Marriott International Reports 2001 EPS of $1.58 Before Charges
WASHINGTON, Feb. 13 /PRNewswire-FirstCall/ -- Marriott International, Inc. (NYSE: MAR - news) today reported its diluted earnings per share of $1.58 for the full year ended December 28, 2001, excluding $271 million, pre-tax, of restructuring and other charges. Restructuring charges totaled $124 million, pre-tax, and were attributable to the company's decision to exit the company's Village Oaks senior living brand, the cancellation of certain hotel projects, severance costs, and the consolidation of facilities. As explained below, other charges totaled approximately $147 million, pre-tax, and primarily included reserves and write-offs relating to guarantees and loans on fifteen hotels, an investment in a technology venture, accounts receivable deemed uncollectible, and asset write-downs for anticipated losses on the sale of certain properties.
The company's fourth quarter began on September 8, 2001. The fourth quarter diluted loss per share totaled $0.48. Excluding the restructuring and other charges outlined above, fourth quarter diluted earnings per share were $0.22. The year-over-year decline in Marriott Distribution Services' profits reduced reported results by $0.03 per share in the fourth quarter excluding charges. Earnings per share were also approximately $0.03 lower because the company did not sell any timeshare notes during the quarter. The quarter's results reflected the significant reduction in travel following the September 11 terrorism attacks, a weakening global economic climate, and unfavorable currency fluctuations.
J.W. Marriott, Jr., chairman and chief executive officer of Marriott International, said, ``Although the rapid drop in travel during the fourth quarter was unprecedented, the company made a substantial operating profit. Convention and resort hotels were particularly hard-hit. However, despite the 25 percent drop in revenue per available room (RevPAR), we held the house profit margins of our comparable, managed hotels to only a four-percentage point decline. We estimate that owners of our properties had earnings before interest, taxes, depreciation and amortization decline 32 percent during the quarter, implying a strong flow-through rate of 1.3 times.
``We are very optimistic about the long-term prospects for our lodging business. With a recovering economy, industry demand growth is expected to exceed supply growth by 2003. Meanwhile, the advantages of Marriott's strong brands have never been more apparent. We had a record year in new room openings, with a total of almost 50,000 rooms added in 2001. Our RevPAR premiums over the competition increased during the year and our market share increased as well. As of year-end, over 55,000 rooms were in our lodging pipeline.''
MARRIOTT LODGING reported $756 million in operating income in 2001 (before restructuring and other charges), a 19 percent decline from 2000. Revenues, excluding cost reimbursements, declined two percent. Results reflected contribution from new properties worldwide offset by lower occupancy and room rates. Combined base and franchise fee revenues were flat with 2000 levels, while incentive management fee revenue declined 36 percent.
For the full year, the company's full service hotels, including Marriott Hotels, Resorts & Suites, Renaissance, and Ritz-Carlton, reported operating profit of $378 million (excluding charges) for a decline of 26 percent, reflecting a 12 percent decline in U.S. RevPAR. The select service hotel brands, including Courtyard, SpringHill Suites, and Fairfield Inn, earned operating profit totaling $158 million (excluding charges), a decline of 18 percent, with 7 percent lower comparable REVPAR. The company's extended-stay brands, Residence Inn, TownePlace Suites and ExecuStay, reported $71 million in operating profit (excluding charges), a 26 percent decline from 2000 levels.
Marriott Vacation Club International's (MVCI) contract sales increased 22 percent in 2001, largely resulting from sales arising from the purchase of the Grand Summit interval ownership resort in Lake Tahoe, California. MVCI operating profits increased eight percent to $149 million (excluding charges) due to higher timeshare note sale gains for the year, partly offset by higher marketing costs. During the fourth quarter, MVCI profits (excluding charges) declined 14 percent while contract sales declined 2 percent. Fourth quarter results reflected significantly higher marketing costs.
The company added a record 313 hotels and timeshare resorts (49,200 rooms) to its worldwide lodging portfolio during 2001 while 14 properties (3,719 rooms) closed or exited the system, including the World Trade Center Marriott and the New York Financial Center Marriott Hotel. The New York Financial Center hotel has since reopened. At year-end, the Marriott lodging group encompassed 2,398 hotels and timeshare resorts (436,000 rooms). In addition, ExecuStay by Marriott managed 6,100 furnished corporate apartments.
MARRIOTT SENIOR LIVING SERVICES operating income reached $17 million in 2001 (excluding restructuring and other charges). Excluding the impact of cost reimbursements, revenues increased 10 percent. In the fourth quarter, senior living services reported $8 million in operating income (excluding charges). For the year and the quarter, results reflected maturing communities and an improving industry supply environment.
MARRIOTT DISTRIBUTION SERVICES reported a 2001 operating loss of $1 million (excluding restructuring and other charges). During the quarter, Distribution Services' operating loss totaled $7 million on the same basis. Transportation inefficiencies and the loss of a portion of the Sodexho business negatively impacted the division's 2001 results. Marriott commenced a strategic review of this business in January 2002.
CORPORATE EXPENSES, excluding restructuring and other charges, decreased 3 percent in 2001, primarily due to cost containment efforts. Fourth quarter corporate expenses, excluding charges, increased 13 percent, reflecting the impact of cost containment efforts offset by higher foreign exchange losses and expenses associated with the company's new synthetic fuel investment, discussed below.
INTEREST EXPENSE increased 9 percent during 2001, reflecting higher debt levels.
INTEREST INCOME excluding restructuring and other charges increased 73 percent in 2001, as a result of higher loan balances, particularly the Courtyard joint venture mezzanine loan.
The company acquired 6 million shares of its common stock during 2001 and is authorized to repurchase an additional 13 million shares. Long-term debt at year-end, net of cash reserves, was approximately $2.3 billion, approximately $200 million higher than a year ago.
Asset sales totaled $663 million in 2001, including $46 million in the fourth quarter. The company owned ten hotels at year-end 2001, including 6 properties subject to sales agreements totaling $150 million (and expected to close in 2002).
Outlook:
The company expects lodging unit expansion to remain strong in 2002 and 2003 with 25,000 to 30,000 new rooms opening each year. We forecast that RevPAR will decline 2 to 3 percent in 2002 and house profit margins will decline by 1 to 2 percent.
A change in accounting rules pertaining to goodwill will increase earnings per share in 2002 by approximately $.12.
In late 2001, the company invested $46 million in synthetic fuel assets. This investment is covered under Section 29 of the Internal Revenue Code and is expected to generate tax credits through 2007. The amount of the tax credit will be based on the amount of qualified fuel produced and sold. The costs of operating the machines will be reflected as an operating loss under a new line of business, but the losses will be more than offset by reduced book and cash taxes. The company expects earnings per share benefits to total $0.10 to $0.12 per share in 2002. Excluding the impact of the synthetic fuel investment, the company's tax rate is expected to decline to 35.0 percent.
The company expects 2002 earnings to total $1.55 to $1.60 per share,
including the impact of the change in accounting for goodwill, the synthetic
fuel investment and a projected loss in the distribution business of about
$20 million. Earnings in 2003 are expected to total $1.95 to $2.05, assuming a
5 to 10 percent increase in RevPAR, the addition of 25,000 to 30,000 rooms,
1 to 2 points of house profit margin improvement, improvement in MDS results,
and expansion of the synthetic fuel operations.
The following table provides
quarterly earnings guidance.
Change in RevPAR Fully diluted
vs prior year Earnings per Share
First Quarter (13%) to (15%) $.26 to $.27
Second Quarter (5%) to (7%) $.38 to $.39
Third Quarter 0 to (3%) $.41 to $.42
Fourth Quarter 14% to 20% $.50 to $.52
Full Year 2002 (2%) to (3%) $1.55 to $1.60
Full Year 2003 5% to 10% $1.95 to $2.05
The company expects investment spending in 2002 will include approximately $50 million for maintenance spending and approximately $300 million for new company-developed hotels. We anticipate timeshare spending to total approximately $200 million. We expect to invest $300 million in equity slivers, mezzanine financing and mortgage loans for hotels developed by our partners.
Charges:
During the fourth quarter, the company began to actively engage in efforts to sell 25 Village Oaks senior living communities, a companion-style moderate-priced assisted living brand. The assets of Village Oaks have been reclassified as assets held for sale, and recorded at their estimated fair value (resulting in a charge of $60 million). The company will continue to operate the Village Oaks communities in the near term. Village Oaks' operating profit is not material to the results of the senior living services segment. The company plans to continue to operate its portfolio of 131 other senior living services communities.
Restructuring charges related to downsizing totaled $64 million and included costs related to severance, cancellation of development projects, lease terminations and charges associated with unneeded corporate office space.
Other charges include reserves and write-offs relating to guarantees primarily on 6 hotels ($42 million pre-tax), loan impairments on 10 hotels ($43 million pre-tax), accounts receivable deemed uncollectible ($17 million pre-tax), a technology investment and other investments ($32 million pre-tax), and writedowns on properties held for sale ($13 million pre-tax).
In total, approximately 25 percent of the restructuring and other charges taken in the fourth quarter of 2001 were cash and the remaining 75 percent were non-cash.
We invite individual investors and members of the news media to listen to our year end earnings conference call on February 13 at 10:00 a.m. ET on the internet at http://www.marriott.com/investor and click on ``recent investor news''. Slides that accompany the conference call are also available at the same website. A recording of the call will be available by telephone until February 20, 2002 at 8:00 p.m. ET by calling (719) 457-0820, reservation number 652113.
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; 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; and the availability of capital to finance growth, 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 - news) is a leading worldwide hospitality company with nearly 2,600 operating units in the United States and 64 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, Horizons, The Ritz-Carlton Club and Marriott Grand Residence Club brands; operates Marriott Executive Apartments; provides furnished corporate housing through its ExecuStay by Marriott division; and operates conference centers. Other Marriott businesses include senior living communities and services, and wholesale food distribution. The company is headquartered in Washington, D.C., and has approximately 140,000 employees. In fiscal year 2001, Marriott International reported systemwide sales of $20 billion. For more information or reservations, please visit our web site at www.marriott.com.
IRPR#1
MARRIOTT INTERNATIONAL, INC.
Financial Highlights
52 Weeks Ended December 28, 2001
(in millions, except per share amounts)
Senior
Living Distribution
Sales Lodging Services Services Total
Management and franchise fees $794 $35 $- $829
Other 1,755 332 1,637 3,724
2,549 367 1,637 4,553
Other revenues from managed
properties 5,237 362 - 5,599
7,786 729 1,637 10,152
Operating costs and expenses
Restructuring costs 44 60 2 106
Other operating costs 1,864 352 1,641 3,857
Other costs from managed
properties 5,237 362 - 5,599
7,145 774 1,643 9,562
Operating profit (loss) before
corporate expenses and interest 641 (45) (6) 590
Restructuring costs (18)
Corporate expenses (139)
Interest expense (109)
Interest income 46
Income before income taxes 370
Provision for income taxes 134
Net income $236
Basic Earnings Per Share $0.97
Diluted Earnings Per Share $0.92
Diluted Shares 256.7
Basic Shares 243.3
52 Weeks Ended December 29, 2000 2001 %
Senior B(W)
Living Distribution Than
Sales Lodging Services Services Total 2000
Management and franchise fees $907 $33 $- $940
Other 1,702 300 1,500 3,502
2,609 333 1,500 4,442
Other revenues from managed
properties 5,302 336 - 5,638
7,911 669 1,500 10,080 1%
Operating costs and expenses
Restructuring costs - - - -
Other operating costs 1,673 351 1,496 3,520
Other costs from managed
properties 5,302 336 - 5,638
6,975 687 1,496 9,158 -4%
Operating profit (loss) before
corporate expenses and interest 936 (18) 4 922 -36%
Restructuring costs -
Corporate expenses (120)
Interest expense (100)
Interest income 55
Income before income taxes 757 -51%
Provision for income taxes 278
Net income $479 -51%
Basic Earnings Per Share $1.99 -51%
Diluted Earnings Per Share $1.89 -51%
Diluted Shares 254.0
Basic Shares 241.0
MARRIOTT INTERNATIONAL, INC.
Financial Highlights
16 Weeks Ended December 28, 2001
(in millions, except per share amounts)
Senior
Living Distribution
Sales Lodging Services Services Total
Management and franchise fees $200 $11 $ - $211
Other 461 107 494 1,062
661 118 494 1,273
Other revenues from managed
properties 1,478 117 - 1,595
2,139 235 494 2,868
Operating costs and expenses
Restructuring costs 44 60 2 106
Other operating costs 604 112 504 1,220
Other costs from managed
properties 1,478 117 - 1,595
2,126 289 506 2,921
Operating profit (loss) before
corporate expenses and interest 13 (54) (12) (53)
Restructuring costs (18)
Corporate expenses (67)
Interest expense (34)
Interest income (13)
Income (loss) before income taxes (185)
Provision for income taxes (69)
Net income (loss) $(116)
Basic Earnings Per Share $(0.48)
Diluted Earnings Per Share $(0.48)
Diluted Shares 241.3
Basic Shares 241.3
16 Weeks Ended December 29, 2000 2001 %
Senior B(W)
Living Distribution Than
Sales Lodging Services Services Total 2000
Management and franchise fees $295 $12 $- $307
Other 523 94 456 1,073
818 106 456 1,380
Other revenues from managed
properties 1,688 111 - 1,799
2,506 217 456 3,179 -10%
Operating costs and expenses
Restructuring costs - - - -
Other operating costs 545 118 451 1,114
Other costs from managed
properties 1,688 111 - 1,799
2,233 229 451 2,913 0%
Operating profit (loss) before
corporate expenses and interest 273 (12) 5 266 -120%
Restructuring costs -
Corporate expenses (40)
Interest expense (28)
Interest income 36
Income (loss) before income taxes 234 -179%
Provision for income taxes 85
Net income (loss) $149 -178%
Basic Earnings Per Share $0.62 -177%
Diluted Earnings Per Share $0.59 -181%
Diluted Shares 253.7
Basic Shares 240.2
MARRIOTT INTERNATIONAL, INC.
2001 FISCAL YEAR NORMALIZED EARNINGS
(in millions, except per share amounts)
FISCAL YEAR
2001 2001
2001 Restructuring Other
Actual Costs Costs
SALES
Excluding Cost Reimbursements $4,553 $ -- $--
OPERATING PROFIT/(LOSS)
Lodging 641 44 71
Senior Living Services (45) 60 2
Marriott Distribution Services (6) 2 3
Operating Profit before Corporate
Expenses and Interest 590 106 76
Corporate Expenses (157) 18 22
Interest Expense (109) -- --
Interest Income 46 -- 49
Income before Income Taxes 370 124 147
Income Taxes 134 45 54
Net Income $236 $79 $93
Diluted Earnings Per Share $0.92 $0.33 $0.39
Diluted Shares 256.7 241.3 241.3
Effective Tax Rate 36.25% 36.50% 36.50%
FISCAL YEAR 2001
Normalized
2001 2000 % B/(W) than
Normalized Actual 2000
SALES
Excluding Cost Reimbursements $ 4,553 $4,442 2
OPERATING PROFIT/(LOSS)
Lodging 756 936 (19)
Senior Living Services 17 (18) 194
Marriott Distribution Services (1) 4 (125)
Operating Profit before Corporate
Expenses and Interest 772 922 (16)
Corporate Expenses (117) (120) 3
Interest Expense (109) (100) (9)
Interest Income 95 55 73
Income before Income Taxes 641 757 (15)
Income Taxes 233 278 16
Net Income $408 $479 (15)
Diluted Earnings Per Share $1.58 $1.89 (16)
Diluted Shares 260.8 254.0
Effective Tax Rate 36.35% 36.75%
MARRIOTT INTERNATIONAL, INC.
FOURTH QUARTER 2001 NORMALIZED EARNINGS
(in millions, except per share amounts)
FOURTH QUARTER
2001
2001 2001 Other
Actual Restructing Costs Costs
SALES
Excluding Cost Reimbursements $1,273 $-- $--
OPERATING PROFIT /(LOSS)
Lodging 13 44 71
Senior Living Services (54) 60 2
Marriott Distribution Services (12) 2 3
Operating Profit (Loss) before
Corporate Expenses and Interest (53) 106 76
Corporate Expenses (85) 18 22
Interest Expense (34) -- --
Interest Income (13) -- 49
Income (Loss) before
Income Taxes (185) 124 147
Income Taxes (69) 45 54
Net Income (Loss) $(116) $79 $93
Diluted Earnings (Loss)
Per Share $ (0.48) $ 0.33 $ 0.39
Diluted Shares 241.3 241.3 241.3
Effective Tax Rate 37.12% 36.50% 36.50%
FOURTH QUARTER 2001
Normalized
2001 2000 % B(W) than
Normalized Actual 2000
SALES
Excluding Cost Reimbursements $1,273 $1,380 (8)
OPERATING PROFIT /(LOSS)
Lodging 128 273 (53)
Senior Living Services 8 (12) 167
Marriott Distribution Services (7) 5 (240)
Operating Profit (Loss) before
Corporate Expenses and Interest 129 266 (52)
Corporate Expenses (45) (40) (13)
Interest Expense (34) (28) (21)
Interest Income 36 36 --
Income (Loss) before Income Taxes 86 234 (63)
Income Taxes 30 85 65
Net Income (Loss) $56 $149 (62)
Diluted Earnings (Loss)
Per Share $0.22 $0.59 (63)
Diluted Shares 252.2 253.7
Effective Tax Rate 35.18% 36.18%
MARRIOTT INTERNATIONAL, INC.
2001 Restructuring and Other Charges (1)
Living Distribution
Lodging Services Services Subtotal
Restructuring Charges:
Elimination of Product Line $- $60 $- $60
Downsizing 44 - 2 46
44 60 2 106
Other Charges:
Loan and Guarantee
Reserves and Write-offs 36 - - 36
Impairment of Technology
Related Investments and Other 10 - - 10
Accounts Receivable
Reserves 12 2 3 17
Write-down of Properties
Held for Sale 13 - - 13
71 2 3 76
Total Restructuring and
Other Charges $115 $62 $5 $182
Corporate Interest
Expenses Income Total
Restructuring Charges:
Elimination of Product
Line $ - $ - $60
Downsizing 18 - 64
18 - 124
Other Charges:
Loan and Guarantee
Reserves and Write-offs - 49 85
Impairment of Technology
Related Investments
and Other 22 - 32
Accounts Receivable
Reserves - - 17
Write-down of Properties
Held for Sale - - 13
22 49 147
Total Restructuring and
Other Charges $40 $49 $271
(1) Charges related to guarantees are predominantly netted against lodging
operating income, while charges related to notes receivable are netted
against interest income.
MARRIOTT INTERNATIONAL, INC.
Business Segment Results
2001 Full Year and Fourth Quarter
52 weeks ended December 28, 2001
Before
Operating profit (loss) Restructuring Restructuring
before corporate expenses As and Other and Other December
and interest Reported Costs Costs 29, 2000
Full Service $294 $84 $378 $510
Select Service 145 13 158 192
MVCI 147 2 149 138
Extended Stay 55 16 71 96
Total Lodging 641 115 756 936
Senior Living Services (45) 62 17 (18)
Distribution Services (6) 5 (1) 4
$590 $182 $772 $922
16 weeks ended December 28, 2001
Before
Operating profit (loss) Restructuring Restructuring
before corporate expenses As and Other and Other December
and interest Reported Costs Costs 29, 2000
Full Service $(20) $84 $64 $156
Select Service 12 13 25 53
MVCI 28 2 30 35
Extended Stay (7) 16 9 29
Total Lodging 13 115 128 273
Senior Living Services (54) 62 8 (12)
Distribution Services (12) 5 (7) 5
$(53) $182 $129 $266
MARRIOTT INTERNATIONAL, INC.
Condensed Consolidated Balance Sheet
$ in millions December 29, December 28,
2000 2001
ASSETS
Cash & Equivalents $334 $817
Other Current Assets 1,311 1,313
Property & Equipment 3,011 2,930
Intangibles 1,833 1,764
Investments in Affiliates 747 823
Notes & Other Receivables 661 1,038
Other 340 422
TOTAL ASSETS $8,237 $9,107
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities $1,917 $1,802
Long-Term Debt 2,016 2,408
Self-Insurance 122 86
Other Long-Term Liabilities 915 926
Convertible Debt -- 407
Shareholders' Equity 3,267 3,478
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $8,237 $9,107
MARRIOTT INTERNATIONAL, INC.
KEY LODGING STATISTICS
Fourth Quarter
2001
REVPAR Average Daily
vs. 2000 Occupancy Rate
Brand 2001 vs. 2000 2001 vs. 2000
Marriott Hotels, Resorts
and Suites -27.0% 61.1% -13.2% pts. $135.83 -11.2%
Ritz-Carlton -29.8% 56.1% -15.4% pts. $220.85 -10.5%
Renaissance Hotels, Resorts
and Suites -29.5% 54.7% -14.6% pts. $131.04 -10.8%
Residence Inn -18.6% 71.9% -8.3% pts. $97.88 -9.3%
Courtyard -19.7% 63.7% -11.3% pts. $94.48 -5.4%
Fairfield Inn -7.9% 60.6% -4.4% pts. $62.02 -1.3%
Fourth Quarter Year-to-Date
2001
REVPAR Average Daily
vs. 2000 Occupancy Rate
Brand 2001 vs. 2000 2001 vs. 2000
Marriott Hotels, Resorts
and Suites -11.8% 70.4% -7.1% pts. $142.96 -2.9%
Ritz-Carlton -11.5% 66.9% -10.4% pts. $249.94 +2.3%
Renaissance Hotels, Resorts
and Suites -13.1% 65.6% -7.7% pts. $137.79 -2.9%
Residence Inn -7.5% 77.8% -5.1% pts. $105.46 -1.4%
Courtyard -7.0% 71.6% -6.4% pts. $99.45 +1.2%
Fairfield Inn -2.6% 66.3% -3.2% pts. $64.70 +2.1%
Note: Statistics for above tables are based on comparable company-operated
U.S. properties, except for Fairfield Inn, which data also include
franchised units.
Number of Number of
Properties Rooms/Suites
Dec. vs. Dec. Dec. vs. Dec.
Brand 2001 2000 2001 2000
Marriott Hotels, Resorts and Suites 424 +39 158,100 +8,900
Ritz-Carlton 45 +8 14,800 +1,800
Renaissance Hotels, Resorts and
Suites 123 +22 44,800 +4,700
Ramada International 133 +107 19,200 +10,000
Residence Inn 392 +48 46,100 +4,700
Courtyard 553 +50 78,700 +4,800
Fairfield Inn 480 +50 45,900 +4,500
TownePlace Suites 99 +22 10,300 +1,800
SpringHill Suites 84 +31 9,500 +3,100
Marriott Vacation Club International* 54 +9 6,600 +1,000
Other** 11 +2 1,900 +200
Total 2,398 +388 435,900 +45,500
* Includes The Ritz-Carlton Club, Horizons and Grand Residences by
Marriott Vacation Club International.
** Includes Marriott Executive Apartments. Excludes ExecuStay by
Marriott.