Starwood Hotel & Resorts Worldwide (HOT), a hotel and leisure company, has recorded an 11.68 percent increase in profit for the quarter ended Jun. 30, 2014. The company earned $153 million or $0.80 a share in the second-quarter compared with $137 million or $0.71 a share a year ago. Analysts on average had predicted net income of $0.75 a share.
Revenue during the second-quarter went down marginally 1.47 percent to $1,539 million from $1,562 million in the last year period.
Gross margin expanded by 291 basis points over the last year period to 71.47 percent. Total expenses as a percentage of revenues increased to 84.60 percent from 83.99 percent in the same period last year. That has resulted in contraction of 61 basis points in operating margins to 15.40 percent.
The company posted operating income of $237 million compared with $250 million in the previous year period.
''Our fast-growing Aloft and Element brands are a perfect fit for the lively city of Columbus and will help meet the demand for high-caliber lodging generated by The Ohio State University and the city's thriving business community,'' said Brian McGuinness, senior vice president of Specialty Select Brands for Starwood.
Cash Flow
Starwood Hotel & Resorts Worldwide has generated cash of $426 million from operating activities during the first half, down 19.92 percent or $106 million when compared with the last year period. The company has generated 14.21 cents of operating cash flow in every sales dollar for the first half, down from 17.16 cents in the same period last year.
The company has generated cash of $56 million from investing activities during the first half, as against cash outgo of $45 million in the last year period. It has made net capital expenditure of $155 million during the first half, which was higher by 9.93 percent or $14 million, from a year ago.
The company's free cash flow accounted for 63.62 percent of operating cash flow for the first half, compared with 73.50 percent in the last year period.
The company has spent $501 million cash to meet financing activities during the first half, as against cash outgo of $121 million in the last year period. It has borrowed net of $42 million through debt during the first half. It has spent net of $150 million on repurchase of common stocks.
The company's cash dividend payment increased to $381 million from $3 million for the last year period. Dividend payment accounted for 89.44 percent of operating cash flow for the first half, compared with 0.56 percent in the same period previous year.
As on Jun. 30, 2014, the company's cash balance stood at $597 million, down 9.82 percent or $65 million from Jun. 30, 2013.
Working Capital
Starwood Hotel's working capital turned negative to $20 million as at Jun. 30, 2014, from $266 million on Jun. 30, 2013. It registered a decrease in current ratio to 0.99 as at Jun. 30, 2014 from 1.14 on Jun. 30, 2013.
Debt Position
Starwood Hotel has witnessed an increase in the total debt over the last one year. As on Jun. 30, 2014, total debt stood at $1,726 million, up 1.47 percent or $25 million, from Jun. 30, 2013.
The company's total debt was 19.73 percent of total assets as on Jun. 30, 2014, compared with 18.97 percent on Jun. 30, 2013. It has witnessed an increase in debt to equity ratio to 0.55 on Jun. 30, 2014 compared with 0.49 on Jun. 30, 2013.
Interest coverage ratio, which determines how easily a company can pay interest expenses on outstanding debt, has improved to 10.30 from 9.62 in the same period last year.