Starwood Reports Record Second Quarter 2005 Results
WHITE PLAINS, N.Y. -- Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT - News): Second Quarter 2005 Highlights:
- EPS from continuing operations for the second quarter of 2005 was $0.65, including an after-tax charge of $11 million relating to the demolition of a portion of the Sheraton in Cancun, Mexico where we will build vacation ownership units, compared to $0.56 in second quarter of 2004. Excluding special items, EPS from continuing operations was $0.70 for the second quarter of 2005 compared to $0.50 for the second quarter of 2004.
- REVPAR at Same-Store Owned Hotels in North America and worldwide increased 12.7% and 12.3%, respectively, when compared to the second quarter of 2004. ADR increased 9.0% and 7.5% in North America and worldwide, respectively.
- Margins at Same-Store Owned Hotels in North America improved approximately 230 basis points when compared to the second quarter of 2004.
- Globally, REVPAR for Same-Store Owned Hotels grew for W Hotels (17.2%), followed by Westin (13.0%), St. Regis/Luxury Collection (11.7%), and Sheraton (11.0%), with each of these brands experiencing both ADR and occupancy gains.
- Third-party management and franchise fees in the quarter increased 21.3% when compared to 2004.
- Vacation ownership and residential revenues, which exclude gains on sales of notes receivable, increased 66.4%. Excluding the fractional sales at the St. Regis Aspen and residential sales at the St. Regis in San Francisco, contract sales at vacation ownership properties were up 15.1% when compared to 2004.
- Net income for the second quarter of 2005 was $145 million, including the after-tax charge of $11 million relating to the demolition of a portion of the Sheraton in Cancun, Mexico referred to above, compared to $154 million in the second quarter of 2004. Excluding special items, income from continuing operations was $156 million compared to $107 million in 2004. Total Company Adjusted EBITDA increased 26.1% to $391 million when compared to $310 million in 2004.
- According to Smith Travel Research system-wide market share in North America increased 90 basis points when compared to 2004.
Starwood Hotels & Resorts Worldwide, Inc. ("Starwood" or the "Company") today reported EPS from continuing operations for the second quarter of 2005 of $0.65 compared to $0.56 in the second quarter of 2004. Excluding special items of $11 million (after-tax) in the 2005 period related to the partial demolition of the Sheraton in Cancun, Mexico where we will build vacation ownership units, EPS from continuing operations was $0.70 for the second quarter of 2005 compared to $0.50 in the second quarter of 2004. Income from continuing operations was $145 million in the second quarter of 2005 compared to $120 million in 2004. Excluding special items, income from continuing operations was $156 million for the second quarter of 2005 compared to $107 million in 2004. Net income (after discontinued operations) was $145 million and EPS was $0.65 in the second quarter of 2005 compared to $154 million and EPS of $0.72 in the second quarter of 2004. The effective tax rate for the second quarter of 2005 was 24.7%.
Steven J. Heyer, CEO, said: "Our results this quarter were outstanding and we are pleased to be raising our guidance for the remainder of the year. For the eleventh quarter in a row we've gained market share. I am thrilled with the progress we are making on our brand-building efforts and service innovation, which I believe will continue to keep us ahead of our competition and will accelerate our market share growth. The marketing and service programs we have and are developing will help us secure an emotional connection with our guests and cement our position as brand leader in the upper upscale and luxury segments.
"Our global development pipeline remains stronger than ever and new brand launches like Project XYZ should capture the lion's share of new select serve opportunities. The strength of our brands should also enable Starwood to capture share of wallet both inside and outside of the four walls of the hotel. Already, the Westin Heavenly Bed ensemble available at Nordstrom's, the Bliss catalogue business and the W Stores are adding to our top and bottom lines.
"During the quarter we announced several additional asset sales including the legendary Hotel Danieli in Venice, moving us in line to achieve our goal of $500 million in asset sales. We continue to evaluate our current portfolio of owned assets with a focus on harvesting previously unrecognized assets either through additional asset sales or redevelopment opportunities."
"Business continues to be robust and supply remains constrained. Our team is excited about the work we are doing and the direction we are heading."
Operating Results:
Second Quarter Ended June 30, 2005
Cash flow from operations was $171 million compared to $119 million in 2004. Total Company Adjusted EBITDA was $391 million compared to $310 million in 2004.
Owned, Leased and Consolidated Joint Venture Hotels
REVPAR for Same-Store Owned Hotels in North America and worldwide increased 12.7% and 12.3%, respectively, when compared to 2004. REVPAR at Same-Store Owned Hotels in North America increased 17.2% at W, 14.2% at both St. Regis/Luxury Collection and Westin, and 9.9% at Sheraton. REVPAR growth was particularly strong at the Company's owned hotels in New York, Chicago, Ft. Lauderdale, Denver, Los Angeles, Maui, Toronto, San Diego, Atlanta and Washington D.C. Revenue from transient travel was up 14.9% in North America when compared to 2004. Internationally, Same-Store Owned Hotel REVPAR increased 11.4%, with Latin America up 19.5% (REVPAR in owned hotels in Argentina, Brazil, Peru and resort areas in Mexico was particularly strong), Asia Pacific up 11.9%, and Europe up 9.8%. Excluding the favorable effects of foreign exchange, REVPAR increased 7.0% internationally.
Total revenues at Same-Store Owned Hotels worldwide increased 9.7%, to $929 million when compared to $847 million in 2004 while costs and expenses at the hotels increased 6.9% to $664 million in 2005 compared to $621 million in 2004. Total revenues at Same-Store Owned Hotels in North America increased 9.3% to $674 million in 2005 when compared to $617 million in 2004 while costs and expenses at these hotels increased 5.9% to $481 million when compared to $454 million in 2004.
System-wide REVPAR; Management/Franchise Fees
System-wide (owned, managed and franchised) REVPAR for Same-Store Hotels in North America increased 11.8%; W Hotels 17.6%, Sheraton 12.0%, Westin and Four Points by Sheraton 11.7% each, and St. Regis/Luxury Collection 4.2%. For the eleventh quarter in a row, total Company market share in North America increased for the Company's owned and managed hotels as well as for system-wide hotels. Total third-party management and franchise fees were $91 million, up $16 million, or 21.3%, from last year.
Distribution
Starwood's central distribution systems gross bookings increased approximately 10% when compared to 2004. Gross online bookings through proprietary branded websites increased 30% as compared to 2004, with gross dollar bookings from the proprietary branded sites increasing 45%. Gross online dollar bookings represented approximately 12% of the overall gross dollar bookings, with 74% of that coming from our proprietary branded websites, as compared to 10% of overall gross dollar bookings, with 72% of that from proprietary branded websites in 2004.
Vacation Ownership and Residential
Vacation ownership and residential revenue, which excludes gains on sales of notes receivable (there were no sales of notes receivable in the second quarter of 2005), was up $93 million, or 66.4% to $233 million when compared to 2004 primarily due to residential sales at the St. Regis Museum Tower in San Francisco and vacation ownership sales at our resorts in Maui, Orlando and Scottsdale. Contract sales, excluding fractional sales at the St. Regis Aspen and residential sales at the St. Regis in San Francisco, were up 15.1% when compared to 2004. The average price per timeshare unit sold increased approximately 12.0% to $22,480, and the number of contracts signed increased approximately 2.7% when compared to 2004.
In December 2004, the Company completed the conversion of 98 guest rooms at the St. Regis in Aspen, Colorado into 25 fractional units, which are being sold in four week intervals, and 20 new hotel rooms. In the second quarter of 2005, the Company recognized revenues of $4 million related to this project. Also, in the second quarter of 2005, the Company continued selling condominiums at the St. Regis Museum Tower which is under construction in San Francisco, and recognized revenues of approximately $40 million.
In addition to its robust pipeline of existing vacation ownership inventory, the Company continues to evaluate its existing owned real estate for potential conversion to vacation ownership, fractional, or residential projects. For example, as discussed earlier, the Company has partially demolished the Sheraton in Cancun, Mexico where it will build a timeshare development that is expected to have up to 73 units upon completion. The Company is also working with its business partners to develop similar conversion opportunities at managed hotels.
Currently, the Company is working on new phases at the Westin Ka'anapali Ocean Resort Villas in Maui, Hawaii, the Westin Kierland Villas in Scottsdale, Arizona, the Sheraton Broadway Plantation in Myrtle Beach, South Carolina, the Harborside Resort at Atlantis, Nassau, Bahamas, and the Sheraton Vistana Villages in Orlando, Florida.
In addition to the expansion at the existing properties above, Starwood Vacation Ownership is in the predevelopment phase of several new vacation ownership resorts including one in Princeville on the island of Kauai, Hawaii. The Company is also working on its second St. Regis-branded fractional resort in Punta Mita, Mexico.
As discussed earlier, the Company did not sell any notes receivable and thereby did not recognize any gains during the second quarter of 2005 compared to gains of $8 million in the same period of 2004.
Brand Development/Unit Growth
During the second quarter, the Company signed 26 full service hotel management and franchise contracts (representing approximately 6,200 rooms) including the Westin Orlando Convention Center (Orlando, Florida, 492 rooms), Westin North Shore (Wheeling, Illinois, 440 rooms), Sheraton Urumqi (Urumqi, China, 410 rooms) and Westin Guangzhou (Guangzhou, China, 400 rooms) and opened nine new hotels and resorts, including the Sheraton Los Angeles Downtown Hotel (Los Angeles, California, 485 rooms) and Sheraton Miami Mart Hotel (Miami, Florida, 332 rooms). Nine properties (representing approximately 2,600 rooms) were removed from the system during the quarter (5 Four Points and 4 Sheratons). Including openings during the first six months of 2005, the Company expects to open approximately 50 new full-service hotels and resorts (approximately 10,000 rooms) around the world in 2005. The Company had approximately 190 full service hotels and approximately 48,000 rooms in its active global development pipeline at June 30, 2005, with roughly half of that number in international locations.
In July 2005, the company opened a new Bliss spa at the W San Francisco hotel. Later in 2005 and in 2006, the Company plans to open 3 new Bliss spas in W hotels in Dallas, Los Angeles and Chicago and 2 new Remede Spas in St. Regis hotels in San Francisco and New York with several others in various planning stages.
Results for the Six Months Ended June 30, 2005:
EPS from continuing operations was $1.01 compared to $0.72 in 2004. Excluding special items, EPS from continuing operations was $1.05 compared to $0.66 in 2004. Income from continuing operations was $224 million compared to $153 million in 2004. Excluding special items, income from continuing operations was $233 million compared to $140 million in 2004. Net income (after discontinued operations) was $224 million and EPS was $1.01 compared to $188 million and $0.88, respectively, in 2004.
Cash flow from operations was $230 million compared to $182 million in 2004. Total Company Adjusted EBITDA was $679 million compared to $532 million in 2004.
Capital:
Gross capital spending during the quarter included approximately $68 million in renovations of hotel assets including construction capital at the Sheraton Hotel and Towers in New York, New York, the St. Regis in New York, New York, the Sheraton Centre Toronto Hotel in Toronto, Canada, and the Boston Park Plaza in Boston, Massachusetts. Investment spending on gross VOI inventory was $40 million, which was more than offset by cost of sales of $46 million during the quarter. The inventory spend included VOI construction at the Westin Ka'anapali Ocean Resort Villas in Maui, Hawaii, the Sheraton Vistana Villages in Orlando, Florida, and the Westin Kierland Villas in Scottsdale, Arizona and construction of fractional units at the St. Regis in Aspen, Colorado. Additionally during the quarter, further investment spending of $27 million included the ongoing development of the St. Regis Museum Tower in San Francisco which will consist of 260 hotel rooms and 102 condominium units. To date, the Company has invested $275 million in the St. Regis Museum Tower project, which is expected to open in late 2005. The Company expects to realize gross proceeds of approximately $240 million from the sale of the project's condominiums and has recognized approximately $99 million in revenues to date.
Balance Sheet:
At June 30, 2005, the Company had total debt of $4.359 billion and cash and cash equivalents (including $518 million of restricted cash) of $899 million, or net debt of $3.460 billion, compared to net debt of $3.669 billion at the end of the first quarter of 2005. In addition, the Company continues to have an approximate $200 million investment in the senior debt of Le Meridien hotels.
At June 30, 2005, debt was approximately 77% fixed rate and 23% floating rate and its weighted average maturity was 4.6 years with a weighted average interest rate of 6.03%. The Company had cash (including total restricted cash) and availability under domestic and international revolving credit facilities of approximately $1.892 billion.
Outlook:
All comments in the following paragraphs and certain comments in this release above are deemed to be forward-looking statements. These statements reflect expectations of the Company's performance given its current base of assets and its current understanding of external economic and geo-political environments. Actual results may differ materially.
For the three months ended September 30, 2005, if REVPAR at Same-Store Owned Hotels in North America increases approximately 10% -12% versus the same period in 2004:
Adjusted EBITDA would be expected to be approximately $342 million, an increase of 17.5% when compared to $291 million in the same period of 2004. Net income would be expected to be approximately $114 million, an increase of 34.1% when compared to income from continuing operations before special items in the third quarter of 2004. EPS would be expected to be $0.51, an increase of 27.5% when compared to EPS from continuing operations before special items in the third quarter of 2004. For the full year 2005, if REVPAR at Same-Store Owned Hotels in North America increases approximately 10% - 12% versus the full year 2004:
Full year revenues, including other revenues from managed and franchised properties, would be expected to be approximately $5.950 billion. Full year Adjusted EBITDA would be expected to increase approximately 21.3% to approximately $1.395 billion, when compared to 2004 Adjusted EBITDA of $1.150 billion. Full year net income before special items would be expected to be approximately $484 million at approximately a 25% effective tax rate, which assumes an annual dividend of $0.84 per Share (payable in January 2006), when compared to 2004 income from continuing operations before special items of approximately $348 million at a 13.9% effective tax rate. Full year EPS before special items would be expected to increase approximately 34.6% to $2.18 when compared to 2004 EPS from continuing operations before special items of $1.62. Full year capital expenditures (excluding timeshare inventory) would be approximately $600 million, including $300 million for maintenance, renovation and technology, approximately $100 million for the completion of the St. Regis San Francisco multi-use project under construction, and $200 million for other growth initiatives. Additionally, net capital expenditures for timeshare inventory would be approximately $100 million. For the full year the Company expects cash interest expense of approximately $281 million and cash taxes of approximately $50 million. Special Items:
The Company recorded net charges of $11 million (after-tax) for special items in the second quarter of 2005 compared to $13 million of net credits (after-tax) in the same period of 2004.
Special items in the second quarter of 2005 primarily relate to impairment charges associated with a hotel in Cancun, Mexico that is being partially demolished to build vacation ownership units.
The following represents a reconciliation of income from continuing operations before special items to income from continuing operations after special items (in millions, except per share data):
Three Months Six Months Ended Ended June 30, June 30, --------------- ---------------- 2005 2004 2005 2004 ------ ------ ------ ------ Income from continuing operations $156 $107 before special items $233 $140 ------ ------ ------ ------ $0.70 $0.50 EPS before special items $1.05 $0.66 ------ ------ ------ ------ Special Items Adjustment to costs associated -- 3 with construction remediation(a) -- 4 Loss on asset dispositions and (17) (3) impairments, net(b) (16) (4) ------ ------ ------ ------ (17) -- Total special items - pre-tax (16) -- Income tax benefit for special 6 1 items(c) 5 1 Favorable settlement of tax -- 12 matters(d) 2 12 ------ ------ ------ ------ (11) 13 Total special items - after-tax (9) 13 ------ ------ ------ ------ $145 $120 Income from continuing operations $224 $153 ------ ------ ------ ------ $0.65 $0.56 EPS including special items $1.01 $0.72 ====== ====== ====== ====== (a) Represents adjustments to the Company's share of costs for construction remediation efforts at a property owned by a vacation ownership unconsolidated joint venture that were previously recorded in 2002. (b) For the three and six months ended June 30, 2005, primarily reflects impairment charges associated with the Sheraton hotel in Cancun, Mexico that is being partially demolished in order to build vacation ownership units. Loss of $3 million and $4 million for the three and six months ended June 30, 2004, respectively, reflects impairment charges primarily associated with the renovation of a portion of the W New York for the Bliss Spa. (c) Represents taxes on special items at the Company's incremental tax rate. (d) Tax benefit in the six months ended June 30, 2005 reflects a state tax refund related to tax years prior to the 1995 split-up of ITT Corporation. Tax benefit of $12 million in the three and six months ended June 30, 2004, respectively, reflects the favorable results of certain changes to the Federal tax rules.
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 second quarter financial results at 10:30 a.m. (EST) today. The conference call will be available through simultaneous webcast in the Investor Relations/Press Releases section of the Company's website at www.starwoodhotels.com. A replay of the conference call will also be available from 1:30 p.m. (EST) today through Tuesday, August 2 at 12:00 midnight (EST) on both the Company's website and via telephone replay at (719) 457-0820 (access code 9990344).
Definitions:
All references to EPS, unless otherwise noted, reflect earnings per diluted share from continuing operations. 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 ability to service debt, fund capital expenditures, pay income taxes and pay cash distributions. 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 the special items described on page 7 of this release and/or revenues and costs and expenses from hotels sold, 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 used Adjusted EBITDA as a measure in determining the value of acquisitions and dispositions and it is used in the annual budget process. Due to guidance from the Securities and Exchange Commission, the Company now does not reflect such items when calculating EBITDA; however, the Company continues to adjust for these special items and refers to this measure as Adjusted EBITDA. 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 hotels sold to date, 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.) REVPAR is defined as revenue per available room. ADR is defined as average daily rate.
All references to contract sales reflect vacation ownership sales before revenue adjustments for percentage of completion accounting methodology.
Starwood Hotels & Resorts Worldwide, Inc. is one of the leading hotel and leisure companies in the world with approximately 750 properties in more than 80 countries and 120,000 employees at its owned and managed properties. With internationally renowned brands, Starwood® corporation is a fully integrated owner, operator and franchisor of hotels and resorts including: St. Regis®, The Luxury Collection®, Sheraton®, Westin®, Four Points® by Sheraton, and W®, Hotels and Resorts as well as Starwood Vacation Ownership, Inc., one of the premier developers and operators of high quality vacation interval ownership resorts. For more information, please visit
STARWOOD HOTELS & RESORTS WORLDWIDE, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (In millions, except per Share data) Three Months Ended Six Months Ended June 30, June 30, ---------------------- ------------------------- % % 2005 2004 Variance 2005 2004 Variance ------ ------ -------- ------- ------- --------- Revenues Owned, leased and consolidated joint $939 $868 8.2 venture hotels $1,752 $1,637 7.0 Vacation ownership and residential 233 140 66.4 sales and services 464 268 73.1 Management fees, franchise fees and 119 104 14.4 other income 223 194 14.9 Other revenues from managed and franchised 268 251 6.8 properties (a) 526 491 7.1 ------ ------ -------- ------- ------- --------- 1,559 1,363 14.4 2,965 2,590 14.5 Costs and Expenses Owned, leased and consolidated joint 675 640 (5.5) venture hotels 1,316 1,247 (5.5) Vacation ownership 167 105 (59.0) and residential 334 202 (65.3) Selling, general, administrative and 94 88 (6.8) other 176 170 (3.5) 101 101 -- Depreciation 206 203 (1.5) 4 5 20.0 Amortization 9 9 -- Other expenses from managed and franchised 268 251 (6.8) properties(a) 526 491 (7.1) ------ ------ -------- ------- ------- --------- 1,309 1,190 (10.0) 2,567 2,322 (10.6) 250 173 44.5 Operating income 398 268 48.5 Gain on sale of VOI -- 8 (100.0) notes receivable -- 8 (100.0) Equity earnings from unconsolidated 18 12 50.0 ventures, net 31 16 93.8 Interest expense, net of interest income (60) (65) 7.7 of $3, $1, $5 and $1 (122) (129) 5.4 Loss on asset dispositions and (17) (3) n/m impairments, net (16) (4) n/m ------ ------ -------- ------- ------- --------- Income from continuing operations before taxes and minority 191 125 52.8 equity 291 159 83.0 (47) (5) n/m Income tax expense (68) (7) n/m Minority equity in 1 -- n/m net loss 1 1 -- ------ ------ -------- ------- ------- --------- Income from continuing 145 120 20.8 operations 224 153 46.4 Discontinued operations: Gain on -- 34 (100.0) disposition(b) -- 35 (100.0) ------ ------ -------- ------- ------- --------- $145 $154 (5.8) Net income $224 $188 19.1 ====== ====== ======== ======= ======= ========= Earnings Per Share - Basic $0.67 $0.57 17.5 Continuing operations $1.04 $0.74 40.5 Discontinued -- 0.17 (100.0) operations -- 0.17 (100.0) ------ ------ -------- ------- ------- --------- $0.67 $0.74 (9.5) Net income $1.04 $0.91 14.3 ====== ====== ======== ======= ======= ========= Earnings Per Share - Diluted $0.65 $0.56 16.1 Continuing operations $1.01 $0.72 40.3 Discontinued -- 0.16 (100.0) operations -- 0.16 (100.0) ------ ------ -------- ------- ------- --------- $0.65 $0.72 (9.7) Net income $1.01 $0.88 14.8 ====== ====== ======== ======= ======= ========= Weighted average 216 208 number of Shares 214 206 ====== ====== ======= ======= Weighted average number of Shares 223 215 assuming dilution 222 213 ====== ====== ======= ======= (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. (b) 2004 activity represents the reversal of reserves that are no longer required as the related contingencies have been resolved and the favorable resolution of certain tax matters related to the 1999 divestiture of the Company's gaming business. n/m = not meaningful STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED BALANCE SHEETS (in millions, except share data) June 30, December 31, 2005 2004 ------------ ------------ Assets Current assets: Cash and cash equivalents $381 $326 Restricted cash 509 347 Accounts receivable, net of allowance for doubtful accounts of $61 and $58 598 482 Inventories 316 371 Prepaid expenses and other 197 157 ------------ ------------ Total current assets 2,001 1,683 Investments 432 453 Plant, property and equipment, net 6,778 6,997 Goodwill and intangible assets, net 2,532 2,544 Other assets (a) 653 621 ------------ ------------ $12,396 $12,298 ============ ============ Liabilities and Stockholders' Equity Current liabilities: Short-term borrowings and current maturities of long-term debt (b) $634 $619 Accounts payable 154 200 Accrued expenses 719 872 Accrued salaries, wages and benefits 248 299 Accrued taxes and other 158 138 ------------ ------------ Total current liabilities 1,913 2,128 Long-term debt (b) 3,725 3,823 Deferred income taxes 851 880 Other liabilities 624 652 ------------ ------------ 7,113 7,483 Minority interest 24 27 Exchangeable units and Class B preferred shares, at redemption value of $38.50 -- -- Commitments and contingencies Stockholders' equity: Class A exchangeable preferred shares of the Trust; $0.01 par value; authorized 30,000,000 shares; outstanding 564,397 and 597,825 shares at June 30, 2005 and December 31, 2004, respectively -- -- Corporation common stock; $0.01 par value; authorized 1,050,000,000 shares; outstanding 216,975,974 and 208,730,800 shares at June 30, 2005 and December 31, 2004, respectively 2 2 Trust Class B shares of beneficial interest; $0.01 par value; authorized 1,000,000,000 shares; outstanding 216,975,974 and 208,730,800 shares at June 30, 2005 and December 31, 2004, respectively 2 2 Additional paid-in capital 5,488 5,121 Deferred compensation (69) (14) Accumulated other comprehensive loss (320) (255) Retained earnings (accumulated deficit) 156 (68) ------------ ------------ Total stockholders' equity 5,259 4,788 ------------ ------------ $12,396 $12,298 ============ ============ (a) Includes restricted cash of $9 million and $10 million at June 30, 2005 and December 31, 2004, respectively. (b) Excludes Starwood's share of unconsolidated joint venture debt aggregating approximately $391 million and $438 million at June 30, 2005 and December 31, 2004, respectively. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Non-GAAP to GAAP Reconciliations - Historical Data (in millions) Three Months Ended Six Months Ended June 30, June 30, --------------------- --------------------- % % 2005 2004 Variance 2005 2004 Variance ----- ----- --------- ----- ----- --------- Reconciliation of Net Income to EBITDA and Adjusted EBITDA $145 $154 (5.8) Net income $224 $188 19.1 68 70 2.9 Interest expense(a) 137 141 2.8 Income tax (benefit) 47 (29) n/m expense(b) 68 (27) n/m 108 109 0.9 Depreciation(c) 222 219 (1.4) 6 6 -- Amortization(d) 12 12 -- ----- ----- --------- ----- ----- --------- 374 310 20.6 EBITDA 663 533 24.4 Adjustment to costs associated with -- (3) (100.0) construction remediation -- (4) (100.0) Loss on asset dispositions 17 3 n/m and impairments, net 16 4 n/m -- -- -- Discontinued operations(e) -- (1) (100.0) ----- ----- --------- ----- ----- --------- $391 $310 26.1 Adjusted EBITDA $679 $532 27.6 ===== ===== ========= ===== ===== ========= (a) Includes $5 and $4 million of interest expense related to unconsolidated joint ventures for the three months ended June 30, 2005 and 2004, respectively, and $10 and $11 million for the six months ended June 30, 2005 and 2004, respectively. (b) Includes $0 and $(34) million of tax expense (benefit) recorded in discontinued operations for the three months ended June 30, 2005 and 2004, respectively, and $0 and $(34) million for the six months ended June 30, 2005 and 2004, respectively. (c) Includes $7 and $8 million of Starwood's share of depreciation expense of unconsolidated joint ventures for the three months ended June 30, 2005 and 2004, respectively, and $16 and $16 million for the six months ended June 30, 2005 and 2004, respectively. (d) Includes $2 and $1 million of Starwood's share of amortization expense of unconsolidated joint ventures for the three months ended June 30, 2005 and 2004, respectively, and $3 and $3 million for the six months ended June 30, 2005 and 2004, respectively. (e) Excludes the taxes already added back as noted in (b) above. Three Months Six Months Ended Ended June 30, June 30, --------------- ---------------- 2005 2004 2005 2004 ------- ------- ------- ------- Cash Flow Data $145 $154 Net income $224 $188 Exclude: -- (34) Discontinued operations, net -- (35) ------- ------- ------- ------- 145 120 Income from continuing operations 224 153 (103) (44) Increase in restricted cash (161) (130) Adjustments to income from continuing operations, changes in working 129 43 capital, and other 167 158 ------- ------- ------- ------- 171 119 Cash from continuing operations 230 181 -- -- Cash from discontinued operations -- 1 ------- ------- ------- ------- $171 $119 Cash from operating activities $230 $182 ======= ======= ======= ======= $(82) $(64) Cash used for investing activities $(151) $(244) ======= ======= ======= ======= $(13) $(128) Cash used for financing activities $(11) $(201) ======= ======= ======= ======= STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Non-GAAP to GAAP Reconciliations - Future Performance (In millions) Year Ended December 31, 2005 ----------------- Net income before special items $484 Special items (see page 7) (9) ---------------- Net income $475 ================ EPS before special items $2.18 Special items (see page 7) (0.04) ---------------- EPS $2.14 ================ Three Months Ended Year Ended September 30, 2005 December 31, 2005 ------------------ ----------------- $114 Net Income $475 72 Interest expense 281 38 Income tax expense 151 118 Depreciation and amortization 472 ----------------- ----------------- 342 EBITDA 1,379 Loss on asset dispositions and -- impairments, net 16 ----------------- ----------------- $342 Adjusted EBITDA $1,395 ================= ================= Three Months Ended Year Ended September 30, 2004 December 31, 2004 ------------------- ----------------- $107 Net income $395 68 Interest expense 275 35 Income tax expense 34 111 Depreciation 445 6 Amortization 26 ------------------ ---------------- 327 EBITDA 1,175 Loss on asset dispositions and 4 impairments, net 33 (3) Discontinued operations (17) Restructuring and other special (37) credits, net (37) Adjustment to costs associated -- with construction remediation (4) ------------------ ---------------- $291 Adjusted EBITDA $1,150 ================== ================ STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Non-GAAP to GAAP Reconciliations - Same Store Owned Hotel Revenue and Expenses (In millions) Three Months Ended Six Months Ended June 30, June 30, -------------------- ------------------------- % Same-Store Owned % 2005 2004 Variance Hotels(1) Worldwide 2005 2004 Variance ----- ----- -------- ------- ------- --------- Revenue Same-Store Owned $929 $847 9.7 Hotels $1,702 $1,576 8.0 Hotels Sold or Closed in 2005 and 2004 (4 1 10 (90.0) hotels) 6 19 (68.4) Hotels Without Comparable Results 8 9 (11.1) (4 hotels) 43 41 4.9 Other ancillary hotel 1 2 (50.0) operations 1 1 -- ----- ----- -------- ------- ------- --------- Total Owned, Leased and Consolidated Joint $939 $868 8.2 Venture Hotels Revenue $1,752 $1,637 7.0 ===== ===== ======== ======= ======= ========= Costs and Expenses Same-Store Owned $664 $621 (6.9) Hotels $1,275 $1,199 (6.3) Hotels Sold or Closed in 2005 and 2004 (4 1 8 87.5 hotels) 6 16 62.5 Hotels Without Comparable Results 8 9 11.1 (4 hotels) 33 30 (10.0) Other ancillary hotel 2 2 -- operations 2 2 -- ----- ----- -------- ------- ------- --------- Total Owned, Leased and Consolidated Joint Venture Hotels Costs $675 $640 (5.5) and Expenses $1,316 $1,247 (5.5) ===== ===== ======== ======= ======= ========= Three Months Ended Six Months Ended June 30, June 30, -------------------- ------------------------- % Same-Store Owned Hotels % 2005 2004 Variance North America 2005 2004 Variance ----- ----- -------- ------- ------- --------- Revenue Same-Store Owned $674 $617 9.2 Hotels $1,237 $1,158 6.8 Hotels Sold or Closed in 2005 and 2004 -- 4 (100.0) (3 hotels) 2 10 (80.0) Hotels Without Comparable Results 4 5 (20.0) (3 hotels) 33 32 3.1 ----- ----- -------- ------- ------- --------- Total Owned, Leased and Consolidated Joint $678 $626 8.3 Venture Hotels Revenue $1,272 $1,200 6.0 ===== ===== ======== ======= ======= ========= Costs and Expenses Same-Store Owned $481 $454 (5.9) Hotels $923 $881 (4.8) Hotels Sold or Closed in 2005 and 2004 -- 4 100.0 (3 hotels) 2 8 75.0 Hotels Without Comparable Results 6 6 -- (3 hotels) 27 24 (12.5) ----- ----- -------- ------- ------- --------- Total Owned, Leased and Consolidated Joint Venture Hotels Costs $487 $464 (5.0) and Expenses $952 $913 (4.3) ===== ===== ======== ======= ======= ========= Three Months Ended Six Months Ended June 30, June 30, -------------------- ------------------------- % Same-Store Owned Hotels % 2005 2004 Variance International 2005 2004 Variance ----- ----- -------- ------- ------- --------- Revenue Same-Store Owned $255 $230 10.9 Hotels $465 $418 11.2 Hotels Sold or Closed in 2005 and 2004 1 6 (83.3) (1 hotel) 4 9 (55.5) Hotels Without Comparable Results 4 4 -- (1 hotel) 10 9 11.1 Other ancillary hotel 1 2 (50.0) operations 1 1 -- ----- ----- -------- ------- ------- --------- Total Owned, Leased and Consolidated Joint $261 $242 7.9 Venture Hotels Revenue $480 $437 9.8 ===== ===== ======== ======= ======= ========= Costs and Expenses Same-Store Owned $183 $167 (9.6) Hotels $352 $318 (10.7) Hotels Sold or Closed in 2005 and 2004 1 4 75.0 (1 hotel) 4 8 50.0 Hotels Without Comparable Results 2 3 33.3 (1 hotel) 6 6 -- Other ancillary 2 2 -- hotel operations 2 2 -- ----- ----- -------- ------- ------- --------- Total Owned, Leased and Consolidated Joint Venture Hotels Costs $188 $176 (6.8) and Expenses $364 $334 (9.0) ===== ===== ======== ======= ======= ========= (1) Same-Store Owned Hotel Results exclude 4 hotels sold or closed in 2005 and 2004 and 4 hotels without comparable results. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Hotel Results - Same Store Owned Hotels(1) For the Three Months Ended June 30, 2005 UNAUDITED WORLDWIDE NORTH AMERICA --------------------- --------------------- 2005 2004 Var. 2005 2004 Var. ------- ------- ----- ------- ------- ----- 134 Hotels 91 Hotels --------------------- --------------------- SAME STORE OWNED HOTELS REVPAR ($) 131.98 117.49 12.3% 130.18 115.54 12.7% ADR ($) 178.24 165.85 7.5% 171.30 157.15 9.0% OCCUPANCY (%) 74.0% 70.8% 3.2 76.0% 73.5% 2.5 58 36 --------------------- --------------------- SHERATON REVPAR ($) 107.89 97.21 11.0% 114.84 104.45 9.9% ADR ($) 150.69 140.23 7.5% 154.33 141.00 9.5% OCCUPANCY (%) 71.6% 69.3% 2.3 74.4% 74.1% 0.3 36 22 --------------------- --------------------- WESTIN REVPAR ($) 142.51 126.13 13.0% 124.26 108.79 14.2% ADR ($) 183.73 172.21 6.7% 158.13 146.06 8.3% OCCUPANCY (%) 77.6% 73.2% 4.4 78.6% 74.5% 4.1 10 4 --------------------- --------------------- ST. REGIS/ LUXURY COLLECTION REVPAR ($) 289.21 258.86 11.7% 266.55 233.32 14.2% ADR ($) 404.50 390.77 3.5% 356.99 338.31 5.5% OCCUPANCY (%) 71.5% 66.2% 5.3 74.7% 69.0% 5.7 12 12 --------------------- --------------------- W REVPAR ($) 196.28 167.46 17.2% 196.28 167.46 17.2% ADR ($) 243.82 218.23 11.7% 243.82 218.23 11.7% OCCUPANCY (%) 80.5% 76.7% 3.8 80.5% 76.7% 3.8 18 17 --------------------- --------------------- OTHER REVPAR ($) 90.90 80.83 12.5% 89.39 78.74 13.5% ADR ($) 127.43 118.65 7.4% 125.71 118.30 6.3% OCCUPANCY (%) 71.3% 68.1% 3.2 71.1% 66.6% 4.5 (1) Hotel Results exclude 4 hotels sold or closed and 3 hotels without comparable results during 2004 and 2005. (2) See next page for breakdown by division INTERNATIONAL(2) ---------------------- 2005 2004 Var. -------- ------- ----- 43 Hotels ---------------------- SAME STORE OWNED HOTELS REVPAR ($) 137.30 123.26 11.4% ADR ($) 200.96 195.77 2.7% OCCUPANCY (%) 68.3% 63.0% 5.3 22 ---------------------- SHERATON REVPAR ($) 92.95 81.69 13.8% ADR ($) 141.78 138.16 2.6% OCCUPANCY (%) 65.6% 59.1% 6.5 14 ---------------------- WESTIN REVPAR ($) 200.32 180.80 10.8% ADR ($) 269.39 260.77 3.3% OCCUPANCY (%) 74.4% 69.3% 5.1 6 ---------------------- ST. REGIS/LUXURY COLLECTION REVPAR ($) 327.07 303.43 7.8% ADR ($) 494.00 493.43 0.1% OCCUPANCY (%) 66.2% 61.5% 4.7 W REVPAR ($) ADR ($) OCCUPANCY (%) 1 ---------------------- OTHER REVPAR ($) 100.04 93.54 6.9% ADR ($) 137.63 120.53 14.2% OCCUPANCY (%) 72.7% 77.6% (4.9) (1) Hotel Results exclude 4 hotels sold or closed and 3 hotels without comparable results during 2004 and 2005. (2) See next page for breakdown by division STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Hotel Results - Same Store Owned Hotels(1) For the Three Months Ended June 30, 2005 UNAUDITED EUROPE LATIN AMERICA --------------------- --------------------- 2005 2004 Var. 2005 2004 Var. ------- ------- ----- ------- ------- ----- 28 Hotels 11 Hotels --------------------- --------------------- SAME STORE OWNED HOTELS REVPAR ($) 194.63 177.28 9.8% 64.50 53.98 19.5% ADR ($) 271.09 265.21 2.2% 103.35 99.83 3.5% OCCUPANCY (%) 71.8% 66.8% 5.0 62.4% 54.1% 8.3 11 8 --------------------- --------------------- SHERATON REVPAR ($) 126.69 114.10 11.0% 55.17 46.05 19.8% ADR ($) 172.74 171.23 0.9% 96.10 92.52 3.9% OCCUPANCY (%) 73.3% 66.6% 6.7 57.4% 49.8% 7.6 11 3 --------------------- --------------------- WESTIN REVPAR ($) 238.48 217.37 9.7% 99.95 84.13 18.8% ADR ($) 332.76 315.41 5.5% 122.73 119.44 2.8% OCCUPANCY (%) 71.7% 68.9% 2.8 81.4% 70.4% 11.0 6 --------------------- ST. REGIS/ LUXURY COLLECTION REVPAR ($) 327.07 303.43 7.8% ADR ($) 494.00 493.43 0.1% OCCUPANCY (%) 66.2% 61.5% 4.7 OTHER REVPAR ($) ADR ($) OCCUPANCY (%) (1) Hotel Results exclude 4 hotels sold or closed and 3 hotels without comparable results during 2004 and 2005. ASIA PACIFIC --------------------- 2005 2004 Var. ------- ------- ----- 4 Hotels --------------------- SAME STORE OWNED HOTELS REVPAR ($) 110.82 99.01 11.9% ADR ($) 156.94 138.70 13.2% OCCUPANCY (%) 70.6% 71.4% (0.8) 3 --------------------- SHERATON REVPAR ($) 117.43 102.36 14.7% ADR ($) 169.35 151.49 11.8% OCCUPANCY (%) 69.3% 67.6% 1.7 WESTIN REVPAR ($) ADR ($) OCCUPANCY (%) ST. REGIS/LUXURY COLLECTION REVPAR ($) ADR ($) OCCUPANCY (%) 1 --------------------- OTHER REVPAR ($) 100.04 93.54 6.9% ADR ($) 137.63 120.53 14.2% OCCUPANCY (%) 72.7% 77.6% (4.9) (1) Hotel Results exclude 4 hotels sold or closed and 3 hotels without comparable results during 2004 and 2005. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Hotel Results - Same Store Owned Hotels(1) For the Three Months Ended June 30, 2005 UNAUDITED ($ thousands except variances) WORLDWIDE(2) NORTH AMERICA(2) ------------------------ ------------------------ 2005 2004 Var. 2005 2004 Var. -------- -------- ------ -------- -------- ------ 134 Hotels 91 Hotels ------------------------ ------------------------ SAME STORE OWNED HOTELS Total REVENUE 928,951 847,188 9.7% 674,173 616,627 9.3% Total EXPENSE 664,554 621,516 (6.9%) 481,103 454,387 (5.9%) 58 36 ------------------------ ------------------------ SHERATON REVENUE 364,631 338,739 7.6% 253,467 240,513 5.4% EXPENSE 264,395 246,701 (7.2%) 180,127 174,040 (3.5%) 36 22 ------------------------ ------------------------ WESTIN REVENUE 295,263 265,614 11.2% 194,662 173,829 12.0% EXPENSE 204,833 191,443 (7.0%) 135,618 126,413 (7.3%) 10 4 ------------------------ ------------------------ ST. REGIS/ LUXURY COLLECTION REVENUE 104,638 98,186 6.6% 69,675 65,080 7.1% EXPENSE 73,729 70,360 (4.8%) 51,384 48,160 (6.7%) 12 12 ------------------------ ------------------------ W(2) REVENUE 107,838 93,742 15.0% 107,838 93,742 15.0% EXPENSE 77,411 71,460 (8.3%) 77,411 71,460 (8.3%) 18 17 ------------------------ ------------------------ OTHER REVENUE 56,581 50,907 11.1% 48,531 43,463 11.7% EXPENSE 44,186 41,552 (6.3%) 36,563 34,314 (6.6%) (1) Hotel Results exclude 4 hotels sold or closed and 3 hotels without comparable results during 2004 and 2005. (2) Includes lease expense of $4,288 in 2005 and 2004 related to the lease of the W Times Square in New York (3) See next page for breakdown by division INTERNATIONAL(3) ------------------------- 2005 2004 Var. -------- -------- ------- 43 Hotels ------------------------- SAME STORE OWNED HOTELS Total REVENUE 254,778 230,561 10.5% Total EXPENSE 183,451 167,129 (9.8%) 22 ------------------------- SHERATON REVENUE 111,164 98,226 13.2% EXPENSE 84,268 72,661 (16.0%) 14 ------------------------- WESTIN REVENUE 100,601 91,785 9.6% EXPENSE 69,215 65,030 (6.4%) 6 ------------------------- ST. REGIS/LUXURY COLLECTION REVENUE 34,963 33,106 5.6% EXPENSE 22,345 22,200 (0.7%) W(2) REVENUE EXPENSE 1 ------------------------- OTHER REVENUE 8,050 7,444 8.1% EXPENSE 7,623 7,238 (5.3%) (1) Hotel Results exclude 4 hotels sold or closed and 3 hotels without comparable results during 2004 and 2005. (2) Includes lease expense of $4,288 in 2005 and 2004 related to the lease of the W Times Square in New York (3) See next page for breakdown by division STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Hotel Results - Same Store Owned Hotels(1) For the Three Months Ended June 30, 2005 UNAUDITED ($ thousands except variances) EUROPE LATIN AMERICA ------------------------- ----------------------- 2005 2004 Var. 2005 2004 Var. -------- -------- ------- ------- ------- ------- 28 Hotels 11 Hotels ------------------------- ----------------------- SAME STORE OWNED HOTELS Total REVENUE 179,686 167,292 7.4% 47,137 38,194 23.4% Total EXPENSE 130,019 121,812 (6.7%) 31,823 25,653 (24.1%) 11 8 ------------------------- ----------------------- SHERATON REVENUE 61,074 55,581 9.9% 30,185 25,014 20.7% EXPENSE 48,790 43,529 (12.1%) 21,492 16,706 (28.6%) 11 3 ------------------------- ----------------------- WESTIN REVENUE 83,649 78,605 6.4% 16,952 13,180 28.6% EXPENSE 58,884 56,083 (5.0%) 10,331 8,947 (15.5%) 6 ------------------------- ST. REGIS/ LUXURY COLLECTION REVENUE 34,963 33,106 5.6% EXPENSE 22,345 22,200 (0.7%) OTHER REVENUE EXPENSE (1) Hotel Results exclude 4 hotels sold or closed and 3 hotels without comparable results during 2004 and 2005. ASIA PACIFIC ------------------------ 2005 2004 Var. -------- ------- ------- 4 Hotels ------------------------ SAME STORE OWNED HOTELS Total REVENUE 27,955 25,075 11.5% Total EXPENSE 21,609 19,664 (9.9%) 3 ------------------------ SHERATON REVENUE 19,905 17,631 12.9% EXPENSE 13,986 12,426 (12.6%) WESTIN REVENUE EXPENSE ST. REGIS/LUXURY COLLECTION REVENUE EXPENSE 1 ------------------------ OTHER REVENUE 8,050 7,444 8.1% EXPENSE 7,623 7,238 (5.3%) (1) Hotel Results exclude 4 hotels sold or closed and 3 hotels without comparable results during 2004 and 2005. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Hotel Results - Same Store Owned Hotels(1) For the Six Months Ended June 30, 2005 UNAUDITED WORLDWIDE NORTH AMERICA --------------------- --------------------- 2005 2004 Var. 2005 2004 Var. ------- ------- ----- ------- ------- ----- 133 Hotels 90 Hotels --------------------- --------------------- SAME STORE OWNED HOTELS REVPAR ($) 122.20 109.90 11.2% 120.46 108.85 10.7% ADR ($) 173.87 162.36 7.1% 168.65 155.81 8.2% OCCUPANCY (%) 70.3% 67.7% 2.6 71.4% 69.9% 1.5 57 35 --------------------- --------------------- SHERATON REVPAR ($) 99.46 90.88 9.4% 103.09 95.46 8.0% ADR ($) 146.12 137.06 6.6% 148.89 136.98 8.7% OCCUPANCY (%) 68.1% 66.3% 1.8 69.2% 69.7% (0.5) 36 22 --------------------- --------------------- WESTIN REVPAR ($) 135.00 120.42 12.1% 120.79 108.82 11.0% ADR ($) 180.70 168.58 7.2% 158.78 147.78 7.4% OCCUPANCY (%) 74.7% 71.4% 3.3 76.1% 73.6% 2.5 10 4 --------------------- --------------------- ST. REGIS/ LUXURY COLLECTION REVPAR ($) 266.71 238.78 11.7% 271.92 238.17 14.2% ADR ($) 396.77 384.29 3.2% 368.61 351.05 5.0% OCCUPANCY (%) 67.2% 62.1% 5.1 73.8% 67.8% 6.0 12 12 --------------------- --------------------- W REVPAR ($) 176.30 152.22 15.8% 176.30 152.22 15.8% ADR ($) 233.63 212.32 10.0% 233.63 212.32 10.0% OCCUPANCY (%) 75.5% 71.7% 3.8 75.5% 71.7% 3.8 18 17 --------------------- --------------------- OTHER REVPAR ($) 80.48 72.28 11.3% 75.69 67.71 11.8% ADR ($) 124.15 115.97 7.1% 121.12 114.72 5.6% OCCUPANCY (%) 64.8% 62.3% 2.5 62.5% 59.0% 3.5 (1) Hotel Results exclude 4 hotels sold or closed and 4 hotels without comparable results during 2004 and 2005. (2) See next page for breakdown by division INTERNATIONAL(2) ---------------------- 2005 2004 Var. ------- ------- ------ 43 Hotels ---------------------- SAME STORE OWNED HOTELS REVPAR ($) 127.35 112.99 12.7% ADR ($) 190.37 184.47 3.2% OCCUPANCY (%) 66.9% 61.3% 5.6 22 ---------------------- SHERATON REVPAR ($) 91.76 81.14 13.1% ADR ($) 139.93 137.27 1.9% OCCUPANCY (%) 65.6% 59.1% 6.5 14 ---------------------- WESTIN REVPAR ($) 181.35 157.87 14.9% ADR ($) 258.09 245.44 5.2% OCCUPANCY (%) 70.3% 64.3% 6.0 6 ---------------------- ST. REGIS/LUXURY COLLECTION REVPAR ($) 258.00 239.85 7.6% ADR ($) 458.46 459.71 (0.3%) OCCUPANCY (%) 56.3% 52.2% 4.1 W REVPAR ($) ADR ($) OCCUPANCY (%) 1 ---------------------- OTHER REVPAR ($) 109.54 100.04 9.5% ADR ($) 138.68 121.41 14.2% OCCUPANCY (%) 79.0% 82.4% (3.4) (1) Hotel Results exclude 4 hotels sold or closed and 4 hotels without comparable results during 2004 and 2005. (2) See next page for breakdown by division STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Hotel Results - Same Store Owned Hotels(1) For the Six Months Ended June 30, 2005 UNAUDITED EUROPE LATIN AMERICA ---------------------- --------------------- 2005 2004 Var. 2005 2004 Var. ------- ------- ------ ------- ------- ----- 28 Hotels 11 Hotels ---------------------- --------------------- SAME STORE OWNED HOTELS REVPAR ($) 168.66 151.89 11.0% 73.27 61.77 18.6% ADR ($) 257.53 249.67 3.1% 110.95 108.05 2.7% OCCUPANCY (%) 65.5% 60.8% 4.7 66.0% 57.2% 8.8 11 8 ---------------------- --------------------- SHERATON REVPAR ($) 118.43 106.79 10.9% 59.33 51.41 15.4% ADR ($) 172.90 169.63 1.9% 96.81 96.81 0.0% OCCUPANCY (%) 68.5% 63.0% 5.5 61.3% 53.1% 8.2 11 3 ---------------------- --------------------- WESTIN REVPAR ($) 203.19 180.03 12.9% 126.21 101.12 24.8% ADR ($) 313.65 294.73 6.4% 150.07 139.27 7.8% OCCUPANCY (%) 64.8% 61.1% 3.7 84.1% 72.6% 11.5 6 ---------------------- ST. REGIS/ LUXURY COLLECTION REVPAR ($) 258.00 239.85 7.6% ADR ($) 458.46 459.71 (0.3%) OCCUPANCY (%) 56.3% 52.2% 4.1 OTHER REVPAR ($) ADR ($) OCCUPANCY (%) (1) Hotel Results exclude 4 hotels sold or closed and 4 hotels without comparable results during 2004 and 2005. ASIA PACIFIC ---------------------- 2005 2004 Var. ------- ------- ------ 4 Hotels ---------------------- SAME STORE OWNED HOTELS REVPAR ($) 117.42 103.29 13.7% ADR ($) 158.10 140.72 12.4% OCCUPANCY (%) 74.3% 73.4% 0.9 3 ---------------------- SHERATON REVPAR ($) 122.25 105.28 16.1% ADR ($) 171.26 155.10 10.4% OCCUPANCY (%) 71.4% 67.9% 3.5 WESTIN REVPAR ($) ADR ($) OCCUPANCY (%) ST. REGIS/LUXURY COLLECTION REVPAR ($) ADR ($) OCCUPANCY (%) 1 ---------------------- OTHER REVPAR ($) 109.54 100.04 9.5% ADR ($) 138.68 121.41 14.2% OCCUPANCY (%) 79.0% 82.4% (3.4%) (1) Hotel Results exclude 4 hotels sold or closed and 4 hotels without comparable results during 2004 and 2005. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Hotel Results - Same Store Owned Hotels(1) For the Six Months Ended June 30, 2005 UNAUDITED ($ thousands except variances) WORLDWIDE(2) ---------------------------- 2005 2004 Var. ---------- ---------- ------ 133 Hotels ---------------------------- SAME STORE OWNED HOTELS Total REVENUE 1,701,818 1,576,067 8.0% Total EXPENSE 1,275,245 1,198,852 (6.4%) 57 ---------------------------- SHERATON REVENUE 652,363 618,591 5.5% EXPENSE 495,858 466,814 (6.2%) 36 ---------------------------- WESTIN REVENUE 556,474 504,853 10.2% EXPENSE 399,888 372,779 (7.3%) 10 ---------------------------- ST. REGIS/LUXURY COLLECTION REVENUE 197,672 186,114 6.2% EXPENSE 145,311 139,403 (4.2%) 12 ---------------------------- W(2) REVENUE 195,229 173,762 12.4% EXPENSE 149,132 139,616 (6.8%) 18 ---------------------------- OTHER REVENUE 100,080 92,747 7.9% EXPENSE 85,056 80,240 (6.0%) (1) Hotel Results exclude 4 hotels sold or closed and 4 hotels without comparable results during 2004 and 2005. (2) Includes lease expense of $8,575 in 2005 and 2004 related to the lease of the W Times Square in New York (3) See next page for breakdown by division NORTH AMERICA(2) INTERNATIONAL(3) ---------------------------- ------------------------- 2005 2004 Var. 2005 2004 Var. ---------- ---------- ------ -------- -------- ------- 90 Hotels 43 Hotels ---------------------------- ------------------------- SAME STORE OWNED HOTELS Total REVENUE 1,237,337 1,158,188 6.8% 464,481 417,879 11.2% Total EXPENSE 923,059 880,686 (4.8%) 352,185 318,165 (10.7%) 35 22 ---------------------------- ------------------------- SHERATON REVENUE 440,847 429,756 2.6% 211,516 188,835 12.0% EXPENSE 334,919 325,952 (2.8%) 160,939 140,862 (14.3%) 22 14 ---------------------------- ------------------------- WESTIN REVENUE 378,599 346,139 9.4% 177,875 158,714 12.1% EXPENSE 267,879 251,935 (6.3%) 132,009 120,844 (9.2%) 4 6 ---------------------------- ------------------------- ST. REGIS/LUXURY COLLECTION REVENUE 139,799 131,726 6.1% 57,873 54,388 6.4% EXPENSE 101,963 97,704 (4.4%) 43,348 41,699 (4.0%) 12 0 ---------------------------- W(2) REVENUE 195,229 173,762 12.4% 0 0 0.0% EXPENSE 149,132 139,616 (6.8%) 0 0 0.0% 17 1 ---------------------------- ------------------------- OTHER REVENUE 82,863 76,805 7.9% 17,217 15,942 8.0% EXPENSE 69,167 65,480 (5.6%) 15,889 14,760 (7.6%) (1) Hotel Results exclude 4 hotels sold or closed and 4 hotels without comparable results during 2004 and 2005. (2) Includes lease expense of $8,575 in 2005 and 2004 related to the lease of the W Times Square in New York (3) See next page for breakdown by division STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Hotel Results - Same Store Owned Hotels(1) For the Six Months Ended June 30, 2005 UNAUDITED ($ thousands except variances) EUROPE LATIN AMERICA ------------------------- ----------------------- 2005 2004 Var. 2005 2004 Var. -------- -------- ------- ------- ------- ------- 28 Hotels 11 Hotels ------------------------- ----------------------- SAME STORE OWNED HOTELS Total REVENUE 308,138 283,123 8.8% 99,285 83,653 18.7% Total EXPENSE 245,985 225,192 (9.2%) 62,844 53,627 (17.2%) 11 8 ------------------------- ----------------------- SHERATON REVENUE 110,292 100,191 10.1% 61,383 53,483 14.8% EXPENSE 91,851 81,323 (12.9%) 41,621 34,953 (19.1%) 11 3 ------------------------- ----------------------- WESTIN REVENUE 139,973 128,544 8.9% 37,902 30,170 25.6% EXPENSE 110,786 102,170 (8.4%) 21,223 18,674 (13.6%) 6 ------------------------- ST. REGIS/LUXURY COLLECTION REVENUE 57,873 54,388 6.4% EXPENSE 43,348 41,699 (4.0%) OTHER REVENUE EXPENSE (1) Hotel Results exclude 4 hotels sold or closed and 4 hotels without comparable results during 2004 and 2005. ASIA PACIFIC ----------------------- 2005 2004 Var. ------- ------- ------- 4 Hotels ----------------------- SAME STORE OWNED HOTELS Total REVENUE 57,058 51,103 11.7% Total EXPENSE 43,356 39,346 (10.2%) 3 ----------------------- SHERATON REVENUE 39,841 35,161 13.3% EXPENSE 27,467 24,586 (11.7%) WESTIN REVENUE EXPENSE ST. REGIS/LUXURY COLLECTION REVENUE EXPENSE 1 ----------------------- OTHER REVENUE 17,217 15,942 8.0% EXPENSE 15,889 14,760 (7.6%) (1) Hotel Results exclude 4 hotels sold or closed and 4 hotels without comparable results during 2004 and 2005. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Debt Portfolio Summary As of June 30, 2005 UNAUDITED Avg Interest Balance % of Interest Maturity Debt Terms (in millions) Portfolio Rate (in years) --------------- -------- ------------- ---------- -------- ----------- Floating Rate Debt: Senior credit facility Revolving credit facility Various + 125 $14 0% 3.81% 1.3 Term loan LIBOR + 125 500 12% 4.59% 1.1 ------------- ---------- -------- ----------- 514 12% 4.57% 1.2 Mortgages and other Various 186 4% 5.38% 2.2 Interest rate swaps LIBOR + 423 300 7% 7.75% ------------- ---------- -------- Total Floating 1,000 23% 5.67% 1.4 Fixed Rate Debt: Sheraton Holding public debt (1) 1,052 24% 6.00% 7.5 Senior notes (2) 1,510 35% 6.70% 4.4 Convertible debt 360 8% 3.50% 0.9 Mortgages and other 737 17% 7.25% 5.8 Interest rate swaps (300) (7%) 7.88% ------------- ---------- -------- Total Fixed 3,359 77% 6.13% 5.2 ------------- ---------- -------- Total Debt $4,359 100% 6.03% 4.6 ============= ========== ======== (1) Balance consists of outstanding public debt of $1.047 billion and a $5 million fair value adjustment related to the unamortized gain on fixed to floating interest rate swaps terminated in September 2002 and March 2004. (2) Balance consists of outstanding public debt of $1.496 billion and a $26 million fair value adjustment related to the unamortized gain on fixed to floating interest rate swaps terminated in September 2002 and March 2004 and a ($12) million fair value adjustment related to current fixed to floating interest rate swaps. -------------------------------- Maturities -------------------------------- less than 1 year $634 1-3 years 1,631 3-5 years 485 greater than 5 years 1,609 ----------- $4,359 =========== -------------------------------- STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Hotels without Comparable Results & Other Selected Items As of June 30, 2005 UNAUDITED ($ millions) Properties without comparable results in 2005: Property Location -------- -------- Sheraton Kauai Koloa, HI St. Regis Aspen Aspen, CO Paradise Streams Caesars Mt. Pocono, PA Sheraton Cancun Cancun, Mexico Properties sold or closed in 2005 and 2004: Property Location -------- -------- Englewood - Sheraton Denver Tech Center Englewood, CO Deerfield - Hilton Ft. Lauderdale, FL Rancho Bernardo - Four Points Rancho Bernardo, CA Lisbon - Sheraton Lisboa Htl & Twrs Lisbon, Portugal Selected Balance Sheet Items: Cash and cash equivalents (including restricted cash of $518 million) $899 Debt level $4,359 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Capital Expenditures For the Three and Six Months Ended June 30, 2005 UNAUDITED ($ millions) Q2 YTD ------ ------- Capital Expenditures: Owned, Leased and Consolidated Joint Venture Hotels 68 126 Corporate/IT 12 16 ------ ------- Subtotal 80 142 Vacation Ownership Capital Expenditures: Capital expenditures (includes land acquisitions) 6 8 Net capital expenditures for inventory (1) (6) (20) ------ ------- Subtotal - (12) Development Capital 27 98 ------ ------- Total Capital Expenditures 107 228 ====== ======= (1) Represents gross inventory capital expenditures of $40 and $73 in the three and six months ended June 30, 2005, respectively, less cost of sales of $46 and $93 in the three and six months ended June 30, 2005, respectively. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. Summary of Portfolio by Properties & Rooms As of June 30, 2005 UNAUDITED NAD EAME LAD ---------------- --------------- --------------- Owned Hotels Rooms Hotels Rooms Hotels Rooms ------- -------- ------- ------- ------- ------- Sheraton 36 16,218 11 3,077 7 3,549 Westin 22 10,359 11 2,374 3 901 Four Points 6 1,153 - - - - W 12 4,294 - - - - Luxury Collection 1 654 5 638 2 320 St. Regis 4 840 1 161 - - Other 12 2,806 - - - - ------- -------- ------- ------- ------- ------- Total Owned 93 36,324 28 6,250 12 4,770 Managed & UJV Sheraton 42 20,828 72 21,170 10 1,995 Westin 37 20,888 7 1,869 - - Four Points 1 475 7 1,035 2 263 W 5 902 - - 1 237 Luxury Collection 6 1,401 6 942 7 158 St. Regis 2 403 1 95 - - Other 1 2,567 - - - - ------- -------- ------- ------- ------- ------- Total Managed & UJV 94 47,464 93 25,111 20 2,653 Franchised Sheraton 114 35,953 29 7,043 3 1,074 Westin 18 7,288 3 1,141 3 598 Four Points 92 16,363 10 1,376 9 1,350 Luxury Collection 3 600 12 1,354 - - ------- -------- ------- ------- ------- ------- Total Franchised 227 60,204 54 10,914 15 3,022 ---------------------------------------------------------------------- Systemwide Sheraton 192 72,999 112 31,290 20 6,618 Westin 77 38,535 21 5,384 6 1,499 Four Points 99 17,991 17 2,411 11 1,613 W 17 5,196 - - 1 237 Luxury Collection 10 2,655 23 2,934 9 478 St. Regis 6 1,243 2 256 - - Other 13 5,373 - - - - ------- -------- ------- ------- ------- ------- Total Systemwide 414 143,992 175 42,275 47 10,445 ======= ======== ======= ======= ======= ======= ASIA Total --------------- ---------------- Owned Hotels Rooms Hotels Rooms ------- ------- ------- -------- Sheraton 3 1,028 57 23,872 Westin - - 36 13,634 Four Points 1 630 7 1,783 W - - 12 4,294 Luxury Collection - - 8 1,612 St. Regis - - 5 1,001 Other - - 12 2,806 ------- ------- ------- -------- Total Owned 4 1,658 137 49,002 Managed & UJV Sheraton 45 16,267 169 60,260 Westin 12 4,935 56 27,692 Four Points 2 387 12 2,160 W 2 353 8 1,492 Luxury Collection - - 19 2,501 St. Regis 2 591 5 1,089 Other 2 296 3 2,863 ------- ------- ------- -------- Total Managed & UJV 65 22,829 272 98,057 Franchised Sheraton 17 5,682 163 49,752 Westin 5 1,226 29 10,253 Four Points 1 126 112 19,215 Luxury Collection - - 15 1,954 ------- ------- ------- -------- Total Franchised 23 7,034 319 81,174 ---------------------------------------------------------------------- Systemwide Sheraton 65 22,977 389 133,884 Westin 17 6,161 121 51,579 Four Points 4 1,143 131 23,158 W 2 353 20 5,786 Luxury Collection - - 42 6,067 St. Regis 2 591 10 2,090 Other 2 296 15 5,669 ------- ------- ------- -------- Total Systemwide 92 31,521 728 228,233 ======= ======= ======= ========
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Alisa Rosenberg
914-640-5214
Starwood