Marriott International Reports 2007 Second Quarter Results

<< Back
Jul 12, 2007

Marriott International Reports 2007 Second Quarter Results

WASHINGTON, July 12, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Marriott International, Inc. (NYSE: MAR) today reported second quarter 2007 adjusted net income of $229 million, an increase of 26 percent, and adjusted diluted earnings per share (EPS) of $0.57, an increase of 36 percent.

Adjusted results exclude the impact of the company's synthetic fuel business and the impact of the previously announced leveraged Employee Stock Ownership Plan ("ESOP") settlement agreement reached in June 2007 with the Internal Revenue Service ("IRS") and the Department of Labor. The company's EPS guidance for the 2007 second quarter, disclosed on April 19, 2007, totaled $0.51 to $0.55 and similarly excluded the company's synthetic fuel business and the ESOP settlement.

Reported net income was $207 million in the second quarter of 2007 compared to $186 million in the year ago quarter. Reported EPS was $0.51 in the second quarter of 2007 and $0.43 in the second quarter of 2006. The company's synthetic fuel business contributed approximately $32 million after- tax ($0.08 per share) to 2007 second quarter earnings and $4 million after-tax ($0.01 per share) to 2006 second quarter earnings. The ESOP settlement resulted in an after-tax charge of $54 million ($0.13 per share) in the 2007 second quarter.

J.W. Marriott, Jr., Marriott International's chairman and chief executive officer, said, "Marriott's performance in the second quarter was impressive. Transient demand was strong and strengthened among leisure travelers. A continued favorable pricing environment, combined with unit growth, increased property-level revenues. Using technology and leveraging system size to improve efficiency, hotel profits continued to climb. In the second quarter worldwide company-operated house profit per available room increased 10.4 percent and Marriott's fee revenue increased 20 percent. The combination of our focus on the bottom line, and a culture of service excellence delivered great returns for our owners and Marriott.

"We continue to build our company for the future. In the second quarter, we announced our partnership with Nickelodeon and Miller Global Properties, LLC to co-develop a breakthrough new lodging resort brand and concept for travelers seeking fun and adventure, 'Nickelodeon Resorts by Marriott.' We didn't stop there; we also teamed up with the pioneer of the lifestyle boutique hotel, Ian Schrager, to create the first truly global boutique lifestyle hotel brand on a large scale. We expect these brands to attract new guests and offer exciting opportunities for growth.

"While launching new concepts we are also keeping our eyes on our flagship brands. Last month, we launched a new advertising campaign focusing on the competitive advantages of our industry leading extended stay brand, Residence Inn, such as spacious rooms, full kitchen, great outdoor space and top service. With over 525 hotels, Residence Inn remains the preferred brand for long-term stay guests.

"Investment in our hotels by owners and franchisees continues to grow. Renovation activity is at record levels and we are opening new hotels around the world. We expect to open nearly 30,000 rooms this year and an additional 30,000 rooms in 2008. We have great reason to be excited about the future," said Mr. Marriott.

In the 2007 second quarter (12 week period from March 24, 2007 to June 15, 2007), REVPAR for the company's worldwide systemwide comparable properties increased 7.5 percent (6.4 percent using constant dollars). Average daily rates rose 7.4 percent (6.3 percent using constant dollars) and occupancy increased slightly, to 76.0 percent.

In North America, REVPAR at the company's comparable managed hotels increased by 5.6 percent during the quarter. REVPAR at the company's comparable managed North American full-service hotels increased by 6.4 percent. Compared to the first quarter, weekday demand remained strong and weekend demand rebounded. REVPAR growth was particularly strong in Manhattan, Dallas, Denver and Chicago.

In the 2007 second quarter, international company-operated comparable REVPAR increased 15.5 percent (9.6 percent using constant dollars) including a 14.2 percent increase in average daily rates (8.4 percent using constant dollars) and a nearly 1.0 percentage point improvement in occupancy to 76.5 percent. Strong conference and exhibition business in Moscow drove REVPAR in that city up 46 percent. In the Middle East, REVPAR increased 17 percent as demand was robust, particularly in Dubai and Red Sea locations. Demand in Asia continued to increase, with REVPAR up 13 percent (nearly 9 percent using constant dollars). Travel to Marriott's six hotels in Beijing was strong as that city gears up for the 2008 Olympics. Marriott expects to have 11 properties open in Beijing in time to greet the arrival of the Olympic torch in August 2008. India also remains a vibrant and growing market, with REVPAR in the second quarter up 40 percent (35 percent using constant dollars).

Marriott added 52 new properties (6,976 rooms) to its worldwide lodging portfolio in the second quarter, including the 206 room Courtyard and 250 room Ritz-Carlton hotels in Tokyo, Japan. The spectacular Ritz-Carlton property sits atop the tallest building in Tokyo. Twenty-two properties (3,158 rooms) exited the system during the quarter, primarily at Marriott's request, due to quality issues at those hotels. At quarter-end, the company's lodging group encompassed 2,898 lodging properties for a total of 521,240 rooms.

MARRIOTT REVENUES totaled $3.2 billion in the 2007 second quarter, an 11 percent increase from the same period in 2006. Base and franchise fees rose 10 percent to $249 million as a result of unit growth and strong REVPAR improvement. Incentive fees soared 51 percent to $116 million, driven by higher property-level house profit margins and $15 million of incentive fees that were calculated based on prior period results, but earned and due in the second quarter of 2007. Also included in incentive fees was $3 million associated with business interruption insurance proceeds at two New Orleans hotels.

Strong room rates, higher food and beverage profits and improved productivity drove margins higher during the quarter. Worldwide company- operated comparable house profit margins increased 160 basis points and worldwide house profit per available room grew 10.4 percent. House profit margins for North American company-operated properties grew 130 basis points. House profit per available room increased 9.3 percent for North American full- service hotels and 7.9 percent for North American limited-service hotels.

Owned, leased, corporate housing and other revenue increased 15 percent in the second quarter, to $312 million, primarily driven by receipt of termination fees totaling $6 million and strong REVPAR at owned and leased properties, including the new Ritz-Carlton property in Tokyo, Japan.

Timeshare sales and services revenue increased 22 percent in the 2007 second quarter, primarily driven by the company's Maui, Las Vegas and Frenchman's Reef resorts, which reached higher reportability thresholds in the quarter. The new resort in St. Kitts also reported strong sales. Timeshare revenues also include $45 million of mortgage note sale gains, $5 million higher than the year ago quarter.

Timeshare sales and services revenue, net of direct expenses, increased 49 percent, to $122 million, reflecting higher note sale gains and higher financial reportability of sales.

Contract sales for the company's timeshare, fractional and whole ownership projects, including sales made by joint venture projects, decreased 24 percent, reflecting tough comparisons to a highly successful launch of the Ritz-Carlton's whole ownership projects in Kapalua Bay and San Francisco in the 2006 second quarter. In addition, the newly introduced Marriott Vacation Club resort in Maui benefited from considerable trade-up from existing owners in the 2006 quarter. Excluding these three projects, contract sales increased nearly 5 percent in the 2007 second quarter.

The company began sales at a timeshare resort in Marco Island in the 2007 second quarter and expects to begin sales at the Ritz-Carlton whole ownership project in Kauai, Hawaii in the second half of 2007.

General and administrative expenses in the 2007 second quarter totaled $207 million and included $35 million of expenses associated with the ESOP tax settlement.

SYNTHETIC FUEL operations contributed approximately $0.08 per share of after-tax earnings during the 2007 second quarter, compared to $0.01 in the year ago quarter. Higher synthetic fuel earnings reflected increased production levels, partially offset by a $3 million mark-to-market expense associated with oil price hedges (recorded as an offset to interest income). Excluding the impact of the synthetic fuel operations and the ESOP tax settlement, the company's tax rate would have been 34.8 percent.

GAINS AND OTHER INCOME totaled $12 million (excluding $16 million of expenses related to synthetic fuel) and included $5 million of gains from the sale of real estate and $7 million of preferred returns and other gains and income. Prior year's second quarter gains included $9 million of gains from the sale of real estate, $29 million of gains from the sale of the company's interest in four joint ventures and $4 million of preferred returns and other income. The 2006 gains were partially offset by a $37 million non-cash charge to adjust the carrying amount of a straight-line rent receivable associated with a land lease which was subject to a purchase option.

INTEREST EXPENSE increased $22 million to $52 million, reflecting $13 million of interest expense associated with the ESOP settlement as well as higher interest rates and higher average borrowings, including the senior debt issued late in the 2006 second quarter.

INTEREST INCOME totaled $6 million during the quarter, down from $12 million in the year ago quarter, primarily driven by loan repayments since the second quarter of 2006 and a $3 million mark-to-market expense associated with oil price hedges for the synthetic fuel operations.

At the end of the 2007 second quarter, total debt was $2,284 million and cash balances totaled $151 million, compared to $1,833 million in total debt and $193 million of cash at the end of 2006. The company repurchased 8.7 million shares of common stock in the second quarter of 2007 at a cost of $402 million. Year-to-date, through July 10, 2007, the company repurchased 21.0 million shares of common stock at a cost of $980 million. The remaining share repurchase authorization, as of July 10, 2007 totaled 13 million shares.

On June 7, 2007, the company reached a settlement agreement with the IRS and Department of Labor regarding the ESOP feature of Marriott's Employees' Profit Sharing, Retirement and Savings Plan. The settlement resulted in an after-tax charge of $54 million ($0.13 per share) in the company's second quarter. Approximately $35 million of the expense related to excise tax was reflected in general and administrative expenses, $13 million of interest on the excise tax was recorded in interest expense and approximately $6 million was recorded as provision for taxes. As a result of the settlement, the company will make cash payments to the U.S. Treasury and state tax jurisdictions of approximately $220 million in the second half of 2007.

OUTLOOK

For the full year 2007, the company expects North American REVPAR to increase 6 to 7 percent. Assuming a 150 to 200 basis point improvement in house profit margins for the year and nearly 30,000 new room openings (gross), the company expects total fee revenue of $1,405 million to $1,415 million, an increase of 15 to 16 percent.

The company expects timeshare sales and services revenues, net of expenses, will decline approximately 3 to 6 percent in 2007, while contract sales are expected to increase roughly 5 percent.

The company expects gains and other income to total approximately $60 million in 2007, excluding the impact of the synthetic fuel business.

Given the risk created by the volatility in oil prices, the company's overall 2007 earnings guidance does not include earnings from the synthetic fuel business.

Assuming roughly $1.5 billion of share repurchases during the year, the company believes that net interest expense will range from $125 million to $135 million for the full year.

The company estimates North American REVPAR will grow 6 to 7 percent in the third quarter and 7 to 8 percent in the fourth quarter. The company also expects property-level house profit margin growth of 150 to 200 basis points in the third quarter.

Under the above assumptions, the company currently estimates the following results for the third quarter and full year 2007, excluding the impact of the ESOP tax settlement and the synthetic fuel business:



                           Third Quarter 2007      Full Year 2007

    Total fee revenue       $295 million to        $1,405 million to
                            $300 million           $1,415 million

    Owned, leased,          $30 million to         $180 million to
     corporate housing      $35 million            $190 million
     and other, net of
     direct expenses

    Timeshare sales         $35 million to         $335 million to
     and services, net      $40 million            $345 million(1)
     of direct expenses
    General,                $170 million to        $695 million to
     administrative &       $175 million           $705 million
     other expenses(4)

    Lodging operating       $185 million to        $1,215  million to
     income(4)              $205 million           $1,255 million(1)

    Gains (excluding        Approx. $10            Approx. $60 million
     synthetic fuel)(2)     million

    Net interest            $30 million to         $125 million to
     expense(3,4)           $35 million            $135 million

    Equity in               Approx. $5             Approx. $15 million
     earnings/(losses)       million

    Earnings per            No guidance            No guidance
     share from
     synthetic fuel

    Earnings per            $0.27 to $0.31         $1.88 to $1.96
     share excluding
     synthetic fuel(4)

    Effective tax           35 percent             35 percent
     rate excluding
     synthetic fuel(4)


    1 Includes timeshare mortgage note sale gains
    2 Excludes timeshare mortgage note sale gains
    3 Net of interest income, and assuming roughly $1.5 billion of share
      repurchases
    4 Excludes the impact of the ESOP tax settlement


The company expects investment spending in 2007 to total approximately $1.1 billion to $1.2 billion, including $60 million for maintenance capital spending, $625 million to $650 million for capital expenditures and acquisitions, $210 million to $250 million for timeshare development, $30 million to $40 million in new mezzanine financing and mortgage loans for hotels developed by owners and franchisees, and approximately $175 million to $200 million in equity and other investments (including timeshare equity investments).

Marriott International, Inc. (NYSE: MAR) will conduct its quarterly earnings review for the investment community and news media on Thursday, July 12, 2007 at 10 a.m. Eastern Time (ET). The conference call will be webcast simultaneously via Marriott's investor relations website at http://www.marriott.com/investor, click the "Recent Investor News" tab and click on the quarterly conference call link. A replay will be available at that same website until August 12, 2007. The webcast will also be available as a podcast from the same site.

The telephone dial-in number for the conference call is 719-234-0008. A telephone replay of the conference call will also be available by telephone from 1 p.m. ET, Thursday, July 12, 2007 until 8 p.m. ET, Thursday, July 19, 2007. To access the replay, call 719-457-0820. The reservation number for the recording is 1076402.

Note: This press release contains "forward-looking statements" within the meaning of federal securities laws, including REVPAR, profit margin and earnings trends; statements concerning the number of lodging properties we expect to add in the future; our expected investment spending; 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 extent of growth in the economy and the lodging industry; supply and demand changes for hotel rooms, vacation ownership, condominiums, and corporate housing; competitive conditions in the lodging industry; relationships with clients and property owners; the availability of capital to finance hotel growth and refurbishment; and other risk factors identified in our most recent quarterly report on Form 10-Q; 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) is a leading lodging company with nearly 2,900 lodging properties in the United States and 68 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 Bulgari brand names; develops and operates vacation ownership resorts under the Marriott Vacation Club, Horizons, The Ritz-Carlton Club and Grand Residences by Marriott brands; operates Marriott Executive Apartments; provides furnished corporate housing through its Marriott ExecuStay division; and operates conference centers. Marriott is also in the synthetic fuel business. The company is headquartered in Washington, D.C., and had approximately 151,000 employees at 2006 year-end. It is ranked as the lodging industry's most admired company and one of the best places to work for by FORTUNE(R). The company is also a 2006 U.S. Environmental Protection Agency (EPA) ENERGY STAR(R) Partner. In fiscal year 2006, Marriott International reported sales from continuing operations of $12.2 billion. For more information or reservations, please visit our Web site at www.marriott.com.



                          MARRIOTT INTERNATIONAL, INC.
                        CONSOLIDATED STATEMENT OF INCOME
                    (in millions, except per share amounts)

                                               Twelve Weeks Ended
                                              --------------------   Percent
                                              June 15,    June 16,   Better/
                                                2007        2006     (Worse)
                                              --------   ---------  ---------
    REVENUES
    Base management fees                        $148        $134         10
    Franchise fees                               101          93          9
    Incentive management fees                    116          77         51
    Owned, leased, corporate housing and
     other revenue(1)                            312         272         15
    Timeshare sales and services(2)              453         371         22
    Cost reimbursements(3)                     1,992       1,905          5
    Synthetic fuel                                88          39        126
                                              --------   ---------
       Total Revenues                          3,210       2,891         11

    OPERATING COSTS AND EXPENSES
    Owned, leased and corporate housing -
     direct(4)                                   257         225        (14)
    Timeshare - direct                           331         289        (15)
    Reimbursed costs                           1,992       1,905         (5)
    General, administrative and other(5)         207         141        (47)
    Synthetic fuel                               123          57       (116)
                                              --------   ---------
       Total Expenses                          2,910       2,617        (11)
                                              --------   ---------

    OPERATING INCOME                             300         274          9


    Gains and other income (expense)(6)           (4)          8       (150)
    Interest expense                             (52)        (30)       (73)
    Interest income                                6          12        (50)
    (Provision for) reversal of loan
     losses                                        -           1       (100)
    Equity in earnings (losses)(7)                (1)          6       (117)
                                              --------   ---------
    INCOME BEFORE INCOME TAXES AND
     MINORITY INTEREST                           249         271         (8)
    Provision for income taxes                   (42)        (85)        51
    Minority interest                              -           -          *
                                              --------   ---------
    NET INCOME                                  $207        $186         11
                                              ========   =========
    EARNINGS PER SHARE - Basic                 $0.54       $0.45         20
                                              ========   =========
    EARNINGS PER SHARE - Diluted               $0.51       $0.43         19
                                              ========   =========

    Basic Shares                               382.9       412.5
    Diluted Shares                             403.8       436.6

    *  Percent can not be calculated.

    1 - Owned, leased, corporate housing and other revenue includes revenue
        from the properties we own or lease, revenue from our corporate
        housing business, land rent income and other revenue.
    2 - Timeshare sales and services includes total timeshare revenue except
        for base fees, cost reimbursements, real estate gains and joint
        venture earnings.  Timeshare sales and services includes gains on the
        sale of timeshare note receivable securitizations.
    3 - Cost reimbursements include reimbursements from lodging properties
        for Marriott funded operating expenses.
    4 - Owned, leased and corporate housing - direct expenses include
        operating expenses related to our owned or leased hotels, including
        lease payments, pre-opening expenses and depreciation, plus expenses
        related to our corporate housing business.
    5 - General, administrative and other expenses include the overhead
        costs allocated to our lodging business segments, and our corporate
        overhead costs and general expenses.
    6 - Gains and other income (expense) includes net gains on the sale of
        real estate, gains on note sales or repayments (except timeshare note
        securitizations gains), gains on the sale of joint ventures, income
        from cost method joint ventures and net earn-out payments associated
        with our synthetic fuel operations.
    7 - Equity in earnings (losses) includes our equity in earnings
        (losses) of unconsolidated joint ventures.



                          MARRIOTT INTERNATIONAL, INC.
                        CONSOLIDATED STATEMENT OF INCOME
                    (in millions, except per share amounts)

                                            Twenty-Four Weeks Ended
                                            -----------------------   Percent
                                             June 15,    June 16,     Better/
                                                2007        2006      (Worse)
                                             ---------   ---------   --------

    REVENUES
    Base management fees                        $282        $261          8
    Franchise fees                               192         175         10
    Incentive management fees                    187         136         38
    Owned, leased, corporate housing and
     other revenue(1)                            562         526          7
    Timeshare sales and services(2)              822         677         21
    Cost reimbursements(3)                     3,913       3,725          5
    Synthetic fuel                               156          96         63
                                             ---------   ---------
       Total Revenues                          6,114       5,596          9

    OPERATING COSTS AND EXPENSES
    Owned, leased and corporate housing -
     direct(4)                                   476         433        (10)
    Timeshare - direct                           643         529        (22)
    Reimbursed costs                           3,913       3,725         (5)
    General, administrative and other(5)         354         291        (22)
    Synthetic fuel                               227         141        (61)
                                             ---------   ---------
       Total Expenses                          5,613       5,119        (10)
                                             ---------   ---------
    OPERATING INCOME                             501         477          5


    Gains and other income (expense)(6)           19          42        (55)
    Interest expense                             (85)        (57)       (49)
    Interest income                                9          23        (61)
    (Provision for) reversal of loan
     losses                                        -           3       (100)
    Equity in earnings (losses)(7)                 1           3        (67)
                                             ---------   ---------

    INCOME FROM CONTINUING OPERATIONS
     BEFORE INCOME TAXES
     AND MINORITY INTEREST                       445         491         (9)
    Provision for income taxes                   (56)       (141)        60
    Minority interest                              -           6       (100)
                                             ---------   ---------
    INCOME FROM CONTINUING OPERATIONS            389         356          9

    Cumulative effect of change in
     accounting principle, net of tax(8)           -        (109)       100
                                             ---------   ---------
    NET INCOME                                  $389        $247         57
                                             =========   =========

    EARNINGS PER SHARE - Basic
       Earnings from continuing operations     $1.01       $0.86         17
       Losses from cumulative effect of
        change in accounting principle           -         (0.26)       100
                                             ---------   ---------
       Earnings per share                      $1.01       $0.60         68
                                             =========   =========

    EARNINGS PER SHARE - Diluted
       Earnings from continuing
        operations                             $0.95       $0.81         17
       Losses from cumulative effect of
        change in accounting principle           -         (0.25)       100
                                             ---------   ---------
       Earnings per share                      $0.95       $0.56         70
                                             =========   =========

    Basic Shares                               385.5       412.1
    Diluted Shares                             407.9       438.9


    1 - Owned, leased, corporate housing and other revenue includes revenue
        from the properties we own or lease, revenue from our corporate
        housing business, land rent income and other revenue.
    2 - Timeshare sales and services includes total timeshare revenue except
        for base fees, cost reimbursements, real estate gains and joint
        venture earnings.  Timeshare sales and services includes gains on the
        sale of timeshare note receivable securitizations.
    3 - Cost reimbursements include reimbursements from lodging properties
        for Marriott funded operating expenses.
    4 - Owned, leased and corporate housing - direct expenses include
        operating expenses related to our owned or leased hotels, including
        lease payments, pre-opening expenses and depreciation, plus expenses
        related to our corporate housing business.
    5 - General, administrative and other expenses include the overhead
        costs allocated to our lodging business segments and our corporate
        overhead costs and general expenses.
    6 - Gains and other income (expense) includes gains and losses on the
        sale of real estate, gains on note sales or repayments (except
        timeshare note securitizations gains), gains and losses on the sale of
        joint ventures, income from cost method joint ventures and net earn-
        out payments associated with our synthetic fuel operations.
    7 - Equity in earnings (losses) includes our equity in earnings
        (losses) of unconsolidated equity method joint ventures.
    8 - Cumulative effect of change in accounting principle, net of tax is
        associated with the adoption, in the 2006 first quarter, of Statement
        of Position 04-2, "Accounting for Real Estate Time-sharing
        Transactions" which was issued by the American Institute of Certified
        Public Accountants.



                         MARRIOTT INTERNATIONAL, INC.
                              Business Segments
                               ($ in millions)

                                                Twelve Weeks Ended
                                              ---------------------   Percent
                                              June 15,     June 16,   Better/
                                                 2007         2006    (Worse)
                                              --------     --------   --------
    REVENUES

    North American Full-Service                $1,282       $1,267         1
    North American Limited-Service                538          490        10
    International                                 382          326        17
    Luxury                                        370          329        12
    Timeshare                                     532          427        25
                                              --------     --------
      Total lodging(1)                          3,104        2,839         9
    Synthetic Fuel                                 88           39       126
    Other unallocated corporate                    18           13        38
                                              --------     --------
      Total                                    $3,210       $2,891        11
                                              ========     ========

    NET INCOME

    North American Full-Service                  $132         $105        26
    North American Limited-Service                131          106        24
    International                                  59           62        (5)
    Luxury                                         18           16        13
    Timeshare                                     107           68        57
                                              --------     --------
      Total lodging financial results(1)          447          357        25
    Synthetic Fuel (after-tax)                     32            4       700
    Other unallocated corporate                  (101)         (54)      (87)
    Interest income, provision for loan
     losses and interest expense (excluding
     Synthetic Fuel)                              (43)         (19)     (126)
    Income taxes (excluding Synthetic Fuel)      (128)        (102)      (25)
                                              --------     --------
      Total                                      $207         $186        11
                                              ========     ========

    1  We consider lodging revenues and lodging financial results to be
       meaningful indicators of our performance because they measure our
       growth in profitability as a lodging company and enable investors to
       compare the sales and results of our lodging operations to those of
       other lodging companies.



                         MARRIOTT INTERNATIONAL, INC.
                              Business Segments
                               ($ in millions)

                                             Twenty-Four Weeks Ended
                                             -----------------------   Percent
                                              June 15,      June 16,   Better/
                                                2007          2006     (Worse)
                                             ---------      --------   -------
    REVENUES

    North American Full-Service                $2,526        $2,486         2
    North American Limited-Service              1,001           942         6
    International                                 713           601        19
    Luxury                                        709           660         7
    Timeshare                                     975           783        25
                                             ---------      --------
      Total lodging(1)                          5,924         5,472         8
    Synthetic Fuel                                156            96        63
    Other unallocated corporate                    34            28        21
                                             ---------      --------
      Total                                    $6,114        $5,596         9
                                             =========      ========

    INCOME FROM CONTINUING OPERATIONS

    North American Full-Service                  $246          $242         2
    North American Limited-Service                218           178        22
    International                                 109           105         4
    Luxury                                         29            34       (15)
    Timeshare                                     151           119        27
                                             ---------      --------
      Total lodging financial results(1)          753           678        11
    Synthetic Fuel (after-tax)                     50             7       614
    Other unallocated corporate                  (133)         (109)      (22)
    Interest income, provision for loan
     losses and interest expense (excluding
     Synthetic Fuel)                              (67)          (33)     (103)
    Income taxes (excluding Synthetic Fuel)      (214)         (187)      (14)
                                             ---------      --------
      Total                                      $389          $356         9
                                             =========      ========

    1  We consider lodging revenues and lodging financial results to be
       meaningful indicators of our performance because they measure our
       growth in profitability as a lodging company and enable investors to
       compare the sales and results of our lodging operations to those of
       other lodging companies.



                           MARRIOTT INTERNATIONAL, INC.

                             Total Lodging Products(1)
    -------------------------------------------------------------------------
                                Number of Properties   Number of Rooms/Suites

                                  June  June vs. June  June    June  vs. June
                                   15,   16,     16,    15,     16,       16,
    Brand                         2007  2006    2006   2007    2006      2006
    -------------------------   ---------------------------------------------
    Domestic Full-Service
        Marriott Hotels &
         Resorts                   341    340     1  135,800  135,463     337
        Renaissance Hotels &
         Resorts                    69     67     2   25,369   25,571    (202)
    Domestic Limited-Service
        Courtyard                  668    634    34   93,328   89,078   4,250
        Fairfield Inn              513    516    (3)  45,592   46,746  (1,154)
        SpringHill Suites          162    144    18   18,898   16,829   2,069
        Residence Inn              508    483    25   60,462   57,810   2,652
        TownePlace Suites          128    123     5   12,857   12,389     468
    International
        Marriott Hotels &
         Resorts                   180    177     3   51,967   50,796   1,171
        Renaissance Hotels &
         Resorts                    72     69     3   23,423   22,617     806
        Courtyard                   72     77    (5)  13,620   13,324     296
        Fairfield Inn                7      5     2      756      559     197
        SpringHill Suites            1      1     -      124      124       -
        Residence Inn               18     17     1    2,563    2,240     323
        Marriott Executive
         Apartments                 18     17     1    3,005    2,804     201
        Ramada                       2      2     -      332      332       -
    Luxury
        The Ritz-Carlton -
         Domestic                   34     35    (1)  11,343   11,616    (273)
        The Ritz-Carlton -
         International              29     25     4    8,487    7,766     721
        Bulgari Hotels & Resorts     2      1     1      117       58      59
        The Ritz-Carlton
         Residential                15      -    15    1,425        -   1,425
    Timeshare(2)
        Marriott Vacation Club      46     44     2   10,682    9,876     806
        The Ritz-Carlton Club -
         Fractional                  7      7     -      388      491    (103)
        The Ritz-Carlton Club -
         Residential                 2      -     2       82        -      82
        Grand Residences by
         Marriott - Fractional       2      3    (1)     248      313     (65)
        Horizons by Marriott
         Vacation Club               2      2     -      372      328      44
                                -------------------  ------------------------
    Sub Total Timeshare             59     56     3   11,772   11,008     764
                                -------------------  ------------------------
    Total                        2,898  2,789   109  521,240  507,130  14,110
                                ===================  ========================



     Number of Timeshare Interval, Fractional and Whole Ownership Resorts(2)
     -----------------------------------------------------------------------
                                            In Active
                                 Total(3)     Sales
                                 --------   ---------
    100% Company-Developed
    ----------------------
        Marriott Vacation Club      45         24
        The Ritz-Carlton Club        5          3
        Grand Residences by
         Marriott                    2          2
        Horizons by Marriott
         Vacation Club               2          2

    Joint Ventures
    --------------
        Marriott Vacation Club       1          1
        The Ritz-Carlton Club        4          4
                                 --------------------
    Total                           59         36
                                 ====================

    1 Total Lodging Products excludes the 2,054 and 2,005 corporate
      housing rental units as of June 15, 2007 and June 16, 2006,
      respectively.
    2 Includes products in active sales which may not be ready for
      occupancy.
    3 Includes resorts that are in active sales and those that are sold
      out.  Residential properties are captured once they possess a
      certificate of occupancy.



                         MARRIOTT INTERNATIONAL, INC.
                            Key Lodging Statistics

              Comparable Company-Operated International Properties(1)
    --------------------------------------------------------------------------

                             Three Months Ended May 31, 2007 and May 31, 2006
                             -------------------------------------------------
                                 REVPAR         Occupancy   Average Daily Rate
                             -------------------------------------------------
    Region                   2007  vs.2006   2007  vs.2006    2007   vs.2006
    --------------------------------------------------------------------------
    Caribbean & Latin
     America                 $136.75  11.2%  78.4%   0.7% pts. $174.44  10.2%
    Continental Europe       $129.68   9.0%  75.8%   1.1% pts. $171.08   7.3%
    United Kingdom           $146.83   5.2%  76.7%   1.3% pts. $191.32   3.5%
    Middle East & Africa     $110.31  16.5%  76.8%   3.5% pts. $143.60  11.2%
    Asia Pacific(2)          $117.31   8.6%  75.3%  -1.8% pts. $155.79  11.1%

    Regional Composite(3)    $129.16   9.0%  76.5%   0.5% pts. $168.76   8.3%

    International Luxury(4)  $236.74  12.2%  76.0%   4.0% pts. $311.43   6.2%

    Total International(5)   $139.99   9.6%  76.5%   0.9% pts. $183.03   8.4%

    Worldwide(6)             $129.42   6.9%  76.5%   0.2% pts. $169.08   6.7%


                  Comparable Systemwide International Properties(1)
    --------------------------------------------------------------------------
                             Three Months Ended May 31, 2007 and May 31, 2006
                             -------------------------------------------------
                                 REVPAR         Occupancy   Average Daily Rate
                             -------------------------------------------------
    Region                    2007  vs.2006   2007  vs.2006    2007   vs.2006
    --------------------------------------------------------------------------
    Caribbean & Latin
     America                 $128.46   8.5%  77.3%   2.0% pts. $166.28   5.6%
    Continental Europe       $125.61   8.3%  72.6%   0.2% pts. $173.05   8.1%
    United Kingdom           $144.20   5.1%  76.2%   1.4% pts. $189.28   3.1%
    Middle East & Africa     $106.87  16.5%  75.4%   3.5% pts. $141.75  11.0%
    Asia Pacific(2)          $116.04   8.9%  75.8%  -0.6% pts. $153.08   9.7%

    Regional Composite(3)    $125.41   8.6%  75.3%   0.7% pts. $166.51   7.6%

    International Luxury(4)  $236.74  12.2%  76.0%   4.0% pts. $311.43   6.2%

    Total International(5)   $134.72   9.2%  75.4%   1.0% pts. $178.73   7.7%

    Worldwide(6)             $109.13   6.4%  76.0%   0.1% pts. $143.51   6.3%

    1  International financial results are reported on a period basis, while
       International statistics are reported on a monthly basis. Statistics
       are in constant dollars for March through May.  Excludes North America
       (except for Worldwide).
    2  Does not include Hawaii.
    3  Regional information includes the Marriott Hotels & Resorts,
       Renaissance Hotels & Resorts and Courtyard brands.  Includes Hawaii.
    4  International Luxury includes The Ritz-Carlton properties outside of
       North America and Bulgari Hotels & Resorts.
    5  Includes Regional Composite, The Ritz-Carlton International and Bulgari
       Hotels & Resorts brands.
    6  Includes international statistics for the three calendar months ended
       May 31, 2007 and May 31, 2006, and North American statistics for the
       twelve weeks ended June 15, 2007 and June 16, 2006.  Includes the
       Marriott Hotels & Resorts, The Ritz-Carlton, Bulgari Hotels & Resorts,
       Renaissance Hotels & Resorts, Residence Inn, Courtyard, TownePlace
       Suites, Fairfield Inn and SpringHill Suites brands.



                         Marriott International, Inc.
                            Key Lodging Statistics

              Comparable Company-Operated International Properties(1)
    ------------------------------------------------------------------------

                             Five Months Ended May 31, 2007 and May 31, 2006
                             -----------------------------------------------
                                                               Average Daily
                                 REVPAR         Occupancy           Rate
                             ------------------------------------------------
    Region                   2007   vs.2006  2007  vs.2006      2007  vs.2006
    -------------------------------------------------------------------------
    Caribbean & Latin
     America                 $138.10  11.4%  77.8%   1.0% pts. $177.56  10.0%
    Continental Europe       $116.77   9.4%  70.7%   1.5% pts. $165.22   7.1%
    United Kingdom           $141.45   5.6%  74.6%   1.7% pts. $189.69   3.1%
    Middle East & Africa     $106.49  18.3%  74.1%   4.4% pts. $143.78  11.3%
    Asia Pacific(2)          $113.27   9.3%  74.0%  -1.6% pts. $152.97  11.6%

    Regional Composite(3)    $123.17   9.4%  73.9%   0.7% pts. $166.61   8.3%

    International Luxury(4)  $222.55  12.0%  73.2%   4.0% pts. $303.90   6.0%

    Total International(5)   $133.17   9.9%  73.9%   1.1% pts. $180.30   8.3%

    Worldwide(6)             $120.81   6.7%  72.9%  -0.2% pts. $165.67   7.0%


                Comparable Systemwide International Properties(1)
    ------------------------------------------------------------------------

                             Five Months Ended May 31, 2007 and May 31, 2006
                             -----------------------------------------------
                                 REVPAR         Occupancy      Average Daily
                                                                    Rate
    Region                   2007   vs.2006  2007  vs.2006      2007  vs.2006
    -------------------------------------------------------------------------
    Caribbean & Latin
     America                 $127.55  11.7%  75.5%   2.2% pts. $168.89   8.4%
    Continental Europe       $112.80   9.1%  67.6%   0.6% pts. $166.79   8.2%
    United Kingdom           $138.99   5.5%  74.0%   1.9% pts. $187.93   2.9%
    Middle East & Africa     $102.89  18.0%  72.4%   4.2% pts. $142.10  11.2%
    Asia Pacific(2)          $112.08   9.2%  74.3%  -0.5% pts. $150.86  10.0%

    Regional Composite(3)    $119.06   9.4%  72.5%   0.9% pts. $164.26   8.1%

    International Luxury(4)  $222.55  12.0%  73.2%   4.0% pts. $303.90   6.0%

    Total International(5)   $127.67   9.8%  72.5%   1.1% pts. $175.98   8.1%

    Worldwide(6)             $102.12   6.2%  72.3%  -0.5% pts. $141.15   6.9%


    1  International financial results are reported on a period basis, while
       International statistics are reported on a monthly basis. Statistics
       are in constant dollars for January through May. Excludes North America
       (except for Worldwide).
    2  Does not include Hawaii.
    3  Regional information includes the Marriott Hotels & Resorts,
       Renaissance Hotels & Resorts and Courtyard brands.  Includes Hawaii.
    4  International Luxury includes The Ritz-Carlton properties outside of
       North America and Bulgari Hotels & Resorts.
    5  Includes Regional Composite, The Ritz-Carlton International and Bulgari
       Hotels & Resorts brands.
    6  Includes international statistics for the five calendar months ended
       May 31, 2007 and May 31, 2006, and North American statistics for the
       twenty-four weeks ended June 15, 2007 and June 16, 2006.  Includes the
       Marriott Hotels & Resorts, The Ritz-Carlton, Bulgari Hotels & Resorts,
       Renaissance Hotels & Resorts, Residence Inn, Courtyard, TownePlace
       Suites, Fairfield Inn and SpringHill Suites brands.


                         MARRIOTT INTERNATIONAL, INC.
                            Key Lodging Statistics

              Comparable Company-Operated North American Properties
   ---------------------------------------------------------------------------

                            Twelve Weeks Ended June 15, 2007 and June 16, 2006
                            --------------------------------------------------
                                   REVPAR       Occupancy   Average Daily Rate
                            --------------------------------------------------
    Brand                       2007  vs.2006  2007  vs.2006    2007  vs.2006
    --------------------------------------------------------------------------
    Marriott Hotels & Resorts   $136.32  6.7%  76.6%   0.9% pts. $177.97  5.5%
    Renaissance Hotels &
     Resorts                    $134.78  3.2%  76.7%  -1.1% pts. $175.72  4.7%
    Composite North American
     Full-Service(1)            $136.09  6.2%  76.6%   0.6% pts. $177.63  5.4%
    The Ritz-Carlton(2)         $269.10  7.1%  76.2%  -0.1% pts. $352.95  7.3%
    Composite North American
     Full-Service & Luxury(3)   $150.27  6.4%  76.6%   0.5% pts. $196.24  5.7%
    Residence Inn               $100.22  3.4%  80.9%  -1.0% pts. $123.93  4.6%
    Courtyard                    $95.28  4.5%  74.3%  -0.9% pts. $128.24  5.8%
    TownePlace Suites            $66.67  7.6%  78.3%  -1.2% pts.  $85.20  9.2%
    SpringHill Suites            $84.02  3.1%  77.6%  -0.3% pts. $108.22  3.5%
    Composite North American
     Limited-Service(4)          $94.22  4.3%  76.6%  -0.9% pts. $123.08  5.6%
    Composite - All(5)          $124.88  5.6%  76.6%  -0.1% pts. $163.11  5.9%


                    Comparable Systemwide North American Properties
    --------------------------------------------------------------------------
                           Twelve Weeks Ended June 15, 2007 and June 16, 2006
                                   REVPAR        Occupancy      Average Daily
                                                                     Rate
                           ---------------------------------------------------
    Brand                       2007  vs.2006   2007 vs.2006    2007  vs.2006
    --------------------------------------------------------------------------
    Marriott Hotels & Resorts   $119.79  6.1%  74.7%   1.4% pts. $160.33  4.2%
    Renaissance Hotels &
     Resorts                    $119.16  3.4%  74.7%  -1.2% pts. $159.44  5.1%
    Composite North American
     Full-Service(1)            $119.69  5.7%  74.7%   1.0% pts. $160.20  4.4%
    The Ritz-Carlton(2)         $269.10  7.1%  76.2%  -0.1% pts. $352.95  7.3%
    Composite North American
     Full-Service & Luxury(3)   $129.04  5.9%  74.8%   0.9% pts. $172.49  4.6%
    Residence Inn                $98.69  4.7%  80.7%  -1.1% pts. $122.25  6.1%
    Courtyard                    $94.88  5.3%  75.8%  -0.6% pts. $125.15  6.2%
    Fairfield Inn                $65.57  6.9%  74.7%  -0.3% pts.  $87.82  7.3%
    TownePlace Suites            $66.28  4.3%  76.7%  -2.9% pts.  $86.38  8.2%
    SpringHill Suites            $83.18  6.1%  77.7%  -0.3% pts. $107.11  6.4%
    Composite North American
     Limited-Service(4)          $87.53  5.3%  77.1%  -0.8% pts. $113.58  6.4%
    Composite - All(5)          $103.64  5.6%  76.2%  -0.1% pts. $136.03  5.8%

    1 Includes the Marriott Hotels & Resorts and Renaissance Hotels &
      Resorts brands.
    2 Statistics for The Ritz-Carlton are for March through May.
    3 Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts
      and The Ritz-Carlton brands.
    4 Includes the Residence Inn, Courtyard, Fairfield Inn, TownePlace
      Suites and SpringHill Suites brands.
    5 Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts,
      The Ritz-Carlton, Residence Inn, Courtyard, Fairfield Inn, TownePlace
      Suites, and SpringHill Suites brands.


                         MARRIOTT INTERNATIONAL, INC.
                            Key Lodging Statistics

              Comparable Company-Operated North American Properties
    --------------------------------------------------------------------------
                      Twenty-Four Weeks Ended June 15, 2007 and June 16, 2006
                      --------------------------------------------------------
                                                               Average Daily
                                  REVPAR         Occupancy          Rate
                      --------------------------------------------------------
    Brand                       2007  vs.2006   2007  vs.2006    2007  vs.2006
    --------------------------------------------------------------------------
    Marriott Hotels & Resorts  $128.00  6.6%  72.5%   0.6% pts. $176.43   5.7%
    Renaissance Hotels &
     Resorts                   $125.40  3.7%  73.6%  -1.2% pts. $170.42   5.3%
    Composite North American
     Full-Service(1)           $127.61  6.2%  72.7%   0.4% pts. $175.53   5.6%
    The Ritz-Carlton(2)        $259.70  7.5%  74.0%  -0.5% pts. $350.86   8.2%
    Composite North American
     Full-Service & Luxury(3)  $139.39  6.4%  72.8%   0.3% pts. $191.42   5.9%
    Residence Inn               $95.46  2.4%  76.9%  -2.3% pts. $124.07   5.4%
    Courtyard                   $90.12  4.2%  70.2%  -1.5% pts. $128.47   6.5%
    TownePlace Suites           $62.93  6.9%  73.5%  -2.3% pts.  $85.58  10.2%
    SpringHill Suites           $77.95  3.2%  71.6%  -1.4% pts. $108.83   5.2%
    Composite North American
     Limited-Service(4)        $89.20  3.8%  72.3%  -1.8% pts. $123.36   6.4%
    Composite - All(5)        $116.42  5.5%  72.6%  -0.6% pts. $160.38   6.4%


                Comparable Systemwide North American Properties
    --------------------------------------------------------------------------

                     Twenty-Four Weeks Ended June 15, 2007 and June 16, 2006
                     ---------------------------------------------------------
                                  REVPAR        Occupancy       Average Daily
                                                                     Rate
                     ---------------------------------------------------------
    Brand                       2007  vs.2006   2007  vs.2006    2007  vs.2006
    --------------------------------------------------------------------------
    Marriott Hotels & Resorts  $114.21  5.9%  71.0%   0.5% pts. $160.90   5.2%
    Renaissance Hotels &
     Resorts                   $112.74  3.8%  71.8%  -1.3% pts. $157.04   5.7%
    Composite North American
     Full-Service(1)           $114.00  5.6%  71.1%   0.2% pts. $160.32   5.2%
    The Ritz-Carlton(2)        $259.70  7.5%  74.0%  -0.5% pts. $350.86   8.2%
    Composite North American
     Full-Service & Luxury(3)  $121.59  5.8%  71.3%   0.2% pts. $170.64   5.5%
    Residence Inn               $94.42  4.4%  77.5%  -1.8% pts. $121.84   6.8%
    Courtyard                   $89.25  5.1%  71.7%  -1.1% pts. $124.52   6.7%
    Fairfield Inn               $60.45  6.2%  69.6%  -0.9% pts.  $86.89   7.6%
    TownePlace Suites           $63.32  4.6%  72.8%  -3.4% pts.  $86.95   9.4%
    SpringHill Suites           $78.25  5.7%  73.3%  -0.9% pts. $106.73   7.0%
    Composite North American
     Limited-Service(4)         $82.57  5.1%  73.0%  -1.3% pts. $113.15   7.0%
    Composite - All(5)          $97.57  5.4%  72.3%  -0.8% pts. $134.92   6.5%


    1 Includes the Marriott Hotels & Resorts and Renaissance Hotels &
      Resorts brands.
    2 Statistics for The Ritz-Carlton are for January through May.
    3 Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts
      and The Ritz-Carlton brands.
    4 Includes the Residence Inn, Courtyard, Fairfield Inn, TownePlace Suites
      and SpringHill Suites brands.
    5 Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts,
      The Ritz-Carlton, Residence Inn, Courtyard, Fairfield Inn, TownePlace
      Suites, and SpringHill Suites brands.


                          MARRIOTT INTERNATIONAL, INC.
                                TIMESHARE SEGMENT
                                 ($ in millions)

      Segment Results
      ---------------
                                              Second      Second      Percent
                                              Quarter     Quarter     Better /
                                                2007        2006      (Worse)
                                              -------     -------     --------
      Base fees revenue                          $10          $8          25
      Timeshare sales and services
       revenue, net of direct expense            122          82          49
      Joint venture equity income (loss)          (1)          2        (150)
      General, administrative and other
       expense                                   (24)        (24)          0
                                              -------     -------
          Segment results                       $107         $68          57
                                              =======     =======

      Sales and Services Revenue
                                              Second      Second      Percent
                                              Quarter     Quarter     Better /
                                                2007        2006      (Worse)
                                              -------     -------     --------

      Development                               $303        $238          27
      Services                                    72          68           6
      Financing                                   69          62          11
      Other revenue                                9           3         200
                                              -------     -------
          Sales and services revenue            $453        $371          22
                                              =======     =======

      Contract Sales
                                              Second      Second      Percent
                                              Quarter     Quarter     Better /
                                                2007        2006      (Worse)
                                              -------     -------     --------
      Company:
      Timeshare                                 $289        $291          (1)
      Fractional                                   6          11         (45)
      Whole-Ownership                              -           1        (100)
                                              -------     -------
      Total company                              295         303          (3)
      Joint ventures:
          Timeshare                                8           7          14
          Fractional                              21          18          17
          Whole-Ownership                         35         143         (76)
                                              -------     -------
          Total joint ventures                    64         168         (62)
                                              -------     -------
          Total contract sales, including
           joint ventures                       $359        $471         (24)
                                              =======     =======



                          MARRIOTT INTERNATIONAL, INC.
                                TIMESHARE SEGMENT
                                 ($ in millions)

      Segment Results
      ---------------
                                                                      Percent
                                                YTD         YTD       Better /
                                                2007        2006      (Worse)
                                              -------     -------     --------
      Base fees revenue                          $20         $16          25
      Timeshare sales and services
       revenue, net of direct expense            179         148          21
      Joint venture equity income (loss)          (1)          1        (200)
      General, administrative and other
       expense                                   (47)        (46)         (2)
                                              -------     -------
          Segment results                       $151        $119          27
                                              =======     =======

      Sales and Services Revenue
      --------------------------
                                                                      Percent
                                                 YTD         YTD      Better /
                                                2007        2006      (Worse)
                                              -------     -------     --------
      Development                               $567        $453          25
      Services                                   148         137           8
      Financing                                   92          81          14
      Other revenue                               15           6         150
                                              -------     -------
          Sales and services revenue            $822        $677          21
                                              =======     =======

      Contract Sales
      --------------
                                                                      Percent
                                                 YTD         YTD      Better /
                                                2007        2006      (Worse)
                                              -------     -------     --------
      Company:
      Timeshare                                 $564        $579          (3)
      Fractional                                  15          19         (21)
      Whole-Ownership                              -           3        (100)
                                              -------     -------
      Total company                              579         601          (4)
      Joint ventures:
          Timeshare                               16          13          23
          Fractional                              39          19         105
          Whole-Ownership                         51         148         (66)
                                              -------     -------
          Total joint ventures                   106         180         (41)
                                              -------     -------
          Total contract sales, including
           joint ventures                       $685        $781         (12)
                                              =======     =======


                         MARRIOTT INTERNATIONAL, INC.
                         Non-GAAP Financial Measures

In our press release and schedules, and related conference call, we report certain financial measures that are not prescribed or authorized by United States generally accepted accounting principles ("GAAP"). We discuss management's reasons for reporting these non-GAAP measures below, and the tables on the following pages reconcile the most directly comparable GAAP measures to the non-GAAP measures (identified by a double asterisk on the following pages) that we refer to in our press release. Although management evaluates and presents these non-GAAP measures for the reasons described below, please be aware that these non-GAAP measures are not alternatives to revenue, operating income, income from continuing operations, net income, earnings per share or any other comparable operating measure prescribed by GAAP. In addition, these non-GAAP financial measures may be calculated and/or presented differently than measures with the same or similar names that are reported by other companies, and as a result, the non-GAAP measures we report may not be comparable to those reported by others.

Synthetic Fuel. We do not consider the Synthetic Fuel segment to be related to our core business, which is lodging. In addition, management expects the Synthetic Fuel segment will no longer have a material impact on our business after the end of 2007, when the Internal Revenue Code provision which provides for synthetic fuel tax credits expires. Accordingly, our management evaluates non-GAAP measures which exclude the impact of our Synthetic Fuel segment because those measures allow for period-over-period comparisons of our on-going core lodging operations. In addition, these non- GAAP measures facilitate management's comparison of our results with the results of other lodging companies.

ESOP Settlement Charge. Management evaluates non-GAAP measures that exclude the charge associated with the settlement of issues raised during the IRS' and Department of Labor's examination of the employee stock ownership plan ("ESOP") feature of our Employees' Profit Sharing, Retirement and Savings Plan and Trust because these measures allow for period-over-period comparisons relative to our on-going operations before material charges. Additionally, these non-GAAP measures facilitate management's comparison of our results relative to on-going operations before material charges with that of other lodging companies. The settlement resulted in an after tax charge of $54 million reflecting $35 million of excise taxes (impacting General, Administration, and Other Expenses), $13 million of interest expense on those excise taxes and $6 million of income tax expense primarily reflecting additional interest.


    Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
and Adjusted EBITDA.  Our management considers earnings before interest,
taxes, depreciation and amortization to be an indicator of operating
performance because it can be used to measure our ability to service debt,
fund capital expenditures, and expand our business. For the reasons noted
above in the "Synthetic Fuel" and "ESOP" captions, our management also
evaluates Adjusted EBITDA which excludes the Synthetic Fuel segment and the
second quarter 2007 $35 million charge for excise taxes associated with the
ESOP settlement.



                           MARRIOTT INTERNATIONAL, INC.
                    Non-GAAP Financial Measure Reconciliation
                       Measures that Exclude Synthetic Fuel
                     (in millions, except per share amounts)


                              Second Quarter 2007  Second Quarter 2006 Percent
                              -------------------  ------------------- Better/
                                                                       (Worse)
                                As    Synth-  Ex-     As    Synth-  Ex-   Ex-
                              Report-  etic   clud- Report- etic   clud- clud-
                                ed     Fuel   ing     ed    Fuel    ing   ing
                                      Impact  Synth-      Impact Synth- Synth-
                                              etic                 etic   etic
                                              Fuel**              Fuel**  Fuel
                              ------  ------  ----- -----  ------ -----  -----

    Operating income (loss)     $300   $(35)  $335   $274   $(18)  $292    15
    Gains and other income
     (expense)                    (4)   (16)    12      8      3      5   140
    Interest income, provision
     for loan losses and
     interest expense            (46)    (3)   (43)   (17)     2    (19) (126)
    Equity in earnings
     (losses)                     (1)     -     (1)     6      -      6  (117)
                              ------  ------  ----- -----  ------ -----
    Income (losses) before
     income taxes and minority
     interest                    249    (54)   303    271    (13)   284     7
                              ------  ------  ----- -----  ------ -----

    Tax (provision) benefit     (108)    20   (128)   (96)     6   (102)  (25)
    Tax credits                   66     66      -     11     11      -     -
                              ------  ------  ----- -----  ------ -----
    Total tax (provision)
     benefit                     (42)    86   (128)   (85)    17   (102)  (25)
                              ------  ------  ----- -----  ------ -----

    Minority interest              -      -      -    -      -        -     *
                              ------  ------  ----- -----  ------ -----

    Net Income                  $207    $32   $175   $186     $4   $182    (4)
                              ======  ====== ====== =====  ====== =====

    Diluted shares             403.8  403.8  403.8  436.6  436.6  436.6

    Earnings per share -
     diluted                   $0.51  $0.08  $0.43  $0.43  $0.01  $0.42     2

    Tax rate                   16.9%         42.2%  31.4%         35.9%

    *  Percentage not meaningful.
    ** Denotes non-GAAP financial measures.


                           MARRIOTT INTERNATIONAL, INC.
                    Non-GAAP Financial Measure Reconciliation
                       Measures that Exclude Synthetic Fuel
                     (in millions, except per share amounts)


                                Second Quarter        Second Quarter   Percent
                                    YTD 2007              YTD 2006     Better/
                              --------------------   ------------------(Worse)
                                As    Synth-  Ex-     As    Synth-  Ex-   Ex-
                              Report-  etic   clud- Report- etic   clud- clud-
                                ed     Fuel   ing     ed    Fuel    ing   ing
                                      Impact  Synth-      Impact Synth- Synth-
                                              etic                 etic   etic
                                              Fuel**              Fuel**  Fuel
                               ------  ------  ----- -----  ------ ----- -----

    Operating income (loss)     $501   $(71)  $572   $477   $(45)  $522    10
    Gains and other income
     (expense)                    19    (28)    47     42     (1)    43     9
    Interest income, provision
     for loan losses and
     interest expense            (76)    (9)   (67)   (31)     2    (33) (103)
    Equity in earnings (losses)    1      -      1      3      -      3   (67)
                               ------  ------  ----- -----  ------ -----

    Income (losses) from
     continuing operations
     before income taxes and
     minority interest           445   (108)   553    491    (44)   535     3
                               ------  ------ -----  ----  ------ -----

    Tax (provision) benefit     (175)    39   (214)  (173)    14   (187)  (14)
    Tax credits                  119    119      -     32     32      -     *
                               ------  ------ -----  ----  ------ -----
    Total tax (provision)
     benefit                     (56)   158   (214)  (141)    46   (187)  (14)
                               ------  ------ -----  ----  ------ -----

    Minority interest              -      -      -      6      5      1  (100)
                               ------  ------ -----  ----  ------ -----

    Income from continuing
     operations                 $389    $50   $339   $356     $7   $349    (3)
                               ======  ====== =====  ====  ====== =====

    Diluted shares             407.9  407.9  407.9  438.9  438.9  438.9

    Earnings per share from
     continuing
     operations - diluted      $0.95  $0.12  $0.83  $0.81  $0.02  $0.79     5

    Tax rate                   12.6%         38.7%  28.7%         35.0%

    *  Percentage not meaningful.
    ** Denotes non-GAAP financial measures.



                           MARRIOTT INTERNATIONAL, INC.
                    Non-GAAP Financial Measure Reconciliation
           Measures that Exclude Synthetic Fuel and the ESOP Settlement
                     (in millions, except per share amounts)

                                                Second Quarter 2007
                                        --------------------------------------
                                                                     Excluding
                                                                     Synthetic
                                                                      Fuel and
                                                  Synthetic           the ESOP
                                            As      Fuel      ESOP     Settle-
                                         Reported  Impact  Settlement   ment**
                                         --------  ------- ---------- --------

    Operating income (loss)                  $300     $(35)     $(35)    $370
    Gains and other income (expense)           (4)     (16)        -       12
    Interest income, provision for loan
    losses and interest expense               (46)      (3)      (13)     (30)
    Equity in earnings (losses)                (1)       -         -       (1)
                                         --------  ------- ---------- --------
    Income (losses) operations before
     income taxes and minority interest       249      (54)      (48)     351
                                         --------  ------- ---------- --------
    Tax (provision) benefit                  (108)      20        (6)    (122)
    Tax credits                                66       66         -        -
                                         --------  ------- ---------- --------
    Total tax (provision) benefit             (42)      86        (6)    (122)
                                         --------  ------- ---------- --------
    Minority interest                           -        -         -        -
                                         --------  ------- ---------- --------

    Net Income                               $207      $32      $(54)    $229
                                         ========  ======= ========== ========

    Diluted shares                          403.8    403.8     403.8    403.8

    Earnings per share - diluted(1)         $0.51    $0.08    $(0.13)   $0.57

    Tax rate                                16.9%                       34.8%

    **  Denotes non-GAAP financial measures.

      1  Earnings per share does not crossfoot due to rounding.



                           MARRIOTT INTERNATIONAL, INC.
                            Non-GAAP Financial Measure
                            EBITDA and Adjusted EBITDA
                                 ($ in millions)

                                            Fiscal Year 2007
                                         ---------------------
                                          First  Second
                                         Quarter Quarter Total
                                         ------- ------- -----
    Net income                             $182   $207   $389
    Interest expense                         33     52     85
    Tax provision                            14     42     56
    Depreciation and amortization            46     45     91
    Less: Depreciation reimbursed by
     third-party owners                      (4)    (4)    (8)
    Interest expense from unconsolidated
     joint ventures                           5      5     10
    Depreciation and amortization from
     unconsolidated
        joint ventures                        6      7     13
                                         ------- ------- -----
    EBITDA**                               $282   $354   $636

    Synthetic Fuel adjustment                52     52    104
    ESOP settlement - Excise Tax              -     35     35
                                         ------- ------- -----
    Adjusted EBITDA**                      $334   $441   $775
                                         ======= ======= =====

    Increase (Decrease) over 2006
     Adjusted EBITDA                         3%    21%    13%
    The following items make up the
     Synthetic Fuel adjustment:
    Pre-tax Synthetic Fuel operating
     losses (income)                        $54    $54   $108
    Pre-tax minority interest - Synthetic
     Fuel                                     -      -      -
    Synthetic Fuel depreciation              (2)    (2)    (4)
                                         ------- ------- -----
    EBITDA adjustment for Synthetic Fuel    $52    $52   $104
                                         ======= ======= =====



                                                   Fiscal Year 2006
                                         -------------------------------------
                                          First  Second  Third   Fourth
                                         Quarter Quarter Quarter Quarter Total
                                         ------- ------- ------- ------- -----
    Net income                              $61   $186   $141   $220     $608
    Cumulative effect of change in
     accounting principle                   173      -      -      -      173
    Interest expense                         27     30     29     38      124
    Tax provision (benefit)                  56     85     82     63      286
    Tax benefit from cumulative effect of
     change in accounting principle         (64)     -      -      -      (64)
    Depreciation and amortization            40     42     44     62      188
    Less: Depreciation reimbursed by
     third-party owners                      (4)    (4)    (4)    (6)     (18)
    Interest expense from unconsolidated
     joint ventures                           5      6      5      7       23
    Depreciation and amortization from
     unconsolidated
        joint ventures                        6      7      7      9       29
                                         ------- ------  -----  -----  -------
    EBITDA**                               $300   $352   $304   $393   $1,349

    Synthetic Fuel adjustment                24     11     (4)    44       75
                                         ------- ------  -----  -----  -------
    Adjusted EBITDA**                      $324   $363   $300   $437   $1,424
                                         ======= ======  =====  =====  =======

    The following items make up the
     Synthetic Fuel adjustment:
    Pre-tax Synthetic Fuel operating
     losses (income)                        $31    $13    $(2)   $53      $95
    Pre-tax minority interest - Synthetic
     Fuel                                    (5)     -      -     (1)      (6)
    Synthetic Fuel depreciation              (2)    (2)    (2)    (8)     (14)
                                         ------- ------  -----  -----  -------
    EBITDA adjustment for Synthetic Fuel    $24    $11    $(4)   $44      $75
                                         ======= ======  =====  =====  =======

    **  Denotes non-GAAP financial measures.


    IRPR#1

SOURCE Marriott International, Inc.

Tom Marder of Marriott International, Inc., +1-301-380-2553,
thomas.marder@marriott.com
http://www.marriott.com/

Copyright (C) 2007 PR Newswire. All rights reserved

News Provided by COMTEX

About Marriott