First Quarter Financial Highlights
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Pro forma diluted EPS (including Caesars) increases 250% to $0.14
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EBITDA increased 12% for 172 owned hotels worldwide; 14% in North
America and 23% in Europe
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EBITDA margin for 172 owned hotels worldwide increased from 28.3%
to 0.3%
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Same store RevPar for 149 owned hotels increased 4.1% worldwide,including
a 13.1% increase in Europe and a 4.3% increase in North America
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22 managed or franchised hotels with approximately 5,800 rooms added during
the quarter
WHITE PLAINS, N.Y., May 12, 1999 - Starwood Hotels Resorts Worldwide, Inc.
(NYSE: HOT)
("Starwood" or the "Company"), one of the world's largest hotel and
leisure companies which operates the Sheraton, Westin, St. Regis, Luxury
Collection, W and Caesars brands, today announced financial results for
the first quarter ended March 31, 1999.
Pro Forma Comparable Results
For the first quarter of 1999, pro forma comparable income from operations
(including Caesars) was approximately $27 million or $0.14 per diluted
share on pro forma revenues of $1.2 billion compared to $14 million or
$0.04 per diluted share on pro forma revenues of $1.1 billion in the corresponding
period in 1998.
For the first quarter of 1999, pro forma comparable income from continuing
operations (excluding gaming) was approximately $40 million or $0.20 per
diluted share on revenues of approximately $851 million compared to comparable
pro forma income from continuing operations of $24 million or $0.09 per
diluted share on pro forma revenues of approximately $826 million for the
corresponding period in 1998. The pro forma comparable results from continuing
operations for the first quarter of 1999 assume the previously announced
sale of Caesars for approximately $3 billion in cash and exclude pre-tax
gains of $8 million on the sale of certain real estate and investments,
a $15 million pre-tax charge relating to the reorganization of the Company
to a C-Corporation in January 1999, and a previously announced $936 million
deferred tax charge resulting from the reorganization.
These 1999 results further assume the disposition of other non-core
businesses, as of the beginning of the quarter, with total proceeds of
approximately $670 million of which approximately $400 million has been
realized as of April 30, 1999.
The pro forma comparable results from continuing operations for the
first quarter of 1998 reflect the February 23, 1998 merger (the "ITT Merger")
of the Company with ITT Corporation ("ITT"), as if the ITT Merger had occurred
on January 1, 1998, assume the sale of Caesars discussed above, exclude
pretax gains of $12 million on the sale of certain real estate and investments
and assume a 40% effective tax rate (the effective tax rate for continuing
operations in the first quarter of 1999). These 1998 results further assume
the disposition of other non-core businesses with total proceeds of approximately
$3.4 billion of which approximately $3.1 billion has been realized as of
April 30, 1999.
"The first quarter of 1999 included several milestones for our company,"
Barry S. Sternlicht, chairman and chief executive officer of Starwood said.
"We completed our corporate reorganization, retired our near term debt
maturities, and with the sale of our stake in ESI and Madison Square Garden
and the pending sale of Caesars, we will have realized over $6 billion
of asset sales proceeds since acquiring ITT. By deleveraging our balance
sheet,
we have set the stage for future growth in our core global lodging
business. We are now focused on our core business," Mr. Sternlicht continued.
"We continue to fill out our management ranks and this week we announced
the hiring of two key executives and thought leaders, to head worldwide
marketing and worldwide e-commerce strategies. The February launch of our
Starwood Preferred Guest program has been very successful with more than
700,000 new participants enrolled in just over three months. We expect
to start seeing financial benefits in terms of increased RevPar growth
from this program later this year.
On an operating front, we are generally pleased with our first quarter
performance. In the US our RevPar was adversely impacted by renovations
at six large hotels in New England, the nation's strongest RevPar market
in the first quarter," Mr. Sternlicht said. "In addition, strength continued
in Europe, Asia appears to be entering a recovery period and despite a
drop in RevPar in Latin America caused by the currency and economic crisis,
EBITDA actually increased slightly. As importantly, the company is making
improvements each day in integrating operations, implementing technology
enhancements and identifying and implementing purchasing synergies. We
believe that some of these initiatives are being reflected in our significantly
improved operating margins.
The period of reorganization is behind us," Mr. Sternlicht said. We
are focused on our core global lodging business. 1999 will be the year
to focus on our brands, training our people and renovating our superior
owned real estate, providing additional value for our customer without
increasing the cost of our operations," Mr. Sternlicht concluded.
Hotel Group Results
On a same-store-sales basis, revenues for the first quarter of 1999
at the Company's 172 owned and leased hotels, increased 5% to $746 million
from $710 million in 1998, EBITDA margins increased to 30.3% from 28.3%,
and EBITDA increased 12% to $226 million from $201 million in 1998.
The increase in EBITDA reflects a 14% increase in North America and a 23%
increase in Europe, offset by weakness in Latin America due to the economic
conditions. Excluding 23 hotels under significant renovation, or
for which comparable results are not available, EBITDA margins increased
from 29.9% in 1998 to 32.3% in 1999 and EBITDA increased 13% to $220 million
in 1999 when compared to the same period in 1998. For the quarter,
same-store RevPar increased 4.1% to $99.30 from $95.40 in the corresponding
period of 1998. The increase in RevPar primarily resulted from an
increase in ADR of 3.4% to $145.57 from $140.74, and an increase in occupancy
to 68.2% from 67.8% in the corresponding period in 1998.
During the quarter, the Company signed management and franchise agreements
for 30 hotels with more than 5,000 rooms, including the 600 room Essex
House in New York City. In addition, the Company signed 5 new management
and franchise agreements for hotels previously in the Company's portfolio,
including retention of the 1,072 room Century Plaza in Los Angeles. Starwood
also acquired a 25% interest in the 5-hotel Moriah chain of hotels in Israel
and made an investment in the 12-hotel Block chain of hotels in Africa.
Also, 22 managed or franchised hotels with approximately 5,800 rooms opened
during the quarter. More than 30,000 new rooms are currently in the Company's
development pipeline around the world.
Discontinued Operations - Gaming Results
Excluding the Desert Inn in Las Vegas which was held for sale at March
31, 1999, Caesar's recorded revenues of $346 million in the first quarter
of 1999, up 20% from the prior year's quarter, and a 25% increase in EBITDA
to $84 million this period.
Gain (Loss) on Disposition of Discontinued Operations
On April 27, 1999, the Company entered into a definitive agreement with
Park Place Entertainment Corporation to sell the Company's gaming operations
(excluding the Desert Inn) for $3 billion in cash, resulting in the recognition
of an estimated after-tax loss on disposal of the gaming operations (including
the Desert Inn) of $180 million in the first quarter of 1999.
In addition, during the first quarter of 1999, the Company realized
approximately $310 million in net proceeds from the completion of the sale
of Educational Services, Inc. ("ESI") resulting in an after-tax gain of
$173 million.
Other Dispositions
In April 1999, the Company sold its remaining interest in Madison Square
Garden for $87 million in cash. During the first quarter of 1999,
the Company realized approximately $25 million from the sale of the International
Golf Club in Bolton, MA.
Renovations and New Construction
During the first quarter, the Company invested approximately $112 million
in new construction and capital improvements with approximately $82 million
spent on hotel assets and approximately $30 million spent on gaming assets.
In the first quarter, approximately 250,000 available room nights, or
nearly 5% of the total available room nights worldwide at owned properties,
were lost due to renovations. Of this number, approximately 150,000 were
in owned properties in the New England region, one of the nations strongest
markets in the first quarter. These included the Sheraton Ferncroft Resort
in Danvers, MA; the Sheraton Tara Hotel in Newton, MA; Sheraton Needham,
MA; Sheraton Tara in Braintree, MA; Sheraton Boston Hotel Towers; Park
Plaza Hotel in Boston.
Major renovations commenced in the quarter at the Grand Hotel in Rome
(which will be closed for most of 1999), the 1,068 room Westin Peachtree
Plaza in Atlanta and six other Westin properties, as well as the 232 room
Houston St. Regis. The Company continued its $60 million major renovation
and expansion of the 1,180 room Sheraton Boston, the largest hotel in New
England, which is scheduled to reopen on July 1, 1999. During the quarter,
the W Hotel New York was substantially completed with approximately 650
of its 720 rooms now operating. The asset, excluded from RevPar information
above, recorded a 250% RevPar increase in the first quarter. In March,
the second W Hotel, located in Atlanta, opened followed by the opening
last week of the newly built 423-room W Hotel in San Francisco. The Company
expects to open five more W Hotels in 1999, including two in New York City
and others in Seattle, Los Angeles, and New Orleans.
Financing
On March 31, 1999, the Company had total debt of approximately $8.5
billion and cash of approximately $253 million. In February 1999,
Starwood completed a $540 million 10-year mortgage financing at a rate
of 6.98%. Proceeds of the mortgage financing were used to refinance the
asset sale bridge portion of the Company's Senior Credit Facility.
Starwood has no significant debt maturing until November 2000, and the
weighted average maturity of the Company's debt portfolio exceeds five
years.
The Company expects to significantly improve its balance sheet by retiring
the increasing rate notes with the proceeds from the Caesars sale. At the
end of the first quarter, the Company's debt was approximately 50% fixed
and 50% floating. Adjusting for the sale of the Company's gaming operations,
the debt portfolio is expected to shift to approximately 70% fixed and
30% floating.
During the quarter, the Company declared a dividend of $0.15 per paired
share. The payment reflects Starwood's new dividend policy of $0.60 per
share per year, established as part of the conversion from a paired share
REIT to a C-Corporation. During the first quarter, the Company repurchased
approximately 0.5 million shares for approximately $16 million bringing
the total number of shares repurchased to 10.6 million since the second
quarter of 1998. At the end of the quarter, Starwood had approximately
198 million shares outstanding (including partnership units and exchangeable
preferred shares).
New Corporate Structure
On January 6, 1999, the Company's shareholders approved a reorganization
(the "reorganization"), as a result of which Starwood has become a C-Corporation
and Starwood Hotels and Resorts became a subsidiary of the Company.
As previously announced in connection with the Reorganization, the Company
recorded one-time charges during the first quarter of 1999 of $15 million
for direct costs attributable to the Reorganization and a $936 million
non cash charge to establish a deferred tax liability relating to the difference
between the book and tax basis in the assets of the Trust. The direct
costs are included in miscellaneous expense and the deferred tax charge
is included in income tax expense in the first quarter 1999 statement of
operations.
Starwood
Names Tad Smith, Senior Vice President, E-Commerce
| WHITE PLAINS, N.Y., May 13, 1999 - Starwood Hotels Resorts Worldwide,
Inc. (NYSE: HOT) announced today the appointment of Tad Smith as Senior
Vice President, E-Commerce.
In this newly created position, Mr. Smith, 33, will have worldwide responsibility
for developing and implementing a comprehensive Internet strategy for Starwood.
This Internet strategy will include securing alliances with key online
and other travel partners, reviewing and investing in new Internet-based
business opportunities, further
enhancing the company's websites, and managing the company's Internet-based
marketing and customer service programs. He will be located at the Company's
White Plains, NY headquarters and report to Juergen Bartels, chief executive
officer of Starwood's Hotel Group.
"We are very pleased to have attracted an executive of Tad's caliber
to our team," said Barry S. Sternlicht, chairman and chief executive of
Starwood. "His hire is a recognition of the importance of the E-commerce
function
to our company going forward."
Prior to joining Starwood, Mr. Smith was with BMG Entertainment, the
North American entertainment division of Bertelsmann, the German media
conglomerate, where he was, most recently, the managing director of Nice
Man Merchandising, the apparel and concessions operation of BMG. Before
that assignment, Mr. Smith was Vice President for Corporate Development
with the North American Division of BMG. Mr. Smith successfully sold Nice
Man Merchandising in 1998 and has since been consulting in the areas of
new media and technology for BMG, Starwood and a number of start-up companies.
Prior to BMG, Mr. Smith spent four years with the Los Angeles office
of McKinsey Company, the international management consulting firm where
he was most recently responsible for building the firm's West Coast entertainment
practice.
Mr. Smith received his Bachelor of Arts degree with honors from the
Woodrow Wilson School of Public and International affairs of Princeton
University and an MBA from Harvard Business School. Mr. Smith is married
and lives in New York City. |
(Note: 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. Forward-looking statements are no guarantees of future performance
and involve risks and uncertainties that could cause actual results to
differ materially from historical results or those anticipated at the time
the forward-looking statements are made, including, without limitation,
risks and uncertainties associated with the following: the continued ability
of Starwood Hotels and Resorts (the "Trust") to qualify for taxation as
a REIT; Starwood's integration of the assets and operations of ITT and
Westin; completion, terms and timing of future acquisitions and dispositions,
including the pending sale of Caesars World, Inc.; the availability of
capital for acquisitions and for renovations; execution of hotel and casino
renovation and expansion programs; the ability to maintain existing management,
franchise or representation agreements and to obtain new agreements on
current terms; competition within the lodging industry and the gaming industry;
the cyclicality of the real estate business, the hotel business and the
gaming business; foreign exchange fluctuations; general real estate and
national and international economic conditions; political, financial and
economic conditions and uncertainties in countries in which Starwood owns
property or operates; the ability of Starwood, owners of properties it
manages or franchises and others with which it does business to address
the Year 2000 issue, and the costs associated therewith; the adoption by
several European countries of the euro as their national currency; and
the other risks and uncertainties set forth in the annual, quarterly and
current reports and proxy statements of the Trust and Starwood. Starwood
undertakes no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.) |
