Starwood 2005 Annual Report Download - page 98

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
AND STARWOOD HOTELS & RESORTS
NOTES TO FINANCIAL STATEMENTS Ì (Continued)
approximately $943 million of available borrowing capacity under its domestic and foreign lines of credit as of
December 31, 2005.
The Company is subject to certain restrictive debt covenants under its short-term borrowing and long-
term debt obligations including deÑned Ñnancial covenants, limitations on incurring additional debt, escrow
account funding requirements for debt service, capital expenditures, tax payments and insurance premiums,
among other restrictions. The Company was in compliance with all of the short-term and long-term debt
covenants at December 31, 2005.
The weighted average interest rate for short-term borrowings was 3.21% and 5.44% at December 31, 2005
and 2004, respectively, and their fair values approximated carrying value given their short-term nature. These
average interest rates are composed of interest rates on both U.S. dollar and non-U.S. dollar denominated
indebtedness.
For adjustable rate debt, fair value approximates carrying value due to the variable nature of the interest
rates. For non-public Ñxed rate debt, fair value is determined based upon discounted cash Öows for the debt at
rates deemed reasonable for the type of debt and prevailing market conditions and the length to maturity for
the debt. The estimated fair value of debt at December 31, 2005 and 2004 was $4.4 billion and $4.8 billion,
respectively, and was determined based on quoted market prices and/or discounted cash Öows. See Note 20.
Derivative Financial Instruments for additional discussion regarding the Company's interest rate swap
agreements.
Note 16. Employee BeneÑt Plans
DeÑned BeneÑt and Postretirement BeneÑt Plans. The Company and its subsidiaries sponsor or
previously sponsored numerous funded and unfunded domestic and international pension plans, including the
ITT Sheraton Corporation Ongoing Retirement Plan (""Ongoing Plan''), the ITT Corporation Excess Pension
Plan (""Excess Plan'') and several other plans. All deÑned beneÑt plans covering U.S. employees are frozen.
Certain plans covering non-U.S. employees remain active.
The Ongoing Plan, a frozen pension plan, purchased annuities for $4 million in 2004. The Ongoing Plan
also paid out $1 million in lump-sum beneÑt payments in 2004. The purchase of the annuities and lump-sum
beneÑt payments settled the remaining pension liabilities of the Ongoing Plan. In conjunction with the
settlement of the Ongoing Plan's liabilities, the investment in 174,000 Company Shares were sold in 2003 for
$6 million. The Excess Plan was a frozen plan providing beneÑts to certain former executives of ITT
Corporation. Lump-sum distributions of $1 million were made from the Excess Plan in 2003, settling the
remaining liabilities of the Excess Plan.
As a result of annuity purchases and lump sum distributions from our domestic pension plans, the
Company recorded net settlement gains of approximately $0.3 million, $2 million and $5 million during the
years ended December 31, 2005, 2004 and 2003, respectively.
The Company also sponsors the Starwood Hotels & Resorts Worldwide, Inc. Retiree Welfare Program.
This plan provides health care and life insurance beneÑts for certain eligible retired employees. The Company
has prefunded a portion of the health care and life insurance obligations through trust funds where such
prefunding can be accomplished on a tax eÅective basis. The Company also funds this program on a pay-as-
you-go basis.
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