Marriott International Reports Third Quarter 2010 Results
BETHESDA, Md., Oct 06, 2010 /PRNewswire via COMTEX News Network/ -- THIRD QUARTER HIGHLIGHTS
- Third quarter diluted earnings per share (EPS) totaled $0.22, a 47 percent increase over prior year adjusted results,
- Total fee revenue increased 9 percent to $253 million as a result of strong revenue per available room (REVPAR) and unit growth. Incentive fees climbed 24 percent,
- Worldwide systemwide comparable REVPAR rose 8.2 percent using constant dollars. Average daily rate rose 1.8 percent using constant dollars,
- The company's worldwide pipeline of hotels under construction, awaiting conversion or approved for development totaled nearly 95,000 rooms, including over 33,000 rooms outside North America,
- Over 5,000 rooms opened during the third quarter, including nearly 2,000 rooms in international markets.
Marriott International, Inc. (NYSE: MAR) today reported third quarter 2010 results, exceeding prior year results and at the high end of the company's expectations.
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THIRD QUARTER 2010 RESULTS
Third quarter 2010 net income totaled $83 million, a 57 percent increase compared to third quarter 2009 adjusted net income. Diluted EPS totaled $0.22, a 47 percent increase from adjusted diluted EPS in the year-ago quarter. On July 14, 2010, the company forecasted third quarter diluted EPS of $0.18 to $0.22.
Adjusted results for the 2009 third quarter exclude $8 million pretax ($4 million after-tax and $0.01 per diluted share) of restructuring costs and other charges, as well as $752 million pretax ($502 million after-tax and $1.41 per diluted share) of impairment charges related to the Timeshare segment. Adjusted results for 2009 third quarter also exclude the $13 million ($0.03 per diluted share) impact of non-cash charges in the provision for income taxes.
Reported net income totaled $83 million in the third quarter of 2010 compared to the reported loss of $466 million in the year-ago quarter. Reported diluted EPS was $0.22 in the third quarter of 2010 compared to reported diluted losses per share of $1.31 in the third quarter of 2009.
J.W. Marriott, Jr., chairman and chief executive officer of Marriott International, said, "We are having an outstanding year. Corporate and leisure demand continues to strengthen, and we are leading the U.S. industry in pushing retail price increases. For the Marriott Hotels and Resorts brand in North America, nearly 90 percent of hotels raised corporate retail rates in the quarter and, overall, such retail rates rose 9 percent.
"In the third quarter, revenue per available room at North American systemwide hotels rose 7.2 percent year-over-year and average daily rates rose nearly 2 percent. International systemwide hotels showed tremendous strength, with REVPAR up 12 percent in the quarter on a constant dollar basis. Our Asia Pacific region is leading the way with REVPAR up over 20 percent. China was especially strong with our hotels benefiting from favorable demand, strong brands and outstanding locations.
"While U.S. supply growth continues to moderate, we are adding hotels to our portfolio. During the third quarter, we opened over 5,000 new rooms, and we have nearly 95,000 rooms in our worldwide development pipeline at quarter-end, including the stunning 3,000 room Cosmopolitan Hotel in Las Vegas - our first hotel on the Strip - which will open in December as part of The Autograph Collection. Our pipeline also includes almost 7,000 rooms to be converted to our brands.
"With substantial unit growth, improving REVPAR and continued focus on the bottom line, our strong cash flow has enabled us to reduce our debt ahead of schedule. Our adjusted net debt has declined by almost $1.5 billion since the end of 2008. We are pleased that Standard & Poor's upgraded our bond rating to BBB last week.
"We expect 2011 to be even better than 2010 as demand and pricing continue to strengthen. We are currently forecasting 2011 systemwide worldwide REVPAR to increase 6 to 8 percent. We also expect to open 25,000 to 30,000 rooms worldwide in 2011."
For the 2010 third quarter, REVPAR for worldwide comparable systemwide properties increased 8.2 percent (a 7.5 percent increase using actual dollars).
International comparable systemwide REVPAR rose 12.0 percent (an 8.5 percent increase using actual dollars), including a 1.6 percent increase in average daily rate (a 1.6 percent decrease using actual dollars) in the third quarter of 2010.
In North America, comparable systemwide REVPAR increased 7.2 percent in the third quarter of 2010, including a 1.7 percent increase in average daily rate. REVPAR for comparable systemwide North American full-service and luxury hotels (including Marriott Hotels & Resorts, The Ritz-Carlton and Renaissance Hotels) increased 7.3 percent with a 2.6 percent increase in average daily rate. The company estimates that excluding the impact of the calendar shift of Rosh Hashanah from the 2009 fiscal fourth quarter to the 2010 fiscal third quarter, REVPAR for comparable systemwide North American full-service and luxury hotels would have increased nearly 8 percent.
Marriott added 32 new properties (5,056 rooms) to its worldwide lodging portfolio in the 2010 third quarter, including the Renaissance Tianjin Lakeview, the Ritz-Carlton Shanghai Pudong and the 457-room Courtyard Shanghai Puxi. Three properties (667 rooms) exited the system during the quarter. At quarter-end, the company's lodging group encompassed 3,518 properties and timeshare resorts for a total of over 611,000 rooms.
The company's worldwide pipeline of hotels under construction, awaiting conversion or approved for development totaled almost 575 properties with nearly 95,000 rooms at quarter-end.
MARRIOTT REVENUES totaled over $2.6 billion in the 2010 third quarter compared to approximately $2.5 billion for the third quarter of 2009. Total fee revenue rose 9 percent to $253 million reflecting higher REVPAR and fees from new hotels. Third quarter incentive management fees alone increased 24 percent to $21 million. In the third quarter, 23 percent of company-managed hotels earned incentive management fees compared to 20 percent in the year-ago quarter. Incentive management fees largely came from hotels outside of North America in both the 2010 and 2009 quarters.
Worldwide comparable company-operated house profit margins increased 90 basis points in the third quarter reflecting higher occupancy, rate increases and strong productivity. House profit margins for comparable company-operated properties outside North America increased 170 basis points and North American comparable company-operated house profit margins increased 30 basis points from the year-ago quarter. Excluding the impact of cancellation and attrition fees in the 2009 quarter, North American comparable company-operated house profit margins increased 60 basis points year-over-year.
Owned, leased, corporate housing and other revenue, net of direct expenses, declined $5 million in the 2010 third quarter, to $7 million, largely due to the impact of a $6 million cancellation fee recorded in the 2009 third quarter.
The company launched Marriott Vacation Club Destinations, a new North American timeshare points program, in June and focused its efforts on educating existing customers about the benefits of the new product. The program allows customers to purchase timeshare in smaller increments than the traditional one-week product and allows greater flexibility of use. Feedback from owners has been favorable. In the third quarter alone, 22,000 existing owners joined the points program, exceeding the company's expectations, and many of those owners purchased additional product. In fact, contract sales to existing owners increased 27 percent in the third quarter. With fewer sales to new customers year-over-year, third quarter adjusted Timeshare segment contract sales decreased 6 percent to $165 million (excluding a $1 million allowance for fractional contract cancellations recorded in the quarter). In the prior year's quarter, Timeshare segment adjusted contract sales totaled $176 million (excluding a $24 million allowance for fractional and residential contract cancellations).
In the third quarter, Timeshare sales and services revenue totaled $275 million and, net of expenses, totaled $56 million for the quarter. Adjusting for the Timeshare impairment and restructuring costs and other charges, as well as the impact of consolidating securitized loans had that occurred at the beginning of 2009 rather than 2010, third quarter 2009 timeshare sales and services revenue would have totaled $290 million and, net of direct expenses, would have totaled $45 million. These adjustments for the 2009 quarter are shown on page A-11.
Third quarter 2010 Timeshare sales and services revenue, net of expense, benefited from lower marketing and sales costs, price increases year-over-year, and a $15 million favorable adjustment to the Marriott Rewards liability resulting from the lower than projected cost of Marriott Rewards redemptions. Results were reduced by $6 million of incremental program costs and $11 million of deferred profit associated with lower reportability of contract sales, both related to the new points-based program.
Timeshare segment results include Timeshare sales and services revenue, net of direct expenses, as well as base management fees, equity in earnings (losses), gains and other income, noncontrolling interest, interest expense and general, administrative and other expenses associated with the timeshare business. Timeshare segment results for the 2010 third quarter totaled $37 million as shown on page A-9. In the prior year quarter, adjusted Timeshare segment results would have totaled $24 million, adjusting for the Timeshare impairment and restructuring costs and other charges, as well as the impact of consolidating securitized loans had that occurred at the beginning of 2009 rather than 2010, as shown on page A-11. Timeshare segment results for the 2010 third quarter included $12 million of interest expense related to the consolidation of securitized Timeshare notes. Adjusted Timeshare segment results for the year-ago quarter included $17 million of interest expense related to the consolidation of securitized Timeshare notes.
GENERAL, ADMINISTRATIVE and OTHER expenses for the 2010 third quarter increased 4 percent to $149 million, compared to adjusted expenses of $143 million in the year-ago quarter, and included higher incentive compensation and legal costs, partially offset by lower deferred compensation expenses and the favorable reversal of an accrual related to a tax settlement on a European asset.
GAINS (LOSSES) AND OTHER INCOME totaled $3 million, primarily reflecting gains on the sale of real estate. The prior year's third quarter losses totaled $1 million and included a $5 million impairment charge on an investment partially offset by $3 million of gains on the sale of real estate and $1 million of income from cost method investments.
INTEREST EXPENSE increased to $41 million in the third quarter primarily due to $12 million of interest expense related to the consolidation of debt associated with securitized Timeshare notes, lower capitalized interest and higher interest expense associated with the company's deferred compensation plan, partially offset by the impact of lower debt balances and lower interest rates. Adjusting for the impact of consolidating securitized loans had that occurred at the beginning of 2009 rather than 2010, third quarter 2009 interest expense would have been $44 million.
EQUITY IN (LOSSES) totaled a $5 million loss in the quarter compared to an $11 million adjusted loss in the year-ago quarter. The $6 million improvement in results primarily reflected lower losses in two joint ventures, as well as the favorable impact of the impairment of one investment in the year ago quarter.
Earnings before Interest Expense, Taxes, Depreciation and Amortization (EBITDA)
EBITDA totaled $220 million in the 2010 third quarter. In the 2009 third quarter, adjusted EBITDA totaled $163 million. If the consolidation of securitized Timeshare notes had occurred at the beginning of 2009, adjusted EBITDA in the 2009 third quarter would have totaled $195 million.
BALANCE SHEET
At the end of the third quarter 2010, total debt was $2,726 million and cash balances totaled $223 million, compared to $2,298 million in debt and $115 million of cash at year-end 2009. Adjusting for the debt associated with securitized Timeshare mortgage notes now required to be consolidated under new accounting rules, adjusted total debt, net of cash, totaled $1,591 million, a decline of nearly $600 million since year-end 2009.
At the end of the 2010 third quarter, Marriott did not have any borrowings outstanding under its $2.4 billion revolving bank credit facility.
COMMON STOCK
Weighted average fully diluted shares outstanding used to calculate diluted EPS totaled 378.1 million in the 2010 third quarter compared to weighted average fully diluted shares outstanding of 367.5 million used to calculate adjusted diluted EPS in the year-ago quarter.
The remaining share repurchase authorization, as of September 10, 2010, totaled 21.3 million shares.
FOURTH QUARTER 2010 OUTLOOK
For the fourth quarter, the company assumes comparable systemwide REVPAR on a constant dollar basis will increase 6 to 8 percent in North America, 7 to 9 percent outside North America and 6 to 8 percent worldwide.
The company assumes fourth quarter 2010 Timeshare contract sales will total $190 million to $200 million and Timeshare sales and services revenue, net of direct expenses, will total approximately $45 million to $50 million. With these assumptions, Timeshare segment results for the fourth quarter, including interest expense associated with securitized notes, are expected to total $40 million to $45 million, including an approximately $20 million gain on the sale of real estate.
The company expects to open about 30,000 rooms in 2010.
The company estimates that, on a full-year basis, one point of worldwide systemwide REVPAR impacts total fees by approximately $15 million pretax and owned, leased, corporate housing and other revenue, net of direct expense, by approximately $5 million pretax.
Fourth Quarter Full Year
2010 2010
---- ----
Total fee revenue $370 million to $380 $1,166 million to $1,176
million million
Owned, leased,
corporate housing
and other
revenue, net of
direct expenses Approx $40 million Approx $90 million
Timeshare sales
and services
revenue, net of
direct expenses $45 million to $50 $201 million to $206
million million
General,
administrative
and other
expenses $220 million to $225 $649 million to $654
million million
Operating income $230 million to $250 $803 million to $823
million million
Gains and other
income Approx $25 million Approx $32 million
Net interest
expense(1) Approx $50 million Approx $169 million
Equity in (losses) Approx ($10) million Approx ($30) million
Earnings per share $0.33 to $0.36 $1.09 to $1.12
Tax rate 35.5 percent
(1)Net of interest income
The company expects investment spending in 2010 will total approximately $500 million, including $50 million for maintenance capital spending and $200 million of other capital expenditures (including property acquisitions). Investment spending will also include new mezzanine financing and mortgage loans, contract acquisition costs, and equity and other investments.
Based upon the assumptions above, full year 2010 EBITDA is expected to total $1,050 million to $1,065 million, an 8 to 9 percent increase over the prior year's adjusted EBITDA including the impact of consolidating securitized loans had that occurred at the beginning of 2009 rather than 2010. Adjusted EBITDA for full year 2009 totaled $974 million and is shown on page A-15.
2011 OUTLOOK
For the full year 2011, the company expects the business climate, particularly the pricing environment, to continue to improve. The company assumes full year 2011 systemwide REVPAR on a constant dollar basis will increase 6 to 8 percent in North America, outside North America and on a worldwide basis.
The company expects to open 25,000 to 30,000 rooms in 2011 as most hotels expected to open are already under construction or undergoing conversion from other brands. Given these assumptions, full year 2011 fee revenue could total $1,290 million to $1,330 million and owned, leased, corporate housing and other revenue, net of direct expense, could increase 5 to 15 percent year-over-year.
The company expects 2011 Timeshare contract sales to be in line with 2010 levels.
The company expects its 2011 general and administrative costs to increase 3 to 5 percent reflecting increased spending for brand initiatives and higher compensation.
Marriott International, Inc. (NYSE: MAR) will conduct its quarterly earnings review for the investment community and news media on Thursday, October 7, 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 October 7, 2011.
The telephone dial-in number for the conference call is 706-679-3455 and the conference ID is 93873764. A telephone replay of the conference call will be available from 1 p.m. ET, Thursday, October 7, 2010 until 8 p.m. ET, Thursday, October 14, 2010. To access the replay, call 706-645-9291. The reservation number for the recording is 93873764.
Definitions
All references to net income or net loss 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 expectations about 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, corporate housing and our Timeshare segment products; competitive conditions in the lodging industry; relationships with clients and property owners; the availability of capital to finance hotel growth and refurbishment; and other risk factors that we identify in our most recent quarterly report on Form 10-Q; any of which could cause actual results to differ materially from the expectations we express or imply here. These statements are made as of October 6, 2010, 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 3,500 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 3, 2010
TABLE OF CONTENTS
Consolidated Statements of Income A-1
Total Lodging Products A-4
Key Lodging Statistics A-5
Timeshare Segment A-9
Third Quarter 2009 Timeshare Segment As Adjusted Had ASU Nos. 2009-16
and 2009-17 Been Adopted on January 3, 2009 A-11
Timeshare Inventory As Adjusted Had ASU Nos. 2009-16 and 2009-17 Been
Adopted on January 3, 2009 A-12
EBITDA and Adjusted EBITDA A-13
Third Quarter 2009 EBITDA As Adjusted Had ASU Nos. 2009-16 and
2009-17 Been Adopted on January 3, 2009 A-14
2009 EBITDA As Adjusted Had ASU Nos. 2009-16 and 2009-17 Been Adopted
on January 3, 2009 and Forecasted 2010 A-15
Adjusted Total Debt Net of Cash A-16
Third Quarter 2009 Interest Expense As Adjusted Had ASU Nos. 2009-16
and 2009-17 Been Adopted on January 3, 2009 A-17
Non-GAAP Financial Measures A-18
MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
As As
Reported Reported
12 Weeks 12 Weeks
Ended Ended
September September
10, 2010 11, 2009
--------- ---------
REVENUES
Base management fees $123 $116
Franchise fees 109 100
Incentive management fees 21 17
Owned, leased, corporate housing and other
revenue (1) 220 226
Timeshare sales and services (2) 275 254
Cost reimbursements (3) 1,900 1,758
----- -----
Total Revenues 2,648 2,471
OPERATING COSTS AND EXPENSES
Owned, leased and corporate housing -direct
(4) 213 214
Timeshare - direct 219 238
Timeshare strategy - impairment charges - 614
Reimbursed costs 1,900 1,758
Restructuring costs - 9
General, administrative and other (5) 149 144
--- ---
Total Expenses 2,481 2,977
----- -----
OPERATING INCOME (LOSS) 167 (506)
Gains and other income (6) 3 (1)
Interest expense (41) (27)
Interest income 4 5
Equity in losses (7) (5) (12)
Timeshare strategy - impairment charges (non-
operating) - (138)
--- ----
INCOME (LOSS) BEFORE INCOME TAXES 128 (679)
(Provision) benefit for income taxes (45) 210
--- ---
NET INCOME (LOSS) 83 (469)
Add: Net losses attributable to noncontrolling
interests, net of tax - 3
--- ---
NET INCOME (LOSS) ATTRIBUTABLE TO MARRIOTT $83 $(466)
=== =====
EARNINGS (LOSSES) PER SHARE - Basic (8)
Earnings (losses) per share attributable to
Marriott shareholders 9 $0.23 $(1.31)
===== ======
EARNINGS (LOSSES) PER SHARE - Diluted (8,10)
Earnings (losses) per share attributable to
Marriott shareholders 9 $0.22 $(1.31)
===== ======
Basic Shares (8) 363.1 356.7
Diluted Shares (8,10) 378.1 356.7
Adjustments
-----------
Timeshare
Restructuring Strategy
Costs & - Certain
Other Impairment Tax
Charges Charges Items
-------------- ---------- --------
REVENUES
Base management fees $- $- $-
Franchise fees - - -
Incentive management fees - - -
Owned, leased, corporate housing
and other revenue (1) - - -
Timeshare sales and services (2) (3) - -
Cost reimbursements (3) - - -
--- --- ---
Total Revenues (3) - -
OPERATING COSTS AND EXPENSES
Owned, leased and corporate
housing -direct (4) - - -
Timeshare - direct - - -
Timeshare strategy -impairment
charges - (614) -
Reimbursed costs - - -
Restructuring costs (9) - -
General, administrative and
other (5) (1) - -
--- --- ---
Total Expenses (10) (614) -
--- ---- ---
OPERATING INCOME (LOSS) 7 614 -
Gains and other income (6) - - -
Interest expense - - -
Interest income - - -
Equity in losses (7) 1 - -
Timeshare strategy - impairment
charges (non-operating) - 138 -
--- --- ---
INCOME (LOSS) BEFORE INCOME
TAXES 8 752 -
(Provision) benefit for income
taxes (4) (250) 13
--- ---- ---
NET INCOME (LOSS) 4 502 13
Add: Net losses attributable to
noncontrolling interests, net
of tax - - -
--- --- ---
NET INCOME (LOSS) ATTRIBUTABLE
TO MARRIOTT $4 $502 $13
=== ==== ===
EARNINGS (LOSSES) PER SHARE -
Basic (8)
Earnings (losses) per share
attributable to Marriott
shareholders 9 $0.01 $1.41 $0.03
===== ===== =====
EARNINGS (LOSSES) PER SHARE -
Diluted (8,10)
Earnings (losses) per share
attributable to Marriott
shareholders 9 $0.01 $1.41 $0.03
===== ===== =====
Basic Shares (8) 356.7 356.7 356.7
Diluted Shares (8,10) 356.7 356.7 356.7
As
Adjusted Percent
12 Weeks Better/
Ended (Worse)
September 2010 vs.
11, Adjusted
2009** 2009
--------- --------
REVENUES
Base management fees $116 6
Franchise fees 100 9
Incentive management fees 17 24
Owned, leased, corporate housing and other
revenue (1) 226 (3)
Timeshare sales and services (2) 251 10
Cost reimbursements (3) 1,758 8
-----
Total Revenues 2,468 7
OPERATING COSTS AND EXPENSES
Owned, leased and corporate housing -direct
(4) 214 -
Timeshare - direct 238 8
Timeshare strategy - impairment charges - -
Reimbursed costs 1,758 (8)
Restructuring costs - -
General, administrative and other (5) 143 (4)
---
Total Expenses 2,353 (5)
-----
OPERATING INCOME (LOSS) 115 45
Gains and other income (6) (1) 400
Interest expense (27) (52)
Interest income 5 (20)
Equity in losses (7) (11) 55
Timeshare strategy - impairment charges (non-
operating) - -
---
INCOME (LOSS) BEFORE INCOME TAXES 81 58
(Provision) benefit for income taxes (31) (45)
---
NET INCOME (LOSS) 50 66
Add: Net losses attributable to noncontrolling
interests, net of tax 3 (100)
---
NET INCOME (LOSS) ATTRIBUTABLE TO MARRIOTT $53 57
===
EARNINGS (LOSSES) PER SHARE - Basic (8)
Earnings (losses) per share attributable to
Marriott shareholders 9 $0.15 53
=====
EARNINGS (LOSSES) PER SHARE - Diluted (8,10)
Earnings (losses) per share attributable to
Marriott shareholders 9 $0.15 47
=====
Basic Shares (8) 356.7
Diluted Shares (8,10) 367.5
** Denotes non-GAAP financial measures. Please see pages A-18 and
A-19 for additional information about our reasons for providing
these alternative financial measures and limitations on their use.
See page A-3 for footnote references.
A-1
MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
As As
Reported Reported
36 Weeks 36 Weeks
Ended Ended
September September
10, 2010 11, 2009
--------- ---------
REVENUES
Base management fees $384 $367
Franchise fees 305 281
Incentive management fees 107 95
Owned, leased, corporate housing and other
revenue (1) 704 684
Timeshare sales and services (including net note
sale losses of $1 for 849 746
thirty-six weeks ended September 11, 2009) (2)
Cost reimbursements (3) 5,700 5,355
Total Revenues 8,049 7,528
OPERATING COSTS AND EXPENSES
Owned, leased and corporate housing - direct (4) 654 638
Timeshare - direct 693 737
Timeshare strategy - impairment charges - 614
Reimbursed costs 5,700 5,355
Restructuring costs - 44
General, administrative and other (5) 429 507
Total Expenses 7,476 7,895
-----
OPERATING INCOME (LOSS) 573 (367)
Gains and other income (including gain on debt
extinguishment of $21 7 27
for the thirty-six weeks ended September 11,
2009) (6)
Interest expense (130) (84)
Interest income 11 20
Equity in losses (7) (20) (50)
Timeshare strategy - impairment charges (non-
operating) - (138)
--- ----
INCOME (LOSS) BEFORE INCOME TAXES 441 (592)
(Provision) benefit for income taxes (156) 133
---- ---
NET INCOME (LOSS) 285 (459)
Add: Net losses attributable to noncontrolling
interests, net of tax - 7
--- ---
NET INCOME (LOSS) ATTRIBUTABLE TO MARRIOTT $285 $(452)
==== =====
EARNINGS (LOSSES) PER SHARE - Basic (8)
Earnings (losses) per share attributable to
Marriott shareholders (9) $0.79 $(1.27)
===== ======
EARNINGS (LOSSES) PER SHARE - Diluted (8,10)
Earnings (losses) per share attributable to
Marriott shareholders (9) $0.76 $(1.27)
===== ======
Basic Shares (8) 361.5 355.7
Diluted Shares (8,10) 376.4 355.7
Adjustments
-----------
Timeshare
Restructuring Strategy
Costs & - Certain
Other Impairment Tax
Charges Charges Items
-------------- ---------- --------
REVENUES
Base management fees $- $- $-
Franchise fees - - -
Incentive management fees - - -
Owned, leased, corporate
housing and other revenue (1) - - -
Timeshare sales and services
(including net note sale
losses of $1 for 26 - -
thirty-six weeks ended
September 11, 2009) (2)
Cost reimbursements (3) - - -
Total Revenues 26 - -
OPERATING COSTS AND EXPENSES
Owned, leased and corporate
housing -direct (4) - - -
Timeshare - direct 1 - -
Timeshare strategy -impairment
charges - (614) -
Reimbursed costs - - -
Restructuring costs (44) - -
General, administrative and
other (5) (92) - -
Total Expenses (135) (614) -
---- ---
OPERATING INCOME (LOSS) 161 614 -
Gains and other income
(including gain on debt
extinguishment of $21 - - -
for the thirty-six weeks ended
September 11, 2009) (6)
Interest expense - - -
Interest income - - -
Equity in losses (7) 33 - -
Timeshare strategy -
impairment charges (non-
operating) - 138 -
--- --- ---
INCOME (LOSS) BEFORE INCOME
TAXES 194 752 -
(Provision) benefit for income
taxes (76) (250) 56
--- ---- ---
NET INCOME (LOSS) 118 502 56
Add: Net losses attributable to
noncontrolling interests, net
of tax - - -
--- --- ---
NET INCOME (LOSS) ATTRIBUTABLE
TO MARRIOTT $118 $502 $56
==== ==== ===
EARNINGS (LOSSES) PER SHARE -
Basic (8)
Earnings (losses) per share
attributable to Marriott
shareholders (9) $0.33 $1.41 $0.16
===== ===== =====
EARNINGS (LOSSES) PER SHARE -
Diluted (8,10)
Earnings (losses) per share
attributable to Marriott
shareholders (9) $0.33 $1.41 $0.16
===== ===== =====
Basic Shares (8) 355.7 355.7 355.7
Diluted Shares (8,10) 355.7 355.7 355.7
As Percent
Adjusted Better/
36 Weeks (Worse)
Ended 2010
September vs.
11, Adjusted
2009** 2009
--------- --------
REVENUES
Base management fees $367 5
Franchise fees 281 9
Incentive management fees 95 13
Owned, leased, corporate housing and other
revenue (1) 684 3
Timeshare sales and services (including net note
sale losses of $1 for 772 10
thirty-six weeks ended September 11, 2009) (2)
Cost reimbursements (3) 5,355 6
Total Revenues 7,554 7
OPERATING COSTS AND EXPENSES
Owned, leased and corporate housing - direct (4) 638 (3)
Timeshare - direct 738 6
Timeshare strategy - impairment charges - -
Reimbursed costs 5,355 (6)
Restructuring costs - -
General, administrative and other (5) 415 (3)
Total Expenses 7,146 (5)
-----
OPERATING INCOME (LOSS) 408 40
Gains and other income (including gain on debt
extinguishment of $21 27 (74)
for the thirty-six weeks ended September 11,
2009) (6)
Interest expense (84) (55)
Interest income 20 (45)
Equity in losses (7) (17) (18)
Timeshare strategy - impairment charges (non-
operating) - -
---
INCOME (LOSS) BEFORE INCOME TAXES 354 25
(Provision) benefit for income taxes (137) (14)
----
NET INCOME (LOSS) 217 31
Add: Net losses attributable to noncontrolling
interests, net of tax 7 (100)
---
NET INCOME (LOSS) ATTRIBUTABLE TO MARRIOTT $224 27
====
EARNINGS (LOSSES) PER SHARE - Basic (8)
Earnings (losses) per share attributable to
Marriott shareholders (9) $0.63 25
=====
EARNINGS (LOSSES) PER SHARE - Diluted (8,10)
Earnings (losses) per share attributable to
Marriott shareholders (9) $0.61 25
=====
Basic Shares (8) 355.7
Diluted Shares (8,10) 365.4
** Denotes non-GAAP financial measures. Please see pages A-18 and
A-19 for additional information about our reasons for providing
these alternative financial measures and limitations on their use.
See page A-3 for footnote references.
A-2
MARRIOTT INTERNATIONAL, INC.
FOOTNOTES TO CONSOLIDATED STATEMENTS OF INCOME
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, branding 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 includes our equity in losses 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 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 for the periods in
which we had a loss are the same because inclusion of additional
equivalents would be anti-dilutive.
A-3
MARRIOTT INTERNATIONAL, INC.
TOTAL LODGING PRODUCTS (1)
Number of Properties
--------------------
September 10, September 11, vs. September
Brand 2010 2009 11, 2009
----- -------------- -------------- --------------
Domestic Full-Service
---------------------
Marriott Hotels &
Resorts 355 350 5
Renaissance Hotels 79 78 1
Autograph Collection 11 - 11
Domestic Limited-
Service
-----------------
Courtyard 785 761 24
Fairfield Inn &
Suites 647 609 38
SpringHill Suites 271 241 30
Residence Inn 592 583 9
TownePlace Suites 192 179 13
International
-------------
Marriott Hotels &
Resorts 195 188 7
Renaissance Hotels 67 65 2
Courtyard 97 88 9
Fairfield Inn &
Suites 10 9 1
SpringHill Suites 1 1 -
Residence Inn 18 18 -
Marriott Executive
Apartments 23 22 1
Luxury
------
The Ritz-Carlton -
Domestic 39 37 2
The Ritz-Carlton -
International 35 33 2
Bulgari Hotels &
Resorts 2 2 -
The Ritz-Carlton
Residential 26 25 1
The Ritz-Carlton
Serviced Apartments 3 3 -
Timeshare (2)
-------------
Marriott Vacation
Club (3) 53 52 1
The Ritz-Carlton
Destination Club 9 10 (1)
The Ritz-Carlton
Residences 4 4 -
Grand Residences by
Marriott -
Fractional 2 2 -
Grand Residences by
Marriott -
Residential 2 2 -
Sub Total Timeshare 70 70 -
--- --- ---
Total 3,518 3,362 156
===== ===== ===
Number of Rooms/Suites
----------------------
September 10, September 11, vs. September
Brand 2010 2009 11, 2009
----- -------------- -------------- --------------
Domestic Full-
Service
--------------
Marriott Hotels &
Resorts 142,277 139,280 2,997
Renaissance Hotels 28,790 28,508 282
Autograph Collection 1,646 - 1,646
Domestic Limited-
Service
-----------------
Courtyard 110,325 106,835 3,490
Fairfield Inn &
Suites 58,398 54,537 3,861
SpringHill Suites 31,772 27,818 3,954
Residence Inn 71,280 69,865 1,415
TownePlace Suites 19,320 17,917 1,403
International
-------------
Marriott Hotels &
Resorts 59,936 57,010 2,926
Renaissance Hotels 22,622 22,291 331
Courtyard 19,307 17,254 2,053
Fairfield Inn &
Suites 1,235 1,109 126
SpringHill Suites 124 124 -
Residence Inn 2,559 2,604 (45)
Marriott Executive
Apartments 3,775 3,580 195
Luxury
------
The Ritz-Carlton -
Domestic 11,587 11,549 38
The Ritz-Carlton -
International 10,457 10,117 340
Bulgari Hotels &
Resorts 117 117 -
The Ritz-Carlton
Residential 2,715 2,638 77
The Ritz-Carlton
Serviced Apartments 458 474 (16)
Timeshare (2)
-------------
Marriott Vacation
Club (3) 11,866 11,854 12
The Ritz-Carlton
Destination Club 446 461 (15)
The Ritz-Carlton
Residences 238 234 4
Grand Residences by
Marriott -
Fractional 248 248 -
Grand Residences by
Marriott -
Residential 68 91 (23)
Sub Total Timeshare 12,866 12,888 (22)
------ ------ ---
Total 611,566 586,515 25,051
======= ======= ======
Number of Timeshare Interval, Fractional and Residential Resorts
----------------------------------------------------------------
Total Properties in
Properties Active Sales
(2) (4)
----------- -------------
100% Company-Developed
----------------------
Marriott Vacation Club (3) 53 27
The Ritz-Carlton Destination
Club and Residences 11 9
Grand Residences by Marriott and
Residences 4 3
Joint Ventures
--------------
The Ritz-Carlton Destination
Club and Residences 2 2
Total 70 41
=== ===
1 Total Lodging Products excludes the 1,993 and 2,153 corporate
housing rental units as of September 10, 2010 and September 11,
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.
A-4
MARRIOTT INTERNATIONAL, INC.
KEY LODGING STATISTICS
CONSTANT $
Comparable Company-Operated International Properties(1)
Three Months Ended August 31, 2010 and August
31, 2009
---------------------------------------------
REVPAR Occupancy Average
------ --------- Daily
Rate
----
vs. vs. vs.
Region 2010 2009 2010 2009 2010 2009
------ ---- ---- ---- ---- ---- ----
Caribbean & Latin
America $113.33 7.6% 71.5% 5.8% pts. $158.53 -1.1%
Continental
Europe $112.54 8.6% 75.5% 3.8% pts. $149.09 3.2%
United Kingdom $129.35 9.7% 81.6% 3.3% pts. $158.45 5.3%
Middle East &
Africa $74.25 -2.2% 62.4% 1.5% pts. $119.06 -4.5%
Asia Pacific(2) $80.76 29.9% 68.1% 13.1% pts. $118.54 4.9%
Regional
Composite(3) $103.89 12.1% 73.0% 6.5% pts. $142.33 2.2%
International
Luxury(4) $182.05 12.4% 62.8% 5.3% pts. $289.92 2.8%
Total
International(5) $112.42 12.2% 71.9% 6.3% pts. $156.39 2.3%
Worldwide(6) $101.43 8.4% 71.2% 3.7% pts. $142.46 2.8%
Comparable Systemwide International Properties(1)
-------------------------------------------------
Three Months Ended August 31, 2010 and August
31, 2009
----------------------------------------------
REVPAR Occupancy Average
------ --------- Daily
Rate
----
vs. vs. vs.
Region 2010 2009 2010 2009 2010 2009
------ ---- ---- ---- ---- ---- ----
Caribbean & Latin
America $100.82 14.2% 68.6% 8.1% pts. $146.92 0.7%
Continental
Europe $111.17 9.0% 74.7% 4.8% pts. $148.78 2.0%
United Kingdom $127.58 9.6% 81.3% 3.4% pts. $157.02 5.0%
Middle East &
Africa $73.85 -1.9% 62.7% 1.6% pts. $117.81 -4.4%
Asia Pacific(2) $88.25 21.0% 68.2% 11.3% pts. $129.35 0.9%
Regional
Composite(3) $103.38 11.9% 72.2% 6.7% pts. $143.23 1.5%
International
Luxury(4) $182.05 12.4% 62.8% 5.3% pts. $289.92 2.8%
Total
International(5) $110.47 12.0% 71.3% 6.6% pts. $154.85 1.6%
Worldwide(6) $89.79 8.2% 71.7% 4.2% pts. $125.18 1.8%
1 We report financial results on a period basis and international
statistics on a monthly basis. Statistics are in constant dollars
for June through August. International includes properties located
outside the Continental United States and Canada, except for
Worldwide which includes the Continental United States.
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 the Continental United States and Canada and Bulgari Hotels &
Resorts.
5 Includes Regional Composite and International Luxury.
6 Includes international statistics for the three calendar months
ended August 31, 2010 and August 31, 2009, and the Continental
United States statistics for the twelve weeks ended September 10,
2010 and September 11, 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-5
MARRIOTT INTERNATIONAL, INC.
KEY LODGING STATISTICS
CONSTANT $
Comparable Company-Operated International Properties(1)
Eight Months Ended August 31, 2010 and August
31, 2009
---------------------------------------------
REVPAR Occupancy Average
------ --------- Daily
Rate
----
vs. vs. vs.
Region 2010 2009 2010 2009 2010 2009
------ ---- ---- ---- ---- ---- ----
Caribbean &
Latin
America $130.49 5.2% 72.4% 5.2% pts. $180.16 -2.4%
Continental
Europe $108.94 5.8% 69.4% 4.0% pts. $156.87 -0.3%
United
Kingdom $117.80 7.5% 76.0% 3.9% pts. $154.96 2.0%
Middle East &
Africa $90.84 -4.4% 69.0% 2.3% pts. $131.57 -7.5%
Asia
Pacific(2) $80.00 25.7% 66.1% 14.1% pts. $121.02 -1.1%
Regional
Composite(3) $104.12 8.5% 70.5% 6.8% pts. $147.78 -1.9%
International
Luxury(4) $196.14 9.8% 63.5% 6.8% pts. $308.92 -1.9%
Total
International(5) $114.16 8.7% 69.7% 6.8% pts. $163.79 -1.8%
Worldwide(6) $102.45 5.5% 69.2% 4.6% pts. $148.01 -1.5%
Comparable Systemwide International Properties(1)
-------------------------------------------------
Eight Months Ended August 31, 2010 and August
31, 2009
----------------------------------------------
REVPAR Occupancy Average
------ --------- Daily
Rate
----
vs. vs. vs.
Region 2010 2009 2010 2009 2010 2009
------ ---- ---- ---- ---- ---- ----
Caribbean &
Latin
America $113.59 11.1% 69.3% 7.9% pts. $163.94 -1.6%
Continental
Europe $106.02 5.5% 68.1% 4.7% pts. $155.68 -1.8%
United
Kingdom $116.04 7.3% 75.4% 3.8% pts. $153.86 1.9%
Middle East &
Africa $89.87 -3.9% 69.1% 2.7% pts. $130.09 -7.6%
Asia
Pacific(2) $85.54 17.9% 66.5% 12.1% pts. $128.55 -3.5%
Regional
Composite(3) $102.48 8.4% 69.4% 6.9% pts. $147.58 -2.4%
International
Luxury(4) $196.14 9.8% 63.5% 6.8% pts. $308.92 -1.9%
Total
International(5) $110.92 8.6% 68.9% 6.9% pts. $160.97 -2.3%
Worldwide(6) $87.38 4.8% 68.6% 4.3% pts. $127.41 -1.8%
1 We report financial results on a period basis and international
statistics on a monthly basis. Statistics are in constant dollars
for January through August. International includes properties
located outside the Continental United States and Canada, except for
Worldwide which includes the Continental United States.
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 the Continental United States and Canada and Bulgari Hotels &
Resorts.
5 Includes Regional Composite and International Luxury.
6 Includes international statistics for the eight calendar months
ended August 31, 2010 and August 31, 2009, and the Continental
United States statistics for the thirty-six weeks ended September
10, 2010 and September 11, 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-6
MARRIOTT INTERNATIONAL, INC.
KEY LODGING STATISTICS
Comparable Company-Operated North American Properties(1)
Twelve Weeks Ended September 10, 2010 and
September 11, 2009
-----------------------------------------
REVPAR Occupancy
------ ---------
vs. vs.
Brand 2010 2009 2010 2009
----- ---- ---- ---- ----
Marriott Hotels &
Resorts $105.35 7.0% 71.7% 2.2% pts.
Renaissance Hotels $98.20 3.8% 69.1% 0.7% pts.
Composite North
American Full-
Service(2) $104.01 6.4% 71.2% 1.9% pts.
The Ritz-Carlton(3) $169.51 7.9% 68.6% 2.9% pts.
Composite North
American Full-
Service & Luxury(4) $112.10 6.7% 70.9% 2.0% pts.
Residence Inn $89.50 6.2% 78.9% 3.8% pts.
Courtyard $71.37 5.8% 67.5% 2.5% pts.
TownePlace Suites $54.67 5.2% 72.8% 4.0% pts.
SpringHill Suites $64.65 8.0% 68.5% 3.6% pts.
Composite North
American Limited-
Service(5) $74.74 6.0% 70.9% 3.0% pts.
Composite - All(6) $96.40 6.5% 70.9% 2.4% pts.
Twelve Weeks Ended September 10, 2010 and
September 11, 2009
-----------------------------------------
Average Daily
Rate
--------------
vs.
Brand 2010 2009
----- ---- ----
Marriott Hotels &
Resorts $147.02 3.7%
Renaissance Hotels $142.02 2.7%
Composite North
American Full-
Service(2) $146.11 3.5%
The Ritz-Carlton(3) $247.12 3.3%
Composite North
American Full-
Service & Luxury(4) $158.18 3.6%
Residence Inn $113.40 1.1%
Courtyard $105.77 1.9%
TownePlace Suites $75.06 -0.5%
SpringHill Suites $94.32 2.3%
Composite North
American Limited-
Service(5) $105.39 1.5%
Composite - All(6) $135.99 2.8%
Comparable Systemwide North American Properties(1)
Twelve Weeks Ended September 10, 2010 and
September 11, 2009
-----------------------------------------
REVPAR Occupancy
------ ---------
vs. vs.
Brand 2010 2009 2010 2009
----- ---- ---- ---- ----
Marriott Hotels &
Resorts $95.20 7.4% 69.4% 3.1% pts.
Renaissance Hotels $92.22 6.2% 69.6% 2.7% pts.
Composite North
American Full-
Service(2) $94.67 7.2% 69.4% 3.1% pts.
The Ritz-Carlton(3) $169.51 7.9% 68.6% 2.9% pts.
Composite North
American Full-
Service & Luxury(4) $100.21 7.3% 69.4% 3.0% pts.
Residence Inn $91.37 6.6% 80.6% 4.4% pts.
Courtyard $76.92 6.8% 70.2% 3.3% pts.
Fairfield Inn & Suites $61.20 8.4% 70.5% 4.4% pts.
TownePlace Suites $61.74 8.6% 76.4% 7.1% pts.
SpringHill Suites $69.63 6.9% 70.6% 4.5% pts.
Composite North
American Limited-
Service(5) $75.92 7.1% 73.3% 4.1% pts.
Composite - All(6) $85.24 7.2% 71.8% 3.7% pts.
Twelve Weeks Ended September 10, 2010 and
September 11, 2009
-----------------------------------------
Average Daily
Rate
--------------
vs.
Brand 2010 2009
----- ---- ----
Marriott Hotels &
Resorts $137.17 2.6%
Renaissance Hotels $132.59 2.1%
Composite North
American Full-
Service(2) $136.35 2.5%
The Ritz-Carlton(3) $247.12 3.3%
Composite North
American Full-
Service & Luxury(4) $144.46 2.6%
Residence Inn $113.32 0.9%
Courtyard $109.63 1.8%
Fairfield Inn & Suites $86.76 1.7%
TownePlace Suites $80.79 -1.4%
SpringHill Suites $98.56 0.1%
Composite North
American Limited-
Service(5) $103.52 1.1%
Composite - All(6) $118.69 1.7%
1 Statistics include only properties located in the Continental
United States.
2 Includes the Marriott Hotels & Resorts and Renaissance Hotels
brands.
3 Statistics for The Ritz-Carlton are for June through August.
4 Includes the Marriott Hotels & Resorts, Renaissance Hotels and The
Ritz-Carlton brands.
5 Includes the Residence Inn, Courtyard, Fairfield Inn & Suites,
TownePlace Suites and SpringHill Suites brands.
6 Includes the Marriott Hotels & Resorts, Renaissance Hotels, The
Ritz-Carlton, Residence Inn, Courtyard, Fairfield Inn & Suites,
TownePlace Suites, and SpringHill Suites brands.
A-7
MARRIOTT INTERNATIONAL, INC.
KEY LODGING STATISTICS
Comparable Company-Operated North American Properties(1)
Thirty-six Weeks Ended September 10, 2010 and
September 11, 2009
---------------------------------------------
REVPAR Occupancy
------ ---------
vs. vs.
Brand 2010 2009 2010 2009
----- ---- ---- ---- ----
Marriott Hotels &
Resorts $107.94 4.3% 70.4% 3.7% pts.
Renaissance Hotels $102.32 1.1% 68.1% 2.2% pts.
Composite North
American Full-
Service(2) $106.88 3.7% 69.9% 3.4% pts.
The Ritz-Carlton(3) $191.72 9.7% 68.7% 6.5% pts.
Composite North
American Full-Service
& Luxury(4) $116.24 4.7% 69.8% 3.7% pts.
Residence Inn $85.65 3.5% 75.0% 4.7% pts.
Courtyard $69.98 1.9% 65.2% 3.2% pts.
TownePlace Suites $49.48 -1.1% 66.6% 3.4% pts.
SpringHill Suites $63.36 3.0% 65.9% 3.7% pts.
Composite North
American Limited-
Service(5) $72.48 2.3% 68.0% 3.6% pts.
Composite - All(6) $97.69 4.0% 69.0% 3.7% pts.
Thirty-six Weeks Ended September 10, 2010 and
September 11, 2009
---------------------------------------------
Average Daily
Rate
--------------
vs.
Brand 2010 2009
----- ---- ----
Marriott Hotels &
Resorts $153.40 -1.2%
Renaissance Hotels $150.30 -2.3%
Composite North
American Full-
Service(2) $152.83 -1.4%
The Ritz-Carlton(3) $279.22 -0.7%
Composite North
American Full-Service
& Luxury(4) $166.55 -0.9%
Residence Inn $114.20 -3.0%
Courtyard $107.35 -3.1%
TownePlace Suites $74.34 -6.2%
SpringHill Suites $96.09 -2.9%
Composite North
American Limited-
Service(5) $106.63 -3.1%
Composite - All(6) $141.53 -1.6%
Comparable Systemwide North American Properties(1)
Thirty-six Weeks Ended September 10, 2010 and
September 11, 2009
---------------------------------------------
REVPAR Occupancy
------ ---------
vs. vs.
Brand 2010 2009 2010 2009
----- ---- ---- ---- ----
Marriott Hotels &
Resorts $95.79 4.4% 67.6% 4.0% pts.
Renaissance Hotels $94.03 3.1% 68.0% 3.9% pts.
Composite North
American Full-
Service(2) $95.48 4.2% 67.7% 4.0% pts.
The Ritz-Carlton(3) $191.72 9.7% 68.7% 6.5% pts.
Composite North
American Full-Service
& Luxury(4) $101.80 4.8% 67.8% 4.1% pts.
Residence Inn $85.83 3.8% 76.4% 4.7% pts.
Courtyard $73.42 2.7% 66.8% 3.1% pts.
Fairfield Inn & Suites $54.54 2.7% 64.5% 2.8% pts.
TownePlace Suites $55.95 3.1% 69.6% 5.5% pts.
SpringHill Suites $65.41 2.0% 66.9% 3.8% pts.
Composite North
American Limited-
Service(5) $71.08 3.0% 69.0% 3.7% pts.
Composite - All(6) $82.80 3.9% 68.5% 3.8% pts.
Thirty-six Weeks Ended September 10, 2010 and
September 11, 2009
---------------------------------------------
Average Daily
Rate
--------------
vs.
Brand 2010 2009
----- ---- ----
Marriott Hotels &
Resorts $141.62 -1.7%
Renaissance Hotels $138.29 -2.8%
Composite North
American Full-
Service(2) $141.02 -1.9%
The Ritz-Carlton(3) $279.22 -0.7%
Composite North
American Full-Service
& Luxury(4) $150.23 -1.5%
Residence Inn $112.34 -2.6%
Courtyard $109.90 -2.0%
Fairfield Inn & Suites $84.62 -1.7%
TownePlace Suites $80.33 -5.1%
SpringHill Suites $97.73 -3.7%
Composite North
American Limited-
Service(5) $103.04 -2.5%
Composite - All(6) $120.84 -1.9%
1 Statistics include only properties located in the Continental
United States.
2 Includes the Marriott Hotels & Resorts and Renaissance Hotels
brands.
3 Statistics for The Ritz-Carlton are for January through August.
4 Includes the Marriott Hotels & Resorts, Renaissance Hotels and The
Ritz-Carlton brands.
5 Includes the Residence Inn, Courtyard, Fairfield Inn & Suites,
TownePlace Suites and SpringHill Suites brands.
6 Includes the Marriott Hotels & Resorts, Renaissance Hotels, The
Ritz-Carlton, Residence Inn, Courtyard, Fairfield Inn & Suites,
TownePlace Suites, and SpringHill Suites brands.
A-8
MARRIOTT INTERNATIONAL, INC.
TIMESHARE SEGMENT
($ in millions)
Adjustments
-----------
As As
Reported Reported Restructuring Timeshare
Costs &
12 Weeks 12 Weeks Other Strategy -
Ended Ended Charges Impairment
September September
10, 11, ------- Charges
2010 2009 -------
---- ----
Segment
Revenues
---------
Base
management
fees $11 $11 $- $-
Sales and
services
revenue
Development 135 138 - -
Services 86 82 - -
Financing
revenue
Interest
income -
non-
securitized
notes 11 11 - -
Interest
income -
securitized
notes 30 - - -
Other
financing
revenue 2 12 (3) -
--- --- --- ---
Total
financing
revenue 43 23 (3) -
Other
revenue 11 11 - -
--- --- --- ---
Total sales
and
services
revenue 275 254 (3) -
Cost
reimbursements 65 65 - -
Segment
revenues $351 $330 $(3) $-
==== ==== === ===
Segment
Results
--------
Base
management
fees $11 $11 $- $-
Timeshare
sales and
services,
net 56 16 (3) -
Timeshare
strategy -
impairment
charges - (614) - 614
Restructuring
costs - (7) 7 -
General,
administrative
and other
expense (16) (17) - -
Gains and
other
income - 1 - -
Equity in
losses (2) (4) 1 -
Interest
expense (12) - - -
Timeshare
strategy -
impairment
charges
(non-
operating) - (71) - 71
Noncontrolling
interest - 4 - -
Segment
results $37 $(681) $5 $685
=== ===== === ====
Contract
Sales
--------
Company:
Timeshare $157 $164 $- $-
Fractional 5 7 - -
Residential - 2 - -
--- --- --- ---
Total
company 162 173 - -
Joint
ventures:
Timeshare - - - -
Fractional 2 (4) 7 -
Residential - (17) 17 -
--- --- --- ---
Total joint
ventures 2 (21) 24 -
Total
contract
sales (1) $164 $152 $24 $-
==== ==== === ===
As
Adjusted Percent
12 Weeks Better/
Ended (Worse)
September
11, 2010 vs.
Adjusted
2009** 2009
------ ---------
Segment Revenues
----------------
Base management fees $11 -
Sales and services revenue
Development 138 (2)
Services 82 5
Financing revenue
Interest income - non-
securitized notes 11 -
Interest income -securitized
notes - *
Other financing revenue 9 (78)
---
Total financing revenue 20 115
Other revenue 11 -
---
Total sales and services
revenue 251 10
Cost reimbursements 65 -
Segment revenues $327 7
====
Segment Results
---------------
Base management fees $11 -
Timeshare sales and services,
net 13 331
Timeshare strategy -
impairment
charges - -
Restructuring costs - -
General, administrative and
other
expense (17) 6
Gains and other income 1 (100)
Equity in losses (3) (33)
Interest expense - *
Timeshare strategy -
impairment
charges (non-operating) - -
Noncontrolling interest 4 (100)
Segment results $9 311
===
Contract Sales
--------------
Company:
Timeshare $164 (4)
Fractional 7 (29)
Residential 2 (100)
---
Total company 173 (6)
Joint ventures:
Timeshare - -
Fractional 3 (33)
Residential - -
---
Total joint ventures 3 (33)
Total contract sales (1) $176 (7)
==== ===
* Percent cannot be calculated.
** Denotes non-GAAP financial measures. Please see pages A-18 and
A-19 for additional information about our reasons for providing
these alternative financial measures and limitations on their use.
1 As Reported 12 Weeks Ended September 10, 2010 includes fractional
contract cancellation allowances of ($1) million. Gross contract
sales for the 2010 third quarter were $165 million before the
contract cancellation allowance.
A-9
MARRIOTT INTERNATIONAL, INC.
TIMESHARE SEGMENT
($ in millions)
Adjustments
-----------
As As
Reported Reported Restructuring Timeshare
Costs &
36 Weeks 36 Weeks Other Strategy -
Ended Ended Charges Impairment
September September
10, 11, ------- Charges
2010 2009 -------
---- ----
Segment
Revenues
---------
Base
management
fees $34 $32 $- $-
Sales and
services
revenue
Development 430 441 4 -
Services 253 232 - -
Financing
revenue
Interest
income -
non-
securitized
notes 30 34 - -
Interest
income -
securitized
notes 99 - - -
Other
financing
revenue
(1) 5 8 22 -
--- --- --- ---
Total
financing
revenue 134 42 22 -
Other
revenue 32 31 - -
--- --- --- ---
Total
sales and
services
revenue 849 746 26 -
Cost
reimbursements 189 184 - -
Segment
revenues $1,072 $962 $26 $-
====== ==== === ===
Segment
Results
--------
Base
management
fees $34 $32 $- $-
Timeshare
sales and
services,
net 156 9 25 -
Timeshare
strategy
-
impairment
charges - (614) - 614
Restructuring
costs - (38) 38 -
General,
administrative
and other
expense (48) (57) 7 -
Gains and
other
income - 1 - -
Equity in
losses (10) (6) 3 -
Interest
expense (40) - - -
Timeshare
strategy
-
impairment
charges
(non-
operating) - (71) - 71
Noncontrolling
interest - 11 - -
Segment
results $92 $(733) $73 $685
=== ===== === ====
Contract
Sales
--------
Company:
Timeshare $463 $502 $- $-
Fractional 21 25 1 -
Residential 6 (1) 4 -
--- --- --- ---
Total
company 490 526 5 -
Joint
ventures:
Timeshare - - - -
Fractional 2 (9) 23 -
Residential (3) (27) 27 -
--- --- --- ---
Total
joint
ventures (1) (36) 50 -
--- --- --- ---
Total
contract
sales (2) $489 $490 $55 $-
==== ==== === ===
As
Adjusted Percent
36 Weeks Better/
Ended (Worse)
September
11, 2010 vs.
Adjusted
2009** 2009
------ ---------
Segment Revenues
----------------
Base management fees $32 6
Sales and services revenue
Development 445 (3)
Services 232 9
Financing revenue
Interest income - non-
securitized notes 34 (12)
Interest income -
securitized notes - *
Other financing revenue (1) 30 (83)
---
Total financing revenue 64 109
Other revenue 31 3
---
Total sales and services
revenue 772 10
Cost reimbursements 184 3
Segment revenues $988 9
====
Segment Results
---------------
Base management fees $32 6
Timeshare sales and
services, net 34 359
Timeshare strategy -
impairment
charges - -
Restructuring costs - -
General, administrative and
other
expense (50) 4
Gains and other income 1 100
Equity in losses (3) 233
Interest expense - *
Timeshare strategy -
impairment
charges (non-operating) - -
Noncontrolling interest 11 (100)
Segment results $25 268
===
Contract Sales
--------------
Company:
Timeshare $502 (8)
Fractional 26 (19)
Residential 3 100
---
Total company 531 (8)
Joint ventures:
Timeshare - -
Fractional 14 (86)
Residential - *
---
Total joint ventures 14 (107)
---
Total contract sales (2) $545 (10)
====
* Percent cannot be calculated.
** Denotes non-GAAP financial measures. Please see pages A-18 and
A-19 for additional information about our reasons for providing
these alternative financial measures and limitations on their use.
1 As Reported 36 Weeks Ended September 11, 2009 and As Adjusted 36
Weeks Ended September 11, 2009 include losses on notes sold of $1
million and $1 million, respectively.
2 As Reported 36 Weeks Ended September 10, 2010 includes fractional
and residential contract cancellation allowances of ($8) million and
($7) million, respectively. Gross contract sales for 2010 year-to-
date were $504 million before the contract cancellation allowance.
A-10
MARRIOTT INTERNATIONAL, INC.
TIMESHARE SEGMENT
AS ADJUSTED HAD ASU NOS. 2009-16 AND 2009-17 BEEN ADOPTED ON JANUARY
3, 2009
THIRD QUARTER 2009
($ in millions)
Adjustments
-----------
As Restructuring Timeshare As
Reported Costs & Strategy - Adjusted
12 Weeks Other Impairment 12 Weeks
Ended Charges Charges Ended
September ------- ------- September
11, 11,
2009 2009**
---- ------
Segment
Revenues
---------
Base
management
fees $11 $- $- $11
Sales and
services
revenue
Development 138 - - 138
Services 82 - - 82
Financing
revenue
Interest
income -
non-
securitized
notes 11 - - 11
Interest
income -
securitized
notes - - - -
Other
financing
revenue 12 (3) - 9
--- --- --- ---
Total
financing
revenue 23 (3) - 20
Other
revenue 11 - - 11
--- --- --- ---
Total
sales and
services
revenue 254 (3) - 251
Cost
reimbursements 65 - - 65
Segment
revenues $330 $(3) $- $327
==== === === ====
Segment
Results
--------
Base
management
fees $11 $- $- $11
Timeshare
sales and
services,
net 16 (3) - 13
Timeshare
strategy
-
impairment
charges (614) - 614 -
Restructuring
costs (7) 7 - -
General,
administrative
and other
expense (17) - - (17)
Gains and
other
income 1 - - 1
Equity in
losses (4) 1 - (3)
Interest
expense - - - -
Timeshare
strategy
-
impairment
charges
(non-
operating) (71) - 71 -
Noncontrolling
interest 4 - - 4
Segment
results $(681) $5 $685 $9
===== === ==== ===
Contract
Sales
--------
Company:
Timeshare $164 $- $- $164
Fractional 7 - - 7
Residential 2 - - 2
--- --- --- ---
Total
company 173 - - 173
Joint
ventures:
Timeshare - - - -
Fractional (4) 7 - 3
Residential (17) 17 - -
--- --- --- ---
Total
joint
ventures (21) 24 - 3
--- --- --- ---
Total
contract
sales,
including
joint
ventures $152 $24 $- $176
==== === === ====
ASU Nos. As
2009-16 Adjusted
And
2009-17 For
Adjustments ASU Nos.
----------- 2009-16
And 2009-17
12 Weeks
Ended
September
11, 2009**
----------
Segment Revenues
----------------
Base management fees $- $11
Sales and services revenue
Development 11 149
Services - 82
Financing revenue
Interest income - non-
securitized notes - 11
Interest income -
securitized notes 36 36
Other financing revenue (8) 1
--- ---
Total financing revenue 28 48
Other revenue - 11
--- ---
Total sales and services
revenue 39 290
Cost reimbursements - 65
Segment revenues $39 $366
=== ====
Segment Results
---------------
Base management fees $- $11
Timeshare sales and
services, net 32 45
Timeshare strategy -
impairment
charges - -
Restructuring costs - -
General, administrative
and other
expense - (17)
Gains and other income - 1
Equity in losses - (3)
Interest expense (17) (17)
Timeshare strategy -
impairment
charges (non-operating) - -
Noncontrolling interest - 4
Segment results $15 $24
=== ===
Contract Sales
--------------
Company:
Timeshare $- $164
Fractional - 7
Residential - 2
--- ---
Total company - 173
Joint ventures:
Timeshare - -
Fractional - 3
Residential - -
--- ---
Total joint ventures - 3
--- ---
Total contract sales,
including joint ventures $- $176
=== ====
MARRIOTT INTERNATIONAL, INC.
NON-GAAP FINANCIAL MEASURES
TIMESHARE INVENTORY
AS ADJUSTED HAD ASU NOS. 2009-16 AND 2009-17 BEEN ADOPTED ON JANUARY
3, 2009
($ in millions)
Adjustments
-----------
As
Balance As ASU Nos. Adjusted
at Reported 2009-16 For
End of Balance And ASU Nos.
2010 at 2009-17 2009-16
Year-
Third End And
Quarter 2009 Adjustments 2009-17
-------- ------ ----------- Balance at
Year-End
2009**(1)
---------
Finished goods (2) $738 $721 $100 $821
Work-in-process 147 198 - 198
Land and
infrastructure 552 507 - 507
Total inventory $1,437 $1,426 $100 $1,526
====== ====== ==== ======
** Denotes non-GAAP financial measures. Please see pages A-18 and
A-19 for additional information about our reasons for providing
these alternative financial measures and limitations on their use.
1 As Adjusted had ASU Nos. 2009-16 and 2009-17 (formerly referred to
as FAS 166 & 167) been adopted on January 3, 2009.
2 Includes completed inventory as well as an estimate of inventory
we expect to acquire when we foreclose on defaulted notes. The
estimate of inventory we expect to acquire when we foreclose on
defaulted notes for As Adjusted 2009 and As Reported 2010 include
securitized and non-securitized notes, and As Reported 2009
includes non-securitized notes.
A-12
MARRIOTT INTERNATIONAL, INC.
NON-GAAP FINANCIAL MEASURES
EBITDA AND ADJUSTED EBITDA
($ in millions)
Fiscal Year 2010
----------------
Total
First Second Third Year to
Quarter Quarter Quarter Date
-------- ------- ------- -------
Net Income
attributable to
Marriott $83 $119 $83 $285
Interest expense 45 44 41 130
Tax provision 46 65 45 156
Depreciation and
amortization 39 42 40 121
Less: Depreciation
reimbursed by
third-party owners (3) (3) (2) (8)
Interest expense
from unconsolidated
joint ventures 5 5 6 16
Depreciation and
amortization from
unconsolidated
joint ventures 6 6 7 19
--- --- --- ---
EBITDA ** $221 $278 $220 $719
==== ==== ==== ====
Increase over 2009
Adjusted EBITDA 3% 26% 35% 20%
Fiscal Year 2009
----------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Net Income (Loss)
attributable to
Marriott $(23) $37 $(466) $106
Interest expense 29 28 27 34
Tax provision
(benefit) 33 44 (210) 68
Tax provision,
noncontrolling
interest 1 2 1 -
Depreciation and
amortization 39 42 43 61
Less: Depreciation
reimbursed by (2) (2) (2) (3)
third-party owners
Interest expense
from
unconsolidated
joint ventures 3 6 4 6
Depreciation and
amortization from
unconsolidated
joint ventures 6 6 6 9
--- --- --- ---
EBITDA ** 86 163 (597) 281
Restructuring costs
and other charges
Severance 2 10 4 5
Facilities exit
costs - 22 5 2
Development
cancellations - 1 - -
--- --- --- ---
Total restructuring
costs 2 33 9 7
--- --- --- ---
Impairment of
investments and
other, net of
prior year
reserves 68 3 1 11
Reserves for loan
losses 42 1 - -
Contract
cancellation
allowances 4 1 1 3
Residual interests
valuation 13 12 (3) (2)
System development
write-off - 7 - -
--- --- --- ---
Total other charges 127 24 (1) 12
--- --- --- ---
Total restructuring
costs and other
charges 129 57 8 19
--- --- --- ---
Timeshare strategy
-impairment
charges
Operating
impairments - - 614 -
Non-operating
impairments - - 138 -
--- --- --- ---
Total timeshare
strategy -
impairment charges - - 752 -
--- --- --- ---
Adjusted EBITDA ** $215 $220 $163 $300
==== ==== ==== ====
Total
-----
Net Income (Loss)
attributable to
Marriott $(346)
Interest expense 118
Tax provision
(benefit) (65)
Tax provision,
noncontrolling
interest 4
Depreciation and
amortization 185
Less: Depreciation
reimbursed by (9)
third-party owners
Interest expense
from
unconsolidated
joint ventures 19
Depreciation and
amortization from
unconsolidated
joint ventures 27
---
EBITDA ** (67)
Restructuring costs
and other charges
Severance 21
Facilities exit
costs 29
Development
cancellations 1
---
Total restructuring
costs 51
---
Impairment of
investments and
other, net of
prior year
reserves 83
Reserves for loan
losses 43
Contract
cancellation
allowances 9
Residual interests
valuation 20
System development
write-off 7
---
Total other charges 162
---
Total restructuring
costs and other
charges 213
---
Timeshare strategy
-impairment
charges
Operating
impairments 614
Non-operating
impairments 138
---
Total timeshare
strategy -
impairment charges 752
---
Adjusted EBITDA ** $898
====
MARRIOTT INTERNATIONAL, INC.
NON-GAAP FINANCIAL MEASURES
EBITDA AND ADJUSTED EBITDA
AS ADJUSTED HAD ASU NOS. 2009-16 AND 2009-17 BEEN ADOPTED ON JANUARY
3, 2009
THIRD QUARTER 2009
($ in millions)
As Adjusted
Third ASU Nos. For
2009-16
Quarter and ASU Nos.
2009 2009-17 2009-16 and
---- Adjustments 2009-17
----------- Third Quarter
2009**
------
Net (Loss) Income attributable
to Marriott $(466) $9 $(457)
Interest expense 27 17 44
Tax benefit (210) 6 (204)
Tax provision, noncontrolling
interest 1 - 1
Depreciation and amortization 43 - 43
Less: Depreciation reimbursed by
third-party owners (2) - (2)
Interest expense from
unconsolidated joint ventures 4 - 4
Depreciation and amortization
from unconsolidated joint
ventures 6 - 6
--- --- ---
EBITDA ** (597) 32 (565)
Restructuring costs and other
charges
Severance 4 - 4
Facilities exit costs 5 - 5
Development cancellations - - -
--- --- ---
Total restructuring costs 9 - 9
--- --- ---
Impairment of investments and
other, net of prior year
reserves 1 - 1
Reserves for loan losses - - -
Contract cancellation allowances 1 - 1
Residual interests valuation (3) - (3)
System development write-off - - -
--- ---
Total other charges (1) - (1)
--- --- ---
Total restructuring costs and
other charges 8 - 8
--- --- ---
Timeshare strategy -impairment
charges
Operating impairments 614 - 614
Non-operating impairments 138 - 138
--- ---
Total timeshare strategy -
impairment charges 752 - 752
--- --- ---
Adjusted EBITDA ** $163 $32 $195
==== === ====
** Denotes non-GAAP financial measures. Please see pages A-18 and
A-19 for additional information about our reasons for providing
these alternative financial measures and limitations on their use.
A-14
MARRIOTT INTERNATIONAL, INC.
NON-GAAP FINANCIAL MEASURES
EBITDA AND ADJUSTED EBITDA
2009 AS ADJUSTED HAD ASU NOS. 2009-16 AND 2009-17 BEEN ADOPTED ON
JANUARY 3, 2009 AND FORECASTED 2010
($ 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 (benefit) 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
==== === ====
Increase over 2009 Adjusted
EBITDA as Adjusted for ASU Nos.
2009-16 and 2009-17
Range
-----
Estimated
EBITDA
Full Year 2010
--------------
Net (Loss) Income attributable
to Marriott $411 $424
Interest expense 190 185
Tax (benefit) provision 224 231
Tax provision, noncontrolling
interest - -
Depreciation and amortization 180 180
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 ** 1,050 1,065
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 ** $1,050 $1,065
====== ======
Increase over 2009 Adjusted
EBITDA as Adjusted for ASU Nos.
2009-16 and 2009-17 8% 9%
MARRIOTT INTERNATIONAL, INC.
NON-GAAP FINANCIAL MEASURES
ADJUSTED TOTAL DEBT NET OF CASH
($ in millions)
Balance Balance
Balance at at at
End of 2010 Year-End Year-End
Third
Quarter 2009 2008
-------- ---- ----
Total debt $2,726 $2,298 $3,095
Cash and cash equivalents (223) (115) (134)
Total debt net of cash** 2,503 2,183 2,961
Less the impact of ASU Nos.
2009-16 and 2009-17 (912) - -
Adjusted total debt net of cash**
(a) $1,591 $2,183 $2,961
====== ====== ======
Better /(Worse)
Change
---------------
Balance at End of
2010 Third Quarter
as Compared to
--------------
Balance
at
Year- Balance
End at Year-
2009 End 2008
-------- --------
Total debt $(428) $369
Cash and cash equivalents 108 89
Total debt net of cash** (320) 458
Less the impact of ASU Nos.
2009-16 and 2009-17 912 912
Adjusted total debt net of cash**
(a) $592 $1,370
==== ======
(a) Excludes the impact of the update to ASU Nos. 2009-16 and 2009-17.
** Denotes non-GAAP financial measures. Please see pages A-18 and
A-19 for additional information about our reasons for providing
these alternative financial measures and limitations on their use.
A-16
MARRIOTT INTERNATIONAL, INC.
NON-GAAP FINANCIAL MEASURES
INTEREST EXPENSE
AS ADJUSTED HAD ASU NOS. 2009-16 AND 2009-17 BEEN ADOPTED ON JANUARY
3, 2009
THIRD QUARTER 2009
($ in millions)
As Adjusted
For ASU
Nos.
2009-16
As And
Reported ASU Nos. 2009-17 12
12 Weeks 2009-16 Weeks
Ended and Ended
September 2009-17 September
11, 2009 Adjustments 11, 2009**
--------- ----------- -----------
Interest
Expense $27 $17 $44
=== === ===
** Denotes non-GAAP financial measures. Please
see pages A-18 and A-19 for additional
information about our reasons for providing
these alternative financial measures and
limitations on their use.
A-17
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 have limitations and should not be considered in isolation or as a substitute for 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 through fourth quarters, and certain tax expenses incurred in the 2009 first through third quarters, 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 experienced, 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 we experienced a significant decline in demand for hotel rooms both domestically and internationally due, in part, to the financial crisis 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 which resulted in first, second, third and fourth quarter 2009 restructuring costs of $2 million, $33 million, $9 million, and $7 million, respectively, that were directly related to the downturn. We also incurred other charges in the 2009 first, second, and fourth quarters 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 non-cash charges of $26 million in the 2009 first quarter, $17 million in the 2009 second quarter, and $13 million in the 2009 third quarter primarily related to the treatment of funds received from certain foreign subsidiaries, an issue we are contesting with the Internal Revenue Service.
Earnings Before Interest, Taxes, Depreciation and Amortization. Earnings before interest, taxes, depreciation and amortization ("EBITDA") reflects earnings excluding the impact of interest expense, provision for income taxes, depreciation and amortization. Management considers EBITDA to be an indicator of operating performance because we use it to measure our ability to service debt, fund capital expenditures, and expand our business. We also use EBITDA, as do analysts, lenders, investors and others, 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 provision for income taxes 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.
Both EBITDA and Adjusted EBITDA (described below) exclude certain cash expenses that we are obligated to make.
Adjusted EBITDA. Management also evaluates Adjusted EBITDA as an indicator of operating performance. Adjusted EBITDA excludes: (1) Timeshare strategy - impairment charges of $752 million incurred in the 2009 third quarter; and (2) the 2009 restructuring costs and other charges of $19 million from the fourth quarter, $8 million from the third quarter, $57 million from the second quarter and $129 million from the first quarter. Management excludes these Timeshare strategy-impairment charges and restructuring costs and other charges for the reasons noted above under "Adjusted Measures That Exclude Certain Charges, Costs, and Other Expenses."
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) 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), 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.
Total Debt Net of Cash (or "Net Debt") and Adjusted Total Debt Net of Cash. Total debt net of cash reflects total debt less cash and cash equivalents. Management considers total debt net of cash to be a more accurate indicator of the net debt that must be repaid or refinanced at maturity (as it gives consideration to cash resources available to retire a portion of the debt when due). In addition, Management evaluates adjusted total debt net of cash, which excludes the debt that was consolidated as a result of adopting ASU Nos. 2009-16 and 2009-17, because that debt is non-recourse to the Company and is not supported by the Company's cash flows. Management believes that these financial measures provide a clearer picture of the future demands on cash to repay debt and uses these measures in making decisions regarding its borrowing capacity and future refinancing needs. Management also evaluates adjusted total debt net of cash for the reason stated in the previous paragraph.
SOURCE Marriott International, Inc.
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