Starwood 2012 Annual Report Download

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2013 PROXY STATEMENT & 2012 ANNUAL REPORT
A BETTER WAY
TO EXPERIENCE
THE WORLD.
SHERATON MACAO HOTEL, COTAI CENTRAL
MACAU

Table of contents

  • Page 1
    SHERATON MACAO HOTEL, COTAI CENTRAL MACAU A BETTER WAY TO EXPERIENCE THE WORLD. 2013 PROXY STATEMENT & 2012 ANNUAL REPORT

  • Page 2
    2012 NEW OPENINGS The St. Regis Bal Harbour Resort The St. Regis Doha The St. Regis Mauritius Resort Echoes, A Luxury Collection Resort, Blue Mountains ITC Grand Chola, A Luxury Collection Hotel, Chennai Keraton at The Plaza, A Luxury Collection Hotel, Jakarta Lilianfels, A Luxury Collection Resort,...

  • Page 3
    ...Vitoria Hotel Sheraton Xian North City Hotel Sheraton Yantai Golden Beach Resort Aloft Asheville Downtown Aloft Chandigarh Zirakpur Aloft Nashville West End Aloft San Jose Hotel, Costa Rica Aloft Vaughan Mills Aloft Zhengzhou Zhengdong New District Element Miami International Airport Four Points by...

  • Page 4
    ...major trends driving growth in demand for high-end travel enabled Starwood to perform well. By the numbers, we: » Grew Same Store Worldwide RevPAR by 5% in constant dollars and Management and Franchise Fees by over 10% » Opened 69 hotels, with nearly 18,000 rooms, including the Sheraton Macao, our...

  • Page 5
    ... even more growth as more guests, customers and developers become connected to our brands. We enter 2013 with the strongest balance sheet in the history of our company, perhaps the fastest-growing luxury hotel portfolio in the industry and the largest high-end global footprint of hotels. As a result...

  • Page 6
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. 2013 PROXY STATEMENT & 2012 ANNUAL REPORT

  • Page 7
    ...approve Starwood's 2013 Long-Term Incentive Compensation Plan, (iv) ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2013 and (v) act on any other matters that may be properly presented at the Annual Meeting or...

  • Page 8
    ...our named executive officers; To approve Starwood's 2013 Long-Term Incentive Compensation Plan; To consider and vote upon a proposal to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2013; and To transact such other business as may...

  • Page 9
    ... THE ANNUAL MEETING AND VOTING - QUESTIONS AND ANSWERS CORPORATE GOVERNANCE ELECTION OF DIRECTORS ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION APPROVAL OF THE COMPANY'S 2013 LONG-TERM INCENTIVE COMPENSATION PLAN RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM...

  • Page 10
    ... Alfonso XIII in Seville; • We generated $684 million in residential sales at the St. Regis Bal Harbour; and • We returned over $550 million to stockholders, increasing our dividend by 150% and repurchasing 6.3 million shares. 4 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013 Proxy Statement

  • Page 11
    ...'s incentive compensation in a way that discourages the taking of excessive risks; - the Corporate Governance and Nominating Committee oversees Board processes and corporate governance-related risk and annually reviews legal and regulatory risk with the Company's General Counsel; and - the Capital...

  • Page 12
    ...ficant equity incentives with stock ownership guidelines help ensure long-term compensation is strongly linked to stockholder returns. • Achievement of Company Financial Objectives - A portion of named executive officer compensation is tied directly to our financial performance. • Achievement...

  • Page 13
    ...each named executive officer as determined under Securities and Exchange Commission ("SEC") rules. See the notes and narrative accompanying the 2012 Summary Compensation Table on page 55 of this proxy statement for more information. Option Awards ($) 1,172,036 Non-Equity Incentive Plan Compensation...

  • Page 14
    ...(the "Board") solicits your proxy for the 2013 Annual Meeting (the "Annual Meeting") of Stockholders of Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation ("we," "us," "Starwood" or the "Company"), to be held on May 30, 2013, at 10:00 a.m. local time, at the Sheraton New Orleans Hotel...

  • Page 15
    ... 2013 at 10:00 a.m., local time, at the Sheraton New Orleans Hotel, 500 Canal Street, New Orleans, Louisiana 70130. Seating will begin at 9:00 a.m. If you plan to attend the Annual Meeting and have a disability or require special assistance, please contact the Company's Investor Relations department...

  • Page 16
    ... account. Please sign and return all proxy cards or voting instruction forms you receive to ensure that all of the shares you hold are voted. What if I hold shares through the Company's 401(k) savings plan or employee stock purchase plan? If you participate in the Company's Savings and Retirement...

  • Page 17
    ... of the votes cast at the Annual Meeting, either in person or by proxy. Brokers are not permitted to vote on the approval of Starwood's 2013 Long-Term Incentive Compensation Plan without instructions from the beneficial owner, so if you hold your shares through a broker or other nominee, your...

  • Page 18
    ...informational website that provides stockholders with general information about how to cast their vote and why voting should be an and important consideration for stockholders. You may access that information at investor.gov or at sec.gov/spotlight/ proxymatters.shtml. 12 STARWOOD HOTELS & RESORTS...

  • Page 19
    ... incentive compensation in a way that discourages the taking of excessive risks; • the Corporate Governance and Nominating Committee oversees Board processes and corporate governance-related risk and annually reviews legal and regulatory risk with the Company's General Counsel; and • the Capital...

  • Page 20
    ... or interested party and would like to contact the Board of Directors, you may send a letter to the Board of Directors, c/o the Corporate Secretary of the Company, One StarPoint, Stamford, Connecticut 06902 or contact us online 14 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013 Proxy Statement

  • Page 21
    ... documents on Starwood's investor relations website free of charge at www.starwoodhotels.com/corporate/about/investor/index.html. Choosing to access the documents online will save us the cost of printing and mailing the documents to you and will also help preserve environmental resources. While we...

  • Page 22
    ...Board extensive experience in the travel and leisure industries. Mr. Aron also has significant financial and operational expertise from his experience as Chief Executive Officer or director of several publicly traded companies. 16 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013 Proxy Statement

  • Page 23
    ...: Audit, Compensation and Option Other Current Public Boards: Nucor Corporation and Foster Wheeler, AG Mr. Daley spent his entire professional career with The Procter & Gamble Company, a global consumer packaged goods company, joining the company in 1974, and has held a number of key accounting and...

  • Page 24
    ... positions at Yum! Brands, Kmart, Sears and Potbelly Sandwich Works, Mr. Lewis brings to the Board significant expertise in corporate branding, franchising and management of complex global businesses. Director since: 2001 Committees served: Capital, Compensation and Option Other Current Public...

  • Page 25
    ...account suggestions made by officers, directors, employees and stockholders), recommending directors for service on Board committees, developing and reviewing background information for candidates, monitoring our executive succession STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013 Proxy Statement...

  • Page 26
    ...failed to timely file one Form 3 and 24 Form 4s with respect to 84 transactions. Once the Company informed Mr. Schnaid of his filing obligation, the Company assisted Mr. Schnaid with reporting all late transactions in July 2012. 20 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013 Proxy Statement

  • Page 27
    ... and Analysis beginning on page 37 of this proxy statement, the Compensation Committee has approved the use of performance share awards under which executives may earn payouts measured by the Company's three-year total shareholder STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013 Proxy Statement 21

  • Page 28
    ... OF THE COMPANY'S 2013 LONG-TERM INCENTIVE COMPENSATION PLAN return relative to that of a custom peer group of 20 hospitality, leisure and real estate peers that are of similar scale and operate in the same space as the Company. The initial performance shares reï¬,ecting this design were granted...

  • Page 29
    ...equity-based compensation in the future. In 2012, we granted awards under the 2004 Plan to 1,623 employees covering 1,788,048 shares and we granted awards to 10 nonemployee directors covering 55,510 shares of our common stock. We currently anticipate that our award grants in 2013 and in future years...

  • Page 30
    ... for the grant of awards under the 2013 Plan. As of March 1, 2013, approximately 1,600 employees of the Company and its affiliates and 10 non-employee members of the Board would be eligible for awards under the 2013 Plan. 24 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013 Proxy Statement

  • Page 31
    ... COMPANY'S 2013 LONG-TERM INCENTIVE COMPENSATION PLAN Types of Awards The 2013 Plan provides for the grant of unrestricted stock, restricted stock, RSUs, performance shares, performance units, nonqualified stock options ("NQSOs"), incentive stock options ("ISOs"), SARs and other stock-based awards...

  • Page 32
    ... THE COMPANY'S 2013 LONG-TERM INCENTIVE COMPENSATION PLAN Individual Limits The Committee will determine the individuals to whom awards will be granted, the number of shares subject to an award, and the other terms and conditions of an award. Subject to adjustment as described in the 2013 Plan, and...

  • Page 33
    ...fit margin, revenues, revenue growth, market value added, market share, economic value added, return measures (including but not limited to return on equity, return on investment, return on assets, return on net assets, and return on capital employed), total stockholder return, profit, operating...

  • Page 34
    ... in the value of a share at different points in time, the grant or exercise price must generally (except as otherwise described in the 2013 Plan) not be less than 100% of the fair market value of a share on the date of grant. 28 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013 Proxy Statement

  • Page 35
    .... However, the Committee may provide in an award agreement for an NQSO that the NQSO be transferable consistent with securities law and other applicable law. NQSOs and SARs may not be transferred for value or consideration. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013 Proxy Statement 29

  • Page 36
    .... It does not address state, local, gift, estate, social security or foreign tax consequences, which may be substantially different. Certain intended 2013 Plan participants are residents of foreign countries. Awards of Shares; Restricted Stock Awards A participant generally will recognize taxable...

  • Page 37
    APPROVAL OF THE COMPANY'S 2013 LONG-TERM INCENTIVE COMPENSATION PLAN Performance Share/Unit Awards; Stock Appreciation Rights ("SARs") A participant generally is not taxed upon the grant of a performance share/unit or SAR. The participant will recognize taxable income at the time of settlement of ...

  • Page 38
    ... discretion. We cannot determine the number of awards that may be granted in the future. Registration with the SEC We intend to file a Registration Statement on Form S-8 relating to the issuance of shares of common stock under the 2013 Plan with the SEC pursuant to the Securities Act of 1933, as...

  • Page 39
    ... the Company for fiscal year 2013. The Board of Directors unanimously recommends a vote "FOR" ratification of the appointment of Ernst & Young as the Company's independent registered public accounting firm for fiscal year 2013. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013 Proxy Statement 33

  • Page 40
    ... Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities. (2) Based on information contained in a Schedule 13G/A, dated February 7, 2013 (the "Vanguard 13G/A") filed by The Vanguard Group Inc. ("Vanguard") with the SEC, with respect to the Company, reporting...

  • Page 41
    ... some investment control, and 397 shares owned by Mr. Quazzo's wife in a retirement account. (8) Includes 26,660 shares owned jointly with Mr. Turner's wife, and 280 shares held in a custodial account for Mr. Turner's daughter. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013 Proxy Statement 35

  • Page 42
    ...limit the number of deferred restricted stock units that may be issued. In addition, 9,926,752 shares remain available for issuance under our Employee Stock Purchase Plan, a stock purchase plan meeting the requirements of Section 423 of the Code. 36 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013...

  • Page 43
    ... vacation ownership resorts, 547 hotels managed by us on behalf of third-party owners (including entities in which we have a minority equity interest) and 521 hotels for which we receive franchise fees. from the sales of residential units at the St. Regis Bal Harbour. During 2012, we closed sales...

  • Page 44
    ... performance metrics for this award related to: (1) achieving construction of the project below budget and on time; (2) funding all costs of the property from Starwood Vacation Ownership cash ï¬,ow; (3) achieving budgeted close rates for sales of property units; (4) exceeding mid-2012 revenue goals...

  • Page 45
    ...100 50 0 2008 TSR 2009 CEO Compensation 2010 2011 2012 11,500 10,500 9,500 8,500 7,500 6,500 5,500 4,500 We believe that this chart demonstrates that we have effectively operated an executive compensation program that has closely linked CEO pay changes to the stock price results experienced by our...

  • Page 46
    ... executive compensation to our annual business results and stock performance. Moreover, we strive to keep the executive compensation program transparent, in line with market practices and consistent with the highest standards 40 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013 Proxy Statement

  • Page 47
    ...of our business strategy, as well as demonstrated performance tied to our core leadership competencies that include team building and the development of future talent. These objectives may be related to, among others, operational excellence, brand enhancement, innovation, growth, cost containment/ef...

  • Page 48
    ... strategic/operational/leadership goals performance • Equity compensation awards (consisting of restricted stock and stock option awards made under our Long-Term Incentive Compensation Plan ("LTIP")) granted in February 2012 following the announcement of our earnings for 2011 • Retirement bene...

  • Page 49
    ... promotes achievement of business and individual performance objectives; and • it provides long-term incentives for named executive officers to remain in our employment. 2012 Annual Incentive Compensation. Annual cash incentive awards are a key part of our executive compensation program. For 2012...

  • Page 50
    ... to be paid for 2012 under the Executive Plan, the Compensation Committee established specific annual company financial and strategic/operational/leadership performance goals and a related target incentive amount for each participating executive (plus a maximum payout level for each participating...

  • Page 51
    ...data center, upgrading service and security standards while lowering costs; • Grew share of occupancy for SPG above 50% for the first time in Company history, due in part to Starwood's innovative and industry-leading transformation of benefits of the SPG program; • Expanded the Company's hotel...

  • Page 52
    ... relations program to advance certain of the Company's key initiatives. Mr. Turner's accomplishments for the 2012 performance year included the following: • Successfully managed the global development team to execute agreements for 131 new managed and franchise hotels, which exceeds 2011 growth...

  • Page 53
    ...our compensation strategy and competitive market positioning taking into account company and individual performance factors for the named executive officers described in the section entitled 2012 Annual Incentive Compensation beginning on page 43 of this proxy statement. The Compensation Committee...

  • Page 54
    ... the 2012 Summary Compensation Table on page 55 of this proxy statement. Special Long-Term Cash Incentive Award. In 2009, we granted Mr. Rivera a special long-term performance-based cash award opportunity related to the development of our St. Regis Bal Harbour property. The design of the award was...

  • Page 55
    ... which will be based on our three-year total shareholder return performance relative to a group of peer companies (or relative TSR). For the Chief Executive Officer, the equity mix will be 60% performance shares and 40% restricted stock awards; for the other named executive officers (except for Mr...

  • Page 56
    ... Mr. van Paasschen to receive certain limited perquisites and personal benefits at a level consistent with his prior agreement (such as the use of a driver and car service for business purposes and a private aircraft for business 50 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013 Proxy Statement

  • Page 57
    ... purposes for 2012, including levels of total compensation for executives and directors, pay mix, incentive plan design and equity usage and other terms of employment. We believe that by conducting the competitive analysis using a broad peer group, which includes companies outside the hospitality...

  • Page 58
    ... annual incentive awards, and the expected value of total longterm incentives; and • retirement benefits. When establishing target compensation levels for 2012, the Compensation Committee reviewed peer group data on payments to named executive officers as reported in proxy statements available...

  • Page 59
    ... these equity compensation awards. Compensation Committee Report The Compensation and Option Committee of the Board of Directors of Starwood Hotels & Resorts Worldwide, Inc. has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management...

  • Page 60
    ... and the design of our Executive Plan, incentive compensation is payable under our incentive plans only upon the attainment of performance targets related to business criteria that are in the interests of our stockholders. • Use of Long-Term Incentive Compensation: Equity-based long-term incentive...

  • Page 61
    ... this proxy statement. Cash incentive awards disclosed for 2011 include the following 2011 amounts that were converted into restricted stock units in 2012 and such number of restricted stock units was increased by 33% in accordance with the Executive Plan (no amounts earned for 2012 performance were...

  • Page 62
    ... grants of plan-based incentive awards to the named executive officers made during 2012: All Other Option Exercise Grant Date All Other Stock Awards: Number or Base Fair Value Compensation Awards: Number of Securities Price of of Stock Grant Committee of Shares of Underlying Option and Option Date...

  • Page 63
    ...to the Compensation Committee's determination of the 2012 annual incentive awards for the named executive officers: • the Company's 2012 financial performance as measured by adjusted EBIDTA and EPS; • the strategic, operational and leadership performance goals for each named executive officer...

  • Page 64
    ... restricted stock units. Each equity grant is shown separately for each named executive officer. The market value of the stock awards is based on the closing price of a share on December 31, 2012, the last business day of the fiscal year, which was $57.36. Option Awards Number of Securities...

  • Page 65
    ... initially deferred annual incentive award upon which these awards are based. Shares are distributed upon vesting. Option Exercise Price ($)(1) 53.25 11.39 38.24 61.28 55.06 Option Expiration Date 5/07/2016 2/27/2017 2/26/2018 2/28/2019 2/28/2020 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013...

  • Page 66
    ... investments that he selects. The Company may, but is not required to, make identical investments pursuant to a variable universal life insurance product. When it does, participants have no direct interest in this life insurance. 60 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013 Proxy Statement

  • Page 67
    ...- Class II Dreyfus Stock Index - Initial Shares Fidelity VIP II Contrafund - Service Class NVIT Mid Cap Index Class I Dreyfus IP Small Cap Stock Index - Service Shares NVIT International Index - Class 2 Invesco V.I. International Growth - Series I Shares 1-Year Annualized Rate of Return (as of 2/28...

  • Page 68
    ...award, prorated based upon the number of days employed during such year; • immediate vesting of stock options, restricted stock and restricted stock units held by the executive under any stock option or incentive plan maintained by us; • outplacement services suitable to the executive's position...

  • Page 69
    ...to the unpaid incentive compensation then subject to performance conditions, payable at the maximum level of performance; • immediate vesting of stock options, restricted stock and restricted stock units held under any stock option or long-term incentive plan maintained by the Company; • a lump...

  • Page 70
    ...,500. The Chairman of the Board receives an additional fee of $150,000, payable quarterly in restricted stock units which vest in three years. Attendance Fees Non-Employee Directors do not receive fees for attendance at meetings. 64 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013 Proxy Statement

  • Page 71
    ...grant date. The restricted stock units awarded pursuant to the annual grant generally vest in full upon the earlier of (1) the third anniversary of the grant date and (2) the date such person ceases to be a director of the Company. Starwood Preferred Guest Program Points and Rooms In 2012, each Non...

  • Page 72
    ... meetings and, for one meeting per year, attendance by spouses. In addition, in 2012 Non-Employee Directors received 750,000 SPG points valued at $0.025 per point. Non-Employee Directors receive interest on deferred dividends. Pursuant to SEC rules, perquisites and personal benefits are not reported...

  • Page 73
    ... matters. The Company has adopted a policy which requires the Audit Committee of the Board of Directors to approve the hiring of any current or former employee (within the last five years) of the Company's independent registered public accounting firm into any position (i) as a manager or higher...

  • Page 74
    ... employee of the Company. None of the Compensation Committee members had any relationship requiring disclosure under the Related Person Transaction Policy described below. During fiscal year 2012, none of our executive officers served on the compensation committee (or its equivalent) or board...

  • Page 75
    ... proxy materials to beneficial owners of shares. The Company has engaged D.F. King & Co., Inc. to solicit proxies and to assist with the distribution of proxy materials for a fee of $17,500 plus reasonable out-of-pocket expenses. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013 Proxy Statement 69

  • Page 76
    ...charge, by addressing a request to Investor Relations, Starwood Hotels & Resorts Worldwide, Inc., One StarPoint, Stamford, Connecticut 06902 or by calling (203) 3513500. You may also obtain a copy of the proxy statement and annual report from the investor relations page on the Company's website (www...

  • Page 77
    .... • Continue on Camp Street approximately 3 blocks. • The hotel is on the right, at the corner of Camp Street and Canal Street. • Taxi service is available from the Louis Armstrong New Orleans International Airport, the New Orleans Train Station, and from the Greyhound Bus Station. • Take...

  • Page 78
    ANNEX A STARWOOD HOTELS & RESORTS WORLDWIDE, INC. 2013 LONG-TERM INCENTIVE COMPENSATION PLAN A-1 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013 Proxy Statement

  • Page 79
    ... Article 4 - Shares Subject to the Plan...A-9 4.1 Number of Shares ...A-9 4.2 Individual Limits ...A-9 4.3 Adjustment of Shares ...A-9 Article 5 - Stock Options ...A-10 5.1 Grant of Options ...A-10 5.2 Agreement ...A-10 5.3 Option Price...A-11 5.4 Duration of Options...A-11 5.5 Exercise of Options...

  • Page 80
    .../Units ...A-14 8.3 Earning of Performance Shares/Units ...A-14 8.4 Form and Timing of Payment of Performance Shares/Units ...A-14 8.5 Dividends and Other Distributions ...A-14 8.6 Nontransferability ...A-14 Article 9 - Other Awards ...A-14 Article 10 - Performance Measures ...A-15 10.1 In General...

  • Page 81
    ...the "Starwood Hotels & Resorts Worldwide, Inc. 2013 Long-Term Incentive Compensation Plan" (the "Plan"), as set forth in this document. 1.2 Purpose of Plan. The objectives of the Plan are to (i) attract and retain employees, directors, consultants, advisors and other persons who perform services for...

  • Page 82
    ... the Outstanding Shares and (b) the Outstanding Company Voting Securities, as the case may be, (ii) no Person (other than: the Company, any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, the corporation resulting from...

  • Page 83
    ... selling prices of a Share on the NYSE or other securities exchange on the given date, the trading date preceding the given date, the trading date next succeeding the given date, or an average of trading days. Notwithstanding the foregoing, (i) in the case of an Option or SAR, Fair Market Value...

  • Page 84
    ... 162(m). 2.30 "Plan" means the Starwood Hotels & Resorts Worldwide, Inc. 2013 Long-Term Incentive Compensation Plan set forth in this document and as it may be amended from time to time. 2.31 "Restricted Stock" means an Award of Shares under Article 7 of the Plan, which Shares are issued with such...

  • Page 85
    ... Agreement evidencing the Award, including without limitation, the determination of the number of Options, Stock Appreciation Rights, Stock Awards, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units or Other Awards subject to an Award and the form, terms, conditions and...

  • Page 86
    ...except to the extent the Committee determines that an Award to a Covered Employee shall not comply with the performance-based compensation provisions of Code section 162(m) (and may be excluded from these limits without adversely A-9 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013 Proxy Statement

  • Page 87
    ... rules shall apply to Awards under the Plan: (a) Options and SARs. The maximum number of Options and Stock Appreciation Rights that, in the aggregate, may be granted in any one fiscal year to any one Participant shall be three million (3,000,000). Restricted Stock and Restricted Stock Units...

  • Page 88
    ... date. The aggregate Fair Market Value of Shares with respect to which incentive stock options (within the meaning of Code section 422) granted to a Participant are first exercisable in any calendar year under the Plan and all other incentive stock option plans of the Employer) shall not exceed One...

  • Page 89
    ...any Option. A Stock Appreciation Right shall entitle the holder, within the specified period, to exercise the SAR and receive in exchange therefor a payment having an aggregate value equal to the amount by which the Fair Market Value of a Share exceeds the SAR Price, times the number of Shares with...

  • Page 90
    ..., without limitation, the number of Shares of Restricted Stock or the number of Restricted Stock Units granted; the purchase price, if any, to be paid for each Share of Restricted Stock or Restricted Stock Unit, which may be more than, equal to, or less than Fair Market Value of a Share and may...

  • Page 91
    ... in the value of a Share at different points in time, the grant or exercise price will not be less than 100% of the Fair Market Value of the Shares on the date of grant unless the Other Award is granted in replacement for STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013 Proxy Statement A-14

  • Page 92
    ...fit margin, revenues, revenue growth, market value added, market share, economic value added, return measures (including but not limited to return on equity, return on investment, return on assets, return on net assets, and return on capital employed), total stockholder return, profit, operating...

  • Page 93
    ... to the closing price of a Share on the last trading day of the calendar quarter immediately preceding the grant date for such Shares (e.g., for purposes of any Shares awarded on September 30, 2013, under this Section 11.2, "Fair Market Value" shall be the NYSE closing price for a Share on June...

  • Page 94
    ...of any agreement between the Company and the Participant relating to the disclosure of confidential information or trade secrets, the solicitation of employees, customers, suppliers, licensees, licensors or contractors, or the performance of competitive services; (ii) conduct that constitutes Cause...

  • Page 95
    ... "short-term deferral rule," payment for such Outstanding Awards or Accelerated Replacement Awards shall be made not later than 2-1/2 months after the year in which they are no longer subject to substantial risk of forfeiture. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. - 2013 Proxy Statement A-18

  • Page 96
    ...applicable requirements of any securities exchange or similar entity. 17.2 Rights of Stockholder. Except as otherwise provided in Article 7 of the Plan or in the applicable Restricted Stock Agreement, each Participant who receives an Award of Shares of Restricted Stock shall at all times have all of...

  • Page 97
    ... qualification of the Shares under any applicable national or foreign law or ruling of any governmental body that the Company determines are necessary or advisable. (b) IN WITNESS WHEREOF, this Plan is executed this ___ day of _____, 2013. STARWOOD HOTELS & RESORTS WORLDWIDE, INC ATTEST Secretary...

  • Page 98
    ...For the Fiscal Year Ended December 31, 2012 OR ' Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period from to Commission File Number: 1-7959 (Exact name of registrant as specified in its charter) STARWOOD HOTELS & RESORTS WORLDWIDE, INC...

  • Page 99
    ...-Looking Statements ...Business ...Risk Factors ...Unresolved Staff Comments ...Properties ...Legal Proceedings ...Mine Safety Disclosures ...PART II Market for Registrants' Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ...Selected Financial Data ...Management...

  • Page 100
    ... business both directly and through our subsidiaries. We boast one of the industry's leading loyalty programs, Starwood Preferred Guest ("SPG"), allowing members to earn and redeem points for room stays, room upgrades and flights, with no blackout dates. We also own Starwood Vacation Ownership...

  • Page 101
    ... been selling vacation ownership interests ("VOIs") for more than 30 years. Our principal executive offices are located at One StarPoint, Stamford, Connecticut 06902, and our telephone number is (203) 964-6000. Hotel Business Managed and Franchised Hotels. Hotel and resort properties in the United...

  • Page 102
    ...to gross revenue and incentive fees tied to profits as well as fees for other services, including centralized reservations, national and international advertising and sales and marketing. In our experience, owners seek hotel managers that can provide attractively priced base, incentive and marketing...

  • Page 103
    ..., 2012 and 2011, we invested approximately $315 million and $283 million, respectively, for capital expenditures at owned hotels. These capital expenditures included renovation costs at The Westin Peachtree Plaza in Atlanta, GA, the Sheraton Kauai Resort in Koloa, HI, the Aloft San Francisco Airport...

  • Page 104
    ... number of our hotels in the past few years, as of December 31, 2012, we own or lease 53 hotels as follows: Hotel Location Rooms U.S. Hotels: The St. Regis Hotel, San Francisco The St. Regis Bal Harbour Resort The St. Regis New York The Phoenician, Scottsdale W New York - Times Square W New Orleans...

  • Page 105
    ... our brands. We develop, own and operate vacation ownership resorts, market and sell the VOIs in the resorts and, in many cases, provide financing to customers who purchase such ownership interests. Owners of VOIs can trade their interval for intervals at other Starwood vacation ownership resorts...

  • Page 106
    ... and residences) is for connoisseurs who desire the finest expressions of luxury. They provide flawless and bespoke service to high-end leisure and business travelers. St. Regis hotels are located in the ultimate locations within the world's most desired destinations, important emerging markets and...

  • Page 107
    ... that provides "A New Perspective". Sheraton® (luxury and upscale full-service hotels, resorts and residences) is our largest brand serving the needs of business and leisure travelers worldwide. For over 75 years this iconic brand has welcomed guests, becoming a trusted friend to travelers and one...

  • Page 108
    ...and timeshare industry is highly competitive. Competition is generally based on quality and consistency of room, restaurant and meeting facilities and services, attractiveness of locations, availability of a global distribution system, price, the ability to earn and redeem loyalty program points and...

  • Page 109
    ... and managed hotels and vacation ownership resorts, of which approximately 28% were employed in the United States. At December 31, 2012, approximately 27% of the U.S.-based employees were covered by various collective bargaining agreements providing, generally, for basic pay rates, working hours...

  • Page 110
    ... on pricing and the value of our brands and our increasing reliance on technology; • cyclical over-building in the hotel and vacation ownership industries; • restrictive changes in zoning and similar land use laws and regulations or in health, safety and environmental laws, rules and regulations...

  • Page 111
    ... affected. Moreover, our present growth strategy for development of additional lodging facilities entails entering into and maintaining various management agreements, franchise agreements, and leases with property owners. We compete with other hotel companies for this business primarily on the basis...

  • Page 112
    ... you that any development project, including sites held for development of vacation ownership resorts, will in fact be developed, and, if developed, the time period or the budget of such development may be greater than initially contemplated and the actual number of units or rooms constructed may be...

  • Page 113
    ... demand the use of sophisticated technology and systems including technology utilized for property management, brand assurance and compliance, procurement, reservation systems, operation of our customer loyalty program, distribution, revenue management and guest amenities. These technologies can be...

  • Page 114
    ... technology networks and systems to process, transmit and store proprietary and personal information, and to communicate among our various locations around the world, which may include our reservation systems, vacation exchange systems, hotel/property management systems, customer and employee...

  • Page 115
    ... hazardous or toxic under applicable Environmental Laws, and we from time to time have incurred, and in the future may incur, costs related to cleaning up contamination resulting from historic uses at certain of our current or former properties or our treatment, storage or disposal of wastes at...

  • Page 116
    ...Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Cash Used for Financing Activities in this Annual Report. Volatility in the Credit Markets May Adversely Impact Our Ability to Sell the Loans That Our Vacation Ownership Business...

  • Page 117
    ... drop in demand for our hotel and vacation ownership businesses and adversely affect our financial condition and results of operations. Our Insurance Policies May Not Cover All Potential Losses We carry insurance coverage for general liability, property, business interruption, and other risks with...

  • Page 118
    ... us as the developer of the resort for certain construction related defects. Although we believe that we are in material compliance with all applicable federal, state, local and foreign laws and regulations to which vacation ownership marketing, sales and operations are currently subject, changes in...

  • Page 119
    ... on the management and franchise business. As a result, we are planning on substantially increasing the number of hotels we open every year and increasing the overall number of hotels in our system. This increase will require us to recruit and train a substantial number of new associates to work at...

  • Page 120
    ... Not applicable. PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock, par value $0.01 per share ("Corporation Shares"), is traded on the New York Stock Exchange (the "NYSE") under the symbol...

  • Page 121
    ... conversion requests in cash or Corporation Shares. At December 31, 2012 and 2011 there were approximately 158,000 and 159,000 of these units outstanding, respectively. Issuer Purchases of Equity Securities During the year ended December 31, 2012, our Board of Directors authorized a $250 million...

  • Page 122
    ... total stockholder return on the Corporation Shares against the cumulative total return on the S&P 500 and the S&P Hotels, Resorts & Cruise Lines Index (the "S&P Hotel") for the five fiscal years beginning after December 31, 2007 and ending December 31, 2012. The graph assumes that the value of the...

  • Page 123
    ... and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and related notes thereto (the "Notes") beginning on page F-1 of this Annual Report. 2012 Year Ended December 31, 2011 2010 2009 (In millions, except per share data) 2008 Revenues ...Operating...

  • Page 124
    ...by conditions impacting the travel and hospitality industry as well as competition from other hotel management and franchise companies. • Vacation Ownership and Residential Sales - We recognize revenue from VOI sales and financings and the sales of residential units which are typically a component...

  • Page 125
    ... operating results. Frequent Guest Program. Starwood Preferred Guest ("SPG") is our frequent guest incentive marketing program. SPG members earn points based on spending at our owned, managed and franchised hotels, as incentives to first-time buyers of VOIs and residences, and through participation...

  • Page 126
    .... As of December 31, 2012, the average estimated default rate for our pools of receivables was 9.7%. We use the origination of the notes by brand (Sheraton, Westin, and Other) as the primary credit quality indicator to calculate the loan loss reserve for the vacation ownership notes, as we believe...

  • Page 127
    ... financial statements or tax returns. RESULTS OF OPERATIONS The following discussion presents an analysis of results of our operations for the years ended December 31, 2012, 2011 and 2010. Results for the year ended December 31, 2012 were strong. We performed well along all four key drivers of value...

  • Page 128
    .... Our vacation ownership and residential business remains a separate segment. Prior period data has been restated to be consistent with the current year presentation. In addition to revenues recorded within our four segments, we also have other revenues from managed and franchised properties, which...

  • Page 129
    ... managed hotels and payroll costs for the new hotels entering the system. These revenues represent reimbursements of costs incurred on behalf of managed hotel and vacation ownership properties and franchisees and relate primarily to payroll costs at managed properties where we are the employer...

  • Page 130
    ... related to vacation ownership and residential sales and the $74 million increase in management fees and franchise fees and other income. During the year ended December 31, 2012, we also recorded an $11 million benefit from a favorable adjustment to a litigation reserve compared to a charge, in 2011...

  • Page 131
    ...of $7 million related to the sale of one hotel, $2 million in losses related to the impairments of two hotels whose carrying values exceeded their fair values and a charge of $4 million to reflect the current market price less costs to sell two properties. During the year ended December 31, 2011, we...

  • Page 132
    .... The increase in the effective rate is primarily due to higher pretax income in the U.S. as a result of the Bal Harbour residential sales previously discussed. Incremental tax benefits in 2011 compared to 2012 amounted to approximately $117 million. In 2011, we completed transactions that involved...

  • Page 133
    ...the year ended December 31, 2012 and 2011. Same-Store Systemwide Hotels represent results for same-store owned, leased, managed and franchised hotels. Year Months Ended December 31, 2012 2011 Variance Worldwide (901 hotels with approximately 265,900 rooms) REVPAR (1) ...ADR ...Occupancy ...Americas...

  • Page 134
    ... earnings primarily relate to other license fee income and are also reported outside of segment revenues. Note 26 to the consolidated financial statements presents further information about our segments. The Americas Segment revenues decreased $3 million in the year ended December 31, 2012, compared...

  • Page 135
    ... sales at the St. Regis Bal Harbour. Segment earnings increased $142 million in the year ended December 31, 2012, compared to the corresponding period in 2011, also driven by residential sales at the St. Regis Bal Harbour and an increase in resort and other income at vacation ownership properties...

  • Page 136
    ... been reserved due to uncertainty around collection. Total vacation ownership and residential revenue increased 30.7% to $703 million, for the year ended December 31, 2011, when compared to $538 million in 2010, primarily driven by residential sales related to the St. Regis Bal Harbour which...

  • Page 137
    ... residential sales related to the St. Regis Bal Harbour as discussed above. Other revenues from managed and franchised properties increased primarily due to an increase in payroll costs commensurate with increased occupancy at our existing managed hotels and payroll costs for the new hotels entering...

  • Page 138
    ... an increase in capitalized interest related to construction projects, primarily relating to the St. Regis Bal Harbour. Our weighted average interest rate was 6.66% at December 31, 2011 as compared to 6.86% at December 31, 2010. Year Ended December 31, 2011 Increase / Year Ended (decrease) December...

  • Page 139
    ... million gain from the sale of non-hotel assets. Year Ended December 31, 2011 Increase / Year Ended (decrease) December 31, from prior 2010 year (in millions) Percentage change from prior year Income Tax (Benefit) Expense ... $(75) $27 $(102) n/m In 2011, the Company completed transactions that...

  • Page 140
    ... for our Same-Store Systemwide Hotels for the year ended December 31, 2011 and 2010. Same-Store Systemwide Hotels represent results for same-store owned, leased, managed and franchised hotels. Year Months Ended December 31, 2011 2010 Variance Worldwide (837 hotels with approximately 252,600...

  • Page 141
    ... $33 million in the year ended December 31, 2011, compared to the corresponding period in 2010, primarily related to the increase in management fees and franchise fees, partially offset by the decrease in revenues from our owned leased and consolidated joint venture hotels. Revenues from our owned...

  • Page 142
    ... general overhead expenses, commensurate with the growth in this region. Vacation ownership and residential Total vacation ownership and residential services segment revenue increased $162 million to $688 million for the year ended December 31, 2011, when compared to the corresponding period in 2010...

  • Page 143
    ... from operating activities is generated primarily from management and franchise revenues, operating income from our owned hotels and resorts and sales of VOIs and residential units. Other sources of cash are distributions from joint ventures, servicing financial assets and interest income. These are...

  • Page 144
    ...Venture Hotels ...Corporate and information technology ...Subtotal ...Vacation Ownership and Residential Capital Expenditures: Net capital expenditures for inventory (excluding St. Regis Bal Harbour) (2) ...Capital expenditures for inventory - St. Regis Bal Harbour ...Subtotal ...Development Capital...

  • Page 145
    ... 31, 2012, we have closed contracts on 224 units representing approximately 73% of the total residential units available at the St. Regis Bal Harbour and realized residential revenue of $810 million. Cash Used for Financing Activities The following is a summary of our indebtedness (including capital...

  • Page 146
    ... the call premiums, and other related redemption costs. During 2011, we completed the securitization of vacation ownership receivables resulting in net proceeds of approximately $177 million. December 31, December 31, 2012 2011 (in millions) Gross Unsecuritized Debt ...less: cash (including...

  • Page 147
    ... unfavorable rates. 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...

  • Page 148
    ... in Item 8, Financial Statements and Supplementary Data, and in Note 25. 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...

  • Page 149
    ...financial instruments as of December 31, 2012 (in millions, excluding average exchange rates): Expected Maturity or Transaction Date At December 31, 2013 2014 2015 2016 2017 Total at December 31, 2012 Total Fair Value at December 31, 2012 Thereafter Indebtedness Fixed rate ...Average interest rate...

  • Page 150
    ... the 2013 Annual Meeting of Stockholders (the "Proxy Statement"). The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the close of our fiscal year ended December 31, 2012 and such information is incorporated herein by reference. Executive Officers of...

  • Page 151
    ... of Global Staffing, Training and Development for ITT Sheraton Corporation, a hotel company. Mr. Cava is also a member of the board of directors and has chaired the compensation committee of The Society for Human Resources Management, a non-profit global human resources professional organization...

  • Page 152
    ...of Hotel Administration at Cornell University. Item 11. Executive Compensation. Information regarding executive compensation will be included in our Proxy Statement. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the close of our fiscal year ended...

  • Page 153
    ... by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the SEC on January 8, 1999). Second Indenture Supplement, dated as of April 9, 2006, among the Company, Sheraton Holding Corporation and Bank of New York Trust Company, N.A., as trustee (incorporated by reference to...

  • Page 154
    ... Operating Limited Partnership (incorporated by reference to Exhibit 10.2 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998). Form of Trademark License Agreement, dated as of December 10, 1997, between Starwood Capital Group, L.L.C. and [the Company]/[Starwood...

  • Page 155
    ... the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2007). * Form of Indemnification Agreement between the Company and each of its Directors and executive officers (incorporated by reference to Exhibit 10.10 to the Company's Current Report on Form 8-K filed with the SEC...

  • Page 156
    ...* Retirement Agreement and Mutual General Release of Claims by and between Starwood International Licensing Company, S.A.R.L., Starwood Hotels & Resorts Worldwide, Inc. and Matthew E. Avril, dated as of April 12, 2012 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form...

  • Page 157
    ...the undersigned, thereunto duly authorized. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. By: /s/ FRITS VAN PAASSCHEN Frits van Paasschen Chief Executive Officer and Director Date: February 21, 2013 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by...

  • Page 158
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. INDEX TO FINANCIAL STATEMENTS AND SCHEDULE Page Management's Report on Internal Control over Financial Reporting ...Report of Independent Registered Public Accounting Firm ...Report of Independent Registered Public Accounting Firm ...Consolidated Balance ...

  • Page 159
    ... over financial reporting is effective. Management has engaged Ernst & Young LLP, the independent registered public accounting firm that audited the financial statements included in this Annual Report on Form 10-K, to attest to the Company's internal control over financial reporting. The report is...

  • Page 160
    ... with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2012 and 2011 and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the...

  • Page 161
    ... as a whole, presents fairly in all material respects the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2012, based on...

  • Page 162
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED BALANCE SHEETS (In millions, except share data) December 31, 2012 2011 ASSETS Current assets: Cash and cash equivalents ...Restricted cash ...Accounts receivable, net of allowance for doubtful accounts of $59 and $46 ...Inventories ......

  • Page 163
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share data) Year Ended December 31, 2012 2011 2010 Revenues Owned, leased and consolidated joint venture hotels ...Vacation ownership and residential sales and services ...Management fees, franchise...

  • Page 164
    ...HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Year Ended December 31, 2012 2011 2010 Net income ...$562 Other comprehensive income (loss), net of taxes: Foreign currency translation adjustments ...25 Defined benefit pension and postretirement benefit...

  • Page 165
    ...) (13) - 2,955 562 167 6 (320) 10 (242) - 4 $3,142 (1) Stock option and restricted stock award transactions are net of a tax (expense) benefit of $72 million, $26 million and $28 million in 2012, 2011, and 2010 respectively. (2) As of December 31, 2012, this balance is comprised of $251 million of...

  • Page 166
    ...) decrease in restricted cash ...Dividends paid ...Proceeds from stock option exercises ...Excess stock-based compensation tax benefit ...Share repurchases ...Other, net ...Cash (used for) from financing activities ...Exchange rate effect on cash and cash equivalents ...Increase (decrease) in...

  • Page 167
    ... companies. Our principal business is hotels and leisure, which is comprised of a worldwide hospitality network of approximately 1,100 full-service hotels, vacation ownership resorts and residential developments primarily serving two markets: luxury and upscale. The principal operations of Starwood...

  • Page 168
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS We use the origination of the notes by brand (Sheraton, Westin, and Other) as the primary credit quality indicator to calculate the loan loss reserve for the vacation ownership notes, as we believe there is a relationship ...

  • Page 169
    ...recognized in operating results. Frequent Guest Program. Starwood Preferred Guest® ("SPG") is our frequent guest incentive marketing program. SPG members earn points based on spending at our owned, managed and franchised hotels, as incentives to first-time buyers of VOIs and residences, and through...

  • Page 170
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS estimate of the points that will eventually be redeemed as well as the cost of reimbursing hotels and other thirdparties for other point redemption opportunities. We consolidate the assets and liabilities of the SPG program ...

  • Page 171
    ... recognized in our financial statements or tax returns. Stock-Based Compensation. We calculate the fair value of share-based awards on the date of grant. Restricted stock awards are valued based on the share price. We have determined that a lattice valuation model provides a better estimate of the...

  • Page 172
    ...by conditions impacting the travel and hospitality industry as well as competition from other hotel management and franchise companies. • Vacation Ownership and Residential Sales - We recognize revenue from VOI sales and financings and the sales of residential units which are typically a component...

  • Page 173
    ...made to the prior years' financial statements to conform to the current year presentation. Impact of Recently Issued Accounting Standards. Adopted Accounting Standards In July 2012, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2012-02, "Intangibles...

  • Page 174
    ... share data): Year Ended December 31, 2012 Earnings Shares Per Share Earnings 2011 Shares Per Share Earnings 2010 Shares Per Share Basic earnings from continuing operations attributable to Starwood's common shareholders ...Effect of dilutive securities: Employee options and restricted stock awards...

  • Page 175
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS with ASC Topic 805, Business Combinations, we accounted for this transaction as a step acquisition, remeasured our previously held investment to fair value and recorded the approximately $50 million difference between fair value...

  • Page 176
    ... the properties based on the current market price less costs to sell. The sales of these hotels, which are encumbered by franchise agreements, closed in January 2013, and we received gross cash proceeds of approximately $36 million. Note 7. Plant, Property and Equipment December 31, 2012 2011 Plant...

  • Page 177
    ... January 2013. The goodwill balances as of December 31, 2011 have been reclassified to be consistent with the current year presentation. At October 31, 2012, the date of our annual impairment valuation, the vacation ownership and residential segment's fair value significantly exceeded its book value...

  • Page 178
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS In 2011, we early adopted ASU 2011-08 to consider impairment for our two reporting units at that time, hotels and vacation ownership. The ASU allows companies to perform a qualitative assessment of goodwill, to determine if the ...

  • Page 179
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS this determination, we evaluated the activities that significantly impact the economics of the VIEs, including the management of the securitized notes receivable and any related non-performing loans. We are the servicer of the ...

  • Page 180
    ...(in millions): Year Ended December 31, 2012 2011 2010 Vacation ownership loans - securitized ...Vacation ownership loans - unsecuritized ... $69 15 $84 $64 21 $85 $66 21 $87 The following tables present future maturities of gross VOI notes receivable (in millions) and interest rates: Securitized...

  • Page 181
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS For the vacation ownership and residential segment, we record an estimate of expected uncollectibility on our VOI notes receivable as a reduction of revenue at the time we recognize profit on a timeshare sale. We hold large ...

  • Page 182
    ... 31, 2011 Sheraton ...Westin ...Other ... $ 5 3 1 $ 9 Note 12. Deferred Gains We defer gains realized in connection with the sale of a property for which we continue to manage through a long-term management agreement and recognize the gains over the initial term of the related agreement. As...

  • Page 183
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS Note 14. Income Taxes Year Ended December 31, 2012 2011 2010 Income tax data from our continuing operations is as follows (in millions): Pretax income U.S...Foreign ... $356 262 $618 $ 165 260 $ 425 $ 85 250 $335 Provision ...

  • Page 184
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS The tax effect of the temporary differences and carryforward items that give rise to deferred taxes were as follows (in millions): December 31, 2012 2011 Plant, property and equipment ...Intangibles ...Inventories ...Deferred ...

  • Page 185
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS A reconciliation of our tax provision at the U.S. statutory rate to the provision for income tax as reported is as follows (in millions): Year Ended December 31, 2012 2011 2010 Tax provision at U.S. statutory rate ...U.S. state...

  • Page 186
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS It is reasonably possible that approximately $51 million of our unrecognized tax benefits as of December 31, 2012 will reverse within the next twelve months, the majority of which will not impact the effective tax rate. We ...

  • Page 187
    ... a loan of approximately $38 million, which is due in 2016 and is secured by one of our owned hotels. Proceeds from this loan were used to pay off an existing credit agreement that was due in 2012. During the year ended December 31, 2011, we redeemed all of the outstanding 7.875% Senior Notes due...

  • Page 188
    ... ownership debt was $22 million. Note 17. Other Liabilities December 31, 2012 2011 Other liabilities consisted of the following (in millions): Deferred gains on asset sales ...SPG point liability (a) ...Deferred revenue including VOI and residential sales ...Benefit plan liabilities ...Insurance...

  • Page 189
    ... related to the Amendment was $28 million and $72 million, respectively, and was recorded in other liabilities. Note 18. Discontinued Operations Year Ended December 31, 2012 2011 2010 Summary of financial information for discontinued operations is as follows (in millions): Income Statement Data...

  • Page 190
    ... 2012 2011 Change in Benefit Obligation Benefit obligation at beginning of year ...Service cost ...Interest cost ...Actuarial loss ...Effect of foreign exchange rates ...Plan participant contributions ...Benefits paid ...Other ...Benefit obligation at end of year ...Change in Plan Assets Fair value...

  • Page 191
    ... table presents the components of net periodic benefit cost for the years ended December 31 (in millions): Domestic Pension Benefits 2012 2011 2010 2012 Foreign Pension Benefits 2011 2010 2012 Postretirement Benefits 2011 2010 Service cost ...$- Interest cost ...1 Expected return on plan assets...

  • Page 192
    ... assumptions used to determine net periodic benefit cost for the years ended December 31 were as follows: Domestic Pension Benefits 2012 2011 2010 2012 Foreign Pension Benefits 2011 2010 2012 Postretirement Benefits 2011 2010 Discount rate ...Rate of compensation increase ...Expected return on plan...

  • Page 193
    ... completed at least one year of service. The amount of expense for matching contributions totaled $16 million in 2012, $15 million in 2011, and $13 million in 2010. The plan includes our publicly traded common stock as an investment choice. The balances held in Starwood's stock were $69 million and...

  • Page 194
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS life insurance for eligible participants and retirees. Our contributions to these plans, which were charged to expense during 2012, 2011 and 2010, were approximately $24 million, $26 million and $27 million, respectively. Note ...

  • Page 195
    ... based on market analysis. The historical share price volatility was measured over an 8-year period, which is equal to the contractual term of the options. The weighted average volatility for 2012 grants was 40.6%. The expected life represents the period that our stock-based awards are expected...

  • Page 196
    ... options as of December 31, 2012. We recognize compensation expense, equal to the fair market value of the stock on the date of grant for restricted stock and unit grants, over the service period. The weighted-average fair value per restricted stock or unit granted during 2012, 2011 and 2010...

  • Page 197
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS Approximately 0.1 million shares were issued under the ESPP during the year ended December 31, 2012 at purchase prices ranging from $50.21 to $52.37. Approximately 0.1 million shares were issued under the ESPP during the year ...

  • Page 198
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS Fair Value of Derivative Instruments (in millions) December 31, 2012 Balance Sheet Location Fair Value December 31, 2011 Balance Sheet Location Fair Value Derivatives designated as hedging instruments Asset Derivatives Forward ...

  • Page 199
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS Balance at December 31, 2011 ...Mark-to-market loss (gain) on forward exchange contracts ...Reclassification of gain (loss) from OCI to management fees, franchise fees, and other income ...Balance at December 31, 2012 ...$ (3) -...

  • Page 200
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2012 Carrying Fair Amount Value December 31, 2011 Carrying Fair Amount Value Hierarchy Level Off-Balance sheet: Letters of credit ...Surety bonds ...Total off-balance sheet ... 2 2 $ $ - - - $ 117 80 $ 197 $ $...

  • Page 201
    ... by state or local governments relating to our vacation ownership operations and by our insurers to secure large deductible insurance programs. To secure management contracts, we may provide performance guarantees to third-party owners. Most of these performance guarantees allow us to terminate the...

  • Page 202
    ... December 31, 2012, approximately 27% of our U.S.-based employees were covered by various collective bargaining agreements, generally providing for basic pay rates, working hours, other conditions of employment and orderly settlement of labor disputes. Generally, labor relations have been maintained...

  • Page 203
    ... Luxury Collection®, W®, Westin®, Le Méridien®, Sheraton®, Four Points® by Sheraton, Aloft®, and Element®, and as well as hotels and resorts which are managed or franchised under these brand names in exchange for fees. The management of our vacation ownership and residential sales business...

  • Page 204
    ...reflect the current period presentation (in millions): Year Ended December 31, 2012 2011 2010 Revenues: Americas (a) ...EAME ...Asia Pacific ...Vacation ownership and residential ...Total segment revenues ...Other revenues from managed and franchised hotels ...Other corporate revenues - unallocated...

  • Page 205
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS Year Ended December 31, 2012 2011 2010 Segment earnings: Americas ...EAME ...Asia Pacific ...Vacation ownership and residential ...Total segment earnings ...Other corporate - unallocated ...Corporate selling, general, ...

  • Page 206
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (a) Represents gross inventory capital expenditures less cost of sales of $(11) million, $90 million and $112 million for the years ended 2012, 2011 and 2010, respectively. Additionally, includes development capital of $24 ...

  • Page 207
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS Note 27. Quarterly Results (Unaudited) March 31 Three Months Ended June 30 September 30 December 31 (In millions, except per share data) Year 2012 Revenues ...Costs and expenses ...Income from continuing operations ...Net (...

  • Page 208
    ...II STARWOOD HOTELS & RESORTS WORLDWIDE, INC. VALUATION AND QUALIFYING ACCOUNTS (In millions) Additions (Deductions) Charged to/reversed Charged from to/from Other Payments/ Expenses Accounts (a) Other Balance January 1, Balance December 31, 2012 Trade receivables - allowance for doubtful accounts...

  • Page 209
    ... REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP, New York, NY REQUEST ELECTRONIC OR PRINT COPY OF ANNUAL REPORT A copy of the Annual Report of Starwood Hotels & Resorts Worldwide, Inc., and Form 10-K filed with the Securities and Exchange Commission may be obtained on the Company's website at...

  • Page 210
    ... LEFT THE ST. REGIS BAL HARBOUR RESORT, FLORIDA, UNITED STATES // KERATON AT THE PLAZA, A LUXURY COLLECTION HOTEL, JAKARTA, INDONESIA // W SINGAPORE - SENTOSA COVE, SINGAPORE LE MERIDIEN ISTANBUL ETILER, TURKEY // THE WESTIN LAKE LAS VEGAS RESORT & SPA, NEVADA, UNITED STATES // SHERATON HUZHOU HOT...