WASHINGTON, April 20, 2006 - Marriott International, Inc. (NYSE: MAR)
today reported first quarter 2006 adjusted net income of $167 million,
an increase of 31 percent, and adjusted diluted earnings per share (EPS)
of $0.76, an increase of 43 percent. Adjusted results exclude the impact
of the one-time charge related to the change in timeshare accounting rules
and the results of the company's synthetic fuel business. The company's
EPS guidance for the first quarter, disclosed on February 9, 2006, totaled
$0.67 to $0.73 and similarly excluded the one-time impact of the timeshare
accounting rule change and the results of the company's synthetic fuel
business.
.
-
Worldwide systemwide comparable revenue per available room (REVPAR) rose
10.3 percent (10.8 percent using constant dollars) for the first quarter
ended March 24; Average daily rate increased 8 percent (8.4 percent using
constant dollars);
-
North American comparable systemwide REVPAR increased 10.9 percent for
the fiscal quarter ended March 24. For the calendar quarter ended March
31, North American comparable systemwide REVPAR increased 11.7 percent,
reflecting strong year over year comparisons in the final week of March;
-
House profit margins for North American comparable company-operated properties
advanced 210 basis points. North American property-level EBITDA margins
for comparable company-operated properties, calculated as if wholly owned,
expanded 230 basis points;
-
Base management, franchise and incentive fees increased 16 percent to $268
million in the first quarter as a result of strong REVPAR growth, house
profit margin improvement and continued unit expansion. Incentive fees
alone were $59 million; forty-nine percent of company-managed hotels reported
incentive fees in the first quarter compared to 28 percent in the year
ago quarter;
-
The company's worldwide pipeline of hotels under construction, awaiting
conversion or approved for development increased to more than 75,000 rooms
compared to 55,000 rooms in the year ago quarter and 70,000 rooms at year-end
2005. Approximately 6,800 rooms opened during the first quarter, including
3,300 rooms converted to Marriott Hotels & Resorts, Renaissance Hotels
& Resorts or The Ritz-Carlton;
-
Marriott repurchased 3.6 million shares of its common stock for $247 million
during the first quarter.
|
.
Reported net income was $65 million and diluted earnings per share
was $0.29. Results reflected a $105 million after-tax one-time charge ($0.48
per share) resulting from Marriott's adoption of new accounting rules for
the timeshare industry. The company's synthetic fuel business contributed
approximately $3 million after-tax ($0.01 per share) to first quarter 2006
earnings and $18 million after-tax ($0.08 per share) to first quarter 2005
earnings.
J.W. Marriott, Jr., Marriott International's chairman and chief executive
officer, said, "We are delighted to report excellent results this quarter
as we continue to benefit from a strong preference for our brands and favorable
economic and industry trends.
"North American business and leisure transient demand remained strong
during the quarter, driving REVPAR and house profit margins higher. Company-
operated hotel REVPAR grew 15 to 20 percent in major markets such as Atlanta,
Dallas, Chicago and San Diego.
"While hotel industry supply in North America is still growing only
modestly, particularly in the full-service segment, we are taking a greater
share of new hotels being developed around the world, reflecting owners'
and franchisees' confidence in our brands, innovative plans and operational
strength.
"We acquired the largest conference hotel in Paris, the 782-room Paris
Rive Gauche Hotel & Conference Center, with approximately 50,000 square
feet of meeting space in the first quarter, and after extensive refurbishment,
it will be re-branded as a Marriott Hotel. We currently operate the leading
portfolio of large group hotels in the United States; we are becoming a
top destination for major conferences in Europe.
"Our luxurious new bedding package -- the largest rollout in the industry
-- is now available at 90 percent of our North American properties and
85 percent of our hotels worldwide. Customers love the look and feel of
fresh, crisp white linens and guest satisfaction scores are way up. We
are continuing to renovate and reinvent our brands and results show our
success.
"With North American comparable company-operated REVPAR up 9.6 percent
in the first quarter, we look forward to a highly successful year, and
we continue to believe REVPAR for North American company-operated properties
will grow between 8 and 10 percent in 2006. With the combination of strong
room rate improvement and a proactive focus on productivity, we believe
house profit margins can improve 150 to 200 basis points. We expect to
open 25,000 new rooms this year, and we have a robust pipeline of more
than 75,000 rooms."
In the 2006 first quarter (12 week period from December 31, 2005 to
March 24, 2006), REVPAR for the company's comparable worldwide systemwide
properties increased 10.3 percent (10.8 percent using constant dollars).
Systemwide comparable North American REVPAR increased by 10.9 percent in
the quarter. With the strength of the Marriott brands, a growing economy,
the roll-out of the new bedding program across all brands and renovations
at the Courtyard and Residence Inn brands, the company was able to substantially
increase rates in the first quarter. 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 10.2 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 11.6 percent.
For the calendar quarter ended March 31, 2006, REVPAR for the company's
comparable worldwide systemwide properties increased 10.9 percent (11.4
percent using constant dollars). Systemwide comparable North American REVPAR
increased by 11.7 percent in the calendar quarter.
In the first quarter, international company-operated comparable REVPAR
increased 6.8 percent (9.9 percent using constant dollars) including a
5.3 percent increase in average daily rates and a 1.0 percentage point
improvement in occupancy to 69.3 percent. Demand in Asia continues to be
outstanding, with company-operated comparable REVPAR up 27.0 percent (26.4
percent using constant dollars) in Hong Kong and 10.7 percent (7.9 percent
using constant dollars) in China. Lodging demand was also strong in Central
America, South America and the United Kingdom.
In addition to solid REVPAR growth, the company enjoyed significant
unit growth in the first quarter, adding 33 hotels and timeshare resorts
(6,827 rooms) to its worldwide lodging portfolio. Seven properties (1,373
rooms) exited the system. Nearly 60 percent of room openings in the first
quarter were conversions from other brands and 52 percent of room openings
were high value full-service rooms. At quarter-end, the company's lodging
group encompassed 2,767 hotels and timeshare resorts (504,610 rooms).
The company currently has over 75,000 rooms in its worldwide pipeline
of hotels under construction, awaiting conversion or approved for development,
up from 55,000 rooms in the year ago quarter. The pipeline of Ritz-Carlton
hotels soared to 23 hotels (6,400 rooms) in the first quarter, with six
properties under development in China including the brand's first China
resort in Sanya, Yalong Bay, Hainan Province. In the first quarter, Ritz-Carlton
assumed management of its 60th hotel, a 112-room luxury resort, Hotel Villa
Padierna, on the Costa del Sol in Marbella, Spain.
The pipeline of Courtyard hotels under construction, awaiting conversion
or approved for development increased to 143 hotels (21,000 rooms) including
26 hotels (5,400 rooms) in 18 countries outside the United States. Today,
Courtyard has 699 hotels (100,800 rooms) including 72 hotels (12,700 rooms)
outside the United States. The company opened seven Courtyard hotels in
the first quarter, including hotels in India, Puerto Rico and Mexico.
MARRIOTT REVENUES totaled $2.7 billion in the 2006 first quarter,
a 7 percent increase from the same period in 2005. Combined base, franchise
and incentive fees rose 16 percent to $268 million as a result of unit
growth, strong REVPAR improvement and higher property-level house profit
margins. In the 2006 first quarter, the company recognized base fees of
$5 million that were calculated based on prior period results, but not
earned and due until the first quarter of 2006. In the prior year's quarter,
Marriott recognized $8 million in incentive fees that were calculated based
on prior period results, but not earned and due until the first quarter
of 2005. Excluding the impact of the $5 million of base fees recognized
in 2006 and the $8 million of incentive fees recognized in 2005, base and
franchise fees increased 13 percent and incentive fees increased 40 percent
in the first quarter of 2006. The number of hotels paying incentive fees
in the first quarter nearly doubled.
House profit margins for North American comparable company-operated
properties increased 210 basis points during the quarter, while house profit
margins for worldwide company-operated properties grew 200 basis points.
Higher room rates and cost efficiency measures drove strong margins. Property-level
EBITDA margins for comparable North American company-operated properties,
calculated as if wholly owned, increased 230 basis points.
Demand for Marriott's timeshare projects continues to be strong, particularly
at resorts in Las Vegas, Maui, Phuket, and St. Thomas. The company began
sales at the Ritz-Carlton resort in Abaco, Bahamas in the first quarter.
However, several projects have sold out or are selling out faster than
anticipated, including the Ritz-Carlton Club resort in Bachelor Gulch,
Colorado as well as the Marriott Vacation Club resorts in Park City, Utah
and Palm Beach Shores, Florida. Limited available inventory resulted in
a 10 percent decline in contract sales in the first quarter and an 11 percent
decrease in timeshare interval, fractional and whole ownership sales and
services revenue, net of direct costs.
Looking ahead, the company expects to begin sales at four new resorts
offering timeshare, fractional or whole ownership products in the second
quarter of 2006, including the Marriott Vacation Club in St. Kitts and
the Ritz-Carlton Clubs in Miami Beach, San Francisco and Kapalua, Hawaii.
Later in the year, the company plans to begin sales at projects in Kauai,
Hawaii and Thailand.
New accounting rules for the timeshare industry took effect at the beginning
of 2006. The new rules changed the timing for recognizing timeshare revenues,
selling and product costs, and maintenance fees for unsold timeshare inventory.
In the first quarter of 2006 the company recorded a one-time non- cash
after-tax charge of $105 million ($0.48 per share) as a result of adopting
these new rules. The on-going impact of the new timeshare rules is expected
to be immaterial.
LODGING OPERATING INCOME for the first quarter of 2006 was $230
million, up 13 percent over the year ago quarter. Marriott's 2006 first
quarter lodging operating income benefited from strong fee growth as well
as increased profits from owned and leased properties that the company
acquired in 2005. In addition, the company received a $4 million fee for
the termination of a hotel management agreement, offset by $4 million of
lower lease income as a result of the sale of the Courtyard land at the
end of 2005. In the 2005 first quarter, direct costs associated with owned
and leased properties included nearly $6 million of severance payments
and other costs associated with the temporary closing for renovation of
a hotel in Ireland. During the 2006 first quarter, general and administrative
expenses were up 21 percent, to $150 million, largely due to the impact
of the new accounting rules requiring the expensing of all share-based
compensation ($9 million pre-tax) and higher deferred compensation expense.
SYNTHETIC FUEL operations contributed approximately $0.01 per
share of after-tax earnings during the 2006 first quarter, compared to
$0.08 in the year ago quarter. Lower synthetic fuel earnings reflected
lower production levels and an estimated 20 percent phase out of tax credits
due to higher oil prices for the 2006 first quarter. Excluding the impact
of our synthetic fuel operations, the effective tax rate was approximately
33.9 percent in the first quarter of 2006. The company expects the tax
rate for 2006 to approximate 34.5 percent.
GAINS AND OTHER INCOME totaled $34 million (or $38 million excluding
the $4 million loss from synthetic fuel) and included $7 million of gains
from the sale of real estate, $25 million from the redemption of preferred
stock in a joint venture, $5 million of preferred returns and a $1 million
gain on the sale of a note. Prior year's first quarter gains included $4
million from the sale of real estate.
INTEREST EXPENSE increased $3 million to $27 million primarily
due to higher commercial paper balances and higher interest rates.
INTEREST INCOME totaled $11 million during the quarter, down
from $27 million in the year ago quarter, primarily driven by loan repayments
in 2005.
At the end of the 2006 first quarter, total debt was $1,877 million
and cash balances totaled $172 million, compared to $1,737 million in total
debt and $203 million of cash at the end of 2005. The company also repurchased
3.6 million shares of common stock in the first quarter of 2006 at a cost
of $247 million. The remaining share repurchase authorization, as of the
end of the first quarter, totaled 14.2 million shares.
OUTLOOK
The company continues to expect North American company-operated REVPAR
to increase 8 to 10 percent in 2006. Assuming a 150 to 200 basis point
improvement in house profit margins, and approximately 25,000 new room
openings (gross), the company expects total fee revenue of $1,170 million
to $1,190 million, an increase of 14 to 16 percent.
The company expects timeshare interval, fractional and whole ownership
sales and services revenues, net of expenses, will decline approximately
2 percent in 2006, reflecting lower contract sales in 2005 resulting from
limited inventory. With significant customer interest in the company's
new projects, contract sales (including joint venture sales) are expected
to increase roughly 40 percent in 2006.
General, administrative and other expenses are expected to decline approximately
11 to 12 percent in 2006 to $660 million to $670 million from $753 million
in 2005. The comparison reflects the impact in 2005 of the $94 million
charge associated with the CTF transaction and $30 million in bedding incentives.
This 2006 guidance includes an approximately $37 million pre-tax impact
of the 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 $915 million to $945 million in 2006, an increase of
31 to 35 percent over 2005.
The company expects lodging gains and other income to total approximately
$130 million in 2006 (including approximately $75 million in timeshare
mortgage note sale gains).
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, as well as higher debt levels and interest rates.
Given the continued high level of oil prices and the uncertainty surrounding
the availability of 2006 tax credits, the company suspended production
at its four synthetic fuel facilities in April 2006. The company cannot
yet predict whether or when the facilities will restart production and,
as such, is unable to provide guidance for 2006 earnings from the synthetic
fuel business. The net book value of the four facilities at the end of
the first quarter 2006 is $17 million.
The company estimates North American company-operated REVPAR will grow
8 to 10 percent in the second 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 second quarter and full year 2006:
Second Quarter 2006 Full Year
2006
------------------- --------------
Total fee revenue
$290 million to $295 $1,170 million
to
million
$1,190 million
Owned, leased,
Approx. $40 million Approx. $160
million
corporate housing and
other, net of direct
expenses
Timeshare interval,
Approx. $45 million Approx. $255
million
fractional and whole
ownership sales and
services, net of
direct expenses
General,
$153 million to $158 $660 million to
$670
administrative &
million
million
other expense(1)
Lodging operating
$217 million to $227 $915 million to
$945
income(1)
million
million
Gains (excluding
$45 million to $50 Approx.
$130 million
synthetic fuel)(2)
million
Net interest expense(3) Approx. $15
million Approx $75 million
Equity in
Approx. $5 million Approx.
$15 million
earnings/(losses)
Earnings per share
No guidance
No guidance
from synthetic fuel
Earnings per share
$0.76 to $0.81
$2.99 to $3.08
excluding synthetic
fuel(1,4)
Effective tax rate
34.5 percent
34.5 percent
excluding synthetic
fuel
(1) Full year 2006 includes pre-tax
expense of $37 million ($0.11 per
share) associated
with the adoption of FAS No. 123® ($9 million
($0.03 per
share) for the 2006 second quarter).
(2) Includes timeshare mortgage note
sale gains. Full year 2006 excludes
$4 million
loss reported in the first quarter of 2006 from the
synthetic
fuel business.
(3) Includes interest expense, provision
for loan losses and interest
income
(4) Full year estimate is before the
cumulative effect of a change in
accounting
principle associated with the new timeshare accounting
rules.
The company recorded an after-tax charge of $105 million
($0.48 per
share) in the 2006 first quarter.
The company expects investment spending in 2006 to total approximately
$900 million, including $50 million for maintenance capital spending, $400
million for capital expenditures and acquisitions, $50 million for timeshare
development, $50 million in new mezzanine financing and mortgage loans
for hotels developed by owners and franchisees, and approximately $350
million in equity and other investments (including timeshare equity investments).
MARRIOTT INTERNATIONAL, INC.
Financial Highlights
(in millions, except per share amounts)
12 Weeks Ended 12 Weeks
Ended
March 24, 2006 March 25,
2005
--------------------- --------------------- Percent
Synthetic
Synthetic Better/
Lodging Fuel Total Lodging Fuel
Total (Worse)
------- ------ ------ ------- ------ ------ --------
REVENUES
Base management fees $
127 $ - $ 127 $ 111 $
- $ 111 14
Franchise fees
82 - 82
70 - 70
17
Incentive management
fees
59 - 59
50 - 50
18
Owned, leased,
corporate housing and
other revenue(1)
254 - 254
167 - 167
52
Timeshare interval,
fractional and whole
ownership sales and
services(2)
306 - 306
346 - 346
(12)
Cost
reimbursements(3)
1,820 - 1,820 1,682
- 1,682 8
Synthetic fuel
- 57 57
- 108 108 (47)
------- ------ ------ ------- ------ ------
Total Revenues
2,648 57 2,705 2,426
108 2,534 7
OPERATING COSTS AND
EXPENSES
Owned, leased and
corporate housing
- direct(4)
208 - 208
145 - 145
(43)
Timeshare - direct
240 - 240
272 - 272
12
Reimbursed costs
1,820 - 1,820 1,682
- 1,682 (8)
General,
administrative and
other(5)
150 - 150
124 - 124
(21)
Synthetic fuel
- 84 84
- 153 153
45
------- ------ ------ ------- ------ ------
Total Expenses
2,418 84 2,502 2,223
153 2,376 (5)
------- ------ ------ ------- ------ ------
OPERATING INCOME
(LOSS)
$ 230 $(27) 203 $ 203
$(45) 158 28
======= ====== =======
======
Gains and other
income (expense)(6)
34
(5) *
Interest expense
(27)
(24) (13)
Interest income
11
27 (59)
Provision for loan
losses
2
(11) *
Equity in losses(7)
(3)
(5) 40
------
------
INCOME BEFORE INCOME
TAXES, MINORITY
INTEREST AND
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE
220
140 57
Provision for
income taxes
(56)
(5) (1,020)
------
------
INCOME BEFORE
MINORITY INTEREST
AND CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE
164
135 21
Minority interest
6
10 (40)
------
------
INCOME BEFORE
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE
170
145 17
Cumulative effect of
change in accounting
principle, net of
tax(8)
(105)
- *
------
------
NET INCOME
$ 65
$ 145 (55)
======
======
EARNINGS PER SHARE -
Basic
Earnings before
cumulative
effect
of change
in
accounting
principle
$ 0.82
$ 0.64 28
Loss from
cumulative
effect
of change
in
accounting
principle
(0.51)
- *
------
------
Earnings per share
$ 0.31
$ 0.64 (52)
======
======
EARNINGS PER SHARE -
Diluted
Earnings before
cumulative
effect
of change
in
accounting
principle
$0.77
$0.61 26
Loss from
cumulative
effect
of change
in
accounting
principle
(0.48)
- *
------
------
Earnings per share
$ 0.29
$ 0.61 (52)
======
======
Basic Shares
205.8
225.5
Diluted Shares
220.5
239.6
* Percent cannot be calculated
or is not meaningful.
(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, fractional
and whole ownership 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 (expense)
includes gains on the sale of real
estate, gains from the sale of joint ventures, income related to
our cost method joint ventures, mark-to-market valuation of
synthetic fuel hedge, 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 includes our
equity in losses of unconsolidated
joint ventures.
(8) -- 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)
Twelve Weeks Ended
Percent
------------------------------- Better/
March 24, 2006 March 25, 2005 (Worse)
-------------- -------------- -------
REVENUES
Full-Service
$ 1,842 $ 1,629
13
Select-Service
306
272 13
Extended-Stay
144
126 14
Timeshare
356
399 (11)
-------------- --------------
Total lodging(1)
2,648
2,426 9
Synthetic Fuel
57
108 (47)
-------------- --------------
Total
$ 2,705 $ 2,534
7
============== ==============
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE
Full-Service
$ 189
$ 116 63
Select-Service
45
33 36
Extended-Stay
20
16 25
Timeshare
51
63 (19)
-------------- --------------
Total lodging financial
results(1)
305
228 34
Synthetic Fuel (after-tax)
3
18 (83)
Unallocated corporate expenses
(39)
(26) (50)
Interest income, provision for
loan losses and interest expense
(14)
(8) (75)
Income taxes (excluding
Synthetic Fuel)
(85)
(67) (27)
-------------- --------------
Total
$ 170
$ 145 17
============== ==============
(1) We consider total lodging revenues
and total 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 Properties Number of Rooms/Suites
-------------------- ----------------------
Change
Change
March March vs. March
March vs.
24, 25, March 25, 24,
25, March 25,
Brand
2006 2005 2005 2006
2005 2005
----------------------- ------------------------------------------------
Full-Service Lodging
Marriott Hotels &
Resorts
515 492 23 186,010
179,485 6,525
The Ritz-Carlton
60 57 3
19,382 18,598 784
Renaissance Hotels &
Resorts
137 135 2
48,389 48,221 168
Bulgari Hotel & Resort
1 1 -
58 58
-
Ramada International
2 4 (2)
332 726 (394)
Select-Service Lodging
Courtyard
699 663 36 100,841
95,429 5,412
Fairfield Inn
524 517 7
47,921 47,840 81
SpringHill Suites
142 126 16
16,644 14,644 2,000
Extended-Stay Lodging
Residence Inn
496 469 27
59,402 55,770 3,632
TownePlace Suites
122 117 5
12,304 11,816 488
Marriott Executive
Apartments
17 15 2
2,852 2,585 267
Timeshare(2)
Marriott Vacation Club
International
44 44 -
9,542 8,895 647
The Ritz-Carlton Club
4 4 -
292 261
31
Grand Residences by
Marriott
2 2 -
313 248
65
Horizons by Marriott
Vacation Club
2 2 -
328 328
-
------------------- --------------------------
Total
2,767 2,648 119 504,610
484,904 19,706
=================== ==========================
Number of Timeshare Resorts(2)
------------------------------
In Active
Total(3) Sales
-------- ---------
100% Company Developed
Marriott Vacation Club
International 43
23
The Ritz-Carlton Club
3
2
Grand Residences by Marriott
2
2
Horizons by Marriott Vacation
Club
2
2
Joint Ventures
Marriott Vacation Club
International
1
1
The Ritz-Carlton Club
1
1
Grand Residences by Marriott
-
-
-------------------------
Total
52
31
=========================
(1) Total Lodging Products does not
include the 1,992 Marriott ExecuStay
corporate
housing rental units.
(2) Includes products in active sales
which are not ready for occupancy.
(3) Includes resorts that are in active
sales as well as those that are
sold out.
MARRIOTT INTERNATIONAL, INC.
KEY LODGING STATISTICS
Comparable Company-Operated North American Properties
-------------------------------------------------------------------------
Twelve Weeks Ended March 24, 2006 and March 25, 2005
----------------------------------------------------
Average Daily
REVPAR Occupancy
Rate
------ ---------
-------------
vs.
vs.
vs.
Brand
2006 2005 2006 2005
2006 2005
-------------------------------------------------------------------------
Marriott Hotels &
Resorts
$115.93 8.0% 69.5% 0.0% pts. $166.76
8.1%
The Ritz-Carlton(1)
$228.61 10.8% 71.5% 4.4% pts. $319.74
3.9%
Renaissance Hotels
& Resorts
$108.67 12.7% 70.5% 2.2% pts. $154.21
9.2%
Composite -
Full-Service
$122.97 9.0% 69.8% 0.6% pts. $176.15
8.0%
Residence Inn
$89.02 10.1% 76.6% 0.0% pts. $116.26
10.1%
Courtyard
$81.20 11.5% 68.3% 0.2% pts. $118.82
11.2%
TownePlace Suites
$55.81 13.1% 72.2% 1.2% pts. $77.28
11.3%
SpringHill Suites
$68.75 6.9% 68.0% -2.1% pts. $101.13
10.3%
Composite --
Select-Service &
Extended-Stay
$80.98 10.9% 70.8% 0.0% pts. $114.42
10.9%
Composite -- All(2)
$105.06 9.6% 70.2% 0.4% pts. $149.61
9.0%
Comparable Systemwide North American Properties
-------------------------------------------------------------------------
Twelve Weeks Ended March 24, 2006 and March 25, 2005
----------------------------------------------------
Average Daily
REVPAR Occupancy
Rate
------ ---------
-------------
vs.
vs.
vs.
Brand
2006 2005 2006 2005
2006 2005
-------------------------------------------------------------------------
Marriott Hotels &
Resorts
$106.36 9.7% 68.8% 1.1% pts. $154.67
8.0%
The Ritz-Carlton(1)
$228.61 10.8% 71.5% 4.4% pts. $319.74
3.9%
Renaissance Hotels &
Resorts
$102.56 12.8% 69.5% 2.3% pts. $147.66
9.1%
Composite --
Full-Service
$111.44 10.2% 69.0% 1.4% pts. $161.53
8.0%
Residence Inn
$86.27 10.0% 77.1% 1.3% pts. $111.83
8.2%
Courtyard
$79.80 11.3% 69.5% 1.1% pts. $114.86
9.5%
Fairfield Inn
$52.57 14.3% 65.9% 2.6% pts. $79.73
9.7%
TownePlace Suites
$57.24 13.0% 72.7% 1.5% pts. $78.71
10.6%
SpringHill Suites
$69.21 13.2% 70.9% 1.9% pts. $97.68
10.2%
Composite --
Select-Service &
Extended-Stay
$73.65 11.6% 71.0% 1.6% pts. $103.77
9.1%
Composite -- All(2)
$88.69 10.9% 70.2% 1.5% pts. $126.36
8.5%
(1) Statistics for The Ritz-Carlton
are for January and February.
(2) Composite -- All statistics
include properties for the Marriott
Hotels
& Resorts, The Ritz-Carlton, Renaissance Hotels & Resorts,
Residence
Inn, Courtyard, TownePlace Suites, Fairfield Inn, and
SpringHill
Suites brands. Full-Service composite statistics include
properties
for Marriott Hotels & Resorts, The Ritz-Carlton and
Renaissance
Hotels & Resorts brands. Select-Service and Extended-Stay
composite
statistics include properties for the Residence Inn,
Courtyard,
TownePlace Suites, Fairfield Inn and SpringHill Suites
brands.
MARRIOTT INTERNATIONAL, INC.
KEY LODGING STATISTICS
(Constant $)
Comparable Company-Operated International Properties(1,2)
--------------------------------------------------------------------------
Two Months Ended February 28, 2006 and February 28, 2005
--------------------------------------------------------
Average Daily
REVPAR Occupancy
Rate
------ ---------
-------------
vs.
vs.
vs.
Region/Brand(3)
2006 2005 2006 2005
2006 2005
--------------------------------------------------------------------------
Caribbean & Latin
America
$140.88 10.7% 79.0% 2.8% pts. $178.40
6.8%
Continental Europe
$78.30 4.7% 60.5% 2.0% pts. $129.40
1.2%
United Kingdom
$146.40 14.6% 71.0% 2.7% pts. $206.16
10.1%
Middle East & Africa
$96.83 7.1% 64.6% -4.9% pts. $149.86
15.2%
Asia Pacific(4)
$86.77 15.5% 73.3% 1.8% pts. $118.42
12.6%
The Ritz-Carlton
International
$141.52 2.6% 65.9% -3.3% pts. $214.74
7.8%
Total International(5) $101.53
9.9% 69.3% 1.0% pts. $146.60 8.4%
Worldwide(6)
$104.36 9.7% 70.0% 0.5% pts. $149.02
8.9%
Comparable Systemwide International Properties(1,2)
--------------------------------------------------------------------------
Two Months Ended February 28, 2006 and February 28, 2005
--------------------------------------------------------
Average Daily
REVPAR Occupancy
Rate
------ ---------
-------------
vs.
vs.
vs.
Region/Brand(3)
2006 2005 2006 2005
2006 2005
--------------------------------------------------------------------------
Caribbean & Latin
America
$120.92 5.5% 73.8% 3.3% pts. $163.82
0.8%
Continental Europe
$76.21 5.8% 58.5% 1.9% pts. $130.33
2.4%
United Kingdom
$120.04 18.8% 64.9% 4.4% pts. $184.96
10.7%
Middle East & Africa
$92.20 9.1% 64.5% -4.7% pts. $143.02
17.0%
Asia Pacific(4)
$88.44 15.4% 73.3% 1.7% pts. $120.70
12.8%
The Ritz-Carlton
International
$141.52 2.6% 65.9% -3.3% pts. $214.74
7.8%
Total International(5)
$97.14 10.3% 67.7% 1.4% pts. $143.55
8.0%
Worldwide(6)
$89.71 10.8% 69.9% 1.5% pts. $128.38
8.4%
(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
for January and February. Excludes
North America
(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) Does not include Hawaii.
(5) Includes Hawaii.
(6) Includes international statistics
for the two calendar months ended
February 28,
2006 and February 28, 2005, and North American statistics
for the twelve
weeks ended March 24, 2006 and March 25, 2005. Includes
the Marriott
Hotels & Resorts, The Ritz-Carlton, Renaissance Hotels &
Resorts, Residence
Inn, Courtyard, TownePlace Suites, Fairfield Inn
and SpringHill
Suites brands.
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measures
In our press release and schedules 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 generally accepted accounting
principle measures to the non-GAAP measures (identified by a double asterisk
on the following pages) that we refer to in our press release. Although
our 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 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.
Synthetic Fuel. We do not consider the Synthetic Fuel
segment to be related to our core business, which is lodging. In addition,
management expects the Synthetic Fuel segment will no longer have a material
impact on our business after the end of 2007, when the Internal Revenue
Code provision which provides for synthetic fuel tax credits expires, or
earlier if the company elects to make its present synthetic fuel production
shutdown permanent. Accordingly, our management evaluates non-GAAP measures
which exclude the impact of our Synthetic Fuel segment 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.
CTF transaction. Some of the non-GAAP measures are further
adjusted to exclude the impact of the $94 million pre-tax charge (2005
second quarter) associated with the agreements we entered into with CTF
Holdings Ltd. and its affiliates ("the CTF transaction"). That charge was
primarily non-cash and primarily due to the write-off of deferred contract
acquisition costs associated with the termination of management agreements.
GAAP reporting for the CTF transaction charge does not reflect the fact
that the company entered into new management agreements as part of the
CTF transaction, which substantially replaced the terminated management
agreements. Accordingly, our management evaluates the non-GAAP measures
which exclude the CTF transaction charge because those measures allow for
period-over-period comparisons relative to our on-going core lodging operations
before material charges, and in particular because those non-GAAP measures
recognize the new management agreements that were entered into as part
of the CTF transaction and the resulting continuity of management for the
hotels in question. In addition, these non-GAAP measures facilitate management's
comparison of our results with the results of other lodging companies.
Leveraged lease impairment charge and discontinued operations.
Management evaluates non-GAAP measures that exclude the $17 million leveraged
lease impairment charge recorded in the 2005 third quarter and discontinued
operations in order to better assess the period-over-period performance
of our on-going core operating businesses. Management does not consider
the leveraged lease investment to be related to our core lodging business.
In addition, non-GAAP measures which exclude these non-lodging items facilitate
management's comparison of our results with the results of other lodging
companies.
Base Management and Franchise Fees. In the first quarter
of 2006, we recognized $5 million in base management fees that were calculated
based on prior period results, but not earned and due until the first quarter
of 2006. Management evaluates the non-GAAP measure that excludes the $5
million recognized in 2006 in order to better assess the period-over-period
performance of our on-going lodging operations.
Incentive Fees. In the first
quarter of 2005, we recognized $8 million in
incentive fees that were calculated based on prior period
results, but not
earned and due until the first quarter of 2005.
Management evaluates the non-
GAAP measure that excludes the $8 million recognized
in 2005 in order to
better assess the period-over-period performance of our
on-going lodging
operations.
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure Reconciliation
Lodging Operating Income
($ in millions)
Fiscal Year 2006
-----------------------------------------------------
Range
Range
-------- -------------------- --------------------
Estimated Estimated
First Second Second
Estimated Estimated
Quarter Quarter Quarter
Full Year Full Year
------- ------- -------
--------- ---------
Operating income
$ 203 $ 217
$ 227 $ 915
$ 945
Add back:
Synthetic
Fuel
operating
loss*** 27
- -
- -
------- ------- -------
--------- ---------
Lodging operating
income **
$ 230 217
227 915
945
======= ======= =======
========= =========
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
======= ======= =======
========= =========
** Denotes non-GAAP financial measures.
*** Guidance not provided for the
second, third and fourth quarters of
2006.
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure Reconciliation
Measures that Exclude Synthetic Fuel
(in millions, except per share amounts)
First Quarter 2006 First Quarter 2005
Percent
------------------------- ------------------------- Better/
(Worse)
Synthetic Excluding Synthetic Excluding
Excluding
Net Fuel Synthetic Net
Fuel Synthetic Synthetic
Income Impact Fuel** Income Impact
Fuel** Fuel
------ -------- --------- ------ -------- --------- ---------
Operating
income
(loss)
$ 203 $ (27) $ 230 $ 158
$ (45) $ 203 13
Gains and
other
income
(expense)
34 (4)
38 (5) (9)
4 850
Interest
income,
provision
for loan
losses and
interest
expense
(14) -
(14) (8) -
(8) (75)
Equity in
losses
(3) -
(3) (5) -
(5) 40
------ -------- --------- ------ -------- ---------
Income (loss)
before Income
Taxes,
Minority
Interest and
Cumulative
Effect of
Change in
Accounting
Principle
220 (31) 251
140 (54) 194
29
------ -------- --------- ------ -------- ---------
Tax
(Provision)/
Benefit
(77) 8
(85) (52) 15
(67) (27)
Tax Credits
21 21
- 47 47
- *
------ -------- --------- ------ -------- ---------
Total Tax
(Provision)/
Benefit
(56) 29 (85)
(5) 62
(67) (27)
------ -------- --------- ------ -------- ---------
Income (Loss)
before
Minority
Interest and
Cumulative
Effect of
Change in
Accounting
Principle
164 (2) 166
135 8
127 31
Minority
Interest
6 5
1 10 10
- *
------ -------- --------- ------ -------- ---------
Income
before
Cumulative
Effect
of Change in
Accounting
Principle $ 170
$ 3 $ 167 $ 145
$ 18 $ 127
31
====== ======== ========= ====== ======== =========
Diluted
Shares
220.5 220.5 220.5 239.6
239.6 239.6
Earnings per
Share -
Diluted
$0.77 $0.01 $ 0.76 $0.61
$0.08 $0.53
43
Tax Rate
25.5%
33.9% 3.6%
34.5%
* Percent cannot be calculated
or is not meaningful.
** Denotes non-GAAP financial measures.
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure Reconciliation
EBITDA
($ in millions)
Fiscal
Year 2006
-------------
First Quarter
-------------
Net income
$ 65
Cumulative effect of change in accounting
principle,
before tax
173
Interest expense
27
Tax provision from continuing operations
56
Tax benefit from cumulative effect
of change in
accounting principle
(68)
Depreciation
34
Amortization
6
Less: Depreciation reimbursed
by third-party owners
(4)
Interest expense from unconsolidated
joint ventures
5
Depreciation and amortization from
unconsolidated
joint ventures
6
-------------
EBITDA **
$ 300
Synthetic fuel adjustment
24
-------------
Adjusted EBITDA **
$ 324
=============
Increase over 2005 Adjusted EBITDA
17%
The following items make up the Synthetic
Fuel adjustment:
Pre-tax synthetic fuel operating losses
$ 31
Pre-tax minority interest -- synthetic
fuel
(5)
Synthetic fuel depreciation
(2)
-------------
EBITDA adjustment for synthetic fuel
$ 24
=============
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/(benefit) from
discontinued operations
- -
1 -
1
Depreciation
30 29
46 51 156
Amortization
7 7
7 7
28
Less: Depreciation reimbursed
by third-party owners
- -
(12) (5) (17)
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 from
discontinued operations
- (2)
- (2)
Non-recurring charges -
CTF Acquisition
one-time
charge
- 94
- -
94
Leveraged lease
charge
- -
17 -
17
------- ------- ------- ------- ------
Adjusted EBITDA **
$ 276 $ 306 $ 267
$ 421 $1,270
======= ======= ======= ======= ======
The following items make up the
Synthetic Fuel adjustment:
Pre-tax synthetic fuel
operating 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
======= ======= ======= ======= ======
** Denotes Non-GAAP financial
measures.
MARRIOTT INTERNATIONAL, INC.
Non-GAAP Financial Measure Reconciliation
Measures that Exclude Fees Recognized
Based on Prior Period Results
(in millions)
First First
Percent
Quarter Quarter Better/
2006 2005
(Worse)
-------------------- ---------
Base management fees
$ 127 $ 111
14
Franchise fees
82 70
17
-------- --------
Total base management
and franchise
fees
209 181
15
Less: Fees recognized
based on
prior period
results
5 -
*
-------- --------
Total base management
and franchise
fees, excluding
fees recognized
based on prior
period results ** $ 204
$ 181 13
======== ========
Incentive management
fees
$ 59 $ 50
18
Less: Fees recognized
based on prior
period results
-
8 (100)
-------- --------
Total incentive
management fees,
excluding
fees recognized based on
prior period
results **
$ 59 $ 42
40
======== ========
* Percent cannot be calculated
or is not meaningful.
** Denotes non-GAAP financial measures.
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; and matters referred to in our most recent
annual report on Form 10-K under the heading "Risks and Uncertainties",
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 nearly 2,800 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 at 2005 year-end.
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.
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