This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Starwood Reports Fourth Quarter 2012 Results

Balance Sheet

During the fourth quarter of 2012, the Company completed a public offering of $350 million of 3.125% Senior Notes due 2023. The proceeds, together with cash on hand, were used to complete a tender offer to purchase $321 million of its 7.875% Senior Notes due 2014, $156 million of its 7.375% Senior Notes due 2015, $29 million of its 6.75% Senior Notes due 2018, and $40 million of its 7.150% Senior Notes due 2019. Subsequent to the tender, the Company exercised its call option to redeem the remaining $179 million outstanding 7.875% Senior Notes due 2014.

At December 31, 2012, the Company had gross debt of $1.275 billion, cash and cash equivalents of $428 million (including $123 million of restricted cash) and net debt of $847 million, compared to net debt of $859 million as of September 30, 2012, in each case, excluding debt and restricted cash associated with securitized vacation ownership notes receivable. Net debt at December 31, 2012, including $533 million of debt and $41 million of restricted cash associated with securitized vacation ownership notes receivables, was $1.339 billion.

At December 31, 2012, debt was approximately 97% fixed rate and 3% floating rate and its weighted average maturity was 6.4 years with a weighted average interest rate of 5.86%, excluding the securitized debt. The Company had cash (including current restricted cash) and availability under the domestic and international revolving credit facility of approximately $2.180 billion.

Outlook

We continue to operate in an uncertain world. Macroeconomic indicators are trending positively as we enter 2013. However, macroeconomic and geopolitical “tail risks,” though lower, persist. We remain of the view that several scenarios could play out. Our outlook below reflects our baseline scenario for the full year 2013:

Including Bal Harbour, which is expected to contribute approximately $50 million of EBITDA, adjusted EBITDA is expected to be approximately $1.165 billion to $1.190 billion (based on the assumptions below).

  • Excluding Bal Harbour, adjusted EBITDA is expected to be approximately $1.115 billion to $1.140 billion, assuming:
    • REVPAR increases at Same-Store Company-Operated Hotels Worldwide of 5% to 7% in constant and actual dollars.
    • REVPAR increases at Same-Store Owned Hotels Worldwide of 3% to 6% in constant and actual dollars.
    • Margins at Same-Store Owned Hotels Worldwide increase 50 to 100 basis points.
    • Management fees, franchise fees and other income increase approximately 9% to 11%.
    • Earnings from the Company’s vacation ownership and residential business of approximately $160 million to $165 million.
    • Selling, general and administrative expenses increase approximately 3% to 5%.
  • Full year owned earnings are negatively impacted by approximately $25 million due to recent asset sales.
  • Depreciation and amortization is expected to be approximately $300 million.
  • Interest expense is expected to be approximately $125 million.
  • Full year effective tax rate is expected to be approximately 32%, and cash taxes are expected to be approximately $100 million.
  • Including Bal Harbour, EPS before special items is expected to be approximately $2.59 to $2.68 (based on the assumptions above).
  • Full year capital expenditures (excluding vacation ownership and residential inventory) is expected to be approximately $200 million for maintenance, renovation and technology. In addition, in-flight investment projects and prior commitments for joint ventures and other investments are expected to total approximately $350 million.
  • Vacation ownership (excluding Bal Harbour) is expected to generate approximately $150 million in positive cash flow. Bal Harbour is expected to generate at least $100 million in net cash flow.

For the three months ended March 31, 2013:

  • Including Bal Harbour, which is expected to contribute approximately $20 million of EBITDA, adjusted EBITDA is expected to be approximately $250 million to $260 million (based on the assumptions below).
  • Excluding Bal Harbour, adjusted EBITDA is expected to be approximately $230 million to $240 million, assuming:
    • REVPAR increases at Same-Store Company-Operated Hotels Worldwide of 4% to 6% in constant dollars (approximately 50 basis points lower in actual dollars at current exchange rates), impacted by holiday shift.
    • REVPAR increases at Same-Store Company Owned Hotels Worldwide of 3% to 5% in constant dollars (approximately 50 basis points lower in actual dollars at current exchange rates).
    • Management fees, franchise fees and other income increase approximately 7% to 9%.
    • Earnings from the Company’s vacation ownership and residential business are flat to up approximately $5 million year over year.
  • Depreciation and amortization is expected to be approximately $73 million.
  • Interest expense is expected to be approximately $32 million.
  • Including Bal Harbour, income from continuing operations is expected to be approximately $99 million to $105 million, reflecting an effective tax rate of approximately 32% (based on the assumptions above).
  • Including Bal Harbour, EPS is expected to be approximately $0.51 to $0.54 (based on the assumptions above).

Special Items

The Company’s special items netted to a charge of $126 million ($72 million after-tax) in the fourth quarter of 2012 compared to a charge of $98 million (an $18 million benefit after-tax) in the same period of 2011.

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,

2012     2011

    2012    

   

    2011    

 
$ 137   $ 140   Income from continuing operations before special items $ 513   $ 378  
$ 0.70   $ 0.71   EPS before special items $ 2.61   $ 1.93  
Special Items
1 (68 ) Restructuring and other special (charges) credits, net (a) 12 (68 )
(14 ) (14 ) Gain (loss) on asset dispositions and impairments, net (b) (21 )
  (113 )   (16 ) Loss on early extinguishment of debt, net (c)   (128 )   (16 )
(126 ) (98 ) Total special items – pre-tax (137 ) (84 )
48 38 Income tax benefit (expense) for special items (d) 96 108
  6     78   Income tax benefit (expense) – other non-recurring items (e)   (2 )   100  
  (72 )   18   Total special items – after-tax   (43 )   124  
 
$ 65   $ 158   Income from continuing operations $ 470   $ 502  
$ 0.33   $ 0.80   EPS including special items $ 2.39   $ 2.57  
 
(a)   During the year ended December 31, 2012, the Company recorded a favorable adjustment of $11 million to reverse a portion of a litigation reserve established in 2011.
 
During the three months and year ended December 31, 2011, the Company recorded restructuring and other special charges of $68 million primarily related to an unfavorable legal decision.
 
(b) During the three months ended December 31, 2012, the net loss primarily relates to the impairment of a preferred equity investment. The year ended December 31, 2012 also includes a net loss primarily relating to the sale of one wholly-owned hotel.
 
During the three months ended December 31, 2011, the net loss primarily relates to impairment charges of $7 million related to six hotels where their carrying value exceeded their estimated fair values and impairment charges of $9 million associated with fixed assets at two owned hotels undergoing a significant renovation, partially offset by insurance proceeds as a result of storm damage at another owned hotel. Additionally, the year ended December 31, 2011 includes the gain from an asset exchange transaction that was partially offset by the impairment of a minority investment in a joint venture hotel located in Japan.
 
(c) During the three months ended December 31, 2012, the net charges primarily relates to tender premiums associated with the early redemption of $725 million of the Company’s long-term debt. The year ended December 31, 2012 also includes a net charge associated with the early redemption of approximately $495 million of the Company’s long-term debt.
 
The three months and year ended December 31, 2011 include $16 million of charges associated with tender premiums and other costs related to the early redemption of approximately $605 million of the Company’s long-term debt.
 
(d) During the three months and year ended December 31, 2012, the benefit primarily relates to a tax benefit on the special items at the statutory tax rate. The year ended December 31, 2012 also includes a tax benefit primarily relating to the sale of two hotels with high tax bases.
 
During the three months and year ended December 31, 2011, the benefit primarily relates to a tax benefit on the special items at the statutory tax rate. The year ended December 31, 2011 also includes a tax benefit on the sale of two wholly-owned hotels with high tax bases.
 
(e) During the three months and year ended December 31, 2012, the net benefit and expense primarily represents adjustments to deferred income taxes.
 
During the three months and year ended December 31, 2011, the benefit primarily relates to the use of capital losses which had previously been reserved and certain changes in valuation allowances associated with deferred tax assets. The year ended December 31, 2011 also includes a tax benefit of $35 million related to the IRS settlement in the third quarter of 2011.
 

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.

8 of 11

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,051.73 -48.45 -0.28%
S&P 500 1,973.63 -4.59 -0.23%
NASDAQ 4,424.7040 -7.4420 -0.17%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs