Full Year Highlights:
-
Full year management and franchise fee revenue totaled a record breaking
$1.4 billion in 2007, up 17 percent over the prior year;
-
Incentive management fees reached an all-time record $369 million during
the year, 31 percent higher than 2006 levels. Over 67 percent of
company-operated hotels earned incentive management fees in 2007compared
to 62 percent in 2006. Hotels outside the United Statescontributed
36 percent of incentive management fees in 2007;
-
Adjusted diluted earnings per share from continuing operations, which excludes
the impact of the 2007 second quarter ESOP settlement, totaled $1.89 for
2007, an increase of 15 percent over last year. Diluted earnings
per share as reported was $1.75 for the full year;
-
Worldwide systemwide comparable revenue per available room (REVPAR) rose
7.6 percent (6.5 percent using constant dollars). Average DailyRates
increased 7.5 percent (6.4 percent using constant dollars). Occupancy remained
strong at 73 percent;
-
In North America, company-operated comparable REVPAR rose 6.2 percent during
2007 and house profit margins increased 160 basis points to near record
levels;
-
Over 31,000 rooms opened in 2007, including nearly 7,800 rooms outside
the United States. Eighteen percent of total room openings were conversions
from competitor brands;
-
The company's worldwide pipeline of hotels under construction, awaiting
conversion or approved for development increased to a record 125,000 rooms
compared to 100,000 rooms a year ago and 115,000 rooms in the third quarter
of 2007;
-
Marriott repurchased 41 million shares of the company's common stock in
2007 for nearly $1.8 billion. The company repurchased over $5 billion
of the company's common stock over the past three years.
Fourth Quarter Highlights:
-
Fourth quarter 2007 earnings per share from continuing operations
totaled $0.62, up 19 percent from the fourth quarter of 2006;
-
Fourth quarter management and franchise fee revenue rose 19 percent over
the prior year. Incentive management fees increased 31 percent;
-
Worldwide company-operated comparable REVPAR rose 9.2 percent (7.0 percent
using constant dollars) and worldwide company-operated house profit margins
increased 130 basis points during the quarter;
-
In North America, company-operated comparable REVPAR increased 6.2 percent
and house profit margins rose 140 basis points;
-
Outside North America, company-operated comparable REVPAR increased 15.5
percent (8.5 percent using constant dollars) with double-digit growth in
Southeast Asia, Latin America, Europe and the Middle East;
-
Approximately 10,800 rooms opened during the fourth quarter, including
over 2,500 rooms converted from competitor brands. Twenty-five percent
of rooms opened in the quarter are outside the United States;
-
Marriott repurchased 12 million shares of the company's common stock for
$462 million during the fourth quarter.
Marriott International, Inc. MAR today reported diluted earnings
per share (EPS) from continuing operations of $0.62 in the fourth quarter
of 2007, up 19 percent from the fourth quarter of 2006. Income from continuing
operations was $236 million for the quarter, an 8 percent increase over
the prior year. The company's EPS guidance for the 2007 fourth quarter,
disclosed on October 4, 2007, totaled $0.61 to $0.63.
Pre-tax charges during the quarter included an approximately $12 million
non-cash loan loss reserve related to one property and a $5 million reserve
for a leveraged aircraft lease. The fourth quarter results also reflected
$13 million in higher legal costs.
J.W. Marriott, Jr., Marriott International's chairman and chief executive
officer, said, "2007 was another terrific year. Significant unit growth,
REVPAR gains, and property-level margin improvement combined to deliver
record management and franchise fee earnings. We recently celebrated our
3,000th hotel in November, the JW Marriott Beijing, and we introduced two
new brands, Edition and Nickelodeon, which position us well for the travelers
of the future. With our owners and franchisees, we opened 31,000 rooms
during the year and, despite a tight credit market, drove our pipeline
of hotels under construction, awaiting conversion or approved for development
to a record 125,000 rooms.
"Around the world, customer satisfaction levels rose as our guests enjoyed
a record number of newly renovated hotels. We introduced either new lobby
or guest room enhancements -- and sometimes both -- in six of our brands.
Our Marriott and Renaissance hotels are rolling out next-generation lobbies
throughout our system. Our limited-service brands are also changing, with
guest room and lobby enhancements designed to drive guest satisfaction
and owner profitability.
"Looking ahead, we've never been better positioned to tackle short-term
economic challenges nor more optimistic about our long-term prospects.
While we're carefully watching economic trends, our expected unit growth
for 2008 is strong, customers love our brands, and owners and franchisees
prefer our portfolio more than ever. Almost 40 percent of our full-service
hotels, including Ritz-Carlton, are located outside the U.S. and 60 percent
of the full-service hotels in our pipeline are outside the U.S.
"Our strategy of managing and franchising hotels under solid, long-term
agreements is proven. Over the years, we've shown that this business model
results in profits that are less volatile than owning properties. And our
brands' strength continues to accelerate unit growth without significant
capital investment by us. Marriott's pre-tax return on invested capital
rose to a record 25 percent in 2007."
In the 2007 fourth quarter (16-week period from September 8, 2007 to
December 28, 2007), REVPAR for the company's comparable worldwide systemwide
properties increased 8.1 percent (6.6 percent using constant dollars).
Comparable worldwide company-operated properties experienced 9.2 percent
(7.0 percent using constant dollars) REVPAR growth over the year ago quarter.
North American REVPAR for the company's comparable company-operated
properties rose 6.2 percent in the fourth quarter of 2007, largely driven
by a 5.6 percent increase in rate and a slight increase in occupancy to
70 percent. For the calendar quarter ended December 31, 2007, REVPAR at
North American company-operated properties increased 7.0 percent.
Fourth quarter international company-operated comparable REVPAR increased
15.5 percent (8.5 percent using constant dollars), including a 13.9 percent
increase in average daily rate (7.0 percent using constant dollars) and
a 1.0 percentage point improvement in occupancy to 76.0 percent. Strong
international economic growth continues to drive global travel.
In the fourth quarter, Marriott added 70 new properties (10,787 rooms)
to its worldwide lodging portfolio, including 12 new hotels (2,697 rooms)
outside the United States. Worldwide, 13 properties (2,832 rooms) exited
the system during the quarter. At quarter-end, the company's lodging group
encompassed about 3,000 properties and timeshare resorts for a total of
over 535,000 rooms.
MARRIOTT REVENUES totaled $4.1 billion in the fourth quarter, an 8 percent
increase from the same period in 2006. Base management and franchise fees
rose 15 percent to $339 million as a result of REVPAR improvement and unit
expansion. In addition, base management fees reflected $4 million in proceeds
from business interruption insurance. Incentive management fees rose 31
percent to $126 million, driven by strong REVPAR, higher property-level
house profit margins and $9 million of business interruption insurance
proceeds. A record 600 company-operated hotels earned incentive management
fees in the 2007 fourth quarter, including 165 properties outside the United
States. Incentive management fees from North American Full-Service hotels
rose 35 percent in the quarter while incentive management fees from North
American Limited-Service properties rose 59 percent over the prior year.
Strong room rates, moderating utility costs, and improved productivity
drove margins during the quarter. Worldwide company-operated comparable
house profit margins increased 130 basis points. House profit margins for
comparable North American company-operated properties grew 140 basis points
and house profit per available room increased nearly 10 percent.
Owned, leased, corporate housing and other revenue, net of direct expenses,
increased 25 percent in the fourth quarter, to $65 million, primarily driven
by higher profits at owned and leased properties, including strong results
at the Ritz-Carlton hotels in St. Thomas and Tokyo and the Renaissance
Jaragua Hotel in the Dominican Republic.
Timeshare sales and services revenue increased 2 percent in the 2007
fourth quarter on strong services and financing revenue offset by lower
development revenue. Strong revenue in the 2006 quarter reflected several
projects reaching reportability thresholds. In the 2007 quarter, timeshare
sales and services revenue, net of direct expenses, declined 5 percent.
Gain on the sale of timeshare notes totaled $36 million in the fourth quarter
of 2007 and $37 million in the year ago quarter. In the guidance provided
in October 2007, the company stated that it expected fourth quarter timeshare
sales and services revenue, net of direct expenses, to decline 14 to 17
percent. Stronger than expected results reflected favorable marketing and
selling costs and higher financing profits.
Timeshare segment results reflect timeshare sales and services revenue,
net of direct expenses, as well as base fees, equity earnings, minority
interest and general and administrative expenses associated with the timeshare
business. Timeshare segment results increased 16 percent reflecting strong
equity earnings from the Kapalua joint venture in Hawaii and lower timeshare
general and administrative spending.
Although fourth quarter timeshare and fractional prices rose nearly
6 percent, timeshare contract sales declined 26 percent to $366 million.
The 2006 quarter benefited from a $150 million surge in residential and
fractional contract sales in Hawaii when a new project received final government
approval. Compared to prior guidance, fourth quarter 2007 contract sales
reflected lower than expected volume at projects in the Western United
States and Florida, somewhat offset by stronger sales in Asia.
GENERAL, ADMINISTRATIVE and OTHER expenses for the fourth quarter totaled
$250 million, a 5 percent increase compared to the prior year, reflecting
$13 million in higher legal costs.
GAINS AND OTHER INCOME totaled $20 million and included $10 million
of gains on the sale of real estate, an $8 million gain from the sale of
a stock investment and $2 million of preferred returns from joint venture
investments and other income. The prior year's fourth quarter gains totaled
$21 million and included $12 million from the sale of an interest in a
joint venture, $5 million of gains from the sale of real estate, and $4
million of preferred returns from joint venture investments and other income.
INTEREST EXPENSE, net of INTEREST INCOME, increased $21 million to $45
million, primarily due to higher interest rates and higher average borrowings,
including $400 million of senior debt issued during the 2007 fourth quarter.
The provision for loan losses totaled $17 million in the fourth quarter
reflecting a $12 million reserve for a loan at one property and a $5 million
reserve for an aircraft leveraged lease.
EQUITY IN EARNINGS (LOSSES) reflects Marriott's share of income or losses
in equity joint venture investments. The $5 million increase in equity
in earnings was primarily driven by improved results at a timeshare joint
venture project in Kapalua, Hawaii.
DISCONTINUED OPERATIONS
Production of synthetic fuel ceased in the fourth quarter. Therefore,
financial results for that business are shown as discontinued operations
for 2006 and 2007. The estimated phase-out for 2007 tax credits was 71
percent due to higher average oil prices for the year. This increase in
estimated phase-out for the full year offset income from synthetic fuel
operations recorded in the first three quarters of 2007.
FULL YEAR 2007 RESULTS
For the full year 2007, adjusted income from continuing operations totaled
$751 million, an increase of 5 percent, and adjusted diluted earnings per
share from continuing operations was $1.89, an increase of 15 percent.
Adjusted income from continuing operations and adjusted diluted earnings
per share exclude the impact of the 2007 second quarter settlement agreement
with the Internal Revenue Service and the Department of Labor relating
to the company's leveraged Employee Stock Ownership Plan. As reported,
diluted earnings per share was $1.75.
MARRIOTT REVENUES totaled $13 billion in 2007, an 8 percent increase
from 2006. Total fees in 2007 were $1,428 million, an increase of 17 percent
over the prior year, reflecting unit, REVPAR and incentive management fee
growth. Worldwide company-operated comparable property-level margins rose
150 basis points during 2007, approaching record levels and driving incentive
management fees higher. In 2006, the company recognized base management
fees of $5 million and incentive management fees of $10 million that were
based on prior period results but not earned and due until 2006. In 2007,
incentive management fees included $17 million that were based on prior
period results but not earned and due until 2007. In addition, in 2007
Marriott recognized incentive management fees of $13 million and base management
fees of $6 million related to business interruption insurance proceeds.
Owned, leased, corporate housing and other revenue, net of direct expenses,
totaled $178 million in 2007 compared to $183 million in 2006. Results
were impacted by fewer owned hotels and lower termination fees during 2007,
partially offset by higher affinity card revenue and branding fees. Termination
fees totaled $19 million in 2007 compared to $26 million in 2006.
Timeshare sales and services revenue increased 11 percent to $1,747
million in 2007 on strong development, services and financing revenue.
Timeshare sales and services revenue, net of direct expenses, totaled $350
million in 2007 and exceeded February 2007 guidance of $320 million to
$330 million. Stronger than expected performance reflected strong demand
at resorts in Maui, Las Vegas and Frenchmen's Cove, which achieved reportability
thresholds during the year, as well as higher than expected financing income.
Timeshare segment revenue and segment results increased 12 percent and
9 percent, respectively, during 2007.
Timeshare contract sales in 2007 declined 14 percent to $1,401 million.
Results in 2006 benefited from $287 million of residential contract sales,
largely at project launches in Hawaii and San Francisco. In contrast, 2007
residential contract sales totaled $49 million.
GENERAL, ADMINISTRATIVE and OTHER expenses in 2007 included $35 million
of expenses associated with the ESOP tax settlement.
GAINS AND OTHER INCOME totaled $97 million in 2007 and included gains
of $39 million from the sale of real estate, $12 million of gains associated
with the forgiveness of debt, an $18 million gain from the sale of a stock
investment, $13 million of gains on the sale of the company's interests
in five joint ventures and $15 million of preferred returns from several
joint venture investments and other income. Prior year gains of $74 million
in 2006 included gains of $26 million from the sale of real estate, $2
million of gains from the sale or refinancing of real estate loans, $15
million of preferred returns from several joint venture investments, $25
million from the redemption of preferred stock in a joint venture and $43
million of gains on the sale of the company's interests in six joint ventures.
These 2006 gains were partially offset by a $37 million non-cash charge
to adjust the carrying amount of a straight-line rent receivable associated
with a land lease that has been sold.
INTEREST EXPENSE, net of INTEREST INCOME, increased $71 million primarily
due to higher average borrowings in 2007 compared to 2006, including the
issuance of $750 million of senior debt, and higher interest rates.
EQUITY IN EARNINGS increased $12 million, to $15 million, largely due
to improved results at the timeshare joint venture project in Kapalua and
the reopening of a hotel in Mexico following Hurricane Wilma in 2005.
BALANCE SHEET
At year-end 2007, total debt was $2,965 million and cash balances totaled
$332 million, compared to $1,833 million in total debt and $191 million
of cash at year-end 2006.
The company repurchased 41 million shares of common stock in 2007 at
a cost of nearly $1.8 billion. The remaining share repurchase authorization
as of year-end 2007 totaled 33 million shares.
OUTLOOK
The company expects worldwide systemwide comparable REVPAR and North
American company-operated comparable REVPAR to increase 3 to 5 percent
in 2008. Assuming only modest increases in North American house profit
margins and roughly 30,000 new room openings, the company expects total
fee revenue for the full year of approximately $1,490 million to $1,520
million, an increase of 4 to 6 percent. Adjusting 2007 fees for receipt
of business interruption proceeds of $19 million, $17 million of incentive
fees based on prior periods' results and relicensing fees about $10 million
higher than those anticipated in 2008 due to fewer expected transactions,
total fee growth is expected to be 8 to 10 percent over 2007.
The company expects timeshare sales and services revenue, net of expenses,
to decline 6 to 10 percent in 2008 reflecting projects near sellout and
startup costs associated with new projects beginning sales. Timeshare contract
sales are expected to increase 15 to 20 percent as four new projects begin
sales in 2008. Timeshare segment results are expected to total $300 million
to $315 million in 2008, roughly flat with 2007.
Based upon the above assumptions, the company expects 2008 EPS to total
$2.00 to $2.10.
For the first quarter of 2008, the company expects worldwide systemwide
comparable REVPAR to increase 3 to 5 percent and North American company-
operated comparable REVPAR to increase 2 to 4 percent. Comparable worldwide
house profit margins are expected to be flat. Expected first quarter results
reflect the impact of the timing of the Easter holiday and the December
29, 2007 start of Marriott's 2008 fiscal first quarter.
In the first quarter, the company expects timeshare sales and services
revenue, net of direct expenses, to total $7 million to $12 million reflecting
start up costs at new projects and tough comparisons to the 2007 quarter.
In the year ago quarter, a significant amount of contract sales associated
with a Hawaiian project became financially reportable. First quarter contract
sales are expected to be flat to up 5 percent.
Based upon the above assumptions, the company expects EPS for the 2008
first quarter to total $0.32 to $0.36.
First Quarter 2008
Full Year 2008
------------------
--------------
Total fee revenue
$310 million to $315 million $1,490 million to $1,520 million
Owned, leased, corporate $35
million to $40 million $170 million to $180 million
housing and other
revenue, net of direct
expenses
Timeshare sales and
$7 million to $12 million $315 million to
$330 million
services revenue,
net of direct
expenses(1)
General, administrative
$160 million to $170 million $775 million to $785 million
and other expenses
Operating income
$182 million to $207 million $1,190 million to $1,255 million
Gains and other income
Approx $5 million Approx $30 million
Net interest expense(2)
Approx $30 million Approx $155 million
Equity in earnings
Approx $20 million Approx $55 million
(losses)
After-tax minority
Approx $3 million Approx $6 million
interest
Earnings per share
$0.32 to $0.36 $2.00 to
$2.10
Tax rate
35.5 percent
35.5 percent
1 - Includes an estimated $90 million
of timeshare note sale gains for
full year
2008
2 - Net of interest income
The company expects investment spending in 2008 to total approximately
$1.1 billion to $1.2 billion, including $60 million for maintenance capital
spending, $525 million to $575 million for capital expenditures and acquisitions,
$175 million to $200 million for timeshare development, $15 million to
$25 million in new mezzanine financing and mortgage loans for hotels developed
by owners and franchisees, and $275 million to $290 million in equity and
other investments (including timeshare equity investments).
MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share amounts)
Sixteen Weeks Ended
------------------------- Percent
December 28, December 29, Better/
2007 2006
(Worse)
------------ ------------ -------
REVENUES
Base management fees
$203 $173
17
Franchise fees
136 121
12
Incentive management fees
126 96
31
Owned, leased, corporate housing and
other revenue(1)
416 354
18
Timeshare sales and services(2)
536 526
2
Cost reimbursements(3)
2,672 2,528
6
------------ ------------
Total Revenues
4,089 3,798
8
OPERATING COSTS AND EXPENSES
Owned, leased and corporate housing
-
direct(4)
351 302
(16)
Timeshare - direct
410 393
(4)
Reimbursed costs
2,672 2,528
(6)
General, administrative and other(5)
250 237
(5)
------------ ------------
Total Expenses
3,683 3,460
(6)
------------ ------------
OPERATING INCOME
406 338
20
Gains and other income(6)
20 21
(5)
Interest expense
(57) (38)
(50)
Interest income
12 14
(14)
(Provision for) reversal of loan losses
(17) -
*
Equity in earnings (losses)(7)
6 1
500
------------ ------------
INCOME FROM CONTINUING OPERATIONS
BEFORE
INCOME TAXES AND MINORITY INTEREST
370 336
10
Provision for income taxes
(134) (116)
(16)
Minority interest
- (1)
100
------------ ------------
INCOME FROM CONTINUING OPERATIONS
236 219
8
Discontinued operations - Synthetic
Fuel, net of tax(8)
(60) 1
(6,100)
------------ ------------
NET INCOME
$176 $220
(20)
============ ============
EARNINGS PER SHARE - Basic
Earnings from continuing
operations $0.65
$0.56 16
Losses from discontinued
operations (0.17)
- *
------------ ------------
Earnings per share
$0.48 $0.56
(14)
============ ============
EARNINGS PER SHARE - Diluted
Earnings from continuing
operations $0.62
$0.52 19
Losses from discontinued
operations (0.16)
- *
------------ ------------
Earnings per share
$0.46 $0.52
(12)
============ ============
Basic Shares
363.6 394.8
Diluted Shares
383.1 419.9
* Percent can not be calculated.
1 - Owned, leased, corporate housing
and other revenue includes revenue
from the properties
we own or lease, revenue from our corporate
housing business,
termination fees and other revenue.
2 - Timeshare sales and services includes
total timeshare revenue except
for base fees,
cost reimbursements, real estate gains and joint
venture earnings.
Timeshare sales and services includes gains on the
sale of timeshare
note receivable securitizations.
3 - Cost reimbursements include reimbursements
from lodging properties for
Marriott funded
operating expenses.
4 - Owned, leased and corporate housing
- direct expenses include
operating
expenses related to our owned or leased hotels, including
lease payments,
pre-opening expenses and depreciation, plus expenses
related to
our corporate housing business.
5 - General, administrative and other
expenses include the overhead costs
allocated
to our segments, and our corporate overhead costs and
general expenses.
6 - Gains and other income includes
net gains on the sale of real estate,
gains on note
sales or repayments (except timeshare note
securitizations
gains), gains on the sale of joint ventures, and
income from
cost method joint ventures.
7 - Equity in earnings (losses) includes
our equity in earnings (losses)
of unconsolidated
equity method joint ventures.
8 - Discontinued operations relates
to our Synthetic Fuel business which
was shut down
and substantially all the assets liquidated at
December 28,
2007.
MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share amounts)
Fifty-Two Weeks Ended
------------------------ Percent
December 28, December 29, Better/
2007 2006
(Worse)
------------ ------------ -------
REVENUES
Base management fees
$620 $553
12
Franchise fees
439 390
13
Incentive management fees
369 281
31
Owned, leased, corporate housing and
other revenue(1)
1,240 1,119
11
Timeshare sales and services(2)
1,747 1,577
11
Cost reimbursements(3)
8,575 8,075
6
------------ ------------
Total Revenues
12,990 11,995
8
OPERATING COSTS AND EXPENSES
Owned, leased and corporate housing
-
direct(4)
1,062 936
(13)
Timeshare - direct
1,397 1,220
(15)
Reimbursed costs
8,575 8,075
(6)
General, administrative and other(5)
768 677
(13)
------------ ------------
Total Expenses
11,802 10,908
(8)
------------ ------------
OPERATING INCOME
1,188 1,087
9
Gains and other income(6)
97 74
31
Interest expense
(184) (124)
(48)
Interest income
38 49
(22)
(Provision for) reversal of loan losses
(17) 3
(667)
Equity in earnings (losses)(7)
15 3
400
------------ ------------
INCOME FROM CONTINUING OPERATIONS
BEFORE
INCOME TAXES AND MINORITY INTEREST
1,137 1,092
4
Provision for income taxes
(441) (380)
(16)
Minority interest
1 -
*
------------ ------------
INCOME FROM CONTINUING OPERATIONS
697 712
(2)
Discontinued operations - Synthetic
Fuel, net of tax(8)
(1) 5
(120)
------------ ------------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE
696 717
(3)
Cumulative effect of change in
accounting principle, net of
tax(9)
- (109)
100
------------ ------------
NET INCOME
$696 $608
14
============ ============
EARNINGS PER SHARE - Basic
Earnings from continuing
operations $1.85
$1.76 5
Earnings from discontinued
operations -
0.01 (100)
Losses from cumulative
effect of
change in
accounting principle
- (0.27)
100
------------ ------------
Earnings per share
$1.85 $1.50
23
============ ============
EARNINGS PER SHARE - Diluted
Earnings from continuing
operations $1.75
$1.65 6
Earnings from discontinued
operations -
0.01 (100)
Losses from cumulative
effect of
change in
accounting principle
- (0.25)
100
------------ ------------
Earnings per share
$1.75 $1.41
24
============ ============
Basic Shares
376.1 404.1
Diluted Shares
397.3 430.2
* Percent can not be calculated.
1 - Owned, leased, corporate housing
and other revenue includes revenue
from the properties
we own or lease, revenue from our corporate
housing business,
termination fees and other revenue.
2 - Timeshare sales and services includes
total timeshare revenue except
for base fees,
cost reimbursements, real estate gains and joint
venture earnings.
Timeshare sales and services includes gains on the
sale of timeshare
note receivable securitizations.
3 - Cost reimbursements include reimbursements
from lodging properties for
Marriott funded
operating expenses.
4 - Owned, leased and corporate housing
-- direct expenses include
operating
expenses related to our owned or leased hotels, including
lease payments,
pre-opening expenses and depreciation, plus expenses
related to
our corporate housing business.
5 - General, administrative and other
expenses include the overhead costs
allocated
to our segments and our corporate overhead costs and general
expenses.
6 - Gains and other income includes
gains and losses on the sale of real
estate, gains
on note sales or repayments (except timeshare note
securitizations
gains), gains and losses on the sale of joint
ventures,
and income from cost method joint ventures.
7 - Equity in earnings (losses) includes
our equity in earnings (losses)
of unconsolidated
equity method joint ventures.
8 - Discontinued operations relates
to our Synthetic Fuel business which
was shut down
and substantially all the assets liquidated at December
28, 2007.
9 - Cumulative effect of change in
accounting principle, net of tax is
associated
with the adoption, in the 2006 first quarter, of Statement
of Position
04-2, "Accounting for Real Estate Time-sharing
Transactions"
which was issued by the American Institute of Certified
Public Accountants.
Marriott International, Inc.
Business Segments
($ in millions)
Sixteen Weeks Ended
------------------------- Percent
December 28, December 29, Better/
2007 2006
(Worse)
------------ ------------ -------
REVENUES
North American Full-Service
$1,709 $1,586
8
North American Limited-Service
657 618
6
International
538 478
13
Luxury
528 450
17
Timeshare
627 644
(3)
------------ ------------
Total segment revenues(1)
4,059 3,776
7
Other unallocated corporate
30 22
36
------------ ------------
Total
$4,089 $3,798
8
============ ============
INCOME FROM CONTINUING OPERATIONS
North American Full-Service
$154 $141
9
North American Limited-Service
124 109
14
International
105 77
36
Luxury
28 19
47
Timeshare
116 100
16
------------ ------------
Total segment financial
results(1) 527
446 18
Other unallocated corporate
(95) (87)
(9)
Interest income, provision for loan
losses
and interest expense
(62) (24)
(158)
Income taxes
(134) (116)
(16)
------------ ------------
Total
$236 $219
8
============ ============
1 - We consider segment revenues and
segment financial results to be
meaningful
indicators of our performance because they measure our
growth in
profitability as a lodging company and enable investors to
compare the
revenues and results of our lodging operations to those of
other lodging
companies.
Marriott International, Inc.
Business Segments
($ in millions)
Fifty-Two Weeks Ended
-------------------------- Percent
December 28, December 29, Better/
2007 2006
(Worse)
------------ ------------ -------
REVENUES
North American Full-Service
$5,476 $5,196
5
North American Limited-Service
2,198 2,060
7
International
1,594 1,411
13
Luxury
1,576 1,423
11
Timeshare
2,065 1,840
12
------------ ------------
Total segment revenues(1)
12,909 11,930
8
Other unallocated corporate
81 65
25
------------ ------------
Total
$12,990 $11,995
8
============ ============
INCOME FROM CONTINUING OPERATIONS
North American Full-Service
$478 $455
5
North American Limited-Service
461 380
21
International
271 237
14
Luxury
72 63
14
Timeshare
306 280
9
------------ ------------
Total segment financial
results(1) 1,588
1,415 12
Other unallocated corporate
(287) (251)
(14)
Interest income, provision for loan
losses and interest expense
(163) (72)
(126)
Income taxes
(441) (380)
(16)
------------ ------------
Total
$697 $712
(2)
============ ============
1 - We consider segment revenues and
segment 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
revenues and results of our lodging operations to those of
other lodging
companies.
MARRIOTT INTERNATIONAL, INC.
Total Lodging Products(1)
--------------------------------------------------------------------------
Number of Properties Number of Rooms/Suites
-------------------- ----------------------
vs.
vs.
Dec. 28, Dec. 29, Dec. 29, Dec. 28, Dec. 29, Dec. 29,
Brand
2007 2006 2006
2007 2006 2006
-------------------- -----------------------------------------------------
Domestic Full-Service
---------------------
Marriott Hotels &
Resorts
342 340
2 136,348 136,097
251
Renaissance Hotels &
Resorts
71 65
6 26,117 25,106 1,011
Domestic Limited-Service
------------------------
Courtyard
693 650 43
96,759 91,226 5,533
Fairfield Inn
529 513 16
46,930 46,030 900
SpringHill Suites
176 152 24
20,445 17,684 2,761
Residence Inn
528 494 34
62,805 58,973 3,832
TownePlace Suites
141 123 18
14,122 12,368 1,754
International
-------------
Marriott Hotels &
Resorts
178 179 (1)
52,196 51,307 889
Renaissance Hotels &
Resorts
70 71
(1) 22,817 23,120
(303)
Courtyard
74 83
(9) 14,021 14,300
(279)
Fairfield Inn
8 5
3 947
559 388
SpringHill Suites
1 1
- 124
124 -
Residence Inn
18 17
1 2,611 2,313
298
Marriott Executive
Apartments
18 18
- 2,905 3,027
(122)
Ramada
2 2
- 332
332 -
Luxury
------
The Ritz-Carlton -
Domestic
36 35
1 11,627 11,616
11
The Ritz-Carlton -
International
32 25
7 9,591 7,790
1,801
Bulgari Hotels &
Resorts
2 2
- 117
117 -
The Ritz-Carlton
Residential
17 -
17 1,707
- 1,707
The Ritz-Carlton
Services Apartments
2 -
2 387
- 387
Timeshare(2)
-----------
Marriott Vacation
Club
46 45
1 10,896 10,512
384
The Ritz-Carlton
Club - Fractional
7 5
2 388
398 (10)
The Ritz-Carlton
Club - Residential
3 2
1 144
148 (4)
Grand Residences by
Marriott - Fractional
2 2
- 248
248 -
Grand Residences by
Marriott -
Residential
1 1
- 65
65 -
Horizons by Marriott
Vacation Club
2 2
- 444
372 72
------------------------ -------------------------
Sub Total Timeshare
61 57
4 12,185 11,743
442
------------------------ -------------------------
Total
2,999 2,832 167
535,093 513,832 21,261
======================== =========================
Number of Timeshare Interval, Fractional and Residential Resorts(2)
-------------------------------------------------------------------
In Active
Total(3) Sales
-------- ---------
100% Company-Developed
----------------------
Marriott Vacation Club
45
24
The Ritz-Carlton Club
and Residences
6
4
Grand Residences by Marriott
and Residences 3
3
Horizons by Marriott Vacation
Club
2
2
Joint Ventures
--------------
Marriott Vacation Club
1
1
The Ritz-Carlton Club
and Residences
4
4
-------------------------
Total
61
38
=========================
1 - Total Lodging Products excludes
the 2,156 and 2,046 corporate housing
rental units
as of December 28, 2007 and December 29, 2006,
respectively.
2 - Includes products in active sales
which may not be ready for
occupancy.
3 - Includes resorts that are in active
sales and those that are sold out.
Residential
properties are captured once they possess a certificate of
occupancy.
Marriott International, Inc.
Key Lodging Statistics
Comparable Company-Operated International Properties(1)
--------------------------------------------------------------------------
Four Months Ended December 31, 2007 and December 31, 2006
---------------------------------------------------------
Average Daily
REVPAR Occupancy
Rate
---------------------------------------------------------
Region
2007 vs. 2006 2007 vs. 2006 2007 vs.
2006
--------------------------------------------------------------------------
Caribbean & Latin America $124.79
14.2% 74.8% 3.7% pts. $166.81 8.6%
Continental Europe
$145.74 10.1% 76.9% 1.0% pts. $189.57 8.7%
United Kingdom
$167.23 5.2% 78.1% -1.4% pts. $214.00 7.1%
Middle East & Africa
$104.19 15.1% 72.2% 5.7% pts. $144.39 6.0%
Asia Pacific(2)
$121.60 6.1% 76.2% -0.2% pts. $159.51 6.5%
Regional Composite(3)
$136.77 8.4% 76.5% 0.9% pts. $178.87
7.1%
International Luxury(4)
$211.48 9.3% 72.0% 2.5% pts. $293.69
5.5%
Total International(5) $144.54 8.5% 76.0% 1.0% pts. $190.18
7.0%
Worldwide(6) $123.72 7.0% 71.7% 0.6% pts. $172.43 6.1%
Comparable Systemwide International Properties(1)
--------------------------------------------------------------------------
Four Months Ended December 31, 2007 and December 31, 2006
---------------------------------------------------------
Average Daily
REVPAR Occupancy
Rate
---------------------------------------------------------
Region
2007 vs. 2006 2007 vs. 2006 2007 vs.
2006
--------------------------------------------------------------------------
Caribbean & Latin America $112.41
12.4% 73.5% 3.4% pts. $152.88 7.2%
Continental Europe
$141.52 9.3% 75.4% 2.2% pts. $187.76
6.1%
United Kingdom
$164.37 4.9% 77.9% -1.2% pts. $210.97 6.5%
Middle East & Africa
$102.10 15.5% 71.6% 5.7% pts. $142.63 6.3%
Asia Pacific(2)
$122.65 5.2% 76.4% -0.5% pts. $160.54 5.9%
Regional Composite(3)
$132.92 7.7% 75.8% 1.2% pts. $175.47
6.0%
International Luxury(4)
$211.48 9.3% 72.0% 2.5% pts. $293.69
5.5%
Total International(5) $139.63 7.9% 75.4% 1.3% pts. $185.11
6.0%
Worldwide(6) $103.51 6.6% 70.8% 0.2% pts. $146.29 6.3%
1 - International financial results
are reported on a period basis, while
International
statistics are reported on a monthly basis. Statistics
are in constant
dollars for September through December. Excludes
North America
(except for Worldwide).
2 - Does not include Hawaii.
3 - Regional information includes
Marriott Hotels & Resorts, Renaissance
Hotels &
Resorts and Courtyard properties. Includes Hawaii.
4 - International Luxury includes
The Ritz-Carlton properties outside of
North America
and Bulgari Hotels & Resorts.
5 - Includes Regional Composite and
International Luxury.
6 - Includes international statistics
for the four calendar months ended
December 31,
2007 and December 31, 2006, and North American statistics
for the sixteen
weeks ended December 28, 2007 and December 29, 2006.
Includes Marriott
Hotels & Resorts, The Ritz-Carlton, Bulgari Hotels &
Resorts, Renaissance
Hotels & Resorts, Residence Inn, Courtyard,
TownePlace
Suites, Fairfield Inn and SpringHill Suites properties.
Marriott International, Inc.
Key Lodging Statistics
Comparable Company-Operated International Properties(1)
--------------------------------------------------------------------------
Twelve Months Ended December 31, 2007 and December 31, 2006
-----------------------------------------------------------
Average Daily
REVPAR Occupancy
Rate
-----------------------------------------------------------
Region
2007 vs. 2006 2007 vs. 2006 2007 vs.
2006
--------------------------------------------------------------------------
Caribbean & Latin America $128.25
12.7% 76.5% 2.4% pts. $167.56 9.2%
Continental Europe
$129.34 7.7% 74.4% 1.3% pts. $173.92
5.8%
United Kingdom
$158.08 5.2% 77.8% 0.1% pts. $203.27
5.2%
Middle East & Africa
$99.57 16.8% 73.3% 4.8% pts. $135.74 9.1%
Asia Pacific(2)
$111.15 7.8% 75.2% -0.8% pts. $147.79 8.9%
Regional Composite(3)
$127.44 8.2% 75.7% 0.8% pts. $168.30
7.0%
International Luxury(4)
$212.54 12.2% 72.7% 4.0% pts. $292.24 6.1%
Total International(5) $136.29 8.9% 75.4% 1.2% pts. $180.73
7.2%
Worldwide(6) $121.34 7.0% 73.5% 0.5% pts. $165.19 6.2%
Comparable Systemwide International Properties(1)
--------------------------------------------------------------------------
Twelve Months Ended December 31, 2007 and December 31, 2006
-----------------------------------------------------------
Average Daily
REVPAR Occupancy
Rate
-----------------------------------------------------------
Region
2007 vs. 2006 2007 vs. 2006 2007 vs.
2006
--------------------------------------------------------------------------
Caribbean & Latin America $117.20
11.7% 74.8% 2.8% pts. $156.76 7.5%
Continental Europe
$126.01 7.3% 72.0% 1.2% pts. $174.93
5.4%
United Kingdom
$155.27 5.1% 77.4% 0.3% pts. $200.65
4.7%
Middle East & Africa
$96.95 17.0% 72.4% 4.9% pts. $133.98 9.0%
Asia Pacific(2)
$111.92 7.0% 75.3% -0.5% pts. $148.67 7.7%
Regional Composite(3)
$123.78 7.8% 74.6% 1.0% pts. $166.03
6.3%
International Luxury(4)
$212.54 12.2% 72.7% 4.0% pts. $292.24 6.1%
Total International(5) $131.36 8.4% 74.4% 1.3% pts. $176.57
6.6%
Worldwide(6) $103.19 6.5% 72.9% 0.1% pts. $141.60 6.4%
1 - International financial results
are reported on a period basis, while
International
statistics are reported on a monthly basis. Statistics
are in constant
dollars for January through December. Excludes North
America (except
for Worldwide).
2 - Does not include Hawaii.
3 - Regional information includes
Marriott Hotels & Resorts, Renaissance
Hotels &
Resorts and Courtyard properties. Includes Hawaii.
4 - International Luxury includes
The Ritz-Carlton properties outside of
North America
and Bulgari Hotels & Resorts.
5 - Includes Regional Composite and
International Luxury.
6 - Includes international statistics
for the twelve calendar months ended
December 31,
2007 and December 31, 2006, and North American statistics
for the fifty-two
weeks ended December 28, 2007 and December 29, 2006.
Includes Marriott
Hotels & Resorts, The Ritz-Carlton, Bulgari Hotels &
Resorts, Renaissance
Hotels & Resorts, Residence Inn, Courtyard,
TownePlace
Suites, Fairfield Inn and SpringHill Suites properties.
Marriott International, Inc.
Key Lodging Statistics
Comparable Company-Operated North American Properties
--------------------------------------------------------------------------
Sixteen Weeks Ended December 28, 2007 and December 29, 2006
-----------------------------------------------------------
Average Daily
REVPAR Occupancy
Rate
-----------------------------------------------------------
Brand
2007 vs. 2006 2007 vs. 2006 2007 vs. 2006
--------------------------------------------------------------------------
Marriott Hotels & Resorts
$128.23 6.1% 70.0% 0.1% pts. $183.31 5.9%
Renaissance Hotels &
Resorts
$123.40 7.9% 70.0% 1.2% pts. $176.29 6.1%
Composite North American
Full-Service(1)
$127.47 6.4% 70.0% 0.3% pts. $182.20 5.9%
The Ritz-Carlton(2)
$232.62 7.0% 68.7% -0.1% pts. $338.59 7.1%
Composite North American
Full-Service & Luxury(3)
$138.26 6.5% 69.8% 0.3% pts. $197.99 6.1%
Residence Inn
$93.60 5.1% 75.0% 0.8% pts. $124.83 4.0%
Courtyard
$88.19 5.4% 68.0% 0.1% pts. $129.65 5.3%
TownePlace Suites
$60.95 8.5% 71.5% 1.3% pts. $85.30
6.5%
SpringHill Suites
$75.40 6.8% 70.0% 2.2% pts. $107.65 3.5%
Composite North American
Limited-Service(4)
$87.08 5.6% 70.2% 0.5% pts. $124.11 4.9%
Composite - All(5)
$115.07 6.2% 70.0% 0.4% pts. $164.43 5.6%
Comparable Systemwide North American Properties
--------------------------------------------------------------------------
Sixteen Weeks Ended December 28, 2007 and December 29, 2006
-----------------------------------------------------------
Average Daily
REVPAR Occupancy
Rate
-----------------------------------------------------------
Brand
2007 vs. 2006 2007 vs. 2006 2007 vs. 2006
--------------------------------------------------------------------------
Marriott Hotels & Resorts
$112.62 6.3% 68.0% 0.0% pts. $165.66 6.3%
Renaissance Hotels &
Resorts
$112.37 6.2% 69.3% 0.0% pts. $162.07 6.3%
Composite North American
Full-Service(1)
$112.58 6.3% 68.2% 0.0% pts. $165.11 6.3%
The Ritz-Carlton(2)
$232.62 7.0% 68.7% -0.1% pts. $338.59 7.1%
Composite North American
Full-Service & Luxury(3)
$119.87 6.4% 68.2% 0.0% pts. $175.72 6.4%
Residence Inn
$92.85 5.6% 75.6% 0.0% pts. $122.88 5.6%
Courtyard
$87.62 6.3% 69.7% 0.4% pts. $125.71 5.7%
Fairfield Inn
$59.30 6.8% 67.0% -0.1% pts. $88.50 6.9%
TownePlace Suites
$61.13 4.9% 70.5% -1.3% pts. $86.76 6.8%
SpringHill Suites
$74.22 5.3% 69.9% -0.9% pts. $106.22 6.7%
Composite North American
Limited-Service(4)
$80.81 6.0% 70.7% 0.0% pts. $114.22 6.0%
Composite - All(5)
$95.89 6.2% 69.8% 0.0% pts. $137.43 6.2%
1 - Includes Marriott Hotels &
Resorts and Renaissance Hotels & Resorts
properties.
2 - Statistics for Ritz-Carlton properties
are for September through
December.
3 - Includes Marriott Hotels &
Resorts, Renaissance Hotels & Resorts and
Ritz-Carlton
properties.
4 - Includes Residence Inn, Courtyard,
Fairfield Inn, TownePlace Suites
and SpringHill
Suites properties.
5 - Includes Marriott Hotels &
Resorts, Renaissance Hotels & Resorts, The
Ritz-Carlton,
Residence Inn, Courtyard, Fairfield Inn, TownePlace
Suites, and
SpringHill Suites properties.
Comparable Company-Operated North American Properties
--------------------------------------------------------------------------
Fifty-two Weeks Ended December 28, 2007 and December 29, 2006
---------------------------------------------------------------
Average Daily
REVPAR Occupancy
Rate
---------------------------------------------------------------
Brand
2007 vs. 2006 2007 vs. 2006 2007
vs. 2006
--------------------------------------------------------------------------
Marriott Hotels & Resorts $127.43
6.9% 72.6% 1.0% pts. $175.41 5.4%
Renaissance Hotels &
Resorts
$124.17 5.9% 73.1% 0.4% pts. $169.93 5.4%
Composite North American
Full-Service(1)
$126.92 6.8% 72.7% 0.9% pts. $174.54 5.4%
The Ritz-Carlton(2)
$239.67 7.5% 72.3% 0.1% pts. $331.48 7.3%
Composite North American
Full-Service & Luxury(3)
$137.66 6.9% 72.7% 0.8% pts. $189.41 5.7%
Residence Inn
$96.53 3.9% 77.7% -0.5% pts. $124.24 4.6%
Courtyard
$89.69 4.9% 70.4% -0.4% pts. $127.34 5.6%
TownePlace Suites
$63.56 7.2% 74.2% -1.1% pts. $85.65 8.9%
SpringHill Suites
$78.27 5.0% 72.6% 0.6% pts. $107.86 4.2%
Composite North American
Limited-Service(4)
$89.18 4.8% 72.7% -0.4% pts. $122.63 5.4%
Composite - All(5)
$115.60 6.2% 72.7% 0.3% pts. $159.01 5.8%
Comparable Systemwide North American Properties
--------------------------------------------------------------------------
Fifty-two Weeks Ended December 28, 2007 and December 29, 2006
---------------------------------------------------------------
Average Daily
REVPAR Occupancy
Rate
---------------------------------------------------------------
Brand
2007 vs. 2006 2007 vs. 2006 2007 vs. 2006
--------------------------------------------------------------------------
Marriott Hotels & Resorts
$113.66 6.4% 70.8% 0.6% pts. $160.61 5.5%
Renaissance Hotels &
Resorts
$112.96 5.1% 71.8% -0.4% pts. $157.29 5.8%
Composite North American
Full-Service(1)
$113.56 6.2% 70.9% 0.5% pts. $160.10 5.5%
The Ritz-Carlton(2)
$239.67 7.5% 72.3% 0.1% pts. $331.48 7.3%
Composite North American
Full-Service & Luxury(3)
$120.65 6.4% 71.0% 0.4% pts. $169.92 5.7%
Residence Inn
$95.80 5.1% 78.2% -0.8% pts. $122.44 6.1%
Courtyard
$89.53 5.6% 72.1% -0.2% pts. $124.12 5.9%
Fairfield Inn
$62.17 6.7% 70.5% -0.3% pts. $88.19 7.2%
TownePlace Suites
$63.89 5.0% 73.5% -2.4% pts. $86.93 8.4%
SpringHill Suites
$77.97 5.7% 73.2% -0.6% pts. $106.49 6.5%
Composite North American
Limited-Service(4)
$83.37 5.6% 73.6% -0.5% pts. $113.34 6.3%
Composite - All(5)
$97.70 6.0% 72.6% -0.2% pts. $134.62 6.2%
1 - Includes Marriott Hotels &
Resorts and Renaissance Hotels & Resorts
properties.
2 - Statistics for Ritz-Carlton properties
are for January through
December.
3 - Includes Marriott Hotels &
Resorts, Renaissance Hotels & Resorts and
Ritz-Carlton
properties.
4 - Includes Residence Inn, Courtyard,
Fairfield Inn, TownePlace Suites
and SpringHill
Suites properties.
5 - Includes Marriott Hotels &
Resorts, Renaissance Hotels & Resorts, The
Ritz-Carlton,
Residence Inn, Courtyard, Fairfield Inn, TownePlace
Suites, and
SpringHill Suites properties.
MARRIOTT INTERNATIONAL, INC.
TIMESHARE SEGMENT
($ in millions)
Segment Results
Sixteen Weeks Ended
------------------------ Percent
December 28, December 29, Better /
2007 2006
(Worse)
------------------------ ---------
Base fees revenue
$13 $10
30
Timeshare sales and services
revenue, net of
direct
expense
126 133
(5)
Joint venture equity income
(loss) 6
(3) 300
General, administrative
and other
expense
(29) (40)
28
----------- -----------
Segment results
$116 $100
16
=========== ===========
Sales and Services Revenue
Sixteen Weeks Ended
------------------------ Percent
December 28, December 29, Better /
2007 2006
(Worse)
------------------------ ---------
Development
$362 $378
(4)
Services
90 79
14
Financing
75 67
12
Other revenue
9 2
350
----------- -----------
Sales and
services revenue
$536 $526
2
=========== ===========
Contract Sales(1)
Sixteen Weeks Ended
------------------------ Percent
December 28, December 29, Better /
2007 2006
(Worse)
------------------------ ---------
Company:
Timeshare
$344 $314
10
Fractional
17 10
70
Residential
(15) -
*
----------- -----------
Total company
346 324
7
Joint ventures:
Timeshare
10 10
-
Fractional
8 46
(83)
Residential
2 116
(98)
----------- -----------
Total joint ventures
20 172
(88)
----------- -----------
Total contract sales, including
joint ventures
$366 $496
(26)
=========== ===========
* Percent can not be calculated.
1 - Timeshare contract sales represent
gross sales of timeshare,
fractional,
and residential products from both our wholly-owned and
joint venture
projects, before the adjustment for percentage-of-
completion
accounting.
MARRIOTT INTERNATIONAL, INC.
TIMESHARE SEGMENT
($ in millions)
Segment Results
Fifty-Two Weeks Ended
------------------------ Percent
December 28, December 29, Better /
2007 2006
(Worse)
------------------------ ---------
Base fees revenue
$43 $34
26
Timeshare sales and services
revenue, net of
direct expense
350 357
(2)
Joint venture equity income
(loss) 10
(2) 600
Minority interest
1 -
*
General, administrative
and other
expense
(98) (109)
10
----------- -----------
Segment results
$306 $280
9
=========== ===========
Sales and Services Revenue
Fifty-Two Weeks Ended
------------------------ Percent
December 28, December 29, Better /
2007 2006
(Worse)
------------------------ ---------
Development
$1,208 $1,112
9
Services
315 286
10
Financing
195 171
14
Other revenue
29 8
263
----------- -----------
Sales and
services revenue
$1,747 $1,577
11
=========== ===========
Contract Sales(1)
Fifty-Two Weeks Ended
------------------------ Percent
December 28, December 29, Better /
2007 2006
(Worse)
------------------------ ---------
Company:
Timeshare
$1,221 $1,207
1
Fractional
44 42
5
Residential
(9) 5
(280)
----------- -----------
Total company
1,256 1,254
-
Joint ventures:
Timeshare
33 28
18
Fractional
54 68
(21)
Residential
58 282
(79)
----------- -----------
Total joint ventures
145 378
(62)
----------- -----------
Total contract sales, including
joint ventures
$1,401 $1,632
(14)
=========== ===========
* Percent can not be calculated.
1 - Timeshare contract sales represent
gross sales of timeshare,
fractional,
and residential products from both our wholly-owned and
joint venture
projects, before the adjustment for percentage-of-
completion
accounting.
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measures
In our press release and schedules,
and related conference call, we report
certain financial measures that are not prescribed or
authorized by United
States generally accepted accounting principles ("GAAP").
We discuss
management's reasons for reporting these non-GAAP measures
below, and the
tables on the following pages reconcile the most directly
comparable GAAP
measures to the non-GAAP measures (identified by a double
asterisk on the
following pages) that we refer to in our press release
and related conference
call. Although management evaluates and presents
these non-GAAP measures for
the reasons described below, please be aware that these
non-GAAP measures are
not alternatives to revenue, operating income, income
from continuing
operations, net income, earnings per share or any other
comparable operating
measure prescribed by GAAP. In addition, these
non-GAAP financial measures
may be calculated and/or presented differently than measures
with the same or
similar names that are reported by other companies, and
as a result, the non-
GAAP measures we report may not be comparable to those
reported by others.
ESOP Settlement Charge. Management
evaluates non-GAAP measures that
exclude the charge associated with the 2007 settlement
of issues raised during
the IRS' and Department of Labor's examination of the
employee stock ownership
plan ("ESOP") feature of our Employees' Profit Sharing,
Retirement and Savings
Plan and Trust, including adjusted earnings per share
and adjusted earnings
before interest, taxes, depreciation and amortization,
because these measures
allow for period-over-period comparisons relative to
our on-going operations
before material charges. Additionally, these non-GAAP
measures facilitate
management's comparison of our results relative to on-going
operations before
material charges with that of other lodging companies.
The settlement
resulted in an after-tax charge of $54 million in the
second quarter 2007
reflecting $35 million of excise taxes (impacting General,
Administrative, and
Other Expenses), $13 million of interest expense on those
excise taxes and $6
million of income tax expense primarily reflecting additional
interest.
Earnings Before Interest and Taxes.
Earnings before interest and taxes
(EBIT) reflects earnings excluding the impact of interest
expense and tax
expense. EBIT is used by analysts, lenders, investors
and others, as well as
by us, to evaluate companies because it excludes certain
items that can vary
widely across different industries or among companies
within the same
industry. For example, interest expense can be
dependent on a company's
capital structure, debt levels and credit ratings.
Accordingly, the impact of
interest expense on earnings can vary significantly among
companies.
Additionally, the tax positions of companies can vary
because of their
differing abilities to take advantage of tax benefits
and because of the tax
policies of the jurisdictions in which they operate.
As a result, effective
tax rates and tax expense can vary considerably among
companies.
Earnings Before Interest, Taxes, Depreciation
and Amortization. Earnings
before interest, taxes, depreciation and amortization
(EBITDA) reflects EBIT
excluding the impact of depreciation and amortization.
Our management
considers EBITDA to be an indicator of operating performance
because it can be
used to measure our ability to service debt, fund capital
expenditures, and
expand our business. EBITDA is used by analysts,
lenders, investors and
others, as well as by us, to evaluate companies because
it excludes certain
items that can vary widely across different industries
or among companies
within the same industry. In addition to the items
previously noted that are
excluded in calculating EBIT, EBITDA further excludes
depreciation and
amortization because companies utilize productive assets
of different ages and
use different methods of both acquiring and depreciating
productive assets.
These differences can result in considerable variability
in the relative costs
of productive assets and the depreciation and amortization
expense among
companies.
Adjusted EBITDA. Our management
also evaluates adjusted EBITDA which
excludes the synthetic fuel business for 2007 and 2006,
as well as the $35
million charge in 2007 for excise taxes associated with
the ESOP settlement.
The synthetic fuel operations, discontinued in 2007,
are not related to our
core business, which is lodging. Accordingly, our
management evaluates non-
GAAP measures which exclude the impact of the synthetic
fuel business because
those measures allow for period-over-period comparisons
of our on-going core
lodging operations. In addition, these non-GAAP
measures facilitate
management's comparison of our results with the results
of other lodging
companies. Our management excludes the excise taxes
associated with the ESOP
settlement for the reasons noted above in the "ESOP Settlement
Charge"
caption.
Return on Invested Capital. Return
on Invested Capital ("ROIC") is
calculated as EBIT divided by average capital investment.
We consider ROIC to
be a meaningful indicator of our operating performance,
and we evaluate this
metric because it measures how effectively we use the
money invested in our
lodging operations. The calculation of EBIT adds
back to income from
continuing operations: 1) the provision for income taxes;
2) interest expense;
and 3) timeshare interest representing previously capitalized
interest that is
a component of product cost. The calculation of
invested capital adds back to
total assets cumulative goodwill amortization to be consistent
with the
calculation for earlier years. Beginning with 2002,
we stopped amortizing
goodwill in conjunction with the adoption of FAS No.
142, "Goodwill and Other
Intangible Assets." The calculation of invested
capital deducts from total
assets: 1) current liabilities as they will be satisfied
in the short term; 2)
assets associated with discontinued operations net of
liabilities because the
ROIC metric we analyze is related to our core lodging
business (continuing
operations); 3) deferred tax assets net of liabilities
because the numerator
of the calculation is a pre-tax number; and 4) timeshare
capitalized interest
because the numerator of the calculation is a pre-interest
expense number.
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure Reconciliation
Measures that Exclude the Second Quarter 2007 ESOP Settlement
(in millions, except per share amounts)
Fiscal Year 2007
------------------------------------
Excluding
As Reported ESOP Impact ESOP **(1)
----------- ----------- ----------
Operating income (loss)
$1,188 $(35)
$1,223
Gains and other income (expense)
97 -
97
Interest income, provision for loan
losses and interest expense
(163) (13)
(150)
Equity in earnings (losses)
15 -
15
----------- ----------- ----------
Income (losses) from continuing
operations before income taxes
and minority interest
1,137 (48)
1,185
Provision for income taxes
(441) (6)
(435)
Minority interest
1 -
1
----------- ----------- ----------
Income (loss) from continuing
operations
$697 $(54)
$751
=========== =========== ==========
Diluted shares
397.3 397.3
397.3
Earnings per share - diluted
$1.75 $(0.14)
$1.89
** Denotes non-GAAP financial
measures.
1 - We refer to earnings per share
excluding the ESOP impact as adjusted
earnings per
share, and we refer to income from continuing
operations
excluding the ESOP impact as adjusted income from
continuing
operations.
Marriott International, Inc.
Non-GAAP Financial Measure Reconciliation
Return on Invested Capital
($ in millions)
The reconciliation of income from continuing
operations to earnings before
income taxes and interest expense is as follows:
Fiscal Year 2007
----------------
Income from continuing operations
$697
Add:
Provision for income taxes
441
Interest expense
184
Timeshare interest(1)
24
----------------
Earnings before income taxes and
interest expense **
$1,346
================
The reconciliation of assets to invested
capital is as follows:
Fiscal Year 2007 Fiscal Year 2006
---------------- ----------------
Assets
$8,942
$8,588
Add:
Cumulative goodwill amortization
128
128
Current liabilities -
discontinued
operations
13
55
Less:
Current liabilities, net
of current
portion of long-term
debt
(2,701) (2,507)
Assets - discontinued
operations
(53)
(91)
Deferred tax assets, net
(863)
(865)
Timeshare capitalized
interest
(19)
(19)
---------------- ----------------
Invested capital **
$5,447
$5,289
================ ================
Average capital investment
** (2)
$5,368
================
Return on invested capital
**
25%
** Denotes a non-GAAP financial
measure.
1 - Timeshare interest represents previously
capitalized interest that is
a component
of product cost.
2 - Calculated as "Invested capital"
for the current year and prior year,
divided by
two.
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure
EBITDA and Adjusted EBITDA
($ in millions)
Fiscal Year 2007
--------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- ------
Net income
$182 $207 $131 $176
$696
Interest expense
33 52 42
57 184
Tax provision
14 42 52
207 315
Depreciation and amortization
46 45 43
63 197
Less: Depreciation reimbursed by
third-party owners
(4) (4) (4)
(6) (18)
Interest expense from unconsolidated
joint ventures
5 5
8 6 24
Depreciation and amortization from
unconsolidated joint ventures
6 7
6 9 28
------- ------- ------- ------- ------
EBITDA**
$282 $354 $278 $512
1,426
ESOP Settlement - Excise Tax
- 35
- - 35
Discontinued operations adjustment
(synthetic fuel)
52 52 30
(15) 119
------- ------- ------- ------- ------
Adjusted EBITDA**
$334 $441 $308 $497 $1,580
======= ======= ======= ======= ======
Increase over 2006
Adjusted EBITDA
3% 21% 3%
14% 11%
The following items make up the
discontinued operations
(synthetic fuel)
Pre-tax Synthetic Fuel operating
losses (income)
$54 $54 $32
$(13) $127
Synthetic Fuel depreciation
(2) (2) (2)
(2) (8)
EBITDA adjustment for discontinued
operations (synthetic fuel)
------- ------- ------- ------- ------
$52 $52 $30
$(15) $119
======= ======= ======= ======= ======
Fiscal Year 2006
--------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- ------
Net income
$61 $186 $141 $220
$608
Cumulative effect of change in
accounting principle
173 - -
- 173
Interest expense
27 30 29
38 124
Tax provision
56 85 82
63 286
Tax benefit from cumulative effect
of
change in accounting principle
(64) - -
- (64)
Depreciation and amortization
40 42 44
62 188
Less: Depreciation reimbursed by
third-party owners
(4) (4) (4) (6)
(18)
Interest expense from unconsolidated
joint ventures
5 6 5
7 23
Depreciation and amortization from
unconsolidated joint ventures
6 7 7
9 29
------- ------- ------- ------- ------
EBITDA**
$300 $352 $304 $393 $1,349
Discontinued operations adjustment
(synthetic fuel)
24 11 (4)
44 75
------- ------- ------- ------- ------
Adjusted EBITDA**
$324 $363 $300 $437 $1,424
======= ======= ======= ======= ======
The following items make up the
discontinued operations
(synthetic fuel)
Pre-tax Synthetic Fuel operating
losses (income)
$31 $13 $(2) $53
$95
Pre-tax minority interest -
Synthetic Fuel
(5) - -
(1) (6)
Synthetic Fuel depreciation
(2) (2) (2) (8)
(14)
EBITDA adjustment for discontinued
------- ------- ------- ------- ------
operations (synthetic fuel)
$24 $11 $(4) $44
$75
======= ======= ======= ======= ======
** Denotes non-GAAP financial
measures. |
Note: This press release contains "forward-looking statements" within
the meaning of federal securities laws, including REVPAR, profit margin
and earnings trends; statements concerning the number of lodging properties
we expect to add in the future; our expected share repurchases and investment
spending; and similar statements concerning anticipated future events and
expectations that are not historical facts. |
