Company Press Release: Starwood Hotels & Resorts Worldwide, Inc.
February 11, 2000
WHITE PLAINS, NY -- Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT), one of the world's largest hotel
and leisure companies which, through its subsidiaries, operates the Sheraton, Westin, St. Regis, Luxury Collection,
Four Points, and W brands, yesterday announced financial results for the fourth quarter and year ended December
31, 1999.
Pro Forma Comparable Results
Fourth Quarter Ended December 31, 1999
For the fourth quarter of 1999, total revenues increased 17% to $1.1 billion when compared to the same period in
1998 (despite the sale of two owned hotels during the fourth quarter of 1999). Pro forma comparable income from
continuing operations was $0.51 per diluted share compared to $0.48 per diluted share in the corresponding period
in 1998. Pro forma comparable income from continuing operations increased to $104 million in the fourth quarter
of 1999 compared to $95 million in the same period of 1998. (See the attached unaudited consolidated statements
of operations for the three months ended December 31, 1999 and 1998, and the notes thereto, for the basis of the
pro forma comparable results.)
Year Ended December 31, 1999
For the year ended December 31, 1999, total revenues increased 8% to $3.9 billion when compared to the same period
in 1998. Pro forma comparable income from continuing operations increased 23% to $1.54 per diluted share compared
to pro forma comparable income from continuing operations of $1.25 per diluted share for the corresponding period
in 1998. Pro forma comparable income from continuing operations was approximately $303 million for the year ended
December 31, 1999 compared to $262 million for the same period of 1998. (See the attached unaudited consolidated
statements of operations for the years ended December 31, 1999 and 1998, and the notes thereto, for the basis of
the pro forma comparable results.)
Operating Results
Revenues for the fourth quarter of 1999 at the Company's 168 owned and leased hotels (excluding the W hotels in
San Francisco and Seattle which were not open in 1998) increased 5.9% to $874 million from $825 million in 1998
and EBITDA increased 6.2% to $288 million from $271 million in 1998. Results for the fourth quarter were negatively
impacted by Starwood Preferred Guest Program ramp-up costs, the unfavorable impact of foreign exchange, pre-opening
expenses and one-time Y2K expenses. EBITDA at 119 hotels in North America (excluding the W hotels in San Francisco
and Seattle) increased 5.7% to $206 million in the fourth quarter of 1999 when compared to the same period in 1998.
North American EBITDA was negatively impacted in 1999 as a result of significant renovations and reflaggings at
numerous Sheraton, St. Regis and other/independent hotels. EBITDA at 31 hotels in Europe increased 10.7% (approximately
19% excluding foreign exchange impacts) to $41 million in the fourth quarter of 1999 when compared to the same
period of 1998. Excluding the W hotels in San Francisco and Seattle and 13 hotels under significant renovation,
or for which comparable results are not available, EBITDA at 155 and leased hotels worldwide (``Same-Store Owned
Hotels''), increased 7.3% in the fourth quarter of 1999 to $266 million when compared to the same period in 1998
and EBITDA margins increased to 33.1% from 32.6%.
For the fourth quarter of 1999, Same-Store Owned Hotel worldwide revenue per available room (``REVPAR'') increased
as a result of increases in both average daily rate (``ADR'') and occupancy rate. ADR and occupancy rate increases
were strongest in the Same-Store Owned Hotels in North America (108 hotels) where ADR increased 3.8% to $149.38
and occupancy increased 110 basis points to 67.9% when compared to the same period in 1998. These results exclude
the W Hotel New York, which officially re-opened in December of 1998 after significant renovation, the W Hotel
in San Francisco, California which opened in May, 1999 and the W Hotel in Seattle, Washington which opened in September,
1999. For the fourth quarter of 1999, the W New York had REVPAR growth of 150% when compared to the same period
in 1998.
During the fourth quarter, the Company signed management and franchise agreements for 37 hotels with approximately
8,200 rooms, bringing the year-to-date total to 112 hotels with approximately 25,000 rooms under all six brands
including the Westin Essex House, Sheraton Sapporo, W Sydney and St. Regis Shanghai. During the quarter, a net
10 managed or franchised hotels with approximately 1,600 rooms were opened. Already, 77 new hotel openings or conversions
with approximately 18,000 rooms are scheduled for 2000.
Vacation ownership interest (``VOI'') sales in the fourth quarter of 1999 increased 4.9% when compared to VOI sales
reported by Vistana, Inc. in the same period of 1998. The Company acquired Vistana, Inc. one of the premier developers
and operators of high quality vacation interval ownership on October 1, 1999. Currently, VOI inventory remains
in various locations including Orlando, Florida, Scottsdale, Arizona and The PGA Vacation Resort in Port St. Lucie,
Florida, and new build projects are currently underway in the Bahamas, Avon, Colorado and Orlando, Florida. Additional
VOI projects, capitalizing on current Starwood locations in Palm Springs, Phoenix and Hawaii are expected to begin
by the end of 2000.
``We are pleased with the progress and momentum represented in our fourth quarter and annual results as EPS growth
for the year exceeded our 20% target,'' said Barry S. Sternlicht, Chairman & CEO of Starwood. ``1999 was a
year of transformation for Starwood that included major investments in key areas, establishing a strong foundation
for future success. Our company is in the best shape it has ever been. With the completion of approximately $6.8
billion in asset sales in less than 2 years, we are now focused on a single business, global lodging, and our balance
sheet is positioned to achieve investment grade.''
Continuing, Mr. Sternlicht said: ``In the past six months, we strengthened our management team with more than a
dozen key executives from both within and outside the hotel industry joining the ranks of our 120,000 person strong
worldwide operations. We restructured our operating hierarchies, created brand leaders and our people are enthusiastic.
Recently the Starwood Preferred Guest Program swept the important Freddie Awards, providing independent recognition
of what the more than 2 million new members discovered -- that SPG is the best hotel loyalty program in the industry.''
Mr. Sternlicht added: ``We've positioned the Company for industry leading growth in 2000. The acquisition of Vistana
provides Starwood with an entry into the fast growing timeshare market. We opened 89 hotels and signed contracts
on 112 hotels around the world expanding our system-wide room base. We launched the St. Regis brand and our W brand
has exceeded our operating expectations and we expect to have almost 20 W's operating in the near future. More
than 10,500 rooms, representing almost 25% of our North American owned room inventory base, were under renovation
in the fourth quarter of 1999 and renovation activity continues in the first quarter of 2000, positioning us well
for continued positive performance later in the year. Our internet initiatives will provide new productivity tools
and alternative revenue sources. During 1999 and early 2000, we made strategic growth investments in five internet
travel related businesses for a total of $14 million.''
Concluding, Mr. Sternlicht said: ``While we are pleased with our current revenue momentum, we expect our progress
to be enhanced by the roll out of a state-of-the-art revenue management system in the second half of 2000 along
with new sales force automation technology. We continue to focus on improving margins, which were negatively impacted
in 1999 by significant SPG ramp-up costs, pre-opening costs, foreign currency hits, Y2K costs and the operating
disruptions of the renovation program. We do not expect to incur the same level of these costs in 2000. The health
of our balance sheet, our growth platform, advances in our technology platform (including the internet), implementation
of our new brand strategies, and most importantly, the strengthening of our management team, position us very well
for 2000 and beyond.''
Renovations
During the fourth quarter, the Company invested approximately $211 million in new construction and capital improvements.
Throughout 1999 over 65% of the Company's owned North American Sheratons underwent capital improvements. By the
end of 2000, more than 60% of owned hotel rooms in North America, across all brands, are expected to be renovated.
Currently, renovations are underway at 32 hotels.
Gaming Disposition
On December 30, 1999 the Company completed the sale of Caesars World Inc. for approximately $3.0 billion. The Company
used the proceeds to immediately pay off $2.5 billion of increasing rate notes and to reduce its bank revolver
by approximately $500 million.
On May 18, 1999 Sun International Hotels Limited announced the definitive agreement to acquire the Desert Inn hotel
and casino for $275 million. Regulatory review of the transaction continues.
Sale of Lampsa, SA
During the fourth quarter of 1999, the Company sold substantially all of its interest in Lampsa, SA, a Greek company
that owns the Grand Bretagne in Athens. The Company owned its interest in Lampsa, SA through its approximate 73%
ownership of CIGA S.p.A. The Company received gross proceeds (before minority interest) of approximately $290 million
as a result of these sales and recorded pre tax gains (before minority interest) of $11 million and $265 million
in the third and fourth quarters of 1999, respectively. These gains are excluded from pro forma comparable results
for the fourth quarter and year ended December 31, 1999.
Tender offer to purchase minority shares of CIGA , S.p.A.
During the fourth quarter of 1999, the Company announced its intention to tender for all of the outstanding shares
of CIGA, S.p.A. not currently owned by the Company. The Company owns approximately 73% of the ordinary shares.
If 100% of the shares are tendered, the aggregate purchase price will be approximately $275 million. The tender
offer began in January and is expected to be completed by the end of February 2000.
Financing
On December 31, 1999, the Company had total debt of approximately $5.8 billion and cash of approximately $436 million
versus total debt of approximately $8.4 billion and cash of approximately $195 million at the end of the prior
quarter. Starwood has no significant debt maturing until November 2000, and the weighted average maturity of the
Company's debt portfolio exceeds five years. At the end of the fourth quarter, the Company's debt was approximately
68% fixed and 32% floating.
During the fourth quarter, the Company declared a dividend of $0.15 per share. Consistent with the Company's announcement
January 6, 1999, when the Company restructured as a C-corp, the Company's annual dividend is expected to increase
15% in 2000 to $0.69 per share. Also during the quarter, as part of the Company's on-going stock repurchase program,
the Company repurchased approximately one million shares at an average price of $21.69 per share. At the end of
1999, the balance remaining on the Board authorized stock repurchase program was approximately $300 million. At
December 31, 1999, Starwood had approximately 202 million shares outstanding (including partnership units and exchangeable
preferred shares).
Starwood is one of the world's largest lodging and leisure companies which, through its subsidiaries, operates
the Sheraton, Westin, St. Regis, Luxury Collection, Four Points, and W brands. Starwood's portfolio of owned, managed
and franchised hotels include approximately 716 hotels in 80 countries with approximately 218,000 rooms. Additional
information, including more detailed financial information, is available at the Company's website at www.starwoodhotels.com.
(Note: This release contains certain statements that may be deemed ``forward-looking statements'' within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements are not guarantees of future performance and involve risks and uncertainties that could cause actual
results to differ materially from historical results or those anticipated at the time the forward-looking statements
are made, including, without limitation, risks and uncertainties associated with the following: the continued ability
of Starwood Hotels and Resorts (the ``Trust'') to qualify for taxation as a REIT; Starwood's ability to attract
and retain personnel; completion, terms and timing of future acquisitions and dispositions, including the pending
sale of Starwood's remaining gaming operations; the availability of capital for acquisitions and for renovations;
execution of hotel renovation and expansion programs; the ability to maintain existing management, franchise or
representation agreements and to obtain new agreements on favorable terms; competition within the lodging industry
and from emerging technologies, the cyclicality of the real estate business; and the hotel business; foreign exchange
fluctuations and exchange control restrictions; general real estate and national and international economic conditions;
political, financial and economic conditions and uncertainties in countries in which Starwood owns property or
operates; and the other risks and uncertainties set forth in the annual, quarterly and current reports and proxy
statements of the Trust and Starwood. Starwood undertakes 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 OPERATIONS
(In millions, except per Share data)
Historical(a) Pro Forma Comparable(a)
Three Months Ended Three Months Ended
December 31, December 31,
1999 1998 1999(b) 1998(c)
Revenues
$ 895 $ 829 Owned, leased and consolidated $ 895 $ 829
joint venture hotels
90 63 Management and franchise fees 90 63
102 39 Other 102 39
1,087 931 1,087 931
Costs and Expenses
604 560 Owned, leased and consolidated 604 560
joint venture hotels
47 -- Other 47 --
50 42 Selling, general and 50 31
administrative
44 (36) Restructuring and other -- --
special charges/(credits)
123 90 Depreciation and amortization 123 90
868 656 824 681
219 275 263 250
(129) (125) Interest expense, net of interest (96) (88)
income of $8 and $4
169 4 Gains on sales of real estate and -- --
investments, net
259 154 167 162
(77) 23 Income tax (expense) benefit (61) (65)
(81) (2) Minority equity in net income (2) (2)
101 175 Income from continuing operations 104 95
Discontinued operations:
-- (21) Net loss from operations, -- --
net of tax benefit of $8
(64) (3) Net loss on dispositions, -- --
net of tax of $4 and $3
(30) -- Extraordinary item, net of tax -- --
benefit of $17
$ 7 $ 151 Net income $ 104 $ 95
Earnings Per Share -- Basic
$ 0.51 $ 0.92 Continuing operations $ 0.53 $ 0.50
(0.33) (0.13) Discontinued operations -- --
(0.15) -- Extraordinary item -- --
$ 0.03 $ 0.79 Net income $ 0.53 $ 0.50
Earnings Per Share - Diluted
$ 0.50 $ 0.87 Continuing operations $ 0.51 $ 0.48
(0.32) (0.12) Discontinued operations -- --
(0.15) -- Extraordinary item -- --
$ 0.03 $ 0.75 Net income $ 0.51 $ 0.48
195 189 Weighted average 195 189
number of Shares
203 200 Weighted average number of 203 200
Shares assuming dilution
(a) During the quarters ended December 31, 1999 and 1998, the gaming segment was presented as a discontinued operation as a result of the Company's announced plan to dispose of Caesars and the Desert Inn.
(b) Represents the pro forma comparable results of Starwood assuming the disposition of the gaming segment had occurred at the beginning of the period and the exclusion of the following unusual items: (i) restructuring and other special charges of $44 million (pretax) attributable to the $36 million reversal of prior years' restructuring costs, net of a current period charge of $8 million related to executive severance costs and a current period charge of $72 million to reserve for certain litigation costs primarily related to the judgement in a matter involving the former Sheraton in Washington, D.C., and (ii) pretax gains (net of losses) on sales of real estate and investments totaling $169 million primarily attributable to the $265 million gain on the sale of the Company's interest in Lampsa SA, net of $96 million primarily related to the write-down of certain hotel assets held for sale at December 31, 1999.
(c) Represents the pro forma comparable results of Starwood assuming the dispositions of the gaming segment and other non-core businesses had occurred at the beginning of the period, certain savings of $4 million (pretax) as a result of the elimination of duplicate facilities associated with the ITT Merger, certain benefit savings of $7 million (pretax), a tax rate of 40% (the effective tax rate after giving effect to the reorganization of the Company to a C-Corporation in January 1999 (the ``Reorganization'')) and the exclusion of restructuring and other special credits of $36 million (pretax) attributable to the reversal of certain restructuring charges as a result of the resolution of certain employment related contingencies.
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per Share data)
Historical(a) Pro Forma Comparable(a)
Year Ended Year Ended
December 31, December 31,
1999 1998(b) 1999(c) 1998(d)
Revenues
$ 3,391 $ 2,983 Owned, leased and consolidated $ 3,391 $ 3,224
joint venture hotels
285 226 Management and franchise fees 285 232
186 116 Other 186 130
3,862 3,325 3,862 3,586
Costs and Expenses
2,313 2,030 Owned, leased and consolidated 2,313 2,206
joint venture hotels
47 -- Other 47 --
173 210 Selling, general and 166 149
administrative
3 149 Restructuring and other -- --
special charges
476 399 Depreciation and amortization 476 455
3,012 2,788 3,002 2,810
850 537 860 776
(493) (447) Interest expense, net of (362) (317)
interest income of $23 and $26
191 55 Gains on sales of real estate -- --
and investments, net
(15) -- Miscellaneous expense -- --
533 145 498 459
(1,076) 89 Income tax (expense) benefit (182) (184)
(95) (14) Minority equity in net income (13) (13)
(638) 220 Income (loss) from continuing 303 262
operations
Discontinued operations:
-- (80) Net loss from operations, net -- --
of tax benefit of $0 and $20
(71) 1,162 Net gain (loss) on dispositions, -- --
net of taxes of $125 and $607
(32) -- Extraordinary item, net of tax -- --
benefit of $18
$ (741) $ 1,302 Net income (loss) $ 303 $ 262
Earnings Per Share -- Basic
$ (3.41) $ 1.06 Continuing operations $ 1.59 $ 1.26
(0.38) 5.64 Discontinued operations -- --
(0.17) -- Extraordinary item -- --
$ (3.96) $ 6.70 Net income (loss) $ 1.59 $ 1.26
Earnings Per Share -- Diluted
$ (3.41) $ 1.05 Continuing operations $ 1.54 $ 1.25
(0.38) 5.58 Discontinued operations -- --
(0.17) -- Extraordinary item -- --
$ (3.96) $ 6.63 Net income (loss) $ 1.54 $ 1.25
189 192 Weighted average 189 195
number of Shares
189 194 Weighted average number of 197 196
Shares assuming dilution
(a) During the years ended December 31, 1999 and 1998, the gaming segment was presented as a discontinued operation
as a result of the Company's announced plan to dispose of Caesars and the Desert Inn.
(b) Represents results of ITT for the year ended December 31, 1998 and the results of Starwood (inclusive of Westin)
for the period from the closing of the ITT Merger (February 23, 1998) through December 31, 1998.
(c) Represents the pro forma comparable results of Starwood assuming the dispositions of the gaming segment and
other non-core businesses had occurred at the beginning of the period, certain benefit savings of $7 million (pretax)
and the exclusion of the following unusual items: (i) a $15 million pretax charge to miscellaneous expense and
a $936 million deferred tax charge related to the Reorganization; (ii) restructuring and other special charges
of $3 million (pretax) attributable to the $90 million reversal of certain prior year restructuring charges and
as a result of the resolution of certain employment related contingencies, net of restructuring and other special
charges of $93 million (pretax) attributable to a reserve for certain litigation costs primarily related to the
judgement in a matter involving the former Sheraton in Washington, D.C., the rationalization of one of the Company's
technical centers and certain executive severance costs; and (iii) pretax gains (net of losses) on sales of real
estate and investments totaling $191 million primarily attributable to the $276 million gain on the sale of the
Company's interest in Lampsa SA and the $42 million gain on the sale of the Company's remaining interest in Madison
Square Garden, net of $127 million primarily related to the write-down of hotel assets sold during 1999 or held
for sale as of December 31, 1999.
(d) Represents the pro forma comparable results of Starwood as if the ITT Merger, the acquisition of Westin, the
dispositions of the gaming segment and other non-core businesses had occurred at the beginning of the period, including
certain pretax benefit savings of $29 million, savings resulting from the elimination of duplicate facilities and
other purchase price adjustments related to the acquisition of Westin and the ITT Merger, a tax rate of 40% (the
effective tax rate after giving effect to the Reorganization) and the exclusion of the following unusual items:
(i) restructuring and other special charges of $149 million (pretax) attributable to the ITT Merger; (ii) a pretax
loss of $40 million related to the early termination of interest rate swaps; (iii) nonrecurring charge to selling,
general and administrative expense of approximately $30 million (pretax) primarily associated with the vesting
of certain restricted stock awards; and (iv) pretax gains (net of losses) on disposal of real estate and investments
totaling $55 million.
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
UNAUDITED BALANCE SHEET INFORMATION
(In millions)
December 31, 1999
Historical(a) Pro Forma(b)
Total assets $ 12,923 $ 12,819
Total debt $ 5,631 $ 5,521
Shares outstanding(c) 202 202
(a ) Total assets include the net assets of the discontinued gaming segment of $104 million. Total debt excludes
$165 million of debt allocated to the discontinued gaming segment based on generally accepted accounting principles.
(b) Total assets exclude the net assets of the discontinued gaming segment of $104 million. Total debt excludes
$275 million of debt assumed to be paid down with the net proceeds expected to be received in connection with the
sale of the Desert Inn.
(c) Shares outstanding include partnership units and exchangeable preferred shares.
SOURCE: Starwood Hotels & Resorts Worldwide, Inc.