Marriott International Reports First Quarter Results
BETHESDA, Md., April 22, 2010 /PRNewswire via COMTEX News Network/ -- Marriott International, Inc. (NYSE: MAR) today reported first quarter 2010 results, exceeding its revenue per available room (REVPAR) and diluted earnings per share (EPS) expectations.
(Logo: http://www.newscom.com/cgi-bin/prnh/20090217/MARRIOTTINTLLOGO )
FIRST QUARTER 2010 RESULTS
First quarter 2010 net income totaled $83 million, a 5 percent decline compared to first quarter 2009 adjusted net income. Diluted EPS totaled $0.22, down $0.02 from adjusted diluted EPS in the year-ago quarter. On February 11, 2010, the company forecasted first quarter diluted EPS of $0.15 to $0.21.
Reported net income was $83 million in the first quarter of 2010 compared to a reported net loss of $23 million in the year-ago quarter. Reported diluted EPS was $0.22 in the first quarter of 2010 compared to reported diluted losses per share of $0.06 in the first quarter of 2009.
Adjusted results for the 2009 first quarter exclude $129 million pretax ($84 million after-tax and $0.24 per diluted share) of restructuring costs and other charges and $26 million of non-cash charges ($0.07 per diluted share) in the provision for income taxes.
J.W. Marriott, Jr., chairman and chief executive officer of Marriott International, said, "In the first quarter we welcomed increasing numbers of business guests to our hotels as travelers got back to work in most markets around the world. Corporate roomnights for the Marriott Hotels & Resort brand in North America rose 16 percent in the first quarter as business demand strengthened dramatically. At the same time, leisure demand remained solid as vacationers continued to find memorable holiday experiences and good values. While first quarter room rates were generally lower than last year, as occupancy levels continue to improve, we see higher room rates on the horizon. In fact, we anticipate that North American systemwide REVPAR will increase by 3 to 6 percent for the full year 2010 with higher room rates by year end. International demand trends are even stronger. We expect REVPAR outside North America will increase 4 to 7 percent on a constant dollar basis in 2010 reflecting strong demand in Europe, South America and Asia.
Over 8,000 new rooms joined our system during the first quarter including the JW Marriott Los Angeles L.A. LIVE, the JW Marriott Hill Country Resort and Spa in San Antonio, and the Shanghai Marriott Hotel Changfeng Park, our 47th hotel in China. We also launched our newest brand, The Autograph Collection, with two new properties, Casa Monica Hotel in St. Augustine Florida and the Grand Bohemian Hotel in Asheville, North Carolina.
With stronger demand and meaningful unit growth, fee revenue and earnings per share exceeded our expectations. 2010 is shaping up to be a good year."
REVPAR for the company's worldwide comparable company-operated properties was flat (a 1.0 percent decline using constant dollars) in the 2010 first quarter and REVPAR for the company's worldwide comparable systemwide properties declined 0.7 percent (a 1.3 percent decline using constant dollars).
International comparable company-operated REVPAR rose 5.8 percent (a 1.5 percent increase using constant dollars), including a 4.5 percent decline in average daily rate (a 8.3 percent decline using constant dollars) in the first quarter of 2010.
In North America, comparable company-operated REVPAR declined 1.9 percent in the first quarter of 2010. 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) was down 1.2 percent with a 7.8 percent decline in average daily rate.
Marriott added 44 new properties (8,361 rooms) to its worldwide lodging portfolio in the 2010 first quarter and seven properties (1,146 rooms) exited the system during the quarter. At quarter-end, the company's lodging group encompassed 3,457 properties and timeshare resorts for a total of over 603,000 rooms.
The company's worldwide pipeline of hotels under construction, awaiting conversion or approved for development totaled over 95,000 rooms in more than 600 hotels at quarter-end.
MARRIOTT REVENUES totaled over $2.6 billion in the 2010 first quarter compared to approximately $2.5 billion for the first quarter of 2009. Base management and franchise fees rose 1 percent to $216 million reflecting fees from new hotels offset by slightly lower REVPAR. First quarter incentive management fees declined 7 percent to $40 million. In the first quarter, 23 percent of company-managed hotels earned incentive management fees compared to 25 percent in the year-ago quarter. Approximately 60 percent of incentive management fees came from hotels outside North America in the 2010 quarter compared to 54 percent in the 2009 quarter.
Worldwide comparable company-operated house profit margins declined 110 basis points in the first quarter reflecting increasing occupancy and declining rate partially offset by efficiency improvements at the property level. House profit margins for comparable company-operated properties outside North America increased 40 basis points and North American comparable company-operated house profit margins declined 180 basis points from the year-ago quarter.
Owned, leased, corporate housing and other revenue, net of direct expenses, declined $1 million in the 2010 first quarter, to $12 million, primarily reflecting the impact of lower operating results in owned and leased hotels partially offset by $4 million of termination fees.
First quarter adjusted Timeshare segment contract sales increased 10 percent to $172 million excluding an $8 million allowance for fractional and residential contract cancellations recorded in the quarter. In the prior year's quarter, adjusted Timeshare segment contract sales totaled $157 million excluding a $28 million allowance for contract cancellations.
In the first quarter, timeshare sales and services revenue totaled $285 million and, net of expenses, totaled $50 million for the quarter. Adjusting for restructuring and other charges, as well as the impact of consolidation of securitized loans as if such consolidation had occurred at the beginning of 2009, first quarter 2009 timeshare sales and services revenue would have totaled $254 million and, net of direct expenses, would have totaled $25 million. These adjustments for the 2009 quarter are shown on page A-14.
Timeshare development revenue, net of expense, benefited from stronger demand, higher closing efficiency, favorable reportability and lower marketing and sales costs.
Timeshare segment results include Timeshare sales and services revenue, net of direct expenses, as well as base management fees, equity earnings (losses), noncontrolling interest, interest expense and general, administrative and other expenses associated with the timeshare business. Timeshare segment results for the 2010 first quarter, shown on page A-6, totaled $25 million, including $14 million of interest expense related to the consolidation of securitized Timeshare notes. On February 11, 2010, the company provided Timeshare segment guidance of $30 million to $40 million, excluding interest expense associated with securitized Timeshare notes.
GENERAL, ADMINISTRATIVE and OTHER expenses for the 2010 first quarter increased 1 percent to $138 million, compared to adjusted expenses of $136 million in the year-ago quarter. The 2010 first quarter benefited from $6 million in guarantee reserve reversals and $4 million of lower receivable reserves partially offset by higher legal expenses of $3 million. The 2009 first quarter benefited from $8 million of incentive compensation and other accrual reversals and a $5 million favorable impact associated with deferred compensation.
GAINS AND OTHER INCOME totaled $1 million primarily reflecting gains on the sale of real estate. The prior year's first quarter gains and other income totaled $25 million and included a $21 million gain on the extinguishment of debt, $3 million of gains on the sale of real estate and other income and $1 million of preferred returns from joint venture investments.
INTEREST EXPENSE increased $16 million to $45 million in the first quarter primarily due to $14 million of interest expense related to the consolidation of debt associated with securitized Timeshare notes, lower capitalized interest and interest associated with deferred compensation partially offset by lower debt balances and interest rates. Adjusting for the impact of consolidation of securitized loans as if such consolidation had occurred at the beginning of 2009, first quarter 2009 interest expense would have totaled $45 million, flat with 2010 first quarter interest expense.
EQUITY IN (LOSSES) EARNINGS totaled an $11 million loss in the quarter compared to a $3 million adjusted loss in the year-ago quarter. The $8 million decline primarily reflected a $4 million increase in cancellation reserves at one Timeshare joint venture and impairment charges of $3 million associated with two investments.
Earnings before Interest Expense, Taxes, Depreciation and Amortization (EBITDA)
EBITDA totaled $221 million in the 2010 first quarter. In the 2009 first quarter, adjusted EBITDA totaled $215 million. If the consolidation of securitized timeshare notes had occurred at the beginning of 2009, adjusted EBITDA in 2009 would have totaled $235 million.
BALANCE SHEET
At the end of the first quarter 2010, total debt was $3,269 million and cash balances totaled $118 million, compared to $2,298 million in debt and $115 million of cash at year-end 2009. The increase in debt included $1,043 million of debt associated with securitized Timeshare mortgage notes now required to be consolidated, as noted below. At the end of the first quarter 2010, Marriott had borrowings of $396 million outstanding under its $2.4 billion bank revolver.
COMMON STOCK
Weighted average fully diluted shares outstanding used to calculate diluted EPS totaled 373.3 million in the 2010 first quarter compared to weighted average fully diluted shares outstanding of 360.5 million used to calculate adjusted diluted EPS in the year-ago quarter.
The remaining share repurchase authorization, as of March 26, 2010, totaled 21.3 million shares. No share repurchases are planned for 2010.
IMPACT OF ACCOUNTING CHANGES
The company adopted ASU Nos. 2009-16 and 2009-17 (formerly referred to as FAS 166 and 167) at the beginning of 2010, which required consolidation of entities associated with securitized Timeshare notes and impacts the ongoing accounting for those notes. With the consolidation of the existing portfolio of securitized loans on the first day of fiscal 2010, assets increased by $970 million, liabilities increased by $1,116 million, and shareholders' equity decreased by $146 million. No change in net cash flow is anticipated as a result of the accounting changes. If the consolidation had occurred at the beginning of 2009, first quarter 2009 adjusted revenue would have increased to $2,540 million, first quarter 2009 adjusted EBITDA would have increased to $235 million, first quarter 2009 interest expense would have increased to $45 million and first quarter 2009 adjusted pretax income would have increased to $141 million. See the tables on pages A-14, A-15, A-16, A-17 and A-18 of the accompanying schedules for 2009 quarterly and full year Timeshare segment results adjusted as if the accounting changes had been made on the first day of fiscal 2009.
SECOND QUARTER 2010 OUTLOOK
For the second quarter, the company assumes comparable systemwide REVPAR on a constant dollar basis will increase 4 to 6 percent in North America, 8 to 10 percent outside North America and 5 to 7 percent worldwide.
In the 2010 second quarter, the company assumes Timeshare contract sales will total $175 million to $185 million and Timeshare sales and services revenue, net of direct expenses, will total approximately $40 million to $45 million. With these assumptions, Timeshare segment results for the second quarter, including interest expense associated with securitized notes, are expected to total $20 million to $25 million.
FULL YEAR 2010 OUTLOOK
For the full year 2010, the company assumes comparable systemwide REVPAR on a constant dollar basis will increase 3 to 6 percent in North America, 4 to 7 percent outside North America and 3 to 6 percent worldwide.
The company expects to open 25,000 to 30,000 rooms in 2010 as most hotels expected to open are already under construction or undergoing conversion from other brands.
The company continues to estimate that, on a full-year basis, one point of worldwide systemwide REVPAR impacts total fees by approximately $10 million to $15 million pretax and owned, leased, corporate housing and other revenue, net of direct expense, by roughly $4 million pretax.
For its timeshare business, the company assumes 2010 timeshare contract sales will be slightly higher than 2009 levels. For 2010, Timeshare sales and services revenue, net of direct expenses, is expected to total $185 million to $195 million. Timeshare segment results for 2010, including interest expense associated with previously securitized notes, is expected to total $95 million to $105 million.
The company expects its 2010 general, administrative and other expenses to total $650 million to $660 million reflecting higher incentive compensation.
Second Quarter Full Year
2010 2010
---- ----
Total
fee
revenue $275 million to $285 million $1,145 million to $1,175 million
Owned,
leased,
corporate
housing
and
other
revenue,
net of
direct
expenses Approx $25 million $75 million to $80 million
Timeshare
sales
and
services
revenue,
net of
direct
expenses $40 million to $45 million $185 million to $195 million
General,
administrative
and
other
expenses Approx $150 million $650 million to $660 million
Operating
income $190 million to $205 million $745 million to $800 million
Gains
and
other
income $0 to $5 million Approx $15 million
Net
interest
expense(1) Approx $40 million $165 million to $170 million
Equity
in
earnings
(losses) Approx $0 million Approx $30 million
Earnings
per
share $0.25 to $0.29 $0.95 to $1.05
Tax rate 36 percent 36 percent
(1)Net of interest income
Based upon the assumptions above, full year 2010 EBITDA is expected to total $985 million to $1,040 million. Assuming the investment spending levels below, adjusted total debt is expected to decline $400 million to $500 million by year end 2010.
The company expects investment spending in 2010 will total approximately $500 million, including capital expenditures totaling $150 million to $200 million, of which maintenance capital spending is expected to total $50 million. Investment spending will also include new mezzanine financing and mortgage loans, contract acquisition costs, and equity and other investments. The investment in net timeshare development is not included above as the company expects cost of goods sold in the timeshare business will exceed timeshare inventory spending in 2010.
Marriott International, Inc. (NYSE: MAR) will conduct its quarterly earnings review for the investment community and news media on Thursday, April 22, 2010 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 and Upcoming Events" tab and click on the quarterly conference call link. A replay will be available at that same website until April 22, 2011.
The telephone dial-in number for the conference call is 719-325-2122. A telephone replay of the conference call will be available from 1 p.m. ET, Thursday, April 22, 2010 until 8 p.m. ET, Thursday, April 29, 2010. To access the replay, call 719-457-0820. The reservation number for the recording is 7418222.
Definitions
All references to net income or net loss, unless otherwise noted, reflect net income or net loss attributable to Marriott. All references to EPS or diluted losses per share, unless otherwise noted, reflect EPS or diluted losses per share attributable to Marriott shareholders.
Note: This press release and accompanying schedules contain "forward-looking statements" within the meaning of federal securities laws, including REVPAR, profit margin and earnings trends, estimates and assumptions; statements concerning the number of lodging properties we expect to add in the future; our expected cost savings, investment spending and share repurchases; 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 continuation and pace of the economic recovery; supply and demand changes for hotel rooms, vacation ownership, condominiums, and corporate housing; competitive conditions in the lodging industry; relationships with clients and property owners; the availability of capital to finance hotel growth and refurbishment; and other risk factors identified in our most recent annual or quarterly report on Form 10-K or 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 more than 3,400 lodging properties in 70 countries and territories. Marriott International operates and franchises hotels under the Marriott, JW Marriott, The Ritz-Carlton, The Autograph Collection, 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, The Ritz-Carlton Destination Club, and Grand Residences by Marriott brands; licenses and manages whole-ownership residential brands, including The Ritz-Carlton Residences, JW Marriott Residences and Marriott Residences; operates Marriott Executive Apartments; provides furnished corporate housing through its Marriott ExecuStay division; and operates conference centers. The company is headquartered in Bethesda, Maryland, USA, and had approximately 137,000 employees at 2009 year-end. It is recognized by FORTUNE(R) as one of the best companies to work for, and by Newsweek as one of the greenest big companies in America. In fiscal year 2009, Marriott International reported sales from continuing operations of nearly $11 billion. For more information or reservations, please visit our web site at www.marriott.com, and for the latest company news, visit www.marriottnewscenter.com.
IRPR#1
Tables follow
Marriott International, Inc.
Press Release Schedules
Quarter 1, 2010
Table of Contents
Consolidated Statements of Income A-1
Total Lodging Products A-3
Key Lodging Statistics A-4
Timeshare Segment A-6
EBITDA A-7
Total Debt A-8
First Quarter 2009 Revenue, Interest Expense and
Income Before Income Taxes As Adjusted Had ASU Nos.
2009-16 and 2009-17 Been Adopted on January 3, 2009 A-9
First Quarter 2009 EBITDA As Adjusted Had ASU Nos.
2009-16 and 2009-17 Been Adopted on January 3, 2009 A-10
2009 EBITDA As Adjusted Had ASU Nos. 2009-16 and
2009-17 Been Adopted on January 3, 2009 and
Forecasted 2010 A-11
Second Quarter 2009 General, Administrative, and Other
Expenses Excluding Restructuring Costs and Other
Charges A-12
Timeshare Inventory As Adjusted Had ASU Nos. 2009-16
and 2009-17 Been Adopted on January 3, 2009 A-13
2009 Timeshare Segment As Adjusted Had ASU Nos.
2009-16 and 2009-17 Been Adopted on January 3, 2009 A-14
Non-GAAP Financial Measures A-19
MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
Adjustments
-----------
Restructuring
As Reported As Reported Costs Certain
& Other
12 Weeks 12 Weeks Charges Tax Items
Ended Ended -------- ---------
March 26, March 27,
2010 2009
---------- ---------
REVENUES
Base management fees $125 $125 $- $-
Franchise fees 91 88 - -
Incentive management
fees 40 43 - -
Owned, leased,
corporate housing
and other revenue
(1) 229 220 - -
Timeshare sales and
services (including
net note sale
losses of $1 for
the twelve weeks
ended March 27,
2009) (2) 285 209 17 -
Cost reimbursements
(3) 1,860 1,810 - -
Total Revenues 2,630 2,495 17 -
OPERATING COSTS AND
EXPENSES
Owned, leased and
corporate housing -
direct (4) 217 207 - -
Timeshare - direct 235 220 1 -
Reimbursed costs 1,860 1,810 - -
Restructuring costs - 2 (2) -
General,
administrative and
other (5) 138 216 (80) -
Total Expenses 2,450 2,455 (81) -
----- --- ---
OPERATING INCOME 180 40 98 -
Gains and other
income (including
gain on debt
extinguishment of
$21 for the twelve
weeks ended March
27, 2009) (6) 1 25 - -
Interest expense (45) (29) - -
Interest income 4 6 - -
Equity in (losses)
earnings (7) (11) (34) 31 -
--- --- --- ---
INCOME BEFORE INCOME
TAXES 129 8 129 -
Provision for income
taxes (46) (33) (45) 26
--- --- --- ---
NET INCOME / (LOSS) 83 (25) 84 26
Add: Net losses
attributable to
noncontrolling
interests, net of
tax - 2 - -
--- --- --- ---
NET INCOME /(LOSS)
ATTRIBUTABLE TO
MARRIOTT $83 $(23) $84 $26
=== ==== === ===
EARNINGS /(LOSSES)
PER SHARE -
Basic(8)
Earnings /(losses)
per share
attributable to
Marriott
shareholders (9) $0.23 $(0.06) $0.24 $0.07
===== ====== ===== =====
EARNINGS /(LOSSES)
PER SHARE -Diluted
(8)
Earnings /(losses)
per share
attributable to
Marriott
shareholders (9) $0.22 $(0.06) $0.24 $0.07
===== ====== ===== =====
Basic Shares (8) 359.4 354.4 354.4 354.4
Diluted Shares(8,10) 373.3 354.4 354.4 354.4
As Adjusted Percent
Better/
(Worse)
12 Weeks 2010
Ended vs.
March 27, Adjusted
2009** 2009
--------- ---------
REVENUES
Base management fees $125 -
Franchise fees 88 3
Incentive management fees 43 (7)
Owned, leased, corporate housing
and other revenue (1) 220 4
Timeshare sales and services
(including net note sale losses
of $1 for the twelve weeks ended
March 27, 2009) (2) 226 26
Cost reimbursements (3) 1,810 3
Total Revenues 2,512 5
OPERATING COSTS AND EXPENSES
Owned, leased and corporate
housing -direct (4) 207 (5)
Timeshare - direct 221 (6)
Reimbursed costs 1,810 (3)
Restructuring costs - -
General, administrative and other
(5) 136 (1)
Total Expenses 2,374 (3)
-----
OPERATING INCOME 138 30
Gains and other income (including
gain on debt extinguishment of
$21 for the twelve weeks ended
March 27, 2009) (6) 25 (96)
Interest expense (29) (55)
Interest income 6 (33)
Equity in (losses) earnings (7) (3) (267)
---
INCOME BEFORE INCOME TAXES 137 (6)
Provision for income taxes (52) 12
---
NET INCOME / (LOSS) 85 (2)
Add: Net losses attributable to
noncontrolling interests, net of
tax 2 (100)
---
NET INCOME /(LOSS) ATTRIBUTABLE
TO MARRIOTT $87 (5)
===
EARNINGS /(LOSSES) PER SHARE -
Basic(8)
Earnings /(losses) per share
attributable to Marriott
shareholders (9) $0.25 (8)
=====
EARNINGS /(LOSSES) PER SHARE -
Diluted (8)
Earnings /(losses) per share
attributable to Marriott
shareholders (9) $0.24 (8)
=====
Basic Shares (8) 354.4
Diluted Shares(8,10) 360.5
** Denotes non-GAAP financial measures. Please see pages A-19 and
A-20 for additional information about our reasons for providing
these alternative financial measures and the limitations on their
use.
See page A-2 for footnote references.
A-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 and cost reimbursements.
3 - Cost reimbursements include reimbursements from 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; note sales or repayments (except timeshare note securitizations); the sale of joint ventures and investments; and debt extinguishments, as well as income from cost method joint ventures.
7 - Equity in (losses) earnings includes our equity in (losses) / earnings of unconsolidated equity method joint ventures.
8 - 2009 share numbers and per share amounts have been retroactively adjusted to reflect the stock dividends with distribution dates of July 30, 2009, September 3, 2009 and December 3, 2009.
9 - Earnings / (Losses) per share attributable to Marriott shareholders plus adjustment items may not equal earnings per share attributable to Marriott shareholders as adjusted due to rounding.
10 - Basic and fully diluted weighted average common shares outstanding used to calculate earnings per share from continuing operations for the periods in which we had a loss are the same because inclusion of additional equivalents would be anti-dilutive.
A-2
MARRIOTT INTERNATIONAL, INC.
TOTAL LODGING PRODUCTS (1)
Number of Properties
--------------------
March 26, March 27, vs. March 27,
Brand 2010 2009 2009
----- ---------- ---------- --------------
Domestic Full-Service
---------------------
Marriott Hotels &
Resorts 356 349 7
Renaissance Hotels 79 76 3
Autograph 2 - 2
Domestic Limited-
Service
-----------------
Courtyard 775 738 37
Fairfield Inn & Suites 632 574 58
SpringHill Suites 260 217 43
Residence Inn 588 558 30
TownePlace Suites 187 166 21
International
-------------
Marriott Hotels &
Resorts 194 185 9
Renaissance Hotels 66 66 -
Courtyard 93 83 10
Fairfield Inn & Suites 9 9 -
SpringHill Suites 1 1 -
Residence Inn 17 16 1
Marriott Executive
Apartments 23 21 2
Luxury
------
The Ritz-Carlton -
Domestic 40 37 3
The Ritz-Carlton -
International 34 34 -
Bulgari Hotels &
Resorts 2 2 -
The Ritz-Carlton
Residential 26 24 2
The Ritz-Carlton
Serviced Apartments 3 3 -
Timeshare (2)
------------
Marriott Vacation Club
(3) 53 51 2
The Ritz-Carlton
Destination Club 9 10 (1)
The Ritz-Carlton
Residences 4 3 1
Grand Residences by
Marriott -Fractional 2 2 -
Grand Residences by
Marriott -
Residential 2 2 -
Sub Total Timeshare 70 68 2
--- --- ---
Total 3,457 3,227 230
===== ===== ===
Number of Rooms/Suites
----------------------
March 26, vs. March 27,
Brand 2010 March 27, 2009 2009
----- ---------- -------------- --------------
Domestic Full-Service
---------------------
Marriott Hotels &
Resorts 142,282 138,931 3,351
Renaissance Hotels 28,914 28,047 867
Autograph 242 - 242
Domestic Limited-
Service
-----------------
Courtyard 108,858 103,042 5,816
Fairfield Inn & Suites 56,948 51,052 5,896
SpringHill Suites 30,484 25,128 5,356
Residence Inn 70,723 66,730 3,993
TownePlace Suites 18,759 16,643 2,116
International
-------------
Marriott Hotels &
Resorts 59,641 55,740 3,901
Renaissance Hotels 21,992 22,536 (544)
Courtyard 18,185 16,222 1,963
Fairfield Inn & Suites 1,109 1,109 -
SpringHill Suites 124 124 -
Residence Inn 2,418 2,389 29
Marriott Executive
Apartments 3,903 3,337 566
Luxury
------
The Ritz-Carlton -
Domestic 12,120 11,652 468
The Ritz-Carlton -
International 10,171 10,477 (306)
Bulgari Hotels &
Resorts 117 117 -
The Ritz-Carlton
Residential 2,669 2,539 130
The Ritz-Carlton
Serviced Apartments 458 478 (20)
Timeshare (2)
------------
Marriott Vacation Club
(3) 11,874 11,803 71
The Ritz-Carlton
Destination Club 464 456 8
The Ritz-Carlton
Residences 238 149 89
Grand Residences by
Marriott -Fractional 248 241 7
Grand Residences by
Marriott -Residential 68 91 (23)
Sub Total Timeshare 12,892 12,740 152
------ ------ ---
Total 603,009 569,033 33,976
======= ======= ======
A-3
Number of Timeshare Interval, Fractional and Residential Resorts
----------------------------------------------------------------
Total Properties in
Properties Active
(2) Sales(4)
------------- -----------
100% Company-Developed
----------------------
Marriott Vacation Club(3) 53 30
The Ritz-Carlton Destination Club and
Residences 9 8
Grand Residences by Marriott and
Residences 4 4
Joint Ventures
--------------
The Ritz-Carlton Destination Club and
Residences 4 4
Total 70 46
=== ===
(1)Total Lodging Products excludes the 1,781 and 2,157 corporate
housing rental units as of March 26, 2010 and March 27, 2009,
respectively.
(2) Includes products that are in active sales as well as those that
are sold out. Residential products are included once they possess a
certificate of occupancy.
(3)Marriott Vacation Club includes Horizons by Marriott Vacation Club
products that were previously reported separately.
(4)Products in active sales may not be ready for occupancy.
MARRIOTT INTERNATIONAL INC.
---------------------------
KEY LODGING STATISTICS
----------------------
Constant $
----------
Comparable Company-Operated International Properties(1)
------------------------------------------------------
Two Months Ended February 28, 2010 and February 28, 2009
--------------------------------------------------------
REVPAR Occupancy
------ ---------
vs. vs.
Region 2010 2009 2010 2009
------ ---- ---- ---- ----
Caribbean & Latin
America $145.17 -3.0% 73.4% 4.0% pts.
Continental Europe $90.47 1.5% 57.2% 4.8% pts.
United Kingdom $103.06 6.0% 66.4% 4.4% pts.
Middle East & Africa $92.29 -11.6% 67.6% 1.5% pts.
Asia Pacific(2) $72.52 15.8% 60.2% 12.5% pts.
Regional Composite(3) $96.54 2.1% 63.6% 6.4% pts.
International
Luxury(4) $188.74 -0.7% 58.5% 3.6% pts.
Total
International(5) $106.72 1.5% 63.1% 6.1% pts.
Worldwide(6) $94.13 -1.0% 64.1% 4.6% pts.
Average Daily
Rate
-------------
vs.
Region 2010 2009
------ ---- ----
Caribbean & Latin
America $197.68 -8.3%
Continental Europe $158.20 -7.0%
United Kingdom $155.19 -1.1%
Middle East & Africa $136.58 -13.6%
Asia Pacific(2) $120.42 -8.3%
Regional Composite(3) $151.73 -8.3%
International
Luxury(4) $322.47 -6.8%
Total
International(5) $169.23 -8.3%
Worldwide(6) $146.86 -8.1%
Comparable Systemwide International Properties(1)
Two Months Ended February 28, 2010 and February
28, 2009
-----------------------------------------------
REVPAR Occupancy
------ ---------
vs. vs.
Region 2010 2009 2010 2009
------ ---- ---- ---- ----
Caribbean & Latin
America $120.01 1.8% 67.4% 6.4% pts.
Continental Europe $87.50 0.4% 56.1% 4.8% pts.
United Kingdom $101.29 5.6% 65.6% 4.3% pts.
Middle East & Africa $92.29 -11.6% 67.6% 1.5% pts.
Asia Pacific(2) $76.86 8.2% 60.8% 10.6% pts.
Regional Composite(3) $93.73 1.6% 62.3% 6.3% pts.
International
Luxury(4) $188.74 -0.7% 58.5% 3.6% pts.
Total
International(5) $102.35 1.2% 61.9% 6.0% pts.
Worldwide(6) $78.93 -1.3% 62.9% 3.6% pts.
Two Months Ended February 28, 2010 and February
28, 2009
-----------------------------------------------
Average
Daily Rate
-----------
vs.
Region 2010 2009
------ ---- ----
Caribbean & Latin
America $178.11 -7.9%
Continental Europe $156.03 -8.1%
United Kingdom $154.36 -1.2%
Middle East & Africa $136.58 -13.6%
Asia Pacific(2) $126.47 -10.6%
Regional Composite(3) $150.52 -8.6%
International
Luxury(4) $322.47 -6.8%
Total
International(5) $165.25 -8.7%
Worldwide(6) $125.48 -6.9%
(1) We report International results on a period basis, and
international statistics on a monthly basis. Statistics are in
constant dollars for January through February. 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 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 two calendar months
ended February 28, 2010 and February 28, 2009, and North American
statistics for the twelve weeks ended March 26, 2010 and March 27,
2009. Includes the Marriott Hotels & Resorts, Renaissance Hotels,
The Ritz-Carlton, Bulgari Hotels & Resorts, Residence Inn,
Courtyard, Fairfield Inn & Suites, TownePlace Suites and SpringHill
Suites brands.
A-4
MARRIOTT INTERNATIONAL INC.
KEY LODGING STATISTICS
Comparable Company-Operated North American Properties(1)
Twelve Weeks Ended March 26, 2010 and March 27,
2009
------------------------------------------------
REVPAR Occupancy
------ ---------
vs. vs.
Brand 2010 2009 2010 2009
----- ---- ---- ---- ----
Marriott Hotels &
Resorts $101.05 -1.2% 66.2% 4.4% pts.
Renaissance Hotels $96.04 -4.6% 63.9% 3.3% pts.
Composite North
American Full-
Service(2) $100.12 -1.8% 65.8% 4.2% pts.
The Ritz-Carlton(3) $193.68 2.5% 64.2% 6.8% pts.
Composite North
American Full-Service
& Luxury(4) $107.58 -1.2% 65.7% 4.4% pts.
Residence Inn $78.90 -0.9% 69.4% 5.3% pts.
Courtyard $64.74 -4.1% 60.3% 3.6% pts.
TownePlace Suites $43.32 -11.2% 58.0% 1.0% pts.
SpringHill Suites $58.16 -2.3% 59.8% 4.0% pts.
Composite North
American Limited-
Service(5) $66.83 -3.3% 62.7% 3.9% pts.
Composite - All(6) $90.36 -1.9% 64.4% 4.2% pts.
Twelve Weeks Ended March 26, 2010 and March 27,
2009
------------------------------------------------
Average Daily
Rate
--------------
vs.
Brand 2010 2009
----- ---- ----
Marriott Hotels
& Resorts $152.59 -7.7%
Renaissance
Hotels $150.21 -9.6%
Composite North
American Full-
Service(2) $152.16 -8.0%
The Ritz-
Carlton(3) $301.74 -8.4%
Composite North
American Full-
Service &
Luxury(4) $163.82 -7.8%
Residence Inn $113.69 -8.4%
Courtyard $107.29 -9.9%
TownePlace
Suites $74.67 -12.7%
SpringHill
Suites $97.22 -8.9%
Composite North
American
Limited-
Service(5) $106.64 -9.3%
Composite -
All(6) $140.30 -8.2%
Comparable Systemwide North American Properties(1)
-------------------------------------------------
Twelve Weeks Ended March 26, 2010 and March 27,
2009
------------------------------------------------
REVPAR Occupancy
------ ---------
vs. vs.
Brand 2010 2009 2010 2009
----- ---- ---- ---- ----
Marriott Hotels &
Resorts $89.79 -1.0% 63.5% 3.9% pts.
Renaissance Hotels $87.78 -2.2% 63.6% 4.7% pts.
Composite North
American Full-
Service(2) $89.43 -1.2% 63.5% 4.1% pts.
The Ritz-Carlton(3) $193.68 2.5% 64.2% 6.8% pts.
Composite North
American Full-Service
& Luxury(4) $94.31 -0.9% 63.5% 4.2% pts.
Residence Inn $78.22 -0.8% 70.6% 4.3% pts.
Courtyard $66.99 -2.9% 61.4% 2.4% pts.
Fairfield Inn & Suites $46.59 -3.9% 56.4% 0.9% pts.
TownePlace Suites $49.27 -4.5% 61.3% 3.4% pts.
SpringHill Suites $58.95 -4.4% 61.1% 2.6% pts.
Composite North
American Limited-
Service(5) $64.15 -2.6% 62.8% 2.7% pts.
Composite - All(6) $75.63 -1.8% 63.0% 3.3% pts.
Twelve Weeks Ended March 26, 2010 and March 27,
2009
------------------------------------------------
Average Daily
Rate
-------------
vs.
Brand 2010 2009
----- ---- ----
Marriott Hotels &
Resorts $141.50 -7.1%
Renaissance Hotels $138.12 -9.5%
Composite North
American Full-
Service(2) $140.90 -7.6%
The Ritz-Carlton(3) $301.74 -8.4%
Composite North
American Full-Service
& Luxury(4) $148.52 -7.4%
Residence Inn $110.80 -6.8%
Courtyard $109.16 -6.7%
Fairfield Inn & Suites $82.66 -5.4%
TownePlace Suites $80.33 -9.7%
SpringHill Suites $96.55 -8.5%
Composite North
American Limited-
Service(5) $102.22 -6.7%
Composite - All(6) $119.96 -6.8%
(1)North America includes properties located in the Continental
United States and Canada.
(2) Includes theMarriott Hotels & Resorts and Renaissance Hotels
brands.
(3) Statistics for The Ritz-Carlton are for January through February.
(4) Includes theMarriott Hotels & Resorts, Renaissance Hotels and The
Ritz-Carlton brands.
(5) Includes theResidence Inn, Courtyard, Fairfield Inn & Suites,
TownePlace Suites and SpringHill Suites brands.
(6) Includes theMarriott Hotels & Resorts, Renaissance Hotels, The
Ritz-Carlton, Residence Inn, Courtyard,
Fairfield Inn & Suites, TownePlace Suites, and SpringHill Suites brands.
A-5
MARRIOTT INTERNATIONAL, INC.
TIMESHARE SEGMENT
($ in millions)
As Reported As Reported
12 Weeks Ended 12 Weeks Ended
March 26, 2010 March 27, 2009
-------------- --------------
Segment Revenues
----------------
Base fees revenue $11 $10
Sales and services revenue
Development 147 121
Services 83 70
Financing revenue
Interest income - non-
securitized notes 9 13
Interest income -securitized
notes 36 -
Other financing revenue (1) 5 -
--- ---
Total financing revenue 50 13
Other revenue 5 5
--- ---
Total sales and services
revenue 285 209
Cost reimbursements 62 58
--- ---
Segment revenues $358 $277
==== ====
Segment Results
---------------
Base fees revenue $11 $10
Timeshare sales and services,
net 50 (11)
Timeshare strategy -impairment
charges - -
Restructuring costs - (1)
General, administrative and
other
expense (17) (17)
Gains and other income - -
Joint venture equity earnings (5) (1)
Interest expense (14) -
Timeshare strategy -impairment
charges (non-operating) - -
Noncontrolling interest - 3
--- ---
Segment results $25 $(17)
=== ====
Contract Sales
--------------
Company:
Timeshare $151 $138
Fractional 8 10
Residential 4 (5)
--- ---
Total company 163 143
Joint ventures:
Timeshare - -
Fractional 1 13
Residential - (27)
--- ---
Total joint ventures 1 (14)
--- ---
Total contract sales (2) $164 $129
==== ====
Adjustments
Timeshare Strategy
-Impairment
Restructuring Charges
Costs & Other ------------------
Charges
-------
Segment Revenues
----------------
Base fees revenue $- $-
Sales and services revenue
Development 4 -
Services - -
Financing revenue
Interest income - non-
securitized notes - -
Interest income -securitized
notes - -
Other financing revenue (1) 13 -
--- ---
Total financing revenue 13 -
Other revenue - -
--- ---
Total sales and services
revenue 17 -
Cost reimbursements - -
--- ---
Segment revenues $17 $-
=== ===
Segment Results
---------------
Base fees revenue $- $-
Timeshare sales and services,
net 16 -
Timeshare strategy -impairment
charges - -
Restructuring costs 1 -
General, administrative and
other
expense - -
Gains and other income - -
Joint venture equity earnings 1 -
Interest expense - -
Timeshare strategy -impairment
charges (non-operating) - -
Noncontrolling interest - -
--- ---
Segment results $18 $-
=== ===
Contract Sales
--------------
Company:
Timeshare $- $-
Fractional - -
Residential 4 -
--- ---
Total company 4 -
Joint ventures:
Timeshare - -
Fractional (3) -
Residential 27 -
--- ---
Total joint ventures 24 -
--- ---
Total contract sales (2) $28 $-
=== ===
As Adjusted Percent
Better/
12 Weeks Ended (Worse)
March 27,
2009** 2010 vs.
Adjusted
--------- 2009
---------
Segment Revenues
----------------
Base fees revenue $10 10
Sales and services revenue
Development 125 18
Services 70 19
Financing revenue
Interest income - non-
securitized notes 13 (31)
Interest income -securitized
notes - *
Other financing revenue (1) 13 (62)
---
Total financing revenue 26 92
Other revenue 5 -
---
Total sales and services
revenue 226 26
Cost reimbursements 58 7
---
Segment revenues $294 22
====
Segment Results
---------------
Base fees revenue $10 10
Timeshare sales and services,
net 5 900
Timeshare strategy -impairment
charges - -
Restructuring costs - -
General, administrative and
other
expense (17) -
Gains and other income - -
Joint venture equity earnings - *
Interest expense - *
Timeshare strategy -impairment
charges (non-operating) - -
Noncontrolling interest 3 (100)
---
Segment results $1 2,400
===
Contract Sales
--------------
Company:
Timeshare $138 9
Fractional 10 (20)
Residential (1) (500)
---
Total company 147 11
Joint ventures:
Timeshare - -
Fractional 10 (90)
Residential - -
---
Total joint ventures 10 (90)
---
Total contract sales (2) $157 4
====
* Percent cannot be calculated.
**Denotes non-GAAP financial measures. Please see pages A-19 and
A-20 for additional information about our reasons for providing
these alternative financial measures and the limitations on their
use.
1 As Reported 12 Weeks Ended March 27, 2009 and As Adjusted 12 Weeks
Ended March 27, 2009 include gain/(loss) on notes sold of ($1)
million and ($1) million, respectively.
2 As Reported 12 Weeks Ended March 26, 2010 includes fractional and
residential contract cancellation allowances of ($4) million and
($4) million, respectively. Gross contract sales for the 2010 first
quarter were $172 million before the contract cancellation reserves
of $8 million.
A-6
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure
EBITDA and Adjusted EBITDA
($ in millions)
Fiscal Year
2010
------------
First Quarter
-------------
Net Income attributable to Marriott $83
Interest expense 45
Tax provision 46
Tax provision, noncontrolling interest -
Depreciation and amortization 39
Less: Depreciation reimbursed by third-
party owners (3)
Interest expense from unconsolidated joint
ventures 5
Depreciation and amortization from
unconsolidated joint ventures 6
---
EBITDA ** 221
Increase over 2009 Adjusted EBITDA 3%
Fiscal Year 2009
----------------
First Second Third
Quarter Quarter Quarter
------- ------- -------
Net Income /(Loss)
attributable to Marriott $(23) $37 $(466)
Interest expense 29 28 27
Tax provision 33 44 (210)
Tax provision, noncontrolling
interest 1 2 1
Depreciation and amortization 39 42 43
Less: Depreciation reimbursed
by third-party owners (2) (2) (2)
Interest expense from
unconsolidated joint ventures 3 6 4
Depreciation and amortization
from unconsolidated joint
ventures 6 6 6
--- --- ---
EBITDA ** 86 163 (597)
Restructuring costs and other
charges
Severance 2 10 4
Facilities exit costs - 22 5
Development cancellations - 1 -
Total restructuring costs 2 33 9
--- --- ---
Impairment of investments and
other, net of prior year
reserves 68 3 1
Reserves for loan losses 42 1 -
Contract cancellation
allowances 4 1 1
Residual interests valuation 13 12 (3)
System development write-off - 7 -
Total other charges 127 24 (1)
--- --- ---
Total restructuring costs and
other charges 129 57 8
--- --- ---
Timeshare strategy -impairment
charges
Operating impairments - - 614
Non-operating impairments - - 138
--- --- ---
Total timeshare strategy -
impairment charges - - 752
--- --- ---
Adjusted EBITDA ** $215 $220 $163
==== ==== ====
Fiscal Year 2009
----------------
Fourth Total
Quarter -----
-------
Net Income /(Loss) attributable to
Marriott $106 $(346)
Interest expense 34 118
Tax provision 68 (65)
Tax provision, noncontrolling interest - 4
Depreciation and amortization 61 185
Less: Depreciation reimbursed by third-
party owners (3) (9)
Interest expense from unconsolidated
joint ventures 6 19
Depreciation and amortization from
unconsolidated joint ventures 9 27
--- ---
EBITDA ** 281 (67)
Restructuring costs and other charges
Severance 5 21
Facilities exit costs 2 29
Development cancellations - 1
Total restructuring costs 7 51
--- ---
Impairment of investments and other, net
of prior year reserves 11 83
Reserves for loan losses - 43
Contract cancellation allowances 3 9
Residual interests valuation (2) 20
System development write-off - 7
Total other charges 12 162
--- ---
Total restructuring costs and other
charges 19 213
--- ---
Timeshare strategy - impairment charges
Operating impairments - 614
Non-operating impairments - 138
--- ---
Total timeshare strategy -impairment
charges - 752
--- ---
Adjusted EBITDA ** $300 $898
==== ====
** Denotes non-GAAP financial measures. Please see pages A-19 and
A-20 for additional information about our reasons for providing
these alternative financial measures and the limitations on their
use.
A-7
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure
Total Debt
($ in millions)
Balance
Balance at at Better/
End of 2010 Year-End (Worse)
First
Quarter 2009 Change
-------- ---- ------
Total debt $3,269 $2,298 $(971)
Less the impact of ASU Nos.
2009-16 and 2009-17 (1,043) - 1,043
Adjusted total debt** (a) $2,226 $2,298 $72
====== ====== ===
Range Range
----- -----
Estimated Estimated
Balance Balance As Compared to Balance
at Year-End 2009
----------------
Better/ Better/
Year-End Year-End (Worse) (Worse)
2010 (b) 2010 (c) Change (b) Change (c)
------- -------- --------- ---------
Total debt $2,854 $2,754 $(556) $(456)
Less the impact of ASU
Nos. 2009-16 and
2009-17 (956) (956) 956 956
Adjusted total debt**
(a) $1,898 $1,798 $400 $500
====== ====== ==== ====
(a) Excludes the impact of the update to ASU Nos. 2009-16 and 2009-17.
(b) Assumes $400 debt repayment in 2010.
(c) Assumes $500 debt repayment in 2010.
**Denotes non-GAAP financial measures. Please see pages A-19 and
A-20 for additional information about our reasons
A-8
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure
Revenue, Interest Expense and Income Before Income Taxes
As Adjusted Had ASU Nos. 2009-16 and 2009-17 (Formerly Referred to as
FAS 166 & 167) Been Adopted on January 3, 2009
First Quarter 2009
($ in millions)
First
Quarter First Quarter First Quarter
2009 2009 2009
As Adjusted For
Restructuring
Restructuring Costs Costs and Other
As Reported and Other Charges Charges**
Revenue $2,495 $17 $2,512
====== === ======
Interest
Expense $(29) $- $(29)
==== === ====
Income
Before $8 $129 $137
Income
Taxes === ==== ====
ASU Nos. First Quarter
2009-16 and 2009
As Adjusted
2009-17 For
ASU Nos.
Adjustments 2009-16
and 2009-17**
Revenue $28 $2,540
=== ======
Interest
Expense $(16) $(45)
==== ====
Income
Before $4 $141
Income
Taxes === ====
** Denotes non-GAAP financial measures. Please see pages A-19 and
A-20 for additional information about our reasons for providing
these alternative financial measures and the limitations on their
use.
A-9
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure
EBITDA and Adjusted EBITDA
As Adjusted Had ASU Nos. 2009-16 and 2009-17 (Formerly Referred to as
FAS 166 & 167) Been Adopted on January 3, 2009
First Quarter 2009
($ in millions)
First Quarter
2009 ASU Nos. As Adjusted For
-------------- 2009-16 and ASU Nos.
2009-17 2009-16 and
Adjustments 2009-17
----------- First Quarter
2009**
------
Net (Loss) /
Income
attributable to
Marriott $(23) $2 $(21)
Interest expense 29 16 45
Tax provision 33 2 35
Tax provision,
noncontrolling
interest 1 - 1
Depreciation and
amortization 39 - 39
Less:
Depreciation
reimbursed by
third-party
owners (2) - (2)
Interest expense
from
unconsolidated
joint ventures 3 - 3
Depreciation and
amortization
from
unconsolidated
joint ventures 6 - 6
--- --- ---
EBITDA ** 86 20 106
Restructuring
costs and other
charges
Severance 2 - 2
Facilities exit
costs - - -
Development
cancellations - - -
--- --- ---
Total
restructuring
costs 2 - 2
--- --- ---
Impairment of
investments and
other, net of
prior year
reserves 68 - 68
Reserves for
loan losses 42 - 42
Contract
cancellation
allowances 4 - 4
Residual
interests
valuation 13 - 13
System
development
write-off - - -
--- ---
Total other
charges 127 - 127
--- --- ---
Total
restructuring
costs and other
charges 129 - 129
--- --- ---
Timeshare
strategy -
impairment
charges
Operating
impairments - - -
Non-operating
impairments - - -
--- ---
Total timeshare
strategy -
impairment
charges - - -
--- --- ---
Adjusted EBITDA
** $215 $20 $235
==== === ====
** Denotes non-GAAP financial measures. Please see pages A-19 and
A-20 for additional information about our reasons for providing
these alternative financial measures and the limitations on their
use
.
A-10
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure
EBITDA and Adjusted EBITDA
2009 As Adjusted Had ASU Nos. 2009-16 and 2009-17 Been Adopted on
January 3, 2009 and Forecasted 2010
($ in millions)
2009
Fiscal As Adjusted
Year ASU Nos. For
------ 2009-16 and ASU Nos.
2009-17 2009-16 and
Adjustments 2009-17
----------- Fiscal Year
2009**
------
Net (Loss) /Income
attributable to Marriott $(346) $(1) $(347)
Interest expense 118 77 195
Tax provision (65) - (65)
Tax provision,
noncontrolling interest 4 - 4
Depreciation and
amortization 185 - 185
Less: Depreciation
reimbursed by third-
party owners (9) - (9)
Interest expense from
unconsolidated joint
ventures 19 - 19
Depreciation and
amortization from
unconsolidated joint
ventures 27 - 27
--- --- ---
EBITDA ** (67) 76 9
Restructuring costs and
other charges
Severance 21 - 21
Facilities exit costs 29 - 29
Development cancellations 1 - 1
--- --- ---
Total restructuring costs 51 - 51
--- --- ---
Impairment of investments
and other, net of prior
year reserves 83 - 83
Reserves for loan losses 43 - 43
Contract cancellation
allowances 9 - 9
Residual interests
valuation 20 - 20
System development write-
off 7 - 7
--- --- ---
Total other charges 162 - 162
--- --- ---
Total restructuring costs
and other charges 213 - 213
--- --- ---
Timeshare strategy -
impairment charges
Operating impairments 614 - 614
Non-operating impairments 138 - 138
--- ---
Total timeshare strategy -
impairment charges 752 - 752
--- --- ---
Adjusted EBITDA ** $898 $76 $974
==== === ====
Range
-----
Estimated EBITDA
Full Year 2010
--------------
Net (Loss) /Income attributable to
Marriott $358 $397
Interest expense 195 190
Tax provision 202 223
Tax provision, noncontrolling
interest - -
Depreciation and amortization 185 185
Less: Depreciation reimbursed by
third-party owners (10) (10)
Interest expense from unconsolidated
joint ventures 25 25
Depreciation and amortization from
unconsolidated joint ventures 30 30
--- ---
EBITDA ** 985 1,040
Restructuring costs and other charges
Severance - -
Facilities exit costs - -
Development cancellations - -
--- ---
Total restructuring costs - -
--- ---
Impairment of investments and other,
net of prior year reserves - -
Reserves for loan losses - -
Contract cancellation allowances - -
Residual interests valuation - -
System development write-off - -
--- ---
Total other charges - -
--- ---
Total restructuring costs and other
charges - -
--- ---
Timeshare strategy -impairment
charges
Operating impairments - -
Non-operating impairments - -
--- ---
Total timeshare strategy -impairment
charges - -
--- ---
Adjusted EBITDA ** $985 $1,040
==== ======
** Denotes non-GAAP financial measures. Please see pages A-19 and
A-20 for additional information about our reasons for providing
these alternative financial measures and the limitations on their
use.
A-11
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure Reconciliation
Second Quarter 2009 General, Administrative, and Other Expenses
Excluding Restructuring Costs and Other Charges
($ in millions)
Second Quarter Percent Better/
Estimated 2009 (Worse)
Second Quarter 2010 --------------- Estimated
Second Quarter
------------------- 2010 vs.
Second Quarter
2009
---------------
General,
administrative
and other
expenses $150 $146
Less:
Restructuring
costs and
other charges - (10)
General,
administrative
and other
expenses
excluding
restructuring
costs and
other
charges** $150 $136 -10%
** Denotes non-GAAP financial measures. Please see pages A-19 and
A-20 for additional information about our reasons for providing
these alternative financial measures and the limitations on their
use.
A-12
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure
Timeshare Inventory
As Adjusted Had ASU Nos. 2009-16 and 2009-17 (Formerly Referred to as
FAS 166 & 167) Been Adopted on January 3, 2009
($ in millions)
Adjustments
-----------
ASU Nos. As Adjusted
Balance at As Reported 2009-16 For
ASU Nos.
End of 2010 Balance at And 2009-17 2009-16
First Year-End
Quarter 2009 Adjustments And 2009-17
-------- --------- ----------- Balance at
Year-End
2009** (1)
-------------
Finished goods (2) $797 $721 $100 821
Work-in-process 168 198 - 198
Land and
infrastructure 520 507 - 507
Total inventory $1,485 $1,426 $100 $1,526
====== ====== ==== ======
** Denotes non-GAAP financial measures. Please see pages A-19 and
A-20 for additional information about our reasons for providing
these alternative financial measures and the limitations on their
use.
(1)As Adjusted had ASU Nos. 2009-16 and 2009-17 (formerly referred to
as FAS 166 & 167) been adopted on January 3, 2009.
(2) Includes completed inventory as well as an estimate of inventory
we expect to acquire when we foreclose on defaulted notes. The
estimate of inventory we expect to acquire when we foreclose on
defaulted notes for As Adjusted 2009 and As Reported 2010 include
securitized and non-securitized notes, and As Reported 2009
includes non-securitized notes.
A-13
MARRIOTT INTERNATIONAL, INC.
TIMESHARE SEGMENT
AS ADJUSTED HAD ASU NOS. 2009-16 AND 2009-17 (FORMERLY REFERRED TO AS
FAS 166 & 167) BEEN ADOPTED ON JANUARY 3, 2009
FIRST QUARTER 2009
($ in millions)
Adjustments
-----------
Timeshare
Restructuring Strategy -
Costs & Other Impairment
As Reported Charges Charges
12 Weeks Ended -------------- ----------
March 27, 2009
--------------
Segment
Revenues
---------
Base
fees
revenue $10 $- $-
Sales
and
services
revenue
Development 121 4 -
Services 70 - -
Financing
revenue
Interest
income
-
non-
securitized
notes 13 - -
Interest
income
-
securitized
notes - - -
Other
financing
revenue - 13 -
--- --- ---
Total
financing
revenue 13 13 -
Other
revenue 5 - -
--- --- ---
Total
sales
and
services
revenue 209 17 -
Cost
reimbursements 58 - -
Segment
revenues $277 $17 $-
==== === ===
Segment
Results
--------
Base
fees
revenue $10 $- $-
Timeshare
sales
and
services,
net (11) 16 -
Timeshare
strategy
-
impairment
charges - - -
Restructuring
costs (1) 1 -
General,
administrative
and
other
expense (17) - -
Gains
and
other
income - - -
Joint
venture
equity
earnings (1) 1 -
Interest
expense - - -
Timeshare
strategy
-
impairment
charges
(non-
operating) - - -
Noncontrolling
interest 3 - -
Segment
results $(17) $18 $-
==== === ===
Contract
Sales
--------
Company:
Timeshare $138 $- $-
Fractional 10 - -
Residential (5) 4 -
--- --- ---
Total
company 143 4 -
Joint
ventures:
Timeshare - - -
Fractional 13 (3) -
Residential (27) 27 -
--- --- ---
Total
joint
ventures (14) 24 -
--- --- ---
Total
contract
sales,
including
joint
ventures $129 $28 $-
==== === ===
Gain /
(Loss)
on
Notes
Sold
-------
Gain /
(loss)
on
notes
sold $(1) $- $-
=== === ===
ASU Nos.
As Adjusted 2009-16 As Adjusted For
12 Weeks
Ended And 2009-17 ASU Nos. 2009-16
March 27,
2009** Adjustments And 2009-17
12 Weeks Ended
---------- ----------- March 27, 2009**
-----------------
Segment
Revenues
---------
Base fees
revenue $10 $- $10
Sales and
services
revenue
Development 125 2 127
Services 70 - 70
Financing
revenue
Interest
income -
non-
securitized
notes 13 - 13
Interest
income -
securitized
notes - 35 35
Other
financing
revenue 13 (8) 5
--- --- ---
Total
financing
revenue 26 27 53
Other revenue 5 (1) 4
--- --- ---
Total sales
and services
revenue 226 28 254
Cost
reimbursements 58 - 58
Segment
revenues $294 $28 $322
==== === ====
Segment
Results
--------
Base fees
revenue $10 $- $10
Timeshare
sales and
services,
net 5 20 25
Timeshare
strategy -
impairment
charges - - -
Restructuring
costs - - -
General,
administrative
and other
expense (17) - (17)
Gains and
other income - - -
Joint venture
equity
earnings - - -
Interest
expense - (16) (16)
Timeshare
strategy -
impairment
charges (non-
operating) - - -
Noncontrolling
interest 3 - 3
Segment
results $1 $4 $5
=== === ===
Contract
Sales
--------
Company:
Timeshare $138 $- $138
Fractional 10 - 10
Residential (1) - (1)
--- --- ---
Total company 147 - 147
Joint
ventures:
Timeshare - - -
Fractional 10 - 10
Residential - - -
--- --- ---
Total joint
ventures 10 - 10
--- --- ---
Total
contract
sales,
including
joint
ventures $157 $- $157
==== === ====
Gain /(Loss)
on Notes
Sold
------------
Gain /(loss)
on notes
sold $(1) $1 $-
=== === ===
**Denotes non-GAAP financial measures. Please see pages A-19 and
A-20 for additional information about our reasons for providing
these alternative financial measures and the limitations on their
use.
A-14
MARRIOTT INTERNATIONAL, INC.
TIMESHARE SEGMENT
AS ADJUSTED HAD ASU NOS. 2009-16 AND 2009-17 (FORMERLY REFERRED TO AS
FAS 166 & 167) BEEN ADOPTED ON JANUARY 3, 2009
SECOND QUARTER 2009
($ in millions)
Adjustments
-----------
Timeshare
Restructuring Strategy -
Costs & Other Impairment
As Reported Charges Charges
12 Weeks
Ended -------------- ----------
June 19, 2009
-------------
Segment Revenues
----------------
Base fees revenue $11 $- $-
Sales and services
revenue
Development 182 - -
Services 80 - -
Financing revenue
Interest income -
non-securitized
notes 10 - -
Interest income -
securitized notes - - -
Other financing
revenue 4 12 -
--- --- ---
Total financing
revenue 14 12 -
Other revenue 7 - -
--- --- ---
Total sales and
services revenue 283 12 -
Cost reimbursements 61 - -
Segment revenues $355 $12 $-
==== === ===
Segment Results
---------------
Base fees revenue $11 $- $-
Timeshare sales and
services, net 4 12 -
Timeshare strategy
-impairment
charges - - -
Restructuring costs (30) 30 -
General,
administrative and
other
expense (23) 7 -
Gains and other
income - - -
Joint venture
equity earnings (1) 1 -
Interest expense - - -
Timeshare strategy
-impairment
charges (non-
operating) - - -
Noncontrolling
interest 4 - -
Segment results $(35) $50 $-
==== === ===
Contract Sales
--------------
Company:
Timeshare $200 $- $-
Fractional 8 1 -
Residential 2 - -
--- --- ---
Total company 210 1 -
Joint ventures:
Timeshare - - -
Fractional (18) 19 -
Residential 17 (17) -
--- --- ---
Total joint
ventures (1) 2 -
--- --- ---
Total contract
sales, including
joint ventures $209 $3 $-
==== === ===
Gain /(Loss) on
Notes Sold
---------------
Gain /(loss) on
notes sold $- $- $-
=== === ===
ASU Nos.
As Adjusted 2009-16 As Adjusted For
12 Weeks
Ended And 2009-17 ASU Nos. 2009-16
June 19,
2009** Adjustments And 2009-17
12 Weeks Ended
--------- ----------- June 19, 2009**
---------------
Segment Revenues
----------------
Base fees revenue $11 $- $11
Sales and services
revenue
Development 182 6 188
Services 80 - 80
Financing revenue
Interest income -
non-securitized
notes 10 - 10
Interest income -
securitized notes - 38 38
Other financing
revenue 16 (8) 8
--- --- ---
Total financing
revenue 26 30 56
Other revenue 7 - 7
--- --- ---
Total sales and
services revenue 295 36 331
Cost reimbursements 61 - 61
Segment revenues $367 $36 $403
==== === ====
Segment Results
---------------
Base fees revenue $11 $- $11
Timeshare sales and
services, net 16 32 48
Timeshare strategy
-impairment
charges - - -
Restructuring costs - - -
General,
administrative and
other
expense (16) - (16)
Gains and other
income - - -
Joint venture
equity earnings - - -
Interest expense - (18) (18)
Timeshare strategy
-impairment
charges (non-
operating) - - -
Noncontrolling
interest 4 - 4
Segment results $15 $14 $29
=== === ===
Contract Sales
--------------
Company:
Timeshare $200 $- $200
Fractional 9 - 9
Residential 2 - 2
--- --- ---
Total company 211 - 211
Joint ventures:
Timeshare - - -
Fractional 1 - 1
Residential - - -
--- --- ---
Total joint
ventures 1 - 1
--- --- ---
Total contract
sales, including
joint ventures $212 $- $212
==== === ====
Gain /(Loss) on
Notes Sold
---------------
Gain /(loss) on
notes sold $- $- $-
=== === ===
**Denotes non-GAAP financial measures. Please see pages A-19 and
A-20 for additional information about our reasons for providing
these alternative financial measures and the limitations on their
use.
A-15
MARRIOTT INTERNATIONAL, INC.
TIMESHARE SEGMENT
AS ADJUSTED HAD ASU NOS. 2009-16 AND 2009-17 (FORMERLY REFERRED TO AS
FAS 166 & 167) BEEN ADOPTED ON JANUARY 3, 2009
THIRD QUARTER 2009
($ in millions)
Adjustments
-----------
Timeshare
Restructuring Strategy -
Costs & Other Impairment
As Reported Charges Charges
12 Weeks Ended -------------- ----------
September 11,
2009
--------------
Segment
Revenues
--------
Base
fees
revenue $11 $- $-
Sales
and
services
revenue
Development 138 - -
Services 82 - -
Financing
revenue
Interest
income
-
non-
securitized
notes 11 - -
Interest
income
-
securitized
notes - - -
Other
financing
revenue 16 (3) -
--- --- ---
Total
financing
revenue 27 (3) -
Other
revenue 7 - -
--- --- ---
Total
sales
and
services
revenue 254 (3) -
Cost
reimbursements 65 - -
Segment
revenues $330 $(3) $-
==== === ===
Segment
Results
-------
Base
fees
revenue $11 $- $-
Timeshare
sales
and
services,
net 16 (3) -
Timeshare
strategy
-
impairment
charges (614) - 614
Restructuring
costs (7) 7 -
General,
administrative
and
other
expense (17) - -
Gains
and
other
income 1 - -
Joint
venture
equity
earnings (4) 1 -
Interest
expense - - -
Timeshare
strategy
-
impairment
charges
(non-
operating) (71) - 71
Noncontrolling
interest 4 - -
Segment
results $(681) $5 $685
===== === ====
Contract
Sales
--------
Company:
Timeshare $164 $- $-
Fractional 7 - -
Residential 2 - -
--- --- ---
Total
company 173 - -
Joint
ventures:
Timeshare - - -
Fractional (4) 7 -
Residential (17) 17 -
--- --- ---
Total
joint
ventures (21) 24 -
--- --- ---
Total
contract
sales,
including
joint
ventures $152 $24 $-
==== === ===
Gain /
(Loss)
on
Notes
Sold
-------
Gain /
(loss)
on
notes
sold $- $- $-
=== === ===
ASU Nos.
As Adjusted 2009-16 As Adjusted For
12 Weeks Ended And 2009-17 ASU Nos. 2009-16
September 11,
2009** Adjustments And 2009-17
12 Weeks Ended
September 11,
-------------- ----------- 2009**
---------------
Segment
Revenues
---------
Base fees
revenue $11 $- $11
Sales and
services
revenue
Development 138 11 149
Services 82 - 82
Financing
revenue
Interest
income -
non-
securitized
notes 11 - 11
Interest
income -
securitized
notes - 36 36
Other
financing
revenue 13 (8) 5
--- --- ---
Total
financing
revenue 24 28 52
Other
revenue 7 - 7
--- --- ---
Total sales
and
services
revenue 251 39 290
Cost
reimbursements 65 - 65
Segment
revenues $327 $39 $366
==== === ====
Segment
Results
--------
Base fees
revenue $11 $- $11
Timeshare
sales and
services,
net 13 32 45
Timeshare
strategy -
impairment
charges - - -
Restructuring
costs - - -
General,
administrative
and other
expense (17) - (17)
Gains and
other
income 1 - 1
Joint
venture
equity
earnings (3) - (3)
Interest
expense - (17) (17)
Timeshare
strategy -
impairment
charges
(non-
operating) - - -
Noncontrolling
interest 4 - 4
Segment
results $9 $15 $24
=== === ===
Contract
Sales
--------
Company:
Timeshare $164 $- $164
Fractional 7 - 7
Residential 2 - 2
--- --- ---
Total
company 173 - 173
Joint
ventures:
Timeshare - - -
Fractional 3 - 3
Residential - - -
--- --- ---
Total joint
ventures 3 - 3
--- --- ---
Total
contract
sales,
including
joint
ventures $176 $- $176
==== === ====
Gain /
(Loss) on
Notes Sold
-----------
Gain /
(loss) on
notes sold $- $- $-
=== === ===
**Denotes non-GAAP financial measures. Please see pages A-19 and
A-20 for additional information about our reasons for providing
these alternative financial measures and the limitations on their
use.
A-16
MARRIOTT INTERNATIONAL, INC.
TIMESHARE SEGMENT
AS ADJUSTED HAD ASU NOS. 2009-16 AND 2009-17 (FORMERLY REFERRED TO AS
FAS 166 & 167) BEEN ADOPTED ON JANUARY 3, 2009
FOURTH QUARTER 2009
($ in millions)
Adjustments
-----------
Timeshare
Restructuring Strategy -
Costs & Other Impairment
As Reported Charges Charges
16 Weeks
Ended -------------- ----------
January 1,
2010
-----------
Segment
Revenues
---------
Base fees
revenue $15 $- $-
Sales and
services
revenue
Development 185 - -
Services 98 - -
Financing
revenue
Interest income
- non-
securitized
notes 12 - -
Interest income
-securitized
notes - - -
Other financing
revenue 64 (2) -
--- --- ---
Total financing
revenue 76 (2) -
Other revenue 18 - -
--- --- ---
Total sales and
services
revenue 377 (2) -
Cost
reimbursements 85 - -
Segment
revenues $477 $(2) $-
==== === ===
Segment Results
---------------
Base fees
revenue $15 $- $-
Timeshare sales
and services,
net 74 (2) -
Timeshare
strategy -
impairment
charges - - -
Restructuring
costs (7) 7 -
General,
administrative
and other
expense (23) - -
Gains and other
income 1 - -
Joint venture
equity
earnings (6) 3 -
Interest
expense - - -
Timeshare
strategy -
impairment
charges (non-
operating) - - -
Noncontrolling
interest - - -
Segment results $54 $8 $-
=== === ===
Contract Sales
--------------
Company:
Timeshare $183 $- $-
Fractional 3 3 -
Residential 9 - -
--- --- ---
Total company 195 3 -
Joint ventures:
Timeshare - - -
Fractional (12) 17 -
Residential (8) 8 -
--- --- ---
Total joint
ventures (20) 25 -
--- --- ---
Total contract
sales,
including
joint ventures $175 $28 $-
==== === ===
Gain /(Loss)
on Notes Sold
--------------
Gain /(loss)
on notes sold $38 $- $-
=== === ===
ASU Nos.
As Adjusted 2009-16 As Adjusted For
16 Weeks
Ended And 2009-17 ASU Nos. 2009-16
January 1,
2010** Adjustments And 2009-17
16 Weeks Ended
----------- ----------- January 1, 2010**
------------------
Segment
Revenues
---------
Base fees
revenue $15 $- $15
Sales and
services
revenue
Development 185 4 189
Services 98 - 98
Financing
revenue
Interest
income -
non-
securitized
notes 12 - 12
Interest
income -
securitized
notes - 49 49
Other
financing
revenue 62 (55) 7
--- --- ---
Total
financing
revenue 74 (6) 68
Other
revenue 18 - 18
--- --- ---
Total sales
and
services
revenue 375 (2) 373
Cost
reimbursements 85 - 85
Segment
revenues $475 $(2) $473
==== === ====
Segment
Results
--------
Base fees
revenue $15 $- $15
Timeshare
sales and
services,
net 72 (8) 64
Timeshare
strategy -
impairment
charges - - -
Restructuring
costs - - -
General,
administrative
and other
expense (23) - (23)
Gains and
other
income 1 - 1
Joint
venture
equity
earnings (3) - (3)
Interest
expense - (26) (26)
Timeshare
strategy -
impairment
charges
(non-
operating) - - -
Noncontrolling
interest - - -
Segment
results $62 $(34) $28
=== ==== ===
Contract
Sales
--------
Company:
Timeshare $183 $- $183
Fractional 6 - 6
Residential 9 - 9
--- --- ---
Total
company 198 - 198
Joint
ventures:
Timeshare - - -
Fractional 5 - 5
Residential - - -
--- --- ---
Total joint
ventures 5 - 5
--- --- ---
Total
contract
sales,
including
joint
ventures $203 $- $203
==== === ====
Gain /
(Loss) on
Notes Sold
-----------
Gain /
(loss) on
notes sold $38 $(38) $-
=== ==== ===
**Denotes non-GAAP financial measures. Please see pages A-19 and
A-20 for additional information about our reasons for providing
these alternative financial measures and the limitations on their
use.
A-17
MARRIOTT INTERNATIONAL, INC.
TIMESHARE SEGMENT
AS ADJUSTED HAD ASU NOS. 2009-16 AND 2009-17 (FORMERLY REFERRED TO AS
FAS 166 & 167) BEEN ADOPTED ON JANUARY 3, 2009
FULL YEAR 2009
($ in millions)
Adjustments
-----------
Timeshare
Restructuring Strategy -
Costs & Other Impairment
As Reported Charges Charges
52 Weeks
Ended -------------- ----------
January 1,
2010
-----------
Segment
Revenues
---------
Base
fees
revenue $47 $- $-
Sales
and
services
revenue
Development 626 4 -
Services 330 - -
Financing
revenue
Interest
income -
non-
securitized
notes 46 - -
Interest
income -
securitized
notes - - -
Other
financing
revenue 84 20 -
--- --- ---
Total
financing
revenue 130 20 -
Other
revenue 37 - -
--- --- ---
Total
sales
and
services
revenue 1,123 24 -
Cost
reimbursements 269 - -
Segment
revenues $1,439 $24 $-
====== === ===
Segment
Results
--------
Base
fees
revenue $47 $- $-
Timeshare
sales
and
services,
net 83 23 -
Timeshare
strategy
-
impairment
charges (614) - 614
Restructuring
costs (45) 45 -
General,
administrative
and
other
expense (80) 7 -
Gains
and
other
income 2 - -
Joint
venture
equity
earnings (12) 6 -
Interest
expense - - -
Timeshare
strategy
-
impairment
charges
(non-
operating) (71) - 71
Noncontrolling
interest 11 - -
Segment
results $(679) $81 $685
===== === ====
Contract
Sales
--------
Company:
Timeshare $685 $- $-
Fractional 28 4 -
Residential 8 4 -
--- --- ---
Total
company 721 8 -
Joint
ventures:
Timeshare - - -
Fractional (21) 40 -
Residential (35) 35 -
Total
joint
ventures (56) 75 -
--- --- ---
Total
contract
sales,
including
joint
ventures $665 $83 $-
==== === ===
Gain /
(Loss)
on
Notes
Sold
-------
Gain /
(loss)
on
notes
sold $37 $- $-
=== === ===
ASU Nos.
As Adjusted 2009-16 As Adjusted For
52 Weeks
Ended And 2009-17 ASU Nos. 2009-16
January 1,
2010** Adjustments And 2009-17
52 Weeks Ended
----------- ----------- January 1, 2010**
------------------
Segment
Revenues
---------
Base fees
revenue $47 $- $47
Sales and
services
revenue
Development 630 23 653
Services 330 - 330
Financing
revenue
Interest
income -
non-
securitized
notes 46 - 46
Interest
income -
securitized
notes - 158 158
Other
financing
revenue 104 (79) 25
--- --- ---
Total
financing
revenue 150 79 229
Other
revenue 37 (1) 36
--- --- ---
Total sales
and
services
revenue 1,147 101 1,248
Cost
reimbursements 269 - 269
Segment
revenues $1,463 $101 $1,564
====== ==== ======
Segment
Results
--------
Base fees
revenue $47 $- $47
Timeshare
sales and
services,
net 106 76 182
Timeshare
strategy -
impairment
charges - - -
Restructuring
costs - - -
General,
administrative
and other
expense (73) - (73)
Gains and
other
income 2 - 2
Joint
venture
equity
earnings (6) - (6)
Interest
expense - (77) (77)
Timeshare
strategy -
impairment
charges
(non-
operating) - - -
Noncontrolling
interest 11 - 11
Segment
results $87 $(1) $86
=== === ===
Contract
Sales
--------
Company:
Timeshare $685 $- $685
Fractional 32 - 32
Residential 12 - 12
--- --- ---
Total
company 729 - 729
Joint
ventures:
Timeshare - - -
Fractional 19 - 19
Residential - - -
--- ---
Total joint
ventures 19 - 19
--- --- ---
Total
contract
sales,
including
joint
ventures $748 $- $748
==== === ====
Gain /
(Loss) on
Notes Sold
-----------
Gain /
(loss) on
notes sold $37 $(37) $-
=== ==== ===
**Denotes non-GAAP financial measures. Please see pages A-19 and
A-20 for additional information about our reasons for providing
these alternative financial measures and the limitations on their
use.
A-18
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measures
In our press release and schedules, and on the 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 press release schedules reconcile the most directly comparable GAAP measure to each non-GAAP measure that we refer to (identified by a double asterisk on the preceding pages). 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.
Adjusted Measures That Exclude Certain Charges, Costs, and Other Expenses. Management evaluates non-GAAP measures that exclude the impact of Timeshare strategy - impairment charges incurred in the 2009 third quarter, restructuring costs and other charges incurred in the 2009 first quarter through the 2009 fourth quarter, and certain tax expenses incurred in the 2009 first quarter, because those non-GAAP measures allow for period-over-period comparisons of our on-going core operations before material charges. These non-GAAP measures also facilitate management's comparison of results from our on-going operations before material charges with results from other lodging companies.
Timeshare Strategy - Impairment Charges. In response to the difficult business conditions that the Timeshare segment's timeshare, luxury residential, and luxury fractional real estate development businesses continued to experience, we evaluated our entire Timeshare portfolio in the 2009 third quarter. In order to adjust the business strategy to reflect current market conditions at that time, on September 22, 2009, we approved plans for our Timeshare segment to take the following actions: (1) for our luxury residential projects, reduce prices, convert certain proposed projects to other uses, sell some undeveloped land, and not pursue further Marriott-funded residential development projects; (2) reduce prices for existing luxury fractional units; (3) continue short-term promotions for our U.S. timeshare business and defer the introduction of new projects and development phases; and (4) for our European timeshare and fractional resorts, continue promotional pricing and marketing incentives and not pursue further development. As a result of these decisions, we recorded third quarter 2009 pretax charges totaling $752 million in our Consolidated Statements of Income ($502 million after-tax), including $614 million of pretax charges impacting operating income under the "Timeshare strategy-impairment charges" caption, and $138 million of pretax charges impacting non-operating income under the "Timeshare strategy-impairment charges (non-operating)" caption.
Restructuring Costs and Other Charges. During the latter part of 2008 and particularly the fourth quarter, we experienced a significant decline in demand for hotel rooms both domestically and internationally due, in part, to the failures and near failures of several large financial service companies and the dramatic downturn in the economy. Our capital intensive Timeshare business was also hurt by the downturn in market conditions and particularly, the significant deterioration in the credit markets. These declines resulted in reduced management and franchise fees, cancellation of development projects, reduced timeshare contract sales, contract cancellation allowances, and charges and reserves associated with expected fundings, loans, Timeshare inventory, accounts receivable, contract cancellation allowances, valuation of Timeshare residual interests, hedge ineffectiveness, and asset impairments. We responded by implementing various cost saving measures, beginning in the fourth quarter of 2008 and which continued in 2009, and resulted in first quarter 2009 restructuring costs of $2 million, second quarter 2009 restructuring costs of $33 million, third quarter 2009 restructuring costs of $9 million, and 2009 fourth quarter restructuring costs of $7 million that were directly related to the downturn. We also incurred other first quarter 2009, second quarter 2009 and fourth quarter 2009 charges totaling $127 million, $24 million, and $12 million respectively, as well as $1 million in net other credits in the 2009 third quarter, that were directly related to the downturn, including asset impairment charges, accounts receivable and guarantee charges, reserves associated with loans, reversal of the liability related to expected fundings, Timeshare contract cancellation allowances, and charges related to the valuation of Timeshare residual interests.
Certain Tax Expenses. Certain tax expenses included $26 million in the 2009 first quarter of non-cash charges primarily related to the treatment of funds received from certain foreign subsidiaries, an issue we are contesting with the Internal Revenue Service ("IRS").
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. 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. The tax positions of companies can also 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.
Adjusted EBITDA. Management also evaluates adjusted EBITDA which excludes: (1) Timeshare strategy - impairment charges of $752 million incurred in the 2009 third quarter; (2) the 2009 fourth quarter restructuring costs and other charges totaling $19 million; (3) the 2009 third quarter restructuring costs and other charges totaling $8 million; (4) the 2009 second quarter restructuring costs and other charges totaling $57 million; and (5) the 2009 first quarter restructuring costs and other charges totaling $129 million. Management excludes the restructuring costs and other charges incurred in the 2009 first through fourth quarters and the Timeshare strategy-impairment charges recorded in the 2009 third quarter for the reasons noted above under "Measures That Exclude Certain Charges, Costs, and Other Expenses."
A-19
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measures
(cont.)
Adjusted Measures that Exclude the Impact of New Accounting Standards or Reflect Their Early Adoption. As of the first day of fiscal year 2010, we adopted Accounting Standards Update ("ASU") No. 2009-16 "Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets" (formerly known as FAS No. 166, "Accounting for Transfers of Financial Assets-an amendment of FASB Statement No. 140") and ASU No. 2009-17 "Consolidations (Topic 810); Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities" (formerly known as FAS No. 167, "Amendments to FASB Interpretation No. 46(R)," which required consolidating previously securitized pools of Timeshare notes and impacts the ongoing accounting for those notes. Management evaluates non-GAAP measures that exclude the impact of these standards in the current year or include the impact of these standards as if we had adopted them early in order to better perform year-over-year comparisons on a comparable basis.
A-20
SOURCE Marriott International, Inc.
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