Starwood 2006 Annual Report Download - page 46

Fair Value Swap liabilities. At December 31, 2005 our debt included a decrease of approximately $3 million related
to the unamortized gains on terminated Fair Value Swaps and the fair market value of current Fair Value Swap
assets.
If we are unable to generate sufficient cash flow from operations in the future to service our debt, we may be
required to sell additional assets, reduce capital expenditures, refinance all or a portion of our existing debt or obtain
additional financing. Our ability to make scheduled principal payments, to pay interest on or to refinance our
indebtedness depends on our future performance and financial results, which, to a certain extent, are subject to
general conditions in or affecting the hotel and vacation ownership industries and to general economic, political,
financial, competitive, legislative and regulatory factors beyond our control.
On July 26, 2006, Standard & Poor’s upgraded our rating to BBB⫺from BB+ and revised their outlook from
positive to stable.
On August 28, 2006, Moody’s Investors Service upgraded our rating to Baa3 from Ba1 and revised their
outlook from positive to stable.
On October 24, 2006, Fitch’s Investors Service upgraded our rating to BBB⫺from BB+ and revised their
outlook from positive to stable.
A distribution of $0.84 per Share was paid in January 2006 and January 2005 to shareholders of record as of
December 31, 2005 and 2004, respectively. In connection with the Host Transaction, on February 17, 2006, the
Trust declared a distribution of $0.21 per Share to shareholders of record on February 28, 2006, which was paid on
March 10, 2006. In addition, on March 15, 2006, the Trust declared a distribution of $0.21 per Share to shareholders
of record on March 27, 2006, which was paid on April 7, 2006. In December 2006 the Corporation declared a
dividend of $0.42 per Corporation Share to shareholders of record on December 31, 2006, which was paid in
January 2007.
Stock Sales and Repurchases
On March 15, 2006 we completed the redemption of the remaining 25,000 shares of Class B EPS for
approximately $1 million in cash. In April 2006, in connection with the Host Transaction, we redeemed all of the
Class A EPS (approximately 562,000 shares) and Realty Partnership units (approximately 40,000 units) for
approximately $34 million in cash. SLC Operating Limited Partnership units are convertible into Shares at the unit
holder’s option, provided that we have the option to settle conversion requests in cash or Shares. In the year ended
December 31, 2006, we redeemed approximately 926,000 SLC Operating Limited Partnership units for approx-
imately $56 million in cash. At December 31, 2006, we had outstanding approximately 213 million Corporation
Shares and 179,000 SLC Operating Limited Partnership units.
In May 2006, the Board of Directors of the Company authorized the repurchase of up to an additional
$600 million of Corporation Shares under our existing Corporation Share repurchase authorization (the “Share
Repurchase Authorization”). Pursuant to the Share Repurchase Authorization, we repurchased 21.7 million Shares
and Corporation Shares in the open market for an aggregate cost of $1.263 billion during 2006. Approximately
$380 million remains available under the Share Repurchase Authorization.
Off-Balance Sheet Arrangements
Our off-balance sheet arrangements include retained interests in securitizations of $51 million, third-party loan
guarantees of $51 million, letters of credit of $148 million, unconditional purchase obligations of $184 million and
surety bonds of $122 million. These items are more fully discussed earlier in this section and in the Notes to
Financial Statements and Item 8 of Part II of this report.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
In limited instances, we seek to reduce earnings and cash flow volatility associated with changes in interest
rates and foreign currency exchange rates by entering into financial arrangements intended to provide a hedge
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