Hotel Online  Special Report
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Marriott Reports 4th Quarter Profit Up 25%; Continues to Sell
Properties and Retain Management Contracts
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Hotel Operating Statistics
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Full Year Highlights:
  • Record Full Year 2005 earnings per share totaled $2.89, up 17 percent from 2004;
  • Full year management and franchise fee revenue exceeded $1 billion in 2005, 18 percent over the prior year and surpassing the previous peak reached in 2000;
  • Incentive fees totaled $201 million during the year, 42 percent higher than 2004 levels. Approximately 50 percent of managed hotels generated incentive fees during 2005 compared to 32 percent in 2004;
  • Full year 2005 worldwide systemwide comparable revenue per available room (REVPAR) rose 10.4 percent (9.9 percent using constant dollars) and worldwide company-operated house profit margins increased 180 basis points during the year;
  • In North America, company-operated comparable REVPAR rose 9.8 percent during 2005 and house profit margins rose 160 basis points; Property- level EBITDA margins for comparable North American company-operated properties, calculated as if wholly owned, increased 200 basis points;
  • Internet sales totaled $3.2 billion in 2005, 42 percent over 2004 levels. Nearly 85 percent of internet sales were booked on Marriott.com;
  • Approximately 22,000 rooms opened in 2005, including nearly 9,000 full- service rooms under the Marriott Hotels & Resorts, Renaissance Hotels & Resorts and The Ritz-Carlton brands. Twenty-seven percent of total room openings were conversions from competitor brands. In addition, nearly 9,000 rooms franchised under Marriott flags converted to Marriott management during the year;
  • At the close of the year, worldwide rooms approached the one-half million mark with a pipeline of over 70,000 rooms worldwide under construction, awaiting conversion, or approved for development;
  • Marriott returned a record $1.65 billion to shareholders through the repurchase of nearly 26 million shares of the company's common stock in 2005, $1 billion more than in the prior year;
  • Marriott recycled more than $1.4 billion of capital in 2005, generating cash proceeds through notes receivable repayments and asset sales, including the sale of timeshare notes. At year-end, Marriott's notes receivable balance, excluding timeshare notes, totaled $333 million compared to $942 million at year-end 2004;
  • Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) was approximately $1,270 million in 2005, a 15 percent increase over 2004.
Fourth Quarter Highlights:
  • Record fourth quarter 2005 earnings per share totaled $1.07, up 35 percent from the fourth quarter of 2004;
  • Fourth quarter management and franchise fee revenue rose 19 percent over the prior year. Thirty-five percent of managed hotels generated incentive fees during the quarter compared to 31 percent in the prior year's quarter;
  • Worldwide systemwide comparable revenue per available room rose 11.2 percent (11.0 percent using constant dollars) and worldwide company- operated house profit margins increased 210 basis points during the quarter. Property-level EBITDA margins for comparable North American company-operated properties, calculated as if wholly owned, increased 250 basis points;
  • Nearly 6,000 rooms opened during the fourth quarter including the 366- room Grand Cayman Ritz-Carlton and 1,600 rooms converted from competitor properties;
  • Cash proceeds generated by notes receivable repayments and asset sales, including the sale of timeshare notes, totaled $587 million and share repurchases totaled $334 million. 
WASHINGTON, Feb. 9, 2006 - Marriott International, Inc. (NYSE: MAR) today reported record diluted earnings per share from continuing operations (EPS) of $1.07 in the fourth quarter of 2005, up 35 percent from the fourth quarter of 2004. Income from continuing operations, net of taxes, for the quarter was $237 million, a 26 percent increase over the prior year. Excluding the impact of our synthetic fuel business, income from continuing operations increased 32 percent to $204 million and diluted earnings per share increased 42 percent to $0.92 during the quarter.

J.W. Marriott, Jr., Marriott International chairman and chief executive officer, said, "Strong worldwide economic expansion and impressive lodging industry strength continued in the fourth quarter, and Marriott International capitalized on those trends through increasingly favorable financial performance.

"Across all travel segments, group, business transient and leisure, revenues remained strong in the quarter. Meeting attendance was solid and group spending was robust. Catering revenues rose 13 percent during the quarter with particularly impressive demand from financial services and pharmaceutical businesses. Business guests continued to fill hotels. Manhattan REVPAR rose 16 percent largely due to a greater mix of corporate rated business and higher room rates. Technology rebounded, driving demand higher in San Francisco and the suburbs of Boston. Business travel to and especially within Asia continues to thrive. In China alone, Marriott currently operates 32 hotels, with 14 properties under construction, and additional projects in the development pipeline.

"The resort business in the Caribbean exceeded expectations, as leisure travel continues to boom. Our Ritz-Carlton brand just opened a spectacular resort on Grand Cayman Island, and we anticipate significant additional expansion opportunities in the region. In total, 16 Ritz-Carlton hotels, many in resort destinations, are currently in the development pipeline, including 11 which are under construction.

"Marriott and its owners invested record amounts in product improvements and renovations throughout our system in 2005, including new bedding for over 600,000 beds. Guest satisfaction scores and REVPAR improved dramatically in 2005, reflecting renovations over the past three years, including 129 Courtyard hotels and 95 Residence Inns. An additional 43 Courtyards and 24 Residence Inns are scheduled for renovation in 2006.

"We expect to deliver another year of outstanding results in 2006. U.S. industry supply growth is expected to remain modest while lodging demand continues to strengthen. Given the strength of the industry and the outstanding quality of our products, we believe our North American company- operated REVPAR should increase 8 to 10 percent in 2006."

In the 2005 fourth quarter (16 week period from September 10, 2005 to December 30, 2005), REVPAR for the company's comparable worldwide systemwide properties increased 11.2 percent (11.0 percent using constant dollars). Systemwide North American REVPAR increased by 11.0 percent in the fourth quarter of 2005, driven by a 7.8 percent increase in average daily rate and a 2 percentage point increase in occupancy to 70.7 percent. REVPAR at the company's comparable systemwide North American full-service hotels (including Marriott Hotels & Resorts, The Ritz-Carlton, and Renaissance Hotels & Resorts) increased by 11.3 percent during the quarter. North American systemwide REVPAR for the company's comparable select-service and extended-stay brands (including Courtyard, Fairfield Inn, Residence Inn, TownePlace Suites, and SpringHill Suites) increased 10.6 percent.

In the fourth quarter, international systemwide comparable REVPAR increased 11.9 percent (11.0 percent using constant dollars) including a 9.9 percent increase in average daily rates and a 1.3 percentage point improvement in occupancy to nearly 75 percent. REVPAR showed dramatic improvements in Hong Kong, China and Dubai.

The company added 38 hotels and timeshare resorts (5,980 rooms) to our worldwide lodging portfolio during the fourth quarter of 2005, while four properties (679 rooms) exited the system. At year-end, the company's lodging group encompassed 2,741 hotels and timeshare resorts (499,165 rooms).

MARRIOTT REVENUES totaled $3.6 billion in the 2005 fourth quarter, a 16 percent increase from the same period in 2004. Base and franchise fees also rose 16 percent. Incentive management fees soared 33 percent as a result of robust growth in REVPAR and higher property level house profit margins. In the prior year's quarter, Marriott recognized $7 million in incentive fees that were calculated based on prior period results, but not earned and due until the fourth quarter of 2004. Comparable company-operated house profit margins increased 210 basis points during the quarter, both worldwide and in North America, despite dramatically higher energy costs. Property level EBITDA margins for comparable North American company-operated properties, calculated as if wholly owned, increased 250 basis points.
Timeshare interval sales and services revenue increased 18 percent in the fourth quarter of 2005. Timeshare contract sales, including sales made by joint venture projects, increased 6 percent, reflecting strong sales at our timeshare resorts in St. Thomas, Las Vegas and Paris, as well as strong whole- ownership sales at our Grand Residences by Marriott in Panama City, Florida. Contract sales were lower at Ritz-Carlton Club resorts in St. Thomas and Bachelor Gulch, Colorado. These resorts continue to experience strong demand but offer limited inventory as they near sell-out. Seven new resorts offering timeshare, fractional or whole ownership products are expected to begin sales in 2006 including the Ritz-Carlton projects in San Francisco, Miami Beach, Kapalua and Kauai.

LODGING OPERATING INCOME for the fourth quarter of 2005 was $250 million, up from $146 million a year ago. Marriott's 2005 fourth quarter lodging operating income benefited from strong fee growth as well as increased profits from owned and leased properties the company acquired in 2005. The company's results included a $7 million charge in connection with the write-off of previously capitalized costs for one timeshare project. General and administrative expenses were also lower. The 2004 quarter included a $13 million charge associated with the Courtyard joint venture transaction.

SYNTHETIC FUEL operations contributed approximately $0.15 per share of after-tax earnings during the 2005 fourth quarter compared to $0.14 in the year ago quarter. Excluding the impact of our synthetic fuel operations, our tax rate for continuing operations was approximately 35 percent in the fourth quarter of 2005.

GAINS AND OTHER INCOME (excluding $12 million from synthetic fuel) totaled $72 million and included a $40 million gain from a fourth quarter timeshare mortgage note sale, a $17 million gain on the Courtyard land sale, $5 million of gains from the sale of other real estate, $6 million of preferred returns from joint venture investments and a $4 million gain on the sale of an equity interest in an international joint venture. Prior year gains of $69 million included a $36 million gain from a timeshare mortgage note sale, a $5 million gain associated with the repayment of a note, and $28 million of gains primarily related to the sale of real estate, our interest in an international joint venture and the disposition of the Ramada International business.

INTEREST EXPENSE increased $7 million primarily due to higher commercial paper balances, partially offset by changes in the company's senior debt in 2005.

INTEREST INCOME totaled $14 million during the quarter, down from $48 million in the year ago quarter, primarily driven by loan repayments in 2005 and in the fourth quarter of 2004.

EQUITY IN (LOSSES)/EARNINGS - OTHER reflects Marriott's share of income or losses from joint venture investments. During the fourth quarter 2005, the company earned a $15 million profit associated with the disposition of a hotel by a joint venture in which Marriott had an equity interest. Results also reflected improved profitability of joint venture hotels benefiting from higher property REVPAR. The company also benefited from the recapitalization of the Courtyard joint venture.

FULL YEAR 2005 RESULTS

For the full year 2005 EPS totaled $2.89, up 17 percent from 2004. Income from continuing operations, net of taxes, for the year was $668 million, a 12 percent increase over 2004 levels. Synthetic fuel operations contributed approximately $125 million ($0.54 per share) in 2005 versus $107 million ($0.44 per share) in the prior year. The guidance provided by the company on October 6, 2005, for fiscal year 2005 excluded the $94 million pre-tax ($0.27 per share) one-time charge associated with the CTF transaction, recorded in the 2005 second quarter, and the $17 million ($0.05 per share) pre-tax charge related to an impairment in a Delta Airlines leveraged aircraft lease, recorded in the 2005 third quarter. Excluding these items, 2005 EPS was $3.21, up 30 percent, and income from continuing operations, net of taxes, was $741 million, up 25 percent over 2004 levels.

LODGING OPERATING INCOME increased 22 percent from 2004 levels to $699 million, largely as a result of higher base and franchise fees, growth in incentive fees, favorable timeshare profits and strong results from our owned and leased properties, partially offset by higher general and administrative expenses. Marriott's general and administrative expenses increased 24 percent to $753 million, driven by $94 million of pre-tax charges associated with the CTF transaction, primarily due to the non-cash write-off of management agreements, $30 million for bedding incentives, a $12 million payment made in the second quarter to retain a management agreement and a $6 million charge recorded in the third quarter associated with the settlement of a litigation matter from 1998, partially offset by an overall decline in litigation costs.

GAINS AND OTHER INCOME of $149 million in 2005 (excluding $32 million for synthetic fuel) included $69 million from timeshare mortgage note sales, $34 million from the sale of real estate, $25 million of gains from the sale or refinancing of real estate loans, $14 million of preferred returns from several joint venture investments and $7 million of gains on the sale of the company's interests in two joint ventures. Prior year gains of $136 million (excluding $28 million for synthetic fuel) included $64 million from the sale of timeshare mortgage notes, $50 million related to the sale of real estate and our interest in an international joint venture, a $17 million gain on the disposition of Marriott's interest in the Two Flags joint venture and the Ramada International business, and a $5 million gain associated with the repayment of principal and interest of a mezzanine loan to a joint venture.

INTEREST INCOME declined $67 million in 2005 to $79 million as the company reduced its notes receivable balance in 2005, excluding timeshare notes, by $609 million. The provision for loan losses reflected a $17 million non-cash pre-tax charge associated with the impairment of a Delta Airline leveraged lease receivable and an $11 million reserve for a loan at one property.

BALANCE SHEET

With record earnings, loan repayments and asset sales, Marriott generated significant cash flow in 2005. At the end of 2005, total debt was $1,737 million and cash balances totaled $203 million compared to $1,325 million in debt and $770 million of cash at the end of 2004. The company also repurchased a record 26 million shares of common stock in 2005 at a cost of $1.65 billion. The remaining share repurchase authorization, as of year-end 2005, totaled approximately 17.9 million shares.

OUTLOOK

The company expects North American company-operated REVPAR to increase 8 to 10 percent in 2006, roughly 80 percent of which should be rate driven. Assuming a 150 to 200 percentage point improvement in house profit margins, and approximately 25,000 new room openings (gross), the company expects total fee revenue of $1,165 million to $1,185 million, an increase of 13 to 15 percent.

Given the recent rise in oil prices and the uncertainty surrounding the availability of 2006 tax credits, the company suspended production at its four synthetic fuel facilities in mid-January 2006. The company has not yet determined the duration of the temporary shut down and as such is unable to provide guidance for 2006 earnings from the synthetic fuel business. The current net book value of the four facilities is $19 million.

New accounting rules for the timeshare industry take effect in 2006. The new rules change the timing of the recognition of timeshare revenues, selling and product costs, reacquired timeshare inventory and maintenance fees for unsold timeshare inventory. At the same time, the attractive cash flow characteristics of the timeshare business will remain unchanged. The company's estimate of the one-time non-cash impact to 2006 first quarter earnings will be an after-tax charge of approximately $110 million to $115 million ($0.50 to $0.53 per share). Since this charge is a one-time item, and will be presented in the financial statements below income from continuing operations, it is not included in the 2006 earnings guidance.

Timeshare interval sales and services revenues, net of expenses are expected to decline approximately 2 percent in 2006, reflecting soft contract sales in 2005 resulting from limited inventory. Contract sales (including joint venture sales) are expected to increase over 40 percent in 2006, as the company continues to experience strong sales from highly successful projects in Aruba, Newport Coast, Las Vegas and Hawaii and begins sales in 2006 at seven new resorts offering timeshare, fractional or whole ownership products.

General, administrative and other expenses are expected to decline approximately 12 to 14 percent in 2006 to $650 million to $660 million from $753 million in 2005. The comparison reflects the impact of the $94 million charge associated with the CTF transaction in the second quarter of 2005 and $30 million in bedding incentives also recorded in 2005. This 2006 guidance includes the $44 million pre-tax impact of the Financial Accounting Standards Board's Statement (FAS) No. 123®, requiring the expensing of all share-based compensation (including stock options).

Given these above items, the company estimates that lodging operating income will total $910 million to $940 million in 2006, an increase of 30 to 34 percent over 2005 (20 to 24 percent excluding the $94 million charge associated with the CTF transaction in 2005 and the expected $44 million impact of FAS No. 123® in 2006).

The company expects lodging gains and other income to total approximately $130 million in 2006 (including approximately $70 million in timeshare mortgage note sale gains), compared to $149 million in 2005.

Net interest expense is expected to total $75 million, an increase of $20 million, primarily driven by loan repayments in 2005 resulting in reduced interest income.

The company estimates North American company-operated REVPAR growth of 8 to 10 percent in the first quarter of 2006, with house profit margin growth of 150 to 200 basis points.

Under the above assumptions, the company currently estimates the following results for the first quarter and full year 2006:
 
 

                              First Quarter 2006       Full Year 2006
    Total fee revenue         $250 million to          $1,165 million to
                              $260 million             $1,185 million

    Owned, leased,            Approx. $45 million      Approx. $150 million
     corporate housing
     and other, net of
     direct expenses

    Timeshare interval
     sales and services,
     net of direct expenses   $65 million to           Approx. $255 million
                              $70 million

    General, administrative
     & other expense(1)       $140 million to          $650 million to
                              $145 million             $660 million

    Lodging operating         $215 million to          $910 million to
     income(1)                $235 million             $940 million

    Gains (excluding
     synthetic fuel)          Approx. $30 million      Approx. $130 million(2)

    Net interest expense(3)   Approx. $20 million      Approx $75 million

    Equity in earnings/       Approx. $0               Approx. $15 million
     (losses)

    Earnings per share        No guidance              No guidance
     from synthetic fuel

    Earnings per share
     excluding synfuel(1,4)   $0.67 to $0.73           $2.95 to $3.05

    Earnings per share        $0.70 to $0.76           $3.08 to $3.18
     excluding synfuel and
     impact of FAS123®
     adoption(4,5)
 

    (1) Full Year 2006 includes pre-tax charge of $44 million ($0.13 per
        share) associated with the adoption of FAS No. 123® ($9 million
        ($0.03 per share) for the 2006 first quarter).
    (2) Includes timeshare mortgage note sale gains.
    (3) Net of interest income
    (4) From continuing operations before cumulative effect of a change in
        accounting principle associated with the new timeshare accounting
        rules.  The company expects to record an after-tax charge of $110
        million to $115 million ($0.50 to $0.53 per share) in the 2006 first
        quarter.
    (5) Full Year 2006 excludes pre-tax charge of $44 million ($0.13 per
        share) associated with the adoption of FAS No. 123® ($9 million
        ($0.03 per share) for the 2006 first quarter).

The company expects investment spending in 2006 to total approximately $900 million, including $50 million for maintenance capital spending, $500 million for capital expenditures, acquisitions and timeshare development, $30 million in new mezzanine financing and mortgage loans for hotels developed by owners and franchisees, and approximately $320 million in equity and other investments (including timeshare equity investments).

Marriott International, Inc. (NYSE: MAR - News) will conduct its quarterly earnings review for the investment community and news media on Thursday, February 9, 2006 at 10 a.m. Eastern Time (ET). The conference call will be webcast simultaneously via Marriott's investor relations website at http://www.marriott.com/investor, click the "Recent Investor News" tab and click on the quarterly conference call link. A replay will be available on the Internet until March 9, 2006.

The telephone dial-in number for the conference call is 913-981-4910. A telephone replay of the conference call will also be available by telephone from 1 p.m. ET, Thursday, February 9, 2006 until Thursday, February 16, 2006 at 8 p.m. ET. To access the recording, call 719-457-0820. The reservation number for the recording is 8301413.
 
 

MARRIOTT INTERNATIONAL, INC. 
Financial Highlights
(in millions, except per share amounts)

                                 16 Weeks Ended      16 Weeks Ended
                                December 30, 2005   December 31, 2004
                             -------------------- -------------------- Percent
                                   Synthetic            Synthetic      Better/
                             Lodging  Fuel  Total Lodging  Fuel  Total (Worse)
                             ------- ------ ----- ------- ------ ----- -------
    REVENUES
    Base management fees        $155    $-   $155   $133     $-   $133    17
    Franchise fees               103     -    103     89      -     89    16
    Incentive management fees     69     -     69     52      -     52    33
    Owned, leased, corporate
     housing and other(1)        361     -    361    239      -    239    51
    Timeshare interval sales
     and services(2)             413     -    413    349      -    349    18
    Cost reimbursements(3)     2,423     -  2,423  2,156      -  2,156    12
    Synthetic fuel                 -   117    117      -    123    123    (5)
                             ------- ------ ----- ------- ------ -----
       Total Revenues          3,524   117  3,641  3,018    123  3,141    16

    OPERATING COSTS AND EXPENSES
    Owned, leased and corporate
     housing - direct(4)         298     -    298    201      -    201   (48)
    Timeshare - direct           357     -    357    293      -    293   (22)
    Reimbursed costs           2,423     -  2,423  2,156      -  2,156   (12)
    General, administrative
     and other(5)                196     -    196    222      -    222    12
    Synthetic fuel                 -   146    146      -    160    160     9
                             ------- ------ ----- ------- ------ -----
       Total Expenses          3,274   146  3,420  2,872    160  3,032   (13)
                             ------- ------ ----- ------- ------ -----

    OPERATING INCOME (LOSS)     $250  $(29)   221   $146   $(37)   109   103
                             ======= ======       ======= ======
 

    Gains and other income(6)                  84                   69    22
    Interest expense                          (37)                 (30)  (23)
    Interest income                            14                   48   (71)
    Reversal of provision for
     loan losses                                -                    8  (100)
    Equity in earnings/
     (losses) - Other(7)                       18                   (5)  460
                                             ----                 ----

    INCOME BEFORE INCOME TAXES
     AND MINORITY INTEREST                    300                  199    51
    Provision for income taxes                (76)                 (21) (262)
                                             ----                 ----

    INCOME BEFORE MINORITY
     INTEREST                                 224                  178    26
    Minority interest                          13                   10    30
                                             ----                 ----
    INCOME FROM CONTINUING
     OPERATIONS                               237                  188    26

    DISCONTINUED OPERATIONS                     -                    1  (100)
                                             ----                 ----

    NET INCOME                               $237                 $189    25
                                             ====                 ====

    EARNINGS PER SHARE - Basic
       Earnings from continuing
        operations                          $1.14                $0.84    36
       Earnings from discontinued
        operations                            -                    -       *
                                             ----                 ----
    EARNINGS PER SHARE - Basic              $1.14                $0.84    36
                                             ====                 ====

    EARNINGS PER SHARE - Diluted
       Earnings from continuing
        operations                          $1.07                $0.79    35
       Earnings from discontinued
        operations                            -                    -       *
                                             ----                 ----
    EARNINGS PER SHARE - Diluted            $1.07                $0.79    35
                                             ====                 ====

    Basic Shares                            207.3                224.5
    Diluted Shares                          220.8                239.1

    *  Percent cannot be calculated.

    (1) Owned, leased, corporate housing and other revenue includes revenue
        from the properties we own or lease, revenue from our ExecuStay
        business, land rent income and other revenue.

    (2) Timeshare interval sales and services includes total timeshare
        revenue except for base fees, cost reimbursements, gains, and joint
        venture earnings (losses).

    (3) Cost reimbursements include reimbursements from lodging properties
        for Marriott funded operating expenses.

    (4) Owned, leased and corporate housing -- direct expenses include
        operating expenses related to our owned or leased hotels, including
        lease payments, pre-opening expenses and depreciation, plus expenses
        related to our ExecuStay business.

    (5) General, administrative and other expenses include the overhead
        costs allocated to our lodging business segments (including ExecuStay
        and Timeshare) and our unallocated corporate overhead costs and
        general expenses.

    (6) Gains and other income includes gains on the sale of real estate,
        gains from the sale of joint ventures, income related to our cost
        method joint ventures and the earn-out payments we made to the
        previous owner of the synthetic fuel operations and earn-out payments
        we received from our synthetic fuel joint venture partner.

    (7) Equity in earnings/(losses) -- Other includes our equity in earnings
        (losses) of unconsolidated joint ventures.
 
 

                         MARRIOTT INTERNATIONAL, INC.
                             Financial Highlights
                   (in millions, except per share amounts)

                               52 Weeks Ended       52 Weeks Ended
                              December 30, 2005    December 31, 2004
                             -------------------- -------------------- Percent
                                   Synthetic            Synthetic      Better/
                             Lodging  Fuel  Total Lodging  Fuel  Total (Worse)
                             ------- ------ ----- ------- ------ ----- -------
    REVENUES
    Base management fees       $497     $-    $497   $435    $-    $435    14
    Franchise fees              329      -     329    296     -     296    11
    Incentive management
     fees                       201      -     201    142     -     142    42
    Owned, leased, corporate
     housing and other(1)       944      -     944    730     -     730    29
    Timeshare interval sales
     and services(2)          1,487      -   1,487  1,247     -   1,247    19
    Cost reimbursements(3)    7,671      -   7,671  6,928     -   6,928    11
    Synthetic fuel                -    421     421      -   321     321    31
                             ------- ------ ------ ------ ------ ------
       Total Revenues        11,129    421  11,550  9,778   321  10,099    14

    OPERATING COSTS AND
     EXPENSES
    Owned, leased and
     corporate housing -
     direct(4)                  778      -     778    629     -     629   (24)
    Timeshare - direct        1,228      -   1,228  1,039     -   1,039   (18)
    Reimbursed costs          7,671      -   7,671  6,928     -   6,928   (11)
    General, administrative
     and other(5)               753      -     753    607     -     607   (24)
    Synthetic fuel                -    565     565      -   419     419   (35)
                             ------- ------ ------ ------ ------ ------
       Total Expenses        10,430    565  10,995  9,203   419   9,622   (14)
                             ------- ------ ------ ------ ------ ------
    OPERATING INCOME (LOSS)    $699  $(144)    555   $575  $(98)    477    16
                             ======= ======        ====== ======
 

    Gains and other income(6)                  181                  164    10
    Interest expense                          (106)                 (99)   (7)
    Interest income                             79                  146   (46)
    (Provision for)/reversal
     of provision for loan
     losses                                    (28)                   8  (450)
    Equity in losses -
     Synthetic Fuel(7)                           -                  (28)  100
    Equity in earnings/
     (losses) - Other(8)                        36                  (14)  357
                                             -----                -----
    INCOME BEFORE INCOME
     TAXES AND MINORITY
     INTEREST                                  717                  654    10
    Provision for income
     taxes                                     (94)                (100)    6
                                             -----                -----

    INCOME BEFORE MINORITY
     INTEREST                                  623                  554    12
    Minority interest                           45                   40    13
                                             -----                -----
    INCOME FROM CONTINUING
     OPERATIONS                                668                  594    12

    DISCONTINUED OPERATIONS                      1                    2   (50)
                                             -----                -----

    NET INCOME                                $669                 $596    12
                                             =====                =====

    EARNINGS PER SHARE -
     Basic
       Earnings from
        continuing
        operations                           $3.09                $2.62    18
       Earnings from
        discontinued
        operations                             -                   0.01  (100)
                                             -----                -----
    EARNINGS PER SHARE -
     Basic                                   $3.09                $2.63    17
                                             =====                =====

    EARNINGS PER SHARE -
     Diluted
       Earnings from
        continuing
        operations                           $2.89                $2.47    17
       Earnings from
        discontinued
        operations                             -                   0.01  (100)
                                             -----                -----
    EARNINGS PER SHARE -
     Diluted                                 $2.89                $2.48    17
                                             =====                =====

    Basic Shares                             216.4                226.6
    Diluted Shares                           231.2                240.5
 

    (1) Owned, leased, corporate housing and other revenue includes revenue
        from the properties we own or lease, revenue from our ExecuStay
        business, land rent income and other revenue.

    (2) Timeshare interval sales and services includes total timeshare revenue
        except for base fees, cost reimbursements, gains, and joint venture
        earnings (losses).

    (3) Cost reimbursements include reimbursements from lodging properties for
        Marriott funded operating expenses.

    (4) Owned, leased and corporate housing -- direct expenses include
        operating expenses related to our owned or leased hotels, including
        lease payments, pre-opening expenses and depreciation, plus expenses
        related to our ExecuStay business.

    (5) General, administrative and other expenses include the overhead costs
        allocated to our lodging business segments (including ExecuStay and
        Timeshare) and our unallocated corporate overhead costs and general
        expenses.

    (6) Gains and other income includes gains on the sale of real estate,
        gains from the sale of joint ventures, income related to our cost
        method joint ventures and the earn-out payments we made to the
        previous owner of the synthetic fuel operations and earn-out payments
        we received from our synthetic fuel joint venture partner.

    (7) Equity in losses -- Synthetic fuel includes our share of the equity in
        earnings of the synthetic fuel joint ventures and the net earn-out
        payments made to our synthetic fuel joint venture partner from January
        3, 2004 through March 25, 2004. Beginning March 26, 2004, the
        synthetic fuel operations were consolidated as a result of adopting
        FIN 46®, "Consolidation of Variable Interest Entities."

    (8) Equity in earnings/(losses) -- Other includes our equity in earnings/
        (losses) of unconsolidated joint ventures.
 
 

                         Marriott International, Inc.
                              Business Segments
                               ($ in millions)

                                      Sixteen Weeks Ended             Percent
                            ---------------------------------------   Better/
                             December 30, 2005   December 31, 2004    (Worse)
                            ------------------- -------------------  ---------
    REVENUES

    Full-Service                      $2,442              $2,099         16%
    Select-Service                       397                 330         20%
    Extended-Stay                        197                 170         16%
    Timeshare                            488                 419         16%
                            ------------------- -------------------
       Total lodging(1)                3,524               3,018         17%
    Synthetic fuel                       117                 123         -5%
                            ------------------- -------------------
       Total                          $3,641              $3,141         16%
                            =================== ===================
 

    INCOME FROM CONTINUING
     OPERATIONS

    Full-Service                        $199                $134         49%
    Select-Service                        79                  36        119%
    Extended-Stay                         22                  18         22%
    Timeshare                             78                  68         15%
                            ------------------- -------------------
       Total lodging
        financial results(1)             378                 256         48%
    Synthetic fuel (after-tax)            33                  34         -3%
    Unallocated corporate
     expenses                            (40)                (47)        15%
    Interest income, provision
     for loan losses and
     interest expense                    (23)                 26       -188%
    Income taxes (excluding
     Synthetic fuel)                    (111)                (81)       -37%
                            ------------------- -------------------
       Total                            $237                $188         26%
                            =================== ===================

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

                         Marriott International, Inc.
                              Business Segments
                               ($ in millions)

                                     Fifty-Two Weeks Ended            Percent
                            ---------------------------------------   Better/
                             December 30, 2005   December 31, 2004    (Worse)
                            ------------------- -------------------  ---------

    REVENUES

    Full-Service                      $7,535              $6,611         14%
    Select-Service                     1,265               1,118         13%
    Extended-Stay                        608                 547         11%
    Timeshare                          1,721               1,502         15%
                            ------------------- -------------------
       Total lodging(1)               11,129               9,778         14%
    Synthetic fuel                       421                 321         31%
                            ------------------- -------------------
       Total                         $11,550             $10,099         14%
                            =================== ===================
 

    INCOME FROM CONTINUING
     OPERATIONS

    Full-Service                        $474                $426         11%
    Select-Service                       209                 140         49%
    Extended-Stay                         65                  66         -2%
    Timeshare                            271                 203         33%
                            ------------------- -------------------
       Total lodging
        financial results(1)           1,019                 835         22%
    Synthetic fuel (after-tax)           125                 107         17%
    Unallocated corporate
     expenses                           (137)               (138)         1%
    Interest income, provision
     for loan losses and
     interest expense                    (55)                 55       -200%
    Income taxes (excluding
     Synthetic fuel)                    (284)               (265)        -7%
                            ------------------- -------------------
        Total                           $668                $594         12%
                            =================== ===================

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

                         MARRIOTT INTERNATIONAL, INC.
 

                           Total Lodging Products(1)
    -------------------------------------------------------------------------
                                          Number of           Number of
                                         Properties          Rooms/Suites
                                         ----------          ------------
                                               Change vs.           Change vs.
                                      Dec. 30,  Dec. 31,   Dec. 30,  Dec. 31,
    Brand                               2005      2004       2005      2004
    --------------------------------- ---------------------------------------
    Full-Service Lodging
    --------------------
        Marriott Hotels & Resorts         507        17    183,455     4,296
        The Ritz-Carlton                   59         2     19,285       674
        Renaissance Hotels & Resorts      137         4     48,232       773
        Bulgari Hotel & Resort              1       -           58       -
        Ramada International                3        (1)       532      (195)
    Select-Service Lodging
    ----------------------
        Courtyard                         692        36     99,669     5,666
        Fairfield Inn                     524         1     47,999      (711)
        SpringHill Suites                 137        12     16,002     1,452
    Extended-Stay Lodging
    ---------------------
        Residence Inn                     490        27     58,444     3,385
        TownePlace Suites                 122         7     12,303       593
        Marriott Executive Apartments      17         3      2,852       381
    Timeshare(2)
    -----------
        Marriott Vacation Club
         International                     44         1      9,401       569
        The Ritz-Carlton Club               4       -          292        31
        Grand Residences by Marriott        2       -          313        65
        Horizons by Marriott Vacation
         Club                               2       -          328       -
                                      ------------------  -------------------
    Total                               2,741       109    499,165    16,979
                                      ==================  ===================

    (1) Total Lodging Products excludes the 1,850 corporate housing rental
        units.
    (2) Includes products in active sales which are not ready for occupancy.
 
 

                         MARRIOTT INTERNATIONAL, INC.
                            KEY LODGING STATISTICS

            Comparable Company-Operated North American Properties
    --------------------------------------------------------------------------
                                   Sixteen Weeks Ended December 30, 2005
                                           and December 31, 2004
                              ------------------------------------------------
                                                                   Average
                                   REVPAR         Occupancy       Daily Rate
                                   ------         ---------       ----------
     Brand                     2005 vs. 2004    2005 vs. 2004    2005 vs. 2004
    --------------------------------------------------------------------------
     Marriott Hotels &
      Resorts                 $114.74  10.9%   71.1%  1.8% pts.  $161.39  8.2%
     The Ritz-Carlton(2)      $199.80  12.9%   68.9%  3.8% pts.  $290.17  6.7%
     Renaissance Hotels &
      Resorts                 $109.95  15.1%   70.1%  3.9% pts.  $156.77  8.8%
     Composite - Full-Service $122.82  11.8%   70.7%  2.3% pts.  $173.68  8.2%
     Residence Inn             $85.47   9.7%   78.5%  1.7% pts.  $108.87  7.2%
     Courtyard                 $74.16  10.2%   68.2%  0.5% pts.  $108.67  9.4%
     TownePlace Suites         $52.54  11.6%   73.3%  2.6% pts.   $71.70  7.5%
     SpringHill Suites         $68.79  14.0%   72.3%  1.7% pts.   $95.13 11.3%
     Composite - Select-
      Service & Extended-Stay  $75.34  10.4%   71.5%  1.1% pts.  $105.33  8.7%
     Composite - All(1)       $103.86  11.4%   71.0%  1.8% pts.  $146.19  8.5%
 

               Comparable Systemwide North American Properties
    --------------------------------------------------------------------------
                                   Sixteen Weeks Ended December 30, 2005
                                           and December 31, 2004
                              ------------------------------------------------
                                                                   Average
                                   REVPAR         Occupancy       Daily Rate
                                   ------         ---------       ----------
     Brand                     2005 vs. 2004    2005 vs. 2004    2005 vs. 2004
    --------------------------------------------------------------------------
     Marriott Hotels &
      Resorts                 $102.57  10.5%   69.0%  1.8% pts.  $148.64  7.6%
     The Ritz-Carlton(2)      $199.80  12.9%   68.9%  3.8% pts.  $290.17  6.7%
     Renaissance Hotels &
      Resorts                 $102.29  14.5%   69.7%  3.0% pts.  $146.67  9.6%
     Composite - Full-Service $109.26  11.3%   69.1%  2.1% pts.  $158.11  7.9%
     Residence Inn             $81.62   9.1%   77.7%  1.9% pts.  $105.00  6.4%
     Courtyard                 $75.08  10.2%   69.9%  1.2% pts.  $107.36  8.3%
     Fairfield Inn             $50.48  13.5%   67.4%  3.2% pts.   $74.94  8.1%
     TownePlace Suites         $54.09  11.8%   74.1%  2.2% pts.   $72.99  8.6%
     SpringHill Suites         $65.66  13.4%   72.5%  2.7% pts.   $90.54  9.2%
     Composite - Select-
      Service & Extended-Stay  $69.61  10.6%   71.8%  2.0% pts.   $96.91  7.6%
     Composite - All(1)        $86.14  11.0%   70.7%  2.0% pts.  $121.85  7.8%

    (1) Composite - All statistics include properties for the Marriott Hotels
        & Resorts, Renaissance Hotels & Resorts, The Ritz-Carlton, Courtyard,
        Residence Inn, TownePlace Suites, Fairfield Inn, and SpringHill Suites
        brands. Full-Service composite statistics include properties for
        Marriott Hotels & Resorts, Renaissance Hotels & Resorts and The Ritz-
        Carlton brands. Select-Service and Extended-Stay composite statistics
        include properties for the Courtyard, Residence Inn, TownePlace
        Suites, Fairfield Inn and SpringHill Suites brands.

    (2) Statistics for The Ritz-Carlton are for September through December.
 
 

                         MARRIOTT INTERNATIONAL, INC.
                            KEY LODGING STATISTICS

            Comparable Company-Operated North American Properties
    --------------------------------------------------------------------------
                                   Fifty-Two Weeks Ended December 30, 2005
                                             and December 31, 2004
                              ------------------------------------------------
                                                                   Average
                                   REVPAR         Occupancy       Daily Rate
                                   ------         ---------       ----------
     Brand                     2005 vs. 2004    2005 vs. 2004    2005 vs. 2004
    --------------------------------------------------------------------------
     Marriott Hotels &
      Resorts                 $113.31   9.0%   73.2%  1.0% pts.  $154.84  7.5%
     The Ritz-Carlton(2)      $204.45  12.2%   71.0%  1.9% pts.  $287.99  9.2%
     Renaissance Hotels &
      Resorts                 $108.01  12.5%  72.1%   3.0% pts.  $149.90  7.8%
     Composite - Full-Service $121.27  10.0%  72.8%   1.4% pts.  $166.58  7.8%
     Residence Inn             $86.46   8.6%  80.0%   1.0% pts.  $108.09  7.3%
     Courtyard                 $75.32   9.1%  70.7%  -0.2% pts.  $106.50  9.4%
     TownePlace Suites         $53.18   9.1%  75.4%   1.1% pts.   $70.52  7.4%
     SpringHill Suites         $70.36  16.3%  74.9%   3.4% pts.   $93.89 11.0%
     Composite - Select-
      Service & Extended-Stay  $76.49   9.4%  73.8%   0.5% pts.  $103.70  8.7%
     Composite - All(1)       $103.29   9.8%  73.2%   1.0% pts.  $141.14  8.2%
 

                 Comparable Systemwide North American Properties
    --------------------------------------------------------------------------
                                   Fifty-Two Weeks Ended December 30, 2005
                                             and December 31, 2004
                              ------------------------------------------------
                                                                   Average
                                   REVPAR         Occupancy       Daily Rate
                                   ------         ---------       ----------
     Brand                     2005 vs. 2004    2005 vs. 2004    2005 vs. 2004
    --------------------------------------------------------------------------
     Marriott Hotels &
      Resorts                 $102.21   8.7%  71.0%   1.2% pts.  $144.03  6.9%
     The Ritz-Carlton(2)      $204.45  12.2%  71.0%   1.9% pts.  $287.99  9.2%
     Renaissance Hotels &
      Resorts                 $100.45  12.4%  71.3%   2.6% pts.  $140.89  8.3%
     Composite - Full-Service $108.51   9.6%  71.0%   1.4% pts.  $152.81  7.3%
     Residence Inn             $83.47   8.1%  79.5%   1.1% pts.  $104.99  6.7%
     Courtyard                 $76.31   8.9%  72.2%   0.6% pts.  $105.72  7.9%
     Fairfield Inn             $51.76  11.7%  69.5%   2.3% pts.   $74.47  8.1%
     TownePlace Suites         $54.62  10.8%  75.8%   1.1% pts.   $72.11  9.3%
     SpringHill Suites         $66.88  13.5%  74.0%   2.9% pts.   $90.43  9.1%
     Composite - Select-
      Service &
      Extended-Stay            $70.97   9.5%  73.8%   1.3% pts.   $96.11  7.6%
     Composite - All(1)        $86.56   9.5%  72.7%   1.3% pts.  $119.12  7.5%

    (1) Composite - All statistics include properties for the Marriott Hotels
        & Resorts, Renaissance Hotels & Resorts, The Ritz-Carlton, Courtyard,
        Residence Inn, TownePlace Suites, Fairfield Inn, and SpringHill Suites
        brands. Full-Service composite statistics include properties for
        Marriott Hotels & Resorts, Renaissance Hotels & Resorts and The Ritz-
        Carlton brands. Select-Service and Extended-Stay composite statistics
        include properties for the Courtyard, Residence Inn, TownePlace
        Suites, Fairfield Inn and SpringHill Suites brands.

    (2) Statistics for The Ritz-Carlton are for January through December.
 
 

             Comparable Company-Operated International Properties (1, 2)
    --------------------------------------------------------------------------
                     Four Months Ended December 31, 2005 and December 31, 2004
                     ---------------------------------------------------------
                                                                   Average
                                 REVPAR         Occupancy         Daily Rate
                                 ------         ---------         ----------
    Region/Brand(3)           2005 vs. 2004   2005 vs. 2004     2005 vs. 2004
    --------------------------------------------------------------------------
    Caribbean & Latin
     America                 $102.05  10.2%  72.1%   3.9% pts.  $141.62   4.3%
    Continental Europe        $99.87   3.2%  72.9%   0.4% pts.  $137.07   2.7%
    United Kingdom           $141.92   4.5%  77.8%  -0.5% pts.  $182.44   5.2%
    Middle East & Africa      $88.93  28.6%  69.6%   0.8% pts.  $127.84  27.2%
    Asia Pacific(4)           $94.14  10.8%  76.7%   0.1% pts.  $122.79  10.7%
 

    The Ritz-Carlton
     International           $150.08  12.0%  72.3%   1.1% pts.  $207.67  10.2%

    Total International(5)   $105.37   9.7%  74.5%   0.9% pts.  $141.39   8.5%

    Worldwide(6)             $104.25  10.9%  72.0%   1.6% pts.  $144.89   8.5%
 

            Comparable Systemwide International Properties (1, 2)
    --------------------------------------------------------------------------
                    Four Months Ended December 31, 2005 and December 31, 2004
                    ----------------------------------------------------------
                                                                   Average
                                 REVPAR         Occupancy         Daily Rate
                                 ------         ---------         ----------
    Region/Brand(3)            2005 vs. 2004   2005 vs. 2004    2005 vs. 2004
    --------------------------------------------------------------------------
    Caribbean & Latin America  $95.64  10.7%  73.7%  5.8% pts.  $129.84   1.9%
    Continental Europe         $99.99   7.0%  72.6%  1.7% pts.  $137.70   4.4%
    United Kingdom            $124.31   4.5%  77.8%  0.1% pts.  $159.74   4.4%
    Middle East & Africa       $87.53  31.3%  69.8%  3.0% pts.  $125.42  25.7%
    Asia Pacific(4)            $98.04  14.4%  77.7%  0.9% pts.  $126.18  13.1%

    The Ritz-Carlton
     International            $150.08  12.0%  72.3%  1.1% pts.  $207.67  10.2%

    Total International(5)    $103.88  11.0%  74.8%  1.3% pts.  $138.87   9.1%

    Worldwide(6)               $89.18  11.0%  71.4%  1.9% pts.  $124.91   8.0%

    (1) International financial results are reported on a period-end basis,
        while International statistics are reported on a month-end basis.

    (2) Statistics are in constant dollars and include results for September
        through December.  Excludes North American (except for Worldwide).

    (3) Regional information includes the Marriott Hotels & Resorts,
        Renaissance Hotels & Resorts and Courtyard brands. Does not include
        The Ritz-Carlton brand.

    (4) Excludes Hawaii.

    (5) Includes Hawaii.

    (6) Includes international statistics for the four calendar months ended
        December 31, 2005 and December 31, 2004, and North American statistics
        for the sixteen weeks ended December 30, 2005 and December 31, 2004.
        Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts,
        The Ritz-Carlton, Courtyard, Residence Inn, TownePlace Suites,
        Fairfield Inn and SpringHill Suites brands.
 
 

             Comparable Company-Operated International Properties (1, 2)
    --------------------------------------------------------------------------
                  Twelve Months Ended December 31, 2005 and December 31, 2004
                  ------------------------------------------------------------
                                                                   Average
                                 REVPAR         Occupancy         Daily Rate
                                 ------         ---------         ----------
    Region/Brand(3)            2005 vs. 2004   2005 vs. 2004    2005 vs. 2004
    --------------------------------------------------------------------------
    Caribbean & Latin America $107.24  12.1%  73.6%  3.9% pts.  $145.78   6.3%
    Continental Europe         $96.69   3.1%  70.5%  0.5% pts.  $137.09   2.4%
    United Kingdom            $140.49   4.8%  76.9%  0.1% pts.  $182.61   4.8%
    Middle East & Africa       $84.96  29.5%  73.2%  4.0% pts.  $116.07  22.5%
    Asia Pacific(4)            $86.63  13.1%  75.8%  0.8% pts.  $114.34  12.0%
 

    The Ritz-Carlton
     International            $143.30  18.3%  71.6%  3.4% pts.  $200.08  12.7%

    Total International(5)    $101.84  11.0%  74.0%  1.5% pts.  $137.62   8.7%

    Worldwide(6)              $102.94  10.1%  73.4%  1.2% pts.  $140.26   8.3%
 
 

                Comparable Systemwide International Properties (1, 2)
    --------------------------------------------------------------------------
                 Twelve Months Ended December 31, 2005 and December 31, 2004
                 -------------------------------------------------------------
                                                                   Average
                                 REVPAR         Occupancy         Daily Rate
                                 ------         ---------         ----------
    Region/Brand(3)            2005 vs. 2004   2005 vs. 2004    2005 vs. 2004
    --------------------------------------------------------------------------
    Caribbean & Latin
     America                 $101.02  13.1%  73.0%   4.6% pts.  $138.31   5.9%
    Continental Europe        $95.10   5.9%  68.6%   1.0% pts.  $138.63   4.3%
    United Kingdom           $120.53   3.1%  74.0%  -1.1% pts.  $162.96   4.6%
    Middle East & Africa      $82.10  29.3%  71.7%   4.5% pts.  $114.45  21.2%
    Asia Pacific(4)           $90.79  14.7%  76.5%   1.5% pts.  $118.63  12.5%

    The Ritz-Carlton
     International           $143.30  18.3%  71.6%   3.4% pts.  $200.08  12.7%

    Total International(5)   $100.02  11.9%  73.2%   1.8% pts.  $136.57   9.1%

    Worldwide(6)              $88.72   9.9%  72.8%   1.4% pts.  $121.94   7.8%
 
 

    (1) International financial results are reported on a period-end basis,
        while International statistics are reported on a month-end basis.
    (2) Statistics are in constant dollars and include results for January
        through December.  Excludes North American (except for Worldwide).
    (3) Regional information includes the Marriott Hotels & Resorts,
        Renaissance Hotels & Resorts and Courtyard brands. Does not include
        The Ritz-Carlton brand.
    (4) Excludes Hawaii.
    (5) Includes Hawaii.
    (6) Includes international statistics for the twelve calendar months ended
        December 31, 2005 and December 31, 2004, and North American statistics
        for the fifty-two weeks ended December 30, 2005 and December 31, 2004.
        Includes the Marriott Hotels & Resorts, Renaissance Hotels & Resorts,
        The Ritz-Carlton, Courtyard, Residence Inn, TownePlace Suites,
        Fairfield Inn and SpringHill Suites brands.
 
 

                          MARRIOTT INTERNATIONAL, INC.
                   Non-GAAP Financial Measure Reconciliation
                                ($ in millions)
We consider lodging operating income to be a meaningful indicator of our performance because it measures our growth in profitability as a lodging company and enables investors to compare the operating income related to our lodging segments to the operating income of other lodging companies. However, lodging operating income is a non-GAAP financial measure and is not an alternative to operating income or any other operating measure prescribed by United States generally accepted accounting principles.
    The reconciliation of operating income to lodging operating income is as
follows:

                                                  Fiscal Year 2005
                                        --------------------------------------
                                         First  Second  Third   Fourth
                                        Quarter Quarter Quarter Quarter Total
                                        ------- ------- ------- ------- ------

      Operating income as reported      $  $158 $   $41 $  $135    $221   $555

       Add back: Synthetic fuel
        operating loss                       45      36      34      29    144
                                        ------- ------- ------- ------- ------
       Lodging operating income         $   203 $    77 $   169    $250   $699
                                        ======= ======= ======= ======= ======
 

                                                  Fiscal Year 2004
                                         -------------------------------------
                                          First  Second  Third   Fourth
                                         Quarter Quarter Quarter Quarter Total
                                         ------- ------- ------- ------- -----

      Operating income as reported         $151    $118     $99    $109   $477

       Add back: Synthetic fuel
        operating loss                        -      30      31      37     98
                                        ------- ------- ------- ------- ------
       Lodging operating income            $151    $148    $130    $146   $575
                                        ======= ======= ======= ======= ======
 
 

                         MARRIOTT INTERNATIONAL, INC.
                  Non-GAAP Financial Measure Reconciliation
                   (in millions, except per share amounts)
The table below details the impact on our continuing operations of our Synthetic Fuel segment for the 2005 and 2004 fourth quarters. Our management evaluates the figures presented in the "Excluding Synthetic Fuel" columns because management expects the Synthetic Fuel segment will no longer have a material impact on our business after the Internal Revenue Code Section 29 synthetic fuel tax credits expire at the end of 2007 or earlier if the company elects to make permanent its present synthetic fuel production shutdown and because the presentation reflects the results of our core lodging operations. Management also believes that these presentations facilitate the comparison of our results with the results of other lodging companies.
However, the figures presented in the "Excluding Synthetic Fuel" columns are all non-GAAP financial measures, may be calculated and/or presented differently than presentations of other companies and are not alternatives to operating income, income from continuing operations, net income, earnings per share or any other operating measure prescribed by United States generally accepted accounting principles.

                                                Fourth Quarter 2005

                                               Continuing Operations
                                     -----------------------------------------
                                      Income from   Synthetic
                                      Continuing      Fuel       Excluding
                                      Operations     Impact    Synthetic Fuel
                                     ------------- ----------- ---------------
    Operating income (loss)               $221        $(29)          $250
      Gains and other income                84          12             72
      Interest income, provision
       for loan losses and interest
       expense                             (23)          -            (23)
      Equity in earnings/(losses)           18           -             18
                                     ------------- ----------- ---------------
    Pre-tax income (loss)                  300         (17)           317
                                     ------------- ----------- ---------------

       Tax (Provision)/Benefit            (109)          2           (111)
       Tax Credits                          33          33              -
                                     ------------- ----------- ---------------
     Total Tax (Provision)/Benefit         (76)         35           (111)
                                     ------------- ----------- ---------------

     Income from Continuing Operations
      before Minority Interest             224          18            206

     Minority Interest                      13          15             (2)
                                     ------------- ----------- ---------------

     Income from Continuing
      Operations                          $237         $33           $204
                                     ============= =========== ===============

     Diluted Shares                      220.8       220.8          220.8

     Earnings per Share from
      Continuing Operations -
      Diluted                            $1.07       $0.15           0.92

     Tax Rate                            25.3%                      35.0%
 

                                              Fourth Quarter 2004

                                             Continuing Operations
                                     -----------------------------------------
                                      Income from   Synthetic
                                      Continuing      Fuel       Excluding
                                      Operations     Impact    Synthetic Fuel
                                     ------------- ----------- ---------------

    Operating income (loss)               $109        $(37)         $146
      Gains and other income                69           -            69
      Interest income, provision for
       loan losses and interest expense     26           -            26
      Equity in earnings/(losses)           (5)          -            (5)
                                     ------------- ----------- ---------------
    Pre-tax income (loss)                  199         (37)          236
                                     ------------- ----------- ---------------

       Tax (Provision)/Benefit             (72)          9           (81)
       Tax Credits                          51          51             -
                                     ------------- ----------- ---------------
     Total Tax (Provision)/Benefit         (21)         60           (81)
                                     ------------- ----------- ---------------

     Income from Continuing
      Operations before Minority
      Interest                             178          23           155

     Minority Interest                      10          11            (1)
                                     ------------- ----------- ---------------

     Income from Continuing
      Operations                          $188         $34          $154
                                     ============= =========== ===============

     Diluted Shares                      239.1       239.1         239.1

     Earnings per Share from
      Continuing Operations - Diluted    $0.79       $0.14         $0.65

     Tax Rate                            10.4%                     34.3%
 
 
 

                          MARRIOTT INTERNATIONAL, INC.
                    Non-GAAP Financial Measure Reconciliation
                     (in millions, except per share amounts)
The table below details the impact on our continuing operations of our Synthetic Fuel segment for the 52 weeks ended December 30, 2005 and December 31, 2004. Our management evaluates the figures presented in the "Excluding Synthetic Fuel" columns because management expects the Synthetic Fuel segment will no longer have a material impact on our business after the Internal Revenue Code Section 29 synthetic fuel tax credits expire at the end of 2007 or earlier if the company elects to make permanent its present synthetic fuel production shutdown and because the presentation reflects the results of our core lodging operations. Management also believes that these presentations facilitate the comparison of our results with the results of other lodging companies.
However, the figures presented in the "Excluding Synthetic Fuel" columns are all non-GAAP financial measures, may be calculated and/or presented differently than presentations of other companies and are not alternatives to operating income, income from continuing operations, net income, earnings per share or any other operating measure prescribed by United States generally accepted accounting principles.

                                                   Fiscal Year 2005

                                                Continuing Operations
                                         ------------------------------------
                                         Income from    Synthetic   Excluding
                                          Continuing       Fuel     Synthetic
                                          Operations      Impact       Fuel
                                         -----------    ---------   ---------

    Operating income (loss)                     $555       $(144)       $699
     Gains and other income                      181          32         149
     Interest income, provision for loan
      losses and interest expense                (55)          -         (55)
     Equity in earnings/(losses)                  36           -          36
                                            ---------     -------   ---------
    Pre-tax income (loss)                        717        (112)        829
                                            ---------     -------   ---------

      Tax (Provision)/Benefit                   (261)         23        (284)
      Tax Credits                                167         167           -
                                            ---------     -------   ---------
    Total Tax (Provision)/Benefit                (94)        190        (284)
                                            ---------     -------   ---------

    Income from Continuing Operations
     before Minority Interest                    623          78         545

    Minority Interest                             45          47          (2)
                                            ---------     -------   ---------

    Income from Continuing Operations           $668        $125        $543
                                            =========     =======   =========

    Diluted Shares                             231.2       231.2       231.2

    Earnings per Share from Continuing
     Operations - Diluted                      $2.89       $0.54       $2.35

    Tax Rate                                   13.1%                   34.3%
 
 

                                                   Fiscal Year 2004

                                                Continuing Operations
                                         ------------------------------------
                                         Income from    Synthetic   Excluding
                                          Continuing       Fuel     Synthetic
                                          Operations      Impact       Fuel
                                         -----------    ---------   ---------

    Operating income (loss)                     $477        $(98)       $575
     Gains and other income                      164          28         136
     Interest income, provision for loan
      losses and interest expense                 55           -          55
     Equity in earnings/(losses)                 (42)        (28)        (14)
                                            ---------     -------   ---------
    Pre-tax income (loss)                        654         (98)        752
                                            ---------     -------   ---------

      Tax (Provision)/Benefit                   (244)         21        (265)
      Tax Credits                                144         144           -
                                            ---------     -------   ---------
    Total Tax (Provision)/Benefit               (100)        165        (265)
                                            ---------     -------   ---------

    Income from Continuing Operations
         before Minority Interest                554          67         487

    Minority Interest                             40          40           -
                                            ---------     -------   ---------

    Income from Continuing Operations           $594        $107        $487
                                            =========     =======   =========

    Diluted Shares                             240.5       240.5       240.5

    Earnings per Share from Continuing
          Operations - Diluted                 $2.47       $0.44       $2.03

    Tax Rate                                   15.3%                   35.2%
 
 
 

                          MARRIOTT INTERNATIONAL, INC.
                    Non-GAAP Financial Measure Reconciliation
                     (in millions, except per share amounts)
The table below details the impact on our continuing operations of the $94 million charge (2005 second quarter) associated with the agreements we entered into with CTF Holdings Ltd. (the "CTF transaction") and the $17 million leveraged lease impairment charge (2005 third quarter). The $94 million charge recorded in connection with the CTF transaction was primarily non-cash and primarily due to the write-off of deferred contract acquisition costs associated with the termination of management agreements. In addition, we incurred a material charge of $17 million associated with the impairment of our one investment in an aircraft leveraged lease. We do not consider the leveraged lease investment to be related to our core business.
Our management evaluates the figures in the "Excluding CTF and Leveraged Lease Charges" column because they allow for year-over-year comparisons relative to our on-going operations before material charges and believes that this presentation facilitates the comparison of our results with the results of other lodging companies. Management evaluates income-related financial measures that exclude the leveraged lease impairment charge in order to better assess the period-over-period performance of our core operating businesses. Management evaluates income-related financial measures that exclude the CTF transaction charge in order to better assess the Company's period-over-period performance of our lodging operations in light of the fact that the CTF transaction charge does not reflect the fact that new management agreements, entered into as part of the CTF transaction, substantially replaced the old management agreements the termination of which make up the bulk of the CTF transaction charge.
However, the figures presented in the "Excluding CTF and Leveraged Lease Charges" column are all non-GAAP financial measures, may be calculated and/or presented differently than presentations of other companies, and are not alternatives to operating income, income from continuing operations, net income, earnings per share or any other operating measure prescribed by United States generally accepted accounting principles.

                                              Fiscal Year 2005
                           ---------------------------------------------------
                                                                     Excluding
                             Income           CTF         Leveraged   CTF and
                              from        Transaction       Lease    Leveraged
                           Continuing       Charge         Charge      Lease
                           Operations                                 Charges
                           ----------     -----------     ---------  ---------
    Operating income
     (loss)               $   555        $   (94)        $     -    $     649
     Gains and other
      income                  181              -               -          181
     Interest income,
      provision for
      loan losses and
      interest expense        (55)             -             (17)         (38)
     Equity in earnings        36              -               -           36
                          ----------      -----------     ----------  --------
    Pre-tax income
     (loss)                   717            (94)            (17)         828
                          ----------      -----------     ----------  --------

      Tax (Provision)/
       Benefit               (261)            32               6         (299)
      Tax Credits             167              -               -          167
                          ----------      -----------     ----------  --------
    Total Tax (Provision)/
     Benefit                  (94)            32               6         (132)
                          ----------      -----------     ----------  --------

     Income (Loss)
      from Continuing
      Operations before
      Minority Interest       623            (62)            (11)         696

    Minority Interest          45              -               -           45
                          ----------      -----------     ----------  --------

    Income (Loss)
     from Continuing
     Operations          $    668        $   (62)        $   (11)    $    741
                          ==========      ===========     ==========  ========

    Diluted Shares          231.2          231.2           231.2        231.2

    Earnings/(Loss) per
     Share from
     Continuing
     Operations - Diluted   $2.89         $(0.27)         $(0.05)       $3.21
 

                                        Fiscal Year 2004
                           ---------------------------------------------------
                                                                     Excluding
                             Income          CTF          Leveraged   CTF and
                              from        Transaction       Lease    Leveraged
                           Continuing       Charge         Charge      Lease
                           Operations                                 Charges
                           ----------     -----------     ---------  ---------

    Operating income      $   477        $      -        $     -    $     477
     Gains and other
      income                  164               -              -          164
     Interest income,
      provision for loan
      losses and
      interest expense         55               -              -           55
     Equity in losses         (42)              -              -          (42)
                          ----------      -----------     ----------  --------
    Pre-tax income            654               -              -          654

      Tax Provision          (244)              -              -         (244)
      Tax Credits             144               -              -          144
                          ----------      -----------     ----------  --------
    Total Tax Provision      (100)              -              -         (100)
                          ----------      -----------     ----------  --------

    Income from Continuing
     Operations before
     Minority Interest        554               -              -          554

      Minority Interest        40               -              -           40
                          ----------      -----------     ----------  --------

    Income from
     Continuing
     Operations          $   $594        $      -        $     -     $    594
                          ==========      ===========     ==========  ========

    Diluted Shares          240.5           240.5          240.5        240.5

    Earnings per Share
     from Continuing
     Operations -
     Diluted             $  $2.47               -        $     -     $   2.47
 
 

                         MARRIOTT INTERNATIONAL, INC.
                  Non-GAAP Financial Measure Reconciliation
We adopted Statement of Financial Accounting Standard No. 123 (revised 2004), "Share-Based Payment ("FAS No. 123R") at the beginning of our 2006 fiscal year. We estimate the adoption of FAS No. 123R, using the modified prospective method, will result in incremental pre-tax expense in the 2006 first quarter of $9 million and total incremental pre-tax expense for the entire 2006 fiscal year of $44 million.
Our management evaluates diluted earnings per share from continuing operations excluding the impact of the Synthetic Fuel segment and the adoption of FAS 123R because it allows for year-over-year comparisons relative to our on-going lodging operations before material charges and because management expects the Synthetic Fuel segment will no longer have a material impact on our business after the Internal Revenue Code Section 29 synthetic fuel tax credits expire at the end of 2007 or earlier if the company elects to make permanent its present synthetic fuel production shutdown. Management believes that this presentation facilitates the comparison of our results with the results of other lodging companies.
However, diluted earnings per share from continuing operations excluding the impact of the Synthetic Fuel segment and the adoption of FAS 123R is a non-GAAP financial measure, may be calculated and/or presented differently than presentations of other companies and are not alternatives to operating income, income from continuing operations, net income, earnings per share or any other operating measure prescribed by United States generally accepted accounting principles.

                                                        Range
                                        --------------------------------------
                                            Estimated          Estimated
                                        First Quarter 2006  First Quarter 2006
                                        ------------------- ------------------

       Diluted earnings per share from
        continuing operations
        excluding the impact of the
        Synthetic Fuel segment             $       0.67         $     0.73
       Add back estimated eps impact
        associated with the adoption
        of FAS No. 123R                            0.03               0.03
                                        ------------------- ------------------
       Diluted earnings per share from
        continuing operations excluding
        the impact of the Synthetic
        Fuel segment and the adoption
        of FAS No. 123R                    $       0.70         $     0.76
                                        =================== ==================
 

                                                          Range
                                          ------------------------------------
                                              Estimated          Estimated
                                            Full Year 2006     Full Year 2006
                                          ------------------- ----------------
 

       Diluted earnings per share from
        continuing operations
        excluding the impact of the
        Synthetic Fuel segment               $       2.95         $     3.05
       Add back estimated eps impact
        associated with the adoption
        of FAS No. 123R                              0.13               0.13
                                          ------------------- ----------------
       Diluted earnings per share from
        continuing operations excluding
        the impact of the Synthetic
        Fuel segment and the adoption
        of FAS No. 123R                      $      $3.08         $    $3.18
                                          =================== ================
 

                         MARRIOTT INTERNATIONAL, INC.
                          Non-GAAP Financial Measure
                                    EBITDA
                               ($ in millions)
Our management considers earnings before interest, taxes, depreciation and amortization (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.
In the 2005 second quarter we recorded a $94 million charge associated with the agreements we entered into with CTF Holdings Ltd. (the "CTF transaction"). The $94 million charge was primarily non-cash and due to the write-off of deferred contract acquisition costs associated with the termination of management agreements. In addition, we incurred a material charge of $17 million in the 2005 third quarter associated with the impairment of our one investment in an aircraft leveraged lease. We do not consider the leveraged lease investment to be related to our core business. Management expects the Synthetic Fuel segment will no longer have a material impact on our business after the Internal Revenue Code Section 29 synthetic fuel tax credits expire at the end of 2007 or earlier if the company elects to make permanent its present synthetic fuel production shutdown.
Management evaluates Adjusted EBITDA which excludes the aircraft leveraged lease impairment charge, discontinued operations and the impact of our Synthetic Fuel segment in order to better assess the period-over-period performance of our on-going core operating businesses. Management evaluates Adjusted EBITDA which also excludes the CTF transaction charge in order to better assess the Company's period-over-period performance of our lodging operations in light of the fact that the CTF transaction charge does not reflect the fact that new management agreements, entered into as part of the CTF transaction, substantially replaced the old management agreements the termination of which makes up the bulk of the CTF transaction charge. Management also believes that these presentations facilitate the comparison of our results with the results of other lodging companies.
    However, EBITDA and Adjusted EBITDA are non-GAAP financial measures, may
be calculated and/or presented differently than presentations of other
companies, and are not alternatives to operating income, income from
continuing operations, net income, cash flow from operations, or any other
operating measure prescribed by United States generally accepted accounting
principles.
 

                                                   Fiscal Year 2005
                                      --------------------------------------
                                       First  Second   Third  Fourth
                                      Quarter Quarter Quarter Quarter  Total
                                      ------- ------- ------- ------- ------
    Net income                        $   145 $   138 $   149 $   237 $  669
    Interest expense                       24      21      24      37    106
    Tax provision/(benefit) from
     continuing operations                  5     (20)     33      76     94
    Tax provision from discontinued
     operations                             -       -       1       -      1
    Depreciation(1)                        30      29      34      46    139
    Amortization                            7       7       7       7     28
    Interest expense from unconsolidated
     joint ventures                        11       6       4       8     29
    Depreciation and amortization from
     unconsolidated joint ventures         12       9       7      11     39
                                      ------- ------- ------- ------- ------
    EBITDA                            $   234 $   190 $   259 $   422 $1,105

    Synthetic fuel adjustment              42      22      (7)     (1)    56
    Pre-tax gain discontinued
     operations                             -       -      (2)      -     (2)
    Non-recurring charges -
      CTF acquisition charge                -      94       -       -     94
      Leveraged lease charge                -       -      17       -     17
                                      ------- ------- ------- ------- ------
    Adjusted EBITDA                   $   276 $   306 $   267 $   421 $1,270
                                      ======= ======= ======= ======= ======
    Increase over 2004 Adjusted
      EBITDA                              14%     10%      12%     23%    15%

    The following items make up the
     synthetic fuel adjustment:
    Pre-tax synthetic fuel losses     $    54 $    28 $    13 $    17 $  112
    Pre-tax minority interest -
     synthetic fuel                       (10)     (4)    (18)    (15)   (47)
    Synthetic fuel depreciation            (2)     (2)     (2)     (3)    (9)
                                      ------- ------- ------- ------- ------
    EBITDA adjustment for synthetic
     fuel                             $    42 $    22 $    (7)     (1)$   56
                                      ======= ======= ======= ======= ======

    (1) Does not include depreciation reimbursed by third party owners.
 

                                                Fiscal Year 2004
                                      --------------------------------------
                                       First  Second   Third  Fourth
                                      Quarter Quarter Quarter Quarter  Total
                                      ------- ------- ------- ------- ------
    Net income                        $   114 $   160 $   133 $   189 $  596
    Interest expense                       22      24      23      30     99
    Tax provision continuing
     operations                            18      33      28      21    100
    Tax provision discontinued
     operations                             -       -       1       -      1
    Depreciation                           32      29      32      40    133
    Amortization                            7       8       7      11     33
    Interest expense from unconsolidated
     joint ventures                        10      11       9      15     45
    Depreciation and amortization from
     unconsolidated joint ventures         13       9      13      17     52
                                      ------- ------- ------- ------- ------
    EBITDA                            $   216 $   274  $  246 $   323 $1,059

    Synthetic fuel adjustment              28      5       (6)     21     48
    Pre-tax gain discontinued
     operations                            (1)     -       (1)     (1)    (3)
                                      ------- ------- ------- ------- ------
    Adjusted EBITDA                      $243    $279    $239    $343 $1,104
                                      ======= ======= ======= ======= ======

    The following items make up the
     synthetic fuel adjustment:
    Pre-tax synthetic fuel losses     $     - $    21 $    12 $    37 $   70
    Pre-tax synthetic fuel equity
     losses                                28       -       -       -     28
    Pre-tax minority interest -
     synthetic fuel                         -     (14)    (15)    (11)   (40)
    Synthetic fuel depreciation             -      (2)     (3)     (5)   (10)
                                      ------- ------- ------- ------- ------
    EBITDA adjustment for synthetic
     fuel                             $    28 $     5 $    (6)$    21 $   48
                                      ======= ======= ======= ======= ======

Note: This press release contains "forward-looking statements" within the meaning of federal securities laws, including REVPAR, profit margin and earning trends; statements concerning the number of lodging properties we expect to add in future years; our expected investment spending; and similar statements concerning anticipated future events and expectations that are not historical facts. We caution you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including the duration and full extent of the current growth environment in both the economy and the lodging industry; supply and demand changes for hotel rooms, vacation ownership intervals, 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; 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 - News) is a leading lodging company with over 2,700 lodging properties in the United States and 66 other countries and territories. Marriott International operates and franchises hotels under the Marriott, JW Marriott, The Ritz-Carlton, Renaissance, Residence Inn, Courtyard, TownePlace Suites, Fairfield Inn, SpringHill Suites and Bulgari brand names; develops and operates vacation ownership resorts under the Marriott Vacation Club International, Horizons, The Ritz-Carlton Club and Grand Residences by Marriott brands; operates Marriott Executive Apartments; provides furnished corporate housing through its Marriott ExecuStay division; and operates conference centers. Marriott is also in the synthetic fuel business. The company is headquartered in Washington, D.C., and has approximately 143,000 employees. In fiscal year 2005, Marriott International reported sales from continuing operations of $11.6 billion. For more information or reservations, please visit our web site at http://www.marriott.com.

.
Contact:

Marriott International, Inc.
http://www.marriott.com


 
Also See: Marriott International Reports 4th Qtr Net Income of $189 million, Compared to $169 million in 2003; 2004 a Spectacular Year / Hotel Operating Statistics / February 2005
Marriott Reports 2003 Net Income Up 81% to $502 million from $277 million for 2002; Full-year Revpar for North American Properties Fell 1.3%, Expects 2004 Revpar to Increase 3% to 4%, Plans to Add 25,000 to 30,000 Rooms in 2004 / Hotel Operating Statistics / February 2004
Marriott Reports Loss of $37 million in 4th Qtr 2002; Revpar for North American Properties Drop 5.7% in 2002 / Key Lodging Statistics / Feb 2003
Marriott Reports Loss of $116 million for Fourth Quarter; For 2001, Marriott Earned $236 million Compared to $479 million Last Year / Key Lodging Statistics / Feb 2002
Marriott International Posts Record 2000 Fourth Quarter And Full Year Earnings / Feb 2001 
REVPAR and ADR at Marriott Lodging Brands Grow By 3.5 % in 1999; Occupancy Remained at 78 % / Feb 2000 


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