Starwood Reports First Quarter 2010 Results
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Starwood Reports First Quarter 2010 Results
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Category: Worldwide - Industry economy -
Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2010-04-29
Starwood Hotels & Resorts Worldwide, Inc. (NYSE:
HOT) today reported first quarter 2010 financial results.
First Quarter 2010 Highlights
Excluding special items, EPS from continuing operations was $0.13. Including
special items, EPS from continuing operations was $0.16.
Adjusted EBITDA was $179 million.
Excluding special items, income from continuing operations was $24 million.
Including special items, income from continuing operations was $30 million.
Worldwide System-wide REVPAR for Same-Store Hotels increased 6.3% (3.0% in
constant dollars) compared to the first quarter of 2009. System-wide REVPAR for
Same-Store Hotels in North America increased 2.8% (1.2% in constant dollars).
Management and franchise revenues increased 5.6% compared to 2009.
Worldwide REVPAR for Starwood branded Same-Store Owned Hotels increased
6.6% (2.1% in constant dollars) compared to the first quarter of 2009. REVPAR for
Starwood branded Same-Store Owned Hotels in North America increased 5.8%
(2.8% in constant dollars).
Operating income from vacation ownership and residential increased $3 million
compared to 2009, including the impact of ASU 2009-17 (formerly SFAS 167).
During the quarter, the Company signed 13 hotel management and franchise
contracts representing approximately 3,000 rooms and opened 14 hotels and
resorts with approximately 2,600 rooms.
On April 20, 2010, the Company executed a new $1.5 billion Senior Credit Facility
which matures on November 15, 2013 and replaces the existing Revolving Credit
Agreement which would have matured on February 11, 2011.
First Quarter 2010 Earnings Summary
Starwood Hotels & Resorts Worldwide, Inc. (“Starwood” or the “Company”) today reported
income from continuing operations for the first quarter of 2010 of $0.16 per share
compared to $0.04 in the first quarter of 2009. Excluding special items, which net to a
benefit of $6 million in 2010 and a charge of $18 million in 2009, EPS from continuing
operations was $0.13 for the first quarter of 2010 compared to $0.15 in the first quarter of
2009. Excluding special items, the effective income tax rate in the first quarter of 2010 was
14.5% compared to 17.8% in the same period of 2009.
Income from continuing operations was $30 million in the first quarter of 2010 compared to
$9 million in 2009. Excluding special items, income from continuing operations was $24
million in the first quarter of 2010 compared to $27 million in 2009.
Net income was $30 million and EPS was $0.16 in the first quarter of 2010 compared to
net income of $6 million and EPS of $0.03 in the first quarter of 2009.
Frits van Paasschen, CEO said, “Lodging demand for our nine global brands accelerated
as we moved through the first quarter, allowing us to beat expectations on robust top-line
growth. We continued to hold the line on costs. Most encouraging for us was that
occupancy gains were led by the luxury market. This benefits Starwood, thanks to our
leading presence in the four and five star categories. With the depths of the downturn
behind us, we have a long runway ahead as we move into the upcycle.”
First Quarter 2010 Operating Results
Management and Franchise Revenues
Worldwide System-wide REVPAR for Same-Store Hotels increased 6.3% (3.0% in
constant dollars) compared to the first quarter of 2009. International System-wide
REVPAR for Same-Store Hotels increased 10.7% (5.2% in constant dollars).
Worldwide System-wide REVPAR for Same-Store changes by region:
REVPAR
Region Reported Constant dollars
North America +2.8% +1.2%
Europe +10.8% +3.7%
Asia Pacific +20.9% +12.8%
Africa and the Middle East -1.4% -2.5%
Latin America -0.2% -0.2%
Worldwide System-wide REVPAR for Same-Store changes by brand:
REVPAR
Brand Reported Constant dollars
St. Regis/Luxury Collection +8.3% +4.8%
W Hotels +20.1% +18.9%
Westin +5.4% +2.0%
Sheraton +5.0% +2.0%
Le Méridien +8.2% +3.7%
Four Points by Sheraton +4.7% 0.0%
Worldwide Same-Store company-operated gross operating profit margins increased
approximately 10 basis points in the first quarter driven by REVPAR increases.
International gross operating profit margins for Same-Store company-operated properties
increased approximately 150 basis points, and North American Same-Store companyoperated
gross operating profit margins decreased approximately 180 basis points.
Management fees, franchise fees and other income were $153 million, up $9 million, or
6.3%, from the first quarter of 2009. Management fees increased 10.1% to $87 million and
franchise fees increased 9.4% to $35 million.
During the first quarter of 2010, the Company signed 13 hotel management and franchise
contracts, representing approximately 3,000 rooms, of which nine are new builds and four
are conversions from other brands. At March 31, 2010, the Company had approximately
350 hotels in the active pipeline representing approximately 85,000 rooms.
During the first quarter of 2010, 14 new hotels and resorts (representing approximately
2,600 rooms) entered the system, including the W Hollywood Hotel & Residences
(California, 160 rooms), the Westin Mumbai Garden City (India, 88 rooms), the Westin
Austin at the Domain (Texas, 331 rooms), and the Sheraton Qiandao Lake Resort (China,
250 rooms). Seven properties (representing approximately 4,200 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 6.6%
(2.1% in constant dollars). REVPAR at Starwood branded Same-Store Owned Hotels in
North America increased 5.8% (2.8% in constant dollars). Internationally, Starwood
branded Same-Store Owned Hotel REVPAR increased 7.9% (0.8% in constant dollars).
Revenues at Starwood branded Same-Store Owned Hotels in North America increased
5.6% (2.6% in constant dollars) while costs and expenses increased 5.3% when compared
to 2009.
Revenues at Starwood branded Same-Store Owned Hotels Worldwide increased 5.9%
(1.6% in constant dollars) while costs and expenses increased 6.0% when compared to
2009.
Revenues at owned, leased and consolidated joint venture hotels were $381 million,
compared to $380 million in 2009.
Vacation Ownership
Total vacation ownership revenues decreased 2.2% to $131 million when compared to
2009. Originated contract sales of vacation ownership intervals decreased 4.9% primarily
due to the closure of fractional sales centers in 2009. Excluding fractional, originated
contract sales decreased 0.8% compared to 2009. The average price per vacation
ownership unit sold decreased 7.5% to approximately $16,800, driven by price reductions
and a higher percentage of biennial inventory. The number of contracts signed increased
3.6% when compared to 2009 due to higher closing efficiency partly offset by lower tour
flow.
Vacation ownership results include the impact of ASU 2009-17 (formerly SFAS 167)
discussed further below.
Selling, General, Administrative and Other
Selling, general, administrative and other expenses increased 4.1% to $76 million
compared to the first quarter of 2009.
Capital
Gross capital spending during the quarter included approximately $16 million of
maintenance capital and $13 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.
Dividend
In October 2009, the Company’s Board of Directors declared its annual dividend of $0.20
per share. The dividend was paid by the Company on January 14, 2010 to holders of
record on December 31, 2009.
Impact of Accounting Standards Update (“ASU”) 2009-17
The Company adopted ASU 2009-17 (formerly SFAS 167) on January 1, 2010, which
required the consolidation of entities associated with our previous securitization
transactions. As a result of the adoption of this rule, on January 1, 2010 the Company’s
assets (primarily short-term and long-term securitized vacation ownership notes receivable
net of loan loss reserve) increased by approximately $401 million and its liabilities
(primarily short-term and long-term securitized vacation ownership debt) increased by $444
million. Beginning retained earnings was reduced by $26 million (net of tax) as the
cumulative effect of a change in accounting principle. As a result of applying ASU 2009-17,
vacation ownership revenues in the first quarter of 2010 increased $14 million compared to
2009 and interest expense includes $6 million related to the securitized vacation ownership
debt.
Balance Sheet
At March 31, 2010, the Company had gross debt of $3.047 billion, excluding $406 million
of debt associated with securitized vacation ownership notes receivable that was required
to be consolidated beginning on January 1, 2010. Additionally, the Company had cash and
cash equivalents of $164 million (including $73 million of restricted cash), or net debt of
-5-
$2.883 billion, compared to net debt of $2.819 billion as of December 31, 2009. Net debt
at March 31, 2010 including debt associated with securitized vacation ownership notes
receivable was $3.289 billion.
At March 31, 2010, debt was approximately 76% fixed rate and 24% floating rate and its
weighted average maturity was 4.7 years with a weighted average interest rate of 6.88%
excluding the securitized debt. The Company had cash (including current restricted cash)
and availability under the domestic and international revolving credit facility of
approximately $1.679 billion.
On April 15, 2010, the Company completed the sale of two hotels for gross proceeds of
$78 million.
On April 20, 2010, the Company executed a new $1.5 billion Senior Credit Facility (“New
Facility”). The New Facility matures on November 15, 2013 and replaces the existing
$1.875 billion Revolving Credit Agreement, which would have matured on February 11,
2011. The New Facility enhances the Company’s financial flexibility and is expected to be
used for general corporate purposes.
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. Under the proposed settlement, the Company expects to receive a refund
in 2010 of over $200 million as a result of tax payments previously made.
Outlook
For the Full Year 2010:
Based on our first quarter results and our expectations for the second quarter, full year
2010 REVPAR at Same-Store Company Operated Hotels Worldwide could be up 5% to
8% in constant dollars and approximately 100 bps higher in dollars at current exchange
rates. REVPAR at Branded Same-Store Owned Hotels Worldwide could be up 4% to 7%
in constant dollars and approximately 100 bps higher in dollars at current exchange rates.
At the midpoint of these REVPAR ranges, adjusted EBITDA would be approximately $810
million (+/- 1 point of REVPAR drives +/- $15 million of EBITDA).
EPS before special items would be approximately $0.88.
Management and franchise revenues will increase approximately 6% to 9%.
Selling, General and Administrative expenses will increase 3% to 5%.
Operating income from our vacation ownership and residential business will be
approximately $115 million to $125 million, including the impact of adopting ASU
2009-17.
Full year depreciation and amortization will be approximately $335 million.
Full year interest expense will be approximately $262 million (including $20 million
to $23 million from the impact of adopting ASU 2009-17) and cash taxes will be
approximately $75 million.
Full year effective tax rate will be approximately 22%.
Full year capital expenditures (excluding vacation ownership and residential
inventory) would be approximately $150 million for maintenance, renovation and
technology. In addition, in-flight investment projects and prior commitments for joint
ventures and other investments will total approximately $100 million. Vacation
ownership is expected to generate approximately $150 million in positive cash flow,
including proceeds from a planned securitization in late 2010. Bal Harbour capital
will be approximately $140 million.
For the three months ended June 30, 2010:
Adjusted EBITDA is expected to be approximately $200 million to $210 million
assuming:
REVPAR change at Same-Store Company Operated Hotels Worldwide of
9% to 11% in constant dollars (11% to 13% in dollars at current exchange
rates).
REVPAR change at Branded Same-Store Owned Hotels Worldwide of 9% to
11% in constant dollars (12% to 14% in dollars at current exchange rates).
Management and franchise revenues will be up approximately 11% to 13%.
Operating income from our vacation ownership and residential businesses
will be flat to up $5 million.
Income from continuing operations, before special items, is expected to be
approximately $40 million to $48 million, reflecting an effective tax rate of
approximately 22%.
Interest expense is expected to be $66 million.
Depreciation and amortization is expected to be $83 million.
EPS before special items is expected to be approximately $0.21 to $0.25.
Special Items
The Company’s special items netted to a pre-tax benefit of $1 million ($6 million after-tax)
in the first quarter of 2010 compared to a $22 million charge ($18 million after-tax) 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):
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