Starwood 2004 Annual Report Download - page 116

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STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
AND STARWOOD HOTELS & RESORTS
NOTES TO FINANCIAL STATEMENTS Ì (Continued)
the court to assess damages. Starwood vigorously objected to such claims and put forth a two-fold defense
claiming:
(a) that no breach had been committed; and
(b) that even if a breach had been committed, it was merely technical, that is as AHIL was unsuccessful
in acquiring the majority stake in the hotel, AHIL's loss, if any, was not caused by Starwood, but by
its own inability to consummate the acquisition.
The trial judge agreed with Starwood that the breach was merely technical and awarded AHIL nominal
damages of ten Singapore dollars.
AHIL appealed its case to the Court of Appeal (which is the highest court in the Singapore judicial
system) and in a majority decision of 2:1 (with the Chief Justice strongly dissenting), AHIL's appeal was
allowed. The majority ruled that the matter should be sent for assessment of damages for the court to ascertain
what chance AHIL had to acquire the majority stake in the hotel, and place a value on that chance.
No dates have been Ñxed for the hearing of the assessment of damages, but it is expected to take place in
the Ñrst half of 2005. Starwood believes that the numerous obstacles AHIL faced in its failed attempt to
acquire the majority stake in the hotel will make it diÇcult for AHIL to prove that it had a signiÑcant chance
to acquire such stake. Accordingly, Starwood does not expect the resolution of this matter will have a material
adverse eÅect on the consolidated results of operations, Ñnancial position or cash Öows.
The Company is involved in various other legal matters that have arisen in the normal course of business,
some of which include claims for substantial sums. Accruals have been recorded when the outcome is
probable and can be reasonably estimated. While the ultimate results of claims and litigation cannot be
determined, the Company does not expect that the resolution of all legal matters will have a material adverse
eÅect on its consolidated results of operations, Ñnancial position or cash Öow. However, depending on the
amount and the timing, an unfavorable resolution of some or all of these matters could materially aÅect the
Company's future results of operations or cash Öows in a particular period.
Environmental Matters. The Company is subject to certain requirements and potential liabilities under
various federal, state and local environmental laws, ordinances and regulations. Such laws often impose
liability without regard to whether the current or previous owner or operator knew of, or was responsible for,
the presence of such hazardous or toxic substances. Although the Company has incurred and expects to incur
remediation and other environmental costs during the ordinary course of operations, management anticipates
that such costs will not have a material adverse eÅect on the operations or Ñnancial condition of the Company.
Captive Insurance Company. Estimated insurance claims payable at December 31, 2004 were $106 mil-
lion. At December 31, 2004, standby letters of credit amounting to $97 million had been issued to provide
collateral for the estimated claims. The letters of credit are guaranteed by the Company's captive insurance
company.
ITT Industries. In 1995, the former ITT Corporation, renamed ITT Industries, Inc. (""ITT Indus-
tries''), distributed to its stockholders all of the outstanding shares of common stock of ITT Corporation, then
a wholly owned subsidiary of ITT Industries (the ""Distribution''). In connection with this Distribution, ITT
Corporation, which was then named ITT Destinations, Inc., changed its name to ITT Corporation.
For purposes of governing certain of the ongoing relationships between the Company and ITT Industries
after the Distribution and spin-oÅ of ITT Corporation and to provide for an orderly transition, the Company
and ITT Industries have entered into various agreements including a spin-oÅ agreement, Employee BeneÑts
Services and Liability Agreement, Tax Allocation Agreement and Intellectual Property Transfer and License
Agreements. The Company may be liable to or due reimbursement from ITT Industries relating to the
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