Starwood Reports Fourth Quarter 2014 Results and Declares First Quarter Dividend of $0.375 Per Share

STAMFORD, Conn.--()--Starwood Hotels & Resorts Worldwide, Inc. (NYSE:HOT) today reported fourth quarter 2014 financial results.

Fourth Quarter 2014 Highlights

  • Excluding special items, EPS from continuing operations was $0.97. Including special items, EPS from continuing operations was $1.40.
  • Adjusted EBITDA was $335 million.
  • Excluding special items, income from continuing operations was $171 million. Including special items, income from continuing operations was $245 million.
  • Worldwide Systemwide REVPAR for Same-Store Hotels increased 4.4% in constant dollars (2.3% in actual dollars) compared to 2013. Systemwide REVPAR for Same-Store Hotels in North America increased 5.8% in constant dollars (5.1% in actual dollars).
  • Management fees, franchise fees and other income increased 10.9% compared to 2013. Core fees (total management and franchise fees) increased 3.7% compared to 2013.
  • Earnings from Starwood’s vacation ownership and residential business remained flat compared to 2013, including a $12 million decrease in earnings from the St. Regis Bal Harbour residential project (“Bal Harbour”), which is sold out.
  • During the quarter, the Company signed 63 hotel management and franchise contracts, representing approximately 12,900 rooms, and opened 27 hotels and resorts with approximately 5,800 rooms.
  • During the quarter, the Company paid a regular quarterly dividend of $0.35 per share and a special dividend of $0.65 per share, and repurchased 7.8 million shares at a total cost of $609 million and a weighted average price of $78.12 per share.
  • During the quarter, the Company completed the sale of six wholly-owned hotels and one unconsolidated joint venture hotel for gross cash proceeds of approximately $585 million.
  • On February 10, 2015, the Company announced its plans to spin-off its vacation ownership business to shareholders as a separate publicly traded company.

Full Year 2014 Highlights

  • Excluding special items, EPS from continuing operations was $3.02. Including special items, EPS from continuing operations was $3.46.
  • Adjusted EBITDA was $1.238 billion.
  • Excluding special items, income from continuing operations was $561 million. Including special items, income from continuing operations was $643 million.
  • Worldwide Systemwide REVPAR for Same-Store Hotels increased 5.8% in constant dollars (4.9% in actual dollars) compared to 2013. Systemwide REVPAR for Same-Store Hotels in North America increased 7.0% in constant dollars (6.3% in actual dollars).
  • Management fees, franchise fees and other income increased 9.5% compared to 2013. Core fees increased 6.8% compared to 2013.
  • Earnings from Starwood’s vacation ownership and residential business decreased approximately $115 million compared to 2013, including a $108 million decrease in earnings from Bal Harbour.
  • During the year, the Company signed 175 hotel management and franchise contracts, representing approximately 34,700 rooms, and opened 74 hotels and resorts with approximately 15,000 rooms.
  • During the year, the Company returned approximately $2.4 billion to shareholders through dividends and share repurchases.
  • During the year, the Company completed the sale of eight wholly-owned hotels and one unconsolidated joint venture hotel for gross cash proceeds of approximately $817 million.

Fourth Quarter 2014 Earnings Summary

Starwood Hotels & Resorts Worldwide, Inc. (“Starwood” or the “Company”) today reported EPS from continuing operations for the fourth quarter of 2014 of $1.40 compared to $0.67 in the fourth quarter of 2013. Excluding special items, EPS from continuing operations was $0.97 for the fourth quarter of 2014 compared to $0.73 in the fourth quarter of 2013.

Special items in the fourth quarter of 2014, which totaled an after-tax benefit of $74 million, primarily related to net gains on the sales of hotels. Special items in the fourth quarter of 2013 totaled an after-tax charge of $13 million. Excluding special items, the effective income tax rate in the fourth quarter of 2014 was 24.5% compared to 33.0% in the fourth quarter of 2013. The decrease is primarily related to the geographical mix of operational results.

Income from continuing operations was $245 million in the fourth quarter of 2014, compared to $128 million in the fourth quarter of 2013. Excluding special items, income from continuing operations was $171 million in the fourth quarter of 2014, compared to $141 million in the fourth quarter of 2013.

Net income was $234 million and $1.33 per share in the fourth quarter of 2014, compared to $128 million and $0.67 per share in the fourth quarter of 2013.

Frits van Paasschen, CEO, said, “We delivered another solid year of performance. Worldwide REVPAR was up nearly 6% in constant dollars, and both Adjusted EBITDA and EPS were ahead of our expectations. We posted another year of rising REVPAR index, a sign of the global strength of our brands and platform. We signed 175 deals for new hotels, our second best signing year in Starwood’s history. Around the world, we opened nearly 15,000 rooms, including our 200th Westin.

“In 2014, we returned $2.4 billion to shareholders through our dividends and stock repurchases. We were able to deliver this amount by reaching our long-term target leverage, with cash flow from operations, and asset sales. During the year, we sold eight hotels for gross proceeds of over $800 million.

“As a further step in our asset-light strategy, we announced today our plans to spin-off our vacation ownership business in 2015. This transaction will create a new pure-play vacation ownership company with a seasoned management team, strong balance sheet, and great prospects for growth.

“Looking ahead to 2015, we expect more strong growth in global lodging. The U.S. economy looks set to continue its growth, and in the U.S. hotel business, limited new supply points to rising rates for some time to come. In Europe, we are optimistic that hotel performance will improve modestly. In other markets around the world, conditions are mixed. However, the underlying secular growth in demand for high-end hotels continues, and we are bullish on the prospects for our business and industry over the long-term.”

Year Ended December 31, 2014 Earnings Summary

Income from continuing operations was $643 million for the year ended December 31, 2014 compared to $565 million in 2013. Excluding special items, income from continuing operations was $561 million for the year ended December 31, 2014 compared to $579 million in 2013. Excluding special items, the effective income tax rate for the year ended December 31, 2014 was 30.9% compared to 32.4% in the same period in 2013.

Net income was $633 million and $3.40 per share for the year ended December 31, 2014 compared to $635 million and $3.28 per share for the year ended December 31, 2013.

Adjusted EBITDA was $1.238 billion for the year ended December 31, 2014 compared to $1.263 billion in the same period in 2013.

Fourth Quarter 2014 Operating Results

Management and Franchise Revenues

Worldwide Systemwide REVPAR for Same-Store Hotels increased 4.4% in constant dollars (2.3% in actual dollars) compared to the fourth quarter of 2013. International Systemwide REVPAR for Same-Store Hotels increased 2.7% in constant dollars (decreased 0.8% in actual dollars).

             

Changes in REVPAR for Worldwide Systemwide Same-Store Hotels by region:

 
REVPAR
Region Constant
Dollars
        Actual
Dollars
Americas:        
North America 5.8 % 5.1 %
Latin America 2.8 % 2.8 %
Asia Pacific:
Greater China 4.1 % 3.4 %
Rest of Asia 1.2 % (3.4 )%
Europe, Africa & Middle East:
Europe 4.0 % (3.3 )%
Africa & Middle East (0.3 )% (1.8 )%
 
             

Changes in REVPAR for Worldwide Systemwide Same-Store Hotels by brand:

 
REVPAR
Brand Constant
Dollars
        Actual
Dollars
St. Regis/Luxury Collection 5.2 %         3.0 %
W Hotels 3.7 % 2.5 %
Westin 5.8 % 3.6 %
Sheraton 3.7 % 1.7 %
Le Méridien 0.6 % (2.5 )%
Four Points by Sheraton 4.1 % 2.1 %
Aloft 8.7 % 8.1 %
 

Worldwide Same-Store Company-Operated gross operating profit margins increased 32 basis points compared to the fourth quarter of 2013. International gross operating profit margins for Same-Store Company-Operated properties increased 63 basis points. North American Same-Store Company-Operated gross operating profit margins decreased 8 basis points.

Management fees, franchise fees and other income were $294 million, up $29 million, or 10.9% compared to the fourth quarter of 2013. Core fees increased 3.7% to $225 million. Other management and franchise revenues increased 53.7% or $22 million, primarily due to fees associated with the termination of certain management and franchise contracts.

For the full year 2014, Worldwide Systemwide REVPAR for Same-Store Hotels increased 5.8% in constant dollars (4.9% in actual dollars) compared to the full year 2013. Worldwide Same-Store Company-Operated gross operating profit margins increased 96 basis points. Management fees, franchise fees and other income were $1.057 billion, up $92 million or 9.5% compared to the full year 2013. Core fees increased 6.8% to $827 million. Other management and franchise revenues increased 23.4%, or $39 million, primarily due to fees associated with the termination of certain management and franchise contracts.

Development

During the fourth quarter of 2014, the Company signed 63 hotel management and franchise contracts, representing approximately 12,900 rooms, of which 52 are new builds and 11 are conversions from other brands. At December 31, 2014, the Company had approximately 480 hotels in the active pipeline representing approximately 108,000 rooms.

During the fourth quarter of 2014, 27 new hotels and resorts (representing approximately 5,800 rooms) entered the system, including Sheraton Wuhan Hankou Hotel (China, 509 rooms), Excelsior Hotel Gallia, a Luxury Collection Hotel, Milan (Italy, 188 rooms), Le Méridien Suvarnabhumi, Bangkok Golf Resort & Spa (Thailand, 223 rooms), W Bogota (Colombia, 168 rooms), Le Méridien Indianapolis (Indiana, 99 rooms) and Aloft Denver Downtown (Colorado, 140 rooms). During the quarter, 12 properties (representing approximately 3,400 rooms) were removed from the system.

For the full year 2014, the Company signed 175 hotel management and franchise contracts (representing approximately 34,700 rooms). For the full year 2014, 74 new hotels and resorts (representing approximately 15,000 rooms) entered the system and 28 properties (representing approximately 7,000 rooms) left the system.

Owned, Leased and Consolidated Joint Venture Hotels

Worldwide REVPAR at Starwood Same-Store Owned Hotels increased 4.7% in constant dollars (1.2% in actual dollars) when compared to the fourth quarter of 2013. REVPAR at Starwood Same-Store Owned Hotels in North America increased 4.2% in constant dollars (1.9% in actual dollars). Internationally, Starwood Same-Store Owned Hotel REVPAR increased 5.4% in constant dollars (0.3% in actual dollars).

Revenues at Starwood Same-Store Owned Hotels Worldwide increased 3.6% in constant dollars (remained flat in actual dollars) while costs and expenses increased 3.6% in constant dollars (decreased 0.2% in actual dollars) when compared to the fourth quarter of 2013. Margins at these hotels increased 20 basis points.

Revenues at Starwood Same-Store Owned Hotels in North America increased 2.7% in constant dollars (0.4% in actual dollars) while costs and expenses increased 4.8% in constant dollars (2.6% in actual dollars) when compared to the fourth quarter of 2013. Margins at these hotels decreased 170 basis points.

Internationally, revenues at Starwood Same-Store Owned Hotels increased 4.8% in constant dollars (decreased 0.5% in actual dollars) while costs and expenses increased 2.0% in constant dollars (decreased 3.6% in actual dollars) when compared to the fourth quarter of 2013. Margins at these hotels increased 250 basis points.

Revenues at owned, leased and consolidated joint venture hotels were $370 million, compared to $416 million in the fourth quarter of 2013. Expenses at owned, leased and consolidated joint venture hotels were $288 million compared to $326 million in the fourth quarter of 2013. Fourth quarter results were impacted by asset sales since the fourth quarter of 2013.

For the full year 2014, Worldwide REVPAR at Starwood Same-Store Owned Hotels increased 6.1% in constant dollars (5.0% in actual dollars) when compared to the full year 2013. Margins at these hotels increased 150 basis points.

Vacation Ownership

Total vacation ownership revenues increased 15.2% to $167 million in the fourth quarter of 2014 when compared to 2013, primarily due to the timing and recognition of deferred revenues. Originated contract sales of vacation ownership intervals decreased 2.4% during the fourth quarter of 2014, compared to the corresponding period in 2013, as the average price per vacation ownership unit sold decreased 3.0% to approximately $14,000, partially offset by a 0.9% increase in the number of contracts signed.

For the full year 2014, total vacation ownership revenues increased 0.8% to $643 million when compared to the full year 2013 as originated contract sales of vacation ownership intervals, number of contracts signed, and the average price per vacation ownership unit sold remained substantially consistent.

On February 10, 2015, the Company announced plans to spin-off its vacation ownership business to shareholders as a separate publicly traded company. The transaction is subject to the receipt of normal and customary regulatory approvals and will not require a shareholder vote. The transaction, which is expected to be tax-free to shareholders, will be effected through a pro rata distribution of the new entity’s stock to existing Starwood shareholders. The Company expects to complete the transaction in the fourth quarter of 2015 but there can be no assurance regarding the ultimate timing of the spin-off or that the spin-off will ultimately occur.

Residential

During the fourth quarter of 2014, the Company’s residential revenues were $3 million compared to $31 million in 2013. The Company realized residential revenues from Bal Harbour of $23 million and earnings of $12 million in the fourth quarter of 2013 compared to no revenue or earnings in the fourth quarter of 2014, as Bal Harbour sold out in early 2014.

Selling, General, Administrative and Other

During the fourth quarter of 2014, selling, general, administrative and other expenses increased 2.8% to $109 million, compared to $106 million in the fourth quarter of 2013. For the full year 2014, selling, general, administrative and other expenses increased 4.7% to $402 million compared to $384 million in the full year 2013.

Capital

Gross capital spending during the quarter included approximately $74 million of maintenance capital and $58 million of development capital.

For the full year 2014, capital spending included $207 million of maintenance capital and $183 million of development capital.

Asset Sales

During the fourth quarter of 2014, the Company completed the sales of six wholly-owned hotels and one unconsolidated joint venture hotel for gross cash proceeds of approximately $585 million. These hotels were sold subject to long-term management or franchise contracts.

Dividend

In the fourth quarter of 2014, the Company declared a regular quarterly dividend of $0.35 per share, which was paid on December 29, 2014. In accordance with the Company’s intention to return to shareholders approximately $500 million in cash realized from the completion of the Bal Harbour residential project and sale of the hotel earlier this year, the Company also paid the last of four special dividends of $0.65 per share on December 29, 2014. The total dividends paid in the fourth quarter of 2014 were approximately $173 million. For the full year 2014, the Company paid regular dividends of $1.40 per share and special dividends of $2.60 per share for a total of $4.00 per share, or approximately $733 million in dividends to its shareholders.

On February 9, 2015, the Company’s Board of Directors declared a first quarter cash dividend of $0.375 per share representing an increase of 7.1% over the prior quarterly dividend. The cash dividend will be paid on March 26, 2015 to shareholders of record on March 5, 2015.

Share Repurchase

In the fourth quarter of 2014, the Company repurchased 7.8 million shares at a total cost of approximately $609 million and a weighted average price of $78.12 per share. For the full year 2014, the Company repurchased 20.3 million shares at a total cost of approximately $1.636 billion and a weighted average price of $80.45 per share.

As of December 31, 2014, approximately $79 million remained available under the Company’s share repurchase authorization. On February 9, 2015, the Company’s Board of Directors approved an increase to its share repurchase authorization of $750 million. Following this increase, the Company’s total share repurchase authorization is $754 million.

Balance Sheet

At December 31, 2014, the Company had gross debt of $2.7 billion, cash and cash equivalents of $1.0 billion (including $76 million of restricted cash) and net debt of $1.7 billion, compared to net debt of $1.7 billion as of September 30, 2014, in each case, excluding debt and restricted cash associated with securitized vacation ownership notes receivable. Net debt at December 31, 2014, including $249 million of debt and $11 million of restricted cash associated with securitized vacation ownership notes receivables, was $1.9 billion.

At December 31, 2014, debt was approximately 64% fixed rate and 36% floating rate and its weighted average maturity was 7.2 years with a weighted average interest rate of 3.90%, excluding the securitized debt and capital leases. The Company had cash (including current restricted cash) and availability under the revolving credit facilities of approximately $2.12 billion. Subsequent to the end of the year, the Company repaid approximately $400 million of its commercial paper borrowings using cash on hand at December 31, 2014.

Outlook

The following outlook assumes the planned spin-off of the vacation ownership business occurs on December 31, 2015. Transaction costs related to the planned spin-off are not included in full year selling, general and administrative expense guidance.

For the full year 2015:

  • Adjusted EBITDA is expected to be approximately $1.175 billion to $1.200 billion (based on the assumptions below).
    • REVPAR increases at Same-Store Systemwide Hotels Worldwide of 5% to 7% in constant dollars (approximately 300 basis points lower in actual dollars at current exchange rates).1
    • REVPAR increases at Same-Store Owned Hotels Worldwide of 2% to 4% in constant dollars (approximately 550 basis points lower in actual dollars at current exchange rates).
    • Margins at Same-Store Owned Hotels Worldwide increase 25 to 75 basis points.
    • Core management and franchise fees increase approximately 5% to 7%.
    • Management fees, franchise fees and other income increase approximately 2% to 4%.
    • Earnings from the Company’s vacation ownership and residential business of approximately $140 million to $150 million.
    • Selling, general and administrative expenses increase approximately 2% to 4%.
    • Full year owned earnings are negatively impacted by approximately $42 million due to asset sales completed in 2014.
    • Shifts in exchange rates since 2014 will negatively impact full year earnings by approximately $35 million if exchange rates stay at current levels.
    • Significant non-recurring items in 2014 Adjusted EBITDA include $35 million related to five large one-time termination fees received by the Company and $11 million from the Bal Harbour residential project, which is sold out.
  • Depreciation and amortization is expected to be approximately $315 million.
  • Interest expense is expected to be approximately $135 million.
  • Full year effective tax rate is expected to be approximately 32%, and cash taxes from operating earnings are expected to be approximately $110 million.
  • EPS before special items is expected to be approximately $2.87 to $2.97 (based on the assumptions above).
  • Cash flow from operations is expected to be approximately $700 million to $800 million (based on the assumptions above). Cash flow from operations includes vacation ownership investment in inventory expected to be approximately $160 million which includes approximately $80 million related to the development of the third phase of the Westin Ka’anapali Ocean Resort Villas.
  • Full year capital expenditures (excluding vacation ownership inventory) are 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 $200 million.

For the three months ended March 31, 2015:

  • Adjusted EBITDA is expected to be approximately $250 million to $260 million (based on the assumptions below).
    • REVPAR increases at Same-Store Systemwide Hotels Worldwide of 4% to 6% in constant dollars (approximately 300 basis points lower in actual dollars at current exchange rates).
    • REVPAR increases at Same-Store Company Owned Hotels Worldwide of 3% to 5% in constant dollars (approximately 525 basis points lower in actual dollars at current exchange rates).
    • Core management and franchise fees increase approximately 3% to 5%.
    • Management fees, franchise fees and other income are expected to be approximately flat due to a large termination fee received in the first quarter of 2014.
    • Earnings from the Company’s vacation ownership and residential business of approximately $35 million to $40 million.
  • EPS is expected to be approximately $0.53 to $0.57 (based on the assumptions above).

___________________________________________

1   Previously, the Company provided an outlook for REVPAR increases at Same-Store Company-Operated Hotels Worldwide. The current outlook for REVPAR increases at Same-Store Systemwide Hotels Worldwide includes Company-Operated and franchised hotels.
 

Special Items

The Company’s special items netted to a pre-tax benefit of $23 million ($74 million after-tax) in the fourth quarter of 2014 compared to a pre-tax charge of $42 million ($13 million after-tax) in the same period of 2013.

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,

 
2014       2013 2014       2013
$   171   $   141     Income from continuing operations before special items $     561     $     579    
$   0.97   $   0.73     EPS before special items $     3.02     $     2.99    
Special Items
  1   (24 ) Restructuring and other special (charges) credits, net (a)     4     (1 )
22 (18 ) Gain (loss) on asset dispositions and impairments, net (b) (33 ) (23 )
Impairment of unconsolidated joint venture hotel (c) (4 )
              Loss on early extinguishment of debt, net (d)       (1 )            
23 (42 ) Total special items – pre-tax (30 ) (28 )
36 21 Income tax benefit (expense) for special items (e) 44 14
    15       8     Income tax benefit (expense) – other non-recurring items (f)       68              
    74       (13 )   Total special items – after-tax       82           (14 )  
 
$   245   $   128     Income from continuing operations $     643     $     565    
$   1.40   $   0.67     EPS including special items $     3.46     $     2.92    
 
 
(a) During the year ended December 31, 2014, the net credit primarily relates to the reversal of a reserve associated with a note receivable from a previous disposition.
 
During the three months ended December 2013, the Company decided to absorb certain technology related costs and expenses that it previously intended to collect from its managed and franchised properties. As a result, the Company recorded a $19 million charge, representing the costs and expenses incurred through the end of 2013 that are no longer intended to be recovered. The three months ended December 31, 2013 also include approximately $5 million in severance costs related to a hotel the Company exited in 2014. The year ended December 31, 2013 includes a favorable adjustment to a legal reserve of approximately $22 million.
 
(b) During the three months ended December 31, 2014, the net gain relates to a $31 million gain on the acceleration of deferred gains primarily related to hotels that were converted from management to franchise contracts, and a $10 million gain on the sale of our interest in an unconsolidated joint venture hotel, partially offset by a loss of $17 million from the sale of four wholly-owned hotels. The year ended December 31, 2014 also includes a net loss of $39 million from the impairment of three hotels, two of which were sold subject to long-term franchise contracts and the other of which represents a leased hotel that was converted to a managed hotel, an impairment charge of $7 million associated with a foreign unconsolidated joint venture, and a $9 million charge related to the termination of a leasehold interest in a hotel which is now franchised.
 
During the three months ended December 31, 2013, the net loss primarily related to a $17 million impairment charge associated with a wholly-owned hotel, asset disposals at certain owned hotels partially offset by the gain on the sales of two hotels and insurance proceeds relating to an owned hotel that suffered damages as a result of a cyclone. The year ended December 31, 2013 includes losses related to the sale of three wholly-owned hotels.
 
(c) During the year ended December 31, 2013, the net loss related to an impairment charge associated with a hotel in which the Company owns a non-controlling interest.
 
(d) During the year ended December 31, 2014, the net charge relates to the write-off of certain deferred financing costs associated with amending the Company’s Revolving Credit Facility.
 
(e) During the three months ended December 31, 2014, the benefit primarily relates to the recognition of tax benefits that were realized in connection with the dispositions of wholly-owned hotels. The year ended December 31, 2014 also includes tax benefits on hotels sold in prior quarters.
 
During the three months ended December 31, 2013, the benefit primarily related to tax benefits on the special items at the statutory tax rate. The year ended December 31, 2013 also includes tax benefits primarily relating to the sale of three hotels with high tax bases.
 
(f) During the three months ended December 31, 2014, the benefit primarily relates to the tax, net of foreign tax credits, on a portion of foreign earnings no longer considered permanently invested. The year ended December 31, 2014 also includes the recognition of a $49 million benefit for the settlement of a foreign tax audit.
 

During the three months and year ended December 31, 2013, the net benefit primarily represents tax benefits associated with the tax law change in Mexico in late 2013 and the reversal of tax reserves associated with tax assets which are now deemed realizable.

 

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 ongoing operations.

Starwood will be conducting a conference call to discuss the fourth quarter financial results at 10:30 a.m. Eastern Standard Time today, available via webcast on the Company’s website at http://www.starwoodhotels.com/corporate/about/investor/earnings.html. A webcast replay will be available on the corporate website a few hours after the live event on Tuesday, February 10 and will run for one year. Alternatively, participants may dial into the live call at (866) 921-0636 with conference ID 67514695. Outside the U.S., participants may dial into the live call at (706) 758-8764. Please dial in fifteen minutes early to ensure a timely start. A call replay will be available a few hours after the live event on Tuesday, February 10 and will run for one week; the call replay can be accessed by dialing (855) 859-2056 with conference ID 67514695. Outside the U.S., the call replay can be accessed at (404) 537-3406.

Definitions

All references to EPS, unless otherwise noted, reflect earnings per diluted share from continuing operations attributable to Starwood’s common stockholders. All references to continuing operations, discontinued operations and net income reflect amounts attributable to Starwood’s common stockholders (i.e., excluding amounts attributable to non-controlling interests). 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 operating performance. 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 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 restructuring, goodwill impairment and other special charges and gains and losses on asset dispositions and impairments, 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 uses Adjusted EBITDA as a measure in determining the value of acquisitions and dispositions and it is used in the annual budget process. 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 ongoing 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 condo hotels, hotels sold to date and hotels 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 or natural disasters). References to Company-Operated Hotel metrics (e.g., REVPAR) reflect metrics for the Company’s owned, leased and managed hotels. References to Systemwide metrics (e.g., REVPAR) reflect metrics for the Company’s Owned, managed and franchised hotels. REVPAR is defined as revenue per available room. ADR is defined as average daily rate.

All references to revenues in constant dollars represent revenues, excluding the impact of the movement of foreign exchange rates. The Company calculates revenues in constant dollars by calculating revenues for the current year using the prior year’s exchange rates. The Company uses this revenue measure to better understand the underlying results and trends of the business, excluding the impact of movements in foreign exchange rates.

All references to contract sales or originated sales reflect vacation ownership sales before revenue adjustments for percentage of completion accounting methodology. All references to earnings from vacation ownership and residential services represent the mathematical difference between revenues and expenses from vacation ownership and residential as shown on the Company’s statement of operations. All references to management and franchise revenues represent base and incentive fees, franchise fees, amortization of deferred gains resulting from the sales of hotels subject to long-term management contracts and termination fees.

Starwood Hotels & Resorts Worldwide, Inc. is one of the leading hotel and leisure companies in the world with more than 1,200 properties in 100 countries and 180,400 employees at its owned and managed properties. Starwood is a fully integrated owner, operator and franchisor of hotels, resorts and residences with the following internationally renowned brands: St. Regis®, The Luxury Collection®, W®, Westin®, Le Méridien®, Sheraton®, Four Points® by Sheraton, Aloft®, and Element®. The Company boasts one of the industry’s leading loyalty programs, Starwood Preferred Guest (SPG®), allowing members to earn and redeem points for room stays, room upgrades and flights, with no blackout dates. Starwood also owns Starwood Vacation Ownership, Inc., a premier provider of world-class vacation experiences through villa-style resorts and privileged access to Starwood brands. For more information, including reconciliations of non-GAAP financial measures to GAAP financial measures, please visit www.starwoodhotels.com or contact Investor Relations at (203) 351-3500.

Note: This press release contains forward-looking statements within the meaning of federal securities regulations. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties and other factors that may cause actual results to differ materially from those anticipated at the time the forward-looking statements are made. Further results, performance and achievements may be affected by general economic conditions including the impact of war and terrorist activity, natural disasters, business and financing conditions (including the condition of credit markets in the U.S. and internationally), foreign exchange fluctuations, cyclicality of the real estate (including residential) and the hotel and vacation ownership businesses, operating risks associated with the hotel, vacation ownership and residential businesses, relationships with associates and labor unions, customers and property owners, the impact of the internet reservation channels, our reliance on technology, domestic and international political and geopolitical conditions, competition, governmental and regulatory actions (including the impact of changes in U.S. and foreign tax laws and their interpretation), travelers’ fears of exposure to contagious diseases, risk associated with the level of our indebtedness, risk associated with potential acquisitions and dispositions and the introduction of new brand concepts and other risks and uncertainties. These risks and uncertainties are presented in detail in our filings with the Securities and Exchange Commission. There can be no assurance as to the development of future hotels in the Company’s pipeline or additional vacation ownership units.

                 
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
 
Unaudited Consolidated Statements of Income
(In millions, except per share data)
 

Three Months Ended
December 31,

Year Ended
December 31,
2014       2013       %
Variance
2014       2013       %
Variance
Revenues
$   370 $   416 (11.1 ) Owned, leased and consolidated joint venture hotels $   1,541 $   1,612 (4.4 )
170 176 (3.4 ) Vacation ownership and residential sales and services 674 924 (27.1 )
294 265 10.9 Management fees, franchise fees and other income 1,057 965 9.5
    659       649   1.5   Other revenues from managed and franchised properties (a)     2,711       2,614   3.7  
1,493 1,506 (0.9 ) 5,983 6,115 (2.2 )
Costs and Expenses
288 326 11.7 Owned, leased and consolidated joint venture hotels 1,211 1,292 6.3
123 129 4.7 Vacation ownership and residential 497 632 21.4
109 106 (2.8 ) Selling, general, administrative and other 402 384 (4.7 )
(1 ) 24 n/m Restructuring and other special charges (credits), net (4 ) 1 n/m
66 65 (1.5 ) Depreciation 254 239 (6.3 )
7 7 Amortization 29 28 (3.6 )
    659       649   (1.5 ) Other expenses from managed and franchised properties (a)     2,711       2,614   (3.7 )
1,251 1,306 4.2 5,100 5,190 1.7
242 200 21.0 Operating income 883 925 (4.5 )
6 9 (33.3 ) Equity (losses) earnings and gains and (losses) from unconsolidated ventures, net 27 26 3.8
(21 ) (23 ) 8.7 Interest expense, net of interest income of $1, $1, $3 and $3 (94 ) (100 ) 6.0
Loss on early extinguishment of debt (1 ) n/m
    22       (18 ) n/m   Gain (loss) on asset dispositions and impairments, net     (33 )     (23 ) (43.5 )
249 168 48.2 Income from continuing operations before taxes and noncontrolling interests 782 828 (5.6 )
    (4 )     (40 ) 90.0   Income tax benefit (expense)     (139 )     (263 ) 47.1  
245 128 91.4 Income (loss) from continuing operations 643 565 13.8
Discontinued Operations:
(1 ) 100.0 Loss from operations, net of tax (1 ) (100.0 )
    (11 )     1   n/m   Gain (loss) on dispositions, net of tax     (10 )     71   n/m  
$   234   $   128   82.8   Net income (loss) attributable to Starwood $   633   $   635   (0.3 )
Earnings (Losses) Per Share – Basic
$ 1.41 $ 0.68 n/m Continuing operations $ 3.49 $ 2.96 17.9
    (0.07 )       n/m   Discontinued operations     (0.06 )     0.37   n/m  
$   1.34   $   0.68   97.1   Net income (loss) $   3.43   $   3.33   3.0  
Earnings (Losses) Per Share – Diluted
$ 1.40 $ 0.67 n/m Continuing operations $ 3.46 $ 2.92 18.5
    (0.07 )       n/m   Discontinued operations     (0.06 )     0.36   n/m  
$   1.33   $   0.67   98.5   Net income (loss) $   3.40   $   3.28   3.7  
 
    174       189   Weighted average number of shares     185       191  
    176       192   Weighted average number of shares assuming dilution     186       193  
 

(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.

 
n/m = not meaningful
 
               
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
 
Consolidated Balance Sheets
(In millions, except share data)
 
December 31,
2014
December 31,
2013
 
Assets
Current assets:
Cash and cash equivalents $   935 $   616
Restricted cash 84 134
Accounts receivable, net of allowance for doubtful accounts of $63 and $59 661 643
Inventories 236 217
Securitized vacation ownership notes receivable, net of allowance
for doubtful accounts of $4 and $6 47 54
Deferred income tax 199 211
Prepaid expenses and other     159       121  
Total current assets 2,321 1,996
Investments 214 251
Plant, property and equipment, net 2,634 3,034
Goodwill and intangible assets, net 1,956 2,032
Deferred tax assets 596 591
Other assets (a) 711 543
Securitized vacation ownership notes receivable     227       315  
Total assets $   8,659   $   8,762  
Liabilities and Stockholders’ Equity
Current liabilities:
Short-term borrowings and current maturities of long-term debt (b) $ 297 $ 2
Accounts payable 101 105
Current maturities of long-term securitized vacation ownership debt 73 97
Accrued expenses 1,307 1,092
Accrued salaries, wages and benefits 416 404
Accrued taxes and other     256       224  
Total current liabilities 2,450 1,924
Long-term debt(b) 2,398 1,265
Long-term securitized vacation ownership debt 176 258
Deferred income taxes 38 48
Other liabilities     2,069       1,904  
Total liabilities     7,131       5,399  
Commitments and contingencies
Stockholders’ equity:
Common stock; $0.01 par value; authorized 1,000,000,000 shares;
outstanding 172,694,299 and 191,897,809 shares at December 31,
2014 and December 31, 2013, respectively 2 2
Additional paid-in capital 47 661
Accumulated other comprehensive loss (508 ) (335 )
Retained earnings     1,984       3,032  
Total Starwood stockholders’ equity 1,525 3,360
Noncontrolling interest     3       3  
Total stockholders’ equity     1,528       3,363  
Total liabilities and stockholders’ equity $  

8,659

  $   8,762  
 
(a)   Includes restricted cash of $3 million and $3 million at December 31, 2014 and December 31, 2013, respectively.
 
(b) Excludes Starwood’s share of unconsolidated joint venture debt aggregating approximately $200 million and $218 million at December 31, 2014 and December 31, 2013, respectively.
 
                 
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
 
Non-GAAP to GAAP Reconciliations – Historical Data
(In millions)
 
Three Months Ended
December 31,
Year Ended
December 31,
2014       2013       %
Variance
2014       2013       %
Variance
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
$   234 $   128 82.8 Net income $   633 $   635 (0.3 )
28 27 3.7 Interest expense (a) 114 115 (0.9 )
Loss on early extinguishment of debt, net 1 n/m
41 (100.0 ) Income tax (benefit) expense (b) 134 194 (30.9 )
73 71 2.8 Depreciation (c) 280 262 6.9
    8       7   14.3   Amortization (d)     32       31   3.2  
343 274 25.2 EBITDA 1,194 1,237 (3.5 )
(22 ) 18 n/m (Gain) loss on asset dispositions and impairments, net 33 23 43.5
(1 ) 24 n/m Restructuring and other special charges (credits), net (4 ) 1 n/m
Impairment of unconsolidated joint venture hotel (e) 4 (100.0 )
    15       (2 ) n/m   Discontinued operations (gain) loss on dispositions (f)     15       (2 ) n/m  
$   335   $   314   6.7   Adjusted EBITDA $   1,238   $   1,263   (2.0 )
 
 
(a) Includes $6 million and $3 million of Starwood’s share of interest expense of unconsolidated joint ventures for the three months ended December 31, 2014 and 2013, respectively, and $17 million and $12 million for the year ended December 31, 2014 and 2013, respectively.
 
(b) Includes $(4) million and $1 million of tax expense (benefit) recorded in discontinued operations for the three months ended December 31, 2014 and 2013, respectively, and $(5) million and $(69) million for the year ended December 31, 2014 and 2013, respectively.
 
(c) Includes $7 million and $6 million of Starwood’s share of depreciation expense of unconsolidated joint ventures for the three months ended December 31, 2014 and 2013, respectively, and $26 million and $23 million for the year ended December 31, 2014 and 2013, respectively.
 
(d) Includes $1 million and $0 million of Starwood’s share of amortization expense of unconsolidated joint ventures for the three months ended December 31, 2014 and 2013, respectively, and $3 million and $3 million for the year ended December 31, 2014 and 2013, respectively.
 
(e) The impairment charge is included in the equity earnings and gain/(loss) from unconsolidated ventures, net line item in the statement of income.
 
(f) Excludes the amount of income tax expense (benefit) included within (b) above.
 
         
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
 
Non-GAAP to GAAP Reconciliations – Same-Store Owned/Leased Hotels Worldwide
(In millions)
 
Three Months Ended
December 31, 2014

$ Change

        % Variance
Revenue  
Revenue increase/(decrease) (GAAP) $        
Impact of changes in foreign exchange rates           11     3.6

%

 

Revenue increase/(decrease) in constant dollars $         11     3.6

%

 

 
Expense
Expense increase/(decrease) (GAAP) $ (1 ) (0.2

)%

 

Impact of changes in foreign exchange rates           9     3.8

%

 

Expense increase/(decrease) in constant dollars $         8     3.6

%

 

 
           
Non-GAAP to GAAP Reconciliations – Same-Store Owned/Leased Hotels North America
(In millions)
 
  Three Months Ended
December 31, 2014
 

$ Change

          % Variance
Revenue    
Revenue increase/(decrease) (GAAP) $       1 0.4

%

 

Impact of changes in foreign exchange rates           4     2.3

%

 

Revenue increase/(decrease) in constant dollars   $       5     2.7

%

 

 
Expense
Expense increase/(decrease) (GAAP) $ 3 2.6

%

 

Impact of changes in foreign exchange rates           3     2.2

%

 

Expense increase/(decrease) in constant dollars   $       6     4.8

%

 

 
           
Non-GAAP to GAAP Reconciliations – Same-Store Owned/Leased Hotels International
(In millions)
 
  Three Months Ended
December 31, 2014
 

$ Change

        % Variance
Revenue  
Revenue increase/(decrease) (GAAP) $     (1 ) (0.5

)%

 

Impact of changes in foreign exchange rates         7     5.3

%

 

Revenue increase/(decrease) in constant dollars   $     6     4.8

%

 

 
Expense
Expense increase/(decrease) (GAAP) $ (4 ) (3.6

)%

 

Impact of changes in foreign exchange rates         6     5.6

%

 

Expense increase/(decrease) in constant dollars   $     2     2.0

%

 

 
                 
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
 
Non-GAAP to GAAP Reconciliations – Future Performance
(In millions, except per share data)
 
Low Case
 
Three Months Ended
March 31, 2015
Year Ended
December 31, 2015
  $   92 Net income   $   493
35 Interest expense 135
43 Income tax expense 232
      80   Depreciation and amortization       315  
250 EBITDA 1,175
(Gain) loss on asset dispositions and impairments, net
        Discontinued operations (gain) loss on dispositions        
  $   250   Adjusted EBITDA   $   1,175  
 
               
Three Months Ended
March 31, 2015
Year Ended
December 31, 2015
 
  $   92   Income from continuing operations before special items   $   493  
  $   0.53   EPS before special items   $   2.87  
  Special Items  
        Gain (loss) on asset dispositions and impairments, net        
  Total special items – pre-tax  
        Income tax benefit associated with special items        
        Total special items – after-tax        
  $   92   Income from continuing operations   $   493  
  $   0.53   EPS including special items   $   2.87  
 
               

High Case

 
Three Months Ended
March 31, 2015
Year Ended
December 31, 2015
  $   99 Net income   $   510
35 Interest expense 135
46 Income tax expense 240
      80   Depreciation and amortization       315  
260 EBITDA 1,200
(Gain) loss on asset dispositions and impairments, net
        Discontinued operations (gain) loss on dispositions        
  $   260   Adjusted EBITDA   $   1,200  
 
               
Three Months Ended
March 31, 2015
Year Ended
December 31, 2015
  $   99   Income from continuing operations before special items   $   510  
  $   0.57   EPS before special items   $   2.97  
  Special Items  
        Gain (loss) on asset dispositions and impairments, net        
  Total special items – pre-tax  
        Income tax benefit associated with special items        
        Total special items – after-tax        
  $   99   Income from continuing operations   $   510  
  $   0.57   EPS including special items   $   2.97  
 
                 
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
 
Non-GAAP to GAAP Reconciliations – Same Store Owned Hotel Revenue and Expenses
(In millions)
 
Three Months Ended
December 31,
Year Ended
December 31,
2014       2013       %
Variance
Same-Store Owned Hotels
Worldwide
2014     2013     %
Variance
 
Revenue
$    

298

$     298 Same-Store Owned Hotels (a) $   1,044 $   1,008 3.5
20 74 (73.0 ) Hotels Sold in 2014 and 2013 151 305 (50.5 )
45 37 21.6 Hotels Without Comparable Results 320 272 17.6
      7         7     Other ancillary hotel operations     26       27     (3.7 )
$     370   $     416   (11.1 ) Total Owned, Leased and Consolidated Joint Venture Hotels Revenue $   1,541   $   1,612     (4.4 )
 
Costs and Expenses
$ 236 $ 237 0.2 Same-Store Owned Hotels (a) $ 830 $ 816 (1.7 )
12 53 77.4 Hotels Sold in 2014 and 2013 108 226 52.2
33 30 (10.0 ) Hotels Without Comparable Results 248 226 (9.7 )
      7         6   (16.7 ) Other ancillary hotel operations     25       24     (4.2 )
$     288   $     326   11.7   Total Owned, Leased and Consolidated Joint Venture Hotels Costs and Expenses $   1,211   $   1,292     6.3  
 
Three Months Ended
December 31,
Year Ended
December 31,
2014 2013 %
Variance
Same-Store Owned Hotels
North America
2014 2013 %
Variance
 
Revenue
$ 168 $ 167 0.4 Same-Store Owned Hotels (a) $ 531 $ 520 2.1
4 27 (85.2 ) Hotels Sold in 2014 and 2013 28 135 (79.3 )
26 18 44.4 Hotels Without Comparable Results 217 174 24.7
                  Other ancillary hotel operations                
$     198   $   212   (6.6 ) Total Owned, Leased and Consolidated Joint Venture Hotels Revenue $   776   $   829     (6.4 )
 
Costs and Expenses
$ 134 $ 131 (2.6 ) Same-Store Owned Hotels (a) $ 429 $ 422 (1.6 )
3 21 85.7 Hotels Sold in 2014 and 2013 23 107 78.5
21 18 (16.7 ) Hotels Without Comparable Results 178 161 (10.6 )
              (1 ) 100.0   Other ancillary hotel operations                
$     158   $     169   6.5   Total Owned, Leased and Consolidated Joint Venture Hotels Costs and Expenses $   630   $   690     8.7  
 
Three Months Ended
December 31,
Year Ended
December 31,
2014 2013 %
Variance
Same-Store Owned Hotels
International
2014 2013 %
Variance
 
Revenue
$ 130 $ 131 (0.5 ) Same-Store Owned Hotels (a) $ 513 $ 488 5.0
16 47 (66.0 ) Hotels Sold in 2014 and 2013 123 170 (27.6 )
19 19 Hotels Without Comparable Results 103 98 5.1
      7         7     Other ancillary hotel operations     26     27   (3.7 )
$     172   $     204   (15.7 ) Total Owned, Leased and Consolidated Joint Venture Hotels Revenue $   765 $   783   (2.3 )
 
Costs and Expenses
$ 102 $ 106 3.6 Same-Store Owned Hotels (a) $ 401 $ 394 (1.7 )
9 32 71.9 Hotels Sold or 2014 and 2013 85 119 28.6
12 12 Hotels Without Comparable Results 70 65 (7.7 )
      7         7     Other ancillary hotel operations     25     24   (4.2 )
$     130   $     157   17.2   Total Owned, Leased and Consolidated Joint Venture Hotels Costs and Expenses $   581 $   602   3.5  
 
(a)   Same-Store Owned Hotel results exclude 11 hotels sold or closed, two leased hotels converted to managed or franchised hotels and six hotels without comparable results for the three months ended December 31, 2014 and 15 hotels sold, two leased hotels converted to managed or franchised hotels, and eight hotels without comparable results for the year ended December 31, 2014.
 
n/m = not meaningful
 
   
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
Systemwide(1) Statistics - Same Store
For the Three Months Ended December 31,
UNAUDITED
                                                                             
  Systemwide - Worldwide     Systemwide - North America     Systemwide - International  
  2014     2013     Var. USD     2014     2013     Var. USD     2014     2013     Var. USD  
 
TOTAL HOTELS
REVPAR ($) 119.51 116.79 2.3% 123.73 117.77 5.1% 114.70 115.67 -0.8%
ADR ($) 175.45 175.84 -0.2% 177.02 172.47 2.6% 173.55 179.93 -3.5%
Occupancy (%) 68.1% 66.4% 1.7 69.9% 68.3% 1.6 66.1% 64.3% 1.8
 
 
SHERATON
REVPAR ($) 101.02 99.31 1.7% 102.74 98.45 4.4% 99.13 100.26 -1.1%
ADR ($) 151.37 152.40 -0.7% 151.47 148.58 1.9% 151.26 156.75 -3.5%
Occupancy (%) 66.7% 65.2% 1.5 67.8% 66.3% 1.5 65.5% 64.0% 1.5
 
 
WESTIN
REVPAR ($) 132.67 128.08 3.6% 130.46 123.11 6.0% 137.18 138.24 -0.8%
ADR ($) 187.06 185.08 1.1% 184.45 178.07 3.6% 192.33 199.37 -3.5%
Occupancy (%) 70.9% 69.2% 1.7 70.7% 69.1% 1.6 71.3% 69.3% 2.0
 
 
ST. REGIS/LUXURY COLLECTION
REVPAR ($) 209.01 202.94 3.0% 282.73 267.93 5.5% 179.35 176.58 1.6%
ADR ($) 314.18 316.65 -0.8% 396.76 378.64 4.8% 277.54 287.66 -3.5%
Occupancy (%) 66.5% 64.1% 2.4 71.3% 70.8% 0.5 64.6% 61.4% 3.2
 
 
LE MERIDIEN
REVPAR ($) 125.20 128.37 -2.5% 216.21 207.56 4.2% 109.12 114.34 -4.6%
ADR ($) 188.49 193.62 -2.6% 265.62 258.48 2.8% 171.09 179.16 -4.5%
Occupancy (%) 66.4% 66.3% 0.1 81.4% 80.3% 1.1 63.8% 63.8% 0.0
 
 
W
REVPAR ($) 237.71 231.84 2.5% 235.07 227.38 3.4% 243.33 241.39 0.8%
ADR ($) 305.68 303.33 0.8% 304.37 295.36 3.1% 308.41 320.78 -3.9%
Occupancy (%) 77.8% 76.4% 1.4 77.2% 77.0% 0.2 78.9% 75.2% 3.7
 
 
FOUR POINTS
REVPAR ($) 72.30 70.82 2.1% 76.64 73.24 4.6% 66.70 67.69 -1.5%
ADR ($) 111.20 112.54 -1.2% 114.18 112.73 1.3% 107.05 112.29 -4.7%
Occupancy (%) 65.0% 62.9% 2.1 67.1% 65.0% 2.1 62.3% 60.3% 2.0
 
 
ALOFT
REVPAR ($) 79.35 73.43 8.1% 93.46 85.65 9.1% 53.13 50.20 5.8%
ADR ($) 115.19 111.46 3.3% 128.34 121.24 5.9% 86.31 88.35 -2.3%
Occupancy (%) 68.9% 65.9% 3.0 72.8% 70.6% 2.2 61.6% 56.8% 4.8
 
        (1)  

Includes same-store Owned, managed and franchised hotels.

 
   
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
Worldwide Hotel Results - Same Store
For the Three Months Ended December 31,
UNAUDITED
                                                     
  Systemwide (1)     Company Operated (2)  
  2014     2013     Var. USD     2014     2013     Var. USD  
 
 
TOTAL WORLDWIDE
REVPAR ($) 119.51 116.79 2.3% 136.55 134.94 1.2%
ADR ($) 175.45 175.84 -0.2% 198.55 200.51 -1.0%
Occupancy (%) 68.1% 66.4% 1.7 68.8% 67.3% 1.5
 
 
AMERICAS
REVPAR ($) 121.52 115.84 4.9% 158.75 153.17 3.6%
ADR ($) 175.71 171.57 2.4% 222.76 217.88 2.2%
Occupancy (%) 69.2% 67.5% 1.7 71.3% 70.3% 1.0
 
 
North America
REVPAR ($) 123.73 117.77 5.1% 163.98 158.34 3.6%
ADR ($) 177.02 172.47 2.6% 227.65 222.40 2.4%
Occupancy (%) 69.9% 68.3% 1.6 72.0% 71.2% 0.8
 
 
Latin America
REVPAR ($) 96.01 93.40 2.8% 115.34 110.35 4.5%
ADR ($) 158.22 159.40 -0.7% 177.77 175.41 1.3%
Occupancy (%) 60.7% 58.6% 2.1 64.9% 62.9% 2.0
 
 
ASIA PACIFIC
REVPAR ($) 105.69 105.46 0.2% 107.40 106.52 0.8%
ADR ($) 156.80 161.16 -2.7% 159.04 162.84 -2.3%
Occupancy (%) 67.4% 65.4% 2.0 67.5% 65.4% 2.1
 
 
Greater China
REVPAR ($) 99.66 96.36 3.4% 98.57 95.16 3.6%
ADR ($) 154.32 156.96 -1.7% 152.72 155.36 -1.7%
Occupancy (%) 64.6% 61.4% 3.2 64.5% 61.2% 3.3
 
 
Rest of Asia Pacific
REVPAR ($) 114.02 118.09 -3.4% 126.33 131.00 -3.6%
ADR ($) 159.90 166.20 -3.8% 170.88 176.12 -3.0%
Occupancy (%) 71.3% 71.1% 0.2 73.9% 74.4% -0.5
 
 
EAME
REVPAR ($) 132.83 136.61 -2.8% 140.89 144.98 -2.8%
ADR ($) 202.39 213.01 -5.0% 212.23 223.25 -4.9%
Occupancy (%) 65.6% 64.1% 1.5 66.4% 64.9% 1.5
 
 
Europe
REVPAR ($) 133.28 137.77 -3.3% 146.92 152.18 -3.5%
ADR ($) 197.57 210.23 -6.0% 211.72 225.44 -6.1%
Occupancy (%) 67.5% 65.5% 2.0 69.4% 67.5% 1.9
 
 
Africa & Middle East
REVPAR ($) 132.02 134.48 -1.8% 132.58 135.12 -1.9%
ADR ($) 211.91 218.39 -3.0% 213.02 219.96 -3.2%
Occupancy (%) 62.3% 61.6% 0.7 62.2% 61.4% 0.8
 
        (1)  

Includes same-store Owned, managed and franchised hotels.

(2)

Includes same-store Owned and managed hotels.

 
   
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
Owned Hotel Results - Same Store
For the Three Months Ended December 31,
UNAUDITED
                                                                                         
 
  Worldwide     North America     International  
  2014     2013     Var. USD     2014     2013     Var. USD     2014     2013     Var. USD  
 
TOTAL HOTELS 30 Hotels 10 Hotels 20 Hotels
REVPAR ($) 180.12 178.00 1.2% 189.41 185.80 1.9% 169.65 169.20 0.3%
ADR ($) 243.21 251.35 -3.2% 253.18 257.42 -1.6% 231.73 244.21 -5.1%
Occupancy (%) 74.1% 70.8% 3.3 74.8% 72.2% 2.6 73.2% 69.3% 3.9
 
Total Revenue* 298,015 297,928 0.0% 167,939 167,239 0.4% 130,076 130,689 -0.5%
Total Expenses* 236,417 236,813 0.2% 133,942 130,546 -2.6% 102,475 106,267 3.6%
 
* Revenues and Expenses above are represented in '000s
 
 
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
Management Fees, Franchise Fees and Other Income
For the Three Months Ended December 31,
UNAUDITED ($ millions)
                                               
 
  Worldwide  
    2014       2013     Variance     % Variance  
Management Fees
Base Fees 96 94 2 2.1 %
Incentive Fees         71           69     2     2.9 %
Total Management Fees 167 163 4 2.5 %
 
Franchise Fees         58         54     4     7.4 %
 
Total Management and Franchise Fees (Core fees) 225 217 8 3.7 %
 
Other Management and Franchise Revenues (1)         63           41     22     53.7 %
 
Total Management and Franchise Revenues         288           258     30     11.6 %
 
Other         6           7     (1 )   (14.3 )%
 
Management Fees, Franchise Fees and Other Income         294           265     29     10.9 %
 

(1)

 

Other Management and Franchise Revenues primarily includes the amortization of the deferred gains of approximately $21 million in 2014 and $23 million in 2013 resulting from the sales of hotels subject to long-term management contracts and termination fees.

 
 
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
Vacation Ownership & Residential Revenues and Expenses
For the Three Months Ended December 31,
UNAUDITED ($ millions)
                                         
 
    2014        

2013

      $ Variance     % Variance  
 
Originated Sales Revenues (1) -- Vacation Ownership Sales 80 82 (2 ) (2.4 %)
Other Sales and Services Revenues (2) 81 76 5 6.6 %
Deferred Revenues -- Percentage of Completion 12 (8 ) 20

 n/m

Deferred Revenues -- Other (3)     (6 )       (5 )     (1 )   (20.0 %)
Vacation Ownership Sales and Services Revenues 167 145 22 15.2 %
Residential Sales and Services Revenues (4)     3         31       (28 )   (90.3 %)
Total Vacation Ownership & Residential Sales and Services Revenues     170         176       (6 )   (3.4 %)
 
Originated Sales Expenses (5) -- Vacation Ownership Sales 53 60 7 11.7 %
Other Expenses (6) 62 59 (3 ) (5.1 %)
Deferred Expenses -- Percentage of Completion 7 (4 ) (11 ) n/m
Deferred Expenses -- Other     1         1       0     0.0 %
Vacation Ownership Expenses 123 116 (7 ) (6.0 %)
Residential Expenses (4)     0         13       13     100.0 %
Total Vacation Ownership & Residential Expenses     123         129       6     4.7 %
 

(1)

 

Timeshare sales revenue originated at each sales location before deferrals of revenue for U.S. GAAP reporting purposes.

(2)

Includes resort income, interest income, and miscellaneous other revenues.

(3)

Includes deferral of revenue for contracts still in rescission period, contracts that do not yet meet the requirements of ASC 978-605-25 and provision for loan loss.

(4)

For 2014 and 2013, includes $0 and $23 million of revenues and $0 and $11 million expenses associated with the St. Regis Bal Harbour residential project, respectively.

(5)

Timeshare cost of sales and sales & marketing expenses before deferrals of sales expenses for U.S. GAAP reporting purposes.

(6)

Includes resort, general and administrative, and other miscellaneous expenses.

 

Note: Deferred revenue is calculated based on the Percentage of Completion ("POC") of the project. Deferred expenses, also based on POC, include product costs and direct sales and marketing costs only. Indirect sales and marketing costs are not deferred per ASC 978-720-25 and ASC 978-340-25.
 
n/m = not meaningful
 
 
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
Total Earnings by Geographic Area - Owned
For the Year Ended December 31, 2014
UNAUDITED
             
 

Worldwide Markets

% of 2014
Total Earnings (1)

United States 30%
Americas (Latin America & Canada)* 33%
Asia Pacific 13%
Europe 24%
Total Worldwide 100%
 

*

Includes U.S. territories

(1)

 Represents earnings for owned, leased, and consolidated joint venture hotels before depreciation expense.

 
 
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
Total Management and Franchise Fees by Geographic Area
For the Year Ended December 31, 2014
UNAUDITED
                 
Geographical Area Management Fees Franchise Fees

Total Management
and Franchise Fees

 
United States 35% 72% 46%
Americas (Latin America & Canada)* 6% 14% 9%
China 19% 2% 14%
Rest of Asia 13% 5% 11%
Europe 14% 7% 11%
Middle East and Africa 13% 0% 9%
Total Worldwide 100% 100% 100%
 

*

 Includes U.S. territories

 
   
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
Systemwide(1) Statistics - Same Store
For the Twelve Months Ended December 31,
UNAUDITED
                                                                       
  Systemwide - Worldwide   Systemwide - North America   Systemwide - International  
  2014     2013     Var. USD     2014     2013     Var. USD     2014     2013     Var. USD  
 
TOTAL HOTELS
REVPAR ($) 123.08 117.31 4.9% 128.76 121.14 6.3% 116.64 112.95 3.3%
ADR ($) 175.64 172.58 1.8% 173.52 167.47 3.6% 178.37 179.25 -0.5%
Occupancy (%) 70.1% 68.0% 2.1 74.2% 72.3% 1.9 65.4% 63.0% 2.4
 
 
SHERATON
REVPAR ($) 104.24 99.43 4.8% 109.83 104.01 5.6% 98.10 94.38 3.9%
ADR ($) 151.85 149.84 1.3% 151.65 147.56 2.8% 152.08 152.69 -0.4%
Occupancy (%) 68.6% 66.4% 2.2 72.4% 70.5% 1.9 64.5% 61.8% 2.7
 
 
WESTIN
REVPAR ($) 137.20 130.01 5.5% 137.75 128.50 7.2% 136.10 133.02 2.3%
ADR ($) 186.28 181.76 2.5% 182.99 174.98 4.6% 193.25 196.36 -1.6%
Occupancy (%) 73.7% 71.5% 2.2 75.3% 73.4% 1.9 70.4% 67.7% 2.7
 
 
ST. REGIS/LUXURY COLLECTION
REVPAR ($) 208.08 196.80 5.7% 264.51 247.36 6.9% 185.22 176.06 5.2%
ADR ($) 313.97 308.10 1.9% 355.83 334.90 6.2% 293.96 294.53 -0.2%
Occupancy (%) 66.3% 63.9% 2.4 74.3% 73.9% 0.4 63.0% 59.8% 3.2
 
 
LE MERIDIEN
REVPAR ($) 130.33 128.12 1.7% 222.21 210.46 5.6% 114.75 114.16 0.5%
ADR ($) 192.56 189.98 1.4% 264.78 255.06 3.8% 176.72 175.95 0.4%
Occupancy (%) 67.7% 67.4% 0.3 83.9% 82.5% 1.4 64.9% 64.9% 0.0
 
 
W
REVPAR ($) 238.20 226.73 5.1% 229.91 218.82 5.1% 254.56 242.36 5.0%
ADR ($) 304.04 294.20 3.3% 289.46 277.41 4.3% 334.03 329.77 1.3%
Occupancy (%) 78.3% 77.1% 1.2 79.4% 78.9% 0.5 76.2% 73.5% 2.7
 
 
FOUR POINTS
REVPAR ($) 77.70 75.10 3.5% 85.15 80.35 6.0% 67.60 67.99 -0.6%
ADR ($) 113.75 113.79 0.0% 116.62 113.51 2.7% 109.16 114.24 -4.4%
Occupancy (%) 68.3% 66.0% 2.3 73.0% 70.8% 2.2 61.9% 59.5% 2.4
 
 
ALOFT
REVPAR ($) 80.01 74.30 7.7% 93.52 85.18 9.8% 50.93 51.01 -0.2%
ADR ($) 112.72 108.93 3.5% 123.32 117.25 5.2% 84.15 86.90 -3.2%
Occupancy (%) 71.0% 68.2% 2.8 75.8% 72.6% 3.2 60.5% 58.7% 1.8
 
        (1)  

Includes same-store Owned, managed and franchised hotels.

 
 
Worldwide Hotel Results - Same Store
For the Twelve Months Ended December 31,
UNAUDITED
                                                           
  Systemwide (1)     Company Operated (2)  
  2014     2013     Var. USD     2014     2013     Var. USD  
 
TOTAL WORLDWIDE
REVPAR ($) 123.08 117.31 4.9% 137.72 131.58 4.7%
ADR ($) 175.64 172.58 1.8% 197.77 195.11 1.4%
Occupancy (%) 70.1% 68.0% 2.1 69.6% 67.4% 2.2
 
 
AMERICAS
REVPAR ($) 126.23 118.96 6.1% 158.68 150.23 5.6%
ADR ($) 172.76 166.93 3.5% 213.98 206.46 3.6%
Occupancy (%) 73.1% 71.3% 1.8 74.2% 72.8% 1.4
 
 
North America
REVPAR ($) 128.76 121.14 6.3% 164.64 155.69 5.7%
ADR ($) 173.52 167.47 3.6% 217.59 209.81 3.7%
Occupancy (%) 74.2% 72.3% 1.9 75.7% 74.2% 1.5
 
 
Latin America
REVPAR ($) 96.17 93.07 3.3% 110.07 105.78 4.1%
ADR ($) 161.56 158.95 1.6% 177.96 173.31 2.7%
Occupancy (%) 59.5% 58.6% 0.9 61.9% 61.0% 0.9
 
 
ASIA PACIFIC
REVPAR ($) 102.38 99.33 3.1% 104.68 100.46 4.2%
ADR ($) 156.10 159.25 -2.0% 158.74 161.16 -1.5%
Occupancy (%) 65.6% 62.4% 3.2 65.9% 62.3% 3.6
 
 
Greater China
REVPAR ($) 96.73 89.55 8.0% 96.11 88.68 8.4%
ADR ($) 152.37 155.31 -1.9% 150.86 153.79 -1.9%
Occupancy (%) 63.5% 57.7% 5.8 63.7% 57.7% 6.0
 
 
Rest of Asia Pacific
REVPAR ($) 110.26 113.02 -2.4% 123.03 125.83 -2.2%
ADR ($) 160.93 163.85 -1.8% 173.95 173.79 0.1%
Occupancy (%) 68.5% 69.0% -0.5 70.7% 72.4% -1.7
 
 
EAME
REVPAR ($) 143.17 138.36 3.5% 149.92 144.76 3.6%
ADR ($) 214.83 212.43 1.1% 222.95 220.37 1.2%
Occupancy (%) 66.6% 65.1% 1.5 67.2% 65.7% 1.5
 
 
Europe
REVPAR ($) 154.39 148.16 4.2% 168.77 161.51 4.5%
ADR ($) 223.24 219.57 1.7% 237.52 233.26 1.8%
Occupancy (%) 69.2% 67.5% 1.7 71.1% 69.2% 1.9
 
 
Africa & Middle East
REVPAR ($) 119.82 118.03 1.5% 120.13 118.33 1.5%
ADR ($) 195.11 195.86 -0.4% 196.23 196.95 -0.4%
Occupancy (%) 61.4% 60.3% 1.1 61.2% 60.1% 1.1
 
        (1)  

Includes same-store Owned, managed and franchised hotels.

(2)

Includes same-store Owned and managed hotels.

 
 
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
Owned Hotel Results - Same Store
For the Twelve Months Ended December 31,
UNAUDITED
                                                         
 
Worldwide North America International
2014 2013 Var. USD 2014 2013 Var. USD 2014 2013 Var. USD
 
TOTAL HOTELS 28 Hotels 9 Hotels 19 Hotels
REVPAR ($) 167.99 159.96 5.0% 160.75 155.64 3.3% 175.95 164.72 6.8%
ADR ($) 228.42 223.56 2.2% 210.77 208.10 1.3% 249.39 242.30 2.9%
Occupancy (%) 73.5% 71.5% 2.0 76.3% 74.8% 1.5 70.6% 68.0% 2.6
 
Total Revenue* 1,043,559 1,008,123 3.5% 531,271 520,251 2.1% 512,288 487,872 5.0%
Total Expenses* 830,069 816,285 -1.7% 429,469 422,571 -1.6% 400,601 393,714 -1.7%
 
*   Revenues and Expenses above are represented in '000s
 
 
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
Management Fees, Franchise Fees and Other Income
For the Twelve Months Ended December 31,
UNAUDITED ($ millions)
                                             
 
    Worldwide  
    2014       2013     Variance     % Variance  
Management Fees
Base Fees 377 358 19 5.3%
Incentive Fees     214         202     12     5.9%  
Total Management Fees 591 560 31 5.5%
 
Franchise Fees     236         214     22     10.3%  
 
Total Management and Franchise Fees (Core fees) 827 774 53 6.8%
 
Other Management and Franchise Revenues (1)     206         167     39     23.4%  
 
Total Management and Franchise Revenues     1,033         941     92     9.8%  
 
Other     24         24     -     -  
 
Management Fees, Franchise Fees and Other Income     1,057         965     92     9.5%  
 

(1)

 

Other Management and Franchise Revenues primarily includes the amortization of the deferred gains of approximately $86 million in 2014 and $91 million in 2013 resulting from the sales of hotels subject to long-term management contracts and termination fees.

 
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.  
Vacation Ownership & Residential Revenues and Expenses
For the Twelve Months Ended December 31,
UNAUDITED ($ millions)
                                     
 
 

  2014

 

  2013

  $ Variance % Variance
 
Originated Sales Revenues (1) -- Vacation Ownership Sales 323 326 (3 ) (0.9 %)
Other Sales and Services Revenues (2) 334 323 11 3.4 %
Deferred Revenues -- Percentage of Completion (1 ) (7 ) 6 85.7 %
Deferred Revenues -- Other (3)     (13 )       (4 )   (9 ) n/m  
Vacation Ownership Sales and Services Revenues 643 638 5 0.8 %
Residential Sales and Services Revenues (4)     31         286     (255 ) (89.2 %)
Total Vacation Ownership & Residential Sales and Services Revenues     674         924     (250 ) (27.1 %)
 
Originated Sales Expenses (5) -- Vacation Ownership Sales 226 231 5 2.2 %
Other Expenses (6) 253 248 (5 ) (2.0 %)
Deferred Expenses -- Percentage of Completion 0 (4 ) (4 ) (100.0 %)
Deferred Expenses -- Other     8         8     0   0.0 %
Vacation Ownership Expenses 487 483 (4 ) (0.8 %)
Residential Expenses (4)     10         149     139   93.3 %
Total Vacation Ownership & Residential Expenses     497         632     135   21.4 %
 
 

(1)

Timeshare sales revenue originated at each sales location before deferrals of revenue for U.S. GAAP reporting purposes.

(2)

Includes resort income, interest income, and miscellaneous other revenues.

(3)

Includes deferral of revenue for contracts still in rescission period, contracts that do not yet meet the requirements of ASC 978-605-25 and provision for loan loss.

(4)

For 2014 and 2013, includes $20 and $266 million of revenues and $9 and $147 million expenses associated with the St. Regis Bal Harbour residential project, respectively.

(5)

Timeshare cost of sales and sales & marketing expenses before deferrals of sales expenses for U.S. GAAP reporting purposes.

(6)

Includes resort, general and administrative, and other miscellaneous expenses.

 

Note: Deferred revenue is calculated based on the Percentage of Completion ("POC") of the project. Deferred expenses, also based on POC, include
product costs and direct sales and marketing costs only. Indirect sales and marketing costs are not deferred per ASC 978-720-25 and ASC 978-340-25.
 
n/m = not meaningful
 
 
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
Owned Hotels without Comparable Results and Other Selected Items
As of December 31, 2014
UNAUDITED ($ millions)
                             
 
 
 
Owned Hotels without comparable results in 2014 and 2013: Revenues and Expenses Associated with Hotels Sold or Closed in 2014 and 2013: (1)
 

Hotel

Location

Element Denver Park Meadows

Denver, CO Q1 Q2 Q3 Q4 Full Year
Sheraton Maria Isabel Hotel & Towers Mexico City, Mexico Hotels Sold in 2013:
Sheraton Steamboat Resort Steamboat Springs, CO 2013
The Gritti Palace, Venice Venice, Italy Revenues $19 $12 $12 $4 $47

The St. Regis New York

New York, NY Expenses (excluding depreciation) $15 $9 $8 $3 $35
The Westin Excelsior, Florence Florence, Italy
The Westin Maui Resort & Spa, Ka'anapali Maui, HI Hotels Sold or Closed in 2014:
The Westin Resort & Spa, Los Cabos Los Cabos, Mexico 2014
Revenues $50 $44 $37 $20 $151
Expenses (excluding depreciation) $38 $31 $27 $12 $108
 
Owned Hotels sold or closed in 2014 and 2013: 2013
Revenues $63 $65 $60 $70 $258

Hotel

Location

Expenses (excluding depreciation) $47 $48 $46 $50 $191

Aloft Lexington
Aloft Philadelphia Airport
Aloft San Francisco Airport
Aloft Tucson University
Element Lexington
Four Points by Sheraton Philadelphia Airport
Sheraton Ambassador Hotel
Sheraton On The Park
Sheraton Santa Maria de El Paular
Sheraton Suites Philadelphia Airport
The Park Lane Hotel
The St. Regis Bal Harbour Resort
The St. Regis Rome
The Westin San Francisco Airport
The Westin Dublin Hotel
W New Orleans
W New Orleans - French Quarter

Lexington, MA
Philadelphia, PA
San Francisco, CA
Tucson, AZ
Lexington, MA
Philadelphia, PA
Monterrey, Mexico
Sydney, Australia
Madrid, Spain
Philadelphia, PA
London, England
Miami Beach, FL
Rome, Italy
San Francisco, CA
Dublin, Ireland
New Orleans, LA
New Orleans, LA

(1) Results consist of nine hotels sold or closed in 2014, two leased hotels converted to managed or franchised hotels in 2014, and six hotels sold in 2013. These amounts are included in the revenues and expenses from owned, leased and consolidated joint venture hotels in the statements of income for 2014 and 2013.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
Capital Expenditures
For the Three and Twelve Months Ended December 31, 2014
UNAUDITED ($ millions)
                 
 
    Q4         YTD    
Maintenance Capital Expenditures: (1)
Owned, Leased and Consolidated Joint Venture Hotels 26 61
Corporate/IT     48         146    
Subtotal 74 207
 
Net capital expenditures for Vacation Ownership inventory (2) (4 ) (14 )
 
Development Capital     58         183    
 
Total Capital Expenditures     128         376    
 
 

(1)

Maintenance capital expenditures include improvements that extend the useful life of the asset.

 

(2)

Represents gross inventory capital expenditures of $19 million and $57 million in the three and twelve months ended December 31, 2014, less cost of sales of $23 million and $71 million in the three and twelve months ended December 31, 2014.

 
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
2014 Divisional Hotel Inventory Summary by Ownership by Brand
As of December 31, 2014
                                                                 
                                                                                                   
Americas North America Latin America Asia Pacific Greater China Rest of Asia

Europe, Africa &
Middle East

Europe

Africa &
Middle East

  TOTAL
Hotels   Rooms Hotels   Rooms Hotels   Rooms Hotels   Rooms Hotels Rooms Hotels   Rooms Hotels   Rooms Hotels   Rooms Hotels   Rooms   Hotels   Rooms
Owned
Sheraton 9 5,793 5 3,328 4 2,465 1 264 - - 1 264 2 358 2 358 - - 12 6,415
Westin 5 2,734 2 1,832 3 902 1 273 - - 1 273 2 487 2 487 - - 8 3,494
Four Points - - - - - - - - - - - - - - - - - - - -
W 1 509 1 509 - - - - - - - - 2 665 2 665 - - 3 1,174
Luxury Collection 2 824 1 643 1 181 - - - - - - 5