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Starwood reports Q2 loss; provides Q3, Q4 guidance

StarwoodHotels & Resorts Worldwide Inc. reported a net loss of $263million during the second quarter, compared to income of $136 million in theyear-ago period.

EPS came to a loss of $1.56 per share, compared to a gain of79 cents per share in the prior-year quarter.

The S&P Capital IQ consensus EPS estimate for the secondquarter ended June 30 was 73 cents.

Loss from continuing operations, including special items,for the quarter came to $35 million compared to income of $118 million in theequivalent period in 2015. Excluding special items, income from continuingoperations totaled $121 million compared to $117 million a year ago.

Special items during the review period included $114 millionof losses on asset sales and impairments and $16 million of restructuring andother special charges.

As at June-end, Starwood's gross debt totaled $2.4 billion.The company had cash and cash equivalents of $1.6 billion, including $19million of restricted cash, and net debt of $800 million, compared to net debtof $1.1 billion as of Dec. 31, 2015.

Regarding its mergerwith Marriott International Inc.,Starwood said it expects the transaction to close in the "coming weeks,"subject to regulatory approval in China and the satisfaction of other customaryclosing conditions.

However, the company offered its third-quarter andfourth-quarter EPS guidance assuming that it remains an independent companythrough Dec. 31. Starwood's full-year owned earnings are negatively impacted byroughly $46 million as a result of asset sales completed in 2015 and 2016, andan additional $20 million of negative impact witnessed due to lost earningsfrom the five hotels transferredto Interval Leisure Group.

For the three months ending Sept. 30, the company expectsEPS before special items in the range of approximately 71 cents to 75 cents.For the three months ending Dec. 31, EPS before special items is expected torange between 79 cents and 84 cents.

The S&P Capital IQ consensus EPS estimates for the thirdquarter and full year are 72 cents and $3.02, respectively.

"Looking ahead to the next two quarters, we expectcurrent trends in global lodging to continue. This slower rate of REVPAR growthwill contribute to lower fee growth in the second half of 2016 than previouslyexpected," CFO Alan Schnaid said in an earnings release.

"However, we expect that the strong performance of ourowned hotels in the first half of the year and our lower SG&A will offsetthe impact of lower fee growth and partially offset both the loss of earningsfrom the hotels we sold this year and the impact of foreign exchange," hesaid.

Worldwide systemwide RevPAR for same-store hotels increased1.4% in constant dollars and 0.7% in actual dollars. Systemwide RevPAR forsame-store hotels in North America rose 3.4% in constant dollars and 3.1% inactual dollars.

During the quarter, the company signed 120 hotel managementand franchise contracts, representing approximately 21,400 rooms. The companyalso opened 20 hotels and resorts with about 4,200 rooms.

In addition, the company sold The St. Regis Florence and The Westin ExcelsiorFlorence hotels for roughly $213 million, subject to long-term managementagreements.