Marriott International Reports Third Quarter Results

<< Back
Oct 2, 2008

Marriott International Reports Third Quarter Results

BETHESDA, Md., Oct 02, 2008 /PRNewswire-FirstCall via COMTEX News Network/ --


    Third Quarter Highlights:

-- Worldwide comparable company-operated revenue per available room (REVPAR) rose 3.4 percent (1.1 percent using constant dollars) for the third quarter ended September 5, 2008;

-- Outside North America, comparable company-operated REVPAR increased 13.4 percent (5.7 percent using constant dollars) with double-digit growth in South and Central America, the Caribbean, and the Middle East;

-- In a weak economic environment, North American comparable company-operated REVPAR declined 1.0 percent with a 1.6 percent increase in average rate;

-- The company's worldwide pipeline of hotels under construction, awaiting conversion or approved for development totaled over 130,000 rooms;

-- Over 6,500 rooms opened during the third quarter, including almost 2,300 rooms outside North America.

Marriott International, Inc. (NYSE: MAR) today reported third quarter 2008 adjusted income from continuing operations of $123 million, an increase of 1 percent over the year-ago quarter, and adjusted diluted earnings per share ("EPS") from continuing operations of $0.34, up 10 percent. The company's EPS guidance for the third quarter, disclosed on July 10, 2008, totaled $0.30 to $0.35.

Adjusted results for the 2008 quarter exclude a $29 million ($0.08 per diluted share) after-tax non-cash charge primarily related to a 1994 tax planning transaction.

Reported income from continuing operations was $94 million in the third quarter of 2008 compared to $122 million in the year-ago quarter. Reported diluted EPS from continuing operations was $0.26 in the third quarter of 2008 compared to $0.31 in the third quarter of 2007.

J.W. Marriott, Jr., Marriott International's chairman and chief executive officer, said, "In our more than 50 years in the lodging business, we have focused our business strategy on meaningful competitive advantages -- strong brands, skilled management, and leading guest, owner and franchisee preference -- all combined in a time-tested business model of managing and franchising hotels. These attributes drive strong returns when the economic picture is bright and allow us to outperform competitors when times are more challenging.

"The third quarter demonstrated those advantages. With soft economic growth, our third quarter North American REVPAR declined modestly. Favorable international REVPAR and strong global unit growth enabled our fee revenue and operating income to remain steady. Over the past 12 months, we have opened over 200 hotels, including over 30 hotels converted from competitor brands.

"Our timeshare business has certainly been far more impacted by the current financial environment than our core lodging business. Tight credit, soft consumer spending and a difficult securitization market have lowered our expectations for the fourth quarter and 2009. However, our strong brands, high customer satisfaction and loyalty, and the terrific know-how of our associates will reward us in the future.

"Our financial leverage is modest, we have ample liquidity, and our market share continues to grow. Increasingly, our presence is global. During the quarter, nearly 70 percent of the company's incentive fees were earned at properties outside North America. Today, our pipeline of hotels under development totals over 130,000 rooms worldwide. We expect to open approximately 30,000 rooms in 2008 and 30,000 to 35,000 rooms in 2009. Companywide we are maximizing revenue opportunities and operating efficiencies while redefining and refreshing our brands. We're confident that as the economy strengthens, we'll be well positioned to achieve solid earnings growth."

In the 2008 third quarter (12-week period from June 14, 2008 to September 5, 2008), REVPAR for the company's comparable worldwide company-operated properties increased 3.4 percent (1.1 percent using constant dollars) and average daily rates increased 6.2 percent (3.9 percent using constant dollars). REVPAR at comparable worldwide systemwide properties rose 2.2 percent (0.7 percent using constant dollars) over the year-ago quarter.

Third quarter international comparable company-operated REVPAR increased 13.4 percent (5.7 percent using constant dollars), including a 16.9 percent increase in average daily rate (8.9 percent using constant dollars). REVPAR growth was particularly strong in the Middle East, the Caribbean, and South and Central America.

In North America, comparable company-operated REVPAR declined 1.0 percent in the third quarter of 2008. REVPAR at the company's comparable company- operated North American full-service and luxury hotels (including Marriott Hotels & Resorts, The Ritz-Carlton and Renaissance Hotels & Resorts) was flat with a 2.1 percent increase in average daily rates.

Marriott added 42 new properties (6,528 rooms) to its worldwide lodging portfolio in the third quarter, including a Marriott and a Renaissance in Beijing and The Ritz-Carlton, Fort Lauderdale. Six properties (838 rooms) exited the system during the quarter. At quarter-end, the company's lodging group encompassed 3,105 properties and timeshare resorts for a total of over 550,000 rooms.

MARRIOTT REVENUES totaled $3.0 billion in the 2008 third quarter, a 1 percent increase from the same period in 2007. Base management and franchise fees rose 2 percent to $251 million as a result of REVPAR improvement, primarily driven by rate increases and unit growth. Franchise relicensing fees declined $8 million to $1 million compared to the year-ago quarter, reflecting a slower transaction environment for existing franchised hotels. With soft lodging demand trends in the United States, incentive management fees declined $4 million. Incentive management fees from international markets accounted for nearly 70 percent of total incentive fees in the 2008 quarter compared to about 45 percent in the 2007 quarter.

Worldwide comparable company-operated house profit margins declined 50 basis points. House profit margins for comparable company-operated properties outside North America grew 80 basis points and house profit per available room ("HP-PAR") increased 7 percent. North American comparable company-operated house profit margins declined 130 basis points from the year-ago quarter and HP-PAR declined 4 percent.

Owned, leased, corporate housing and other revenue, net of direct expenses, declined $7 million in the 2008 third quarter, to $20 million, primarily reflecting the impact of properties under renovation and lower termination fees.

The timeshare business continues to be impacted by tight credit markets and increasingly negative perceptions of residential real estate. Third quarter Timeshare segment contract sales declined 13 percent to $306 million largely due to lower sales of timeshare and residential products, partially offset by stronger sales at the new Ritz-Carlton Lake Tahoe fractional resort.

Timeshare segment results, which includes timeshare sales and services revenue, net of direct expenses, as well as base management fees, equity earnings, minority interest and general, administrative and other expenses associated with the timeshare business, totaled $49 million compared to $39 million in the prior year. The segment results reflected a net $10 million pretax impairment charge for a fractional and residential consolidated joint venture project, adjusting the carrying value of the real estate to its estimated fair market value. The $10 million charge included a $22 million negative adjustment in timeshare direct expenses partially offset by a $12 million pretax ($8 million after-tax) benefit associated with the joint venture partner's share, which is reflected in minority interest.

In the third quarter, timeshare sales and services revenue decreased 1 percent to $384 million and, net of expenses, increased 4 percent to $47 million. While soft demand constrained revenue, results reflected favorable product costs, increased year-over-year reportability at several projects, and higher financing and services profit in the 2008 quarter, largely offset by the $22 million charge at the fractional/residential joint venture project referred to above.

GENERAL, ADMINISTRATIVE and OTHER expenses for the 2008 third quarter totaled $167 million, compared to $164 million in the year-ago quarter.

GAINS AND OTHER INCOME totaled $7 million and included $2 million of gains on the sale of real estate, a $2 million gain from the sale of the company's interest in a joint venture and $3 million of preferred returns from joint venture investments. The prior year's third quarter gains totaled $30 million and included $22 million of gains on the sale of real estate, $2 million of gains from the sale of the company's interest in four joint ventures and $6 million of preferred returns from joint venture investments and other income.

INCOME TAXES

During the quarter, the company recorded a non-cash charge of $29 million, largely related to an unfavorable court decision associated with a 1994 tax planning transaction. The company expects to appeal the ruling.

MINORITY INTEREST, NET OF TAX increased $9 million in the third quarter. The increase largely reflected the adjustment of the carrying value of the fractional/residential project noted earlier. Since the project is a consolidated joint venture, the partner's share of the adjustment was an $8 million after-tax benefit to minority interest.

BALANCE SHEET

At the end of third quarter 2008, total debt was $3,046 million and cash balances totaled $117 million, compared to $2,965 million in debt and $332 million of cash at year-end 2007. The company repurchased 3.3 million shares of common stock during the third quarter of 2008 at a cost of $88 million. Weighted average fully diluted shares outstanding totaled 365.4 million in the 2008 third quarter compared to 394.1 million in the year-ago quarter. The remaining share repurchase authorization, as of September 5, 2008, totaled 21.3 million shares.

FOURTH QUARTER 2008 OUTLOOK

Given the current soft economic climate in North America and weakening markets outside North America, the company expects worldwide comparable systemwide REVPAR to decline 1 to 3 percent in the fourth quarter of 2008. North American comparable company-operated REVPAR is expected to decline 3 to 5 percent and as a result, house profit margins are expected to decline 250 to 300 basis points. With approximately 8,000 rooms forecasted to open in the fourth quarter, the company anticipates total fee revenue of approximately $440 million to $450 million, a decrease of 3 to 5 percent from the prior year.

The company expects fourth quarter 2008 timeshare contract sales to be roughly flat with the prior year reflecting weak consumer demand in North America and Europe.

While the company's timeshare loan portfolio remains strong, current conditions in the capital markets significantly lower the likelihood that the company can complete a timeshare note sale in the fourth quarter. In addition, delays in state-level registration approvals have postponed some previously scheduled closings until 2009. As a result, timeshare development revenue should decline in the fourth quarter and note sale gains are expected to be zero, compared to $36 million in the year-ago quarter. All in all, timeshare sales and services revenue, net of expenses, is expected to total $50 million to $60 million in the fourth quarter of 2008.

Timeshare segment results include timeshare sales and services revenue, net of direct expenses, base management fees, equity earnings, minority interest and general, administrative and other expenses associated with the timeshare business. Base management fees associated with the timeshare business are expected to increase and timeshare site, regional and corporate overhead expenses are expected to decline in the fourth quarter, excluding possible severance charges. Timeshare segment results for the 2008 fourth quarter are expected to total $35 million to $45 million.

For the entire company, general, administrative and other expenses are expected to total $245 million to $255 million in the fourth quarter, approximately flat with the 2007 quarter (excluding possible severance charges in the fourth quarter).

The company expects nearly 30,000 new room openings (gross) in 2008. At the end of the 2008 third quarter, the company's worldwide pipeline of hotels under construction, awaiting conversion or approved for development totaled over 130,000 rooms. Given the deteriorating financial markets, the company, owners or franchisees may decide to delay or cancel some of the projects included in the pipeline. Such decisions may lead to write-offs of amounts invested, which cannot be estimated at this time and, therefore, are not included in the fourth quarter 2008 guidance.

Based upon the above assumptions, the company expects EPS for the 2008 fourth quarter to total $0.44 to $0.50.

The company expects investment spending in 2008 to total approximately $1 billion to $1.1 billion, including approximately $70 million for maintenance capital spending, $300 million to $315 million for capital expenditures and acquisitions, $350 million to $400 million for net timeshare development, $30 million to $40 million in new mezzanine financing and mortgage loans for hotels developed by owners and franchisees, and $280 million to $300 million in equity and other investments (including timeshare equity investments).



                                Fourth Quarter 2008      Full Year 2008
    Total fee revenue         $440 million to          $1,435 million to
                              $450 million             $1,445 million

    Owned, leased,            $50 million to $55       $142 million to
     corporate housing        million                  $147 million
     and other revenue,
     net of direct
     expenses

    Timeshare sales and       $50 million to $60       $187 million to
     services revenue,        million                  $197 million
     net of direct
     expenses (1)

    General,                  $245 million to          $758 million to
     administrative and       $255 million             $768 million
     other expenses

    Operating income          $285 million to          $996 million to
                              $320 million             $1,031 million

    Gains and other           Approx. $0               Approx. $19
     income                                             million

    Net interest              Approx. $50 million      Approx. $133
     expense (2)                                       million

    Equity in earnings        Approx. $0               Approx. $26
     (losses)                                          million

    After-tax minority        Approx. $3 million       Approx. $16
     interest                                          million

    Diluted earnings per      $0.44 to $0.50           $1.62 to $1.68
    share (3)

    Tax rate                  33 to 35 percent

    (1) Includes $28 million of timeshare note sale gains for full year 2008
    (2) Net of interest income
    (3) Excludes the $0.18 per diluted share impact of non-cash items included
        in the tax provision for full year 2008


2009 OUTLOOK

While Marriott would typically provide a range of guidance for future performance in the coming year, the current global economic and financial climate makes predictions very difficult. In 2009, at a minimum, the company expects the business environment to remain unusually challenging. For internal planning purposes, the company is assuming roughly flat performance in comparable company-operated REVPAR outside North America (on a constant dollar basis) and, at best, a 3 percent decline in North American comparable company-operated REVPAR. Given these REVPAR assumptions and assuming higher property-level costs, house profit margins could decline 250 to 300 basis points in North America and decline 125 to 175 basis points outside North America. Room growth is expected to total 30,000 to 35,000 rooms in 2009 and most hotels expected to open are already under construction. In this scenario, room growth offsets REVPAR performance to yield modestly higher combined base management and franchise fees, while softer REVPAR and margin declines lead to declining incentive management fees. All in all, fee revenue could total $1,365 to $1,385 million in 2009, a decline of 4 to 5 percent. In this scenario, the company estimates that incentive management fees in 2009 would derive largely from international markets. The company estimates that an additional 1 percent decline in comparable REVPAR in 2009, coupled with a roughly 50 to 100 basis point decline in house profit margin, could impact pretax fees by approximately $20 million.

Assuming continued weak economic conditions, timeshare contract sales could remain flat to 2008 levels with lower fractional and residential sales and modest growth from the company's core timeshare product, particularly the Asia Pacific Points program.

While the company currently does not contemplate a timeshare note sale in the fourth quarter 2008, for internal planning purposes the company assumes the completion of two note sale transactions in 2009, selling approximately $450 million to $500 million of notes and earning $40 million to $50 million in note sale gains, roughly half of the gains expected by the company for 2009 a few months ago.

Base management fees associated with the timeshare business are likely to increase and timeshare site, regional and corporate overhead are likely to decline in 2009. As a result, timeshare segment results for 2009 could total $175 million to $225 million.

Given this plan, the company's general, administrative and other expenses are expected to be generally flat with 2008 levels reflecting increased spending for brand initiatives but decreased spending for development and corporate staffing.

While the company cannot forecast results with certainty, based upon the above assumptions, EPS for 2009 could total $1.48 to $1.60.

In 2009, investment spending is expected to total $700 million to $800 million. The company does not anticipate meaningful share repurchase activity in the balance of 2008 and 2009.

Marriott International, Inc. (NYSE: MAR) will conduct its quarterly earnings review for the investment community and news media on Thursday, October 2, 2008 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 October 2, 2009. The webcast will also be available as a podcast from the same site.

The telephone dial-in number for the conference call is 719-325-4836. A telephone replay of the conference call will be available from 1 p.m. ET, Thursday, October 2, 2008 until 8 p.m. ET, Thursday, October 9, 2008. To access the replay, call 719-457-0820. The reservation number for the recording is 8663694.

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 share repurchases and 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 depth and duration of the current slowdown in the lodging industry and the economy generally; supply and demand changes for hotel rooms, vacation ownership, condominiums, and corporate housing, including the impact of recent increases in transportation fuel costs on demand for our products; 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 over 3,100 lodging properties in the United States and 66 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 by Marriott Vacation Club, 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. The company is headquartered in Bethesda, MD, and had approximately 151,000 employees at 2007 year-end. It is ranked as the lodging industry's most admired company and one of the best companies to work for by FORTUNE(R), and has been recognized by the U.S. Environmental Protection Agency (EPA) with the 2007 Sustained Excellence Award and Partner of the Year since 2004. In fiscal year 2007, Marriott International reported sales from continuing operations of $13 billion. For more information or reservations, please visit our web site at www.marriott.com.

    IRPR#1

                                Tables follow



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

                                            Twelve Weeks Ended
                                         -------------------------  Percent
                                         September 5, September 7,  Better/
                                                2008        2007    (Worse)
                                         ------------ ------------  -------

    REVENUES
    Base management fees                        $143        $135       6
    Franchise fees                               108         111      (3)
    Incentive management fees                     52          56      (7)
    Owned, leased, corporate housing and
     other revenue (1)                           260         262      (1)
    Timeshare sales and services (2)             384         389      (1)
    Cost reimbursements (3)                    2,016       1,990       1
                                         ------------ ------------
      Total Revenues                           2,963       2,943       1

    OPERATING COSTS AND EXPENSES
    Owned, leased and corporate housing -
     direct (4)                                  240         235      (2)
    Timeshare - direct                           337         344       2
    Reimbursed costs                           2,016       1,990      (1)
    General, administrative and other (5)        167         164      (2)
                                         ------------ ------------
       Total Expenses                          2,760       2,733      (1)
                                         ------------ ------------

    OPERATING INCOME                             203         210      (3)


    Gains and other income (6)                     7          30     (77)
    Interest expense                             (33)        (42)     21
    Interest income                                8           8       -
    Equity in earnings (losses) (7)                2           8     (75)
                                         ------------ ------------

    INCOME FROM CONTINUING OPERATIONS
     BEFORE INCOME TAXES AND MINORITY
     INTEREST                                    187         214     (13)
    Provision for income taxes                  (103)        (93)    (11)
    Minority interest, net of tax                 10           1     900
                                         ------------ ------------

    INCOME FROM CONTINUING OPERATIONS             94         122     (23)

    Discontinued operations - Synthetic
     Fuel, net of tax (8)                          -           9    (100)
                                         ------------ ------------

    NET INCOME                                   $94        $131     (28)
                                         ============ ============

    EARNINGS PER SHARE - Basic
       Earnings from continuing
        operations                             $0.27       $0.33     (18)
       Earnings from discontinued
        operations (8)                             -        0.02    (100)
                                         ------------ ------------
       Earnings per share                      $0.27       $0.35     (23)
                                         ============ ============

    EARNINGS PER SHARE - Diluted
       Earnings from continuing
        operations                             $0.26       $0.31     (16)
       Earnings from discontinued
        operations (8)                             -        0.02    (100)
                                         ------------ ------------
       Earnings per share                      $0.26       $0.33     (21)
                                         ============ ============


    Basic Shares                               351.2       373.8
    Diluted Shares                             365.4       394.1



    (1) - Owned, leased, corporate housing and other revenue includes revenue
          from the properties we own or lease, revenue from our corporate
          housing business, termination fees and other revenue.
    (2) - Timeshare sales and services includes total timeshare revenue except
          for base management 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 segments, and our corporate overhead costs
          and general expenses.
    (6) - Gains and other income 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, and
          income from cost method joint ventures.
    (7) - Equity in earnings (losses) includes our equity in earnings (losses)
          of unconsolidated equity method joint ventures.
    (8) - Discontinued operations relates to our Synthetic Fuel business which
          was shut down and substantially all the assets liquidated at
          December 28, 2007.



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


                                          Thirty-Six Weeks Ended
                                         -------------------------  Percent
                                         September 5, September 7,  Better/
                                                2008         2007   (Worse)
                                         -----------  ------------  -------
    REVENUES
    Base management fees                        $452        $417        8
    Franchise fees                               314         303        4
    Incentive management fees                    229         243       (6)
    Owned, leased, corporate housing and
     other revenue (1)                           849         824        3
    Timeshare sales and services (2)           1,098       1,211       (9)
    Cost reimbursements (3)                    6,153       5,903        4
                                         -----------  ------------
       Total Revenues                          9,095       8,901        2

    OPERATING COSTS AND EXPENSES
    Owned, leased and corporate housing -
     direct (4)                                  757         711       (6)
    Timeshare - direct                           961         987        3
    Reimbursed costs                           6,153       5,903       (4)
    General, administrative and other (5)        513         518        1
                                         -----------  ------------
       Total Expenses                          8,384       8,119       (3)
                                         -----------  ------------

    OPERATING INCOME                             711         782       (9)


    Gains and other income (6)                    19          77      (75)
    Interest expense                            (113)       (127)      11
    Interest income                               28          26        8
    (Provision for) reversal of loan
     losses                                        2           -        *
    Equity in earnings (losses) (7)               26           9      189
                                         -----------  ------------

    INCOME FROM CONTINUING OPERATIONS
     BEFORE INCOME TAXES AND MINORITY
     INTEREST                                    673         767      (12)
    Provision for income taxes                  (317)       (307)      (3)
    Minority interest, net of tax                 13           1    1,200
                                         -----------  ------------

    INCOME FROM CONTINUING OPERATIONS            369         461      (20)

    Discontinued operations - Synthetic
     Fuel, net of tax (8)                          3          59      (95)
                                         -----------  ------------

    NET INCOME                                  $372        $520      (28)
                                         ===========  ============

    EARNINGS PER SHARE - Basic
       Earnings from continuing
        operations                             $1.04       $1.21      (14)
       Earnings from discontinued
        operations (8)                          0.01        0.15      (93)
                                         -----------  ------------
       Earnings per share                      $1.05       $1.36      (23)
                                         ===========  ============

    EARNINGS PER SHARE - Diluted
       Earnings from continuing
        operations                             $1.00       $1.14      (12)
       Earnings from discontinued
        operations (8)                          0.01        0.15      (93)
                                         -----------  ------------
       Earnings per share                      $1.01       $1.29      (22)
                                         ===========  ============


    Basic Shares                               353.0       381.6
    Diluted Shares                             369.4       403.4

    *  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, termination fees and other revenue.
    (2) - Timeshare sales and services includes total timeshare revenue except
          for base management 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 segments, and our corporate overhead costs
          and general expenses.
    (6) - Gains and other income 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, and income from cost method joint ventures.
    (7) - Equity in earnings (losses) includes our equity in earnings (losses)
          of unconsolidated equity method joint ventures.
    (8) - Discontinued operations relates to our Synthetic Fuel Business which
          was shut down and substantially all the assets liquidated at
          December 28, 2007.



                          Marriott International, Inc.
                               Business Segments
                                ($ in millions)

                                             Twelve Weeks Ended
                                         ------------------------- Percent
                                         September 5, September 7,  Better/
                                             2008         2007     (Worse)
                                         ------------ ------------ --------
    REVENUES

    North American Full-Service             $1,239       $1,241        -
    North American Limited-Service             544          540        1
    International                              342          343        -
    Luxury                                     357          339        5
    Timeshare                                  463          463        -
                                         ------------ ------------
      Total segment revenues (1)             2,945        2,926        1
    Other unallocated corporate                 18           17        6
                                         ------------ ------------
      Total                                 $2,963       $2,943        1
                                         ============ ============

    INCOME FROM CONTINUING OPERATIONS

    North American Full-Service                $66          $78      (15)
    North American Limited-Service             103          119      (13)
    International                               50           57      (12)
    Luxury                                      17           15       13
    Timeshare (2)                               49           39       26
                                         ------------ ------------
      Total segment financial results (1)      285          308       (7)
    Other unallocated corporate                (58)         (59)       2
    Interest income, provision for loan
     losses and interest expense               (25)         (34)      26
    Income taxes (2)                          (108)         (93)     (16)
                                         ------------ ------------
      Total                                    $94         $122      (23)
                                         ============ ============




    (1) We consider segment revenues and segment 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 revenues and results of our lodging operations to those of
        other lodging companies.

    (2) We allocate minority interest of our consolidated subsidiaries to our
        segments.  Accordingly, minority interest, net of tax, of our
        consolidated subsidiaries of $10 million for the 2008 third quarter as
        reflected in our income statement, was allocated as follows:  $15
        million to our Timeshare segment and $(5) million to Provision for
        income taxes.



                          Marriott International, Inc.
                               Business Segments
                                ($ in millions)

                                           Thirty-Six Weeks Ended
                                         -------------------------  Percent
                                         September 5, September 7,  Better/
                                             2008         2007      (Worse)
                                         ------------ ------------  -------
    REVENUES

    North American Full-Service             $3,917       $3,767        4
    North American Limited-Service           1,570        1,541        2
    International                            1,093        1,056        4
    Luxury                                   1,147        1,048        9
    Timeshare                                1,326        1,438       (8)
                                         ------------ ------------
      Total segment revenues (1)             9,053        8,850        2
    Other unallocated corporate                 42           51      (18)
                                         ------------ ------------
      Total                                 $9,095       $8,901        2
                                         ============ ============


    INCOME FROM CONTINUING OPERATIONS

    North American Full-Service               $290         $324      (10)
    North American Limited-Service             301          337      (11)
    International (2)                          179          166        8
    Luxury                                      66           44       50
    Timeshare (2)                              123          190      (35)
                                         ------------ ------------
      Total segment financial results (1)      959        1,061      (10)
    Other unallocated corporate               (183)        (192)       5
    Interest income, provision for loan
     losses and interest expense               (83)        (101)      18
    Income taxes (2)                          (324)        (307)      (6)
                                         ------------ ------------
      Total                                   $369         $461      (20)
                                         ============ ============


    (1) We consider segment revenues and segment 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 revenues and results of our lodging operations to those of
        other lodging companies.

    (2) We allocate minority interest of our consolidated subsidiaries to our
        segments.  Accordingly, minority interest, net of tax, of our
        consolidated subsidiaries of $13 million for the 2008 third quarter
        year-to-date as reflected in our income statement, was allocated as
        follows: $21 million to our Timeshare segment, $(1) million to our
        International segment, and $(7) million to Provision for income taxes.



                           MARRIOTT INTERNATIONAL, INC.
                             Total Lodging Products (1)


                            Number of Properties     Number of Rooms/Suites
                           ---------------------     ----------------------
                                             vs.                         vs.
                         Sept. 5, Sept. 7, Sept. 7, Sept. 5, Sept. 7, Sept. 7,
    Brand                   2008     2007     2007     2008     2007     2007
    -------------------- -------------------------- --------------------------
    Domestic Full-Service
      Marriott Hotels &
       Resorts                345     340       5  137,498  135,611   1,887
      Renaissance Hotels &
       Resorts                 75      68       7   27,546   25,023   2,523
    Domestic Limited-Service
      Courtyard               715     679      36   99,676   94,830   4,846
      Fairfield Inn           547     521      26   48,542   46,231   2,311
      SpringHill Suites       198     166      32   23,057   19,372   3,685
      Residence Inn           541     516      25   64,552   61,421   3,131
      TownePlace Suites       154     134      20   15,403   13,467   1,936
    International
      Marriott Hotels &
       Resorts                179     181      (2)  53,805   52,324   1,481
      Renaissance Hotels &
       Resorts                 65      74      (9)  21,684   23,958  (2,274)
      Courtyard                78      72       6   14,708   13,605   1,103
      Fairfield Inn             9       7       2    1,109      859     250
      SpringHill Suites         1       1       -      124      124       -
      Residence Inn            18      18       -    2,665    2,612      53
      Marriott Executive
       Apartments              19      18       1    3,029    3,036      (7)
      Ramada                    -       2      (2)       -      332    (332)
    Luxury
      The Ritz-Carlton -
       Domestic                37      35       2   11,603   11,530      73
      The Ritz-Carlton -
       International           33      30       3   10,171    9,052   1,119
      Bulgari Hotels & Resorts  2       2       -      117      117       -
      The Ritz-Carlton
       Residential             21      16       5    2,122    1,495     627
      The Ritz-Carlton
       Serviced Apartments      2       1       1      387      248     139
    Timeshare (2)
      Marriott Vacation Club   49      46       3   11,328   10,775     553
      The Ritz-Carlton Club -
       Fractional               9       7       2      425      388      37
      The Ritz-Carlton Club -
       Residential              3       3       -      145      140       5
      Grand Residences by
       Marriott - Fractional    2       2       -      248      248       -
      Grand Residences by
       Marriott - Residential   1       1       -       65       65       -
      Horizons by Marriott
       Vacation Club            2       2       -      444      444       -
                         -------------------------- --------------------------
    Sub Total Timeshare        66      61       5   12,655   12,060     595
                         -------------------------- --------------------------

    Total                   3,105   2,942     163  550,453  527,307  23,146
                         ========================= ===========================



      Number of Timeshare Interval, Fractional and Residential Resorts (2)
                                                               In Active
                                               Total(3)          Sales
    100% Company-Developed
      Marriott Vacation Club                      49                26
      The Ritz-Carlton Club and Residences         9                 7
      Grand Residences by Marriott and Residences  3                 3
      Horizons by Marriott Vacation Club           2                 2

    Joint Ventures
      The Ritz-Carlton Club and Residences         3                 3
                                               -------------------------
    Total                                         66                41
                                               =========================


    (1) Total Lodging Products excludes the 2,314 and 1,936 corporate housing
        rental units as of September 5, 2008 and September 7, 2007,
        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 August 31, 2008 and August 31, 2007
                        ------------------------------------------------------
                                                               Average Daily
                                  REVPAR         Occupancy          Rate
                        ------------------------------------------------------
    Region                            vs.           vs.                 vs.
                               2008   2007   2008   2007         2008   2007
                        ------------------------------------------------------
    Caribbean & Latin
     America                $137.04  10.0%  74.6%  -2.0% pts. $183.61  12.9%
    Continental Europe      $156.17   4.9%  73.8%  -3.4% pts. $211.57   9.7%
    United Kingdom          $144.05  -0.4%  79.0%  -1.8% pts. $182.42   2.0%
    Middle East & Africa    $105.38  17.9%  73.4%   2.7% pts. $143.48  13.6%
    Asia Pacific(2)         $110.07   4.0%  71.3%  -4.1% pts. $154.45   9.9%

    Regional Composite(3)   $134.06   5.0%  74.1%  -2.6% pts. $180.96   8.7%


    International Luxury(4) $210.17   8.8%  71.2%   0.0% pts. $294.99   8.8%

    Total International(5)  $142.71   5.7%  73.8%  -2.3% pts. $193.48   8.9%

    Worldwide(6)            $121.42   1.1%  74.0%  -2.0% pts. $164.04   3.9%



                  Comparable Systemwide International Properties (1)

                       Three Months Ended August 31, 2008 and August 31, 2007
                       ------------------------------------------------------
                                                                Average Daily
                                  REVPAR          Occupancy          Rate
                       ------------------------------------------------------
    Region                             vs.           vs.                vs.
                               2008   2007   2008   2007         2008  2007
                       ------------------------------------------------------
    Caribbean & Latin
     America                $117.87   8.1%  71.1%  -2.3% pts. $165.72  11.6%
    Continental Europe      $160.18   8.0%  73.2%  -2.3% pts. $218.88  11.5%
    United Kingdom          $142.03  -0.6%  78.3%  -2.4% pts. $181.32   2.4%
    Middle East & Africa    $105.38  17.9%  73.4%   2.7% pts. $143.48  13.6%
    Asia Pacific(2)         $111.81   2.8%  71.9%  -3.2% pts. $155.55   7.4%

    Regional Composite(3)   $133.36   5.7%  73.3%  -2.2% pts. $181.93   8.9%


    International Luxury(4) $210.17   8.8%  71.2%   0.0% pts. $294.99   8.8%

    Total International(5)  $140.43   6.2%  73.1%  -2.0% pts. $192.08   9.1%

    Worldwide(6)            $106.23   0.7%  74.1%  -2.0% pts. $143.43   3.4%



    (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 June through August.  International
        includes properties located outside the Continental United States and
        Canada, except for Worldwide which also includes North America.
    (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 and International Luxury.
    (6) Includes International statistics for the three calendar months ended
        August 31, 2008 and August 31, 2007, and North American statistics for
        the twelve weeks ended September 5, 2008 and September 7, 2007.
        Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts,
        The Ritz-Carlton, Bulgari Hotels & Resorts, Residence Inn, Courtyard,
        Fairfield Inn, TownePlace Suites and SpringHill Suites brands.



                         Marriott International, Inc.
                            Key Lodging Statistics


              Comparable Company-Operated International Properties (1)

                        Eight Months Ended August 31, 2008 and August 31, 2007
                        ------------------------------------------------------
                                                               Average Daily
                                  REVPAR         Occupancy          Rate
                        ------------------------------------------------------
    Region                             vs.           vs.                vs.
                               2008   2007   2008   2007         2008   2007
                        ------------------------------------------------------
    Caribbean & Latin
     America                $151.89  10.2%  76.6%   0.3% pts. $198.18   9.8%
    Continental Europe      $149.15   5.9%  71.1%  -2.0% pts. $209.69   8.8%
    United Kingdom          $138.56   1.2%  75.1%  -1.5% pts. $184.39   3.3%
    Middle East & Africa    $126.48  18.7%  77.5%   4.0% pts. $163.19  12.5%
    Asia Pacific(2)         $116.15   6.0%  72.9%  -1.3% pts. $159.33   7.8%

    Regional Composite(3)   $136.65   6.7%  73.8%  -0.8% pts. $185.19   7.8%


    International Luxury(4) $233.84  11.5%  73.0%   1.9% pts. $320.15   8.5%

    Total International(5)  $147.69   7.6%  73.7%  -0.5% pts. $200.38   8.3%

    Worldwide(6)            $124.84   2.8%  72.7%  -0.9% pts. $171.75   4.2%


                 Comparable Systemwide International Properties (1)

                       Eight Months Ended August 31, 2008 and August 31, 2007
                       ------------------------------------------------------
                                                               Average Daily
                                 REVPAR            Occupancy        Rate
                       ------------------------------------------------------
    Region                             vs.           vs.                vs.
                               2008   2007   2008   2007         2008  2007
                       ------------------------------------------------------
    Caribbean & Latin
     America                $129.99   7.3%  72.0%  -0.9% pts. $180.54   8.6%
    Continental Europe      $149.41   9.2%  69.8%  -0.4% pts. $214.00   9.9%
    United Kingdom          $136.40   1.1%  74.5%  -1.7% pts. $183.01   3.4%
    Middle East & Africa    $126.48  18.7%  77.5%   4.0% pts. $163.19  12.5%
    Asia Pacific(2)         $116.34   4.3%  72.8%  -1.5% pts. $159.81   6.4%

    Regional Composite(3)   $133.77   7.0%  72.4%  -0.6% pts. $184.69   7.9%


    International Luxury(4) $233.84  11.5%  73.0%   1.9% pts. $320.15   8.5%

    Total International(5)  $142.97   7.7%  72.5%  -0.4% pts. $197.23   8.3%

    Worldwide(6)            $105.80   2.1%  71.8%  -1.3% pts. $147.39   4.0%



    (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 August.  International
        includes properties located outside the Continental United States and
        Canada, except for Worldwide which also includes North America.
    (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 and International Luxury.
    (6) Includes International statistics for the eight calendar months ended
        August 31, 2008 and August 31, 2007, and North American statistics for
        the thirty-six weeks ended September 5, 2008 and September 7, 2007.
        Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts,
        The Ritz-Carlton, Bulgari Hotels & Resorts, Residence Inn, Courtyard,
        Fairfield Inn, TownePlace Suites and SpringHill Suites brands.



                         Marriott International, Inc.
                            Key Lodging Statistics


             Comparable Company-Operated North American Properties (1)

                    Twelve Weeks Ended September 5, 2008 and September 7, 2007
                    ----------------------------------------------------------
                                                               Average Daily
                                  REVPAR         Occupancy          Rate
                    ----------------------------------------------------------
                                       vs.           vs.                 vs.
    Brand                      2008   2007  2008    2007         2008   2007
                    ----------------------------------------------------------
    Marriott Hotels &
     Resorts                $125.67   0.5%  75.1%  -1.5% pts. $167.39   2.5%
    Renaissance Hotels &
     Resorts                $111.61   0.1%  72.3%  -0.9% pts. $154.39   1.4%
    Composite North
     American
     Full-Service(2)        $123.19   0.4%  74.6%  -1.4% pts. $165.17   2.3%
    The Ritz-Carlton(3)     $209.12  -1.7%  70.7%  -2.8% pts. $295.75   2.2%
    Composite North
     American Full-Service
     & Luxury(4)            $131.63   0.1%  74.2%  -1.5% pts. $177.40   2.1%
    Residence Inn           $100.41  -1.4%  80.5%  -1.5% pts. $124.76   0.4%
    Courtyard                $88.52  -3.1%  71.3%  -2.4% pts. $124.21   0.1%
    TownePlace Suites        $64.14  -6.0%  73.5%  -4.9% pts.  $87.32   0.2%
    SpringHill Suites        $78.41  -5.2%  73.6%  -3.6% pts. $106.54  -0.6%
    Composite North
     American
     Limited-Service(5)      $89.60  -2.8%  74.0%  -2.3% pts. $121.04   0.3%
    Composite - All(6)      $113.10  -1.0%  74.1%  -1.9% pts. $152.58   1.6%


                Comparable Systemwide North American Properties (1)

                    Twelve Weeks Ended September 5, 2008 and September 7, 2007
                    ----------------------------------------------------------
                                                                Average Daily
                                  REVPAR     Occupancy              Rate
                    ----------------------------------------------------------
    Brand                              vs.           vs.                  vs.
                               2008   2007  2008    2007         2008    2007
                    ----------------------------------------------------------
    Marriott Hotels &
     Resorts                $113.12  -0.3%  72.3%  -1.8% pts. $156.37   2.1%
    Renaissance Hotels &
     Resorts                $106.03   0.9%  72.5%  -0.5% pts. $146.33   1.5%
    Composite North
     American
     Full-Service(2)        $111.99  -0.2%  72.4%  -1.6% pts. $154.76   2.0%
    The Ritz-Carlton(3)     $209.12  -1.7%  70.7%  -2.8% pts. $295.75   2.2%
    Composite North
     American Full-Service
     & Luxury(4)            $117.59  -0.3%  72.3%  -1.6% pts. $162.72   1.9%
    Residence Inn           $103.19   0.9%  81.6%  -1.0% pts. $126.52   2.2%
    Courtyard                $91.28  -1.5%  73.3%  -2.1% pts. $124.57   1.2%
    Fairfield Inn            $68.74  -2.2%  73.3%  -3.2% pts.  $93.82   2.1%
    TownePlace Suites        $67.33  -2.1%  74.9%  -3.2% pts.  $89.96   2.1%
    SpringHill Suites        $79.37  -3.3%  73.2%  -3.0% pts. $108.36   0.6%
    Composite North
     American
     Limited-Service(5)      $87.77  -1.0%  75.5%  -2.1% pts. $116.21   1.8%
    Composite - All(6)       $99.45  -0.7%  74.3%  -1.9% pts. $133.93   1.9%


    (1) North America includes properties located in the Continental United
        States and Canada.
    (2) Includes the Marriott Hotels & Resorts, and Renaissance Hotels &
        Resorts brands.
    (3) Statistics for The Ritz-Carlton are for June through August.
    (4) Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts
        and The Ritz-Carlton brands.
    (5) Includes the Residence Inn, Courtyard, Fairfield Inn, TownePlace
        Suites and SpringHill Suites brands.
    (6) 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 (1)

                Thirty-Six Weeks Ended September 5, 2008 and September 7, 2007
                --------------------------------------------------------------
                                                                Average Daily
                                   REVPAR         Occupancy         Rate
                --------------------------------------------------------------
                                         vs.           vs.               vs.
    Brand                       2008   2007   2008   2007         2008  2007
                --------------------------------------------------------------
    Marriott Hotels &
     Resorts                 $129.50   1.8%  72.8%  -1.1% pts. $177.81  3.3%
    Renaissance Hotels &
     Resorts                 $120.55   1.6%  71.9%  -0.2% pts. $167.55  1.9%
    Composite North
     American
     Full-Service(2)         $127.92   1.7%  72.7%  -0.9% pts. $176.02  3.0%
    The Ritz-Carlton(3)      $247.26   0.9%  72.8%  -0.5% pts. $339.50  1.6%
    Composite North
     American Full-Service
     & Luxury(4)             $138.41   1.6%  72.7%  -0.9% pts. $190.42  2.9%
    Residence Inn             $98.47   0.2%  77.3%  -1.0% pts. $127.37  1.5%
    Courtyard                 $89.91  -0.9%  69.5%  -1.4% pts. $129.27  1.1%
    TownePlace Suites         $61.71  -4.6%  70.0%  -4.6% pts.  $88.11  1.6%
    SpringHill Suites         $79.72   0.2%  72.3%  -0.7% pts. $110.19  1.2%
    Composite North
     American
     Limited-Service(5)       $89.92  -0.6%  71.9%  -1.4% pts. $125.09  1.3%
    Composite - All(6)       $116.89   0.9%  72.3%  -1.1% pts. $161.60  2.4%


                  Comparable Systemwide North American Properties (1)


               Thirty-Six Weeks Ended September 5, 2008 and September 7, 2007
               --------------------------------------------------------------
                                                                Average Daily
                                   REVPAR        Occupancy           Rate
               --------------------------------------------------------------
    Brand                            vs.              vs.                vs.
                                2008   2007   2008   2007         2008  2007
               --------------------------------------------------------------
    Marriott Hotels &
     Resorts                 $115.31   1.1%  70.3%  -1.4% pts. $164.12  3.1%
    Renaissance Hotels &
     Resorts                 $111.54   1.4%  71.4%  -0.4% pts. $156.26  1.9%
    Composite North
     American
     Full-Service(2)         $114.71   1.1%  70.4%  -1.2% pts. $162.85  2.9%
    The Ritz-Carlton(3)      $247.26   0.9%  72.8%  -0.5% pts. $339.50  1.6%
    Composite North
     American Full-Service
     & Luxury(4)             $121.52   1.1%  70.6%  -1.2% pts. $172.23  2.9%
    Residence Inn             $98.79   1.8%  77.8%  -0.8% pts. $126.98  2.8%
    Courtyard                 $90.18   0.3%  70.8%  -1.4% pts. $127.43  2.2%
    Fairfield Inn             $64.12  -0.3%  68.9%  -2.7% pts.  $93.07  3.7%
    TownePlace Suites         $64.53  -1.2%  71.8%  -2.3% pts.  $89.91  2.0%
    SpringHill Suites         $78.73  -0.8%  71.5%  -2.0% pts. $110.17  2.0%
    Composite North
     American
     Limited-Service(5)       $85.06   0.5%  72.4%  -1.6% pts. $117.56  2.7%
    Composite - All (6)       $99.26   0.8%  71.7%  -1.4% pts. $138.51  2.8%


    (1) North America includes properties located in the Continental United
        States and Canada.
    (2) Includes the Marriott Hotels & Resorts, and Renaissance Hotels &
        Resorts brands.
    (3) Statistics for The Ritz-Carlton are for January through August.
    (4) Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts
        and The Ritz-Carlton brands.
    (5) Includes the Residence Inn, Courtyard, Fairfield Inn, TownePlace
        Suites and SpringHill Suites brands.
    (6) 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 Revenues                     Twelve Weeks Ended
                                      --------------------------  Percent
                                      September 5,  September 7,  Better /
                                          2008        2007        (Worse)
                                      ------------  ------------  --------
      Segment revenues                    $463        $463            -
                                      ============  ============

    Segment Results                      Twelve Weeks Ended
                                      --------------------------   Percent
                                      September 5,  September 7,   Better /
                                          2008         2007        (Worse)
                                      ------------  ------------  --------
      Base fees revenue                    $12         $10           20
      Timeshare sales and services, net     47          45            4
      Joint venture equity earnings          2           5          (60)
      Minority interest                     15           1        1,400
      General, administrative and other
       expenses                            (27)        (22)         (23)
                                      ------------  ------------
         Segment results                   $49         $39           26
                                      ============  ============



    Sales and Services Revenue            Twelve Weeks Ended
                                      --------------------------   Percent
                                       September 5,  September 7,  Better /
                                           2008        2007        (Worse)
                                      ------------  ------------  --------
      Development                          $265        $279           (5)
      Services                               81          77            5
      Financing                              31          28           11
      Other revenue                           7           5           40
                                      ------------  ------------
         Sales and services revenue        $384        $389           (1)
                                      ============  ============



    Contract Sales(1)
                                          Twelve Weeks Ended
                                      --------------------------   Percent
                                       September 5,  September 7,  Better /
                                           2008         2007       (Worse)
                                      ------------  ------------  --------
      Company:
        Timeshare                          $283        $313          (10)
        Fractional                           18          12           50
        Residential                          (6)          6         (200)
                                      ------------  ------------
          Total company                     295         331          (11)
      Joint ventures:
        Timeshare                             -           7         (100)
        Fractional                            6           7          (14)
        Residential                           5           5            -
                                      ------------  ------------
          Total joint ventures               11          19          (42)
                                      ------------  ------------
          Total contract sales,
           including joint ventures        $306        $350          (13)
                                      ============  ============


    (1) Timeshare segment contract sales represent gross sales of timeshare,
        fractional, and residential products from both our wholly owned and
        joint venture projects, before the adjustment for
        percentage-of-completion accounting.



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


    Segment Revenues                     Thirty-Six Weeks Ended
                                      --------------------------    Percent
                                      September 5,  September 7,    Better /
                                          2008          2007        (Worse)
                                      ------------  ------------
      Segment revenues                    $1,326        $1,438         (8)
                                      ============  ============


    Segment Results                      Thirty-Six Weeks Ended
                                      --------------------------    Percent
                                      September 5,  September 7,    Better /
                                          2008          2007        (Worse)
                                      ------------  ------------
      Base fees revenue                      $35           $30         17
      Timeshare sales and services, net      137           224        (39)
      Joint venture equity earnings            9             4        125
      Minority interest                       21             1      2,000
      General, administrative and other
       expenses                              (79)          (69)       (14)
                                      ------------  ------------
          Segment results                   $123          $190        (35)
                                      ============  ============



    Sales and Services Revenue           Thirty-Six Weeks Ended
                                      --------------------------    Percent
                                        September 5,  September 7,  Better /
                                            2008          2007      (Worse)
                                      ------------  ------------
      Development                           $722          $846        (15)
      Services                               244           225          8
      Financing                              107           120        (11)
      Other revenue                           25            20         25
                                      ------------  ------------
         Sales and services revenue       $1,098        $1,211         (9)
                                      ============  ============



    Contract Sales(1)                    Thirty-Six Weeks Ended
                                      --------------------------   Percent
                                       September 5,  September 7,   Better /
                                            2008        2007        (Worse)
                                      ------------  ------------
      Company:
        Timeshare                           $859        $877           (2)
        Fractional                            34          27           26
        Residential                           33           6          450
                                      ------------  ------------
          Total company                      926         910            2
      Joint ventures:
        Timeshare                              -          23         (100)
        Fractional                            17          46          (63)
        Residential                           30          56          (46)
                                      ------------  ------------
          Total joint ventures                47         125          (62)
                                      ------------  ------------
          Total contract sales,
           including joint ventures         $973      $1,035           (6)
                                      ============  ============


    (1) Timeshare segment contract sales represent gross sales of timeshare,
        fractional, and residential products from both our wholly owned and
        joint venture projects, before the adjustment for
        percentage-of-completion accounting.



                         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 and related conference call. 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.

Earnings Before Interest, Taxes, Depreciation and Amortization. Earnings before interest, taxes, depreciation and amortization (EBITDA) reflects earnings excluding the impact of interest expense, tax expense, depreciation and amortization. Our management considers EBITDA 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. EBITDA is used by analysts, lenders, investors and others, as well as by us, to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company's capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. Additionally, the tax positions of companies can vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and tax expense can vary considerably among companies. EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.

ESOP Settlement Charge. Management evaluates non-GAAP measures that exclude the charge associated with the 2007 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, including adjusted earnings per share and adjusted earnings before interest, taxes, depreciation and amortization, 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 in the second quarter 2007 reflecting $35 million of excise taxes (impacting General, Administrative, and Other Expenses), $13 million of interest expense on those excise taxes and $6 million of income tax expense primarily reflecting additional interest.

Adjusted EBITDA. Our management also evaluates adjusted EBITDA which excludes the synthetic fuel business for 2007, as well as the $35 million charge in 2007 for excise taxes associated with the ESOP settlement. The synthetic fuel operations, discontinued in 2007, are not related to our core business, which is lodging. Accordingly, our management evaluates non-GAAP measures which exclude the impact of the synthetic fuel business 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. Our management excludes the excise taxes associated with the ESOP settlement for the reasons noted above in the "ESOP Settlement Charge" caption.

Prior Years' Tax Adjustments and Foreign Subsidiaries Related Income Tax Charges. Management evaluates non-GAAP measures including adjusted earnings per share that exclude: (1) income tax expense in the 2008 third quarter totaling $29 million (diluted earnings per share impact of $0.08) primarily related to an unfavorable court decision involving a tax planning transaction associated with a 1994 sale transaction; (2) income tax expense in the 2008 second quarter totaling $12 million (diluted earnings per share impact of $0.03) primarily due to prior years' tax adjustments, including a settlement with the IRS that resulted in a lower than expected refund of taxes associated with a 1995 leasing transaction; and (3) income tax expense in the 2008 second quarter totaling $24 million (diluted earnings per share impact of $0.07) related to the tax treatment of funds received from foreign subsidiaries that is in on-going discussions with the IRS. We evaluate these non-GAAP measures 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 the results of other lodging companies.



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



                                                  Fiscal Year 2008
                                         ----------------------------------
                                          First   Second  Third  Total Year
                                         Quarter Quarter Quarter   to Date
                                         ------- ------- ------- ----------
    Net income                              $121    $157     $94      $372
    Interest expense                          42      38      33       113
    Tax provision, continuing operations      75     139     103       317
    Tax provision, minority interest           1       1       6         8
    Tax (benefit) provision, synthetic
     fuel                                      -      (6)     (1)       (7)
    Depreciation and amortization             41      47      42       130
    Less: Depreciation reimbursed by
     third-party owners                       (3)     (3)     (2)       (8)
    Interest expense from unconsolidated
     joint ventures                            4       4       5        13
    Depreciation and amortization from
     unconsolidated joint ventures             5       6       6        17
                                         ------- ------- ------- ----------
    EBITDA**                                $286    $383    $286      $955


    Discontinued operations adjustment
     (synthetic fuel)                          1       2       1         4
                                         ------- ------- ------- ----------
    Adjusted EBITDA**                       $287    $385    $287      $959
                                         ======= ======= ======= ==========

    Increase (Decrease) over 2007
     Adjusted EBITDA                        -14%    -13%     -7%      -11%

    The following items make up the
     discontinued operations
     adjustment (synthetic fuel)
    Pre-tax Synthetic Fuel losses             $1      $2      $1        $4
                                         ------- ------- ------- ----------
    EBITDA adjustment for discontinued
     operations (synthetic fuel)              $1      $2      $1        $4
                                         ======= ======= ======= ==========



                                                  Fiscal Year 2007
                                         ----------------------------------
                                          First   Second  Third  Total Year
                                         Quarter Quarter Quarter  to Date
                                         ------- ------- ------- ----------
    Net income                              $182    $207    $131      $520
    Interest expense                          33      52      42       127
    Tax provision, continuing operations      86     128      93       307
    Tax (benefit) provision, synthetic
     fuel                                    (72)    (86)    (41)     (199)
    Depreciation and amortization             46      45      43       134
    Less: Depreciation reimbursed by
     third-party owners                       (4)     (4)     (4)      (12)
    Interest expense from unconsolidated
     joint ventures                            5       5       8        18
    Depreciation and amortization from
     unconsolidated joint ventures             6       7       6        19
                                         ------- ------- ------- ----------
    EBITDA**                                $282    $354    $278      $914

    ESOP Settlement - Excise Tax               -      35       -        35
    Discontinued operations adjustment
     (synthetic fuel)                         52      52      30       134
                                          ------- ------- ------- ----------
   Adjusted EBITDA**                        $334    $441    $308    $1,083
                                          ======= ======= ======= ==========


    The following items make up the
     discontinued operations
     adjustment (synthetic fuel)
    Pre-tax Synthetic Fuel losses
     (income)                                $54     $54     $32      $140
    Synthetic Fuel depreciation               (2)     (2)     (2)       (6)
                                         ------- ------- ------- ----------

    EBITDA adjustment for discontinued
     operations (synthetic fuel)             $52     $52     $30      $134
                                         ======= ======= ======= ==========


    **  Denotes non-GAAP financial measures.



                           MARRIOTT INTERNATIONAL, INC.
                    Non-GAAP Financial Measure Reconciliation
                 Measures that Exclude Prior Year Tax Adjustment
                     (in millions, except per share amounts)


                                               Third Quarter 2008
                                      --------------------------------------
                                                                Excluding
                                                   Prior Year   the Prior
                                                       Tax       Year Tax
                                      As Reported  Adjustment  Adjustment**
                                      -----------  ----------  -------------
    Income (losses) from continuing
     operations before income taxes
     and minority interest                $187           $-        $187

    Provision for income taxes            (103)         (29)        (74)

    Minority interest, net of tax           10            -          10
                                      -----------  ----------  -------------

    Income from continuing operations      $94         $(29)       $123
                                      ===========  ==========  =============

    Diluted shares                       365.4        365.4       365.4

    Earnings per share from continuing
     operations - diluted                $0.26       $(0.08)      $0.34


    ** Denotes non-GAAP financial measures.



                          MARRIOTT INTERNATIONAL, INC.
                    Non-GAAP Financial Measure Reconciliation
         Measures that Exclude Prior Years' Tax Adjustments and Foreign
                     Subsidiaries Related Income Tax Charges


                                               2008 Full Year Forecast
                                              -------------------------
                                                 Low             High
                                              -----------    ----------
    Forecasted diluted earnings per share
     from continuing operations                 $1.44           $1.50

    Add back:  Diluted earnings per share
     impact of prior years' tax
     adjustments and foreign subsidiaries
     related income tax charges                  0.18            0.18
                                              -----------    ----------

    Forecasted diluted earnings per share
     excluding prior years' tax
     adjustments and foreign subsidiaries
     related income tax charges**               $1.62           $1.68
                                              ===========    ==========


    ** Denotes non-GAAP financial measures.


SOURCE Marriott International, Inc.

http://www.marriott.com

Copyright (C) 2008 PR Newswire. All rights reserved

News Provided by COMTEX

About Marriott