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Income from continuing operations was $29 m. in the first quarter of 2011

Starwood reports first quarter 2011 results

Starwood Hotels & Resorts Worldwide, Inc. reported first quarter 2011 financial results. Company reported EPS from continuing operations for the first quarter of 2011 of $0.15 per share compared to $0.16 in the first quarter of 2010. Excluding special items, EPS from continuing operations was $0.30 for the first quarter of 2011 compared to $0.13 in the first quarter of 2010. Special items in the first quarter of 2011, which totaled $33 million (pre-tax), primarily relate to a charge associated with the Company’s minority investment in a hotel in Tokyo, Japan following the earthquake in March 2011. Excluding special items, the effective income tax rate in the first quarter of 2011 was 21.0%, compared to 14.5% in the first quarter of 2010.

Income from continuing operations was $29 million in the first quarter of 2011 compared to $30 million in the first quarter of 2010. Excluding special items, income from continuing operations was $58 million in the first quarter of 2011 compared to $24 million in the first quarter of 2010.

Net income was $28 million and $0.14 per share in the first quarter of 2011 compared to $30 million and $0.16 per share in the first quarter of 2010.

Frits van Paasschen, CEO said, “We were able to exceed expectations despite turmoil in North Africa and the Middle East and the devastating earthquake in Japan. This is thanks to our laser-focus on growing faster than the market and flowing this outperformance down to the bottom-line.”

“The outlook for the rest of the year looks promising as we view the events of the past few months as not having derailed the overall global economic recovery. For example, our group and transient bookings remain robust. As such, we remain cautiously confident for 2011 and are bullish about our long-term prospects.”

For the three months ended June 30, 2011:
Adjusted EBITDA is expected to be approximately $245 million to $255 million, assuming:
– REVPAR increases at Same-Store Company Operated Hotels Worldwide of 7% to 9% in constant dollars (approximately 200 basis points higher in dollars at current exchange rates).
– REVPAR increases at Branded Same-Store Owned Hotels Worldwide of 8% to 10% in constant dollars (approximately 400 basis points higher in dollars at current exchange rates).
– Management fees, franchise fees and other income increase approximately 10% to 12%, negatively impacted by approximately 200 basis points by Japan and North Africa.
– Earnings from our vacation ownership and residential business are flat.

Depreciation and amortization is expected to be approximately $79 million. Interest expense is expected to be approximately $58 million. Income from continuing operations is expected to be approximately $82 million to $90 million, reflecting an effective tax rate of approximately 24%. Assuming all of the above, EPS is expected to be approximately $0.42 to $0.46.

For the Full Year 2011:
Macro-economic and geo-political environments remain uncertain. We believe that several scenarios are possible. With low supply growth in developed markets and high demand growth in emerging markets, rate improvement will be the key driver of 2011 results. Based on trends to date, our outlook assumes a normal lodging recovery in 2011, negatively impacted by Japan, North Africa and Mexico:

– Adjusted EBITDA is expected to be approximately $975 million to $1 billion, assuming:
REVPAR increases at Same-Store Company Operated Hotels Worldwide of 7% to 9% in constant dollars (approximately 100 basis points higher in dollars at current exchange rates).
REVPAR increases at Branded Same-Store Owned Hotels Worldwide of 8% to 10% in constant dollars (approximately 200 basis points higher in dollars at current exchange rates).
Margin increases at Branded Same-Store Owned Hotels Worldwide of 150 to 200 basis points.
Management fees, franchise fees and other income increase approximately 10% to 12%, negatively impacted by approximately 200 basis points by Japan and North Africa.
Earnings from our vacation ownership and residential business of approximately $130 million to $140 million.
Selling, general and administrative expenses increase 4% to 5%.
– Depreciation and amortization is expected to be approximately $320 million.
– Interest expense is expected to be approximately $240 million and cash taxes will be approximately $80 million.
– Full year effective tax rate is expected to be approximately 25%.
– Assuming all of the above, EPS is expected to be approximately $1.60 to $1.70.
– Full year capital expenditure (excluding vacation ownership and residential inventory) is expected to be approximately $300 million for maintenance, renovation and technology. In addition, in-flight investment projects and prior commitments for joint ventures and other investments are expected to total approximately $150 million. Vacation ownership (excluding Bal Harbour) is expected to generate approximately $165 million in positive cash flow.
– The Company currently expects closings on Bal Harbour residential units to commence in late Q4 2011. The Company’s current outlook does not include any revenue recognition or cash flows associated with these potential closings. The Company does, however, expect there to be revenue recognition and cash flows from closings in Q4 2011 and the Company will provide updates as the year progresses. Bal Harbour capital expenditure for 2011 is expected to be approximately $150 million.

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