Marriott International Reports Robust 2006 Second Quarter; Significant REVPAR, Margin and Earnings Growth
WASHINGTON, July 13, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- Marriott International, Inc. (NYSE: MAR) today reported second quarter 2006 net income of $186 million, an increase of 35 percent, and diluted earnings per share (EPS) of $0.43, an increase of 48 percent.
Adjusted net income was $182 million, an increase of 17 percent, and adjusted diluted earnings per share was $0.42, an increase of 27 percent. The 2006 adjusted results exclude the impact of the company's synthetic fuel business. The 2005 adjusted results exclude the impact of the company's synthetic fuel business and a $94 million pre-tax charge ($0.13 per share after-tax) due to the non-cash write-off of management agreements in connection with the CTF transaction. The company's EPS guidance for the 2006 second quarter, disclosed on April 20, 2006, totaled $0.38 to $0.40 and similarly excluded the company's synthetic fuel business. All per share amounts are adjusted for the company's two-for-one stock split completed on June 9, 2006.
J.W. Marriott, Jr., Marriott International's chairman and chief executive officer, said, "Across our portfolio, and throughout our global system, business is exceptionally strong. Our hotels continue to thrive around the world, including such markets as New York, Boston, Atlanta, Miami, Chicago, Orlando, Los Angeles, Hong Kong and Santiago. Business transient and group demand in Western Europe was very strong in advance of this summer's World Cup competition.
"REVPAR and margin improvements, particularly at large downtown and convention hotels in North America, dramatically increased incentive fees during the quarter. Incentive fees at U.S. managed hotels increased 61 percent. Higher effective room rates resulted from both price increases and improving customer mix. Property-level house profit margins improved due to higher room rates, continued focus on efficiency improvements and higher catering, spa and other property level revenue.
"As important as our financial measures, customer satisfaction scores also rose during the quarter reflecting substantial renovation activity in recent years as well as the rollout of new bedding and technology-enabled service initiatives. Marriott's service initiatives focus on greater guest personalization, pre-arrival emails to help travelers with trip planning, and a virtual concierge that lets guests book spa appointments or golf tee times online anytime. We recently announced the rollout of new online airline check-in and boarding pass stations in Marriott Hotels & Resorts and Renaissance Hotels & Resorts lobbies. We continue to test new technology that further enhances guest experiences.
"Looking ahead, we expect operations to remain strong, with North American comparable company-operated REVPAR increasing 9 to 11 percent in 2006 and property-level house profit margins improving 225 to 275 basis points. We expect to open 25,000 new rooms this year, and our pipeline of hotel rooms under development has expanded to 80,000."
In the 2006 second quarter (12 week period from March 25, 2006 to June 16, 2006), REVPAR for the company's comparable worldwide systemwide properties increased 10.4 percent (10.7 percent using constant dollars). Systemwide comparable North American REVPAR increased 10.7 percent in the quarter, with average daily rates up 8.9 percent and occupancy up 1.2 percentage points, to 76.5 percent. REVPAR at the company's comparable systemwide North American full-service hotels (including Marriott Hotels & Resorts, The Ritz-Carlton, and Renaissance Hotels & Resorts) increased by 10.5 percent during the quarter. North American systemwide REVPAR for the company's comparable select- service and extended-stay brands (including Courtyard, Fairfield Inn, Residence Inn, TownePlace Suites, and SpringHill Suites) increased 11.0 percent. For the calendar quarter ended June 30, 2006, REVPAR for systemwide comparable North American properties increased 10.0 percent.
In the 2006 second quarter, international company-operated comparable REVPAR increased 9.6 percent (11.1 percent using constant dollars) including a 7.1 percent increase in average daily rates and a 1.7 percentage point improvement in occupancy to 75.5 percent. With strong demand from European and South American travelers, REVPAR in the Caribbean and Latin America increased nearly 18 percent (16 percent using constant dollars).
The company continued to experience strong demand in Asia and the United Kingdom while demand in Continental Europe improved in the second quarter, especially in the weeks leading up to the World Cup competition. REVPAR improved 3.1 percent (10.2 percent using constant dollars) in Germany and 4.0 percent (10.8 percent using constant dollars) in France.
Marriott added 33 new properties (4,853 rooms) to its worldwide lodging portfolio in the second quarter, including the elegant 338 room JW Marriott Hotel San Francisco. The company also opened a 227 room Marriott in Leicester, United Kingdom and five Courtyard hotels in Europe. Eleven properties (2,170 rooms) exited the system, including seven first generation Fairfield Inn properties (942 rooms). The Renaissance Hotel in Kapalua, Hawaii, was closed in the second quarter, pending conversion to a Ritz-Carlton Club resort. At quarter-end, the company's lodging group encompassed 2,789 hotels and timeshare resorts for a total of 507,130 rooms.
Interest in all of the company's brands continues to strengthen. Owners and franchisees are excited about what Marriott has done to refresh and reposition its brands. Marriott's worldwide pipeline of hotels under construction, awaiting conversion or approved for development increased to 80,000 rooms, up from 60,000 rooms in the year ago quarter and 75,000 rooms at the end of the 2006 first quarter. New in the pipeline are two exciting hotels under development, part of a venture designed to reinvigorate downtown Los Angeles. "L.A. Live," is a mixed-use development project that will include two hotels, luxury residences, a 7,000-seat live performance venue, a movie theatre, fine dining and much more. Marriott's role in the project includes an 877 room Marriott Hotel, a 123 room Ritz-Carlton Hotel and 430,000 square feet of Ritz-Carlton Residences.
MARRIOTT REVENUES totaled $2.9 billion in the 2006 second quarter, a 7 percent increase from the same period in 2005. Base and franchise fees rose 13 percent to $227 million as a result of unit growth and strong REVPAR improvement. Incentive fees climbed 48 percent to $77 million, driven by higher property-level house profit margins. Incentive fees in the 2006 second quarter were only $4 million, or 5 percent, shy of the fees earned in the same quarter of 2000, our peak year for earning incentive fees. In the 2006 second quarter, 56 percent of the company's managed properties paid incentive fees, compared to 42 percent in the year ago quarter.
House profit margins for North American comparable company-operated properties increased 300 basis points during the quarter, while house profit margins for worldwide company-operated properties grew 280 basis points. Higher room rates, strong food and beverage profits and continued cost efficiency measures drove strong margins. Property-level EBITDA margins for comparable North American company-operated properties, calculated as if wholly owned, increased 320 basis points.
Second quarter owned, leased, corporate housing and other revenue benefited from strong results from the owned and leased hotels the company acquired in 2005. Seven hotels were sold during the 2006 second quarter. The company retained long-term management agreements for six of the hotels and obtained a franchise agreement for one hotel. During the 2005 second quarter, owned, leased, corporate housing and other revenue included a $10 million fee for the termination of a hotel management agreement.
Contract sales for the company's timeshare, fractional and whole-ownership projects, including sales made by joint venture projects, surged 40 percent. Demand was particularly strong at the timeshare sequel project in Maui and new whole ownership joint venture projects under development in San Francisco and Kapalua. Approximately 95 percent of San Francisco's whole ownership project, under construction, was sold within a month of initiating sales. Demand for our other resorts also continues to be strong, particularly in Las Vegas, Aruba, Hawaii and Orlando.
Timeshare interval, fractional and whole ownership sales and services revenue declined one percent in the 2006 second quarter. Reported revenue in the 2006 quarter was constrained by projects in early stages of development which did not reach revenue reporting thresholds, offset somewhat by higher revenues from marketing-related villa rentals. In contrast, the 2005 quarter reflected very strong financially reportable sales at projects at or nearing sell-out.
Timeshare interval, fractional and whole ownership sales and services revenue, net of direct expenses, declined 36 percent reflecting substantial sales and marketing costs for new projects in the early stages of development. Under the new timeshare accounting rules, most sales and marketing costs are expensed as incurred.
In the second half of 2006, the company plans to begin sales at the Marriott timeshare project in St. Kitts, and the Ritz-Carlton fractional and whole ownership projects in Miami Beach, and Kauai, Hawaii.
LODGING OPERATING INCOME for the second quarter of 2006 was $252 million compared to $77 million in the second quarter of 2005. In the 2006 quarter, strong results reflected outstanding fee growth from managed and franchised hotels and increased profits from owned and leased properties that the company acquired in 2005. General and administrative expenses were down 50 percent, to $141 million, primarily due to 2005 non comparable items. General and administrative expenses in the 2006 second quarter included $9 million associated with the new accounting rules requiring the expensing of all share- based compensation, offset by $2 million of foreign exchange gains, $4 million favorable impact related to the reversal of a guarantee reserve at one hotel, and $6 million lower deferred compensation expense. In the 2005 second quarter, the company recorded a $94 million charge associated with the CTF transaction, primarily related to the non-cash write-off of management agreements, $29 million of incentives paid to owners and franchisees to accelerate the roll-out of the new bedding program, $6 million related to guarantees at two hotels and a $12 million payment made to retain a management agreement.
SYNTHETIC FUEL operations contributed approximately $0.01 per share of after-tax earnings during the 2006 second quarter, compared to $0.09 in the year ago quarter. Lower synthetic fuel earnings reflected the suspension of production in April and an estimated 38 percent phase out of the 2006 tax credits due to higher oil prices. Excluding the impact of our synthetic fuel operations, the effective tax rate was approximately 35.9 percent in the second quarter of 2006. The company expects the tax rate for 2006, excluding synthetic fuel operations, to approximate 34.9 percent.
GAINS AND OTHER INCOME totaled $48 million (or $45 million excluding synthetic fuel) and included a $40 million gain on the sale of timeshare mortgage notes, $9 million of net gains from the sale of real estate, $29 million of net gains from the sale of our interest in four joint ventures and $4 million of preferred returns and other income. These gains were partially offset by a $37 million non-cash charge to adjust the carrying amount of a straight line rent receivable associated with a land lease which is subject to a purchase option that is likely to be exercised. Prior year's second quarter gains included a $29 million gain on the sale of timeshare mortgage notes, $22 million of gains resulting from the sale or refinancing of real estate loans and $4 million of other gains.
INTEREST EXPENSE increased $9 million to $30 million, primarily due to higher commercial paper balances and higher interest rates. The company issued $350 million of new senior debt on June 14, 2006.
INTEREST INCOME totaled $12 million during the quarter, down from $25 million in the year ago quarter, primarily driven by loan repayments in 2005.
At the end of the 2006 second quarter, total debt was $1,561 million and cash balances totaled $364 million, compared to $1,737 million in total debt and $203 million of cash at the end of 2005. Consistent with the company's strategy, Marriott recycled capital and generated cash proceeds of $810 million in the second quarter. The proceeds included $242 million from the sale of timeshare notes, $201 million from the sale of the company's interests in four joint ventures (including the joint venture with Whitbread), $355 million from the sale of seven properties (including five hotels acquired in 2005 as part of the transaction with CTF Holdings Ltd), and $12 million from notes receivable repayments. The company used part of the proceeds to repurchase 10.5 million shares of common stock in the second quarter of 2006 at a cost of $380 million. Year-to-date, through July 10, 2006, the company repurchased 20.7 million shares of common stock at a cost of $733 million. The remaining share repurchase authorization, as of July 10, 2006 totaled 15 million shares.
OUTLOOK
The company expects North American company-operated REVPAR to increase 9 to 11 percent in 2006. Assuming a 225 to 275 basis point improvement in house profit margins and approximately 25,000 new room openings (gross), the company expects total fee revenue of $1,190 million to $1,210 million, an increase of 16 to 18 percent.
The company expects timeshare interval, fractional and whole ownership sales and services revenues, net of expenses, will decline approximately 3 percent in 2006, reflecting lower contract sales in 2005 resulting from limited inventory, and higher sales and marketing costs associated with new projects. With strong customer interest in the company's new projects, Marriott continues to expect contract sales (including joint venture sales) to increase roughly 40 percent in 2006.
General, administrative and other expenses are expected to decline approximately 12 to 14 percent in 2006 to $650 million to $660 million from $753 million in 2005. The comparison reflects the impact in 2005 of the $94 million charge associated with the CTF transaction and $30 million in bedding incentives. This 2006 guidance includes an approximately $37 million pre-tax impact of the FAS No. 123(R), requiring the expensing of all share-based compensation (including stock options).
Given these above items, the company estimates that lodging operating income will total $950 million to $980 million in 2006, an increase of 36 to 40 percent over 2005.
The company expects lodging gains and other income to total approximately $130 million in 2006 (including approximately $75 million in timeshare mortgage note sale gains).
Net interest expense is expected to total $80 million, an increase of $25 million, primarily driven by loan repayments in 2005 resulting in reduced interest income, as well as higher average debt levels and interest rates.
Given the continued high level of oil prices and the uncertainty surrounding the availability of 2006 tax credits, the company suspended production at its four synthetic fuel facilities in April 2006. The company cannot yet predict whether or when the facilities will restart production and, as such, is unable to provide guidance for 2006 earnings from the synthetic fuel business. The net book value of the four facilities at the end of the second quarter 2006 was $15 million.
The company estimates North American company-operated REVPAR will grow 8 to 10 percent in the third quarter of 2006, with house profit margin growth of 225 to 275 basis points.
Under the above assumptions, the company currently estimates the following results for the third quarter and full year 2006:
Third Quarter 2006 Full Year 2006
Total fee revenue $250 million to $1,190 million to
$255 million $1,210 million
Owned, leased,
corporate housing and
other, net of direct expenses Approx. $35 million Approx. $170 million
Timeshare interval, fractional
and whole ownership sales and
services,
net of direct expenses Approx. $65 million Approx. $250 million
General, administrative &
other expenses(1) Approx. $155 million $650 million to
$660 million
Lodging operating income(1) $195 million to $950 million to
$200 million $980 million
Gains
(excluding synthetic fuel) Approx. Approx.
$10 million $130 million(2)
Net interest expense(3) Approx. $20 million Approx $80 million
Equity in earnings/(losses) $0 to $5 million $10 million to
$15 million
Earnings per share from
synthetic fuel No guidance No guidance
Earnings per share excluding
synthetic fuel(1) (4) $0.28 to $0.30 $1.52 to $1.57
Effective tax rate excluding
synthetic fuel 34.9 percent 34.9 percent
(1) Full year 2006 includes pre-tax expense of $37 million ($0.06 per
share) associated with the adoption of FAS No. 123(R) ($9 million
($0.01 per share) for the 2006 third quarter).
(2) Includes timeshare mortgage note sale gains. Excludes $1 million loss
reported year-to-date from the synthetic fuel business.
(3) Includes interest expense, provision for loan losses and interest
income.
(4) Full year estimate is before the cumulative effect of a change in
accounting principle associated with the new timeshare accounting
rules. The company recorded an after-tax charge of $105 million
($0.24 per share) in the 2006 first quarter.
The company expects investment spending in 2006 to total approximately $950 million to $1 billion, including $50 million for maintenance capital spending, $325 million to $350 million for capital expenditures and acquisitions, $125 million to $135 million for timeshare development, $75 million in new mezzanine financing and mortgage loans for hotels developed by owners and franchisees, and approximately $375 million to $390 million in equity and other investments (including timeshare equity investments).
Marriott International, Inc. (NYSE: MAR) will conduct its quarterly earnings review for the investment community and news media on Thursday, July 13, 2006 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. To listen, click the "Recent Investor News" tab and then click on the quarterly conference call link. A replay will be available on the Internet until August 13, 2006.
The telephone dial-in number for the conference call is 913-981-5509. A telephone replay of the conference call will also be available by telephone from 1 p.m. ET, Thursday, July 13, 2006 until Thursday, July 20, 2006 at 8 p.m. ET. To access the recording, call 719-457-0820. The reservation number for the recording is 7343492.
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 we expect to add in future years; our expected investment spending; and similar statements concerning anticipated future events and expectations that are not historical facts. We caution you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including the duration and full extent of the current growth environment in both the economy and the lodging industry; supply and demand changes for hotel rooms, timeshare interval, fractional and whole ownership products, and corporate housing; competitive conditions in the lodging industry; relationships with clients and property owners; the availability of capital to finance hotel growth and refurbishment; and matters referred to in our most recent quarterly report on Form 10-Q under the heading "Risks Factors", any of which could cause actual results to differ materially from those expressed in or implied by the statements herein. These statements are made as of the date of this press release, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
MARRIOTT INTERNATIONAL, INC. (NYSE: MAR) is a leading lodging company with nearly 2,800 lodging properties in the United States and 67 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 International, Horizons, The Ritz-Carlton Club and Grand Residences by Marriott brands; operates Marriott Executive Apartments; provides furnished corporate housing through its Marriott ExecuStay division; and operates conference centers. Marriott is also in the synthetic fuel business. The company is headquartered in Washington, D.C., and had approximately 143,000 employees at 2005 year-end. In fiscal year 2005, Marriott International reported sales from continuing operations of $11.6 billion. 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
June 16, 2006 June 17, 2005
----------------- -----------------
Percent
Synthetic Synthetic Better/
Lodging Fuel Total Lodging Fuel Total (Worse)
------------------- ---------------------------
REVENUES
Base management fees $134 $- $134 $123 $- $123 9
Franchise fees 93 - 93 78 - 78 19
Incentive management fees 77 - 77 52 - 52 48
Owned, leased, corporate
housing and other revenue
(1) 272 - 272 180 - 180 51
Timeshare interval,
fractional and whole
ownership sales and
services(2) 331 - 331 335 - 335 (1)
Cost reimbursements(3) 1,905 - 1,905 1,795 - 1,795 6
Synthetic fuel - 39 39 - 98 98 (60)
----- ---- ----- ----- ---- -----
Total Revenues 2,812 39 2,851 2,563 98 2,661 7
OPERATING COSTS AND
EXPENSES
Owned, leased and corporate
housing - direct(4) 225 - 225 138 - 138 (63)
Timeshare - direct 289 - 289 269 - 269 (7)
Reimbursed costs 1,905 - 1,905 1,795 - 1,795 (6)
General, administrative
and other(5) 141 - 141 284 - 284 50
Synthetic fuel - 57 57 - 134 134 57
----- ---- ----- ----- ---- -----
Total Expenses 2,560 57 2,617 2,486 134 2,620 -
----- ---- ----- ----- ---- -----
OPERATING INCOME (LOSS) $252 $(18) 234 $77 $(36) 41 471
===== ==== ===== ====
Gains and other income(6) 48 63 (24)
Interest expense (30) (21) (43)
Interest income 12 25 (52)
Reversal of provision for
loan losses 1 - *
Equity in earnings(7) 6 6 -
----- -----
INCOME BEFORE INCOME TAXES,
MINORITY INTEREST AND
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 271 114 138
(Provision) benefit for
income taxes (85) 20 *
----- -----
INCOME BEFORE MINORITY
INTEREST AND CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 186 134 39
Minority interest - 4 (100)
----- -----
INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 186 138 35
Cumulative effect of change
in accounting principle,
net of tax(8) - - *
----- -----
NET INCOME $186 $138 35
===== =====
EARNINGS PER SHARE - Basic(9)
Earnings before
cumulative effect of
change in accounting
principle $0.45 $0.31 45
Losses from cumulative
effect of change in
accounting principle - - *
----- -----
Earnings per share $0.45 $0.31 45
===== =====
EARNINGS PER SHARE -
Diluted(9)
Earnings before
cumulative effect of
change in accounting
principle $0.43 $0.29 48
Losses from cumulative
effect of change in
accounting principle - - *
----- -----
Earnings per share $0.43 $0.29 48
===== =====
Basic Shares(9) 412.5 440.9
Diluted Shares(9) 436.6 468.9
* Percent can not be calculated or is not meaningful.
(1) Owned, leased, corporate housing and other revenue includes revenue
from the properties we own or lease, revenue from our ExecuStay
business, land rent income and other revenue.
(2) Timeshare interval, fractional and whole ownership sales and services
includes total timeshare revenue except for base fees, cost
reimbursements, gains, and joint venture earnings (losses).
(3) Cost reimbursements include reimbursements from lodging and timeshare
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 ExecuStay business.
(5) General, administrative and other expenses include the overhead costs
allocated to our lodging business segments (including ExecuStay and
timeshare) and our unallocated corporate overhead costs and general
expenses. Expenses in 2005 included a $94 million charge associated
with the CTF transaction as well as charges totaling $29 million
associated with our bedding incentive program.
(6) Gains and other income includes gains on the sale of real estate, note
sales, joint ventures and timeshare note receivable securitizations,
income related to our cost method joint ventures, and the net earn-out
payments associated with our synthetic fuel operations. It is our
understanding that discussions among rule-makers about the income
statement presentation of gains from note securitizations have taken
place in recent weeks and we are monitoring those developments. If
the Securities and Exchange Commission or other accounting rule
making organizations change the required presentation of gains
associated with note securitizations, we would adjust our
presentation accordingly.
(7) Equity in earnings includes our equity in earnings of unconsolidated
joint ventures.
(8) Cumulative effect of change in accounting principle, net of tax is
associated with the adoption, in the 2006 first quarter, of Statement
of Position 04-2, "Accounting for Real Estate Time-sharing
Transactions" which was issued by the American Institute of Certified
Public Accountants.
(9) All share and per share amounts reflect the June 9, 2006, two-for-one
stock split effected in the form of a stock dividend.
MARRIOTT INTERNATIONAL, INC.
Financial Highlights
(in millions, except per share amounts)
24 Weeks Ended 24 Weeks Ended
June 16, 2006 June 17, 2005
--------------- ---------------
Percent
Synthetic Synthetic Better/
Lodging Fuel Total Lodging Fuel Total (Worse)
------------------- ---------------------------
REVENUES
Base management fees $261 $- $261 $234 $- $234 12
Franchise fees 175 - 175 148 - 148 18
Incentive management fees 136 - 136 102 - 102 33
Owned, leased, corporate
housing and other revenue
(1) 526 - 526 347 - 347 52
Timeshare interval,
fractional and whole
ownership sales and
services(2) 637 - 637 681 - 681 (6)
Cost reimbursements(3) 3,725 - 3,725 3,477 - 3,477 7
Synthetic fuel - 96 96 - 206 206 (53)
----- ---- ----- ----- ---- -----
Total Revenues 5,460 96 5,556 4,989 206 5,195 7
OPERATING COSTS AND
EXPENSES
Owned, leased and corporate
housing - direct(4) 433 - 433 283 - 283 (53)
Timeshare - direct 529 - 529 541 - 541 2
Reimbursed costs 3,725 - 3,725 3,477 - 3,477 (7)
General, administrative and
other(5) 291 - 291 408 - 408 29
Synthetic fuel - 141 141 - 287 287 51
----- ---- ----- ----- ---- -----
Total Expenses 4,978 141 5,119 4,709 287 4,996 (2)
----- ---- ----- ----- ---- -----
OPERATING INCOME (LOSS) $482 $(45) 437 $280 $(81) 199 120
===== ==== ===== ====
Gains and other income(6) 82 58 41
Interest expense (57) (45) (27)
Interest income 23 52 (56)
Reversal of provision for
loan losses (provision for
loan losses) 3 (11) *
Equity in earnings(7) 3 1 200
----- -----
INCOME BEFORE INCOME TAXES,
MINORITY INTEREST AND
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE 491 254 93
(Provision) benefit for
income taxes (141) 15 *
----- -----
INCOME BEFORE MINORITY
INTEREST AND CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 350 269 30
Minority interest 6 14 (57)
----- -----
INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 356 283 26
Cumulative effect of change
in accounting principle,
net of tax(8) (105) - *
----- -----
NET INCOME $251 $283 (11)
===== =====
EARNINGS PER SHARE - Basic(9)
Earnings before
cumulative effect of
change in accounting
principle $0.86 $0.63 37
Losses from cumulative
effect of change in
accounting principle (0.25) - *
----- -----
Earnings per share $0.61 $0.63 (3)
===== =====
EARNINGS PER SHARE -
Diluted(9)
Earnings before
cumulative effect of
change in accounting
principle $0.81 $0.60 35
Losses from cumulative
effect of change in
accounting principle (0.24) - *
----- -----
Earnings per share $0.57 $0.60 (5)
===== =====
Basic Shares(9) 412.1 446.0
Diluted Shares(9) 438.9 475.5
* Percent can not be calculated or is not meaningful.
(1) Owned, leased, corporate housing and other revenue includes revenue
from the properties we own or lease, revenue from our ExecuStay
business, land rent income and other revenue.
(2) Timeshare interval, fractional and whole ownership sales and services
includes total timeshare revenue except for base fees, cost
reimbursements, gains, and joint venture earnings (losses).
(3) Cost reimbursements include reimbursements from lodging and timeshare
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 ExecuStay business.
(5) General, administrative and other expenses include the overhead costs
allocated to our lodging business segments (including ExecuStay and
timeshare) and our unallocated corporate overhead costs and general
expenses. Expenses in 2005 included a $94 million charge associated
with the CTF transaction as well as charges totaling $29 million
associated with our bedding incentive program.
(6) Gains and other income includes gains on the sale of real estate, note
sales, joint ventures and timeshare note receivable securitizations,
income related to our cost method joint ventures, and the net earn-out
payments associated with our synthetic fuel operations. It is our
understanding that discussions among rule-makers about the income
statement presentation of gains from note securitizations have taken
place in recent weeks and we are monitoring those developments. If
the Securities and Exchange Commission or other accounting rule making
organizations change the required presentation of gains associated
with note securitizations, we would adjust our presentation
accordingly.
(7) Equity in earnings includes our equity in earnings of unconsolidated
joint ventures.
(8) Cumulative effect of change in accounting principle, net of tax is
associated with the adoption, in the 2006 first quarter, of Statement
of Position 04-2, "Accounting for Real Estate Time-sharing
Transactions" which was issued by the American Institute of Certified
Public Accountants.
(9) All share and per share amounts reflect the June 9, 2006, two-for-one
stock split effected in the form of a stock dividend.
Marriott International, Inc.
Business Segments
($ in millions)
Twelve Weeks Ended Percent
---------------------------- Better/
June 16, 2006 June 17, 2005 (Worse)
------------- ------------- -------
REVENUES
Full-Service $1,937 $1,751 11%
Select-Service 332 293 13%
Extended-Stay 156 136 15%
Timeshare 387 383 1%
------ ------
Total lodging(1) 2,812 2,563 10%
Synthetic fuel 39 98 -60%
------ ------
Total $2,851 $2,661 7%
====== ======
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE
Full-Service $169 $30 *
Select-Service 72 48 50%
Extended-Stay 26 13 100%
Timeshare 68 80 -15%
------ ------
Total lodging financial results(1) 335 171 96%
Synthetic fuel (after-tax) 4 44 -91%
Unallocated corporate expenses (32) (33) 3%
Interest income, provision for loan
losses and interest expense
(excluding Synthetic Fuel) (19) 4 *
Income taxes (excluding Synthetic
Fuel) (102) (48) -113%
------ ------
Total $186 $138 35%
====== ======
* Calculated percentage is not meaningful.
(1) We consider lodging revenues and lodging financial results to be
meaningful indicators of our performance because they measure our
growth in profitability as a lodging company and enable investors to
compare the sales and results of our lodging operations to those of
other lodging companies.
Marriott International, Inc.
Business Segments
($ in millions)
Twenty-Four Weeks Ended Percent
---------------------------- Better/
June 16, 2006 June 17, 2005 (Worse)
------------- ------------- -------
REVENUES
Full-Service $3,779 $3,380 12%
Select-Service 638 565 13%
Extended-Stay 300 262 15%
Timeshare 743 782 -5%
------ ------
Total lodging(1) 5,460 4,989 9%
Synthetic fuel 96 206 -53%
------ ------
Total $5,556 $5,195 7%
====== ======
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE
Full-Service $358 $146 145%
Select-Service 117 81 44%
Extended-Stay 46 29 59%
Timeshare 119 143 -17%
------ ------
Total lodging financial results(1) 640 399 60%
Synthetic fuel (after-tax) 7 62 -89%
Unallocated corporate expenses (71) (59) -20%
Interest income, provision for loan
losses and interest expense
(excluding Synthetic Fuel) (33) (4) *
Income taxes (excluding Synthetic
Fuel) (187) (115) -63%
------ ------
Total $356 $283 26%
====== ======
* Calculated percentage is not meaningful.
(1) We consider lodging revenues and lodging financial results to be
meaningful indicators of our performance because they measure our
growth in profitability as a lodging company and enable investors to
compare the sales and results of our lodging operations to those of
other lodging companies.
MARRIOTT INTERNATIONAL, INC.
Total Lodging Products(1)
-------------------------------------------------------
Number of Properties Number of Rooms/Suites
-------------------- ----------------------
Change Change
vs. vs.
June June June June June June
16, 17, 17, 16, 17, 17,
Brand 2006 2005 2005 2006 2005 2005
------------------------ --------------------------------------------
Full-Service Lodging
Marriott Hotels &
Resorts 517 499 18 186,259 181,184 5,075
The Ritz-Carlton 60 58 2 19,382 18,931 451
Renaissance Hotels &
Resorts 136 136 - 48,188 48,129 59
Bulgari Hotel & Resort 1 1 - 58 58 -
Ramada International 2 4 (2) 332 724 (392)
Select-Service Lodging
Courtyard 711 668 43 102,402 96,239 6,163
Fairfield Inn 521 515 6 47,305 47,397 (92)
SpringHill Suites 145 134 11 16,953 15,557 1,396
Extended-Stay Lodging
Residence Inn 500 475 25 60,050 56,458 3,592
TownePlace Suites 123 118 5 12,389 11,935 454
Marriott Executive
Apartments 17 16 1 2,804 2,809 (5)
Timeshare(2)
Marriott Vacation Club
International 44 44 - 9,876 9,160 716
The Ritz-Carlton Club 7 4 3 491 273 218
Grand Residences by
Marriott 3 2 1 313 248 65
Horizons by Marriott
Vacation Club 2 2 - 328 328 -
------------------ ------------------------
Total 2,789 2,676 113 507,130 489,430 17,700
================== ========================
Number of Timeshare Interval,
Fractional and Whole Ownership
Resorts(2)
------------------------------------
In Active
Total(3) Sales
--------- ---------
100% Company Developed
Marriott Vacation Club International 43 23
The Ritz-Carlton Club 3 2
Grand Residences by Marriott 3 3
Horizons by Marriott Vacation Club 2 2
Joint Ventures
Marriott Vacation Club International 1 1
The Ritz-Carlton Club 4 4
Grand Residences by Marriott - -
------------------------
Total 56 35
========================
(1) Total Lodging Products does not include the 2,005 Marriott ExecuStay
corporate housing rental units.
(2) Includes products in active sales which may not be ready for
occupancy.
(3) Includes resorts that are in active sales as well as those that are
sold out.
MARRIOTT INTERNATIONAL, INC.
KEY LODGING STATISTICS
Comparable Company-Operated North American Properties(1)
------------------------------------------------------------
Twelve Weeks Ended June 16, 2006 and June 17, 2005
--------------------------------------------------
Average Daily
REVPAR Occupancy Rate
------ --------- -------------
Brand 2006 vs. 2006 vs. 2006 vs.
2005 2005 2005
-------------------------------------------------------------------------
Marriott Hotels &
Resorts $129.97 9.3% 76.3% 0.1% pts. $170.31 9.2%
The Ritz-Carlton(2) $252.81 10.4% 77.7% 2.6% pts. $325.44 6.7%
Renaissance Hotels &
Resorts $129.89 15.7% 77.2% 3.1% pts. $168.34 11.1%
Composite - Full-Service $142.47 10.3% 76.6% 0.8% pts. $186.05 9.2%
Residence Inn $97.12 9.3% 82.0% 0.4% pts. $118.38 8.8%
Courtyard $89.71 12.3% 75.2% 0.7% pts. $119.35 11.2%
TownePlace Suites $61.95 13.3% 79.4% 1.6% pts. $78.00 11.0%
SpringHill Suites $81.47 12.9% 78.5% 0.7% pts. $103.79 11.9%
Composite - Select-
Service & Extended-Stay $89.45 11.6% 77.5% 0.7% pts. $115.41 10.5%
Composite - All $119.92 10.7% 77.0% 0.8% pts. $155.80 9.6%
Comparable Systemwide North American Properties(1)
------------------------------------------------------
Twelve Weeks Ended June 16, 2006 and June 17, 2005
--------------------------------------------------
Average Daily
REVPAR Occupancy Rate
-----------------------------------------
Brand 2006 vs. 2006 vs. 2006 vs.
2005 2005 2005
------------------------------------------------------------------------
Marriott Hotels &
Resorts $115.72 9.8% 74.1% 0.7% pts. $156.14 8.8%
The Ritz-Carlton(2) $252.81 10.4% 77.7% 2.6% pts. $325.44 6.7%
Renaissance Hotels &
Resorts $118.06 14.3% 75.8% 2.4% pts. $155.76 10.7%
Composite - Full-Service $124.91 10.5% 74.6% 1.1% pts. $167.46 8.9%
Residence Inn $93.12 9.2% 81.9% 0.8% pts. $113.72 8.2%
Courtyard $89.45 11.3% 76.5% 1.2% pts. $116.91 9.7%
Fairfield Inn $60.85 12.4% 74.5% 2.2% pts. $81.72 9.1%
TownePlace Suites $62.96 12.2% 79.4% 1.4% pts. $79.25 10.3%
SpringHill Suites $77.65 12.5% 78.3% 1.8% pts. $99.16 10.0%
Composite - Select-
Service & Extended-Stay $82.05 11.0% 77.8% 1.3% pts. $105.52 9.1%
Composite - All $99.26 10.7% 76.5% 1.2% pts. $129.78 8.9%
(1) Composite - All 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. Full-Service composite statistics include properties
for Marriott Hotels & Resorts, Renaissance Hotels & Resorts and The
Ritz-Carlton. Select-Service and Extended-Stay composite statistics
include properties for the Courtyard, Residence Inn, TownePlace
Suites, Fairfield Inn and SpringHill Suites brands.
(2) Statistics for The Ritz-Carlton are for March through May.
MARRIOTT INTERNATIONAL, INC.
KEY LODGING STATISTICS
Comparable Company-Operated North American Properties(1)
------------------------------------------------------------
Twenty-Four Weeks Ended June 16, 2006 and June 17, 2005
-------------------------------------------------------
Average Daily
REVPAR Occupancy Rate
------ --------- -------------
Brand 2006 vs. 2006 vs. 2006 vs.
2005 2005 2005
-------------------------------------------------------------------------
Marriott Hotels &
Resorts $123.14 8.7% 72.8% 0.0% pts. $169.07 8.7%
The Ritz-Carlton(2) $242.14 10.8% 75.3% 3.5% pts. $321.50 5.6%
Renaissance Hotels &
Resorts $120.54 14.5% 74.1% 2.8% pts. $162.72 10.1%
Composite - Full-Service $132.89 9.8% 73.2% 0.7% pts. $181.45 8.7%
Residence Inn $93.31 9.8% 79.4% 0.2% pts. $117.56 9.4%
Courtyard $85.45 11.9% 71.8% 0.4% pts. $119.10 11.2%
TownePlace Suites $58.88 13.2% 75.8% 1.4% pts. $77.66 11.2%
SpringHill Suites $75.11 10.1% 73.2% -0.7% pts. $102.56 11.2%
Composite - Select-
Service & Extended-Stay $85.27 11.3% 74.1% 0.4% pts. $115.00 10.7%
Composite - All $112.42 10.3% 73.6% 0.6% pts. $152.69 9.4%
Comparable Systemwide North American Properties(1)
------------------------------------------------------
Twenty-Four Weeks Ended June 16, 2006 and June 17, 2005
-------------------------------------------------------
Average Daily
REVPAR Occupancy Rate
------ --------- -------------
Brand 2006 vs. 2006 vs. 2006 vs.
2005 2005 2005
-------------------------------------------------------------------------
Marriott Hotels &
Resorts $111.14 9.8% 71.4% 0.9% pts. $155.69 8.4%
The Ritz-Carlton(2) $242.14 10.8% 75.3% 3.5% pts. $321.50 5.6%
Renaissance Hotels &
Resorts $111.09 13.7% 72.8% 2.5% pts. $152.58 9.9%
Composite - Full-Service $118.18 10.4% 71.8% 1.3% pts. $164.59 8.5%
Residence Inn $89.79 9.6% 79.5% 1.1% pts. $112.88 8.2%
Courtyard $84.63 11.3% 73.0% 1.1% pts. $115.95 9.6%
Fairfield Inn $56.59 13.2% 70.1% 2.4% pts. $80.74 9.4%
TownePlace Suites $60.10 12.6% 76.1% 1.5% pts. $78.99 10.5%
SpringHill Suites $73.33 12.7% 74.5% 1.8% pts. $98.38 10.0%
Composite - Select-
Service & Extended-Stay $77.87 11.2% 74.3% 1.4% pts. $104.74 9.1%
Composite - All $93.91 10.8% 73.3% 1.4% pts. $128.05 8.7%
(1) Composite - All 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. Full-Service composite statistics include properties
for Marriott Hotels & Resorts, Renaissance Hotels & Resorts and The
Ritz-Carlton. Select-Service and Extended-Stay composite statistics
include properties for the Courtyard, Residence Inn, TownePlace
Suites, Fairfield Inn and SpringHill Suites brands.
(2) Statistics for The Ritz-Carlton are for January through May.
MARRIOTT INTERNATIONAL, INC.
KEY LODGING STATISTICS
(Constant $)
Comparable Company-Operated International Properties(1,2)
------------------------------------------------------------
Three Months Ended May 31, 2006 and May 31, 2005
------------------------------------------------
Average
REVPAR Occupancy Daily Rate
------ --------- ----------
Region/Brand(3) 2006 vs. 2005 2006 vs. 2005 2006 vs. 2005
-------------------------------------------------------------------------
Caribbean & Latin
America $130.27 16.0% 77.7% 3.8% pts. $167.65 10.2%
Continental Europe $105.81 10.3% 73.8% 3.7% pts. $143.45 4.8%
United Kingdom $167.12 13.7% 78.7% 3.5% pts. $212.32 8.6%
Middle East & Africa $108.24 13.5% 74.1% -1.3% pts. $146.13 15.5%
Asia Pacific(4) $97.21 10.8% 76.2% 1.1% pts. $127.60 9.2%
The Ritz-Carlton
International $163.71 7.1% 71.9% -2.7% pts. $227.60 11.0%
Total International(5) $115.01 11.1% 75.5% 1.7% pts. $152.37 8.6%
Worldwide(6) $118.56 10.8% 76.6% 1.0% pts. $154.86 9.4%
Comparable Systemwide International Properties(1,2)
-----------------------------------------------------
Three Months Ended May 31, 2006 and May 31, 2005
------------------------------------------------
Average
REVPAR Occupancy Daily Rate
------ --------- ----------
Region/Brand(3) 2006 vs. 2005 2006 vs. 2005 2006 vs. 2005
--------------------------------------------------------------------------
Caribbean & Latin
America $124.45 12.6% 75.8% 2.0% pts. $164.26 9.7%
Continental Europe $104.11 11.1% 71.3% 3.2% pts. $146.06 6.0%
United Kingdom $146.49 11.3% 74.1% 2.2% pts. $197.60 7.9%
Middle East & Africa $100.52 14.2% 73.3% -1.4% pts. $137.09 16.3%
Asia Pacific(4) $97.91 9.8% 76.4% 1.0% pts. $128.13 8.4%
The Ritz-Carlton
International $163.71 7.1% 71.9% -2.7% pts. $227.60 11.0%
Total International(5) $112.16 10.7% 74.4% 1.1% pts. $150.77 9.0%
Worldwide(6) $101.49 10.7% 76.1% 1.2% pts. $133.33 9.0%
(1) International financial results are reported on a period-end basis,
while International statistics are reported on a month-end basis.
(2) Statistics are in constant dollars for March through May. Excludes
North America (except for Worldwide).
(3) Regional information includes the Marriott Hotels & Resorts,
Renaissance Hotels & Resorts and Courtyard brands. Does not
include The Ritz-Carlton International brand.
(4) Does not include Hawaii.
(5) Includes Hawaii.
(6) Includes international statistics for the three calendar months ended
May 31, 2006 and May 31, 2005, and North American statistics for the
twelve weeks ended June 16, 2006 and June 17, 2005. Includes the
Marriott Hotels & Resorts, The Ritz-Carlton, Renaissance Hotels &
Resorts, Residence Inn, Courtyard, TownePlace Suites, Fairfield Inn
and SpringHill Suites brands.
MARRIOTT INTERNATIONAL, INC.
KEY LODGING STATISTICS
(Constant $)
Comparable Company-Operated International Properties(1,2)
-----------------------------------------------------------
Five Months Ended May 31, 2006 and May 31, 2005
-----------------------------------------------
Average
REVPAR Occupancy Daily Rate
------ --------- ----------
Region/Brand(3) 2006 vs. 2005 2006 vs. 2005 2006 vs. 2005
-------------------------------------------------------------------------
Caribbean & Latin
America $134.44 13.8% 78.2% 3.4% pts. $171.92 8.8%
Continental Europe $95.06 8.4% 68.6% 3.0% pts. $138.61 3.6%
United Kingdom $159.02 14.0% 75.7% 3.2% pts. $210.06 9.2%
Middle East & Africa $103.86 11.2% 70.5% -2.6% pts. $147.34 15.3%
Asia Pacific(4) $93.13 12.5% 75.0% 1.4% pts. $124.10 10.4%
The Ritz-Carlton
International $155.04 5.4% 69.6% -2.9% pts. $222.84 9.9%
Total International(5) $109.75 10.7% 73.1% 1.4% pts. $150.23 8.6%
Worldwide(6) $111.78 10.4% 73.5% 0.8% pts. $152.10 9.2%
Comparable Systemwide International Properties(1,2)
-----------------------------------------------------
Five Months Ended May 31, 2006 and May 31, 2005
-----------------------------------------------
Average
REVPAR Occupancy Daily Rate
------ --------- ----------
Region/Brand(3) 2006 vs. 2005 2006 vs. 2005 2006 vs. 2005
--------------------------------------------------------------------------
Caribbean & Latin
America $123.05 11.2% 75.0% 2.7% pts. $164.09 7.2%
Continental Europe $93.17 9.3% 66.2% 2.7% pts. $140.68 4.9%
United Kingdom $137.66 12.4% 70.7% 2.7% pts. $194.83 8.0%
Middle East & Africa $97.33 12.3% 69.9% -2.6% pts. $139.23 16.5%
Asia Pacific(4) $94.17 11.8% 75.2% 1.2% pts. $125.27 10.0%
The Ritz-Carlton
International $155.04 5.4% 69.6% -2.9% pts. $222.84 9.9%
Total International(5) $106.26 10.2% 71.8% 1.1% pts. $148.05 8.5%
Worldwide(6) $95.74 10.7% 73.1% 1.3% pts. $130.96 8.7%
(1) International financial results are reported on a period-end basis,
while International statistics are reported on a month-end basis.
(2) Statistics are in constant dollars for January through May. Excludes
North America (except for Worldwide).
(3) Regional information includes the Marriott Hotels & Resorts,
Renaissance Hotels & Resorts and Courtyard brands. Does not include
The Ritz-Carlton International brand.
(4) Does not include Hawaii.
(5) Includes Hawaii.
(6) Includes international statistics for the five calendar months ended
May 31, 2006 and May 31, 2005, and North American statistics for the
twenty-four weeks ended June 16, 2006 and June 17, 2005. Includes the
Marriott Hotels & Resorts, The Ritz-Carlton, Renaissance Hotels &
Resorts, Residence Inn, Courtyard, TownePlace Suites, Fairfield Inn
and SpringHill Suites brands.
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measures
In our press release and schedules 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 generally accepted accounting principle measures to the non-GAAP measures (identified by a double asterisk on the following pages) that we refer to in our press release. Although our 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 operating income, income from continuing operations, net income, earnings per share or any other comparable operating measure prescribed by GAAP. In addition, these non-GAAP financial measures may be calculated and/or presented differently than measures with the same or similar names that are reported by other companies, and as a result, the non-GAAP measures we report may not be comparable to those reported by others.
Synthetic Fuel. We do not consider the Synthetic Fuel segment to be related to our core business, which is lodging. In addition, management expects the Synthetic Fuel segment will no longer have a material impact on our business after the end of 2007, when the Internal Revenue Code provision which provides for synthetic fuel tax credits expires, or earlier if the company elects to make its present synthetic fuel production shutdown permanent. Accordingly, our management evaluates non-GAAP measures which exclude the impact of our Synthetic Fuel segment because those measures allow for period-over-period comparisons of our on-going core lodging operations. In addition, these non-GAAP measures facilitate management's comparison of our results with the results of other lodging companies.
CTF transaction. Some of the non-GAAP measures are further adjusted to exclude the impact of the $94 million pre-tax charge (2005 second quarter) associated with the agreements we entered into with CTF Holdings Ltd. and its affiliates ("the CTF transaction"). That charge was primarily non-cash and primarily due to the write-off of deferred contract acquisition costs associated with the termination of management agreements. GAAP reporting for the CTF transaction charge does not reflect the fact that the company entered into new management agreements as part of the CTF transaction, which substantially replaced the terminated management agreements. Accordingly, our management evaluates the non-GAAP measures which exclude the CTF transaction charge because those measures allow for period-over-period comparisons relative to our on-going core lodging operations before material charges, and in particular because those non-GAAP measures recognize the new management agreements that were entered into as part of the CTF transaction and the resulting continuity of management for the hotels in question. In addition, these non-GAAP measures facilitate management's comparison of our results with the results of other lodging companies.
Leveraged lease impairment charge and discontinued operations. Management
evaluates non-GAAP measures that exclude the $17 million leveraged lease
impairment charge recorded in the 2005 third quarter and discontinued
operations in order to better assess the period-over-period performance of our
on-going core operating business. Management does not consider the leveraged
lease investment to be related to our core lodging business. In addition,
non-GAAP measures which exclude these non-lodging items facilitate
management's comparison of our results with the results of other lodging
companies.
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure Reconciliation
Lodging Operating Income
($ in millions)
Fiscal Year 2006
--------------------------------------------------------
Range Range
--------- ---------
Estimated Estimated Estimated Estimated
First Second Third Third Full Full
Quarter Quarter Quarter Quarter Year Year
------- ------- --------- --------- --------- ---------
Operating income $203 $234 *** *** *** ***
Add back:
Synthetic Fuel
operating
loss *** 27 18 *** *** *** ***
------- ------- -------- ---------- --------- ---------
Lodging
operating
income ** $230 $252 $195 $200 $950 $980
======= ======= ======== ========== ========= =========
Fiscal Year 2005
-------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
Operating income
as reported $158 $41 $135 $221 $555
Add back:
Synthetic Fuel
operating
loss 45 36 34 29 144
------- ------- ------- ------- -----
Lodging
operating
income ** $203 $77 $169 $250 $699
======= ======= ======= ======= =====
** Denotes non-GAAP financial measures.
*** Guidance not provided for the third and fourth quarters of 2006.
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure Reconciliation
Measures that Exclude Synthetic Fuel and CTF Transaction
(in millions, except per share amounts)
Twelve Weeks ending June 16, 2006
---------------------------------------------------------
Excluding
Synthetic
Synthetic Excluding Fuel
As Fuel Synthetic CTF and CTF
Reported Impact Fuel** Transaction Transaction**
-------- --------- --------- ----------- -------------
Operating
income (loss) $234 $(18) $252 $- $252
Gains and
other income 48 3 45 - 45
Interest income,
provision for loan
losses and
interest expense (17) 2 (19) - (19)
Equity in earnings 6 - 6 - 6
-------- --------- ---------- ---------- -------------
Income (loss) before
Income Taxes,
Minority Interest
and Cumulative
Effect of Change
in Accounting
Principle 271 (13) 284 - 284
-------- --------- ---------- ---------- -------------
Tax (Provision)/
Benefit (96) 6 (102) - (102)
Tax Credits 11 11 - - -
-------- --------- ---------- ---------- -------------
Total Tax (Provision)
/Benefit (85) 17 (102) - (102)
-------- --------- ---------- ---------- -------------
Income before
Minority Interest
and Cumulative
Effect of Change
in Accounting
Principle 186 4 182 - 182
Minority Interest - - - - -
-------- --------- ----------- --------- -------------
Income before
Cumulative Effect
of Change in
Accounting
Principle $186 $4 $182 $- $182
======== ========= =========== ========= =============
Diluted Shares 436.6 436.6 436.6 436.6 436.6
Earnings per
Share - Diluted $0.43 $0.01 $0.42 $0.00 $0.42
Tax Rate 31.4% 35.9% 35.9%
Twelve Weeks ending June 17, 2005
---------------------------------------------------------
Excluding
Synthetic
Synthetic Excluding Fuel
As Fuel Synthetic CTF and CTF
Reported Impact Fuel** Transaction Transaction**
-------- --------- --------- ----------- -------------
Operating
income (loss) $41 $(36) $77 $(94) $171
Gains and
other income 63 8 55 - 55
Interest income,
provision for loan
losses and
interest expense 4 - 4 - 4
Equity in earnings 6 - 6 - 6
------- ------- ------- ------------ -------------
Income (loss)
before Income Taxes,
Minority Interest
and Cumulative
Effect of Change
in Accounting
Principle 114 (28) 142 (94) 236
------- ------- ------- ------------ -------------
Tax (Provision)/
Benefit (39) 9 (48) 32 (80)
Tax Credits 59 59 - - -
------- ------- ------- ------------ -------------
Total Tax Benefit/
(Provision) 20 68 (48) 32 (80)
------- ------- ------- ------------ -------------
Income before
Minority Interest
and Cumulative
Effect of Change
in Accounting
Principle 134 40 94 (62) 156
Minority Interest 4 4 - - -
------- ------- ------- ------------ -------------
Income before
Cumulative Effect
of Change in
Accounting
Principle $138 $44 $94 $(62) $156
======= ======= ======= ============ =============
Diluted Shares 468.9 468.9 468.9 468.9 468.9
Earnings per
Share - Diluted $0.29 $0.09 $0.20 ($0.13) $0.33
Tax Rate -17.5% 33.8% 33.8%
** Denotes non-GAAP financial measures.
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure Reconciliation
Measures that Exclude Synthetic Fuel and CTF Transaction
(in millions, except per share amounts)
Twenty-Four Weeks ending June 16, 2006
---------------------------------------------------------
Excluding
Synthetic
Synthetic Excluding Fuel
As Fuel Synthetic CTF and CTF
Reported Impact Fuel** Transaction Transaction**
-------- --------- --------- ----------- -------------
Operating
income (loss) $437 $(45) $482 $- $482
Gains and other
income (expense) 82 (1) 83 - 83
Interest income,
provision for loan
losses and interest
expense (31) 2 (33) - (33)
Equity in earnings 3 - 3 - 3
------- --------- --------- ----------- -------------
Income (loss)
before Income Taxes,
Minority Interest
and Cumulative
Effect of Change
in Accounting
Principle 491 (44) 535 - 535
------- --------- --------- ----------- -------------
Tax (Provision)/
Benefit (173) 14 (187) - (187)
Tax Credits 32 32 - - -
------- --------- --------- ----------- -------------
Total Tax (Provision)
/Benefit (141) 46 (187) - (187)
------- --------- --------- ----------- -------------
Income before
Minority Interest
and Cumulative
Effect of Change
in Accounting
Principle 350 2 348 - 348
Minority Interest 6 5 1 - 1
------- --------- --------- ----------- -------------
Income before
Cumulative Effect
of Change in
Accounting
Principle $356 $7 $349 $- $349
======= ========= ========= =========== =============
Diluted Shares 438.9 438.9 438.9 438.9 438.9
Earnings per
Share - Diluted $0.81 $0.02 $0.79 $0.00 $0.79
Tax Rate 28.7% 35.0% 35.0%
Twenty-Four Weeks ending June 17, 2005
---------------------------------------------------------
Excluding
Synthetic
Synthetic Excluding Fuel
As Fuel Synthetic CTF and CTF
Reported Impact Fuel** Transaction Transaction**
-------- --------- --------- ----------- -------------
Operating
income (loss) $199 $(81) $280 $(94) $374
Gains and other
income (expense) 58 (1) 59 - 59
Interest income,
provision for loan
losses and
interest expense (4) - (4) - (4)
Equity in earnings 1 - 1 - 1
------- --------- --------- ----------- ------------
Income (loss)
before Income Taxes,
Minority Interest
and Cumulative
Effect of Change
in Accounting
Principle 254 (82) 336 (94) 430
------- --------- --------- ----------- ------------
Tax (Provision)/
Benefit (91) 24 (115) 32 (147)
Tax Credits 106 106 - - -
------- --------- --------- ----------- ------------
Total Tax Benefit/
(Provision) 15 130 (115) 32 (147)
------- --------- --------- ----------- ------------
Income before
Minority Interest
and Cumulative
Effect of Change
in Accounting
Principle 269 48 221 (62) 283
Minority Interest 14 14 - - -
------- --------- --------- ----------- ------------
Income before
Cumulative Effect
of Change in
Accounting
Principle $283 $62 $221 $(62) $283
======= ========= ========= =========== ============
Diluted Shares 475.5 475.5 475.5 475.5 475.5
Earnings per
Share - Diluted $0.60 $0.13 $0.47 ($0.13) $0.60
Tax Rate -5.9% 34.2% 34.2%
** Denotes non-GAAP financial measures.
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure Reconciliation
EBITDA
($ in millions)
Fiscal Year 2006
------------------------------
First Second
Quarter Quarter Total
------- ------- -----
Net income $65 $186 $251
Cumulative effect of change in
accounting principle, before tax 173 - 173
Interest expense 27 30 57
Tax provision from continuing
operations 56 85 141
Tax benefit from cumulative effect of
change in accounting principle (68) - (68)
Depreciation 34 34 68
Amortization 6 8 14
Less: Depreciation reimbursed by
third-party owners (4) (4) (8)
Interest expense from unconsolidated
joint ventures 5 6 11
Depreciation and amortization from
unconsolidated joint ventures 6 7 13
------- ------- -----
EBITDA ** $300 $352 $652
Synthetic fuel adjustment 24 11 35
------- ------- -----
Adjusted EBITDA ** $324 $363 $687
======= ======= =====
Increase over 2005 Adjusted EBITDA 17% 19% 18%
The following items make up the
Synthetic Fuel adjustment:
Pre-tax synthetic fuel operating losses $31 $13 $44
Pre-tax minority interest - synthetic fuel (5) - (5)
Synthetic fuel depreciation (2) (2) (4)
------- ------- -----
EBITDA adjustment for synthetic fuel $24 $11 $35
======= ======= =====
Fiscal Year 2005
-------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
Net income $145 $138 $149 $237 $669
Interest expense 24 21 24 37 106
Tax provision/(benefit) from
continuing operations 5 (20) 33 76 94
Tax provision/(benefit) from
discontinued operations - - 1 - 1
Depreciation 30 29 46 51 156
Amortization 7 7 7 7 28
Less: Depreciation reimbursed by
third-party owners - - (12) (5) (17)
Interest expense from unconsolidated
joint ventures 11 6 4 8 29
Depreciation and amortization from
unconsolidated joint ventures 12 9 7 11 39
------- ------- ------- ------ ------
EBITDA ** $234 $190 $259 $422 $1,105
Synthetic fuel adjustment 42 22 (7) (1) 56
Pre-tax gain from discontinued
operations - - (2) - (2)
Non-recurring charges -
CTF Acquisition one-time charge - 94 - - 94
Leveraged lease charge - - 17 - 17
------- ------- ------- ------ ------
Adjusted EBITDA ** $276 $306 $267 $421 $1,270
======= ======= ======= ====== ======
The following items make up the
Synthetic Fuel adjustment:
Pre-tax synthetic fuel operating
losses $54 $28 $13 $17 $112
Pre-tax minority interest - synthetic
fuel (10) (4) (18) (15) (47)
Synthetic fuel depreciation (2) (2) (2) (3) (9)
------- ------- ------- ------ ------
EBITDA adjustment for synthetic fuel $42 $22 $(7) $(1) $56
======= ======= ======= ====== ======
** Denotes Non-GAAP financial measures.
SOURCE Marriott International, Inc.
Tom Marder, Marriott International, Inc., +1-301-380-2553, thomas.marder@marriott.com
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