Industry: Lodging Company: Starwood Hotels and Resorts

1. Industry: Lodging Company: Starwood Hotels and Resorts Sarah Weatherburn

2. Reformulation • Separates Income and assests/liabilities associated with Enterprise and Financing Activities. • Separation allows us to focus on enterprise in forecasting and valuation.

3. Enterprise Operations • Rent rooms/suites • Resorts – Restaurants • Entertainment • Vacation Homes

4. Starwood Hotels and ResortsConsolidated Balance Sheet(In millions, except share data)

5. Assets – Enterprise vs Financial • Cash & Cash Equivalents • Restricted Cash • Accounts Receivable • Inventories • Securitized Vacation Ownership Notes Receivable (net of doubtful accounts) • Deferred Tax Assets • Prepaid Expenses and Other • Investments • Plant, Property & Equipment • Assets Held for Sale • Deferred Income Taxes • Other Assets • Securitized Vacation Ownership Notes Receiveable

6. Starwood Hotels and ResortsConsolidated Balance Sheet(In millions, except share data)

7. Liabilities – Enterprise vs. Financial • Short-term borrowings and current maturities • Accounts Payable • Current maturities of long-term securitized vacation ownership debt • Accrued Expenses • Accrued Salaries, wages and benefits • Accrued taxes and others • Long Term debt • Long-term securitized vacation ownership debt • Deferred income taxes • Other Liabilities

8. NET ENTERPRISE ASSETS

9. NET FINANCIAL LIABILITIES (NFL)

10. DOUBLE CHECK

11. Starwood Hotels & ResortsConsolidated Statements of Earnings(in millions, except share data)

12. Dealing with Interest Expense

13. Enterprise Profit After Tax

14. Financing Expenses after Tax (EPAT)

15. Questions?