Marriott International Reports EPS From Continuing Operations of $0.36 For the First Quarter of 2003, Up 13% From 2002
WASHINGTON, Apr 24, 2003 /PRNewswire-FirstCall via COMTEX/ --
Marriott International, Inc. (NYSE: MAR) today reported diluted earnings per share from continuing operations of $0.36 in the first quarter of 2003, up 13 percent from the 2002 first quarter. Income from continuing operations, net of taxes, for the quarter was $87 million, up from $82 million a year ago. Synthetic fuel operations contributed approximately $19 million after-tax ($0.08 per share) during the first quarter of 2003 compared to $2 million after-tax ($0.01 per share) in the prior year quarter.
J.W. Marriott, Jr., chairman and chief executive officer of Marriott International, said, "Although the lodging industry felt the negative effects of the soft global economy compounded by the war in Iraq in the first quarter, Marriott continued to benefit from its business model and strong balance sheet. In the first quarter of 2003, our base management and franchise fees were up $8 million, or 6 percent, from a year-ago. Given the strength of our balance sheet, we have repurchased 5.5 million shares of Marriott International stock since year-end 2002 for a total cost of $174 million.
"In difficult times like these, owners and franchisees continue to select the strongest brands. With our partners, we added 8,028 rooms to our system in the first quarter. Roughly 35 percent (2,844 rooms) of these rooms were conversions of existing hotels to one of our brands. We remain confident that our management and franchise strategy, combined with our strong brands, will provide sustainable growth in market share and profits over the long term."
MARRIOTT LODGING profits decreased $6 million, or 4 percent, to $147 million during the first quarter of 2003, primarily reflecting the absence of a timeshare note sale transaction in the quarter. Timeshare note sale gains were $14 million in the first quarter of 2002. Incentive management fees declined $3 million during the quarter to $29 million as lower house profit margins reduced profitability at the unit level.
For the 2003 first quarter (January 4 - March 28), revenue per available room (REVPAR) for comparable company-operated North American properties decreased by 1.5 percent, driven entirely by lower average room rates. Company-operated full-service hotels (including Marriott Hotels & Resorts, The Ritz-Carlton, and Renaissance Hotels & Resorts) experienced a REVPAR decrease of 1.7 percent in the 2003 first quarter, while Marriott's company-operated select-service and extended-stay brands (including Courtyard, Fairfield Inn, Residence Inn, TownePlace Suites, and SpringHill Suites) posted a REVPAR decrease of 1.0 percent. Marriott's 2003 fiscal first quarter began on January 4, 2003, while the prior year's first quarter included the New Year's holiday. If calculated on the calendar quarter of January 1 to March 31 for both the 2003 and 2002 first quarters, REVPAR declined by an average of 4.1 percent across Marriott's domestic company-operated hotels during the 2003 first quarter.
Our first quarter profits for international lodging reflected greater strength than in the U.S., with REVPAR up 6.8 percent on a constant dollar basis and improved house profit margins. Lodging demand was particularly strong in the Asia/Pacific, Middle East/Africa and the Caribbean/Latin American regions during the first quarter. Beginning in late March and continuing into April, demand has declined significantly in many Asian markets as a result of Severe Acute Respiratory Syndrome (SARS).
Marriott's timeshare business reported over 15 percent growth in contract sales in the first quarter of 2003. Contract sales were particularly strong at timeshare resorts in Aruba, Hawaii, Arizona, and Jupiter, FL, while the Orlando market continued to be soft. Profits in the timeshare business declined to $18 million in the first quarter of 2003, primarily due to the deferral of a timeshare mortgage note sale to the second quarter. We previously announced our plan to complete two note sales (in the second and fourth quarters) during 2003 versus the smaller transactions in each of the four quarters of 2002.
We added 35 hotels and timeshare resorts (8,028 rooms) to our worldwide lodging portfolio during the first quarter, while one hotel (104 rooms) and two timeshare resorts (78 rooms) exited the system. Seven Marriott Hotels & Resorts (2,357 rooms) opened during the quarter, including the properties in Waikoloa and Wailea, Hawaii that joined us from Outrigger Resorts. Four Renaissance Hotels & Resorts (1,658 rooms), six Courtyards (996 rooms), four Residence Inns (684 rooms), and five Fairfield Inns (536 rooms) also opened during the quarter. At the end of the first quarter, the company's lodging group encompassed 2,589 hotels and timeshare resorts (471,275 rooms).
CORPORATE EXPENSES were $30 million in the first quarter of 2003 compared to $29 million a year ago. Interest expense in the 2003 first quarter was $26 million, up $7 million from a year ago, largely as a result of lower capitalized interest. Provisions for loan losses in the first quarter of 2003 were $5 million, related to reserves on two hotels. At the end of the first quarter 2003, total debt (including debt associated with discontinued operations) was $2.2 billion and cash balances totaled $525 million. We owned nine hotels at the end of the 2003 first quarter.
We repurchased 4.9 million shares of common stock during the 2003 first quarter at a total cost of $155 million and have repurchased approximately 600,000 shares to date in the second quarter. Currently, our remaining share repurchase authorization totals approximately 18 million shares.
We closed our distribution services business in 2002 and completed the sale of our senior living business in the 2003 first quarter. Therefore, we show the financial results for those businesses in discontinued operations for 2002 and 2003. Earnings per share from discontinued operations were $0.12 in the first quarter of 2003. Proceeds from the sale of our senior living business and certain related real estate assets were $266 million during the first quarter of 2003 and we recorded a $23 million after-tax gain on disposal in discontinued operations ($0.09 per share).
OUTLOOK
Based on the extraordinarily high level of uncertainty surrounding the global economy, the effect of the war in Iraq and the evolving impact of SARS, it is very difficult to forecast future operating performance. Our assumptions for the second quarter are for REVPAR trends and unit level profitability to continue at roughly the same levels as the first quarter. We currently estimate that domestic comparable managed REVPAR will decline by approximately four percent in the second quarter compared to 2002 levels and, with continued upward pressure on casualty insurance and medical benefits costs, we expect hotel house profit margins to decline.
We expect timeshare profits in the second quarter of 2003 to be between $42 million and $45 million, as a result of a higher gain on the sale of timeshare mortgage notes, offset somewhat by amortization of technology investments and lower interest income from timeshare notes.
Given the above assumptions and weaker international lodging profits, we estimate total lodging profits (including timeshare profits) will be $180 million to $190 million in the 2003 second quarter, down slightly from the 2002 second quarter. Including approximately $0.09 in earnings per share from our synthetic fuel operations, we anticipate that earnings per share from continuing operations will total $0.46 to $0.49 per share in the second quarter 2003.
For the second half of the year, we believe a fairly wide range of possible lodging demand estimates is appropriate, given the level of economic uncertainty. However, if one assumes that in the third quarter of 2003, the change in domestic comparable managed REVPAR ranges from down two percent to up two percent, no gain on timeshare mortgage note sales and $0.04 to $0.06 of after-tax earnings from synthetic fuel, we estimate EPS from continuing operations will range from $0.30 to $0.34. For the 2003 fourth quarter, assuming REVPAR ranges from flat to up four percent, completion of a timeshare mortgage note sale transaction, and $0.11 to $0.13 of after-tax earnings from our synthetic fuel operation, we estimate EPS will range from $0.64 to $0.68.
Under these assumptions, we estimate 2003 EPS from continuing operations, including synthetic fuel, would be $1.76 to $1.87.
We continue to expect to add between 25,000 and 30,000 hotel rooms annually in 2003 and 2004 to our worldwide lodging portfolio. At the end of the first quarter, the company's pipeline of properties under construction, awaiting conversion, or approved for development was over 50,000 rooms, even after opening more than 8,000 rooms in the first quarter.
We expect investment spending in 2003 to include approximately $40 million for maintenance spending and approximately $100 million for new company- developed hotels. We anticipate timeshare investment spending to total approximately $150 - $200 million. We also expect to invest $200 million in equity slivers, mezzanine financing and mortgage loans for hotels developed by our partners. We expect that total investment spending in 2003 will be roughly $500 - $550 million.
-------------------
We invite individual investors and members of the news media to listen to our first quarter earnings conference call on April 24 at 10:00 a.m. ET on the Internet. Go to http://www.marriott.com/investor and click on "recent investor news." A recording of the call will be available by telephone until May 1 at 8:00 p.m. ET by calling (719)457-0820, reservation number 341068.
Note: This press release contains "forward-looking statements" within the meaning of federal securities laws, including REVPAR, profit margin and earning trends; statements concerning the number of lodging properties expected to be added in future years; expected investment spending; anticipated results from synthetic fuel operations; the completion of the sale of an interest in our synthetic fuel business; and similar statements concerning anticipated future events and expectations that are not historical facts. We caution you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including the duration and severity of the current economic slowdown and the pace at which the lodging industry adjusts to the continuing war on terrorism; the impact of Severe Acute Respiratory Syndrome (SARS) on travel, particularly if cases significantly increase or spread beyond the currently affected areas; supply and demand changes for hotel rooms, vacation ownership intervals, and corporate housing; competitive conditions in the lodging industry; relationships with clients and property owners; the availability of capital to finance growth; and receipt of a satisfactory Internal Revenue Service ruling in connection with the synthetic fuel sale; 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 worldwide hospitality company with nearly 2,600 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 Ramada International brand names; develops and operates vacation ownership resorts under the Marriott Vacation Club International, Horizons, The Ritz-Carlton Club and Marriott Grand Residence Club brands; operates Marriott Executive Apartments; provides furnished corporate housing through its Marriott ExecuStay division; and operates conference centers. Marriott is also in the synthetic fuel business. The company is headquartered in Washington, D.C., has approximately 129,000 employees, and was ranked as the lodging industry's most admired company and one of the best places to work for by FORTUNE(R). For more information or reservations, please visit our web site at www.marriott.com.
IRPR#1
MARRIOTT INTERNATIONAL, INC.
Financial Highlights
(in millions, except per share amounts)
12 Weeks Ended 12 Weeks Ended
March 28, 2003 March 22, 2002
------------------------- --------------------------------
Percent
Synthetic Synthetic better/
Lodging Fuel Total Lodging Fuel Total (worse)
--------- --------- ----- ------- -------- ----- -------
SALES
Base
management
fees $92 $- $92 $85 $- $85
Franchise fees 52 - 52 51 - 51
Incentive
management
fees 29 - 29 32 - 32
Owned and
leased
properties 89 - 89 93 - 93
Other lodging
revenue(1) 276 - 276 280 - 280
Cost
reimbursements
(2) 1,408 - 1,408 1,262 - 1,262
Synthetic Fuel - 68 68 - 5 5
-------- ------- ----- ------- -------- -------
Total
Revenues 1,946 68 2,014 1,803 5 1,808
-------- ------- ----- ------- -------- -------
OPERATING
COSTS AND
EXPENSES
Owned and
leased-
direct(3) 89 - 89 91 - 91
Other
lodging-
direct(4) 250 - 250 240 - 240
Reimbursed
costs 1,408 - 1,408 1,262 - 1,262
Administrative
and other(5) 52 - 52 57 - 57
Synthetic Fuel - 127 127 - 11 11
-------- ------- ------ ------- ------- -------
Total
Expenses 1,799 127 1,926 1,650 11 1,661
-------- ------- ------ ------- ------- -------
Segment
Results $147 $(59) 88 $153 $(6) 147 (40)
======== ======= ======= =======
Corporate
expenses (30) (29)
Interest
expense (26) (19)
Interest
income 20 19
Provision for
loan losses (5) -
------ -------
INCOME FROM
CONTINUING
OPERATIONS
BEFORE
INCOME
TAXES 47 118
Benefit
(Provision)
for
income taxes 40 (36)
------ -------
INCOME FROM
CONTINUING
OPERATIONS 87 82 6
Discontinued
operations
Senior Living
Services
Income from
discontinued
operations,
net of tax 7 4
Gain on
disposal,
net of tax 23 -
Marriott
Distribution
Services
Loss from
discontinued
operations,
net of tax - (4)
Exit costs,
net of tax (1) -
------ -------
NET INCOME $116 $82 41
====== =======
EARNINGS
PER SHARE-Basic
Earnings
from
continuing
operations $0.37 $0.34 9
Earnings
from
discontinued
operations 0.13 - *
------- -------
Earnings
per share $0.50 $0.34 47
======= =======
EARNINGS
PER SHARE-Diluted
Earnings
from
continuing
operations $0.36 $0.32 13
Earnings
from
discontinued
operations 0.12 - *
------ -------
Earnings
per share $0.48 $0.32 50
====== =======
Diluted Shares 243.6 254.3
Basic Shares 233.9 241.9
* Calculated percentage is not meaningful.
(1) Other lodging revenue includes timeshare revenue (including note sale
gains and excluding base management fees and reimbursed costs),
ExecuStay revenue, land rent income, and other revenue.
(2) Cost reimbursements include reimbursements from hotel owners for
Marriott funded operating expenses. Marriott earns no markup on
these expenses.
(3) Owned and leased - direct includes operating expenses of owned or
leased hotels including lease payments, pre-opening expenses and
depreciation.
(4) Other lodging - direct includes administrative and related expenses
of the timeshare (including timeshare development, financing, gains
and joint venture results, but excluding reimbursed costs) and
ExecuStay business units.
(5) Administrative and other expenses include lodging segment overhead,
joint venture results, amortization, and gains and losses. Does not
include any administrative and other expenses related to either the
timeshare or ExecuStay business units.
MARRIOTT INTERNATIONAL, INC.
Business Segment Financial Results
(in millions)
Twelve weeks ended
----------------------------
March 28, March 22,
2003 2002
----------- ----------
SALES
Full-Service $1,321 $1,221
Select-Service 234 207
Timeshare 267 254
Extended-Stay 124 121
---------- ----------
Total Lodging 1,946 1,803
Synthetic Fuel 68 5
---------- ----------
Total $2,014 $1,808
========== ==========
SEGMENT FINANCIAL RESULTS
Full-Service $95 $86
Select-Service 24 28
Timeshare 18 31
Extended-Stay 10 8
---------- ----------
Total Lodging 147 153
Synthetic Fuel (59) (6)
---------- ----------
Total $88 $147
========== ==========
MARRIOTT INTERNATIONAL, INC.
Key Lodging Statistics
North American Comparable Company-Operated Properties(1)
--------------------------------------------------------------------------
First Quarter
------------------------------------------------
REVPAR(2) Occupancy Average Daily Rate
---------- ----------- -------------------
vs. vs. vs.
Brand 2003 2002 2003 2002 2003 2002
--------------------------------------------------------------------------
Marriott Hotels &
Resorts $95.11 -2.1% 68.3% -0.3% pts. $139.32 -1.7%
The Ritz-Carlton $161.97 -0.8% 63.5% -2.0% pts. $255.21 2.4%
Renaissance Hotels &
Resorts $86.81 0.1% 65.1% 1.4% pts. $133.34 -2.0%
Composite -
Full-Service $98.57 -1.7% 67.5% -0.2% pts. $146.14 -1.4%
Residence Inn $72.10 -2.8% 74.2% 0.1% pts. $97.13 -2.9%
Courtyard $62.08 -0.3% 65.9% 0.7% pts. $94.23 -1.4%
TownePlace Suites $40.59 -3.6% 64.7% -6.2% pts. $62.75 5.6%
Composite -
Select-Service &
Extended-Stay $62.68 -1.0% 67.8% 0.2% pts. $92.39 -1.3%
Total North America $85.19 -1.5% 67.6% 0.0% pts. $126.03 -1.5%
North American Comparable Systemwide Properties(1)
--------------------------------------------------------------------------
First Quarter
-------------------------------------------------
REVPAR Occupancy Average Daily Rate
-------- ----------- -------------------
vs. vs. vs.
Brand 2003 2002 2003 2002 2003 2002
--------------------------------------------------------------------------
Marriott Hotels &
Resorts $87.90 -1.9% 66.7% 0.3% pts. $131.70 -2.4%
The Ritz-Carlton $161.97 -0.8% 63.5% -2.0% pts. $255.21 2.4%
Renaissance Hotels &
Resorts $77.84 1.0% 62.4% 2.0% pts. $124.67 -2.2%
Composite -
Full-Service $90.00 -1.5% 65.9% 0.4% pts. $136.50 -2.1%
Residence Inn $70.04 -1.2% 73.7% 0.7% pts. $94.99 -2.2%
Courtyard $62.27 0.6% 66.7% 1.1% pts. $93.42 -1.0%
Fairfield Inn $38.03 2.0% 59.9% 0.7% pts. $63.54 0.8%
TownePlace Suites $42.30 -1.2% 66.5% -1.6% pts. $63.60 1.2%
SpringHill Suites $54.22 6.1% 66.3% 2.6% pts. $81.72 1.8%
Composite -
Select-Service &
Extended-Stay $56.30 0.5% 66.6% 0.8% pts. $84.50 -0.8%
Total North America $70.95 -0.6% 66.3% 0.7% pts. $106.97 -1.6%
(1) Total North America statistics include properties for the Marriott
Hotels & Resorts, Renaissance Hotels & Resorts, The Ritz-Carlton,
Courtyard, Residence Inn, TownePlace Suites, Fairfield Inn, and
SpringHill Suites brands. Select-Service and Extended-Stay composite
statistics include properties for the Courtyard, Residence Inn,
TownePlace Suites, Fairfield Inn and SpringHill Suites brands.
(2) Percentage change in statistics for the North American comparable
company-operated properties for the calendar quarter January 1 -
March 31, 2003 versus the same period in 2002:
REVPAR Occupancy Average Daily Rate
-------- ----------- -------------------
vs. vs. vs.
Brand 2003 2002 2003 2002 2003 2002
------ -------------------------------------------------
Marriott Hotels &
Resorts $93.60 -4.8% 67.5% -1.7% pts. $138.76 -2.4%
The Ritz-Carlton $161.97 -0.8% 63.5% -2.0% pts. $255.08 2.3%
Renaissance Hotels &
Resorts $85.54 -1.9% 64.3% 0.2% pts. $133.11 -2.2%
Composite -
Full-Service $96.90 -4.0% 66.7% -1.4% pts. $145.26 -1.9%
Residence Inn $71.27 -5.5% 73.5% -1.8% pts. $96.94 -3.2%
Courtyard $60.89 -4.0% 64.9% -1.3% pts. $93.80 -2.1%
TownePlace Suites $39.96 -6.5% 63.9% -7.9% pts. $62.53 5.0%
SpringHill Suites $49.53 5.7% 59.9% 2.3% pts. $82.68 1.6%
Composite -
Select-Service &
Extended-Stay $61.87 -4.2% 67.0% -1.7% pts. $92.29 -1.8%
Total North America $83.88 -4.1% 66.8% -1.5% pts. $125.52 -1.9%
MARRIOTT INTERNATIONAL, INC.
Key Lodging Statistics
International Comparable Company-Operated Properties(1)
--------------------------------------------------------------------------
First Quarter
------------------------------------------------------
REVPAR Occupancy Average Daily Rate
-------- ----------- --------------------
vs. vs. vs.
Region 2003 2002 2003 2002 2003 2002
--------------------------------------------------------------------------
Caribbean & Latin
America $111.03 14.5% 69.4% 6.6% pts. $160.05 3.6%
Continental Europe $68.89 -3.7% 57.3% 0.2% pts. $120.27 -4.1%
United Kingdom $98.49 -5.3% 67.7% -5.2% pts. $145.57 1.9%
Middle East & Africa $61.81 33.3% 67.2% 11.2% pts. $91.98 11.0%
Asia Pacific(2) $64.87 8.7% 69.0% 4.7% pts. $94.00 1.3%
Total International $76.12 6.8% 65.3% 3.8% pts. $116.64 0.6%
International Comparable Systemwide Properties(1)
--------------------------------------------------------------------------
First Quarter
------------------------------------------------------
REVPAR Occupancy Average Daily Rate
-------- ----------- -------------------
vs. vs. vs.
Region 2003 2002 2003 2002 2003 2002
--------------------------------------------------------------------------
Caribbean & Latin
America $102.07 16.3% 66.1% 6.3% pts. $154.45 5.1%
Continental Europe $65.04 -2.3% 54.6% -0.3% pts. $119.19 -1.8%
United Kingdom $74.63 -9.2% 61.2% -2.8% pts. $122.01 -5.0%
Middle East & Africa $60.57 34.1% 66.5% 11.7% pts. $91.10 10.4%
Asia Pacific(2) $68.12 7.2% 69.8% 3.9% pts. $97.55 1.3%
Total International $73.27 4.2% 63.3% 2.5% pts. $115.79 0.1%
(1) Statistics are in constant dollars and include results for January and
February. Excludes North America.
(2) Excludes Hawaii.
Total Lodging Products(3)
--------------------------------------------------------------------------
Number of Number of
Properties Rooms/Suites
vs. vs.
March March March March
28, 22, 28, 22,
Brand 2003 2002 2003 2002
------------------------------------ ----------------------------------
Full-Service Lodging
---------------------
Marriott Hotels & Resorts 458 +30 168,107 +8,787
The Ritz-Carlton 52 +6 16,916 +1,551
Renaissance Hotels & Resorts 129 +5 46,907 +1,777
Ramada International 150 +13 21,874 +1,984
Select-Service Lodging
----------------------
Courtyard 593 +31 85,352 +4,815
Fairfield Inn 508 +21 48,750 +2,002
SpringHill Suites 99 +12 11,368 +1,393
Extended-Stay Lodging
----------------------
Residence Inn 431 +36 51,153 +4,455
TownePlace Suites 105 +6 10,806 +546
Marriott Executive Apartments 12 - 2,167 +99
Timeshare
---------
Marriott Vacation Club
International 44 - 7,211 +924
Horizons by Marriott Vacation
Club International 2 - 212 +66
The Ritz-Carlton Club 4 - 204 +60
Marriott Grand Residence Club 2 +1 248 +49
------------- ------------------
Total 2,589 +161 471,275 +28,508
============= ==================
(3) Total Lodging Products excludes the 3,920 corporate housing rental
units.
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure Reconciliation
(in millions, except per share amounts)
The reconciliation of the effective income tax rate from continuing
operations to the effective income tax rate from continuing operations,
excluding the impact of our Synthetic Fuel business is as follows:
Continuing Operations
--------------------------------------
Income from Synthetic Excluding
Continuing Fuel Synthetic
Operations Impact Fuel
------------ -------- ---------
Pre tax income (loss) $47 ($59) $106
Tax (Provision)/Benefit (17) 21 (38)
Tax Credits 57 57 -
---------- ---------- --------
Total Tax Benefit/(Provision) 40 78 (38)
---------- ---------- --------
Income from Continuing Operations $87 $19 $68
Diluted Shares 243.6 243.6 243.6
Earnings per Share - Diluted $0.36 $0.08 $0.28
Tax Rate -83.7% 36.0%
SOURCE Marriott International, Inc.
Tom Marder of Marriott International, Inc., +1-301-380-2553, or thomas.marder@marriott.com /Company News On-Call: http://www.prnewswire.com/gh/cnoc/comp/532963.html
http://www.marriott.com
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