Finally, as a result of these decisions and the Company’s future plans for the vacation
ownership business, the Company recorded a $90 million non-cash charge for the
impairment of goodwill associated with the vacation ownership business.
The Company believes it has a best-in-class team at SVO, with some of the best brands
and resorts in the industry. These decisions reflect Starwood’s new strategy for the
vacation ownership business, including reducing its capital requirements and positioning
SVO to generate cash for the Company.
Selling, General, Administrative and Other
Selling, general, administrative and other expenses increased 8.2% to $79 million
compared to the fourth quarter of 2008. Costs and expenses related to the Company’s
former Bliss spa business have been reclassified to discontinued operations for both 2009
and 2008 as a result of the sale of Bliss at the end of 2009.
Restructuring Charges, Goodwill Impairment and Other Special Charges, Net
During the fourth quarter of 2009, the Company recorded a pre-tax charge of $355 million,
including $255 million of impairment charges related to vacation ownership projects and a
$90 million charge related to the impairment of vacation ownership goodwill, as discussed
above, and $10 million of severance and other costs associated with its ongoing initiative
of rationalizing its cost structure in light of the current economic climate.
Loss on Asset Dispositions and Impairments, Net
During the fourth quarter of 2009, the Company recorded impairment charges of $42
million primarily related to five owned hotels where their carrying value exceeded their
estimated fair values as a result of the significant decline in the business at those hotels.
Discontinued Operations
During the fourth quarter of 2009, the Company sold its Bliss spa business, its Fifth
Avenue retail shops at the St. Regis New York, and other non-core assets for cash
proceeds of $227 million. Revenues and expenses from these entities, together with
revenues and expenses from two hotels which are in the process of being sold, have been
reclassified to discontinued operations resulting in a loss of $1 million, net of tax. In
addition, the net gain on these sales has been recorded in discontinued operations
resulting in income of $80 million, net of tax. Prior period results have been adjusted to
reflect these reclassifications.
Capital
Gross capital spending during the quarter included approximately $40 million of
maintenance capital and $28 million of development capital. Investment spending on net
vacation ownership interest (“VOI”) and residential inventory was $4 million, primarily in Bal
Harbour. The run rate of spending on development and investment capital declined
throughout the year as in-flight projects were completed.
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