|
|
and Franchise Agreements |
Pro Forma Comparable Results Fourth Quarter Ended December 31, 1999 For the fourth quarter of 1999, total revenues increased 17% to $1.1 billion when compared to the same period in 1998 (despite the sale of two owned hotels during the fourth quarter of 1999). Pro forma comparable income from continuing operations was $0.51 per diluted share compared to $0.48 per diluted share in the corresponding period in 1998. Pro forma comparable income from continuing operations increased to $104 million in the fourth quarter of 1999 compared to $95 million in the same period of 1998. (See the attached unaudited consolidated statements of operations for the three months ended December 31, 1999 and 1998, and the notes thereto, for the basis of the pro forma comparable results.) Year Ended December 31, 1999 For the year ended December 31, 1999, total revenues increased 8% to $3.9 billion when compared to the same period in 1998. Pro forma comparable income from continuing operations increased 23% to $1.54 per diluted share compared to pro forma comparable income from continuing operations of $1.25 per diluted share for the corresponding period in 1998. Pro forma comparable income from continuing operations was approximately $303 million for the year ended December 31, 1999 compared to $262 million for the same period of 1998. (See the attached unaudited consolidated statements of operations for the years ended December 31, 1999 and 1998, and the notes thereto, for the basis of the pro forma comparable results.) Operating Results Revenues for the fourth quarter of 1999 at the Company�s 168 owned and leased hotels (excluding the W hotels in San Francisco and Seattle which were not open in 1998) increased 5.9% to $874 million from $825 million in 1998 and EBITDA increased 6.2% to $288 million from $271 million in 1998. Results for the fourth quarter were negatively impacted by Starwood Preferred Guest Program ramp-up costs, the unfavorable impact of foreign exchange, pre-opening expenses and one-time Y2K expenses. EBITDA at 119 hotels in North America (excluding the W hotels in San Francisco and Seattle) increased 5.7% to $206 million in the fourth quarter of 1999 when compared to the same period in 1998. North American EBITDA was negatively impacted in 1999 as a result of significant renovations and reflaggings at numerous Sheraton, St. Regis and other/independent hotels. EBITDA at 31 hotels in Europe increased 10.7% (approximately 19% excluding foreign exchange impacts) to $41 million in the fourth quarter of 1999 when compared to the same period of 1998. Excluding the W hotels in San Francisco and Seattle and 13 hotels under significant renovation, or for which comparable results are not available, EBITDA at 155 and leased hotels worldwide (�Same-Store Owned Hotels�), increased 7.3% in the fourth quarter of 1999 to $266 million when compared to the same period in 1998 and EBITDA margins increased to 33.1% from 32.6%. For the fourth quarter of 1999, Same-Store Owned Hotel worldwide revenue per available room (�REVPAR�) increased as a result of increases in both average daily rate (�ADR�) and occupancy rate. ADR and occupancy rate increases were strongest in the Same-Store Owned Hotels in North America (108 hotels) where ADR increased 3.8% to $149.38 and occupancy increased 110 basis points to 67.9% when compared to the same period in 1998. These results exclude the W Hotel New York, which officially re-opened in December of 1998 after significant renovation, the W Hotel in San Francisco, California which opened in May, 1999 and the W Hotel in Seattle, Washington which opened in September, 1999. For the fourth quarter of 1999, the W New York had REVPAR growth of 150% when compared to the same period in 1998. During the fourth quarter, the Company signed management and franchise agreements for 37 hotels with approximately 8,200 rooms, bringing the year-to-date total to 112 hotels with approximately 25,000 rooms under all six brands including the Westin Essex House, Sheraton Sapporo, W Sydney and St. Regis Shanghai. During the quarter, a net 10 managed or franchised hotels with approximately 1,600 rooms were opened. Already, 77 new hotel openings or conversions with approximately 18,000 rooms are scheduled for 2000. Vacation ownership interest (�VOI�) sales in the fourth quarter of 1999 increased 4.9% when compared to VOI sales reported by Vistana, Inc. in the same period of 1998. The Company acquired Vistana, Inc. one of the premier developers and operators of high quality vacation interval ownership on October 1, 1999. Currently, VOI inventory remains in various locations including Orlando, Florida, Scottsdale, Arizona and The PGA Vacation Resort in Port St. Lucie, Florida, and new build projects are currently underway in the Bahamas, Avon, Colorado and Orlando, Florida. Additional VOI projects, capitalizing on current Starwood locations in Palm Springs, Phoenix and Hawaii are expected to begin by the end of 2000. �We are pleased with the progress and momentum represented in our fourth quarter and annual results as EPS growth for the year exceeded our 20% target,� said Barry S. Sternlicht, Chairman CEO of Starwood. �1999 was a year of transformation for Starwood that included major investments in key areas, establishing a strong foundation for future success. Our company is in the best shape it has ever been. With the completion of approximately $6.8 billion in asset sales in less than 2 years, we are now focused on a single business, global lodging, and our balance sheet is positioned to achieve investment grade.� Continuing, Mr. Sternlicht said: �In the past six months, we strengthened our management team with more than a dozen key executives from both within and outside the hotel industry joining the ranks of our 120,000 person strong worldwide operations. We restructured our operating hierarchies, created brand leaders and our people are enthusiastic. Recently the Starwood Preferred Guest Program swept the important Freddie Awards, providing independent recognition of what the more than 2 million new members discovered�that SPG is the best hotel loyalty program in the industry.� Mr. Sternlicht added: �We�ve positioned the Company for industry leading growth in 2000. The acquisition of Vistana provides Starwood with an entry into the fast growing timeshare market. We opened 89 hotels and signed contracts on 112 hotels around the world expanding our system-wide room base. We launched the St. Regis brand and our W brand has exceeded our operating expectations and we expect to have almost 20 W�s operating in the near future. More than 10,500 rooms, representing almost 25% of our North American owned room inventory base, were under renovation in the fourth quarter of 1999 and renovation activity continues in the first quarter of 2000, positioning us well for continued positive performance later in the year. Our internet initiatives will provide new productivity tools and alternative revenue sources. During 1999 and early 2000, we made strategic growth investments in five internet travel related businesses for a total of $14 million.� Concluding, Mr. Sternlicht said: �While we are pleased with our current revenue momentum, we expect our progress to be enhanced by the roll out of a state-of-the-art revenue management system in the second half of 2000 along with new sales force automation technology. We continue to focus on improving margins, which were negatively impacted in 1999 by significant SPG ramp-up costs, pre-opening costs, foreign currency hits, Y2K costs and the operating disruptions of the renovation program. We do not expect to incur the same level of these costs in 2000. The health of our balance sheet, our growth platform, advances in our technology platform (including the internet), implementation of our new brand strategies, and most importantly, the strengthening of our management team, position us very well for 2000 and beyond.� Renovations During the fourth quarter, the Company invested approximately $211 million
in new construction and capital improvements. Throughout 1999 over
65% of the Company�s owned North American Sheratons underwent capital improvements.
By the end of 2000, more than 60% of owned hotel rooms in North America,
across all brands, are expected to be renovated. Currently, renovations
are underway at 32 hotels.
Gaming Disposition On December 30, 1999 the Company completed the sale of Caesars World Inc. for approximately $3.0 billion. The Company used the proceeds to immediately pay off $2.5 billion of increasing rate notes and to reduce its bank revolver by approximately $500 million. On May 18, 1999 Sun International Hotels Limited announced the definitive agreement to acquire the Desert Inn hotel and casino for $275 million. Regulatory review of the transaction continues. Sale of Lampsa, SA During the fourth quarter of 1999, the Company sold substantially all of its interest in Lampsa, SA, a Greek company that owns the Grand Bretagne in Athens. The Company owned its interest in Lampsa, SA through its approximate 73% ownership of CIGA S.p.A. The Company received gross proceeds (before minority interest) of approximately $290 million as a result of these sales and recorded pre tax gains (before minority interest) of $11 million and $265 million in the third and fourth quarters of 1999, respectively. These gains are excluded from pro forma comparable results for the fourth quarter and year ended December 31, 1999. Tender offer to purchase minority shares of CIGA , S.p.A. During the fourth quarter of 1999, the Company announced its intention to tender for all of the outstanding shares of CIGA, S.p.A. not currently owned by the Company. The Company owns approximately 73% of the ordinary shares. If 100% of the shares are tendered, the aggregate purchase price will be approximately $275 million. The tender offer began in January and is expected to be completed by the end of February 2000. Financing On December 31, 1999, the Company had total debt of approximately $5.8 billion and cash of approximately $436 million versus total debt of approximately $8.4 billion and cash of approximately $195 million at the end of the prior quarter. Starwood has no significant debt maturing until November 2000, and the weighted average maturity of the Company�s debt portfolio exceeds five years. At the end of the fourth quarter, the Company�s debt was approximately 68% fixed and 32% floating. During the fourth quarter, the Company declared a dividend of $0.15 per share. Consistent with the Company�s announcement January 6, 1999, when the Company restructured as a C-corp, the Company�s annual dividend is expected to increase 15% in 2000 to $0.69 per share. Also during the quarter, as part of the Company�s on-going stock repurchase program, the Company repurchased approximately one million shares at an average price of $21.69 per share. At the end of 1999, the balance remaining on the Board authorized stock repurchase program was approximately $300 million. At December 31, 1999, Starwood had approximately 202 million shares outstanding (including partnership units and exchangeable preferred shares). This release contains certain statements that may be deemed �forward-looking statements� within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. |
Dan Gibson of Starwood Hotels Resorts Worldwide, 914-640-8175/ http://www.starwoodlodging.com |