Starwood reports fourth quarter 2008 results
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Starwood reports fourth quarter 2008 results
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Catégorie : Monde - Économie du secteur -
Chiffres et études
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Starwood Hotels & Resorts Worldwide, Inc.
(NYSE: HOT) today reported fourth quarter 2008 financial results.
Fourth Quarter 2008 Highlights
.. Excluding special items, EPS from continuing operations was $0.49. Including
special items, EPS from continuing operations was a loss of $0.25.
.. Total Company Adjusted EBITDA was $273 million.
.. Excluding special items, income from continuing operations was $88 million.
Including special items, the loss from continuing operations was $45 million.
.. Special items totaled $133 million of net charges ($0.74 per share) primarily related
to $30 million of severance costs, $79 million of impairment charges from
discontinued vacation ownership projects and $86 million of impairment charges
primarily at five owned hotels in North America.
.. Worldwide System-wide REVPAR for Same-Store Hotels decreased 12.1% (9.1% in
constant dollars) compared to the fourth quarter of 2007. System-wide REVPAR for
Same-Store Hotels in North America decreased 13.2% (11.7% in constant dollars).
.. Management and franchise revenues decreased 4.7% compared to 2007.
.. Worldwide REVPAR for Starwood branded Same-Store Owned Hotels decreased
19.6% (15.4% in constant dollars) compared to the fourth quarter of 2007. REVPAR
for Starwood branded Same-Store Owned Hotels in North America decreased
18.6% (16.3% in constant dollars).
.. Margins at Starwood branded Same-Store Owned Hotels Worldwide and in North
America decreased 479 and 596 basis points, respectively, compared to the fourth
quarter of 2007.
.. Revenues from vacation ownership and residential sales decreased 48.7%
compared to 2007.
.. The Company signed 31 hotel management and franchise contracts in the quarter
representing approximately 6,100 rooms. For the full year, the Company signed
147 hotel contracts representing approximately 35,700 rooms.
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Fourth Quarter 2008 Earnings Summary
Starwood Hotels & Resorts Worldwide, Inc. (“Starwood” or the “Company”) today reported
a loss from continuing operations for the fourth quarter of 2008 of $0.25 per share
compared to EPS of $0.74 in the fourth quarter of 2007. Excluding special items, which
net to a charge of $133 million in 2008 and $11 million in 2007, EPS from continuing
operations was $0.49 for the fourth quarter of 2008 compared to $0.79 in the fourth quarter
of 2007. Excluding special items, the effective income tax rate in the fourth quarter of 2008
was 27.5% compared to 28.5% in the same period of 2007.
Special items in the fourth quarter of 2008 totaled $133 million of net charges ($0.74 per
share) primarily related to $30 million of severance costs, $79 million of impairment
charges from discontinued vacation ownership projects, and $86 million of impairment
charges primarily at five owned hotels in North America.
The loss from continuing operations was $45 million in the fourth quarter of 2008 compared
to income of $146 million in 2007. Excluding special items, income from continuing
operations was $88 million for the fourth quarter of 2008 compared to $157 million in 2007.
Net income was $79 million and EPS was $0.43 in the fourth quarter of 2008 compared to
$146 million and EPS of $0.74 in the fourth quarter of 2007. The 2008 results include a
gain of $124 million (net of taxes) in discontinued operations, resulting from the sale of
three hotels which were sold unencumbered by management or franchise agreements.
Frits van Paasschen, CEO said, “In the past year, we have made significant progress in
reducing our costs, which enabled us to deliver better than expected quarterly results
despite worse than expected REVPAR. Cost reductions completed so far should yield a
$100 million reduction in our SG&A on a run-rate basis. Our extensive cost cutting efforts
at the property level will help offset some of the margin erosion that results from declining
REVPAR. We also scaled back our capital spending in all areas for 2009. While the
outlook for 2009 remains challenging, we are prepared for the worst and confident that we
will emerge from this downturn stronger than ever. We have experienced operating teams
in the field, some of the strongest brands in the lodging industry, and a pipeline that will
drive our global fee growth.”
Fourth Quarter 2008 Operating Results
Management and Franchise Revenues
Worldwide System-wide REVPAR for Same-Store Hotels decreased 12.1% (9.1% using
constant dollars) compared to the fourth quarter of 2007. International System-wide
REVPAR for Same-Store Hotels decreased 10.8% (6.1% using constant dollars).
Worldwide System-wide REVPAR increased 8.6% in Africa and the Middle East.
Worldwide System-wide REVPAR decreases for the other regions were: 3.3% in Latin
America, 13.2% in North America, 14.4% in Asia Pacific, and 17.8% in Europe. Worldwide
System-wide REVPAR decreases by brand were: Sheraton 9.6%, Westin 11.4%, Le
Méridien 11.5%, Four Points by Sheraton 11.5%, W Hotels 21.1%, and St. Regis/Luxury
Collection 23.3%.
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Management fees, franchise fees and other income were $215 million, down $20 million, or
8.5%, from the fourth quarter of 2007. Management fees decreased 5.6% to $119 million
and franchise fees decreased 12.2% to $36 million.
Approximately 57% of the Company’s management and franchise fees are generated in
markets outside the United States.
During the fourth quarter of 2008, the Company signed 31 hotel management and
franchise contracts representing approximately 6,100 rooms of which 27 are new builds
and four are conversions from other brands. At December 31, 2008, the Company had
over 425 hotels in the active pipeline representing approximately 100,000 rooms, driven by
strong interest in all Starwood brands. Of these rooms, 64% are in the upper upscale and
luxury segments and 62% are in international locations.
During the fourth quarter of 2008, 21 new hotels and resorts (representing approximately
4,200 rooms) entered the system, including the Westin Book Cadillac (Detroit, MI, 453
rooms), St. Regis Punta Mita (Nayarit, Mexico, 120 rooms), Aloft Beijing (Beijing, China,
186 rooms), and the Le Méridien Bangkok (Bangkok, Thailand, 282 rooms). Fifteen
properties (representing approximately 2,700 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 decreased 19.6%.
REVPAR at Starwood branded Same-Store Owned Hotels in North America decreased
18.6%. Internationally, Starwood branded Same-Store Owned Hotel REVPAR decreased
21.3% (down 9.1% using constant dollars).
Revenues at Starwood branded Same-Store Owned Hotels in North America decreased
17.4% while costs and expenses decreased 10.3% when compared to 2007. Margins at
these hotels decreased 596 basis points.
Revenues at Starwood branded Same-Store Owned Hotels Worldwide decreased 18.6%
(down 16.3% in constant dollars) while costs and expenses decreased 13.1% when
compared to 2007. Margins at these hotels decreased 479 basis points.
Approximately 47% of Starwood’s Owned Hotel earnings (before depreciation) are
generated from outside the United States.
Revenues at owned, leased and consolidated joint venture hotels were $504 million when
compared to $631 million in 2007.
Vacation Ownership
Total vacation ownership reported revenues decreased 48.3% to $134 million when
compared to 2007. Originated contract sales of vacation ownership intervals decreased
43.2% primarily due to an overall decline in demand and the sellout of the Company’s
Westin Ka’anapali Ocean Resort North in Maui. The average price per vacation ownership
unit sold decreased 31.1% to approximately $17,000, driven by a higher sales mix of
lower-priced inventory, including a higher percentage of lower-priced biennial inventory in
Hawaii. The number of contracts signed decreased 17.2% when compared to 2007.
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The Company did not sell any vacation ownership receivables during the fourth quarter.
Although conditions remain uncertain in the asset backed securities market, the Company
is exploring a variety of avenues to sell vacation ownership receivables. However, given
unpredictable market conditions, the Company does not expect any gains from
securitizations in 2009.
As a result of the current economic climate and business conditions, the Company has
undertaken a comprehensive review of its vacation ownership business. The Company
has significantly scaled back its overhead to match reduced revenue expectations. This
included closing five sales centers and terminating over 500 employees during the fourth
quarter. In 2008 and early 2009, the Company closed nine sales centers and three call
centers and terminated approximately 900 employees. Additionally, the Company has
reset capital plans for this business. No new projects are being initiated and the Company
has decided to discontinue further development of some projects that were in their early
stages. As a result, development costs and land values at certain projects have been
written down to their fair value, resulting in an impairment charge during the fourth quarter
of 2008 of approximately $72 million.
Residential
Residential fees in the fourth quarter of 2008 totaled $2 million compared to $6 million in
the same period in 2007.
Selling, General, Administrative and Other
Selling, general, administrative and other expenses decreased 35.6% to $96 million
compared to the fourth quarter of 2007. The decrease was primarily due to the Company's
continued focus on reducing its cost structure.
In the fourth quarter, the Company completed the second phase of its overhead cost
reduction program, making significant reductions across several corporate departments
and divisional headquarters. These actions have resulted in expected run rate savings of
approximately $100 million. The Company anticipates completing the review of other
functional areas, and implementing reductions in those areas, by the end of the first quarter
of 2009.
Restructuring Charges and Other Special Charges, Net
During the fourth quarter of 2008, the Company recorded a $109 million charge, including
approximately $30 million of severance and related charges associated with its ongoing
initiative of rationalizing its cost structure in light of the current economic climate and the
decline in activity in its business units. The charge also included impairment charges of
approximately $79 million primarily related to the Company’s decision to not develop
certain vacation ownership projects.
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Loss on Asset Dispositions and Impairments, Net
During the fourth quarter of 2008, the Company recorded impairment charges of $64
million related to five owned hotels in which the carrying values exceeded their estimated
fair values. In addition, the Company recorded a $22 million impairment charge to write
down its economic retained interests in securitized vacation ownership notes receivable
based on a change to the expected future cash flows as a result of the current economic
climate.
Asset Sales
During the fourth quarter of 2008, the Company sold three hotels in Venice, Italy for net
cash proceeds of $206 million. These hotels were sold unencumbered by any
management or franchise agreement and the Company recorded a gain on the sale of
these hotels of $124 million (net of taxes) in discontinued operations. Additionally, during
the fourth quarter of 2008, the Company sold the Westin Turnberry for net cash proceeds
of $99 million. This sale was subject to a long-term management agreement and the
Company recorded a deferred gain of $27 million in connection with the sale.
Capital
Gross capital spending during the quarter included approximately $89 million in
renovations of hotel assets, including construction capital, at the Sheraton Steamboat
Resort, Sheraton Buenos Aires, W Times Square and Phoenician Resort. Investment
spending on gross vacation ownership interest (“VOI”) and residential inventory was $98
million, primarily in Bal Harbour, Maui, Orlando and Cancun.
Share Repurchase
During the fourth quarter of 2008, the Company did not repurchase any shares. In the
twelve months ended December 31, 2008, the Company repurchased approximately 13.6
million shares at a total cost of approximately $593 million. The Company had
approximately 183 million shares outstanding (including partnership units) at December 31,
2008.
Dividend
In November, 2008, the Company’s Board of Directors declared its annual dividend of
$0.90 per share. The dividend was paid by the Company on January 9, 2009 to holders of
record on December 31, 2008.
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
of over $200 million as a result of tax payments previously made. The Company expects
to finalize the details of the agreement and obtain the refund during the summer of 2009.
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Balance Sheet
At December 31, 2008, the Company had total debt of $4.008 billion and cash and cash
equivalents of $491 million (including $102 million of restricted cash), or net debt of $3.517
billion, compared to net debt of $3.240 billion at the end of 2007.
At December 31, 2008, debt was approximately 59% fixed rate and 41% floating rate and
its weighted average maturity was 3.9 years with a weighted average interest rate of
5.24%. The Company had cash (including total restricted cash) and availability under the
domestic and international revolving credit facility of approximately $2.070 billion.
Results for the Twelve Months Ended December 31, 2008
EPS from continuing operations decreased to $1.37 compared to $2.57 in 2007. Excluding
special items, EPS from continuing operations was $2.19 compared to $2.76 in 2007.
Excluding special items, income from continuing operations was $406 million compared to
$582 million in 2007. Net income was $329 million and EPS was $1.77 compared to $542
million and $2.57, respectively, in 2007. Total Company Adjusted EBITDA, which was
impacted by the sale or closure of 19 hotels since the beginning of 2007, was $1.157 billion
compared to $1.356 billion in 2007.
Outlook
For the full year 2009:
At the current time, given significant uncertainty in the global economy, it is very difficult to
provide any definitive guidance looking out four quarters. What the Company can provide
are some broad parameters being used for 2009 planning purposes. In the hotel business,
the Company is planning on a significant decline in Worldwide REVPAR. The Company
also anticipates another difficult year in the vacation ownership business with declines in
originated sales. As previously discussed, the Company’s extensive cost reduction
activities at the hotel level, in the vacation ownership business and in corporate overhead
have offset some of the impact of declining revenues. The Company is also significantly
scaling back capital expenditures for owned hotels and the vacation ownership business.
.. Assuming REVPAR at Same-Store Company Operated Hotels Worldwide REVPAR
declines 12% and REVPAR at Branded Same-Store Owned Hotels declines 15% at
today’s exchange rates:
.. Adjusted EBITDA would be approximately $875 million.
.. EPS before special items would be approximately $1.10.
• Same-Store Branded Owned Hotel EBITDA will decline approximately 35%
versus 2008.
.. Management and Franchise revenues will decline approximately 10%.
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.. Operating income from our vacation ownership and residential business will
be down approximately $50 million.
.. Selling, General and Administrative expenses will decline approximately $50
million.
.. Income from continuing operations, before special items, is expected to be
approximately $200 million, reflecting an effective tax rate of approximately
31%.
.. 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, including Bal Harbour, and
prior commitments for joint ventures and other investments will total approximately
$175 million.
.. Full year depreciation and amortization would be approximately $355 million.
.. Full year interest expense would be approximately $232 million and cash taxes of
approximately $100 million.
.. Vacation ownership and Residential, excluding the Bal Harbour project, is expected
to generate approximately $25 million in positive cash flow, not inclusive of any
sales of timeshare receivables.
.. The Company expects to open 80 to 100 hotels in 2009 (representing approximately
20,000 rooms).
For the three months ended March 31, 2009:
.. Adjusted EBITDA is expected to be $145 million to $160 million assuming:
.. REVPAR decline at Same-Store Company Operated Hotels Worldwide of
17% to 19% (14% to 16% in constant dollars).
.. REVPAR decline at Branded Same-Store Owned Hotels in North America of
27% to 30%.
.. Management and franchise revenues will be down approximately 15%.
.. Operating income from our vacation ownership and residential businesses
will be down $10 million to $15 million.
.. Income from continuing operations, before special items, is expected to be
approximately $3 million to $13 million, reflecting an effective tax rate of
approximately 31%.
.. EPS before special items is expected to be approximately $0.02 to $0.07.
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Special Items
The Company’s special items netted to a charge of $133 million (after tax) in the fourth
quarter of 2008 compared to a charge of $11 million (after-tax) in the same period of 2007.
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,
2008 2007 2008 2007
$ 88 $ 157 Income from continuing operations before special items ............. $ 406 $ 582
$ 0.49 $ 0.79 EPS before special items ............................................................. $ 2.19 $ 2.76
Special Items
(109) (5) Restructuring and other special charges, net (a)............................ (141) (53)
(86) (24) Loss on asset dispositions and impairments, net (b) ................... (98) (44)
(195) (29) Total special items – pre-tax ........................................................ (239) (97)
52 1 Income tax benefit for special items (c) ......................................... 77 38
10 17 Income tax benefits related to hotel sales (d) ................................ 10 20
(133) (11) Total special items – after-tax ....................................................... (152) (39)
$ (45) $ 146 (Loss)/income from continuing operations ................................... $ 254 $ 543
$ (0.25) $ 0.74 EPS including special items ......................................................... $ 1.37 $ 2.57
(a) During the three months ended December 31, 2008, the Company recorded $30 million in restructuring charges,
consisting primarily of severance costs, related to the ongoing initiative to streamline operations and eliminate
costs. Additionally, the Company recorded other special charges of $79 million primarily related to impairment
charges associated with the write down of two vacation ownership projects that the Company no longer plans to
develop as a result of the current economic crisis and its expected long-term impact on this business.
The full year ended December 31, 2008 includes additional restructuring costs, primarily related to severance
costs incurred in prior quarters.
For the three months ended December 31, 2007, the charge primarily relates to additional costs associated with
the Sheraton Bal Harbour Resort, which was demolished and is being converted into a St. Regis Hotel with
residences and fractional units.
The full year ended December 31, 2007 includes the accelerated depreciation of fixed assets at the Sheraton
Bal Harbour, partially offset by a $2 million refund of insurance proceeds related to a retired executive.
(b) During the three months ended December 31, 2008, the Company recorded impairment charges of $64 million
on five owned hotels in which the carrying values exceeded their estimated fair values and a $22 million
impairment charge to write down its retained economic interests in securitized vacation ownership notes
receivable.
The net loss for the full year ended December 31, 2008 also includes an impairment charge of $11 million
associated with the Company’s equity interest in a joint venture that owns land that it no longer intends to
develop.
During the three months ended December 31, 2007, the charge primarily reflects losses of $20 million related to
four hotels which were sold in fourth quarter of 2007.
The loss for the full year ended December 31, 2007 also includes an $18 million loss on the sale of four
additional hotels and a $23 million impairment on two hotels sold in the fourth quarter, offset by a $15 million
gain on the sale of assets in which the Company held minority interest and insurance proceeds of $6 million
related to owned hotels damaged by hurricanes and floods in prior years.
(c) In 2008 and 2007, the benefit relates to the favorable impact of capital loss utilization and tax benefits at the
statutory rate for the special items.
(d) Income tax benefit relates to adjustments to deferred taxes associated with deferred gains on hotel sales.
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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.
Starwood will be conducting a conference call to discuss the fourth quarter financial results
at 10:30 a.m. (EST) today at (913) 312-0422. The conference call will be available through
simultaneous web cast in the Investor Relations/Press Releases section of the Company’s
website at http://www.starwoodhotels.com. A replay of the conference call will also be
available from 1:30 p.m. (EST) today through February 5, 2009 at 12:00 midnight (EST) on
both the Company’s website and via telephone replay at (719) 457-0820 (access code
6866584).
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