Starwood 2005 Annual Report Download - page 73

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STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
AND STARWOOD HOTELS & RESORTS
NOTES TO FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying consolidated Ñnancial statements represent the consolidated Ñnancial position and
consolidated results of operations of (i) Starwood Hotels & Resorts Worldwide, Inc. and its subsidiaries (the
""Corporation''), including Sheraton Holding Corporation and its subsidiaries (""Sheraton Holding'') (for-
merly ITT Corporation) and Starwood Hotels & Resorts and its subsidiaries (the ""Trust'' and, together with
the Corporation, ""Starwood'' or the ""Company''), and (ii) the Trust.
Starwood is one of the world's largest hotel and leisure companies. The Company's principal business is
hotels and leisure, which is comprised of a worldwide hospitality network of more than 860 full-service hotels,
vacation ownership resorts and residential developments primarily serving two markets: luxury and upscale.
The principal operations of Starwood Vacation Ownership, Inc. (""SVO'') include the acquisition, develop-
ment and operation of vacation ownership resorts; marketing and selling vacation ownership interests
(""VOIs'') in the resorts; and providing Ñnancing to customers who purchase such interests.
The Trust was formed in 1969 and elected to be taxed as a real estate investment trust (""REIT'') under
the Internal Revenue Code (the ""Code''). In 1980, the Trust formed the Corporation and made a distribution
to the Trust's shareholders of one share of common stock, par value $0.01 per share, of the Corporation (a
""Corporation Share'') for each common share of beneÑcial interest, par value $0.01 per share, of the Trust (a
""Trust Share'').
Pursuant to a reorganization in 1999, the Trust became a subsidiary of the Corporation, which directly
and indirectly holds all outstanding shares of the new Class A shares of beneÑcial interest of the Trust
(""Class A Shares''). Each Trust Share was converted into one share of the new non-voting Class B Shares of
beneÑcial interest in the Trust (a ""Class B Share''). The Corporation Shares and the Class B Shares trade
together on a one-for-one basis, and pursuant to an agreement between the Corporation and the Trust, may be
transferred only in units (""Shares'') consisting of one Corporation Share and one Class B Share.
The Corporation, through its subsidiaries, is the general partner of, and held, as of December 31, 2005, an
aggregate 98.7% partnership interest in, SLC Operating Limited Partnership (the ""Operating Partnership'').
The Trust, through its subsidiaries, is the general partner of, and held an aggregate 97.6% partnership interest
in, SLT Realty Limited Partnership (the ""Realty Partnership'' and, together with the Operating Partnership,
the ""Partnerships'') as of December 31, 2005. The units of the Partnerships (""LP Units'') held by the limited
partners of the respective Partnerships are exchangeable on a one-for-one basis for Shares. At December 31,
2005, there were approximately 5.4 million LP Units outstanding (including 4.3 million LP Units held by the
Corporation). For all periods presented, the LP Units are assumed to have been converted to Shares for
purposes of calculating basic and diluted weighted average Shares outstanding.
Note 2. SigniÑcant Accounting Policies
Principles of Consolidation. The accompanying consolidated Ñnancial statements of the Company and
the Trust and their subsidiaries include the assets, liabilities, revenues and expenses of majority-owned
subsidiaries over which the Company and/or the Trust exercise control. Intercompany transactions and
balances have been eliminated in consolidation.
Cash and Cash Equivalents. The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Restricted Cash. Restricted cash primarily consists of deposits received on sales of VOIs that are held in
escrow until a certiÑcate of occupancy is obtained, the legal rescission period has expired and the deed of trust
has been recorded in governmental property ownership records.
F-11