Starwood 2011 Annual Report Download - page 163

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS
claims and counterclaims and in favor of Sheraton on others. Overall, the decision is unfavorable to Sheraton.
Judgment has not as yet been entered, pending the Court’s consideration of post-trial applications for the award
of attorney’s fees and expenses. As a result of this decision, the Company recorded a reserve for this matter
resulting in a pretax charge of $70 million. The legal decision is not final and Starwood intends to appeal.
Collective Bargaining Agreements. At December 31, 2011, approximately 25% of the Company’s U.S.-
based employees were covered by various collective bargaining agreements, providing, generally, for basic pay
rates, working hours, other conditions of employment and orderly settlement of labor disputes. Generally, labor
relations have been maintained in a normal and satisfactory manner, and management believes that the
Company’s employee relations are satisfactory.
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 effect on the operations or financial condition of the Company.
Captive Insurance Company. Estimated insurance claims payable at December 31, 2011 and 2010 were
$70 million and $72 million, respectively. At December 31, 2011 and 2010, standby letters of credit amounting
to $60 million and $64 million, respectively, had been issued to provide collateral for the estimated claims. The
letters of credit are guaranteed by the Company.
ITT Industries. In 1995, the former ITT Corporation, renamed ITT Industries, Inc. (“ITT Industries”),
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. Subsequent to the
acquisition of ITT Corporation in 1998, the Company changed the name of ITT Corporation to Sheraton Holding
Corporation.
For purposes of governing certain of the ongoing relationships between the Company and ITT Industries
after the Distribution and spin-off of ITT Corporation and to provide for an orderly transition, the Company and
ITT Industries have entered into various agreements including a spin-off agreement, Employee Benefits 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 resolution of certain
pre-spin-off matters under these agreements. Based on available information, management does not believe that
these matters would have a material impact on the Company’s consolidated results of operations, financial
position or cash flows. During the year ended December 31, 2010, the Company reversed a liability related to the
1998 acquisition (see Note 13).
Note 26. Business Segment and Geographical Information
The Company has two operating segments: hotels and vacation ownership and residential. The hotel
segment generally represents a worldwide network of owned, leased and consolidated joint venture hotels and
resorts operated primarily under the Company’s proprietary brand names including St. Regis®, The Luxury
Collection®, Sheraton®, Westin®,W
®, Le Méridien®, Four Points®by Sheraton, Aloft®and Element®as well as
hotels and resorts which are managed or franchised under these brand names in exchange for fees. The vacation
ownership and residential segment includes the development, ownership and operation of vacation ownership
resorts, marketing and selling VOIs, providing financing to customers who purchase such interests, licensing fees
from branded condominiums and residences and the sale of residential units.
F-46