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): April 22, 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 Ended March 26, 2010

Marriott International, Inc. (“Marriott”) today issued a press release reporting financial results for the quarter ended March 26, 2010.

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 April 22, 2010, reporting financial results for the quarter ended March 26, 2010.

 

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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: April 22, 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 April 22, 2010, reporting financial results for the quarter ended March 26, 2010.

 

4

Exhibit 99

 

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

MARRIOTT INTERNATIONAL REPORTS FIRST QUARTER RESULTS

BETHESDA, MD – April 22, 2010 – Marriott International, Inc. (NYSE:MAR) today reported first quarter 2010 results, exceeding its revenue per available room (REVPAR) and diluted earnings per share (EPS) expectations.

FIRST QUARTER 2010 RESULTS

First quarter 2010 net income totaled $83 million, a 5 percent decline compared to first quarter 2009 adjusted net income. Diluted EPS totaled $0.22, down $0.02 from adjusted diluted EPS in the year-ago quarter. On February 11, 2010, the company forecasted first quarter diluted EPS of $0.15 to $0.21.

Reported net income was $83 million in the first quarter of 2010 compared to a reported net loss of $23 million in the year-ago quarter. Reported diluted EPS was $0.22 in the first quarter of 2010 compared to reported diluted losses per share of $0.06 in the first quarter of 2009.

Adjusted results for the 2009 first quarter exclude $129 million pretax ($84 million after-tax and $0.24 per diluted share) of restructuring costs and other charges and $26 million of non-cash charges ($0.07 per diluted share) in the provision for income taxes.

J.W. Marriott, Jr., chairman and chief executive officer of Marriott International, said, “In the first quarter we welcomed increasing numbers of business guests to our hotels as travelers got back to work in most markets around the world. Corporate roomnights for the Marriott Hotels & Resort brand in North America rose 16 percent in the first quarter as business demand strengthened dramatically. At the same time, leisure demand remained solid as vacationers continued to find memorable holiday experiences and good values. While first quarter room rates were generally lower than last year, as occupancy levels continue to improve, we see higher

 

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room rates on the horizon. In fact, we anticipate that North American systemwide REVPAR will increase by 3 to 6 percent for the full year 2010 with higher room rates by year end. International demand trends are even stronger. We expect REVPAR outside North America will increase 4 to 7 percent on a constant dollar basis in 2010 reflecting strong demand in Europe, South America and Asia.

Over 8,000 new rooms joined our system during the first quarter including the JW Marriott Los Angeles L.A. LIVE, the JW Marriott San Antonio Hill Country Resort and Spa, and the Shanghai Marriott Hotel Changfeng Park, our 47th hotel in China. We also launched our newest brand, The Autograph Collection, with two new properties, Casa Monica Hotel in St. Augustine Florida and the Grand Bohemian Hotel in Asheville, North Carolina.

With stronger demand and meaningful unit growth, fee revenue and earnings per share exceeded our expectations. 2010 is shaping up to be a good year.”

REVPAR for the company’s worldwide comparable company-operated properties was flat (a 1.0 percent decline using constant dollars) in the 2010 first quarter and REVPAR for the company’s worldwide comparable systemwide properties declined 0.7 percent (a 1.3 percent decline using constant dollars).

International comparable company-operated REVPAR rose 5.8 percent (a 1.5 percent increase using constant dollars), including a 4.5 percent decline in average daily rate (a 8.3 percent decline using constant dollars) in the first quarter of 2010.

In North America, comparable company-operated REVPAR declined 1.9 percent in the first quarter of 2010. REVPAR at the company’s comparable company-operated North American full-service and luxury hotels (including Marriott Hotels & Resorts, The Ritz-Carlton and Renaissance Hotels) was down 1.2 percent with a 7.8 percent decline in average daily rate.

Marriott added 44 new properties (8,361 rooms) to its worldwide lodging portfolio in the 2010 first quarter and seven properties (1,146 rooms) exited the system during the quarter. At quarter-end, the company’s lodging group encompassed 3,457 properties and timeshare resorts for a total of over 603,000 rooms.

 

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The company’s worldwide pipeline of hotels under construction, awaiting conversion or approved for development totaled over 95,000 rooms in more than 600 hotels at quarter-end.

MARRIOTT REVENUES totaled over $2.6 billion in the 2010 first quarter compared to approximately $2.5 billion for the first quarter of 2009. Base management and franchise fees rose 1 percent to $216 million reflecting fees from new hotels offset by slightly lower REVPAR. First quarter incentive management fees declined 7 percent to $40 million. In the first quarter, 23 percent of company-managed hotels earned incentive management fees compared to 25 percent in the year-ago quarter. Approximately 60 percent of incentive management fees came from hotels outside North America in the 2010 quarter compared to 54 percent in the 2009 quarter.

Worldwide comparable company-operated house profit margins declined 110 basis points in the first quarter reflecting increasing occupancy and declining rate partially offset by efficiency improvements at the property level. House profit margins for comparable company-operated properties outside North America increased 40 basis points and North American comparable company-operated house profit margins declined 180 basis points from the year-ago quarter.

Owned, leased, corporate housing and other revenue, net of direct expenses, declined $1 million in the 2010 first quarter, to $12 million, primarily reflecting the impact of lower operating results in owned and leased hotels partially offset by $4 million of termination fees.

First quarter adjusted Timeshare segment contract sales increased 10 percent to $172 million excluding an $8 million allowance for fractional and residential contract cancellations recorded in the quarter. In the prior year’s quarter, adjusted Timeshare segment contract sales totaled $157 million excluding a $28 million allowance for contract cancellations.

In the first quarter, timeshare sales and services revenue totaled $285 million and, net of expenses, totaled $50 million for the quarter. Adjusting for restructuring and other charges, as well as the impact of consolidation of securitized loans as if such consolidation had occurred at the beginning of 2009, first quarter 2009 timeshare sales and services revenue would have totaled $254 million and, net of direct expenses, would have totaled $25 million. These adjustments for the 2009 quarter are shown on page A-14.

 

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Timeshare development revenue, net of expense, benefited from stronger demand, higher closing efficiency, favorable reportability and lower marketing and sales costs.

Timeshare segment results include Timeshare sales and services revenue, net of direct expenses, as well as base management fees, equity earnings (losses), noncontrolling interest, interest expense and general, administrative and other expenses associated with the timeshare business. Timeshare segment results for the 2010 first quarter, shown on page A-6, totaled $25 million, including $14 million of interest expense related to the consolidation of securitized Timeshare notes. On February 11, 2010, the company provided Timeshare segment guidance of $30 million to $40 million, excluding interest expense associated with securitized Timeshare notes.

GENERAL, ADMINISTRATIVE and OTHER expenses for the 2010 first quarter increased 1 percent to $138 million, compared to adjusted expenses of $136 million in the year-ago quarter. The 2010 first quarter benefited from $6 million in guarantee reserve reversals and $4 million of lower receivable reserves partially offset by higher legal expenses of $3 million. The 2009 first quarter benefited from $8 million of incentive compensation and other accrual reversals and a $5 million favorable impact associated with deferred compensation.

GAINS AND OTHER INCOME totaled $1 million primarily reflecting gains on the sale of real estate. The prior year’s first quarter gains and other income totaled $25 million and included a $21 million gain on the extinguishment of debt, $3 million of gains on the sale of real estate and other income and $1 million of preferred returns from joint venture investments.

INTEREST EXPENSE increased $16 million to $45 million in the first quarter primarily due to $14 million of interest expense related to the consolidation of debt associated with securitized Timeshare notes, lower capitalized interest and interest associated with deferred compensation partially offset by lower debt balances and interest rates. Adjusting for the impact of consolidation of securitized loans as if such consolidation had occurred at the beginning of 2009, first quarter 2009 interest expense would have totaled $45 million, flat with 2010 first quarter interest expense.

 

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EQUITY IN (LOSSES) EARNINGS totaled an $11 million loss in the quarter compared to a $3 million adjusted loss in the year-ago quarter. The $8 million decline primarily reflected a $4 million increase in cancellation reserves at one Timeshare joint venture and impairment charges of $3 million associated with two investments.

Earnings before Interest Expense, Taxes, Depreciation and Amortization (EBITDA)

EBITDA totaled $221 million in the 2010 first quarter. In the 2009 first quarter, adjusted EBITDA totaled $215 million. If the consolidation of securitized timeshare notes had occurred at the beginning of 2009, adjusted EBITDA in 2009 would have totaled $235 million.

BALANCE SHEET

At the end of the first quarter 2010, total debt was $3,269 million and cash balances totaled $118 million, compared to $2,298 million in debt and $115 million of cash at year-end 2009. The increase in debt included $1,043 million of debt associated with securitized Timeshare mortgage notes now required to be consolidated, as noted below. At the end of the first quarter 2010, Marriott had borrowings of $396 million outstanding under its $2.4 billion bank revolver.

COMMON STOCK

Weighted average fully diluted shares outstanding used to calculate diluted EPS totaled 373.3 million in the 2010 first quarter compared to weighted average fully diluted shares outstanding of 360.5 million used to calculate adjusted diluted EPS in the year-ago quarter.

The remaining share repurchase authorization, as of March 26, 2010, totaled 21.3 million shares. No share repurchases are planned for 2010.

IMPACT OF ACCOUNTING CHANGES

The company adopted ASU Nos. 2009-16 and 2009-17 (formerly referred to as FAS 166 and 167) at the beginning of 2010, which required consolidation of entities associated with securitized Timeshare notes and impacts the ongoing accounting for those notes. With the consolidation of the existing portfolio of securitized loans on the first day of fiscal 2010, assets increased by $970 million, liabilities increased by $1,116 million, and shareholders’ equity

 

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decreased by $146 million. No change in net cash flow is anticipated as a result of the accounting changes. If the consolidation had occurred at the beginning of 2009, first quarter 2009 adjusted revenue would have increased to $2,540 million, first quarter 2009 adjusted EBITDA would have increased to $235 million, first quarter 2009 interest expense would have increased to $45 million and first quarter 2009 adjusted pretax income would have increased to $141 million. See the tables on pages A-14, A-15, A-16, A-17 and A-18 of the accompanying schedules for 2009 quarterly and full year Timeshare segment results adjusted as if the accounting changes had been made on the first day of fiscal 2009.

SECOND QUARTER 2010 OUTLOOK

For the second quarter, the company assumes comparable systemwide REVPAR on a constant dollar basis will increase 4 to 6 percent in North America, 8 to 10 percent outside North America and 5 to 7 percent worldwide.

In the 2010 second quarter, the company assumes Timeshare contract sales will total $175 million to $185 million and Timeshare sales and services revenue, net of direct expenses, will total approximately $40 million to $45 million. With these assumptions, Timeshare segment results for the second quarter, including interest expense associated with securitized notes, are expected to total $20 million to $25 million.

FULL YEAR 2010 OUTLOOK

For the full year 2010, the company assumes comparable systemwide REVPAR on a constant dollar basis will increase 3 to 6 percent in North America, 4 to 7 percent outside North America and 3 to 6 percent worldwide.

The company expects to open 25,000 to 30,000 rooms in 2010 as most hotels expected to open are already under construction or undergoing conversion from other brands.

The company continues to estimate that, on a full-year basis, one point of worldwide systemwide REVPAR impacts total fees by approximately $10 million to $15 million pretax and owned, leased, corporate housing and other revenue, net of direct expense, by roughly $4 million pretax.

 

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For its timeshare business, the company assumes 2010 timeshare contract sales will be slightly higher than 2009 levels. For 2010, Timeshare sales and services revenue, net of direct expenses, is expected to total $185 million to $195 million. Timeshare segment results for 2010, including interest expense associated with previously securitized notes, is expected to total $95 million to $105 million.

The company expects its 2010 general, administrative and other expenses to total $650 million to $660 million reflecting higher incentive compensation.

 

		Second Quarter 2010		Full Year 2010
Total fee revenue		$275 million to $285 million		$1,145 million to $1,175 million
Owned, leased, corporate housing and other revenue, net of direct expenses		Approx $25 million		$75 million to $80 million
Timeshare sales and services revenue, net of direct expenses		$40 million to $45 million		$185 million to $195 million
General, administrative and other expenses		Approx $150 million		$650 million to $660 million
Operating income		$190 million to $205 million		$745 million to $800 million
Gains and other income		$0 to $5 million		Approx $15 million
Net interest expense1		Approx $40 million		$165 million to $170 million
Equity in earnings (losses)		Approx $0 million		Approx $30 million
Earnings per share		$0.25 to $0.29		$0.95 to $1.05
Tax rate		36 percent		36 percent

 

1	Net of interest income

Based upon the assumptions above, full year 2010 EBITDA is expected to total $985 million to $1,040 million. Assuming the investment spending levels below, adjusted total debt is expected to decline $400 million to $500 million by year end 2010.

The company expects investment spending in 2010 will total approximately $500 million, including capital expenditures totaling $150 million to $200 million, of which maintenance capital spending is expected to total $50 million. Investment spending will also include new mezzanine financing and mortgage loans, contract acquisition costs, and equity and other investments. The investment in net timeshare development is not included above as the company expects cost of goods sold in the timeshare business will exceed timeshare inventory spending in 2010.

 

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Marriott International, Inc. (NYSE:MAR) will conduct its quarterly earnings review for the investment community and news media on Thursday, April 22, 2010 at 10 a.m. Eastern Time (ET). The conference call will be webcast simultaneously via Marriott’s investor relations website at http://www.marriott.com/investor, click the “Recent and Upcoming Events” tab and click on the quarterly conference call link. A replay will be available at that same website until April 22, 2011.

The telephone dial-in number for the conference call is 719-325-2122. A telephone replay of the conference call will be available from 1 p.m. ET, Thursday, April 22, 2010 until 8 p.m. ET, Thursday, April 29, 2010. To access the replay, call 719-457-0820. The reservation number for the recording is 7418222.

Definitions

All references to net income or net loss, unless otherwise noted, reflect net income or net loss attributable to Marriott. All references to EPS or diluted losses per share, unless otherwise noted, reflect EPS or diluted losses per share attributable to Marriott shareholders.

Note: This press release and accompanying schedules contain “forward-looking statements” within the meaning of federal securities laws, including REVPAR, profit margin and earnings trends, estimates and assumptions; statements concerning the number of lodging properties we expect to add in the future; our expected cost savings, investment spending and share repurchases; and similar statements concerning anticipated future events and expectations that are not historical facts. We caution you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including the continuation and pace of the economic recovery; supply and demand changes for hotel rooms, vacation ownership, condominiums, and corporate housing; competitive conditions in the lodging industry; relationships with clients and property owners; the availability of capital to finance hotel growth and refurbishment; and other risk factors identified in our most recent annual or quarterly report on Form 10-K or Form 10-Q; any of which could cause actual results to differ materially from those expressed in or implied by the statements herein. These statements are made as of the date of this press release, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

 

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MARRIOTT INTERNATIONAL, INC. (NYSE:MAR) is a leading lodging company with more than 3,400 lodging properties in 70 countries and territories. Marriott International operates and franchises hotels under the Marriott, JW Marriott, The Ritz-Carlton, The Autograph Collection, Renaissance, Residence Inn, Courtyard, TownePlace Suites, Fairfield Inn, SpringHill Suites and Bulgari brand names; develops and operates vacation ownership resorts under the Marriott Vacation Club, The Ritz-Carlton Destination Club, and Grand Residences by Marriott brands; licenses and manages whole-ownership residential brands, including The Ritz-Carlton Residences, JW Marriott Residences and Marriott Residences; operates Marriott Executive Apartments; provides furnished corporate housing through its Marriott ExecuStay division; and operates conference centers. The company is headquartered in Bethesda, Maryland, USA, and had approximately 137,000 employees at 2009 year-end. It is recognized by FORTUNE^® as one of the best companies to work for, and by Newsweek as one of the greenest big companies in America. In fiscal year 2009, Marriott International reported sales from continuing operations of nearly $11 billion. For more information or reservations, please visit our web site at www.marriott.com, and for the latest company news, visit www.marriottnewscenter.com.

IRPR#1

Tables follow

 

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Marriott International, Inc.

Press Release Schedules

Quarter 1, 2010

Table of Contents

 

Consolidated Statements of Income		A-1
Total Lodging Products		A-3
Key Lodging Statistics		A-4
Timeshare Segment		A-6
EBITDA		A-7
Total Debt		A-8
First Quarter 2009 Revenue, Interest Expense and Income Before Income Taxes As Adjusted Had ASU Nos. 2009-16 and 2009-17 Been Adopted on January 3, 2009		A-9
First Quarter 2009 EBITDA As Adjusted Had ASU Nos. 2009-16 and 2009-17 Been Adopted on January 3, 2009		A-10
2009 EBITDA As Adjusted Had ASU Nos. 2009-16 and 2009-17 Been Adopted on January 3, 2009 and Forecasted 2010		A-11
Second Quarter 2009 General, Administrative, and Other Expenses Excluding Restructuring Costs and Other Charges		A-12
Timeshare Inventory As Adjusted Had ASU Nos. 2009-16 and 2009-17 Been Adopted on January 3, 2009		A-13
2009 Timeshare Segment As Adjusted Had ASU Nos. 2009-16 and 2009-17 Been Adopted on January 3, 2009		A-14
Non-GAAP Financial Measures		A-19

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MARRIOTT INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share amounts)

 

										Adjustments
		As Reported 12 Weeks Ended March 26, 2010				As Reported 12 Weeks Ended March 27, 2009				Restructuring Costs & Other Charges				Certain Tax Items			As Adjusted 12 Weeks Ended March 27, 2009**				Percent Better/(Worse) 2010 vs. Adjusted 2009
REVENUES
Base management fees		$	125			$	125			$	—			$	—		$	125			—
Franchise fees			91				88				—				—			88			3
Incentive management fees			40				43				—				—			43			(7	)
Owned, leased, corporate housing and other revenue 1			229				220				—				—			220			4
Timeshare sales and services (including net note sale losses of $1 for the twelve weeks ended March 27, 2009) 2			285				209				17				—			226			26
Cost reimbursements 3			1,860				1,810				—				—			1,810			3
Total Revenues			2,630				2,495				17				—			2,512			5
OPERATING COSTS AND EXPENSES
Owned, leased and corporate housing - direct 4			217				207				—				—			207			(5	)
Timeshare - direct			235				220				1				—			221			(6	)
Reimbursed costs			1,860				1,810				—				—			1,810			(3	)
Restructuring costs			—				2				(2	)			—			—			—
General, administrative and other 5			138				216				(80	)			—			136			(1	)
Total Expenses			2,450				2,455				(81	)			—			2,374			(3	)
OPERATING INCOME			180				40				98				—			138			30
Gains and other income (including gain on debt extinguishment of $21 for the twelve weeks ended March 27, 2009) 6			1				25				—				—			25			(96	)
Interest expense			(45	)			(29	)			—				—			(29	)		(55	)
Interest income			4				6				—				—			6			(33	)
Equity in (losses) earnings 7			(11	)			(34	)			31				—			(3	)		(267	)
INCOME BEFORE INCOME TAXES			129				8				129				—			137			(6	)
Provision for income taxes			(46	)			(33	)			(45	)			26			(52	)		12
NET INCOME / (LOSS)			83				(25	)			84				26			85			(2	)
Add: Net losses attributable to noncontrolling interests, net of tax			—				2				—				—			2			(100	)
NET INCOME / (LOSS) ATTRIBUTABLE TO MARRIOTT		$	83			$	(23	)		$	84			$	26		$	87			(5	)
EARNINGS / (LOSSES) PER SHARE - Basic 8
Earnings / (losses) per share attributable to Marriott shareholders 9		$	0.23			$	(0.06	)		$	0.24			$	0.07		$	0.25			(8	)
EARNINGS / (LOSSES) PER SHARE - Diluted8
Earnings / (losses) per share attributable to Marriott shareholders 9		$	0.22			$	(0.06	)		$	0.24			$	0.07		$	0.24			(8	)
Basic Shares 8			359.4				354.4				354.4				354.4			354.4
Diluted Shares 8,10			373.3				354.4				354.4				354.4			360.5

 

**	Denotes non-GAAP financial measures. Please see pages A-19 and A-20 for additional information about our reasons for providing these alternative financial measures and the limitations on their use. See page A-2 for footnote references.

 

A-1

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1		–		Owned, leased, corporate housing and other revenue includes revenue from the properties we own or lease, revenue from our corporate housing business, termination fees and other revenue.
2		–		Timeshare sales and services includes total timeshare revenue except for base management fees and cost reimbursements.
3		–		Cost reimbursements include reimbursements from properties for Marriott-funded operating expenses.
4		–		Owned, leased and corporate housing - direct expenses include operating expenses related to our owned or leased hotels, including lease payments, pre-opening expenses and depreciation, plus expenses related to our corporate housing business.
5		–		General, administrative and other expenses include the overhead costs allocated to our segments and our corporate overhead costs and general expenses.
6		–		Gains and other income includes gains and losses on: the sale of real estate; note sales or repayments (except timeshare note securitizations); the sale of joint ventures and investments; and debt extinguishments, as well as income from cost method joint ventures.
7		–		Equity in (losses) earnings includes our equity in (losses) / earnings of unconsolidated equity method joint ventures.
8		–		2009 share numbers and per share amounts have been retroactively adjusted to reflect the stock dividends with distribution dates of July 30, 2009, September 3, 2009 and December 3, 2009.
9		–		Earnings / (Losses) per share attributable to Marriott shareholders plus adjustment items may not equal earnings per share attributable to Marriott shareholders as adjusted due to rounding.
10		–		Basic and fully diluted weighted average common shares outstanding used to calculate earnings per share from continuing operations for the periods in which we had a loss are the same because inclusion of additional equivalents would be anti-dilutive.

 

A-2

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MARRIOTT INTERNATIONAL, INC.

TOTAL LODGING PRODUCTS ¹

 

		Number of Properties							Number of Rooms/Suites
Brand		March 26, 2010		March 27, 2009		vs. March 27, 2009			March 26, 2010		March 27, 2009		vs. March 27, 2009
Domestic Full-Service
Marriott Hotels & Resorts		356		349		7			142,282		138,931		3,351
Renaissance Hotels		79		76		3			28,914		28,047		867
Autograph		2		—		2			242		—		242
Domestic Limited-Service
Courtyard		775		738		37			108,858		103,042		5,816
Fairfield Inn & Suites		632		574		58			56,948		51,052		5,896
SpringHill Suites		260		217		43			30,484		25,128		5,356
Residence Inn		588		558		30			70,723		66,730		3,993
TownePlace Suites		187		166		21			18,759		16,643		2,116
International
Marriott Hotels & Resorts		194		185		9			59,641		55,740		3,901
Renaissance Hotels		66		66		—			21,992		22,536		(544	)
Courtyard		93		83		10			18,185		16,222		1,963
Fairfield Inn & Suites		9		9		—			1,109		1,109		—
SpringHill Suites		1		1		—			124		124		—
Residence Inn		17		16		1			2,418		2,389		29
Marriott Executive Apartments		23		21		2			3,903		3,337		566
Luxury
The Ritz-Carlton - Domestic		40		37		3			12,120		11,652		468
The Ritz-Carlton - International		34		34		—			10,171		10,477		(306	)
Bulgari Hotels & Resorts		2		2		—			117		117		—
The Ritz-Carlton Residential		26		24		2			2,669		2,539		130
The Ritz-Carlton Serviced Apartments		3		3		—			458		478		(20	)
Timeshare 2
Marriott Vacation Club 3		53		51		2			11,874		11,803		71
The Ritz-Carlton Destination Club		9		10		(1	)		464		456		8
The Ritz-Carlton Residences		4		3		1			238		149		89
Grand Residences by Marriott - Fractional		2		2		—			248		241		7
Grand Residences by Marriott - Residential		2		2		—			68		91		(23	)
Sub Total Timeshare		70		68		2			12,892		12,740		152
Total		3,457		3,227		230			603,009		569,033		33,976
Number of Timeshare Interval, Fractional and Residential Resorts
		Total Properties 2		Properties in Active Sales  4
100% Company-Developed
Marriott Vacation Club 3		53		30
The Ritz-Carlton Destination Club and Residences		9		8
Grand Residences by Marriott and Residences		4		4
Joint Ventures
The Ritz-Carlton Destination Club and Residences		4		4
Total		70		46

 

1	Total Lodging Products excludes the 1,781 and 2,157 corporate housing rental units as of March 26, 2010 and March 27, 2009, respectively.

2	Includes products that are in active sales as well as those that are sold out. Residential products are included once they possess a certificate of occupancy.

3	Marriott Vacation Club includes Horizons by Marriott Vacation Club products that were previously reported separately.

4	Products in active sales may not be ready for occupancy.

 

A-3

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MARRIOTT INTERNATIONAL, INC.

KEY LODGING STATISTICS

Constant $

Comparable Company-Operated International Properties¹

 

 

		Two Months Ended February 28, 2010 and February 28, 2009
		REVPAR					Occupancy				Average Daily Rate
Region		2010			vs. 2009		2010		vs. 2009		2010			vs. 2009
Caribbean & Latin America		$	145.17		-3.0%		73.4%		4.0% pts.		$	197.68		-8.3%
Continental Europe		$	90.47		1.5%		57.2%		4.8% pts.		$	158.20		-7.0%
United Kingdom		$	103.06		6.0%		66.4%		4.4% pts.		$	155.19		-1.1%
Middle East & Africa		$	92.29		-11.6%		67.6%		1.5% pts.		$	136.58		-13.6%
Asia Pacific2		$	72.52		15.8%		60.2%		12.5% pts.		$	120.42		-8.3%
Regional Composite3		$	96.54		2.1%		63.6%		6.4% pts.		$	151.73		-8.3%
International Luxury4		$	188.74		-0.7%		58.5%		3.6% pts.		$	322.47		-6.8%
Total International5		$	106.72		1.5%		63.1%		6.1% pts.		$	169.23		-8.3%
Worldwide6		$	94.13		-1.0%		64.1%		4.6% pts.		$	146.86		-8.1%

Comparable Systemwide International Properties¹

 

 

		Two Months Ended February 28, 2010 and February 28, 2009
		REVPAR					Occupancy				Average Daily Rate
Region		2010			vs. 2009		2010		vs. 2009		2010			vs. 2009
Caribbean & Latin America		$	120.01		1.8%		67.4%		6.4% pts.		$	178.11		-7.9%
Continental Europe		$	87.50		0.4%		56.1%		4.8% pts.		$	156.03		-8.1%
United Kingdom		$	101.29		5.6%		65.6%		4.3% pts.		$	154.36		-1.2%
Middle East & Africa		$	92.29		-11.6%		67.6%		1.5% pts.		$	136.58		-13.6%
Asia Pacific2		$	76.86		8.2%		60.8%		10.6% pts.		$	126.47		-10.6%
Regional Composite3		$	93.73		1.6%		62.3%		6.3% pts.		$	150.52		-8.6%
International Luxury4		$	188.74		-0.7%		58.5%		3.6% pts.		$	322.47		-6.8%
Total International5		$	102.35		1.2%		61.9%		6.0% pts.		$	165.25		-8.7%
Worldwide6		$	78.93		-1.3%		62.9%		3.6% pts.		$	125.48		-6.9%

 

1

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

2	Does not include Hawaii.

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

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

5	Includes Regional Composite and International Luxury.

6

Includes international statistics for the two calendar months ended February 28, 2010 and February 28, 2009, and North American statistics for the twelve weeks ended March 26, 2010 and March 27, 2009. Includes the Marriott Hotels & Resorts, Renaissance Hotels, The Ritz-Carlton, Bulgari Hotels & Resorts, Residence Inn, Courtyard, Fairfield Inn & Suites, TownePlace Suites and SpringHill Suites brands.

 

A-4

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MARRIOTT INTERNATIONAL, INC.

KEY LODGING STATISTICS

Comparable Company-Operated North American Properties¹

 

 

		Twelve Weeks Ended March 26, 2010 and March 27,  2009
		REVPAR					Occupancy				Average Daily Rate
Brand		2010			vs. 2009		2010		vs. 2009		2010			vs. 2009
Marriott Hotels & Resorts		$	101.05		-1.2%		66.2%		4.4% pts.		$	152.59		-7.7%
Renaissance Hotels		$	96.04		-4.6%		63.9%		3.3% pts.		$	150.21		-9.6%
Composite North American Full-Service2		$	100.12		-1.8%		65.8%		4.2% pts.		$	152.16		-8.0%
The Ritz-Carlton3		$	193.68		2.5%		64.2%		6.8% pts.		$	301.74		-8.4%
Composite North American Full-Service & Luxury4		$	107.58		-1.2%		65.7%		4.4% pts.		$	163.82		-7.8%
Residence Inn		$	78.90		-0.9%		69.4%		5.3% pts.		$	113.69		-8.4%
Courtyard		$	64.74		-4.1%		60.3%		3.6% pts.		$	107.29		-9.9%
TownePlace Suites		$	43.32		-11.2%		58.0%		1.0% pts.		$	74.67		-12.7%
SpringHill Suites		$	58.16		-2.3%		59.8%		4.0% pts.		$	97.22		-8.9%
Composite North American Limited-Service5		$	66.83		-3.3%		62.7%		3.9% pts.		$	106.64		-9.3%
Composite - All6		$	90.36		-1.9%		64.4%		4.2% pts.		$	140.30		-8.2%

Comparable Systemwide North American Properties¹

 

 

		Twelve Weeks Ended March 26, 2010 and March 27,  2009
		REVPAR					Occupancy				Average Daily Rate
Brand		2010			vs. 2009		2010		vs. 2009		2010			vs. 2009
Marriott Hotels & Resorts		$	89.79		-1.0%		63.5%		3.9% pts.		$	141.50		-7.1%
Renaissance Hotels		$	87.78		-2.2%		63.6%		4.7% pts.		$	138.12		-9.5%
Composite North American Full-Service2		$	89.43		-1.2%		63.5%		4.1% pts.		$	140.90		-7.6%
The Ritz-Carlton3		$	193.68		2.5%		64.2%		6.8% pts.		$	301.74		-8.4%
Composite North American Full-Service & Luxury4		$	94.31		-0.9%		63.5%		4.2% pts.		$	148.52		-7.4%
Residence Inn		$	78.22		-0.8%		70.6%		4.3% pts.		$	110.80		-6.8%
Courtyard		$	66.99		-2.9%		61.4%		2.4% pts.		$	109.16		-6.7%
Fairfield Inn & Suites		$	46.59		-3.9%		56.4%		0.9% pts.		$	82.66		-5.4%
TownePlace Suites		$	49.27		-4.5%		61.3%		3.4% pts.		$	80.33		-9.7%
SpringHill Suites		$	58.95		-4.4%		61.1%		2.6% pts.		$	96.55		-8.5%
Composite North American Limited-Service5		$	64.15		-2.6%		62.8%		2.7% pts.		$	102.22		-6.7%
Composite - All6		$	75.63		-1.8%		63.0%		3.3% pts.		$	119.96		-6.8%

 

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

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

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

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

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

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

 

A-5

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MARRIOTT INTERNATIONAL, INC.

TIMESHARE SEGMENT

($ in millions)

 

		As Reported 12 Weeks Ended March 26, 2010				As Reported 12 Weeks Ended March 27, 2009				Adjustments							As Adjusted 12 Weeks Ended March 27, 2009**				Percent Better/ (Worse) 2010 vs. Adjusted 2009
										Restructuring Costs & Other Charges				Timeshare Strategy - Impairment Charges
Segment Revenues
Base fees revenue		$	11			$	10			$	—			$	—		$	10			10
Sales and services revenue
Development			147				121				4				—			125			18
Services			83				70				—				—			70			19
Financing revenue
Interest income - non-securitized notes			9				13				—				—			13			(31	)
Interest income - securitized notes			36				—				—				—			—			*
Other financing revenue 1			5				—				13				—			13			(62	)
Total financing revenue			50				13				13				—			26			92
Other revenue			5				5				—				—			5			—
Total sales and services revenue			285				209				17				—			226			26
Cost reimbursements			62				58				—				—			58			7
Segment revenues		$	358			$	277			$	17			$	—		$	294			22
Segment Results
Base fees revenue		$	11			$	10			$	—			$	—		$	10			10
Timeshare sales and services, net			50				(11	)			16				—			5			900
Timeshare strategy - impairment charges			—				—				—				—			—			—
Restructuring costs			—				(1	)			1				—			—			—
General, administrative and other expense			(17	)			(17	)			—				—			(17	)		—
Gains and other income			—				—				—				—			—			—
Joint venture equity earnings			(5	)			(1	)			1				—			—			*
Interest expense			(14	)			—				—				—			—			*
Timeshare strategy - impairment charges (non-operating)			—				—				—				—			—			—
Noncontrolling interest			—				3				—				—			3			(100	)
Segment results		$	25			$	(17	)		$	18			$	—		$	1			2,400
Contract Sales
Company:
Timeshare		$	151			$	138			$	—			$	—		$	138			9
Fractional			8				10				—				—			10			(20	)
Residential			4				(5	)			4				—			(1	)		(500	)
Total company			163				143				4				—			147			11
Joint ventures:
Timeshare			—				—				—				—			—			—
Fractional			1				13				(3	)			—			10			(90	)
Residential			—				(27	)			27				—			—			—
Total joint ventures			1				(14	)			24				—			10			(90	)
Total contract sales 2		$	164			$	129			$	28			$	—		$	157			4

 

*	Percent cannot be calculated.

**	Denotes non-GAAP financial measures. Please see pages A-19 and A-20 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

1	As Reported 12 Weeks Ended March 27, 2009 and As Adjusted 12 Weeks Ended March 27, 2009 include gain/(loss) on notes sold of ($1) million and ($1) million, respectively.

2	As Reported 12 Weeks Ended March 26, 2010 includes fractional and residential contract cancellation allowances of ($4) million and ($4) million, respectively. Gross contract sales for the 2010 first quarter were $172 million before the contract cancellation reserves of $8 million.

 

A-6

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MARRIOTT INTERNATIONAL, INC.

Non-GAAP Financial Measure

EBITDA and Adjusted EBITDA

($ in millions)

 

		Fiscal Year 2010
		First Quarter
Net Income attributable to Marriott		$	83
Interest expense			45
Tax provision			46
Tax provision, noncontrolling interest			—
Depreciation and amortization			39
Less: Depreciation reimbursed by third-party owners			(3	)
Interest expense from unconsolidated joint ventures			5
Depreciation and amortization from unconsolidated joint ventures			6
EBITDA **			221
Increase over 2009 Adjusted EBITDA			3	%
		Fiscal Year 2009
		First Quarter				Second Quarter				Third Quarter				Fourth Quarter				Total
Net Income / (Loss) attributable to Marriott		$	(23	)		$	37			$	(466	)		$	106			$	(346	)
Interest expense			29				28				27				34				118
Tax provision			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

 

**	Denotes non-GAAP financial measures. Please see pages A-19 and A-20 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

 

A-7

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MARRIOTT INTERNATIONAL, INC.

Non-GAAP Financial Measure

Total Debt

($ in millions)

 

		Balance at End of 2010 First Quarter				Balance at Year-End 2009				Better/ (Worse) Change
Total debt		$	3,269			$	2,298			$	(971	)
Less the impact of ASU Nos. 2009-16 and 2009-17			(1,043	)			—				1,043
Adjusted total debt** (a)		$	2,226			$	2,298			$	72
		Range								Range
		Estimated Balance				Estimated Balance				As Compared to Balance at Year-End 2009
		Year-End 2010 (b)				Year-End 2010 (c)				Better/(Worse) Change (b)				Better/(Worse) Change (c)
Total debt		$	2,854			$	2,754			$	(556	)		$	(456	)
Less the impact of ASU Nos. 2009-16 and 2009-17			(956	)			(956	)			956				956
Adjusted total debt** (a)		$	1,898			$	1,798			$	400			$	500

 

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

(b)	Assumes $400 debt repayment in 2010.

(c)	Assumes $500 debt repayment in 2010.

**	Denotes non-GAAP financial measures. Please see pages A-19 and A-20 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

 

A-8

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MARRIOTT INTERNATIONAL, INC.

Non-GAAP Financial Measure

Revenue, Interest Expense and Income Before Income Taxes

As Adjusted Had ASU Nos. 2009-16 and 2009-17 (Formerly Referred to as FAS 166 & 167) Been Adopted on January 3, 2009

First Quarter 2009

($ in millions)

 

		First  Quarter 2009 As Reported				First  Quarter 2009 Restructuring Costs and Other Charges			First  Quarter 2009 As Adjusted For Restructuring  Costs and Other Charges**				ASU Nos. 2009-16 and 2009-17 Adjustments				First  Quarter 2009 As Adjusted For ASU Nos. 2009-16 and 2009-17**
Revenue		$	2,495			$	17		$	2,512			$	28			$	2,540
Interest Expense		$	(29	)		$	—		$	(29	)		$	(16	)		$	(45	)
Income Before Income Taxes		$	8			$	129		$	137			$	4			$	141

 

**	Denotes non-GAAP financial measures. Please see pages A-19 and A-20 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

 

A-9

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MARRIOTT INTERNATIONAL, INC.

Non-GAAP Financial Measure

EBITDA and Adjusted EBITDA

As Adjusted Had ASU Nos. 2009-16 and 2009-17 (Formerly Referred to as FAS 166 & 167) Been Adopted on January 3, 2009

First Quarter 2009

($ in millions)

 

		First Quarter 2009				ASU Nos. 2009-16 and 2009-17 Adjustments			As Adjusted For ASU Nos. 2009-16 and 2009-17 First Quarter 2009**
Net (Loss) / Income attributable to Marriott		$	(23	)		$	2		$	(21	)
Interest expense			29				16			45
Tax provision			33				2			35
Tax provision, noncontrolling interest			1				—			1
Depreciation and amortization			39				—			39
Less: Depreciation reimbursed by third-party owners			(2	)			—			(2	)
Interest expense from unconsolidated joint ventures			3				—			3
Depreciation and amortization from unconsolidated joint ventures			6				—			6
EBITDA **			86				20			106
Restructuring costs and other charges
Severance			2				—			2
Facilities exit costs			—				—			—
Development cancellations			—				—			—
Total restructuring costs			2				—			2
Impairment of investments and other, net of prior year reserves			68				—			68
Reserves for loan losses			42				—			42
Contract cancellation allowances			4				—			4
Residual interests valuation			13				—			13
System development write-off			—				—			—
Total other charges			127				—			127
Total restructuring costs and other charges			129				—			129
Timeshare strategy - impairment charges
Operating impairments			—				—			—
Non-operating impairments			—				—			—
Total timeshare strategy - impairment charges			—				—			—
Adjusted EBITDA **		$	215			$	20		$	235

 

**	Denotes non-GAAP financial measures. Please see pages A-19 and A-20 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

 

A-10

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MARRIOTT INTERNATIONAL, INC.

Non-GAAP Financial Measure

EBITDA and Adjusted EBITDA

2009 As Adjusted Had ASU Nos. 2009-16 and 2009-17 Been Adopted on January 3, 2009 and Forecasted 2010

($ in millions)

 

														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	)		$	358			$	397
Interest expense			118				77				195				195				190
Tax provision			(65	)			—				(65	)			202				223
Tax provision, noncontrolling interest			4				—				4				—				—
Depreciation and amortization			185				—				185				185				185
Less: Depreciation reimbursed by third-party owners			(9	)			—				(9	)			(10	)			(10	)
Interest expense from unconsolidated joint ventures			19				—				19				25				25
Depreciation and amortization from unconsolidated joint ventures			27				—				27				30				30
EBITDA **			(67	)			76				9				985				1,040
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			$	985			$	1,040

 

**	Denotes non-GAAP financial measures. Please see pages A-19 and A-20 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

 

A-11

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MARRIOTT INTERNATIONAL, INC.

Non-GAAP Financial Measure Reconciliation

Second Quarter 2009 General, Administrative, and Other Expenses

Excluding Restructuring Costs and Other Charges

($ in millions)

 

		Estimated Second Quarter 2010			Second Quarter 2009				Percent Better/(Worse) Estimated Second Quarter  2010 vs. Second Quarter 2009
General, administrative and other expenses		$	150		$	146
Less: Restructuring costs and other charges			—			(10	)
General, administrative and other expenses excluding restructuring costs and other charges**		$	150		$	136			-10	%

 

**	Denotes non-GAAP financial measures. Please see pages A-19 and A-20 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

 

A-12

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MARRIOTT INTERNATIONAL, INC.

Non-GAAP Financial Measure

Timeshare Inventory

As Adjusted Had ASU Nos. 2009-16 and 2009-17 (Formerly Referred to as FAS 166 & 167) Been Adopted on January 3, 2009

($ in millions)

 

		Balance at End of 2010 First Quarter			As Reported Balance at Year-End 2009			Adjustments			As Adjusted For ASU Nos. 2009-16 And 2009-17 Balance at Year-End 2009** 1
								ASU Nos. 2009-16 And 2009-17 Adjustments
Finished goods 2		$	797		$	721		$	100		$	821
Work-in-process			168			198			—			198
Land and infrastructure			520			507			—			507
Total inventory		$	1,485		$	1,426		$	100		$	1,526

 

**	Denotes non-GAAP financial measures. Please see pages A-19 and A-20 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

 

1	As Adjusted had ASU Nos. 2009-16 and 2009-17 (formerly referred to as FAS 166 & 167) been adopted on January 3, 2009.

2

Includes completed inventory as well as an estimate of inventory we expect to acquire when we foreclose on defaulted notes. The estimate of inventory we expect to acquire when we foreclose on defaulted notes for As Adjusted 2009 and As Reported 2010 include securitized and non-securitized notes, and As Reported 2009 includes non-securitized notes.

 

A-13

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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 3, 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
Base fees revenue		$	10			$	—			$	—		$	10			$	—			$	10
Sales and services revenue
Development			121				4				—			125				2				127
Services			70				—				—			70				—				70
Financing revenue
Interest income - non-securitized notes			13				—				—			13				—				13
Interest income - securitized notes			—				—				—			—				35				35
Other financing revenue			—				13				—			13				(8	)			5
Total financing revenue			13				13				—			26				27				53
Other revenue			5				—				—			5				(1	)			4
Total sales and services revenue			209				17				—			226				28				254
Cost reimbursements			58				—				—			58				—				58
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				—			—				—				—
Interest expense			—				—				—			—				(16	)			(16	)
Timeshare strategy - impairment charges (non-operating)			—				—				—			—				—				—
Noncontrolling interest			3				—				—			3				—				3
Segment results		$	(17	)		$	18			$	—		$	1			$	4			$	5
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
Gain / (Loss) on Notes Sold
Gain / (loss) on notes sold		$	(1	)		$	—			$	—		$	(1	)		$	1			$	—

 

**	Denotes non-GAAP financial measures. Please see pages A-19 and A-20 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

 

A-14

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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 3, 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
Base fees revenue		$	11			$	—			$	—		$	11			$	—			$	11
Sales and services revenue
Development			182				—				—			182				6				188
Services			80				—				—			80				—				80
Financing revenue
Interest income - non-securitized notes			10				—				—			10				—				10
Interest income - securitized notes			—				—				—			—				38				38
Other financing revenue			4				12				—			16				(8	)			8
Total financing revenue			14				12				—			26				30				56
Other revenue			7				—				—			7				—				7
Total sales and services revenue			283				12				—			295				36				331
Cost reimbursements			61				—				—			61				—				61
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				—			—				—				—
Interest expense			—				—				—			—				(18	)			(18	)
Timeshare strategy - impairment charges (non-operating)			—				—				—			—				—				—
Noncontrolling interest			4				—				—			4				—				4
Segment results		$	(35	)		$	50			$	—		$	15			$	14			$	29
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-19 and A-20 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

 

A-15

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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 3, 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
Base fees revenue				$	11			$	—			$	—		$	11			$	—			$	11
Sales and services revenue
Development					138				—				—			138				11				149
Services					82				—				—			82				—				82
Financing revenue
Interest income - non-securitized notes					11				—				—			11				—				11
Interest income - securitized notes					—				—				—			—				36				36
Other financing revenue					16				(3	)			—			13				(8	)			5
Total financing revenue					27				(3	)			—			24				28				52
Other revenue					7				—				—			7				—				7
Total sales and services revenue					254				(3	)			—			251				39				290
Cost reimbursements					65				—				—			65				—				65
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	)
Interest expense					—				—				—			—				(17	)			(17	)
Timeshare strategy - impairment charges (non-operating)					(71	)			—				71			—				—				—
Noncontrolling interest					4				—				—			4				—				4
Segment results				$	(681	)		$	5			$	685		$	9			$	15			$	24
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-19 and A-20 for additional information about our reasons for providing these alternative financial measures and the limitations on their use.

 

A-16

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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 3, 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
Base fees revenue				$	15			$	—			$	—		$	15			$	—			$	15
Sales and services revenue
Development					185				—				—			185				4				189
Services					98				—				—			98				—				98
Financing revenue
Interest income - non-securitized notes					12				—				—			12				—				12
Interest income - securitized notes					—				—				—			—				49				49
Other financing revenue					64				(2	)			—			62				(55	)			7
Total financing revenue					76				(2	)			—			74				(6	)			68
Other revenue					18				—				—			18				—				18
Total sales and services revenue					377				(2	)			—			375				(2	)			373
Cost reimbursements					85				—				—			85				—				85
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	)
Interest expense					—				—				—			—				(26	)			(26	)
Timeshare strategy - impairment charges (non-operating)					—				—				—			—				—				—
Noncontrolling interest					—				—				—			—				—				—
Segment results				$	54			$	8			$	—		$	62			$	(34	)		$	28
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-19 and A-20 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.

TIMESHARE SEGMENT

AS ADJUSTED HAD ASU NOS. 2009-16 AND 2009-17 (FORMERLY REFERRED TO AS FAS 166 & 167) BEEN

ADOPTED ON JANUARY 3, 2009

FULL YEAR 2009

($ in millions)

 

				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
Base fees revenue				$	47			$	—		$	—		$	47			$	—			$	47
Sales and services revenue
Development					626				4			—			630				23				653
Services					330				—			—			330				—				330
Financing revenue
Interest income - non-securitized notes					46				—			—			46				—				46
Interest income - securitized notes					—				—			—			—				158				158
Other financing revenue					84				20			—			104				(79	)			25
Total financing revenue					130				20			—			150				79				229
Other revenue					37				—			—			37				(1	)			36
Total sales and services revenue					1,123				24			—			1,147				101				1,248
Cost reimbursements					269				—			—			269				—				269
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	)
Interest expense					—				—			—			—				(77	)			(77	)
Timeshare strategy - impairment charges (non-operating)					(71	)			—			71			—				—				—
Noncontrolling interest					11				—			—			11				—				11
Segment results				$	(679	)		$	81		$	685		$	87			$	(1	)		$	86
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-19 and A-20 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 Measures

In our press release and schedules, and on the related conference call, we report certain financial measures that are not prescribed or authorized by United States generally accepted accounting principles (“GAAP”). We discuss management’s reasons for reporting these non-GAAP measures below, and the press release schedules reconcile the most directly comparable GAAP measure to each non-GAAP measure that we refer to (identified by a double asterisk on the preceding pages). Although management evaluates and presents these non-GAAP measures for the reasons described below, please be aware that these non-GAAP measures are not alternatives to revenue, operating income, income from continuing operations, net income, earnings per share or any other comparable operating measure prescribed by GAAP. In addition, these non-GAAP financial measures may be calculated and/or presented differently than measures with the same or similar names that are reported by other companies, and as a result, the non-GAAP measures we report may not be comparable to those reported by others.

Adjusted Measures That Exclude Certain Charges, Costs, and Other Expenses. Management evaluates non-GAAP measures that exclude the impact of Timeshare strategy - impairment charges incurred in the 2009 third quarter, restructuring costs and other charges incurred in the 2009 first quarter through the 2009 fourth quarter, and certain tax expenses incurred in the 2009 first quarter, because those non-GAAP measures allow for period-over-period comparisons of our on-going core operations before material charges. These non-GAAP measures also facilitate management’s comparison of results from our on-going operations before material charges with results from other lodging companies.

Timeshare Strategy - Impairment Charges. In response to the difficult business conditions that the Timeshare segment’s timeshare, luxury residential, and luxury fractional real estate development businesses continued to experience, we evaluated our entire Timeshare portfolio in the 2009 third quarter. In order to adjust the business strategy to reflect current market conditions at that time, on September 22, 2009, we approved plans for our Timeshare segment to take the following actions: (1) for our luxury residential projects, reduce prices, convert certain proposed projects to other uses, sell some undeveloped land, and not pursue further Marriott-funded residential development projects; (2) reduce prices for existing luxury fractional units; (3) continue short-term promotions for our U.S. timeshare business and defer the introduction of new projects and development phases; and (4) for our European timeshare and fractional resorts, continue promotional pricing and marketing incentives and not pursue further development. As a result of these decisions, we recorded third quarter 2009 pretax charges totaling $752 million in our Consolidated Statements of Income ($502 million after-tax), including $614 million of pretax charges impacting operating income under the “Timeshare strategy-impairment charges” caption, and $138 million of pretax charges impacting non-operating income under the “Timeshare strategy-impairment charges (non-operating)” caption.

Restructuring Costs and Other Charges. During the latter part of 2008 and particularly the fourth quarter, we experienced a significant decline in demand for hotel rooms both domestically and internationally due, in part, to the failures and near failures of several large financial service companies and the dramatic downturn in the economy. Our capital intensive Timeshare business was also hurt by the downturn in market conditions and particularly, the significant deterioration in the credit markets. These declines resulted in reduced management and franchise fees, cancellation of development projects, reduced timeshare contract sales, contract cancellation allowances, and charges and reserves associated with expected fundings, loans, Timeshare inventory, accounts receivable, contract cancellation allowances, valuation of Timeshare residual interests, hedge ineffectiveness, and asset impairments. We responded by implementing various cost saving measures, beginning in the fourth quarter of 2008 and which continued in 2009, and resulted in first quarter 2009 restructuring costs of $2 million, second quarter 2009 restructuring costs of $33 million, third quarter 2009 restructuring costs of $9 million, and 2009 fourth quarter restructuring costs of $7 million that were directly related to the downturn. We also incurred other first quarter 2009, second quarter 2009 and fourth quarter 2009 charges totaling $127 million, $24 million, and $12 million respectively, as well as $1 million in net other credits in the 2009 third quarter, that were directly related to the downturn, including asset impairment charges, accounts receivable and guarantee charges, reserves associated with loans, reversal of the liability related to expected fundings, Timeshare contract cancellation allowances, and charges related to the valuation of Timeshare residual interests.

Certain Tax Expenses. Certain tax expenses included $26 million in the 2009 first quarter of non-cash charges primarily related to the treatment of funds received from certain foreign subsidiaries, an issue we are contesting with the Internal Revenue Service (“IRS”).

Earnings Before Interest, Taxes, Depreciation and Amortization. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) reflects earnings excluding the impact of interest expense, tax expense, depreciation and amortization. Management considers EBITDA to be an indicator of operating performance because it can be used to measure our ability to service debt, fund capital expenditures, and expand our business. EBITDA is used by analysts, lenders, investors and others, as well as by us, to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company’s capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and tax expense can vary considerably among companies. EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.

Adjusted EBITDA. Management also evaluates adjusted EBITDA which excludes: (1) Timeshare strategy - impairment charges of $752 million incurred in the 2009 third quarter; (2) the 2009 fourth quarter restructuring costs and other charges totaling $19 million; (3) the 2009 third quarter restructuring costs and other charges totaling $8 million; (4) the 2009 second quarter restructuring costs and other charges totaling $57 million; and (5) the 2009 first quarter restructuring costs and other charges totaling $129 million. Management excludes the restructuring costs and other charges incurred in the 2009 first through fourth quarters and the Timeshare strategy-impairment charges recorded in the 2009 third quarter for the reasons noted above under “Measures That Exclude Certain Charges, Costs, and Other Expenses.”

 

A-19

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MARRIOTT INTERNATIONAL, INC.

Non-GAAP Financial Measures

(cont.)

 

 

Adjusted Measures that Exclude the Impact of New Accounting Standards or Reflect Their Early Adoption. As of the first day of fiscal year 2010, we adopted Accounting Standards Update (“ASU”) No. 2009-16 “Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets” (formerly known as FAS No. 166, “Accounting for Transfers of Financial Assets-an amendment of FASB Statement No. 140”) and ASU No. 2009-17 “Consolidations (Topic 810); Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” (formerly known as FAS No. 167, “Amendments to FASB Interpretation No. 46(R),” which required consolidating previously securitized pools of Timeshare notes and impacts the ongoing accounting for those notes. Management evaluates non-GAAP measures that exclude the impact of these standards in the current year or include the impact of these standards as if we had adopted them early in order to better perform year-over-year comparisons on a comparable basis.

 

A-20