Starwood 2012 Annual Report Download - page 143

LIQUIDITY AND CAPITAL RESOURCES
In 2012, we returned over half a billion dollars of capital to shareholders. We did this through increasing our
dividend, paid in December 2012, by 150% and by repurchasing 6.3 million shares in 2012 for a total cost of
approximately $320 million. Additionally during 2012, we retired $1.272 billion of debt, and issued $350 million
of 3.125% Senior Notes due 2023.
Cash From Operating Activities
Cash flow 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 the principal
sources of cash used to fund our operating expenses, interest payments on debt, capital expenditures, dividend
payments and property and income taxes. We believe that our existing borrowing availability together with
capacity for additional borrowings and cash from operations will be adequate to meet all funding requirements
for our operating expenses, principal and interest payments on debt, capital expenditures, dividends and share
repurchases.
The majority of our cash flow is derived from corporate and leisure travelers and is dependent on the supply
and demand in the lodging industry. In a recessionary economy, we experience significant declines in business
and leisure travel. The impact of declining demand in the industry and higher hotel supply in key markets could
have a material impact on our cash flow from operating activities.
Our day-to-day operations are financed through net working capital, a practice that is common in our
industry. The ratio of our current assets to current liabilities was 0.95 and 1.27 as of December 31, 2012 and
2011, respectively. Consistent with industry practice, we sweep the majority of the cash at our owned hotels on a
daily basis and fund payables as needed by drawing down on our existing revolving credit facility.
The majority of our restricted cash balance relates to cash used as collateral to reduce fees on letters of
credit. Additionally, state and local regulations governing sales of VOIs and residential properties allow the
purchaser of such a VOI or property to rescind the sale subsequent to its completion for a pre-specified number
of days. In addition, cash payments received from buyers of units under construction are held in escrow during
the period prior to obtaining a certificate of occupancy. These payments and the deposits collected from sales
during the rescission period are another component of our restricted cash balances in our consolidated balance
sheets. At December 31, 2012 and 2011, we had short-term restricted cash balances of $158 million and
$232 million, respectively.
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