Hotel Online Special Report 
Starwood Reports Net Income for the 4th Qtr of 2005 Increased 59% to $159 million; For the Full Year 2005, Starwood’s Earnings Up 7% to $422 million . Hotel Operating Statistics WHITE PLAINS, N.Y. – Feb. 2, 2006 – Fourth Quarter 2005 Highlights
- EPS from continuing operations for the fourth quarter of 2005 increased 37% to $0.70, compared to $0.51 in the fourth quarter of 2004. Excluding special items, EPS from continuing operations increased 25% to $0.71 for the fourth quarter of 2005 compared to $0.57 for the fourth quarter of 2004.
- REVPAR at Same-Store Owned Hotels in North America and worldwide increased 12.2% and 9.4%, respectively, when compared to the fourth quarter of 2004. ADR increased 9.5% and 7.0% in North America and worldwide, respectively.
- Margins at Starwood branded Same-Store Owned Hotels in North America improved approximately 140 basis points when compared to the fourth quarter of 2004, despite the negative impact of a significant 30% increase in energy costs in North America.
- Globally, REVPAR for Same-Store Owned Hotels grew for W Hotels (18.9%), followed by Westin (8.4%), Sheraton (8.2%), and St. Regis/Luxury Collection (5.2%), with each of these brands experiencing both ADR and occupancy gains.
- Third-party management and franchise fees, including fees from the Le Meridien hotels from the acquisition date of November 24, 2005, increased 30.2% in the quarter when compared to 2004.
- Excluding the fractional sales at the St. Regis Aspen and residential sales at the St. Regis in San Francisco, contract sales at vacation ownership properties were up 17.8% when compared to 2004. However, reported revenues from vacation ownership and residential sales decreased $5 million in the quarter when compared to 2004 primarily due to percentage of completion accounting for pre-sales at new timeshare projects.
- Net income for the fourth quarter of 2005 increased 59% to $159 million, compared to net income of $100 million in the fourth quarter of 2004. Excluding special items, income from continuing operations increased 32% to $162 million in the fourth quarter of 2005 compared to $123 million in the same period of 2004.
- Total Company Adjusted EBITDA increased 19.6% to $391 million when compared to $327 million in 2004.
- For the thirteenth quarter in a row, total Company market share in North America increased for the Company’s owned and managed hotels as well as for system-wide hotels. According to Smith Travel Research, system-wide market share in North America increased approximately 100 basis points for the full year 2005 when compared to 2004.
Starwood Hotels & Resorts Worldwide, Inc. (“Starwood” or the “Company”) today reported EPS from continuing operations for the fourth quarter of 2005 of $0.70 compared to $0.51 in the fourth quarter of 2004. Excluding special items which net to a negative $3 million and primarily relate to severance related costs associated with the corporate restructuring in the quarter, net gains realized on the sale of several hotels partially offset by a hotel impairment charge and additional tax expense arising from the deposit with the IRS of funds for taxes claimed as a result of the 1998 disposition of ITT World Directories, EPS from continuing operations was $0.71 for the fourth quarter of 2005 compared to $0.57 in the fourth quarter of 2004. Income from continuing operations was $159 million in the fourth quarter of 2005 compared to $111 million in 2004. Excluding special items, income from continuing operations was $162 million for the fourth quarter of 2005 compared to $123 million in 2004. In connection with the announced sale of 38 hotels to Host Marriott Corporation, the Company’s EPS in the fourth quarter was positively impacted by approximately $17 million or $0.05 per share associated with the cessation of depreciation of these assets held for sale. The Company’s results continued to be negatively impacted by lost business in New Orleans, Cancun and Miami as a result of damage at its owned hotels from Hurricanes Katrina and Wilma. Although the Company has recorded expenses for its insurance deductibles associated with these storms, in accordance with accounting rules, it has not recorded any of its expected recoveries under its existing business interruption insurance policies. Net income (after discontinued operations) was $159 million and EPS was $0.70 in the fourth quarter of 2005 compared to $100 million and EPS of $0.46 in the fourth quarter of 2004. The effective tax rate for the fourth quarter of 2005 was 21.4%.
Steven J. Heyer, CEO, said “I am very pleased with our results this quarter. We beat our top and bottom line expectations and for thirteen quarters in a row our market share has increased. We are moving full speed ahead with all of our strategic initiatives and with the brand building initiatives rolling out across our system, we expect our momentum to continue.
During the quarter we made significant progress toward reducing our investment in owned real estate, while maintaining long-term, attractive management agreements with an outstanding partner. I couldn’t be more pleased with the results of this transaction and the future opportunities it creates for us. And, as we said when we announced the deal, it re-opened our window for share repurchases. Since our window opened, we have repurchased $373 million in stock, and we plan to be buyers of our stock throughout 2006.
We closed on the purchase of the Le Meridien brand, adding another upper upscale brand and 122 hotels to our system. The brand is very strong, and we are pleased with the quality of the hotel management teams in place. After these two transactions, our earnings become more balanced between hotel ownership and fee income. We expect to aggressively drive both businesses.
Entering into 2006, we have significant opportunities ahead of us. We will continue to work on unlocking the value in our owned real estate. Our core lodging business remains strong and supply continues to be constrained. Our pipeline continues to grow, outpacing our fair share, and we’ve added resources to aggressively pursue the opportunity. We are focused on our key initiatives and expect 2006 to be another great year at Starwood with our core business, on a comparable basis, growing approximately 15%.”
Operating Results
Fourth Quarter Ended December 31, 2005
Cash flow used for operations was $54 million compared to cash flow from operations of $201 million in 2004. The decrease in cash flows from operations was primarily due to the payment, in October 2005, of the deposit with the IRS associated with the 1998 disposition of ITT World Directories. Total Company Adjusted EBITDA was $391 million compared to $327 million in 2004.
Owned, Leased and Consolidated Joint Venture Hotels
REVPAR for Same-Store Owned Hotels in North America and worldwide increased 12.2% and 9.4%, respectively, when compared to 2004. REVPAR at Same-Store Owned Hotels in North America increased 18.9% at W, 11.7% at Sheraton, 10.5% at Westin, and 10.3% at St. Regis/Luxury Collection. REVPAR growth was particularly strong at the Company’s owned hotels in New York, Atlanta, Houston, Chicago, and the Hawaiian Islands. Revenue from transient travel was up 16.6% in North America when compared to 2004. Internationally, Same-Store Owned Hotel REVPAR increased 10% after adjusting for the impact of foreign exchange. As reported, in US dollars, Same-Store Owned Hotel REVPAR increased 1.5%, with Latin America up 9.2% (REVPAR in owned hotels in Argentina, Brazil, Peru and resort areas in Mexico was particularly strong, excluding two hotels in Cancun which were closed due to damage from Hurricane Wilma), Europe up 1.6%, and Asia Pacific down 8.5% due to the fact that one of the four owned hotels in this region was under significant renovation during the quarter.
Total revenues at Same-Store Owned Hotels worldwide increased 6.6% to $843 million when compared to $791 million in 2004 while costs and expenses at the hotels increased 5.7% to $620 million in 2005 compared to $587 million in 2004. Total revenues at Same-Store Owned Hotels in North America increased 9.2% to $626 million in 2005 when compared to $573 million in 2004 while costs and expenses at these hotels increased 7.3% to $453 million when compared to $422 million in 2004. The increase in costs and expenses is primarily due to an increase in occupancy and a significant 30% increase in energy costs in North America.
System-wide REVPAR; Management/Franchise Fees
System-wide (owned, managed and franchised) REVPAR for Same-Store Hotels in North America, excluding Le Meridien hotels, increased 10.8%; W Hotels 17.9%, Sheraton 11.3%, Westin 9.8%, Four Points by Sheraton 9.3%, and St. Regis/Luxury Collection 6.9%. For the thirteenth quarter in a row, total Company market share in North America increased for the Company’s owned and managed hotels as well as for system-wide hotels. According to Smith Travel Research, system-wide market share in North America increased approximately 100 basis points for the full year 2005 when compared to 2004. Total third-party management and franchise fees, including fees from the Le Meridien hotels from the acquisition date of November 24, 2005, were $104 million in the quarter, up $24 million, or 30.2%, from last year.
Vacation Ownership and Residential
Vacation ownership and residential revenue, which excludes gains on sales of notes receivable, decreased $5 million, or 2.5% to $192 million when compared to 2004. This decrease was primarily due to a larger portion of vacation ownership sales coming from pre-sales at new phases under construction at the Westin Ka’anapali Ocean Resort Villas in Maui, Hawaii and the Westin Kierland Villas in Scottsdale, Arizona which are recognized based on percentage of completion in accordance with US GAAP. Contract sales, excluding fractional sales at the St. Regis Aspen and residential sales at the St. Regis in San Francisco, were up 17.8% when compared to 2004. The average price per timeshare unit sold increased approximately 11.8% to $22,868, and the number of contracts signed increased approximately 5.3% when compared to 2004.
Residential sales continued in the fourth quarter at the St. Regis Museum Tower in San Francisco. The Company recognized revenues of approximately $42 million, an increase of $27 million compared to 2004. The St. Regis Museum Tower hotel and condominiums opened in November 2005.
In addition to its robust pipeline of existing vacation ownership inventory, the Company continues to evaluate its existing owned real estate for potential conversion to vacation ownership, fractional, or residential projects. For example, the Company is converting four floors of the St. Regis hotel in New York into fractional units and residences and has partially demolished the Sheraton in Cancun, Mexico, where it will build a timeshare development that is expected to have up to 73 units upon completion of the first phase. The Company is also working with its business partners to develop similar conversion opportunities at managed hotels.
Currently, the Company is working on new phases at the Westin Ka’anapali Ocean Resort Villas in Maui, Hawaii, the Westin Kierland Villas in Scottsdale, Arizona, the Sheraton Broadway Plantation in Myrtle Beach, South Carolina, and the Sheraton Vistana Villages in Orlando, Florida.
In addition to the expansion at the existing properties above, Starwood Vacation Ownership is in the predevelopment phase of several new vacation ownership resorts including one in Princeville on the island of Kauai, Hawaii. The Company is also working on a third St. Regis-branded fractional resort in Punta Mita, Mexico.
During the fourth quarter of 2005, the Company sold approximately $221 million of vacation ownership notes receivable and recognized gains of $25 million as compared to gains of $3 million in the same period of 2004.
Results for the Twelve Months Ended December 31, 2005
EPS from continuing operations increased 9% to $1.88 compared to $1.72 in 2004. Excluding special items, EPS from continuing operations increased 44% to $2.34 compared to $1.62 in 2004. Income from continuing operations was $423 million compared to $369 million in 2004. Excluding special items, income from continuing operations increased 51% to $526 million compared to $348 million in 2004. Net income (after discontinued operations) was $422 million and EPS was $1.88 compared to $395 million and $1.84, respectively, in 2004.
Cash flow from operations was $764 million compared to $578 million in 2004. Total Company Adjusted EBITDA was $1.417 billion compared to $1.150 billion in 2004.
Brand Development/Unit Growth
During the fourth quarter, the Company signed 42 hotel management and franchise contracts (representing approximately 15,000 rooms) including the W Las Vegas (Las Vegas, Nevada, 4,000 rooms), Westin Orlando Convention Center (Orlando, Florida, 603 rooms), and W Pudong (Shanghai, China, 400 rooms). In addition to the 122 Le Meridien hotels (representing approximately 31,700 rooms) that are currently in the system following the Company’s acquisition of the brand in November 2005, nine new hotels and resorts (representing approximately 2,200 rooms) entered the system, including the Westin Paris (Paris, France, 438 rooms) and the Sheraton Haikou (Haikou, China, 341 rooms). Thirteen properties (representing approximately 3,500 rooms) were removed from the system during the quarter (4 Sheratons, 4 Four Points, 3 Westins and 2 unbranded). The Company expects to open more than 50 hotels (representing approximately 14,000 rooms) in 2006. The Company had approximately 220 hotels and approximately 65,000 rooms in its active global development pipeline at December 31, 2005, with roughly half of that number in international locations.
In November 2005, the Company opened its third Remede Spa in the St. Regis hotel in San Francisco. The Company also had six Bliss spas at the end of 2005. In 2006, the Company plans to open 2 new Bliss spas in W hotels in Dallas and Los Angeles, with several other Bliss and Remede Spas in various planning stages.
Distribution
Starwood’s central distribution systems gross bookings during the fourth quarter of 2005 increased approximately 10.1% when compared to 2004. Gross online bookings through proprietary branded websites increased 31.2% as compared to 2004, with gross dollar bookings from the proprietary branded sites increasing 38.3%. Gross online dollar bookings represented approximately 12.2% of the overall gross dollar bookings, with 78.6% of that coming from our proprietary branded websites, as compared to 10.4% of overall gross dollar bookings, with 74.6% of that from proprietary branded websites in 2004.
The above distribution figures do not include the Le Meridien hotels. The Company expects to integrate these hotels into the starwoodhotels.com and related websites by the end of the first quarter of 2006.
Capital
Gross capital spending during the quarter included approximately $99 million in renovations of hotel assets including construction capital at the Sheraton Hotel & Towers in New York, New York, the Sheraton Hotel & Marina in San Diego, California, and the Sheraton Royal Denarau Resort in Nadi, Fiji. Investment spending on gross VOI inventory was $36 million, which was offset by cost of sales of $35 million tied to VOI sales during the quarter. The inventory spend included VOI construction at the Westin Ka’anapali Ocean Resort Villas in Maui, Hawaii, the Sheraton Vistana Villages in Orlando, Florida, and the Westin Kierland Villas in Scottsdale, Arizona. Additionally during the quarter, further investment spending of $241 million included the purchase of the Le Meridien brand and the related management and franchise business, which was substantially offset by the return of the Company’s previous investment in the outstanding senior debt of Le Meridien, as well as the development of the St. Regis Museum Tower in San Francisco which consists of 260 hotel rooms and 102 condominium units and which as discussed earlier, opened in November 2005. Construction of this project is substantially complete, and through December 31, 2005, the Company has invested $318 million in the project. The Company expects to realize gross proceeds of approximately $245 million from the sale of the project’s condominiums and has recognized approximately $198 million in revenues through the end of 2005.
Share Repurchase
For the quarter ended December 31, 2005, the Company repurchased approximately 4 million shares at a total cost of approximately $253 million. At December 31, 2005, approximately $1.043 billion remained available under the Company’s Board authorized share repurchase program. At December 31, 2005, Starwood had approximately 219 million shares outstanding (including partnership units and exchangeable preferred shares).
From January 1, 2006 through February 1, 2006, the Company repurchased an additional 1.9 million shares at a total cost of approximately $120 million.
Dividend
Starwood Hotels & Resorts (the “Trust”) declared its annual dividend for 2005 of $0.84 per share, which was paid on January 20, 2006 to shareholders of record on December 31, 2005.
The Trust expects to declare a dividend for the first quarter of 2006 of approximately $0.21 per Share to shareholders of record as of a date in the latter part of February 2006 to be paid in early March 2006. The dividend declaration and the amount are subject to approval of the Trust’s Board of Trustees.
Balance Sheet
At December 31, 2005, the Company had total debt (including debt classified as held for sale) of $4.145 billion and cash and cash equivalents (including $307 million of restricted cash) of $1.204 billion, or net debt of $2.941 billion, compared to net debt of $3.136 billion at the end of the third quarter of 2005.
At December 31, 2005, debt was approximately 69% fixed rate and 31% floating rate and its weighted average maturity was 4.4 years with a weighted average interest rate of 6.27%. The Company had cash (including total restricted cash) and availability under domestic and international revolving credit facilities of approximately $2.147 billion.
Asset Sales
In 2005, in addition to the sale of three hotels in joint ventures that we hold minority interest in, the Company sold ten wholly-owned hotels for cash proceeds of approximately $510 million. Additionally, in January 2006 the Company completed the sale of four hotels for proceeds of $234 million in cash. As previously announced, the Company entered into a definitive agreement with Host Marriott Corporation to sell 38 hotels for cash, assumption of debt and stock. As part of the agreement, the Company will manage the hotels for up to 40 years.
Outlook
All comments in the following paragraphs and certain comments in this release above are deemed to be forward-looking statements. These statements reflect expectations of the Company’s performance given its current base of assets and its current understanding of external economic and geo-political environments. Actual results may differ materially.
The Company’s guidance for 2006 assumes:
— The close of the previously announced transaction with Host Marriott Corporation at the end of the first quarter.
— Stock option expense of approximately $45 million or $0.13 per share.
— Since we last provided forward looking estimates, four additional asset sales which have closed in 2006 and three hotels expected to be sold in the first quarter of 2006 which contributed approximately $122 million in revenues and $87 million in expenses in 2005.
For the full year 2006, assuming REVPAR at Same-Store Owned Hotels in North America increases approximately 8% – 10% versus 2005:
— Full year Adjusted EBITDA would be expected to be approximately $1.210 billion assuming:
— Worldwide Same-Store Owned Hotel EBITDA growth of 15% to 17%.
— Worldwide Same-Store Owned Hotel margin improvement of approximately 150 – 200 basis points.
— Growth from management and franchise fees of approximately 18% to 20%.
— Growth from our timeshare and residential business of approximately 20% to 25% (excluding gains on sales of receivables).
— Full year income from continuing operations, excluding special items, would be expected to be approximately $475 million at an effective tax rate of approximately 33%. This assumes a 20% tax rate in the first quarter and a 35% tax rate for the remainder of the year.
— Full year EPS would be expected to be approximately $2.14.
— Full year capital expenditures (excluding timeshare inventory) would be approximately $475 million, including $175 million for maintenance, renovation and technology and $300 million for other growth initiatives. Additionally, net capital expenditures for timeshare inventory would be approximately $175 million.
— For the full year the Company expects cash interest expense of approximately $175 million and cash taxes of approximately $150 million.
For the three months ended March 31, 2006, if REVPAR at Same-Store Owned Hotels in North America increases approximately 10% – 12% versus the same period in 2005:
— Adjusted EBITDA would be expected to be approximately $238 million assuming:
— Worldwide Same-Store Owned Hotel EBITDA growth of 15% to 17%.
— Worldwide Same-Store Owned Hotel margin improvement of approximately 150 – 200 basis points.
— Growth from management and franchise fees of approximately 18% to 20%.
— A decline in operating income from our timeshare and residential business of $40 million to $45 million due to percentage of completion accounting for pre-sales at new timeshare projects.
— Income from continuing operations, excluding special items, would be expected to be approximately $74 million at an effective tax rate of approximately 20%.
— EPS would be expected to be approximately $0.33.
The Company’s guidance excludes:
— The impact of the adoption of SFAS No. 152, “Accounting for Real Estate Time-Sharing Transactions,” which is expected to result in a one time pre-tax charge of approximately $100 million to $120 million in the first quarter of 2006.
— Transition costs associated with the Le Meridien transaction which closed in 2005 of approximately $15 million in the first quarter and $30 million in the full year.
— A one time income tax benefit and certain one-time financing costs which will be recorded when the transaction with Host Marriott Corporation closes.
Special Items
The Company recorded net charges of $3 million (after-tax) for special items in the fourth quarter of 2005 compared to $12 million of net charges (after-tax) in the same period of 2004.
Special items in the fourth quarter of 2005 primarily relate to severance related costs associated with the corporate restructuring in the fourth quarter of 2005, net gains realized on the sale of several hotels partially offset by a hotel impairment charge and additional tax expense arising from the deposit with the IRS of funds for taxes claimed as a result of the 1998 disposition of ITT World Directories.
The following represents a reconciliation of income from continuing operations before special items to income from continuing operations after special items (in millions, except per share data):
Three Months Ended Year Ended December 31, December 31, —————– ————— 2005 2004 2005 2004 ——- ——- ——- ——-
Income from continuing operations $162 $123 before special items $526 $348 ——- ——- ——- ——- $0.71 $0.57 EPS before special items $2.34 $1.62 ——- ——- ——- ——-
Special Items Restructuring and other special (13) — (charges) credits, net (a) (13) 37 Adjustment to costs associated with — – construction remediation (b) — 4 Gain (loss) on asset dispositions and 2 (25) impairments, net (c) (30) (33) ——- ——- ——- ——- (11) (25) Total special items – pre-tax (43) 8 Income tax benefit (expense) for 5 10 special items (d) 16 (2) Tax expense on repatriation of — – foreign earnings (e) (47) – Reserves and credits associated with 3 3 tax matters (f) (29) 15 ——- ——- ——- ——- (3) (12) Total special items – after-tax (103) 21 ——- ——- ——- ——-
$159 $111 Income from continuing operations $423 $369 ——- ——- ——- ——- $0.70 $0.51 EPS including special items $1.88 $1.72 ======= ======= ======= =======
(a) During 2005, the Company recorded $13 million in restructuring and other special (charges) credits, net primarily related to severance costs in connection with the Company’s restructuring as a result of its planned disposition of significant real estate assets and transition costs associated with the Le Meridien transaction. During the year ended December 31, 2004, the Company reversed a $37 million reserve previously recorded through restructuring and other special credits due to a favorable judgment in a litigation matter.
(b) Represents adjustments to the Company’s share of costs for construction remediation efforts at a property owned by a vacation ownership unconsolidated joint venture that were previously recorded in 2002.
(c) For the three months ended December 31, 2005, primarily reflects the gains recorded on the sale of three hotels offset by the impairment of a hotel. For the year ended December 31, 2005, the balance also includes the losses recorded on the sale of two hotels and impairment charges associated with the Sheraton hotel in Cancun, Mexico that is being partially demolished in order to build vacation ownership units. Loss of $25 million and $33 million for the three and twelve months ended December 31, 2004, respectively, reflects the loss on the sale or impairment of hotels and investments offset, in part, by the gain on the sale of one hotel.
(d) Represents taxes on special items at the Company’s incremental tax rate.
(e) Represents tax expense associated with the adoption of a plan to repatriate foreign earnings in accordance with the American Jobs Creation Act of 2004.
(f) During the three months and year ended December 31, 2005, the Company recorded a tax charge of approximately $12 million and $52 million, respectively, to increase its tax reserves relating to the Company’s 1998 disposition of World Directories as a result of a United States Tax Court decision against another taxpayer and the deposit of these funds with the IRS. The three and twelve months ended December 31, 2005 also include a net tax credit of approximately $15 million related to the deferred gain on the sale of the Hotel Danieli in Venice, Italy. The year ended December 31, 2005 also includes tax refunds of $8 million related to tax years prior to the 1995 split-up of ITT Corporation. Tax benefits in the three and twelve months ended December 31, 2004 reflect the favorable results of certain changes to the Federal tax rules, the resolution of various tax matters that were successfully settled during these periods, and the reversal of tax reserves no longer deemed necessary.
The Company has included the above supplemental information concerning special items to assist investors in analyzing Starwood’s financial position and results of operations. The Company has chosen to provide this information to investors to enable them to perform meaningful comparisons of past, present and future operating results and as a means to emphasize the results of core on-going operations.
STARWOOD HOTELS & RESORTS WORLDWIDE, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (In millions, except per Share data)
Three Months Ended Year Ended December 31, December 31, ———————— ————————- % % 2005 2004 Variance 2005 2004 Variance ——- ——- ——– ——- ——- ——— Revenues Owned, leased and consolidated joint $894 $878 1.8 venture hotels $3,517 $3,326 5.7 Vacation ownership and residential 192 197 (2.5) sales and services 889 640 38.9 Management fees, franchise fees and 152 120 26.7 other income 501 419 19.6 Other revenues from managed and franchised 278 247 12.6 properties (a) 1,070 983 8.9 ——- ——- ——– ——- ——- ——— 1,516 1,442 5.1 5,977 5,368 11.3 Costs and Expenses Owned, leased and consolidated joint 672 655 (2.6) venture hotels 2,634 2,519 (4.6) Vacation ownership 158 154 (2.6) and residential 661 488 (35.5) Selling, general, administrative and 96 87 (10.3) other 370 331 (11.8) Restructuring and other special charges (credits), 13 — n/m net 13 (37) n/m 82 107 23.4 Depreciation 387 413 6.3 7 5 (40.0) Amortization 20 18 (11.1) Other expenses from managed and franchised 278 247 (12.6) properties (a) 1,070 983 (8.9) ——- ——- ——– ——- ——- ——— 1,306 1,255 (4.1) 5,155 4,715 (9.3) 210 187 12.3 Operating income 822 653 25.9 Gain on sale of VOI 25 3 n/m notes receivable 25 14 78.6 Equity earnings from unconsolidated 24 10 n/m ventures, net 64 32 100.0 Interest expense, net of interest income of $8, $1, (58) (61) 4.9 $19 and $3 (239) (254) 5.9 Gain (loss) on asset dispositions and impairments, 2 (25) n/m net (30) (33) 9.1 ——- ——- ——– ——- ——- ——— Income from continuing operations before taxes and minority 203 114 78.1 equity 642 412 55.8 (44) (2) n/m Income tax expense (172) (43) n/m Tax expense on repatriation of — – — foreign earnings (47) – n/m Minority equity in — (1) 100.0 net (income) loss — — — ——- ——- ——– ——- ——- ——— Income from continuing 159 111 43.2 operations 423 369 14.6 Discontinued operations: Loss from — – — operations (b) (1) – n/m Gain (loss) on — (11) 100.0 disposition (c) — 26 (100.0) ——- ——- ——– ——- ——- ——— $159 $100 59.0 Net income $422 $395 6.8 ======= ======= ======== ======= ======= ========= Earnings Per Share – Basic Continuing $0.72 $0.53 35.8 operations $1.95 $1.78 9.6 Discontinued — (0.05) 100.0 operations — 0.13 (100.0) ——- ——- ——– ——- ——- ——— $0.72 $0.48 50.0 Net income $1.95 $1.91 2.1 ======= ======= ======== ======= ======= ========= Earnings Per Share – Diluted Continuing $0.70 $0.51 37.3 operations $1.88 $1.72 9.3 Discontinued — (0.05) 100.0 operations — 0.12 (100.0) ——- ——- ——– ——- ——- ——— $0.70 $0.46 52.2 Net income $1.88 $1.84 2.2 ======= ======= ======== ======= ======= =========
Weighted average 219 208 number of Shares 217 207 ======= ======= ======= ======= Weighted average number of Shares 228 217 assuming dilution 225 215 ======= ======= ======= =======
(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.
(b) 2005 activity primarily represents a sales and use tax assessment related to the Company’s gaming business disposed of in 1999 for periods prior to its disposition.
(c) 2004 activity represents the reversal of reserves that are no longer required as the related contingencies have been resolved and the favorable resolution of certain tax matters related to the 1999 divestiture of the Company’s gaming business.
n/m = not meaningful
STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED BALANCE SHEETS (in millions, except share data)