Starwood 2012 Annual Report Download - page 189

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS
During the year ended December 31, 2009, we entered into an amendment to our existing co-branded credit
card agreement (“Amendment”) with American Express and extended the term of our co-branding agreement to
June 15, 2015. In connection with the Amendment in July 2009, we received $250 million in cash toward the
purchase of future SPG points by American Express. In accordance with ASC Topic 470, Debt, we have recorded
this transaction as a financing arrangement with an implicit interest rate of 4.5%. The Amendment requires a
fixed amount of $50 million per year to be deducted from the $250 million advance over the five-year period
regardless of the total amount of points purchased. As a result, the liability associated with this financing
arrangement is being reduced ratably over a five-year period beginning in October 2009. The terms of the
Amendment state that if we fail to comply with certain financial covenants, we would have to repay the
remaining balance of the liability, and, if we do not pay such liability, then we are required to pledge certain
receivables as collateral for the remaining balance of the liability. As of December 31, 2012 and 2011, the
liability related to the Amendment was $28 million and $72 million, respectively, and was recorded in other
liabilities.
Note 18. Discontinued Operations
Summary of financial information for discontinued operations is as follows (in millions):
Year Ended December 31,
2012 2011 2010
Income Statement Data
Gain (loss) on disposition, net of tax ............................... $92 $(13) $168
Income (loss) from operations, net of tax ........................... $— $— $ (1)
During the year ended December 31, 2012, the gain of $92 million (net of tax) was primarily related to the
gain of $78 million (net of tax) on the sale of one wholly owned hotel, which was sold unencumbered by a
management or franchise agreement. Additionally, a gain of $23 million (net of tax) resulted from the favorable
settlement of certain liabilities associated with a former subsidiary of ITT Corporation, which we acquired in
1998. These gains were partially offset by a loss of $5 million (net of tax) related to the loss on the sale of four
wholly-owned hotels and a loss of $5 million (net of tax) for accrued interest related to an uncertain tax position
associated with a previous disposition.
During the year ended December 31, 2011, we recorded a loss of $13 million, including an $18 million
pretax loss from the sale of our interest in a consolidated joint venture, offset by a $10 million income tax benefit
on the sale. Additionally, we recorded a $5 million charge related to interest on an uncertain tax position
associated with a disposition in a prior year.
During the year ended December 31, 2010, we recorded a tax benefit of $134 million related to the final
settlement with the IRS regarding a disposition in a prior year (see Note 14) and a pretax gain of approximately
$3 million ($36 million after tax) related to the sale of one wholly-owned hotel for $78 million. The tax benefit
was related to the realization of a high tax basis in this hotel that was generated through a previous transaction.
Note 19. Employee Benefit Plan
During the year ended December 31, 2012, we recorded net actuarial losses of $13 million (net of tax)
related to various employee benefit plans. These losses were recorded in other comprehensive income. The
amortization of the net actuarial loss, a component of other comprehensive income, for the year ended
December 31, 2012 was $2 million (net of tax).
Included in accumulated other comprehensive (loss) income at December 31, 2012 are unrecognized net
actuarial losses of $98 million ($86 million, net of tax) that have not yet been recognized in net periodic pension
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