UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 11, 2010

 

 

MARRIOTT INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		1-13881		52-2055918
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

10400 Fernwood Road, Bethesda, Maryland		20817
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (301) 380-3000

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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ITEM 2.02.  Results of Operations and Financial Condition.

Financial Results for the Quarter and Fiscal Year Ended January 1, 2010

Marriott International, Inc. today issued a press release reporting financial results for the quarter and fiscal year ended January 1, 2010 and providing access information for a conference call where management will discuss those results.

A copy of Marriott’s press release is attached as Exhibit 99 and is incorporated by reference.

ITEM 9.01.  Financial Statements and Exhibits.

(d) Exhibits. The following exhibit is furnished with this report:

 

Exhibit 99 -		Press release issued on February 11, 2010, reporting financial results for the quarter and fiscal year ended January 1, 2010 and providing access information for a conference call where management will discuss those results.

 

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

		MARRIOTT INTERNATIONAL, INC.
Date: February 11, 2010		By:		/s/ Carl T. Berquist
				Carl T. Berquist
				Executive Vice President and Chief Financial Officer

 

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EXHIBIT INDEX

 

Exhibit No.		Description
99		Press release dated February 11, 2010, reporting financial results for the quarter and fiscal year ended January 1, 2010 and providing access information for a conference call where management will discuss those results.

 

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Exhibit 99

 

CONTACT:		Tom Marder
		(301) 380-2553
		thomas.marder@marriott.com

MARRIOTT INTERNATIONAL REPORTS FOURTH QUARTER RESULTS

BETHESDA, MD – February 11, 2010 – Marriott International, Inc. (NYSE:MAR) today reported fourth quarter and full year 2009 results.

FOURTH QUARTER 2009 RESULTS

Fourth quarter 2009 adjusted income from continuing operations attributable to Marriott totaled $118 million, a 2 percent decline over the year-ago quarter, and adjusted diluted earnings per share (“EPS”) from continuing operations attributable to Marriott shareholders totaled $0.32, down 3 percent. On October 8, 2009, the company forecasted fourth quarter adjusted diluted EPS of $0.20 to $0.23.

Reported income from continuing operations attributable to Marriott was $106 million in the fourth quarter of 2009 compared to a reported loss from continuing operations attributable to Marriott of $10 million in the year-ago quarter. Reported diluted EPS from continuing operations attributable to Marriott shareholders was $0.28 in the fourth quarter of 2009 compared to reported diluted losses per share from continuing operations attributable to Marriott shareholders of $0.03 in the fourth quarter of 2008.

Adjusted results for the 2009 fourth quarter exclude $19 million pretax ($12 million after-tax and $0.03 per diluted share) of restructuring costs and other charges. Restructuring charges totaled $7 million pretax and included severance and facilities exit costs. Other charges totaled $12 million pretax and primarily included $11 million of charges against lodging assets and $3 million of reserves for Timeshare contract cancellations, offset by the $2 million favorable impact of the revaluation of Timeshare note residuals. Of the total restructuring costs and other charges in the fourth quarter, cash payments are expected to be $6 million. See the table on page

 

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A-15 of the accompanying schedules for the detail of these charges and their placement on the Consolidated Statements of Income.

Adjusted results for the 2008 fourth quarter exclude $192 million pretax ($124 million after-tax and $0.35 per diluted share) of restructuring costs and other charges, $152 million of which were non-cash, as well as $7 million of charges ($0.02 per diluted share) in the provision for income taxes.

J.W. Marriott, Jr., chairman and chief executive officer of Marriott International, said, “While the global business climate remained difficult, fourth quarter results exceeded our expectations. We grew our system, reduced total debt, and continued to improve efficiencies worldwide.

“In the fourth quarter, leisure travelers responded to aggressive marketing campaigns and special offers and, even adjusting for easier year-over-year comparisons, business travel showed signs of improvement, particularly in international markets. With solid cost controls, we translated the stronger-than-expected occupancy to better-than-expected incentive fee revenue. Demand for timeshare intervals improved modestly from third quarter levels which, combined with a successful note sale and reductions in investment spending, allowed the timeshare business to generate over $150 million of cash flow after investing activities for full year 2009.

“We are pleased that we remain an investment grade company. For the full year, we reduced investment spending by two-thirds and we were able to lower total debt by nearly $800 million.

“We opened over 38,000 rooms during 2009 and we’re thrilled to have two new exciting brands, EDITION and the Autograph Collection, opening their first hotels in 2010 with more expected to come. Our global development pipeline totals nearly 100,000 rooms. Our efforts have positioned us quite well for future earnings growth.”

Revenue per available room (REVPAR) for the company’s worldwide comparable company-operated properties declined 12.2 percent (12.4 percent using constant dollars) in the 2009 fourth quarter and REVPAR for the company’s worldwide comparable systemwide properties declined 12.3 percent (12.5 percent using constant dollars).

 

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Outside North America, the fourth quarter included the months from September to December in both years. International comparable company-operated REVPAR declined 11.1 percent (11.7 percent using constant dollars), including an 11.6 percent decline in average daily rate (12.2 percent using constant dollars) in the fourth quarter of 2009.

In North America, comparable company-operated REVPAR declined 13.1 percent in the fourth quarter of 2009. REVPAR at the company’s comparable company-operated North American full-service and luxury hotels (including Marriott Hotels & Resorts, The Ritz-Carlton and Renaissance Hotels & Resorts) was down 11.8 percent with an 11.0 percent decline in average daily rate.

Marriott’s 2009 fiscal year ended on January 1, 2010 and included 52 weeks compared to 53 weeks in fiscal 2008. Similarly, the fourth quarter ended on January 1, 2010 and included 16 weeks compared to 17 weeks in the 2008 fiscal quarter. Key lodging statistics are included in the schedules accompanying the press release beginning on page A-7. While fiscal fourth quarter REVPAR statistics for North America are included, they are not comparable due to differences in the length and seasonality of the reporting periods. As a result, the company has also provided North American and worldwide REVPAR statistics adjusted for the shift in the fiscal calendar.

On a calendar quarter basis, which includes the months of October, November and December, North American comparable company-operated REVPAR declined 10.7 percent while worldwide comparable company-operated REVPAR declined 10.1 percent (10.8 percent using constant dollars).

Marriott added 65 new properties (10,626 rooms) to its worldwide lodging portfolio in the 2009 fourth quarter, including 45 limited-service hotels in North America. Seven properties (1,635 rooms) exited the system during the quarter. Rooms converted from competitor hotels accounted for nearly 18 percent of gross room additions during the quarter. At year-end, the company’s lodging group encompassed 3,420 properties and timeshare resorts for a total of over 595,000 rooms.

 

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in the quarter. In the prior year’s quarter, adjusted Timeshare segment contract sales totaled $218 million excluding a $115 million allowance for contract cancellations.

In the fourth quarter, adjusted timeshare sales and services revenue declined 3 percent to $375 million and, net of expenses, totaled $72 million for the quarter, a $62 million increase from the 2008 adjusted fourth quarter. Development revenue, net of expense, benefited from higher closing efficiency and cost savings. Financing revenue, net of expense, increased largely as a result of a $38 million note sale gain recorded in the fourth quarter of 2009, compared to the absence of a note sale in the fourth quarter of 2008, and cost savings, partially offset by lower interest income.

Adjusted Timeshare segment results, which includes Timeshare sales and services revenue, net of direct expenses, as well as base management fees, equity earnings, gains and other income, noncontrolling interest and general, administrative and other expenses associated with the timeshare business, totaled $62 million in the 2009 fourth quarter compared to a loss of $2 million in the prior year quarter.

ADJUSTED GENERAL, ADMINISTRATIVE and OTHER expenses for the 2009 fourth quarter declined 13 percent to $207 million, compared to $238 million in the year-ago quarter. The 2009 fourth quarter benefited from cost savings throughout the organization, as well as $3 million in foreign exchange gains and the $3 million reversal of a loan loss reserve partially offset by $12 million of accruals and reserves related to the performance of 12 hotels and $8 million of lower capitalized development costs. The 2009 quarter also included a $21 million unfavorable impact associated with deferred compensation compared to the 2008 quarter (offset by a similar decrease in the provision for taxes). Excluding the impact of deferred compensation, adjusted general administrative and other expenses declined 20 percent in the fourth quarter, as shown on page A-19 of the accompanying schedules.

GAINS AND OTHER INCOME totaled $4 million and included a $3 million gain on the sale of investments and $1 million of net gains on the sale of real estate. The prior year’s fourth quarter adjusted gains and other income totaled $28 million and included a $28 million gain on the extinguishment of debt and $7 million of gains on the sale of real estate offset by a $4 million loss on the sale of an investment and $3 million unfavorable impact of preferred returns from joint venture investments and other income.

 

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INTEREST EXPENSE decreased $16 million in the fourth quarter primarily due to lower interest rates and lower debt balances.

ADJUSTED EQUITY IN (LOSSES) EARNINGS totaled a $10 million loss in the quarter compared to $5 million in earnings in the year-ago quarter. The $15 million decline reflected lower operating results in two joint ventures.

ADJUSTED INCOME TAXES

The adjusted provision for taxes in the fourth quarter of 2009 reflected a $21 million favorable impact associated with deferred compensation (offset by a similar unfavorable impact in general, administrative and other expenses) compared with the 2008 fourth quarter.

FULL YEAR 2009 RESULTS

For the full year 2009, adjusted income from continuing operations attributable to Marriott totaled $342 million, a decline of 38 percent, and adjusted diluted EPS from continuing operations attributable to Marriott shareholders was $0.93, a decline of 38 percent.

The reported loss from continuing operations attributable to Marriott was $346 million for full year 2009 compared to reported income from continuing operations attributable to Marriott of $359 million a year ago. Reported diluted losses per share from continuing operations attributable to Marriott was $0.97 for 2009 compared to reported diluted EPS from continuing operations attributable to Marriott of $0.97 for 2008.

Adjusted income from continuing operations attributable to Marriott and adjusted diluted EPS from continuing operations attributable to Marriott shareholders for 2009 exclude the $213 million pretax ($130 million after-tax and $0.37 per diluted share) restructuring costs and other charges, $182 million of which were non-cash, as well as $752 million pretax ($502 million after-tax and $1.41 per diluted share) of primarily non-cash Timeshare impairment charges. See the table on pages A-15 and A-16 of the accompanying schedules for the detail of these charges and their placement on the Consolidated Statements of Income. Adjusted results for full year 2009 also exclude the $56 million ($0.16 per diluted share) impact of non-cash charges in the provision for income taxes.

 

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Adjusted income from continuing operations attributable to Marriott and adjusted diluted EPS from continuing operations attributable to Marriott shareholders for 2008 exclude the $192 million pretax ($124 million after-tax and $0.33 per diluted share) restructuring costs and other charges. Adjusted results for full year 2008 also exclude the $72 million ($0.19 per diluted share) impact of charges, $67 million of which were non-cash, included in the tax provision.

REVPAR for the company’s worldwide comparable company-operated properties declined 20.0 percent (18.3 percent using constant dollars) in 2009. REVPAR for the company’s worldwide comparable systemwide properties declined 18.4 percent (17.3 percent using constant dollars) in 2009.

International comparable company-operated REVPAR for 2009 declined 23.5 percent (18.0 percent using constant dollars), including a 17.8 percent decline in average daily rate (11.9 percent using constant dollars).

In North America, comparable company-operated REVPAR declined 18.5 percent in 2009. REVPAR at the company’s comparable company-operated North American full-service and luxury hotels (including Marriott Hotels & Resorts, The Ritz-Carlton and Renaissance Hotels & Resorts) was down 17.8 percent with an average daily rate decline of 12.2 percent.

Reported results for full year 2009, the adjusted results and the associated reconciliations are shown on pages A-2, A-14, A-15, A-16, and A-19 of the accompanying schedules. The following paragraphs reflect adjusted results where indicated.

MARRIOTT REVENUES totaled $10.9 billion in 2009 compared to $12.9 billion in 2008. Total fees in 2009 were $1,084 million, a decrease of 22 percent from the prior year. Base management and franchise fees declined $156 million in 2009, reflecting the decline in worldwide REVPAR offset in part by unit growth across the system. Incentive management fees declined 50 percent reflecting lower property-level margins due to worldwide REVPAR declines, partially offset by strong cost controls. For full year 2009, 25 percent of company-operated hotels earned incentive management fees compared to 56 percent in the prior year.

 

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Approximately two-thirds of incentive management fees came from hotels outside North America in 2009 compared to 49 percent in 2008.

Owned, leased, corporate housing and other revenue, net of direct expenses, totaled $68 million in 2009 compared to $137 million in 2008. Results were primarily impacted by lower operating results at owned and leased properties, the conversion of some owned properties to management agreements, and lower termination fees, partially offset by higher branding fees and a transaction cancellation fee.

Reflecting weak demand, adjusted Timeshare segment contract sales in 2009 declined 37 percent to $748 million, excluding allowances for anticipated contract cancellations of $83 million in 2009 and $115 million in 2008.

Adjusted Timeshare sales and services revenue declined 23 percent to $1,147 million in 2009 and adjusted Timeshare sales and services revenue, net of direct expenses, totaled $106 million in 2009, a decrease of 28 percent. Development revenue, net of expense, declined in 2009 reflecting soft demand, partially offset by favorable reportability and reduced marketing and sales costs. Services revenue, net of expense, also declined largely reflecting lower rental revenues and higher carry costs on unsold units. Financing revenue, net of expense, increased in 2009 reflecting a $9 million increase in note sale gains and cost savings, partially offset by lower interest income. Timeshare direct expenses in 2008 included a $22 million impairment charge at a fractional and residential joint venture project referred to below.

Adjusted Timeshare segment results, which includes timeshare sales and services revenue, net of direct expenses, as well as base management fees, equity earnings, gains and other income, noncontrolling interest and general, administrative and other expenses associated with the timeshare business, totaled $87 million in 2009 compared to $121 million in the prior year. The segment results for 2008 reflected a net $10 million pretax impairment charge for a fractional and residential consolidated joint venture project, adjusting the carrying value of the real estate to its estimated fair market value. The $10 million charge in 2008 included a $22 million negative adjustment in timeshare direct expenses partially offset by a $12 million pretax ($8 million after-tax) benefit associated

 

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with the joint venture partner’s share, which is reflected in net losses attributable to noncontrolling interest, net of tax.

The Timeshare segment also generated over $150 million of pretax cash flow in 2009.

ADJUSTED GENERAL, ADMINISTRATIVE and OTHER expenses decreased $127 million to $622 million in 2009 reflecting cost savings and lower incentive compensation, partially offset by the $43 million unfavorable impact associated with deferred compensation compared to 2008 (offset by a similar decrease in the provision for taxes) and $12 million of accruals and reserves related to the performance of 12 hotels. Excluding the impact of deferred compensation, adjusted general, administrative and other expenses declined 22 percent in 2009, as shown on page A-19 of the accompanying schedules.

GAINS AND OTHER INCOME totaled $31 million in 2009 and included a $21 million gain on the extinguishment of debt, net gains of $10 million from the sale of real estate, a $3 million gain on the sale of investments and $2 million of preferred returns from joint venture investments, partially offset by a $5 million impairment charge on an investment. Adjusted gains and other income of $47 million in 2008 included gains of $14 million from the sale of real estate, a $28 million gain on the extinguishment of debt, $6 million of preferred returns from several joint venture investments and other income and $3 million of gains on the sale of the company’s interests in two joint ventures, partially offset by a $4 million loss on the sale of an investment.

INTEREST EXPENSE declined 28 percent in 2009 partially due to lower interest rates, repayment of debt and the repurchase of Senior Notes.

ADJUSTED EQUITY IN (LOSSES) EARNINGS totaled a $27 million loss in 2009 compared to $31 million of earnings in 2008. Losses in 2009 primarily reflected losses in five joint ventures and the impairment of one investment. Earnings in 2008 primarily reflected a $15 million gain on the sale of a joint venture’s assets, insurance proceeds of $5 million received through a joint venture and $11 million of earnings from joint ventures.

 

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ADJUSTED INCOME TAXES

The adjusted provision for taxes reflected a $43 million favorable impact associated with deferred compensation (offset by a similar unfavorable impact in general, administrative and other expenses) compared to 2008.

NET LOSSES ATTRIBUTABLE TO NONCONTROLLING INTERESTS, NET OF TAX decreased $8 million in 2009 to $7 million. The decrease largely reflected the adjustment of the carrying value of a fractional and residential project in 2008. Since the project is a consolidated joint venture, the partner’s share of the adjustment was an $8 million after-tax benefit to noncontrolling interests in 2008.

ADJUSTED EBITDA

Adjusted EBITDA totaled $898 million in 2009, a 31 percent decline from 2008 adjusted EBITDA of $1,298 million.

BALANCE SHEET

At year-end 2009, total debt was $2,298 million and cash balances totaled $115 million, compared to $3,095 million in debt and $134 million of cash at year-end 2008. The company repurchased $119 million of its Senior Notes in 2009. At year-end 2009, Marriott had borrowings of $425 million under its $2.4 billion bank revolver.

COMMON STOCK

Weighted average fully diluted shares outstanding used to calculate adjusted diluted earnings per share amounts totaled 372.2 million in the 2009 fourth quarter compared to 363.1 million in the year-ago quarter.

On November 5, 2009, the Board of Directors declared a stock dividend payable on December 3, 2009, to shareholders of record on November 19, 2009. For periods prior to the stock dividend, all share and per share data in our financial statements have been retroactively adjusted to reflect the stock dividend.

On February 4, 2010, the Board of Directors declared the issuance of a $0.04 per share cash dividend payable on April 9, 2010 to shareholders of record on February 19, 2010.

 

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In the 2010 first quarter, the company assumes Timeshare contract sales total $165 million to $175 million and Timeshare sales and services revenue, net of direct expenses, total approximately $35 million to $45 million including the impact of ASU Nos. 2009-16 and 2009-17. With these assumptions, Timeshare segment results for the first quarter could total $30 million to $40 million.

The company anticipates that general, administrative and other expenses could total about $130 million to $140 million in the first quarter 2010, roughly flat from the adjusted 2009 first quarter amount. The company also assumes net interest expense of approximately $40 million in the quarter, reflecting the impact of ASU Nos. 2009-16 and 2009-17, as well as continued debt reduction.

Based upon the above assumptions and a 36.5 percent tax rate, diluted EPS from continuing operations attributable to Marriott shareholders for the 2010 first quarter could total $0.15 to $0.21.

FULL YEAR 2010

For full year 2010, the company expects hotel occupancies to improve, although the pace of such improvement is difficult to predict. The company continues to expect that both domestic and international comparable systemwide REVPAR comparisons to the prior year will turn positive sometime in 2010. For worldwide comparable systemwide hotels, the company assumes full year 2010 REVPAR will be down 2 percent to up 2 percent on a constant dollar basis with performance strengthening over the year. North American comparable systemwide REVPAR could be flat to down 3 percent in 2010, while REVPAR at comparable systemwide hotels outside North America could be flat to up 5 percent.

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. Given these assumptions, full year 2010 fee revenue could total $1,080 million to $1,120 million. The company expects that incentive management fees in 2010 would largely derive from international markets. Owned, leased, corporate housing and other, net of direct expense, could total $65 million to $70 million. 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.

 

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For its timeshare business, the company assumes 2010 timeshare contract sales could be slightly higher than 2009 levels. Including the impact of the accounting changes under this scenario Timeshare sales and services revenue, net of direct expenses, could total $170 million to $180 million. Timeshare segment results for 2010 could total $145 million to $155 million and the segment’s net cash flow could total $175 million to $200 million.

The company expects its 2010 general, administrative and other expenses to total $635 million to $645 million reflecting modest salary increases and assumes interest expense to total $165 million to $170 million for the full year.

While the company cannot forecast results with any certainty, based upon the above assumptions, EBITDA could total $910 million to $970 million and diluted EPS from continuing operations for 2010 could total $0.82 to $0.94. Assuming the investment spending levels below, adjusted total debt, net of cash, could 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 could 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, February 11, 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 February 11, 2011.

 

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The telephone dial-in number for the conference call is 719-325-2253. A telephone replay of the conference call will be available from 1 p.m. ET, Thursday, February 11, 2010 until 8 p.m. ET, Thursday, February 18, 2010. To access the replay, call 719-457-0820. The reservation number for the recording is 5171492.

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 68 countries and territories. Marriott International operates and franchises hotels under the Marriott, JW Marriott, The Ritz-Carlton, Renaissance, Residence Inn, Courtyard, TownePlace Suites, Fairfield Inn, SpringHill Suites and Bulgari brand names; develops and operates vacation ownership resorts under the Marriott Vacation Club, The Ritz-Carlton Destination Club, The Ritz-Carlton Residences and Grand Residences by Marriott brands; operates Marriott Executive Apartments; provides furnished corporate housing through its Marriott ExecuStay division; and operates conference centers. The company is headquartered in Bethesda, Maryland, USA and had approximately 137,000 employees at 2009 year-end. It is recognized by FORTUNE^® as one of the best companies to work for, and by the U.S. Environmental Protection Agency (EPA) as Partner of the Year since 2004. 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. For an interactive online version of Marriott’s 2008 Annual Report, which includes a short video message from Chairman and CEO J.W. Marriott, Jr., visit www.marriott.com/investor.

IRPR#1

Tables follow

 

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MARRIOTT INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share amounts)

 

						Adjustments												Adjustments											Percent Better/ (Worse)
		As Reported 16 Weeks Ended January 1, 2010				Restructuring Costs & Other Charges6				As Adjusted 16 Weeks Ended January 1, 2010**				As Reported 17 Weeks Ended January 2, 2009				Restructuring Costs & Other Charges6				Certain Tax Items			As Adjusted 17 Weeks Ended January 2, 2009**				Adjusted 2009 vs. Adjusted 2008
REVENUES
Base management fees		$	163			$	—			$	163			$	183			$	—			$	—		$	183			(11	)
Franchise fees			119				—				119				137				—				—			137			(13	)
Incentive management fees			59				—				59				82				—				—			82			(28	)
Owned, leased, corporate housing and other revenue 1			335				—				335				376				—				—			376			(11	)
Timeshare sales and services 2			377				(2	)			375				325				61				—			386			(3	)
Cost reimbursements 3			2,327				—				2,327				2,681				—				—			2,681			(13	)
Total Revenues			3,380				(2	)			3,378				3,784				61				—			3,845			(12	)
OPERATING COSTS AND EXPENSES
Owned, leased and corporate housing - direct 4			313				—				313				331				—				—			331			5
Timeshare - direct			303				—				303				373				3				—			376			19
Timeshare strategy - impairment charges 5			—				—				—				—				—				—			—			—
Reimbursed costs			2,327				—				2,327				2,681				—				—			2,681			13
Restructuring costs			7				(7	)			—				55				(55	)			—			—			—
General, administrative and other 7			215				(8	)			207				292				(54	)			—			238			13
Total Expenses			3,165				(15	)			3,150				3,732				(106	)			—			3,626			13
OPERATING INCOME			215				13				228				52				167				—			219			4
Gains and other income 8			4				—				4				19				9				—			28			(86	)
Interest expense			(34	)			—				(34	)			(50	)			—				—			(50	)		32
Interest income			5				—				5				11				—				—			11			(55	)
Equity in (losses) earnings 9			(16	)			6				(10	)			(11	)			16				—			5			(300	)
Timeshare strategy - impairment charges (non-operating) 10			—				—				—				—				—				—			—			—
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES			174				19				193				21				192				—			213			(9	)
Provision for income taxes			(68	)			(7	)			(75	)			(33	)			(68	)			7			(94	)		20
INCOME / (LOSS) FROM CONTINUING OPERATIONS			106				12				118				(12	)			124				7			119			(1	)
Discontinued operations - Synthetic Fuel, net of tax 11			—				—				—				—				—				—			—			—
NET INCOME / (LOSS)			106				12				118				(12	)			124				7			119			(1	)
Add: Net losses attributable to noncontrolling interests, net of tax			—				—				—				2				—				—			2			(100	)
NET INCOME / (LOSS) ATTRIBUTABLE TO MARRIOTT		$	106			$	12			$	118			$	(10	)		$	124			$	7		$	121			(2	)
EARNINGS / (LOSSES) PER SHARE - Basic 13
Earnings / (losses) from continuing operations attributable to Marriott shareholders 12		$	0.30			$	0.03			$	0.33			$	(0.03	)		$	0.35			$	0.02		$	0.34			(3	)
Earnings from discontinued operations 11			—				—				—				—				—				—			—			—
Earnings / (losses) per share attributable to Marriott shareholders 12		$	0.30			$	0.03			$	0.33			$	(0.03	)		$	0.35			$	0.02		$	0.34			(3	)
EARNINGS / (LOSSES) PER SHARE - Diluted 13
Earnings / (losses) from continuing operations attributable to Marriott shareholders 12		$	0.28			$	0.03			$	0.32			$	(0.03	)		$	0.35			$	0.02		$	0.33			(3	)
Earnings from discontinued operations 11			—				—				—				—				—				—			—			—
Earnings / (losses) per share attributable to Marriott shareholders 12		$	0.28			$	0.03			$	0.32			$	(0.03	)		$	0.35			$	0.02		$	0.33			(3	)
Basic Shares 13			357.6				357.6				357.6				353.0				353.0				353.0			353.0
Diluted Shares 13, 14			372.2				372.2				372.2				353.0				353.0				353.0			363.1

 

**	Denotes non-GAAP financial measures. Please see pages A-27 and A-28 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

See page A-3 for footnote references.

 

A-1

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MARRIOTT INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share amounts)

 

						Adjustments																			Adjustments
		As Reported 52 Weeks Ended January 1, 2010				Restructuring Costs & Other Charges6				Timeshare Strategy - Impairment Charges5,10				Certain Tax Items			As Adjusted 52 Weeks Ended January 1, 2010**				As Reported 53 Weeks Ended January 2, 2009				Restructuring Costs & Other Charges6				Certain Tax Items			As Adjusted 53 Weeks Ended January 2, 2009**				Percent Better/(Worse) Adjusted 2009 vs. Adjusted 2008
REVENUES
Base management fees		$	530			$	—			$	—			$	—		$	530			$	635			$	—			$	—		$	635			(17	)
Franchise fees			400				—				—				—			400				451				—				—			451			(11	)
Incentive management fees			154				—				—				—			154				311				—				—			311			(50	)
Owned, leased, corporate housing and other revenue 1			1,019				—				—				—			1,019				1,225				—				—			1,225			(17	)
Timeshare sales and services 2			1,123				24				—				—			1,147				1,423				61				—			1,484			(23	)
Cost reimbursements 3			7,682				—				—				—			7,682				8,834				—				—			8,834			(13	)
Total Revenues			10,908				24				—				—			10,932				12,879				61				—			12,940			(16	)
OPERATING COSTS AND EXPENSES
Owned, leased and corporate housing - direct 4			951				—				—				—			951				1,088				—				—			1,088			13
Timeshare - direct			1,040				1				—				—			1,041				1,334				3				—			1,337			22
Timeshare strategy - impairment charges 5			614				—				(614	)			—			—				—				—				—			—			—
Reimbursed costs			7,682				—				—				—			7,682				8,834				—				—			8,834			13
Restructuring costs			51				(51	)			—				—			—				55				(55	)			—			—			—
General, administrative and other 7			722				(100	)			—				—			622				803				(54	)			—			749			17
Total Expenses			11,060				(150	)			(614	)			—			10,296				12,114				(106	)			—			12,008			14
OPERATING (LOSS) / INCOME			(152	)			174				614				—			636				765				167				—			932			(32	)
Gains and other income 8			31				—				—				—			31				38				9				—			47			(34	)
Interest expense			(118	)			—				—				—			(118	)			(163	)			—				—			(163	)		28
Interest income			25				—				—				—			25				39				—				—			39			(36	)
Equity in (losses) earnings 9			(66	)			39				—				—			(27	)			15				16				—			31			(187	)
Timeshare strategy - impairment charges (non-operating) 10			(138	)			—				138				—			—				—				—				—			—			—
(LOSS) / INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES			(418	)			213				752				—			547				694				192				—			886			(38	)
Benefit / (Provision) for income taxes			65				(83	)			(250	)			56			(212	)			(350	)			(68	)			72			(346	)		39
(LOSS) / INCOME FROM CONTINUING OPERATIONS			(353	)			130				502				56			335				344				124				72			540			(38	)
Discontinued operations - Synthetic Fuel, net of tax 11			—				—				—				—			—				3				—				—			3			(100	)
NET (LOSS) / INCOME			(353	)			130				502				56			335				347				124				72			543			(38	)
Add: Net losses attributable to noncontrolling interests, net of tax			7				—				—				—			7				15				—				—			15			(53	)
NET (LOSS) / INCOME ATTRIBUTABLE TO MARRIOTT		$	(346	)		$	130			$	502			$	56		$	342			$	362			$	124			$	72		$	558			(39	)
(LOSSES) / EARNINGS PER SHARE - Basic 13
(Losses) / earnings from continuing operations attributable to Marriott shareholders 12		$	(0.97	)		$	0.37			$	1.41			$	0.16		$	0.96			$	1.01			$	0.35			$	0.20		$	1.56			(38	)
Earnings from discontinued operations 11			—				—				—				—			—				0.01				—				—			0.01			(100	)
(Losses) / earnings per share attributable to Marriott shareholders 12		$	(0.97	)		$	0.37			$	1.41			$	0.16		$	0.96			$	1.02			$	0.35			$	0.20		$	1.57			(39	)
(LOSSES) / EARNINGS PER SHARE - Diluted 13
(Losses) / earnings from continuing operations attributable to Marriott shareholders 12		$	(0.97	)		$	0.37			$	1.41			$	0.16		$	0.93			$	0.97			$	0.33			$	0.19		$	1.49			(38	)
Earnings from discontinued operations 11			—				—				—				—			—				0.01				—				—			0.01			(100	)
(Losses) / earnings per share attributable to Marriott shareholders 12		$	(0.97	)		$	0.37			$	1.41			$	0.16		$	0.93			$	0.98			$	0.33			$	0.19		$	1.50			(38	)
Basic Shares 13			356.4				356.4				356.4				356.4			356.4				355.6				355.6				355.6			355.6
Diluted Shares 13,14			356.4				356.4				356.4				356.4			367.4				370.7				370.7				370.7			370.7

 

**	Denotes non-GAAP financial measures. Please see pages A-27 and A-28 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

See page A-3 for footnote references.

 

A-2

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MARRIOTT INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share amounts)

Reconciliations of Consolidated Income / (Loss) from Continuing Operations to Income / (Loss) from Continuing Operations Attributable to Marriott

 

						Adjustments																Adjustments									Percent Better/ (Worse) Adjusted 2009 vs. Adjusted 2008
		As Reported 16 Weeks Ended January 1, 2010				Restructuring Costs & Other Charges6			As Adjusted 16 Weeks Ended January 1, 2010**									As Reported 17 Weeks Ended January 2, 2009				Restructuring Costs & Other Charges6			Certain Tax Items			As Adjusted 17 Weeks Ended January 2, 2009**
CONSOLIDATED INCOME / (LOSS) FROM CONTINUING OPERATIONS		$	106			$	12		$	118								$	(12	)		$	124		$	7		$	119		(1	)
Add: Losses attributable to noncontrolling interests, net of tax			—				—			—									2				—			—			2		(100	)
INCOME / (LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO MARRIOTT		$	106			$	12		$	118								$	(10	)		$	124		$	7		$	121		(2	)
						Adjustments																Adjustments									Percent Better/ (Worse) Adjusted 2009 vs. Adjusted 2008
		As Reported 52 Weeks Ended January 1, 2010				Restructuring Costs & Other Charges6			Timeshare Strategy - Impairment Charges5,10			Certain Tax Items			As Adjusted 52 Weeks Ended January 1, 2010**			As Reported 53 Weeks Ended January 2, 2009				Restructuring Costs & Other Charges6			Certain Tax Items			As Adjusted 53 Weeks Ended January 2, 2009**
CONSOLIDATED (LOSS) / INCOME FROM CONTINUING OPERATIONS		$	(353	)		$	130		$	502		$	56		$	335		$	344			$	124		$	72		$	540		(38	)
Add: Losses attributable to noncontrolling interests, net of tax			7				—			—			—			7			15				—			—			15		(53	)
(LOSS) / INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO MARRIOTT		$	(346	)		$	130		$	502		$	56		$	342		$	359			$	124		$	72		$	555		(38	)

 

**				Denotes non-GAAP financial measures. Please see pages A-27 and A-28 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.
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, incentive management fees, cost reimbursements, real estate gains and joint venture earnings. Timeshare sales and services also includes gains / (losses) on the sale of timeshare note receivable securitizations.
3		–		Cost reimbursements include reimbursements from lodging properties for Marriott-funded operating expenses.
4		–		Owned, leased and corporate housing—direct expenses include operating expenses related to our owned or leased hotels, including lease payments, pre-opening expenses and depreciation, plus expenses related to our corporate housing business.
5		–		Reflects the following 2009 third quarter impairments: inventory $529 million, property and equipment $64 million; and other impairments $21 million, all of which are allocated to the Timeshare segment. See page A-16 for information regarding Timeshare Strategy—Impairment Charges.
6		–		Refer to page A-15 for information regarding Restructuring and Other Charges.
7		–		General, administrative and other expenses include the overhead costs allocated to our segments, and our corporate overhead costs and general expenses.
8		–		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.
9		–		Equity in (losses) earnings includes our equity in (losses) / earnings of unconsolidated equity method joint ventures.
10		–		Reflects the 2009 third quarter $71 million joint venture impairment charge which is allocated to the Timeshare segment and $67 million loan impairment and funding liability charge which is unallocated. See page A-16 for information regarding Timeshare Strategy—Impairment Charges.
11		–		Discontinued operations relates to our Synthetic Fuel business which was shut down and substantially all the assets liquidated at December 28, 2007.
12		–		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.
13		–		All 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.
14		–		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-3

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MARRIOTT INTERNATIONAL, INC.

BUSINESS SEGMENTS

($ in millions)

 

		Quarter Ended3								Percent Better/
		January 1, 2010				January 2, 2009				(Worse)
REVENUES
North American Full-Service		$	1,466			$	1,714			(14	)
North American Limited-Service			585				663			(12	)
International			389				451			(14	)
Luxury			442				512			(14	)
Timeshare			477				424			13
Total segment revenues 1			3,359				3,764			(11	)
Other unallocated corporate			21				20			5
Total		$	3,380			$	3,784			(11	)
INCOME / (LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO MARRIOTT
North American Full-Service		$	81			$	129			(37	)
North American Limited-Service			83				94			(12	)
International			40				67			(40	)
Luxury			17				12			42
Timeshare 2			54				(95	)		157
Total segment financial results 1			275				207			33
Other unallocated corporate			(72	)			(143	)		50
Interest income and interest expense			(29	)			(39	)		26
Income taxes 2			(68	)			(35	)		(94	)
Total		$	106			$	(10	)		1,160

 

1	We consider segment revenues and segment financial results to be meaningful indicators of our performance because they measure changes in our profitability as a lodging company and enable investors to compare the revenues and results of our lodging operations to those of other lodging companies.

2	We allocate noncontrolling interests of our consolidated subsidiaries to our segments. For the 2008 fourth quarter, we allocated $2 million of noncontrolling interests as follows: $4 million to our Timeshare segment and $(2) million to provision for income taxes.

3	There were 16 weeks in the quarter ended January 1, 2010 and 17 weeks in the quarter ended January 2, 2009.

 

A-4

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MARRIOTT INTERNATIONAL, INC.

BUSINESS SEGMENTS

($ in millions)

 

		Year Ended5								Percent
		January 1, 2010				January 2, 2009				Better/ (Worse)
REVENUES
North American Full-Service		$	4,848			$	5,631			(14	)
North American Limited-Service			1,986				2,233			(11	)
International			1,145				1,544			(26	)
Luxury			1,413				1,659			(15	)
Timeshare			1,439				1,750			(18	)
Total segment revenues 1			10,831				12,817			(15	)
Other unallocated corporate			77				62			24
Total		$	10,908			$	12,879			(15	)
INCOME / (LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO MARRIOTT
North American Full-Service		$	272			$	419			(35	)
North American Limited-Service			265				395			(33	)
International 3			129				246			(48	)
Luxury			17				78			(78	)
Timeshare 2,3			(679	)			28			(2525	)
Total segment financial results 1			4				1,166			(100	)
Other unallocated corporate 4			(318	)			(324	)		2
Interest income and interest expense			(93	)			(124	)		25
Income taxes 3			61				(359	)		117
Total		$	(346	)		$	359			(196	)

 

1	We consider segment revenues and segment financial results to be meaningful indicators of our performance because they measure changes in our profitability as a lodging company and enable investors to compare the revenues and results of our lodging operations to those of other lodging companies.

2	Reflects $685 million of impairment charges recorded in the 2009 third quarter.

3

We allocate noncontrolling interests of our consolidated subsidiaries to our segments. Accordingly, we allocated $7 million of noncontrolling interests of our consolidated subsidiaries in 2009 as reflected in our income statement as follows: $11 million to our Timeshare segment and $(4) million to provision for income taxes. In 2008, we allocated $15 million of noncontrolling interests as follows: $25 million to our Timeshare segment, $(1) million to our International segment, and $(9) million to provision for income taxes.

4	Reflects a $67 million loan impairment and funding liability charge in the 2009 third quarter which is unallocated. See page A-16 for additional information.

5	There were 52 weeks in the year ended January 1, 2010 and 53 weeks in the year ended January 2, 2009.

 

A-5

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MARRIOTT INTERNATIONAL, INC.

TOTAL LODGING PRODUCTS ¹

 

		Number of Properties							Number of Rooms/Suites
Brand		January 1, 2010		January 2, 2009		vs. January 2, 2009			January 1, 2010		January 2, 2009		vs. January 2, 2009
Domestic Full-Service
Marriott Hotels & Resorts		353		348		5			140,160		138,613		1,547
Renaissance Hotels & Resorts		79		76		3			28,918		27,774		1,144
Domestic Limited-Service
Courtyard		768		728		40			107,640		101,743		5,897
Fairfield Inn		620		560		60			55,622		49,678		5,944
SpringHill Suites		255		207		48			29,846		24,027		5,819
Residence Inn		591		555		36			70,995		66,252		4,743
TownePlace Suites		184		163		21			18,451		16,328		2,123
International
Marriott Hotels & Resorts		192		183		9			58,595		54,617		3,978
Renaissance Hotels & Resorts		64		65		(1	)		21,664		21,615		49
Courtyard		90		80		10			17,566		15,515		2,051
Fairfield Inn		9		9		—			1,109		1,109		—
SpringHill Suites		1		1		—			124		124		—
Residence Inn		17		18		(1	)		2,417		2,665		(248	)
Marriott Executive Apartments		23		20		3			3,880		3,217		663
Luxury
The Ritz-Carlton - Domestic		40		37		3			12,115		11,629		486
The Ritz-Carlton - International		34		33		1			10,171		10,204		(33	)
Bulgari Hotels & Resorts		2		2		—			117		117		—
The Ritz-Carlton Residential		26		23		3			2,706		2,269		437
The Ritz-Carlton Serviced Apartments		3		3		—			474		478		(4	)
Timeshare 2
Marriott Vacation Club 3		52		51		1			11,854		11,797		57
The Ritz-Carlton Destination Club		9		10		(1	)		461		456		5
The Ritz-Carlton Residences		4		3		1			237		148		89
Grand Residences by Marriott - Fractional		2		2		—			248		241		7
Grand Residences by Marriott - Residential		2		1		1			91		65		26
Sub Total Timeshare		69		67		2			12,891		12,707		184
Total		3,420		3,178		242			595,461		560,681		34,780
Number of Timeshare Interval, Fractional and Residential Resorts
		Total Properties 2		Properties in Active Sales 4
100% Company-Developed
Marriott Vacation Club 3		52		29
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		69		45

 

1	Total Lodging Products excludes the 2,072 and 2,332 corporate housing rental units as of January 1, 2010 and January 2, 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-6

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MARRIOTT INTERNATIONAL, INC.

KEY LODGING STATISTICS

Constant $

Comparable Company-Operated International Properties¹

 

 

		Four Months Ended December 31, 2009 and December 31, 2008
		REVPAR						Occupancy						Average Daily Rate
Region		2009			vs. 2008			2009			vs. 2008			2009			vs. 2008
Caribbean & Latin America		$	109.05		-16.4	%		65.9	%		-3.1	% pts.		$	165.45		-12.4	%
Continental Europe		$	121.11		-11.1	%		70.6	%		0.6	% pts.		$	171.44		-11.9	%
United Kingdom		$	110.38		-5.7	%		74.5	%		0.0	% pts.		$	148.16		-5.7	%
Middle East & Africa		$	98.17		-13.9	%		71.9	%		-2.4	% pts.		$	136.59		-11.0	%
Asia Pacific2		$	91.49		-8.1	%		69.4	%		4.4	% pts.		$	131.86		-13.9	%
Regional Composite3		$	107.59		-10.6	%		70.4	%		0.6	% pts.		$	152.88		-11.4	%
International Luxury4		$	173.30		-17.1	%		57.2	%		-1.5	% pts.		$	303.07		-14.9	%
Total International5		$	114.21		-11.7	%		69.0	%		0.4	% pts.		$	165.41		-12.2	%
Worldwide6		$	97.26		-12.4	%		64.8	%		-0.9	% pts.		$	150.05		-11.2	%

Comparable Systemwide International Properties¹

 

 

		Four Months Ended December 31, 2009 and December 31, 2008
		REVPAR						Occupancy						Average Daily Rate
Region		2009			vs. 2008			2009			vs. 2008			2009			vs. 2008
Caribbean & Latin America		$	94.13		-15.2	%		63.9	%		-2.5	% pts.		$	147.24		-11.9	%
Continental Europe		$	119.20		-11.8	%		69.5	%		0.2	% pts.		$	171.56		-12.1	%
United Kingdom		$	108.89		-6.0	%		74.1	%		-0.1	% pts.		$	147.03		-5.9	%
Middle East & Africa		$	98.17		-13.9	%		71.9	%		-2.4	% pts.		$	136.59		-11.0	%
Asia Pacific2		$	98.49		-9.9	%		69.1	%		2.3	% pts.		$	142.57		-13.0	%
Regional Composite3		$	106.59		-11.2	%		69.3	%		0.1	% pts.		$	153.77		-11.3	%
International Luxury4		$	173.30		-17.1	%		57.2	%		-1.5	% pts.		$	303.07		-14.9	%
Total International5		$	112.08		-12.0	%		68.3	%		0.0	% pts.		$	164.06		-12.0	%
Worldwide6		$	81.10		-12.5	%		62.8	%		-1.7	% pts.		$	129.11		-10.1	%

 

1

We report international results on a period basis, and international statistics on a monthly basis. Statistics are in constant dollars for September through December. International includes properties located outside the Continental United States and Canada, except for Worldwide which also includes North America.

2	Does not include Hawaii.

3	Regional information includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts and Courtyard brands. Includes Hawaii.

4	International Luxury includes The Ritz-Carlton properties outside of North America and Bulgari Hotels & Resorts.

5	Includes Regional Composite and International Luxury.

6

Includes international statistics for the four calendar months ended December 31, 2009 and December 31, 2008, and North American statistics for the sixteen weeks ended January 1, 2010 and the seventeen weeks ended January 2, 2009. Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts, The Ritz-Carlton, Bulgari Hotels & Resorts, Residence Inn, Courtyard, Fairfield Inn, TownePlace Suites and SpringHill Suites brands.

 

A-7

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MARRIOTT INTERNATIONAL, INC.

KEY LODGING STATISTICS

Constant $

Comparable Company-Operated International Properties¹

 

 

		Twelve Months Ended December 31, 2009 and December 31, 2008
		REVPAR						Occupancy						Average Daily Rate
Region		2009			vs. 2008			2009			vs. 2008			2009			vs. 2008
Caribbean & Latin America		$	117.59		-19.8	%		67.0	%		-7.6	% pts.		$	175.43		-10.8	%
Continental Europe		$	107.83		-16.0	%		66.9	%		-3.3	% pts.		$	161.17		-11.9	%
United Kingdom		$	101.41		-11.1	%		72.5	%		-3.0	% pts.		$	139.81		-7.5	%
Middle East & Africa		$	94.21		-18.9	%		68.6	%		-9.1	% pts.		$	137.31		-8.1	%
Asia Pacific2		$	80.80		-21.1	%		63.6	%		-4.5	% pts.		$	127.12		-15.5	%
Regional Composite3		$	100.44		-17.1	%		67.3	%		-4.6	% pts.		$	149.15		-11.4	%
International Luxury4		$	179.99		-22.1	%		56.8	%		-7.2	% pts.		$	317.16		-12.2	%
Total International5		$	108.45		-18.0	%		66.3	%		-4.9	% pts.		$	163.64		-11.9	%
Worldwide6		$	96.86		-18.3	%		65.2	%		-5.0	% pts.		$	148.61		-12.1	%

Comparable Systemwide International Properties¹

 

 

		Twelve Months Ended December 31, 2009 and December 31, 2008
		REVPAR						Occupancy						Average Daily Rate
Region		2009			vs. 2008			2009			vs. 2008			2009			vs. 2008
Caribbean & Latin America		$	101.02		-19.6	%		63.6	%		-6.9	% pts.		$	158.85		-10.8	%
Continental Europe		$	106.00		-16.9	%		65.3	%		-4.0	% pts.		$	162.33		-11.8	%
United Kingdom		$	100.03		-11.3	%		72.0	%		-3.0	% pts.		$	139.01		-7.6	%
Middle East & Africa		$	94.21		-18.9	%		68.6	%		-9.1	% pts.		$	137.31		-8.1	%
Asia Pacific2		$	87.33		-19.3	%		64.1	%		-5.1	% pts.		$	136.15		-12.9	%
Regional Composite3		$	99.11		-17.2	%		66.1	%		-4.9	% pts.		$	149.93		-11.0	%
International Luxury4		$	179.99		-22.1	%		56.8	%		-7.2	% pts.		$	317.16		-12.2	%
Total International5		$	105.78		-17.9	%		65.3	%		-5.1	% pts.		$	161.89		-11.5	%
Worldwide6		$	82.83		-17.3	%		64.2	%		-4.9	% pts.		$	128.92		-10.9	%

 

1

We report international results on a period basis, and international statistics on a monthly basis. Statistics are in constant dollars for January through December. International includes properties located outside the Continental United States and Canada, except for Worldwide which also includes North America.

2	Does not include Hawaii.

3	Regional information includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts and Courtyard brands. Includes Hawaii.

4	International Luxury includes The Ritz-Carlton properties outside of North America and Bulgari Hotels & Resorts.

5	Includes Regional Composite and International Luxury.

6

Includes international statistics for the twelve calendar months ended December 31, 2009 and December 31, 2008, and North American statistics for the fifty-two weeks ended January 1, 2010 and the fifty-three weeks ended January 2, 2009. Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts, The Ritz-Carlton, Bulgari Hotels & Resorts, Residence Inn, Courtyard, Fairfield Inn, TownePlace Suites and SpringHill Suites brands.

 

A-8

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MARRIOTT INTERNATIONAL, INC.

KEY LODGING STATISTICS

(Excludes 53rd Week of 2008 for North America)

Comparable Company-Operated North American Properties¹

 

 

		Sixteen Weeks Ended January 1, 2010 and January 2, 2009
		REVPAR						Occupancy						Average Daily Rate
Brand		2009			vs. 2008			2009			vs. 2008			2009			vs. 2008
Marriott Hotels & Resorts		$	104.04		-11.1	%		65.0	%		-0.2	% pts.		$	160.11		-10.9	%
Renaissance Hotels & Resorts		$	96.24		-12.5	%		63.4	%		-0.4	% pts.		$	151.82		-11.9	%
Composite North American Full-Service2		$	102.69		-11.3	%		64.7	%		-0.2	% pts.		$	158.70		-11.1	%
The Ritz-Carlton3		$	169.42		-11.6	%		60.8	%		1.0	% pts.		$	278.52		-13.0	%
Composite North American Full-Service & Luxury4		$	109.42		-11.4	%		64.3	%		-0.1	% pts.		$	170.12		-11.3	%
Residence Inn		$	74.33		-12.9	%		67.2	%		-1.7	% pts.		$	110.55		-10.6	%
Courtyard		$	63.88		-15.9	%		59.4	%		-1.9	% pts.		$	107.57		-13.2	%
TownePlace Suites		$	41.61		-26.5	%		57.1	%		-8.6	% pts.		$	72.83		-15.4	%
SpringHill Suites		$	55.25		-14.7	%		59.3	%		-2.0	% pts.		$	93.22		-11.8	%
Composite North American Limited-Service5		$	64.87		-15.3	%		61.5	%		-2.2	% pts.		$	105.51		-12.2	%
Composite - All6		$	90.40		-12.6	%		63.1	%		-1.0	% pts.		$	143.25		-11.2	%

Comparable Systemwide North American Properties¹

 

 

		Sixteen Weeks Ended January 1, 2010 and January 2, 2009
		REVPAR						Occupancy						Average Daily Rate
Brand		2009			vs. 2008			2009			vs. 2008			2009			vs. 2008
Marriott Hotels & Resorts		$	89.76		-11.8	%		61.9	%		-0.9	% pts.		$	145.12		-10.6	%
Renaissance Hotels & Resorts		$	86.11		-12.1	%		62.4	%		-0.3	% pts.		$	137.91		-11.8	%
Composite North American Full-Service2		$	89.15		-11.9	%		62.0	%		-0.8	% pts.		$	143.90		-10.8	%
The Ritz-Carlton3		$	169.42		-11.6	%		60.8	%		1.0	% pts.		$	278.52		-13.0	%
Composite North American Full-Service & Luxury4		$	93.95		-11.9	%		61.9	%		-0.7	% pts.		$	151.82		-10.9	%
Residence Inn		$	75.57		-11.3	%		68.2	%		-1.6	% pts.		$	110.81		-9.2	%
Courtyard		$	65.60		-13.9	%		60.1	%		-2.3	% pts.		$	109.09		-10.6	%
Fairfield Inn		$	46.62		-12.7	%		57.2	%		-3.0	% pts.		$	81.56		-8.1	%
TownePlace Suites		$	46.21		-17.0	%		59.3	%		-4.0	% pts.		$	77.98		-11.3	%
SpringHill Suites		$	56.37		-13.4	%		59.9	%		-2.1	% pts.		$	94.09		-10.4	%
Composite North American Limited-Service5		$	62.70		-13.0	%		61.6	%		-2.3	% pts.		$	101.79		-9.7	%
Composite - All6		$	74.90		-12.5	%		61.7	%		-1.7	% pts.		$	121.37		-10.1	%

 

1	North America includes properties located in the Continental United States and Canada.

2	Includes the Marriott Hotels & Resorts and Renaissance Hotels & Resorts brands.

3	Statistics for The Ritz-Carlton are for September through December.

4	Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts and The Ritz-Carlton brands.

5	Includes the Residence Inn, Courtyard, Fairfield Inn, TownePlace Suites and SpringHill Suites brands.

6	Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts, The Ritz-Carlton, Residence Inn, Courtyard, Fairfield Inn, TownePlace Suites, and SpringHill Suites brands.

 

A-9

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MARRIOTT INTERNATIONAL, INC.

KEY LODGING STATISTICS

(Excludes 53rd Week of 2008 for North America)

Comparable Company-Operated North American Properties¹

 

 

		Fifty-two Weeks Ended January 1, 2010 and January 2, 2009
		REVPAR						Occupancy						Average Daily Rate
Brand		2009			vs. 2008			2009			vs. 2008			2009			vs. 2008
Marriott Hotels & Resorts		$	104.60		-17.9	%		66.3	%		-4.8	% pts.		$	157.81		-11.9	%
Renaissance Hotels & Resorts		$	100.42		-16.7	%		65.3	%		-4.6	% pts.		$	153.71		-10.8	%
Composite North American Full-Service2		$	103.87		-17.7	%		66.1	%		-4.8	% pts.		$	157.10		-11.7	%
The Ritz-Carlton3		$	172.61		-23.1	%		61.5	%		-6.5	% pts.		$	280.76		-14.9	%
Composite North American Full-Service & Luxury4		$	110.30		-18.5	%		65.7	%		-4.9	% pts.		$	167.93		-12.4	%
Residence Inn		$	79.38		-17.1	%		69.5	%		-5.8	% pts.		$	114.27		-10.1	%
Courtyard		$	67.15		-22.5	%		61.2	%		-6.4	% pts.		$	109.78		-14.4	%
TownePlace Suites		$	47.45		-21.8	%		61.3	%		-8.0	% pts.		$	77.40		-11.6	%
SpringHill Suites		$	59.63		-20.7	%		61.3	%		-7.4	% pts.		$	97.32		-11.2	%
Composite North American Limited-Service5		$	68.83		-20.8	%		63.5	%		-6.4	% pts.		$	108.33		-12.8	%
Composite - All6		$	92.52		-19.3	%		64.8	%		-5.6	% pts.		$	142.86		-12.3	%

Comparable Systemwide North American Properties¹

 

 

		Fifty-two Weeks Ended January 1, 2010 and January 2, 2009
		REVPAR						Occupancy						Average Daily Rate
Brand		2009			vs. 2008			2009			vs. 2008			2009			vs. 2008
Marriott Hotels & Resorts		$	92.09		-18.2	%		63.4	%		-5.1	% pts.		$	145.16		-11.7	%
Renaissance Hotels & Resorts		$	89.75		-17.1	%		63.8	%		-4.7	% pts.		$	140.75		-11.0	%
Composite North American Full-Service2		$	91.70		-18.0	%		63.5	%		-5.0	% pts.		$	144.42		-11.6	%
The Ritz-Carlton3		$	172.61		-23.1	%		61.5	%		-6.5	% pts.		$	280.76		-14.9	%
Composite North American Full-Service & Luxury4		$	96.18		-18.6	%		63.4	%		-5.1	% pts.		$	151.75		-12.0	%
Residence Inn		$	80.48		-15.3	%		70.7	%		-5.0	% pts.		$	113.86		-9.2	%
Courtyard		$	69.87		-19.2	%		62.8	%		-5.7	% pts.		$	111.20		-11.8	%
Fairfield Inn		$	51.41		-16.3	%		60.8	%		-5.8	% pts.		$	84.62		-8.3	%
TownePlace Suites		$	51.24		-17.7	%		62.8	%		-6.5	% pts.		$	81.60		-9.3	%
SpringHill Suites		$	62.01		-16.9	%		62.7	%		-5.7	% pts.		$	98.97		-9.4	%
Composite North American Limited-Service5		$	67.40		-17.3	%		64.5	%		-5.6	% pts.		$	104.55		-10.2	%
Composite - All6		$	78.59		-17.9	%		64.0	%		-5.4	% pts.		$	122.71		-11.0	%

 

1	North America includes properties located in the Continental United States and Canada.

2	Includes the Marriott Hotels & Resorts and Renaissance Hotels & Resorts brands.

3	Statistics for The Ritz-Carlton are for January through December.

4	Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts and The Ritz-Carlton brands.

5	Includes the Residence Inn, Courtyard, Fairfield Inn, TownePlace Suites and SpringHill Suites brands.

6	Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts, The Ritz-Carlton, Residence Inn, Courtyard, Fairfield Inn, TownePlace Suites, and SpringHill Suites brands.

 

A-10

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MARRIOTT INTERNATIONAL, INC.

KEY LODGING STATISTICS

Comparable Company-Operated North American Properties¹

 

 

		Sixteen Weeks Ended January 1, 2010 and Seventeen Weeks Ended January 2, 2009
		REVPAR						Occupancy						Average Daily Rate
Brand		2009			vs. 2008			2009			vs. 2008			2009			vs. 2008
Marriott Hotels & Resorts		$	104.04		-11.9	%		65.0	%		-0.6	% pts.		$	160.11		-11.1	%
Renaissance Hotels & Resorts		$	96.24		-13.4	%		63.4	%		-0.9	% pts.		$	151.82		-12.1	%
Composite North American Full-Service2		$	102.69		-12.2	%		64.7	%		-0.7	% pts.		$	158.70		-11.2	%
The Ritz-Carlton3		$	169.42		-11.6	%		60.8	%		1.0	% pts.		$	278.52		-13.0	%
Composite North American Full-Service & Luxury4		$	109.42		-11.8	%		64.3	%		-0.6	% pts.		$	170.12		-11.0	%
Residence Inn		$	74.33		-13.6	%		67.2	%		-2.2	% pts.		$	110.55		-10.8	%
Courtyard		$	63.88		-17.0	%		59.4	%		-2.4	% pts.		$	107.57		-13.6	%
TownePlace Suites		$	41.61		-26.7	%		57.1	%		-8.8	% pts.		$	72.83		-15.3	%
SpringHill Suites		$	55.25		-15.5	%		59.3	%		-2.3	% pts.		$	93.22		-12.1	%
Composite North American Limited-Service5		$	64.87		-16.2	%		61.5	%		-2.6	% pts.		$	105.51		-12.6	%
Composite - All6		$	90.40		-13.1	%		63.1	%		-1.4	% pts.		$	143.25		-11.1	%
Comparable Systemwide North American Properties1
		Sixteen Weeks Ended January 1, 2010 and Seventeen Weeks Ended January 2, 2009
		REVPAR						Occupancy						Average Daily Rate
Brand		2009			vs. 2008			2009			vs. 2008			2009			vs. 2008
Marriott Hotels & Resorts		$	89.76		-12.6	%		61.9	%		-1.3	% pts.		$	145.12		-10.8	%
Renaissance Hotels & Resorts		$	86.11		-13.1	%		62.4	%		-0.7	% pts.		$	137.91		-12.1	%
Composite North American Full-Service2		$	89.15		-12.7	%		62.0	%		-1.2	% pts.		$	143.90		-11.0	%
The Ritz-Carlton3		$	169.42		-11.6	%		60.8	%		1.0	% pts.		$	278.52		-13.0	%
Composite North American Full-Service & Luxury4		$	93.95		-12.3	%		61.9	%		-1.1	% pts.		$	151.82		-10.8	%
Residence Inn		$	75.57		-12.0	%		68.2	%		-2.0	% pts.		$	110.81		-9.4	%
Courtyard		$	65.60		-14.9	%		60.1	%		-2.8	% pts.		$	109.09		-11.0	%
Fairfield Inn		$	46.62		-13.6	%		57.2	%		-3.3	% pts.		$	81.56		-8.5	%
TownePlace Suites		$	46.21		-17.7	%		59.3	%		-4.4	% pts.		$	77.98		-11.5	%
SpringHill Suites		$	56.37		-14.3	%		59.9	%		-2.5	% pts.		$	94.09		-10.8	%
Composite North American Limited-Service5		$	62.70		-13.9	%		61.6	%		-2.8	% pts.		$	101.79		-10.0	%
Composite - All6		$	74.90		-13.1	%		61.7	%		-2.1	% pts.		$	121.37		-10.1	%

 

1	North America includes properties located in the Continental United States and Canada.

2	Includes the Marriott Hotels & Resorts and Renaissance Hotels & Resorts brands.

3	Statistics for The Ritz-Carlton are for September through December.

4	Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts and The Ritz-Carlton brands.

5	Includes the Residence Inn, Courtyard, Fairfield Inn, TownePlace Suites and SpringHill Suites brands.

6	Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts, The Ritz-Carlton, Residence Inn, Courtyard, Fairfield Inn, TownePlace Suites, and SpringHill Suites brands.

 

A-11

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MARRIOTT INTERNATIONAL, INC.

KEY LODGING STATISTICS

Comparable Company-Operated North American Properties¹

 

 

		Fifty-two Weeks Ended January 1, 2010 and Fifty-three Weeks Ended January 2, 2009
		REVPAR						Occupancy						Average Daily Rate
Brand		2009			vs. 2008			2009			vs. 2008			2009			vs. 2008
Marriott Hotels & Resorts		$	104.60		-17.2	%		66.3	%		-4.3	% pts.		$	157.81		-11.8	%
Renaissance Hotels & Resorts		$	100.42		-16.1	%		65.3	%		-4.2	% pts.		$	153.71		-10.7	%
Composite North American Full-Service2		$	103.87		-17.0	%		66.1	%		-4.3	% pts.		$	157.10		-11.6	%
The Ritz-Carlton3		$	172.61		-23.1	%		61.5	%		-6.5	% pts.		$	280.76		-14.9	%
Composite North American Full-Service & Luxury4		$	110.30		-17.8	%		65.7	%		-4.5	% pts.		$	167.93		-12.2	%
Residence Inn		$	79.38		-16.4	%		69.5	%		-5.3	% pts.		$	114.27		-10.0	%
Courtyard		$	67.15		-21.7	%		61.2	%		-5.8	% pts.		$	109.78		-14.2	%
TownePlace Suites		$	47.45		-21.1	%		61.3	%		-7.4	% pts.		$	77.40		-11.5	%
SpringHill Suites		$	59.63		-20.0	%		61.3	%		-6.9	% pts.		$	97.32		-11.0	%
Composite North American Limited-Service5		$	68.83		-20.0	%		63.5	%		-5.8	% pts.		$	108.33		-12.7	%
Composite - All6		$	92.52		-18.5	%		64.8	%		-5.1	% pts.		$	142.86		-12.2	%

Comparable Systemwide North American Properties¹

 

 

		Fifty-two Weeks Ended January 1, 2010 and Fifty-three Weeks Ended January 2, 2009
		REVPAR						Occupancy						Average Daily Rate
Brand		2009			vs. 2008			2009			vs. 2008			2009			vs. 2008
Marriott Hotels & Resorts		$	92.09		-17.5	%		63.4	%		-4.6	% pts.		$	145.16		-11.6	%
Renaissance Hotels & Resorts		$	89.75		-16.5	%		63.8	%		-4.3	% pts.		$	140.75		-10.9	%
Composite North American Full-Service2		$	91.70		-17.3	%		63.5	%		-4.5	% pts.		$	144.42		-11.5	%
The Ritz-Carlton3		$	172.61		-23.1	%		61.5	%		-6.5	% pts.		$	280.76		-14.9	%
Composite North American Full-Service & Luxury4		$	96.18		-17.9	%		63.4	%		-4.6	% pts.		$	151.75		-11.9	%
Residence Inn		$	80.48		-14.6	%		70.7	%		-4.5	% pts.		$	113.86		-9.2	%
Courtyard		$	69.87		-18.3	%		62.8	%		-5.1	% pts.		$	111.20		-11.7	%
Fairfield Inn		$	51.41		-15.6	%		60.8	%		-5.4	% pts.		$	84.62		-8.1	%
TownePlace Suites		$	51.24		-16.9	%		62.8	%		-5.9	% pts.		$	81.60		-9.2	%
SpringHill Suites		$	62.01		-16.1	%		62.7	%		-5.2	% pts.		$	98.97		-9.2	%
Composite North American Limited-Service5		$	67.40		-16.6	%		64.5	%		-5.1	% pts.		$	104.55		-10.0	%
Composite - All6		$	78.59		-17.2	%		64.0	%		-4.9	% pts.		$	122.71		-10.9	%

 

1	North America includes properties located in the Continental United States and Canada.

2	Includes the Marriott Hotels & Resorts and Renaissance Hotels & Resorts brands.

3	Statistics for The Ritz-Carlton are for January through December.

4	Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts and The Ritz-Carlton brands.

5	Includes the Residence Inn, Courtyard, Fairfield Inn, TownePlace Suites and SpringHill Suites brands.

6	Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts, The Ritz-Carlton, Residence Inn, Courtyard, Fairfield Inn, TownePlace Suites, and SpringHill Suites brands.

 

A-12

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MARRIOTT INTERNATIONAL, INC.

TIMESHARE SEGMENT

($ in millions)

 

						Adjustments															Adjustments
		As Reported 16 Weeks Ended January 1, 2010				Restructuring Costs & Other Charges				Timeshare Strategy - Impairment Charges			As Adjusted 16 Weeks Ended January 1, 2010**				As Reported 17 Weeks Ended January 2, 2009				Restructuring Costs & Other Charges			As Adjusted 17 Weeks Ended January 2, 2009**				Percent Better / (Worse) As Adjusted 2009 vs. As Adjusted 2008
Segment Revenues
Segment revenues		$	477			$	(2	)		$	—		$	475			$	424			$	61		$	485			(2	)
Segment Results
Base fees revenue		$	15			$	—			$	—		$	15			$	7			$	—		$	7			114
Timeshare sales and services, net			74				(2	)			—			72				(48	)			58			10			620
Timeshare strategy - impairment charges			—				—				—			—				—				—			—			—
Restructuring costs			(7	)			7				—			—				(28	)			28			—			—
General, administrative and other expense			(23	)			—				—			(23	)			(32	)			—			(32	)		28
Gains and other income			1				—				—			1				—				—			—			*
Joint venture equity earnings			(6	)			3				—			(3	)			2				7			9			(133	)
Timeshare strategy - impairment charges (non-operating)			—				—				—			—				—				—			—			—
Noncontrolling interest			—				—				—			—				4				—			4			(100	)
Segment results		$	54			$	8			$	—		$	62			$	(95	)		$	93		$	(2	)		3,200
Sales and Services Revenue
Development		$	185			$	—			$	—		$	185			$	231			$	17		$	248			(25	)
Services			98				—				—			98				92				—			92			7
Financing			76				(2	)			—			74				(1	)			44			43			72
Other revenue			18				—				—			18				3				—			3			500
Sales and services revenue		$	377			$	(2	)		$	—		$	375			$	325			$	61		$	386			(3	)
Contract Sales
Company:
Timeshare		$	183			$	—			$	—		$	183			$	222			$	—		$	222			(18	)
Fractional			3				3				—			6				1				2			3			100
Residential			9				—				—			9				(23	)			16			(7	)		229
Total company			195				3				—			198				200				18			218			(9	)
Joint ventures:
Timeshare			—				—				—			—				—				—			—			—
Fractional			(12	)			17				—			5				(23	)			21			(2	)		350
Residential			(8	)			8				—			—				(74	)			76			2			(100	)
Total joint ventures			(20	)			25				—			5				(97	)			97			—			*
Total contract sales, including joint ventures		$	175			$	28			$	—		$	203			$	103			$	115		$	218			(7	)
Gain / (Loss) on Notes Sold
Gain / (loss) on notes sold		$	38			$	—			$	—		$	38			$	(12	)		$	12		$	—			*

 

*	Percent cannot be calculated.

**	Denotes non-GAAP financial measures. Please see pages A-27 and A-28 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

 

A-13

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MARRIOTT INTERNATIONAL, INC.

TIMESHARE SEGMENT

($ in millions)

 

						Adjustments														Adjustments
		As Reported 52 Weeks Ended January 1, 2010				Restructuring Costs & Other Charges			Timeshare Strategy - Impairment Charges			As Adjusted 52 Weeks Ended January 1, 2010**				As Reported 53 Weeks Ended January 2, 2009				Restructuring Costs & Other Charges			As Adjusted 53 Weeks Ended January 2, 2009**				Percent Better / (Worse) As Adjusted 2009 vs. As Adjusted 2008
Segment Revenues
Segment revenues		$	1,439			$	24		$	—		$	1,463			$	1,750			$	61		$	1,811			(19	)
Segment Results
Base fees revenue		$	47			$	—		$	—		$	47			$	42			$	—		$	42			12
Timeshare sales and services, net			83				23			—			106				89				58			147			(28	)
Timeshare strategy - impairment charges			(614	)			—			614			—				—				—			—			—
Restructuring costs			(45	)			45			—			—				(28	)			28			—			—
General, administrative and other expense			(80	)			7			—			(73	)			(111	)			—			(111	)		34
Gains and other income			2				—			—			2				—				—			—			*
Joint venture equity earnings			(12	)			6			—			(6	)			11				7			18			(133	)
Timeshare strategy - impairment charges (non-operating)			(71	)			—			71			—				—				—			—			—
Noncontrolling interest			11				—			—			11				25				—			25			(56	)
Segment results		$	(679	)		$	81		$	685		$	87			$	28			$	93		$	121			(28	)
Sales and Services Revenue
Development		$	626			$	4		$	—		$	630			$	953			$	17		$	970			(35	)
Services			330				—			—			330				336				—			336			(2	)
Financing			130				20			—			150				106				44			150			—
Other revenue			37				—			—			37				28				—			28			32
Sales and services revenue		$	1,123			$	24		$	—		$	1,147			$	1,423			$	61		$	1,484			(23	)
Contract Sales
Company:
Timeshare		$	685			$	—		$	—		$	685			$	1,081			$	—		$	1,081			(37	)
Fractional			28				4			—			32				35				2			37			(14	)
Residential			8				4			—			12				10				16			26			(54	)
Total company			721				8			—			729				1,126				18			1,144			(36	)
Joint ventures:
Timeshare			—				—			—			—				—				—			—			—
Fractional			(21	)			40			—			19				(6	)			21			15			27
Residential			(35	)			35			—			—				(44	)			76			32			(100	)
Total joint ventures			(56	)			75			—			19				(50	)			97			47			(60	)
Total contract sales, including joint ventures		$	665			$	83		$	—		$	748			$	1,076			$	115		$	1,191			(37	)
Gain / (Loss) on Notes Sold
Gain / (loss) on notes sold		$	37			$	—		$	—		$	37			$	16			$	12		$	28			32

 

*	Percent cannot be calculated.

**	Denotes non-GAAP financial measures. Please see pages A-27 and A-28 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

 

A-14

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MARRIOTT INTERNATIONAL, INC.

Summary of Restructuring Costs and Other Charges

($ in millions)

 

				2009
External Line		Description		Fourth Quarter				Fourth Quarter Year to Date
Timeshare sales and services revenue		Mark-to-market of residual interests		$	(2	)		$	20
		Contract sale cancellation allowances			—				4
Timeshare sales and services revenue					(2	)			24
Timeshare - direct expenses		Contract sale cancellation allowances			—				(1	)
		Timeshare - direct expenses			—				(1	)
Restructuring costs		Severance			5				21
		Facilities exit costs			2				29
		Development cancellations			—				1
		Restructuring costs			7				51
General, administrative and other		System development write-down			—				7
		Accounts receivable and guarantee charges			—				4
		Loan impairments			—				43
		Reserves for security deposits & other asset impairments, net of prior year reserves			8				46
		General, administrative and other			8				100
Equity in (earnings) losses		Contract sale cancellation allowances			3				6
		Investment impairment			3				33
		Equity in (earnings) losses			6				39
Restructuring Costs & Other Charges Total					19				213
		Tax Impact			(7	)			(83	)
Restructuring Costs & Other Charges Net of Tax				$	12			$	130

 

A-15

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MARRIOTT INTERNATIONAL, INC.

Timeshare Strategy - Impairment Charges Summary

Full Year 2009

($ in millions)

 

		Impairment Charge
Operating Income Impact
Inventory impairment		$	529
Property and equipment impairment			64
Other impairments			21
Total operating income impact			614
Non-Operating Income Impact
Joint venture impairment			71
Loan impairment			40
Funding liability			27
Total non-operating income impact			138
Total impact			752
Tax Impact			(250	)
Timeshare Strategy - Impairment Charges Net of Tax		$	502

 

A-16

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MARRIOTT INTERNATIONAL, INC.

Non-GAAP Financial Measure

EBITDA and Adjusted EBITDA

($ in millions)

 

		Fiscal Year 2009
		First Quarter				Second Quarter				Third Quarter				Fourth Quarter				Total
Net (Loss) / Income attributable to Marriott		$	(23	)		$	37			$	(466	)		$	106			$	(346	)
Interest expense			29				28				27				34				118
Tax provision, continuing operations			33				44				(210	)			68				(65	)
Tax provision, noncontrolling interest			1				2				1				—				4
Depreciation and amortization			39				42				43				61				185
Less: Depreciation reimbursed by third-party owners			(2	)			(2	)			(2	)			(3	)			(9	)
Interest expense from unconsolidated joint ventures			3				6				4				6				19
Depreciation and amortization from unconsolidated joint ventures			6				6				6				9				27
EBITDA **			86				163				(597	)			281				(67	)
Restructuring costs and other charges
Severance			2				10				4				5				21
Facilities exit costs			—				22				5				2				29
Development cancellations			—				1				—				—				1
Total restructuring costs			2				33				9				7				51
Impairment of investments and other, net of prior year reserves			68				3				1				11				83
Reserves for loan losses			42				1				—				—				43
Contract cancellation allowances			4				1				1				3				9
Residual interests valuation			13				12				(3	)			(2	)			20
System development write-off			—				7				—				—				7
Total other charges			127				24				(1	)			12				162
Total restructuring costs and other charges			129				57				8				19				213
Timeshare strategy - impairment charges
Operating impairments			—				—				614				—				614
Non-operating impairments			—				—				138				—				138
Total timeshare strategy - impairment charges			—				—				752				—				752
Adjusted EBITDA **		$	215			$	220			$	163			$	300			$	898
Decrease over 2008 Adjusted EBITDA			-25	%			-43	%			-43	%			-12	%			-31	%
		Fiscal Year 2008
		First Quarter				Second Quarter				Third Quarter				Fourth Quarter				Total
Net Income / (Loss) attributable to Marriott		$	121			$	157			$	94			$	(10	)		$	362
Interest expense			42				38				33				50				163
Tax provision, continuing operations			75				139				103				33				350
Tax provision, minority interest			1				1				5				2				9
Tax benefit, synthetic fuel			—				(6	)			(1	)			—				(7	)
Depreciation and amortization			41				47				42				60				190
Less: Depreciation reimbursed by third-party owners			(3	)			(3	)			(2	)			(2	)			(10	)
Interest expense from unconsolidated joint ventures			4				4				5				5				18
Depreciation and amortization from unconsolidated joint ventures			5				6				6				10				27
EBITDA **			286				383				285				148				1,102
Discontinued operations adjustment (synthetic fuel)			1				2				1				—				4
Restructuring costs and other charges
Severance			—				—				—				19				19
Facilities exit costs			—				—				—				5				5
Development cancellations			—				—				—				31				31
Total restructuring costs			—				—				—				55				55
Reserves for expected fundings			—				—				—				16				16
Inventory write-downs			—				—				—				9				9
Contract cancellation allowances			—				—				—				12				12
Accounts receivable-bad debts			—				—				—				4				4
Residual interests valuation			—				—				—				32				32
Hedge ineffectiveness			—				—				—				12				12
Impairment of investments and other			—				—				—				30				30
Reserves for loan losses			—				—				—				22				22
Total other charges			—				—				—				137				137
Total restructuring costs and other charges			—				—				—				192				192
Adjusted EBITDA **		$	287			$	385			$	286			$	340			$	1,298
The following items make up the discontinued operations adjustment (synthetic fuel)
Pre-tax Synthetic Fuel losses		$	1			$	2			$	1			$	—			$	4
EBITDA adjustment for discontinued operations (synthetic fuel)		$	1			$	2			$	1			$	—			$	4

 

**	Denotes non-GAAP financial measures. Please see pages A-27 and A-28 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

 

A-17

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MARRIOTT INTERNATIONAL, INC.

Non-GAAP Financial Measure

Total Debt Net of Cash

($ in millions)

		Balance at Year-End 2009				Balance at Year-End 2008				Better/ (Worse) Change
Total debt		$	2,298			$	3,095			$	797
Cash and cash equivalents			(115	)			(134	)			(19	)
Total debt net of cash**		$	2,183			$	2,961			$	778
		Range								Range
		Estimated Balance				Estimated Balance				As Compared to Balance at Year-End 2009
		Year-End 2010 (a)				Year-End 2010 (b)				Better/(Worse) Change (a)				Better/(Worse) Change (b)
Total debt		$	2,851			$	2,751			$	(553	)		$	(453	)
Cash and cash equivalents			(115	)			(115	)			—				—
Total debt net of cash**			2,736				2,636				(553	)			(453	)
Less the impact of ASU Nos. 2009-16 and 2009-17			(953	)			(953	)			953				953
Adjusted total debt net of cash** (c)		$	1,783			$	1,683			$	400			$	500

 

(a)	Assumes $400 debt repayment in 2010.

(b)	Assumes $500 debt repayment in 2010.

(c)	Excludes the impact of the update to ASU Nos. 2009-16 and 2009-17.

**	Denotes non-GAAP financial measures. Please see pages A-27 and A-28 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

 

A-18

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MARRIOTT INTERNATIONAL, INC.

Non-GAAP Financial Measure Reconciliation

Adjusted Fourth Quarter and Full Year 2008 and 2009

General, Adminstrative, and Other Expenses Excluding Restructuring

Costs, Other Charges and Deferred Compensation Charges (Credits)

($ in millions)

 

		Fourth Quarter 2008				Fourth Quarter 2009				Percent Better/(Worse) Adjusted 2009 vs. Adjusted 2008
General, administrative and other expenses		$	292			$	215
Less: Restructuring costs and other charges			(54	)			(8	)
Deferred Compensation (charges) credits			16				(5	)
Adjusted General, administrative and other expenses**		$	254			$	202			20
		Full Year 2008				Full Year 2009				Percent Better/(Worse) Adjusted 2009 vs. Adjusted 2008
General, administrative and other expenses		$	803			$	722
Less: Restructuring costs and other charges			(54	)			(100	)
Deferred Compensation (charges) credits			28				(15	)
Adjusted General, administrative and other expenses**		$	777			$	607			22

 

**	Denotes non-GAAP financial measures. Please see pages A-27 and A-28 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

 

A-19

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MARRIOTT INTERNATIONAL, INC.

Non-GAAP Financial Measure

2009 Adjusted for ASU Nos. 2009-16 and 2009-17 and Forecasted 2010

EBITDA and Adjusted EBITDA

($ in millions)

 

														Range
		2009 Fiscal Year				ASU Nos. 2009-16 and 2009-17 Adjustments				As Adjusted For ASU Nos. 2009-16 and 2009-17 Fiscal Year 2009**				Estimated EBITDA Full Year 2010
Net (Loss) / Income attributable to Marriott		$	(346	)		$	(1	)		$	(347	)		$	311			$	356
Interest expense			118				77				195				195				190
Tax provision, continuing operations			(65	)							(65	)			179				204
Tax provision, noncontrolling interest			4				—				4				—				—
Depreciation and amortization			185				—				185				187				187
Less: Depreciation reimbursed by third-party owners			(9	)			—				(9	)			(21	)			(21	)
Interest expense from unconsolidated joint ventures			19				—				19				27				27
Depreciation and amortization from unconsolidated joint ventures			27				—				27				30				30
EBITDA **			(67	)			76				9				908				973
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			$	908			$	973

 

**	Denotes non-GAAP financial measures. Please see pages A-27 and A-28 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

 

A-20

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MARRIOTT INTERNATIONAL, INC.

Non-GAAP Financial Measure Reconciliation

First Quarter 2009 General, Administrative, and Other Expenses

Excluding Restructuring Costs and Other Charges

($ in millions)

 

		Range										Range
		Estimated First Quarter 2010			Estimated First Quarter 2010			First Quarter 2009				Percent Better/(Worse) Estimated First Quarter 2010 vs. First Quarter 2009		Percent Better/(Worse) Estimated First Quarter 2010 vs. First Quarter 2009
General, administrative and other expenses		$	130		$	140		$	174
Less: Restructuring costs and other charges			—			—			(38	)
General, administrative and other expenses excluding restructuring costs and other charges**		$	130		$	140		$	136			4		(3	)

 

**	Denotes non-GAAP financial measures. Please see pages A-27 and A-28 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

 

A-21

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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 2, 2009

FIRST QUARTER 2009

($ in millions)

 

		As Reported 12 Weeks Ended March 27, 2009				Adjustments							As Adjusted 12 Weeks Ended March 27, 2009**				ASU Nos. 2009-16 And 2009-17 Adjustments***				As Adjusted For ASU Nos. 2009-16 And 2009-17 12 Weeks Ended March 27, 2009**
						Restructuring Costs & Other Charges				Timeshare Strategy - - Impairment Charges
Segment Revenues
Segment revenues		$	277			$	17			$	—		$	294			$	28			$	322
Segment Results
Base fees revenue		$	10			$	—			$	—		$	10			$	—			$	10
Timeshare sales and services, net			(11	)			16				—			5				20				25
Timeshare strategy - impairment charges			—				—				—			—				—				—
Restructuring costs			(1	)			1				—			—				—				—
General, administrative and other expense			(17	)			—				—			(17	)			—				(17	)
Gains and other income			—				—				—			—				—				—
Joint venture equity earnings			(1	)			1				—			—				—				—
Timeshare strategy - impairment charges (non-operating)			—				—				—			—				—				—
Noncontrolling interest			3				—				—			3				—				3
Segment results		$	(17	)		$	18			$	—		$	1			$	20			$	21
Sales and Services Revenue
Development		$	121			$	4			$	—		$	125			$	2			$	127
Services			70				—				—			70				—				70
Financing			13				13				—			26				27				53
Other revenue			5				—				—			5				(1	)			4
Sales and services revenue		$	209			$	17			$	—		$	226			$	28			$	254
Contract Sales
Company:
Timeshare		$	138			$	—			$	—		$	138			$	—			$	138
Fractional			10				—				—			10				—				10
Residential			(5	)			4				—			(1	)			—				(1	)
Total company			143				4				—			147				—				147
Joint ventures:
Timeshare			—				—				—			—				—				—
Fractional			13				(3	)			—			10				—				10
Residential			(27	)			27				—			—				—				—
Total joint ventures			(14	)			24				—			10				—				10
Total contract sales, including joint ventures		$	129			$	28			$	—		$	157			$	—			$	157
(Loss) / Gain on Notes Sold
(Loss) / gain on notes sold		$	(1	)		$	—			$	—		$	(1	)		$	1			$	—

 

**	Denotes non-GAAP financial measures. Please see pages A-27 and A-28 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

***	In addition to the segment impacts shown, ASU Nos. 2009-16 and 2009-17 would have increased consolidated interest expense by $16 million from $29 million as reported to $45 million.

 

A-22

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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 2, 2009

SECOND QUARTER 2009

($ in millions)

 

		As Reported 12 Weeks Ended June 19, 2009				Adjustments							As Adjusted 12 Weeks Ended June 19, 2009**				ASU Nos. 2009-16 And 2009-17 Adjustments***			As Adjusted For ASU Nos. 2009-16 And 2009-17 12 Weeks Ended June 19, 2009**
						Restructuring Costs & Other Charges				Timeshare Strategy - Impairment Charges
Segment Revenues
Segment revenues		$	355			$	12			$	—		$	367			$	36		$	403
Segment Results
Base fees revenue		$	11			$	—			$	—		$	11			$	—		$	11
Timeshare sales and services, net			4				12				—			16				32			48
Timeshare strategy - impairment charges			—				—				—			—				—			—
Restructuring costs			(30	)			30				—			—				—			—
General, administrative and other expense			(23	)			7				—			(16	)			—			(16	)
Gains and other income			—				—				—			—				—			—
Joint venture equity earnings			(1	)			1				—			—				—			—
Timeshare strategy - impairment charges (non-operating)			—				—				—			—				—			—
Noncontrolling interest			4				—				—			4				—			4
Segment results		$	(35	)		$	50			$	—		$	15			$	32		$	47
Sales and Services Revenue
Development		$	182			$	—			$	—		$	182			$	6		$	188
Services			80				—				—			80				—			80
Financing			14				12				—			26				30			56
Other revenue			7				—				—			7				—			7
Sales and services revenue		$	283			$	12			$	—		$	295			$	36		$	331
Contract Sales
Company:
Timeshare		$	200			$	—			$	—		$	200			$	—		$	200
Fractional			8				1				—			9				—			9
Residential			2				—				—			2				—			2
Total company			210				1				—			211				—			211
Joint ventures:
Timeshare			—				—				—			—				—			—
Fractional			(18	)			19				—			1				—			1
Residential			17				(17	)			—			—				—			—
Total joint ventures			(1	)			2				—			1				—			1
Total contract sales, including joint ventures		$	209			$	3			$	—		$	212			$	—		$	212
Gain / (Loss) on Notes Sold
Gain / loss on notes sold		$	—			$	—			$	—		$	—			$	—		$	—

 

**	Denotes non-GAAP financial measures. Please see pages A-27 and A-28 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

***	In addition to the segment impacts shown, ASU Nos. 2009-16 and 2009-17 would have increased consolidated interest expense by $18 million from $28 million as reported to $46 million.

 

A-23

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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 2, 2009

THIRD QUARTER 2009

($ in millions)

 

		As Reported 12 Weeks Ended September 11, 2009				Adjustments							As Adjusted 12 Weeks Ended September 11, 2009**				ASU Nos. 2009-16 And 2009-17 Adjustments***			As Adjusted For ASU Nos. 2009-16 And 2009-17 12 Weeks Ended September 11, 2009**
						Restructuring Costs & Other Charges				Timeshare Strategy - Impairment Charges
Segment Revenues
Segment revenues		$	330			$	(3	)		$	—		$	327			$	39		$	366
Segment Results
Base fees revenue		$	11			$	—			$	—		$	11			$	—		$	11
Timeshare sales and services, net			16				(3	)			—			13				32			45
Timeshare strategy - impairment charges			(614	)			—				614			—				—			—
Restructuring costs			(7	)			7				—			—				—			—
General, administrative and other expense			(17	)			—				—			(17	)			—			(17	)
Gains and other income			1				—				—			1				—			1
Joint venture equity earnings			(4	)			1				—			(3	)			—			(3	)
Timeshare strategy - impairment charges (non-operating)			(71	)			—				71			—				—			—
Noncontrolling interest			4				—				—			4				—			4
Segment results		$	(681	)		$	5			$	685		$	9			$	32		$	41
Sales and Services Revenue
Development		$	138			$	—			$	—		$	138			$	11		$	149
Services			82				—				—			82				—			82
Financing			27				(3	)			—			24				28			52
Other revenue			7				—				—			7				—			7
Sales and services revenue		$	254			$	(3	)		$	—		$	251			$	39		$	290
Contract Sales
Company:
Timeshare		$	164			$	—			$	—		$	164			$	—		$	164
Fractional			7				—				—			7				—			7
Residential			2				—				—			2				—			2
Total company			173				—				—			173				—			173
Joint ventures:
Timeshare			—				—				—			—				—			—
Fractional			(4	)			7				—			3				—			3
Residential			(17	)			17				—			—				—			—
Total joint ventures			(21	)			24				—			3				—			3
Total contract sales, including joint ventures		$	152			$	24			$	—		$	176			$	—		$	176
Gain / (Loss) on Notes Sold
Gain / loss on notes sold		$	—			$	—			$	—		$	—			$	—		$	—

 

**	Denotes non-GAAP financial measures. Please see pages A-27 and A-28 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

***	In addition to the segment impacts shown, ASU Nos. 2009-16 and 2009-17 would have increased consolidated interest expense by $17 million from $27 million as reported to $44 million.

 

A-24

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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 2, 2009

FOURTH QUARTER 2009

($ in millions)

 

		As Reported 16 Weeks Ended January 1, 2010				Adjustments							As Adjusted 16 Weeks Ended January 1, 2010**				ASU Nos. 2009-16 And 2009-17 Adjustments***				As Adjusted For ASU Nos. 2009-16 And 2009-17 16 Weeks Ended January 1, 2010**
						Restructuring Costs & Other Charges				Timeshare Strategy - Impairment Charges
Segment Revenues
Segment revenues		$	477			$	(2	)		$	—		$	475			$	(2	)		$	473
Segment Results
Base fees revenue		$	15			$	—			$	—		$	15			$	—			$	15
Timeshare sales and services, net			74				(2	)			—			72				(8	)			64
Timeshare strategy - impairment charges			—				—				—			—				—				—
Restructuring costs			(7	)			7				—			—				—				—
General, administrative and other expense			(23	)			—				—			(23	)			—				(23	)
Gains and other income			1				—				—			1				—				1
Joint venture equity earnings			(6	)			3				—			(3	)			—				(3	)
Timeshare strategy - impairment charges (non-operating)			—				—				—			—				—				—
Noncontrolling interest			—				—				—			—				—				—
Segment results		$	54			$	8			$	—		$	62			$	(8	)		$	54
Sales and Services Revenue
Development		$	185			$	—			$	—		$	185			$	4			$	189
Services			98				—				—			98				—				98
Financing			76				(2	)			—			74				(6	)			68
Other revenue			18				—				—			18				—				18
Sales and services revenue		$	377			$	(2	)		$	—		$	375			$	(2	)		$	373
Contract Sales
Company:
Timeshare		$	183			$	—			$	—		$	183			$	—			$	183
Fractional			3				3				—			6				—				6
Residential			9				—				—			9				—				9
Total company			195				3				—			198				—				198
Joint ventures:
Timeshare			—				—				—			—				—				—
Fractional			(12	)			17				—			5				—				5
Residential			(8	)			8				—			—				—				—
Total joint ventures			(20	)			25				—			5				—				5
Total contract sales, including joint ventures		$	175			$	28			$	—		$	203			$	—			$	203
Gain / (Loss) on Notes Sold
Gain / loss on notes sold		$	38			$	—			$	—		$	38			$	(38	)		$	—

 

**	Denotes non-GAAP financial measures. Please see pages A-27 and A-28 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

***	In addition to the segment impacts shown, ASU Nos. 2009-16 and 2009-17 would have increased consolidated interest expense by $26 million from $34 million as reported to $60 million.

 

A-25

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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 2, 2009

FULL YEAR 2009

($ in millions)

 

		As Reported 52 Weeks Ended January 1, 2010				Adjustments						As Adjusted 52 Weeks Ended January 1, 2010**				ASU Nos. 2009-16 And 2009-17 Adjustments***				As Adjusted For ASU Nos. 2009-16 And 2009-17 52 Weeks Ended January 1, 2010**
						Restructuring Costs & Other Charges			Timeshare Strategy - Impairment Charges
Segment Revenues
Segment revenues		$	1,439			$	24		$	—		$	1,463			$	101			$	1,564
Segment Results
Base fees revenue		$	47			$	—		$	—		$	47			$	—			$	47
Timeshare sales and services, net			83				23			—			106				76				182
Timeshare strategy - impairment charges			(614	)			—			614			—				—				—
Restructuring costs			(45	)			45			—			—				—				—
General, administrative and other expense			(80	)			7			—			(73	)			—				(73	)
Gains and other income			2				—			—			2				—				2
Joint venture equity earnings			(12	)			6			—			(6	)			—				(6	)
Timeshare strategy - impairment charges (non-operating)			(71	)			—			71			—				—				—
Noncontrolling interest			11				—			—			11				—				11
Segment results		$	(679	)		$	81		$	685		$	87			$	76			$	163
Sales and Services Revenue
Development		$	626			$	4		$	—		$	630			$	23			$	653
Services			330				—			—			330				—				330
Financing			130				20			—			150				79				229
Other revenue			37				—			—			37				(1	)			36
Sales and services revenue		$	1,123			$	24		$	—		$	1,147			$	101			$	1,248
Contract Sales
Company:
Timeshare		$	685			$	—		$	—		$	685			$	—			$	685
Fractional			28				4			—			32				—				32
Residential			8				4			—			12				—				12
Total company			721				8			—			729				—				729
Joint ventures:
Timeshare			—				—			—			—				—				—
Fractional			(21	)			40			—			19				—				19
Residential			(35	)			35			—			—				—				—
Total joint ventures			(56	)			75			—			19				—				19
Total contract sales, including joint ventures		$	665			$	83		$	—		$	748			$	—			$	748
Gain / (Loss) on Notes Sold
Gain / loss on notes sold		$	37			$	—		$	—		$	37			$	(37	)		$	—

 

**	Denotes non-GAAP financial measures. Please see pages A-27 and A-28 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

***

If we had adopted ASU Nos. 2009-16 and 2009-17 on the first day of fiscal year 2009, the full year 2009 impact to the company would have been a $1 million decline in adjusted pretax income, which includes the $76 million increase to Timeshare segment results shown in the table above more than offset by the $77 million increase in interest expense.

 

A-26

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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 2008 fourth quarter through the 2009 fourth quarter, deferred compensation charges and credits incurred in the 2008 first quarter through the 2009 fourth quarter, and certain tax expenses incurred in the 2008 second quarter through the 2009 third 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, which resulted in our decision not to complete a note sale in the fourth quarter of 2008 (although we did complete a note sale in the first quarter of 2009). 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, and 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.

Deferred Compensation Expenses. We evaluate adjusted general, administrative, and other expenses excluding the impact of deferred compensation expenses because this non-GAAP measure allows for period-over-period comparisons of our on-going core general, administrative, other expenses before material charges or credits associated with a program that we have modified. As we implemented changes to our deferred compensation plan in 2009, we expect to have significantly reduced expense impact and volatility in 2010 and beyond. We also utilize this metric for forecasting and modeling purposes.

Certain Tax Expenses. Certain tax expenses included $26 million in the 2009 first quarter, $17 million in the 2009 second quarter, $13 million in the 2009 third quarter and $24 million in the 2008 second 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"). Additionally, certain tax expenses in the 2008 second quarter also reflected $12 million of tax expense due primarily to prior years' tax adjustments, including a settlement with the IRS that resulted in a lower than expected refund of taxes associated with a 1995 leasing transaction. Certain tax expenses in the 2008 third quarter reflected $29 million of tax expense primarily related to an unfavorable court decision involving a tax planning transaction associated with a 1994 sale transaction. Certain tax expenses in the 2008 fourth quarter include income tax expense totaling $7 million primarily due to prior years’ tax adjustments.

 

A-27

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MARRIOTT INTERNATIONAL, INC.

Non-GAAP Financial Measures

(cont.)

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; (5) the 2009 first quarter restructuring costs and other charges totaling $129 million; (6) the 2008 fourth quarter restructuring costs and other charges totaling $192 million; and (7) the first through third quarters of 2008 impact of the synthetic fuel business. Management excludes the restructuring costs and other charges incurred in the 2009 first through fourth quarters and in the 2008 fourth quarter 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.” Fourth quarter 2008 restructuring costs and other charges included $55 million of restructuring costs and $137 million of other charges, including 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. Management also excludes the first through third quarters of 2008 impact of the synthetic fuel business, which was discontinued in 2007 and which did not relate to our core lodging business, to allow for period-over-period comparisons of our on-going core lodging operations and facilitate management’s comparison of our results with those of other lodging companies.

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 know as FAS No. 167, “Amendments to FASB Interpretation No. 46(R),” which requires consolidating previously securitized pools of Timeshare notes and will impact the ongoing accounting for those notes. Management evaluates non-GAAP measures that exclude the impact of these standards in future years 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 considers adjusted total debt net of cash, which excludes the debt that will be 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.

 

A-28