Starwood Hotels & Resorts Worldwide, Inc
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended December 31, 2015 OR o 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 STARWOOD HOTELS & RESORTS WORLDWIDE, INC. (Exact name of registrant as specified in its charter) Maryland (State or other jurisdiction of incorporation or organization) 52-1193298 (I.R.S. employer identification no.) One StarPoint Stamford, CT 06902 (Address of principal executive offices, including zip code) (203) 964-6000 (Registrant’s telephone number, including area code) Securities Registered Pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock, par value $0.01 per share New York Stock Exchange Securities Registered Pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x Note: Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period than the registrant was required to submit and post such files). Yes x No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and smaller reporting company in Rule 12b-2 of the Exchange Act. Large accelerated filer x Accelerated filer o Non-accelerated filer o (Do not check if smaller reporting company) Smaller reporting company o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x As of the last business day of the registrant’s most recently completed second fiscal quarter, June 30, 2015, the aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant computed by reference to the closing sales price as quoted on the New York Stock Exchange was approximately $13.8 billion. As of February 19, 2016, the registrant had 168,759,931 shares of common stock outstanding. Documents Incorporated by Reference: None TABLE OF CONTENTS Page PART I Forward-Looking Statements 1 Item 1. Business 1 Item 1A. Risk Factors 9 Item 1B. Unresolved Staff Comments 23 Item 2. Properties 23 Item 3. Legal Proceedings 23 Item 4. Mine Safety Disclosures 23 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 24 Item 6. Selected Financial Data 26 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 50 Item 8. Financial Statements and Supplementary Data 51 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 51 Item 9A. Controls and Procedures 51 Item 9B. Other Information 51 PART III Item 10. Directors, Executive Officers and Corporate Governance 52 Item 11. Executive Compensation 52 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 52 Item 13. Certain Relationships and Related Transactions and Director Independence 52 Item 14. Principal Accounting Fees and Services 52 PART IV Item 15. Exhibits and Financial Statement Schedules 53 This Annual Report is filed by Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation (the Corporation). Unless the context otherwise requires, all references to “we,” “us,” “our,” “Starwood,” or the “Company” refer to the Corpora tion and include those entities owned or controlled by the Corporation. PART I Forward-Looking Statements This Annual Report contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are any statements other than statements of historical fact, including statements regarding the intent, belief or current expectations of Starwood, its directors or its officers with respect to the matters discussed in this Annual Report. In some cases, forward-looking statements can be identified by the use of words such as “may,” “will,” “expects,” “should,” “believes,” “plans,” “anticipates,” “estimates,” “predicts,” “potential,” “continue,” or other words of similar meaning. Such forward-looking statements appear in several places in this Annual Report, including, without limitation, Item 1. Business and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those discussed in, or implied by, the forward-looking statements. Factors that might cause such a difference include, but are not limited to, general economic conditions, our financial and business prospects, our capital requirements, our financing prospects, our relationships with associates and labor unions, our ability to consummate the Planned Reverse Morris Trust Transaction (as defined below), our ability to consummate the Planned Marriott Merger (as defined below), or realize the anticipated benefits of such transactions and the other risks and uncertainties disclosed under Item 1A. Risk Factors. We caution readers that any such statements are based on currently available operational, financial and competitive information, and they should not place undue reliance on these forward-looking statements, which reflect management’s opinion only as of the date on which they were made. Except as required by law, Starwood undertakes no obligation to publicly update or revise any forward-looking statement to reflect current or future events or circumstances. Item 1. Business General We are one of the largest hotel and leisure companies in the world, with 1,297 properties providing approximately 370,000 rooms in approximately 100 countries and approximately 188,000 employees under our management at our owned and managed properties, vacation ownership resorts and corporate offices. We conduct our hotel and leisure business both directly and through our subsidiaries. We also own Starwood Vacation Ownership, Inc., a premier provider of world- class vacation experiences through villa-style resorts and privileged access to Starwood brands. On October 27, 2015, we entered into definitive agreements with Interval Leisure Group, Inc. (ILG) pursuant to which our vacation ownership business, to be held by Vistana Signature Experiences, Inc., our wholly-owned subsidiary (Vistana), will be spun-off to our stockholders and immediately thereafter Vistana will merge with a wholly-owned subsidiary of ILG (which is referred to in this Annual Report as the Planned Reverse Morris Trust Transaction). Please see Note 27, Planned Reverse Morris Trust Transaction, of the Notes to our Financial Statements for additional information. On November 15, 2015, we entered into a definitive agreement to combine with Marriott International, Inc. (Marriott) (which is referred to in this Annual Report as the Planned Marriott Merger). Please see Note 28, Planned Marriott Merger, of the Notes to our Financial Statements for additional information. The Starwood Preferred Guest (SPG) program is our award-winning proprietary frequent traveler, customer loyalty, and multi-brand marketing program that encourages our members to concentrate their stays within Starwood’s ten brands and to try new hotels in the Starwood family, allowing members to earn and redeem points for room stays, room upgrades and airline flights, with no blackout dates. Since its introduction in 1999, the SPG program has been one of the most innovative and rewarding loyalty program in the hospitality industry. In 2015, SPG members purchased approximately 50% of our room nights. Our revenue and earnings are derived primarily from hotel operations, which include management fees and other fees earned from hotels we manage pursuant to management contracts, the receipt of franchise fees and other fees pursuant to franchise agreements and the operation of our owned hotels. We consider our hotels and resorts, including vacation ownership resorts, generally to be premier establishments with respect to desirability of location, size, facilities, physical condition, quality and variety of services offered in the markets in which they are located. Although obsolescence attributable to age, condition of facilities and style may adversely affect our hotels and resorts, we and the third-party owners of the managed and franchised hotels expend substantial funds to renovate and maintain our facilities in order to remain competitive.