars) compared to the third quarter of 2009. REVPAR for Starwood branded Same-Store Owned Hotels in North America increased 12.5% (11.2% in constant dollars).
  • Margins at Starwood branded Same-Store Owned Hotels Worldwide increased 110 basis points.
  • Operating income from vacation ownership and residential increased $10 million compared to 2009.
  • During the quarter, the Company signed 20 hotel management and franchise contracts representing approximately 4,500 rooms and opened 17 hotels and resorts with approximately 3,300 rooms.

Third Quarter 2010 Earnings Summary

Starwood Hotels & Resorts Worldwide, Inc. (“Starwood” or the “Company”) today reported a loss from continuing operations for the third quarter of 2010 of $0.03 per share compared to EPS of $0.20 in the third quarter of 2009. Excluding special items, EPS from continuing operations was $0.25 for the third quarter of 2010 compared to $0.14 in the third quarter of 2009. Excluding special items, the effective income tax rate in the third quarter of 2010 was 23.0%.

Special items in the third quarter of 2010 included a pretax charge of $55 million ($52 million after tax or $0.28 per share) and were primarily related to the loss on the sale of one hotel. Special items in the third quarter of 2009 included an $11 million after tax benefit or $0.06 per share primarily related to a tax benefit on a hotel sale.

The loss from continuing operations was $5 million in the third quarter of 2010 compared to income of $36 million in 2009. Excluding special items, income from continuing operations was $47 million in the third quarter of 2010 compared to $25 million in 2009.

The net loss was $6 million and $0.03 per share in the third quarter of 2010 compared to net income of $40 million and EPS of $0.22 in the third quarter of 2009.

Frits van Paasschen, CEO said, “We were able to beat expectations thanks to our top-line growth initiatives that powered third quarter REVPAR results. Our distinctive and compelling brands are gaining share, and our strong presence in the key global cities positions us well to benefit from the return of the business traveler.”

“New hotel signings are being driven by our emerging markets platform. We expect overall new supply in developed markets to remain well below historic rates of growth, resulting in a multi-year supply/demand imbalance. In North America, supply growth in the Upper Upscale and Luxury segments is expected to fall below 0.5% in 2011, and remain at these low levels for a few years to come. This limited supply will support our ability to recover the rate we gave up in 2009 and 2010. In that context, we are seeing a recovering transaction market as buyers appreciate the great upside ahead for hotel owners.”

Third Quarter 2010 Operating Results

Management and Franchise Revenues

Worldwide System-wide REVPAR for Same-Store Hotels increased 10.0% (11.1% in constant dollars) compared to the third quarter of 2009. International System-wide REVPAR for Same-Store Hotels increased 9.1% (12.5% in constant dollars).

Worldwide System-wide REVPAR for Same-Store changes by region:

  REVPAR
Region   Reported   Constant dollars
North America   10.6%   10.0%
Europe 0.9% 11.7%
Asia Pacific 20.5% 15.8%
Africa and the Middle East (0.4)% 1.4%
Latin America 28.2% 28.2%

Increases in REVPAR for Worldwide System-wide Same-Store hotels by brand:

  REVPAR
Brand   Reported   Constant dollars
St. Regis/Luxury Collection   6.3%   11.5%
W Hotels 18.9% 18.7%
Westin 8.4% 8.7%
Sheraton 11.3% 11.4%
Le Méridien 5.1% 10.6%
Four Points by Sheraton 12.4% 12.0%

Worldwide Same-Store company-operated gross operating profit margins increased approximately 140 basis points in the third quarter driven by REVPAR increases and cost controls. International gross operating profit margins for Same-Store company-operated properties increased approximately 130 basis points, and North American Same-Store company-operated gross operating profit margins increased approximately 160 basis points.

Management fees, franchise fees and other income were $173 million, up $10 million, or 6.1%, from the third quarter of 2009. Management fees increased 8.0% to $94 million and franchise fees increased 16.2% to $43 million.

During the third quarter of 2010, the Company signed 20 hotel management and franchise contracts, representing approximately 4,500 rooms, of which 15 are new builds and five are conversions from other brands. At September 30, 2010, the Company had approximately 350 hotels in the active pipeline representing approximately 85,000 rooms.

During the third quarter of 2010, 17 new hotels and resorts (representing approximately 3,300 rooms) entered the system, including the W New York Downtown (New York, 217 rooms), the Westin Resort, Costa Navarino (Greece, 123 rooms), Sheraton Zhongshan (China, 350 rooms), Sheraton Udaipur Palace Resort & Spa (India, 228 rooms), and four new Alofts with 521 rooms (Chennai and Bengaluru, India; Brussels, Belgium, and Tulsa, Oklahoma). Three properties (representing approximately 300 rooms) were removed from the system during the quarter.

Owned, Leased and Consolidated Joint Venture Hotels

Worldwide REVPAR for Starwood branded Same-Store Owned Hotels increased 10.8% (12.5% in constant dollars). REVPAR at Starwood branded Same-Store Owned Hotels in North America increased 12.5% (11.2% in constant dollars). Internationally, Starwood branded Same-Store Owned Hotel REVPAR increased 8.3% (14.5% in constant dollars).

Revenues at Starwood branded Same-Store Owned Hotels in North America increased 9.2% (8.0% in constant dollars) while costs and expenses increased 6.0% when compared to 2009. Margins at these hotels increased 250 basis points.

Revenues at Starwood branded Same-Store Owned Hotels Worldwide increased 7.5% (9.1% in constant dollars) while costs and expenses increased 5.9% when compared to 2009. Margins at these hotels increased 110 basis points.

Revenues at owned, leased and consolidated joint venture hotels were $427 million, compared to $388 million in 2009.

Vacation Ownership

Total vacation ownership revenues increased 3.2% to $129 million compared to $125 million in 2009 driven by the impact of ASU 2009-17. Originated contract sales of vacation ownership intervals decreased 4.8% primarily due to lower tour flow and a lower average price. The number of contracts signed decreased 3.6% when compared to 2009 and the average price per vacation ownership unit sold decreased 2.5% to approximately $14,000, driven by price reductions and inventory mix.

Selling, General, Administrative and Other

Selling, general, administrative and other expenses increased 7.1% to $90 million compared to the third quarter of 2009.

Capital

Gross capital spending during the quarter included approximately $28 million of maintenance capital and $24 million of development capital. Investment spending on net vacation ownership interest (“VOI”) and residential inventory was $30 million, primarily related to the St. Regis Bal Harbour project.

Asset Sales

On September 29, 2010, the Company completed the sale of one hotel for gross proceeds of $70 million. This hotel was sold subject to a long-term management contract.

Balance Sheet

At September 30, 2010, the Company had gross debt of $2.860 billion, excluding $532 million of debt associated with securitized vacation ownership notes receivable that are required to be consolidated under ASU 2009-17. Additionally, the Company had cash and cash equivalents of $405 million (including $48 million of restricted cash), or net debt of $2.455 billion, compared to net debt of $2.834 billion as of June 30, 2010. Net debt at September 30, 2010 including debt and restricted cash associated with securitized vacation ownership notes receivables was $2.966 billion.

At September 30, 2010, debt was approximately 81% fixed rate and 19% floating rate and its weighted average maturity was 4.5 years with a weighted average interest rate of 6.87% excluding the securitized debt. The Company had cash (including current restricted cash) and availability under the domestic and international revolving credit facility of approximately $1.762 billion.

During the third quarter of 2010, the Company completed the securitization of approximately $300 million of vacation ownership notes receivable. Approximately $93 million of proceeds from this transaction were used to terminate the privately placed securitization completed in June 2009. The net cash proceeds from the securitization were approximately $180 million.

IRS Tax Settlement

In January 2009, the Company and the IRS reached an agreement in principle to settle the litigation pertaining to the tax treatment of the Company’s 1998 disposition of World Directories, Inc. In October 2010, the previously proposed settlement was formally agreed to by both the Company and the IRS through the execution of definitive documents stipulating the terms of the settlement. The executed settlement and decision documents were filed with the US Tax Court and signed by the Court, resulting in a transfer of the case to the IRS for processing the refund. The Company expects to receive a tax refund of over $200 million during the fourth quarter of 2010.

Outlook

For the Full Year 2010:

  • Adjusted EBITDA is expected to be approximately $840 million to $845 million, assuming:
    • REVPAR increases at Same-Store Company Operated Hotels Worldwide of 8% to 9% in constant dollars (approximately 50 basis points higher in dollars at current exchange rates).
    • REVPAR increases at Branded Same-Store Owned Hotels Worldwide of 9% to 10% in constant dollars (approximately 100 basis points higher in dollars at current exchange rates).
    • Management and franchise revenues increase approximately 8%.
    • Operating income from our vacation ownership and residential business of approximately $125 million.
    • Selling, General and Administrative expenses increase approximately 11%.
  • Depreciation and amortization is expected to be approximately $330 million.
  • Interest expense is expected to be approximately $256 million and cash taxes are expected to be approximately $75 million.
  • Full year effective tax rate is expected to be approximately 19%.
  • EPS before special items is expected to be approximately $1.09 to $1.11.
  • Full year capital expenditure (excluding vacation ownership and residential inventory) is expected to be approximately $140 million for maintenance, renovation and technology. In addition, in-flight investment projects and prior commitments for joint ventures and other investments is expected to total approximately $140 million. Vacation ownership (excluding Bal Harbour) is expected to generate approximately $225 million in positive cash flow, including proceeds from the securitization completed in the third quarter. Bal Harbour capital expenditure is expected to be approximately $150 million.

For the three months ended December 31, 2010:

  • Adjusted EBITDA is expected to be approximately $230 million to $235 million, assuming:
    • REVPAR increases at Same-Store Company Operated Hotels Worldwide of 7% to 9% in constant dollars (approximately 50 basis points lower in dollars at current exchange rates).
    • REVPAR increases at Branded Same-Store Owned Hotels Worldwide of 7% to 9% in constant dollars (approximately 50 basis points lower in dollars at current exchange rates).
    • Management and franchise revenues increase approximately 4% to 6%.
    • Operating income from our vacation ownership and residential business increases approximately $5 million to $10 million.
  • Depreciation and amortization is expected to be $82 million.
  • Interest expense is expected to be $62 million.
  • Income from continuing operations, before special items, is expected to be approximately $69 million to $73 million, reflecting an effective tax rate of approximately 20%.
  • EPS before special items is expected to be approximately $0.36 to $0.38.

For the Full Year 2011:

In Developed markets, the macroeconomic environment is uncertain with high unemployment and high public/private debt. While there are concerns about slower, “new” normal demand growth, the lodging supply situation is very favorable. In Emerging markets, macroeconomic growth has been strong, driving high secular growth in both lodging demand and supply. While visibility is improving, booking windows remain shorter than normal. We remain of the view that several scenarios could play out. Based on what we know at this point, our most likely scenario for 2011 assumes the continuation of current trends and a normal, global lodging recovery:

  • Adjusted EBITDA is expected to be approximately $950 million to $980 million, assuming:
    • REVPAR increases at Same-Store Company Operated Hotels Worldwide of 7% to 9% in constant dollars.
    • REVPAR increases at Branded Same-Store Owned Hotels Worldwide of 7% to 9% in constant dollars.
    • Management and franchise revenues increase approximately 9% to 11%.
    • Operating income from our vacation ownership and residential business of approximately $125 million.
    • Selling, General and Administrative expenses increase 1% to 2%.
  • Depreciation and amortization is expected to be approximately $330 million.
  • Interest Expense is expected to be approximately $250 million.
  • Income from continuing operations is expected to be approximately $278 million to $300 million, reflecting an effective tax rate of approximately 25%.
  • EPS is expected to be approximately $1.44 to $1.55.

Special Items

The Company’s special items netted to a charge of $55 million ($52 million after-tax) in the third quarter of 2010 compared to a $25 million charge ($11 million after-tax benefit) in the same period of 2009.

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 Nine Months Ended
September 30, September 30,
2010   2009

 

2010   2009
 
$ 47   $ 25   Income from continuing operations before special items $ 138   $ 92  
$ 0.25   $ 0.14   EPS before special items (a) $ 0.73   $ 0.51  
 
Special Items

 

1

 

(2

 

)
Restructuring, goodwill impairment and other special credits (charges), net (b) 2 (24 )
  (56 )   (23 ) Loss on asset dispositions and impairments, net (c)   (35 )   (49 )
(55 ) (25 ) Total special items – pre-tax (33 ) (73 )
3 36 Income tax (expense) benefit for special items (d) (1 ) 46
        Italian income tax incentive (e)       120  
  (52 )   11   Total special items – after-tax   (34 )   93  
 
$ (5 ) $ 36   Income (loss) from continuing operations $ 104   $ 185  
$ (0.03 ) $ 0.20   EPS including special items $ 0.55   $ 1.02  
 

(a) Diluted shares for the three months ended September 30, 2010 are 190 million.

 

(b) During the three and nine months ended September 30, 2010, the Company recorded restructuring credits associated with the reversal of previous restructuring reserves no longer deemed necessary.

 

During the three and nine months ended September 30, 2009, the Company recorded restructuring charges associated with its initiative to streamline operations and eliminate costs, including severance, lease  termination fees and write-off of leasehold improvements.

 

(c) During the three months ended September 30, 2010, the net loss primarily reflects a loss on the sale of one hotel.  During the nine months ended September 30, 2010, the charges above were partially offset by $14 million from property insurance proceeds related to an owned hotel damaged by a tornado and a $5 million gain that resulted from the step acquisition of a controlling interest in a previously unconsolidated joint venture.

 

During the three months ended September 30, 2009, the charge primarily reflects impairment charges of approximately $23 million associated with an investment in a hotel management contract which was subsequently cancelled, the Company’s retained interest in securitized receivables and the carrying value of one hotel.  During the nine months ended September 30, 2009, the charge also includes impairment charges of $26 million of the Company’s retained interests in securitized receivables and certain fixed assets.

 

(d) During the three months ended September 30, 2010, the benefit primarily relates to a tax benefit on the sale of one hotel.  During the nine months ended September 30, 2010, the net expense primarily relates to tax expenses at the statutory rate for restructuring credits and losses partially offset by the adjustment of deferred taxes associated with prior year impairment charges due to the change in a foreign tax rate.

 

The results for the three and nine months ended September 30, 2009 primarily reflect tax benefits at the statutory rate for the special items and a tax benefit for a hotel sale with a higher tax basis, partially offset by permanent tax charges associated with the loss on certain asset dispositions.

 

(e) During the nine months ended September 30, 2009, the benefit relates to an Italian tax incentive program through which the tax basis of Italian owned hotels were stepped up in exchange for paying a relatively minor current tax.  As a result, the Company recognized a net deferred tax benefit of $120 million under the program.

 

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 on-going operations.

Definitions

All references to EPS, unless otherwise noted, reflect earnings per diluted share from continuing operations attributable to Starwood’s common shareholders. All references to continuing operations, discontinued operations and net income reflect amounts attributable to Starwood’s common shareholders (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 total 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 on-going 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 and managed hotels. References to System-Wide 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 contract sales or originated sales reflect vacation ownership sales before revenue adjustments for percentage of completion accounting methodology.

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 1,025 properties in nearly 100 countries and 145,000 employees at its owned and managed properties. Starwood Hotels is a fully integrated owner, operator and franchisor of hotels and resorts with the following internationally renowned brands: St. Regis®, The Luxury Collection®, W®, Westin®, Le Méridien®, Sheraton®, Four Points® by Sheraton, aloft(SM), and element(SM). Starwood Hotels also owns Starwood Vacation Ownership, Inc., one of the premier developers and operators of high quality vacation interval ownership resorts. For more information, please visit www.starwoodhotels.com.

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, business and financing conditions, 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. Future vacation ownership units indicated in this press release include planned units on land owned by the Company or by joint ventures in which the Company has an interest that have received all major governmental land use approvals for the development of vacation ownership resorts. There can also be no assurance that such units will in fact be developed and, if developed, the time period of such development (which may be more than several years in the future). Some of the projects may require additional third-party approvals or permits for development and build out and may also be subject to legal challenges as well as a commitment of capital by the Company. The actual number of units to be constructed may be significantly lower than the number of future units indicated. There can also be no assurance that agreements will be entered into for the hotels in the Company’s pipeline and, if entered into, the timing of any agreement and the opening of the related hotel. Although we believe the expectations reflected in forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained or that results will not materially differ. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

   

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share data)

 
Three Months Ended Nine Months Ended
September 30, September 30,
    %     %
2010 2009 Variance 2010 2009 Variance
Revenues
$ 427 $ 388 10.1 Owned, leased and consolidated joint venture hotels $ 1,245 $ 1,154 7.9
132 126 4.8 Vacation ownership and residential sales and services 402 387 3.9
173 163 6.1 Management fees, franchise fees and other income 503 473 6.3
  523     479   9.2   Other revenues from managed and franchised properties (a)   1,581     1,436   10.1  
1,255 1,156 8.6 3,731 3,450 8.1
Costs and Expenses
352 323 (9.0 ) Owned, leased and consolidated joint venture hotels 1,028 972 (5.8 )
98 102 3.9 Vacation ownership and residential 302 306 1.3
90 84 (7.1 ) Selling, general, administrative and other 258 235 (9.8 )

 

(1

 

)

 

2

 

n/m
Restructuring, goodwill impairment and other special (credits) charges, net (2 ) 24 n/m
64 69 7.2 Depreciation 196 206 4.9
7 11 36.4 Amortization 24 25 4.0
  523     479   (9.2 ) Other expenses from managed and franchised properties (a)   1,581     1,436   (10.1 )
1,133 1,070 (5.9 ) 3,387 3,204 (5.7 )
122 86 41.9 Operating income 344 246 39.8
(1 ) (3 ) (66.7 ) Equity earnings and gains and (losses) from unconsolidated ventures, net 5 (5 ) n/m
(59 ) (60 ) 1.7 Interest expense, net of interest income of $0, $0, $1 and $2 (180 ) (156 ) (15.4 )
 

 

(56

 

)
 

 

(23

 

)

 

n/m
  Loss on asset dispositions and impairments, net   (35 )   (49 ) (28.6 )
6 n/m Income from continuing operations before taxes 134 36 n/m
  (11 )   36   n/m   Income tax (expense) benefit   (32 )   147   n/m  

 

(5

 

)
36

 

n/m
Income from continuing operations 102 183 (44.3 )
Discontinued Operations: (
(1 ) n/m Net (loss) income from operations, net of tax (2 ) (1 ) n/m
      4   n/m   Net gain (loss) on dispositions, net of tax   ( 36     (4 ) n/m  
(6 ) 40 n/m Net income 136 178 (23.6 )
          Net loss attributable to noncontrolling interests   2     2    
$ (6 ) $ 40   n/m   Net income attributable to Starwood $ 138   $ 180   (23.3 )
Earnings (Loss) Per Share – Basic
$ (0.03 ) $ 0.20 n/m Continuing operations $ 0.57 $ 1.03 (44.7 )
      0.02   n/m   Discontinued operations   0.19     (0.03 ) n/m  
$ (0.03 ) $ 0.22   n/m   Net income $ 0.76   $ 1.00   (24.0 )
Earnings (Loss) Per Share – Diluted
$ (0.03 ) $ 0.20 n/m Continuing operations $ 0.55 $ 1.02 (46.1 )
      0.02   n/m   Discontinued operations   0.18     (0.03 ) n/m  
$ (0.03 ) $ 0.22   n/m   Net income $ 0.73   $ 0.99   (26.3 )
Amounts attributable to Starwood’s Common Shareholders
$ (5 ) $ 36 n/m Continuing operations $ 104 $ 185 (43.8 )
  (1 )   4   n/m   Discontinued operations   34     (5 ) n/m  
$ (6 ) $ 40   n/m   Net income $ 138   $ 180   (23.3 )
 
  183     180   Weighted average number of shares   182     180  
  183     185   Weighted average number of shares assuming dilution   189     183  
 

(a) The Company includes in revenues the reimbursement of costs incurred on behalf of managed hotel property owners and franchisees with no added margin and includes in costs and expenses these reimbursed costs. These costs relate primarily to payroll costs at managed properties where the Company is the employer.

 

n/m = not meaningful

 
   

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

 
September 30, December 31,
2010 2009
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 357 $ 87
Restricted cash 61 47
Accounts receivable, net of allowance for doubtful accounts of $48 and $54 508 447
Securitized vacation ownership notes receivable, net of allowance for doubtful accounts of $10 and $0

60

Inventories 778 783
Prepaid expenses and other   159     127  
Total current assets 1,923 1,491
Investments 314 344
Plant, property and equipment, net 3,262 3,350
Assets held for sale 71
Goodwill and intangible assets, net 2,067 2,063
Deferred tax assets 988 982
Other assets (a) 409 460
Securitized vacation ownership notes receivable   439      
$ 9,402   $ 8,761  
Liabilities and Stockholders’ Equity
Current liabilities:
Short-term borrowings and current maturities of long-term debt (b) $ 8 $ 5
Current maturities of long-term securitized vacation ownership debt 133
Accounts payable 148 139
Accrued expenses 1,183 1,212
Accrued salaries, wages and benefits 387 303
Accrued taxes and other   323     368  
Total current liabilities 2,182 2,027
Long-term debt (b) 2,852 2,955
Long-term securitized vacation ownership debt 399
Deferred income taxes 33 31
Other liabilities   1,861     1,903  
7,327 6,916
Commitments and contingencies
Stockholders’ equity:
Corporation common stock; $0.01 par value; authorized 1,000,000,000 shares; outstanding 190,567,514 and 186,785,068 shares at September 30, 2010 and December 31, 2009, respectively 2 2
Additional paid-in capital 682 552
Accumulated other comprehensive loss (290 ) (283 )
Retained earnings   1,665     1,553  
Total Starwood stockholders’ equity 2,059 1,824
Noncontrolling interest   16     21  
Total equity   2,075     1,845  
$ 9,402   $ 8,761  
 

(a) Includes restricted cash of $8 million and $7 million at September 30, 2010 and December 31, 2009, respectively.

 

(b) Excludes Starwood’s share of unconsolidated joint venture debt aggregating approximately $457 million and $581 million at September 30, 2010 and December 31, 2009, respectively.

 
   

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

Non-GAAP to GAAP Reconciliations – Historical Data

(In millions)

 
Three Months Ended Nine Months Ended
September 30, September 30,
    %     %
2010 2009 Variance 2010 2009 Variance
 

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

$ (6) $ 40 n/m Net income $ 138 $ 180 (23.3 )
64 65 (1.5 ) Interest expense(a) 194 174 11.5
12 (45 ) n/m Income tax (benefit) expense (b) (1 ) (161 ) (99.4 )
73 79 (7.6 ) Depreciation(c) 222 237 (6.3 )
7 11   (36.4 ) Amortization (d)   26     26   0.0  
150 150 0.0 EBITDA 579 456 27.0
56 23 n/m Loss on asset dispositions and impairments, net 35 49 (28.6 )

 

 

4

 

n/m
Discontinued operations pre-tax net (gain) loss on dispositions

(2

)

17

n/m

 

(1)

 

2
 

 

n/m
  Restructuring, goodwill impairment and other special (credits) charges, net  

(2

)

 

24



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