Marriott International Earns $0.41 Per Share For The 2002 Third Quarter Compared To $0.39 A Year Ago
WASHINGTON, Oct. 3 /PRNewswire-FirstCall/ -- Marriott International, Inc. (NYSE: MAR) today reported diluted earnings per share of 41 cents in its 2002 third quarter ended September 6, up 5 percent from the year-ago quarter. Net income for the quarter was $103 million, up $2 million from the year-ago quarter, which ended on September 7, 2001. The quarter's results included $11 million of pre-tax income related to the sale of Marriott's Village Oaks senior living portfolio and a $30 million pre-tax charge related to Marriott's previously announced exit from its distribution business. After adjusting for these items, earnings per share for the quarter was $0.46. Synthetic fuel operations contributed 9 cents per share of after-tax earnings during the quarter. Systemwide sales totaled $4.8 billion, roughly the same as last year.
J.W. Marriott, Jr., chairman and chief executive officer of Marriott International, noted the company's continued earnings strength despite lower levels of lodging demand. "We are pleased with the relative strength of our lodging profits, despite continued weakness in U.S. industry-wide revenue per available room (REVPAR). As a result of the strong system growth we have achieved over the past several years, base management and franchise fees, which represent over three quarters of our total fees from hotels, declined only slightly, while overall REVPAR declined 6.8 percent. The preference for our brands is unmistakable. During the past 12 months we continued to outpace our competitors in terms of both rooms added and new rooms in the pipeline. In addition, Marriott has increased its overall REVPAR premium this year.
"Room openings for 2002 are on track, with almost 7,100 gross new rooms opened in the third quarter. For 2002 through 2004, we continue to expect to add between 25,000 and 30,000 hotel rooms annually to our worldwide lodging portfolio through management and franchise agreements, both newly constructed and conversions from other brands. At the end of the third quarter, the company's pipeline of properties either under construction or approved for development exceeded 50,000 rooms.
"During the quarter, we commenced our exit from the distribution business with the announcement of the pending sale of two distribution centers. We are grateful for the many years of dedication from our associates in this segment. We expect to complete the wind-down of the distribution business by year-end 2002."
MARRIOTT LODGING reported an 8 percent decrease in operating results. Profits reflected weaker lodging demand, partially offset by timeshare results and contributions from new properties worldwide.
Across Marriott's lodging brands, REVPAR for comparable U.S. properties declined by an average of 6.8 percent in the 2002 third quarter. Average room rates for these hotels decreased 5.1 percent, while occupancy declined slightly to 72.9 percent. The company's full-service brands (including Marriott Hotels, Resorts and Suites, The Ritz-Carlton, and Renaissance Hotels, Resorts and Suites) experienced a REVPAR decline of 7.8 percent in the quarter, driven primarily by a 4.8 percent decline in rate. Marriott's select-service and extended-stay brands (including Courtyard, Fairfield Inn, Residence Inn, TownePlace Suites, and SpringHill Suites) posted a REVPAR decline of 5.4 percent in the third quarter of 2002, almost entirely driven by a 4.8 percent decline in average daily rate.
Third quarter 2002 results for international lodging operations reflected better trends than the U.S., with stable REVPAR and almost 2 percentage points in higher margins. Lodging demand strengthened in Japan, Korea, and Russia.
Marriott's timeshare business reported flat contract sales in the quarter, after excluding sales from the year-ago quarter related to the acquisition of the Grand Residence Club in Lake Tahoe. Contract sales were strong at timeshare resorts in Colorado, Hawaii, and California, but remained soft in Orlando. Profits in the timeshare business were up 5 percent compared to the third quarter of 2001, primarily as a result of higher gains on the sale of timeshare mortgage notes. Mortgage note sale gains totaled $18 million in the third quarter of 2002, compared to $13 million in the year-ago quarter.
The company has added 185 hotels and timeshare resorts (32,887 rooms) to its worldwide lodging portfolio over the past 12 months, while 22 properties (4,211 rooms) exited the system. A net total of 42 hotels and resorts (6,583 rooms) were added in the 2002 third quarter, including five Marriott Hotels, Resorts and Suites (1,657 rooms), nine Courtyard hotels (1,275 rooms) and 13 Residence Inns (1,598 rooms). At quarter-end, the company's lodging group encompassed 2,505 hotels and timeshare resorts (454,587 rooms).
MARRIOTT SENIOR LIVING SERVICES posted 8 percent sales growth in the quarter. The division reported $17 million in profits, including $11 million related to the sale of Village Oaks. After adjusting for Village Oaks, Senior Living's profits were $6 million versus $3 million a year ago. Occupancy for comparable communities was 84 percent in the quarter, flat with last year's third quarter. The company operates 153 facilities totaling 26,257 residential units. As announced last quarter, the company continues to explore strategic alternatives for Senior Living Services, including a spin-off or sale, and expects to announce a resolution by year-end 2002.
MARRIOTT DISTRIBUTION SERVICES reported a 9 percent decrease in sales in the 2002 third quarter. The division posted a loss of $34 million, $30 million of which was related to the company's exit from the distribution business, including the sale of segment assets. We expect to incur additional material charges in connection with exiting the business, but we are currently unable to estimate their magnitude.
CORPORATE EXPENSES were $25 million in the 2002 third quarter, a $12 million increase from the year ago levels. The increase reflects $3 million of foreign exchange losses and the inclusion in last year's corporate expenses of a $4 million gain on the sale of a tax investment. Interest expense was $19 million in the quarter, a decrease of $7 million, reflecting lower average borrowing levels and rates. Long-term debt, net of cash reserves, at the end of the quarter was $1.6 billion, down from $2.3 billion at year end 2001.
The company repurchased 3.1 million shares of common stock during the third quarter of 2002 at a total cost of $105 million. Subsequent to the third quarter, the company repurchased an additional 2.2 million shares, for total year-to-date purchases of 6.0 million shares. Currently, there are 7.5 million shares remaining under the share repurchase authorization.
During the 2002 third quarter the company sold real estate assets for approximately $233 million. Subsequent to the end of the third quarter, Marriott sold its 11 percent stake in Interval International for $63 million and its Village Oaks portfolio for $62 million, bringing total year-to-date asset sales to $665 million. A $44 million pre-tax gain on the sale of the Interval International investment will be included in the company's fourth quarter results. Contingent liabilities at the end of the quarter, including guarantees and loan commitments, were essentially flat with year-end 2001 levels.
The company's synthetic fuel business produced more synthetic fuel and, consequently, higher cash flow and after-tax earnings than anticipated. The segment posted a pre-tax deficit of $32 million for the third quarter of 2002. As a result, taxes were favorably impacted by $54 million, resulting in 9 cents per share of earnings in the quarter.
Outlook
The company expects fourth quarter REVPAR to increase 8 to 10 percent over 2001 levels and earnings per share to total $0.65 to $0.69 in the fourth quarter. This EPS estimate includes $0.12 per share after-tax from synthetic fuel and an $0.11 per share after-tax gain on the sale of the Interval International investment, but does not include any additional charges related to the exit from the distribution services business.
Given the expected improvement in fourth quarter year-over-year REVPAR, lower than anticipated average borrowings, the gain on Interval International investment sale and higher than expected production from the synthetic fuel business, the company believes that earnings per share of $1.88 to $1.92 is achievable in 2002. This estimate includes the third quarter impacts of the Village Oaks sale and the distribution business charge. The outlook reflects an average REVPAR decline of 4 to 6 percent for comparable U.S. hotels in 2002 and a house profit margin decline of approximately one to two percentage points.
While visibility regarding 2003 is quite low, the company currently expects REVPAR to range from flat to an increase of 4 percent versus 2002 levels, with hotel profit margins down modestly. This would result in lodging profits ranging from $770 million to $800 million. Including the after-tax synthetic fuel impact of approximately $0.30 per share, we expect 2003 earnings per share to total $2.05 to $2.15.
The company expects investment spending in 2002 to include approximately $50 million for maintenance spending and approximately $250 million for new company-developed hotels. We expect timeshare spending to total approximately $200 million. We also expect to invest $300 million in equity slivers, mezzanine financing and mortgage loans for hotels developed by our partners. Based on these spending levels and assuming continued success with asset sales, we expect net cash flow to approximate $700 million in 2002 before share repurchases. The company expects that total investment spending in 2003 will be $600 million to $700 million.
We invite individual investors and members of the news media to listen to our third quarter earnings conference call on October 3 at 10 a.m. ET on the Internet. Go to http://www.marriott.com/investor and click on "recent investor news." A recording of the call will be available by telephone until October 10 at 8:00 p.m. ET by calling (719) 457-0820, reservation number 695188.
Note: This press release contains "forward-looking statements" within the meaning of federal securities laws, including REVPAR, profit margin and earning trends; statements concerning the number of lodging properties expected to be added in future years; expected investment spending; anticipated results from synthetic fuel operations; the anticipated time-frame for exiting the distribution services business; and similar statements concerning anticipated future events and expectations that are not historical facts. We caution you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including the duration and severity of the current economic slowdown and the pace of the lodging industry's recovery from the terrorist attacks of September 11, 2001; supply and demand changes for hotel rooms, vacation ownership intervals, corporate housing and senior living accommodations; competitive conditions in the lodging, senior living and food service distribution industries; relationships with clients and property owners; the availability of capital to finance growth; the results of our evaluation of our senior living services business; and the completion of appropriate arrangements for exiting from our distribution services business, any of which could cause actual results to differ materially from those expressed in or implied by the statements herein. These statements are made as of the date of this press release, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
MARRIOTT INTERNATIONAL, INC. (NYSE: MAR), a leading worldwide hospitality company celebrating its 75th Anniversary in 2002, has over 2,600 operating units in the United States and 65 other countries and territories. Marriott International operates and franchises hotels under the Marriott, JW Marriott, The Ritz-Carlton, Renaissance, Residence Inn, Courtyard, TownePlace Suites, Fairfield Inn, SpringHill Suites and Ramada International brand names; develops and operates vacation ownership resorts under the Marriott Vacation Club International, Horizons, The Ritz-Carlton Club and Marriott Grand Residence Club brands; operates Marriott Executive Apartments; provides furnished corporate housing through its Marriott ExecuStay division; and operates conference centers. Other Marriott businesses include senior living communities and services, wholesale food distribution and synthetic fuel. The company is headquartered in Washington, D.C., and has approximately 144,000 employees. In fiscal year 2001, Marriott International reported systemwide sales of $20 billion. For more information or reservations, please visit our web site at http://www.marriott.com.
IRPR#1
MARRIOTT INTERNATIONAL, INC.
Financial Highlights
12 Weeks Ended September 6, 2002
(in millions, except per share amounts)
Senior Distri- Syn-
Living bution thetic
Sales Lodging Services Services Fuel Total
Management and franchise fees $162 $8 $- $- $170
Other 425 77 351 55 908
---- ---- ---- ---- ----
587 85 351 55 1,078
Other revenues from managed and
franchised properties 1,282 94 - - 1,376
---- ---- ---- ---- ----
1,869 179 351 55 2,454
---- ---- ---- ---- ----
Operating costs and expenses
Operating costs 427 68 385 87 967
Other costs from managed and
franchised properties 1,282 94 - - 1,376
---- ---- ---- ---- ----
1,709 162 385 87 2,343
---- ---- ---- ---- ----
Segment financial results $160 $17 $(34) $(32) $111
==== ==== ==== ====
Corporate expenses (25)
Interest expense (19)
Interest income 28
----
Income before income taxes 95
Benefit (Provision) for income taxes 8
----
Net income $103
====
Basic Earnings Per Share $0.43
====
Diluted Earnings Per Share $0.41
====
Diluted Shares 252.1
MARRIOTT INTERNATIONAL, INC.
Financial Highlights
12 Weeks Ended September 7, 2001
(in millions, except per share amounts)
Senior Distri- Syn-
Living bution thetic Better/
Sales Lodging Services Services Fuel Total (Worse)
Management and franchise
fees $179 $8 $- $- $187
Other 447 74 385 - 906
---- ---- ---- ---- ----
626 82 385 - 1,093
Other revenues from managed
and franchised properties 1,197 83 - - 1,280
---- ---- ---- ---- ----
1,823 165 385 - 2,373 3%
---- ---- ---- ---- ----
Operating costs and
expenses
Operating costs 452 79 384 - 915
Other costs from managed
and franchised properties 1,197 83 - - 1,280
---- ---- ---- ---- ----
1,649 162 384 - 2,195 -7%
---- ---- ---- ---- ----
Segment financial results $174 $3 $1 $- $178 -38%
==== ==== ==== ====
Corporate expenses (13)
Interest expense (26)
Interest income 23
----
Income before income taxes 162 -41%
Benefit (Provision) for income
taxes (61)
----
Net income $101 2%
====
Basic Earnings Per Share $0.41 5%
====
Diluted Earnings Per Share $0.39 5%
====
Diluted Shares 264.8
MARRIOTT INTERNATIONAL, INC.
Financial Highlights
36 Weeks Ended September 6, 2002
(in millions, except per share amounts)
Senior Distri- Syn-
Living bution thetic
Sales Lodging Services Services Fuel Total
Management and franchise
fees $527 $25 $- $- $552
Other 1,239 236 1,102 113 2,690
---- ---- ---- ---- ----
1,766 261 1,102 113 3,242
Other revenues from managed
and franchised properties 3,887 275 - - 4,162
---- ---- ---- ---- ----
5,653 536 1,102 113 7,404
---- ---- ---- ---- ----
Operating costs and expenses
Operating costs 1,261 233 1,144 194 2,832
Other costs from managed and
franchised properties 3,887 275 - - 4,162
---- ---- ---- ---- ----
5,148 508 1,144 194 6,994
---- ---- ---- ---- ----
Segment financial results $505 $28 $(42) $(81) $410
==== ==== ==== ====
Corporate expenses (77)
Interest expense (59)
Interest income 75
----
Income before income taxes 349
Provision for income taxes (35)
----
Net income $314
====
Basic Earnings Per Share $1.30
====
Diluted Earnings Per Share $1.23
====
Diluted Shares 257.8
MARRIOTT INTERNATIONAL, INC.
Financial Highlights
36 Weeks Ended September 7, 2001
(in millions, except per share amounts)
Senior Distri- Syn-
Living bution thetic Better/
Sales Lodging Services Services Fuel Total (Worse)
Management and franchise
fees $594 $24 $- $- $618
Other 1,294 225 1,143 - 2,662
---- ---- ---- ---- ----
1,888 249 1,143 - 3,280
Other revenues from managed
and franchised properties 3,759 245 - - 4,004
---- ---- ---- ---- ----
5,647 494 1,143 - 7,284 2%
---- ---- ---- ---- ----
Operating costs
and expenses
Operating costs 1,260 240 1,137 - 2,637
Other costs from managed
and franchised properties 3,759 245 - - 4,004
---- ---- ---- ---- ----
5,019 485 1,137 - 6,641 -5%
---- ---- ---- ---- ----
Segment financial results $628 $9 $6 $- $643 -36%
==== ==== ==== ====
Corporate expenses (72)
Interest expense (75)
Interest income 59
----
Income before income taxes 555 -37%
Provision for income taxes (203)
----
Net income $352 -11%
====
Basic Earnings Per Share $1.44 -10%
====
Diluted Earnings Per Share $1.36 -10%
====
Diluted Shares 261.1
MARRIOTT INTERNATIONAL, INC.
Business Segment Results
Thirty-six weeks
Twelve weeks ended ended
--------------------------------------------
September September September September
6, 2002 7, 2001 6, 2002 7, 2001
--------- --------- --------- ---------
($ in millions)
Sales
Full-Service $1,194 $1,170 $3,714 $3,779
Select-Service 231 209 676 645
Timeshare 297 286 847 764
Extended-Stay 147 158 416 459
--------- --------- --------- ---------
Total Lodging 1,869 1,823 5,653 5,647
Senior Living Services 179 165 536 494
Distribution Services 351 385 1,102 1,143
Synthetic Fuel 55 - 113 -
--------- --------- --------- ---------
$2,454 $2,373 $7,404 $7,284
========= ========= ========= =========
Segment financial results
Full-Service $76 $70 $265 $314
Select-Service 27 45 95 133
Timeshare 40 38 110 120
Extended-Stay 17 21 35 61
--------- --------- --------- ---------
Total Lodging 160 174 505 628
Senior Living Services 17 3 28 9
Distribution Services (34) 1 (42) 6
Synthetic Fuel (32) - (81) -
--------- --------- --------- ---------
$111 $178 $410 $643
========= ========= ========= =========
MARRIOTT INTERNATIONAL, INC.
Normalized Results
($ in millions)
12 weeks ended September 6, 2002 September 7, 2001
Before
Village Oaks Village Oaks
Segment financial As Gain and MDS Gain and MDS
results Reported Charge Charge
Full-Service $76 $- $76 $70
Select-Service 27 - 27 45
Timeshare 40 - 40 38
Extended Stay 17 - 17 21
------- ------- ------- -------
Total Lodging 160 - 160 174
Senior Living
Services 17 11 6 3
Distribution
Services (34) (30) (4) 1
Synthetic Fuel (32) - (32) -
------- ------- ------- -------
$111 $(19) $130 $178
======= ======= ======= =======
36 weeks ended September 6, 2002 September 7, 2001
Before
Village Oaks Village Oaks
Segment financial As Gain and MDS Gain and MDS
results Reported Charge Charge
Full-Service $265 $- $265 $314
Select-Service 95 - 95 133
Timeshare 110 - 110 120
Extended Stay 35 - 35 61
------- ------- ------- -------
Total Lodging 505 - 505 628
Senior Living
Services 28 11 17 9
Distribution
Services (42) (30) (12) 6
Synthetic Fuel (81) - (81) -
------- ------- ------- -------
$410 $(19) $429 $643
======= ======= ======= =======
MARRIOTT INTERNATIONAL, INC.
KEY LODGING STATISTICS
Third Quarter
2002 Average Daily
REVPAR Occupancy Rate
Brand vs. vs. vs.
2001 2002 2001 2002 2001
--------------------------------------------------------------------------
Marriott Hotels, Resorts and
Suites -7.7% 72.0% -2.4% pts. $126.21 -4.7%
The Ritz-Carlton -8.8% 65.8% -1.5% pts. $206.93 -6.7%
Renaissance Hotels, Resorts and
Suites -7.5% 66.1% -2.9% pts. $120.83 -3.5%
Domestic Composite - Full-Service
(1) -7.8% 70.6% -2.3% pts. $132.26 -4.8%
Residence Inn -6.9% 81.9% 0.6% pts. $97.02 -7.6%
Courtyard -8.2% 73.3% -1.7% pts. $91.95 -6.1%
Fairfield Inn -0.8% 73.4% 0.1% pts. $66.51 -1.0%
TownePlace Suites -2.0% 79.5% 1.1% pts. $64.72 -3.3%
SpringHill Suites -2.7% 69.4% -0.8% pts. $78.48 -1.6%
Domestic Composite - Select-
Service & Extended-Stay(2) -5.4% 75.0% -0.5% pts. $81.66 -4.8%
Domestic Composite - All(3) -6.8% 72.9% -1.4% pts. $104.47 -5.1%
Third Quarter Year-to-Date
2002 Average Daily
REVPAR Occupancy Rate
Brand vs. vs. vs.
2001 2002 2001 2002 2001
--------------------------------------------------------------------------
Marriott Hotels, Resorts and
Suites -9.9% 71.6% -2.6% pts. $136.77 -6.6%
The Ritz-Carlton -10.4% 68.4% -1.5% pts. $235.09 -8.4%
Renaissance Hotels, Resorts and
Suites -10.1% 66.7% -4.0% pts. $131.53 -4.7%
Domestic Composite - Full-
Service(1) -9.9% 70.7% -2.7% pts. $143.66 -6.6%
Residence Inn -10.4% 78.9% -1.2% pts. $98.27 -9.0%
Courtyard -11.1% 70.8% -3.8% pts. $95.17 -6.3%
Fairfield Inn -2.2% 68.1% -0.6% pts. $65.16 -1.3%
TownePlace Suites -4.3% 74.8% 2.3% pts. $63.40 -7.3%
SpringHill Suites -1.6% 70.1% 1.5% pts. $78.88 -3.7%
Domestic Composite - Select-
Service & Extended-Stay(2) -8.0% 71.5% -1.6% pts. $82.78 -6.0%
Domestic Composite - All(3) -9.2% 71.1% -2.1% pts. $110.81 -6.5%
Number of Number of
Properties Rooms/Suites
Sept. vs. Sept. Sept. vs. Sept.
Brand 2002 2001 2002 2001
--------------------------------------------------------------------------
Full-Service Lodging
Marriott Hotels, Resorts and
Suites 439 +17 162,530 +4,713
The Ritz-Carlton 48 +5 15,904 +1,831
Renaissance Hotels, Resorts and
Suites 123 +5 44,996 +2,351
Ramada International 143 +14 20,894 +2,421
Select-Service Lodging
Courtyard 578 +35 82,902 +6,021
Fairfield Inn 500 +29 47,971 +3,056
SpringHill Suites 96 +19 11,027 +2,504
Extended-Stay Lodging
Residence Inn 411 +31 48,530 +3,938
TownePlace Suites 103 +7 10,608 +654
Marriott Executive Apartments 11 +1 2,008 +225
Timeshare
Marriott Vacation Club
International 45 (2) 6,680 +870
Horizons 2 +0 146 +0
The Ritz-Carlton Club 4 +1 143 +43
Marriott Grand Residence Club 2 +1 248 +49
-----------------------------------
Total 2,505 +163 454,587 +28,676
===================================
(1) Full-Service composite statistics include domestic managed comparable
properties for the Marriott Hotels, Resorts and Suites, Renaissance
Hotels, Resorts and Suites, and The Ritz-Carlton brands. Statistics
exclude non-U.S. properties.
(2) Select-Service and Extended-Stay composite statistics include
domestic managed comparable properties for the Courtyard and
Residence Inn brands, and domestic managed and franchised comparable
properties for the TownePlace Suites, Fairfield Inn and SpringHill
Suites brands. Statistics exclude non-U.S. properties.
(3) Composite statistics include domestic managed comparable properties
for the Marriott Hotels, Resorts and Suites, Renaissance Hotels,
Resorts and Suites, The Ritz-Carlton, Courtyard, and Residence Inn
brands, and domestic managed and franchised comparable properties for
the TownePlace Suites, Fairfield Inn and SpringHill Suites brands.
Statistics exclude non-U.S. properties.