Starwood Reports Lower Second-Quarter Net Income

Starwood Hotels & Resorts Worldwide, Inc. reported EPS from continuing operations for the second quarter of 2008 was $0.56 compared to $0.67 in the second quarter of 2007. Excluding special items, which net to zero in 2008, EPS from continuing operations was $0.56 for the second quarter of 2008 compared to $0.82 in the second quarter last year.

Excluding special items, the effective income tax rate in the second quarter of 2008 was 28.3 percent compared to 24.1 percent in the same period of 2007 primarily due to the recognition of foreign tax credits in the second quarter of 2007, which were generated in prior years.

Income from continuing operations was $107 million in the second quarter of 2008 compared to $145 million in 2007. Excluding special items, which net to zero in 2008 and a $33 million charge in 2007, income from continuing operations was $107 million for the second quarter of 2008 compared to $178 million in 2007.

Starwood said the decline in 2008 results was primarily due to lower vacation ownership results and the inclusion, in 2007, of a $27 million gain from the sale of several hotels by a joint venture in which we held a minority interest. Net income was $105 million and EPS was $0.56 in the second quarter of 2008 compared to $145 million and EPS of $0.67 in the second quarter of 2007.

Management fees, franchise fees and other income were $218 million, up $23 million, or 11.8 percent, from the second quarter of 2007. Management fees grew 8.5 percent to $115 million and franchise fees grew 18.9 percent to $44 million. Approximately 55 percent of the company’s management and franchise fees are generated in markets outside the United States.

During the second quarter of 2008, the company signed 37 hotel management and franchise contracts representing approximately 9,000 rooms of which 36 were new builds and one was a conversion from another brand.