White Plains, NY (Feb. 4, 2010) — Starwood Hotels & Resorts Worldwide Inc. reported a loss in the fourth quarter, mostly because of a hefty charge for cancelled projects and lower prices in its timeshare business.
Excluding special items, which net to a charge of $281 million in 2009 and $133 million in 2008, EPS from continuing operations was $0.51 for the fourth quarter of 2009 compared to $0.49 in the fourth quarter of 2008. Excluding special items, the effective income tax rate in the fourth quarter of 2009 was 4.1% compared to 27.5% in the same period of 2008 primarily due to a lower overall effective tax rate on foreign earnings.
Special items in the fourth quarter of 2009 totaled a pretax charge of $431 million ($281 million after tax or $1.54 per share) and were related to the following primarily non-cash charges:
- $362 million of impairment charges related to the Company’s decision to no longer pursue development of certain vacation ownership projects, charges related to price reductions at certain vacation ownership projects and impairment of goodwill associated with the vacation ownership business.
- $42 million of impairment charges primarily related to five owned hotels.
- $17 million charge associated with tender premiums and other costs related to the prepayment of approximately $600 million of the Company’s long-term debt.
- $10 million of severance and other costs associated with the Company’s ongoing initiative of rationalizing its cost structure.
Total vacation ownership revenues of $134 million were flat when compared to 2008. Originated contract sales of vacation ownership intervals decreased 10.9% primarily due to an overall decline in demand due to the current economic climate. The average price per vacation ownership unit sold decreased 7.1% to approximately $15,000, driven by a higher sales mix of lower-priced inventory, including a higher percentage of biennial inventory. The number of contracts signed decreased 5.5% when compared to 2008. During the fourth quarter of 2009, the Company sold vacation ownership notes receivable and recognized gains of $23 million.
As previously announced, during the fourth quarter of 2009, the Company completed a comprehensive review of its vacation ownership projects. No new projects are being initiated and the Company has decided not to develop certain vacation ownership sites and future phases of certain existing projects. As a result, inventories, fixed assets and land values at certain projects were determined to be impaired and were written down to their fair value, resulting in a non-cash pre-tax impairment charge of $255 million. Additionally, in connection with this review of the business, the Company made a decision to reduce the pricing of certain inventory at existing projects, resulting in a pre-tax charge of $17 million, recorded in the vacation ownership and residential costs and expenses line.
Finally, as a result of these decisions and the Company’s future plans for the vacation ownership business, the Company recorded a $90 million non-cash charge for the impairment of goodwill associated with the vacation ownership business.
The Company believes it has a best-in-class team at SVO, with some of the best brands and resorts in the industry. These decisions reflect Starwood’s new strategy for the vacation ownership business, including reducing its capital requirements and positioning SVO to generate cash for the Company.
Starwood will be conducting a conference call to discuss the fourth quarter financial results at 10:30 a.m. (EST) today at (706) 758-8744. The conference call will be available through a simultaneous web cast in the Investor Relations/Press Releases section of the Company’s website at http://www.starwoodhotels.com. A replay of the conference call will also be available from 1:30 p.m. (EST) today through February 11, 2010 at 12:00 midnight (EST) on both the Company’s website and via telephone replay at (706) 645-9291 (pass code #46323963).
To view the entire fourth quarter report, including the Financial Tables, go to http://phx.corporate-ir.net/…