Starwood reports third quarter 2009 results
Starwood Hotels & Resorts Worldwide, Inc. reported EPS from continuing operations for the third quarter of 2009 of $0.22 per share compared to $0.62 in the third quarter of 2008. Excluding special items, which net to a benefit of $15 million in 2009 and a charge of $16 million in 2008, EPS from continuing operations was $0.14 for the third quarter of 2009 compared to $0.71 in the third quarter of 2008. Excluding special items, the effective income tax rate in the third quarter of 2009 was a benefit of 7.1% compared to a charge of 29.7% in the same period of 2008 primarily due to a $10 million tax benefit for the reversal of deferred taxes related to interest which is no longer deemed necessary.
Special items in the third quarter of 2009 totaled $15 million of net benefits ($0.08 per share) and included impairment charges of $27 million and restructuring charges of $2 million which were more than offset by a $44 million tax benefit primarily related to hotel sales.
Income from continuing operations was $41 million in the third quarter of 2009 compared to $113 million in 2008. Excluding special items, income from continuing operations was $26 million in the third quarter of 2009 compared to $129 million in 2008. Net income was $40 million and EPS was $0.22 in the third quarter of 2009 compared to $113 million and EPS of $0.62 in the third quarter of 2008.
Frits van Paasschen, CEO said,
“Over the past twelve months we have focused on cost containment and debt reduction, which positions us well to ‘Own the Upswing’. Our increasingly fee-based, capital-efficient business model will grow as REVPAR recovers and as our pipeline translates into unit additions. Our owned hotels are skewed towards the high end and have been particularly hard-hit over the past twelve months, implying they are poised for a strong rebound as the world economy recovers. And with half of our hotels outside of the United States, we will benefit from secular growth in international markets.”
“With the $6 billion Sheraton Revitalization Program nearly complete, I can’t think of a better time to aggressively re-launch the brand than into the early stages of an upcycle.”
Outlook for the full year 2010
It is very difficult at this time to provide any definitive point of view on 2010. While business conditions have clearly stabilized, it is very hard to forecast the pace of recovery, especially rate. While group bookings have picked up for 2011 and beyond, booking pace for 2010 has continued to lag below 2009. And booking windows for both transient and group business have shortened considerably. As such, late breaking business is a larger component of what will drive our performance next year making forward looking predictions four quarters out particularly challenging. What we can provide are broad guidelines that we are using for internal planning purposes:
- REVPAR at Same-Store Company Operated Hotels Worldwide flat to down 5% in local currency when compared to 2009. The REVPAR change in developed markets (U.S. and Western Europe) is likely to be at the lower end of the range and REVPAR change in emerging markets at the higher end of the range. If exchange rates remain at current levels, REVPAR as reported in dollars would be approximately 200 bps higher. Management and franchise revenue growth should be in line with worldwide REVPAR growth, with same store fee declines offset by fees from new hotels.
- REVPAR at Branded Same-Store Owned Hotels Worldwide also flat to down 5% in local currency when compared to 2009. Since most owned hotels are in developed markets, the REVPAR change is likely to be at the lower end of the range. If exchange rates remain at current levels, REVPAR as reported in dollars would be approximately 200bps higher. Despite the Company's focus on productivity to help mitigate the impact from wage and general inflation, margins and EBITDA at owned hotels will likely be down year over year given anticipated REVPAR declines.
- Flat originated sales in our vacation ownership business. Vacation ownership EBITDA will likely be down year over year due to lost interest income assuming we complete two securitizations in 2009. The Company expects to adopt FAS 166 and 167 at the beginning of 2010, which will impact the accounting for securitized timeshare loans. Assuming the consolidation of the existing portfolio of securitized loans, the company expects assets to increase by $225 million to $250 million and, liabilities to increase by $250 million to $275 million when compared to 2009. As a result of the accounting change, vacation ownership pretax earnings in 2010 are estimated to increase by $10 million to $15 million and EBITDA in 2010 is estimated to increase by $25 million to $30 million, but no change in cash flow is anticipated.
- Modest increases to sales, general and administrative expenses due to adjustments in base and incentive compensation.
- To the extent additional asset selling is completed before the end of the year and into 2010, EBITDA would have to be adjusted accordingly.
Tatiana Rokou
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Friday, October 23, 2009