Starwood Reports Second Quarter 2002 Results

WHITE PLAINS, N.Y.—(BUSINESS WIRE)—July, 2002—Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT) (“Starwood” or the “Company”) today reported results for the second quarter of 2002.
Second Quarter Financial Results:
- EPS, excluding special items, was $0.41 compared to $0.54 in 2001. Including special items, EPS was $0.37 compared to $0.52 in 2001. EPS, including tax benefits from discontinued operations was $0.87 compared to $0.52 in 2001.


- Total revenues of $1.032 billion, excluding other revenues from managed and franchised properties, decreased 7.0% from 2001 levels. Revenue per available room (“REVPAR”) for Same-Store Owned Hotels decreased 10.1% in North America and


- 10.2% worldwide when compared to 2001.
- Total Company EBITDA was $320 million compared to $401 million in 2001. EBITDA at Comparable Owned Hotels worldwide decreased
- 19.2% to $253 million. EBITDA at Comparable Owned Hotels in North America decreased 20.8% to $178 million.


- Total Company EBITDA margin was approximately 31.0%. EBITDA margin at Comparable Owned Hotels in North America was 29.2%, up 190 basis points from the first quarter of 2002. EBITDA margin at Comparable Owned Hotels worldwide was 30.3%, up 380 basis points from the first quarter of 2002.


Second Quarter Ended June 30, 2002:
Excluding net charges for special items of approximately $14 million (pretax) in 2002 and $8 million (pretax) in 2001, EPS was $0.41 compared to EPS of $0.54 in the corresponding period of 2001. Including these special items, EPS was $0.37 compared to EPS of $0.52 in 2001. Total revenues were down 7.0% to $1.032 billion compared to the same period of 2001. Operating income, excluding special items, was $189 million compared to $254 million in the same period of 2001 and income from continuing operations, excluding special items, was $85 million compared to $112 million in the same period of 2001. Though in line with the Company`s expectations, results were adversely impacted by the weakened worldwide economic environment. However, operating results continued the sequential quarterly improvement over the fourth quarter of 2001 and first quarter of 2002. Operating results continued to improve primarily as a result of an improving demand environment, a continued focus on cost control and an increase in vacation ownership interest (“VOI”) results.
As discussed in the first quarter 2002 earnings release, in connection with the repayment of debt with the proceeds from the April 2002 senior notes offering, the Company incurred approximately $29 million (pretax) of one-time charges relating to the write-off of deferred financing costs, termination fees for early extinguishment of debt, and terminated interest rate swaps associated with the repaid debt. During the second quarter of 2001, the Company incurred approximately $9 million (pretax) of such charges related to the early extinguishment of debt. Excluding these charges, net interest expense decreased by $11 million when compared to the second quarter of 2001 due to a reduction in interest rates and the completion of financing transactions in the past year. Results further benefited from a $16 million after-tax reduction in goodwill amortization as a result of a new accounting rule pertaining to goodwill and intangible assets. Depreciation expense increased $9 million or 8.4% when compared to the second quarter of 2001 due to prior year`s renovation program and the repositioning and acquisition of certain hotels.

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Six Months Ended June 30, 2002: For the six months ended June 30, 2002, total revenues were $1.926 billion when compared to $2.124 billion in the same period in 2001. EPS excluding net benefits for special items of $9 million (pretax) in 2002 and net charges of $7 million (pretax) in 2001 was $0.49, compared to EPS of $0.84 in the corresponding period in 2001. EPS including these special items was $0.52 compared to $0.82 in 2001 and EPS including discontinued operations was $1.03 compared to $0.82 in 2001. Income from continuing operations decreased to $108 million in the six months ended June 30, 2002 compared to $169 million in the same period of 2001. Income from continuing operations excluding special items was $102 million for the six months ended June 30, 2002 and $174 million for the comparable period of 2001.


Comments from the CEO: Barry S. Sternlicht, Chairman and CEO said, “Though the economic environment remains extremely challenging and the speed of the economic recovery has clearly moderated from our expectations in the first quarter of 2002, there are very encouraging trends, both for the industry and for our company that remain intact. For the industry, future supply continues to decline rapidly, particularly in large urban markets where our assets are concentrated and where the recovery is likely to be most pronounced. For our company, our European operations, particularly Italy and Spain, have fared better than we had predicted and will be helped further by the Euro`s rise. Asia also has exceeded our expectations with owned hotels posting a 14% increase in REVPAR for the quarter. South America, particularly Argentina, has been extremely difficult and is likely to remain so for the foreseeable future.”


Concluding, Mr. Sternlicht said, “As for our brands, our Same-Store Owned W brand`s REVPAR fell just 2% in the quarter and North America systemwide REVPAR declined less than 1% as the brand continues to build share. Three new W`s in San Diego, Seoul and Mexico City will bring our total to 19 and we soon expect W to expand to Europe. Our Westin brand also performed admirably with Same-Store Owned Hotels REVPAR down 8.8% in North America and owned and managed REVPAR down just 5.9%. Westin continues to gain share buoyed by product innovations like the Heavenly Bed, the Heavenly Shower and a new marketing campaign. While Sheraton`s owned REVPAR did not meet our expectations, in part because of its heavy urban concentration, we expect to build upon our Westin and W experience and launch several new Sheraton programs in the third and fourth quarter as we continue the re-imaging of the brand.”


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