Marriott International Reports 2001 EPS of
$1.58 Before Charges
Terrorist Attacks and Recession Contribute to
Fourth Quarter
Charges Totaling $271 Million Pre-Tax
WASHINGTON DC February 13, 2002 - Marriott International today reported
its diluted earnings per share of $1.58 for the full year ended December
28, 2001, excluding $271 million, pre-tax, of restructuring and other charges.
Restructuring charges totaled $124 million, pre-tax, and were attributable
to the company's decision to exit the company's Village Oaks senior living
brand, the cancellation of certain hotel projects, severance costs, and
the consolidation of facilities. As explained below, other charges totaled
approximately $147 million, pre-tax, and primarily included reserves and
write-offs relating to guarantees and loans on fifteen hotels, an investment
in a technology venture, accounts receivable deemed uncollectible, and
asset write-downs for anticipated losses on the sale of certain properties.
The company's fourth quarter began on September 8, 2001. The fourth
quarter diluted loss per share totaled $0.48. Excluding the restructuring
and other charges outlined above, fourth quarter diluted earnings per share
were $0.22. The year-over-year decline in Marriott Distribution Services'
profits reduced reported results by $0.03 per share in the fourth quarter
excluding charges. Earnings per share were also approximately $0.03
lower because the company did not sell any timeshare notes during the quarter.
The quarter's results reflected the significant reduction in travel following
the September 11 terrorism attacks, a weakening global economic climate,
and unfavorable currency fluctuations.
J.W. Marriott, Jr., chairman and chief executive officer of Marriott
International, said, "Although the rapid drop in travel during the fourth
quarter was unprecedented, the company made a substantial operating profit.
Convention and resort hotels were particularly hard-hit. However, despite
the 25 percent drop in revenue per available room (RevPAR), we held the
house profit margins of our comparable, managed hotels to only a four-percentage
point decline. We estimate that owners of our properties had earnings before
interest, taxes, depreciation and amortization decline 32 percent during
the quarter, implying a strong flow-through rate of 1.3 times.
"We are very optimistic about the long-term prospects for our lodging
business. With a recovering economy, industry demand growth is expected
to exceed supply growth by 2003. Meanwhile, the advantages of Marriott's
strong brands have never been more apparent. We had a record year in new
room openings, with a total of almost 50,000 rooms added in 2001. Our RevPAR
premiums over the competition increased during the year and our market
share increased as well. As of year-end, over 55,000 rooms were in our
lodging pipeline."
MARRIOTT LODGING reported $756 million
in operating income in 2001 (before restructuring and other charges), a
19 percent decline from 2000. Revenues, excluding cost reimbursements,
declined two percent. Results reflected contribution from new properties
worldwide offset by lower occupancy and room rates. Combined base and franchise
fee revenues were flat with 2000 levels, while incentive management fee
revenue declined 36 percent.
For the full year, the company's full service hotels, including Marriott
Hotels, Resorts & Suites, Renaissance, and Ritz-Carlton, reported operating
profit of $378 million (excluding charges) for a decline of 26 percent,
reflecting a 12 percent decline in U.S. RevPAR. The select service hotel
brands, including Courtyard, SpringHill Suites, and Fairfield Inn, earned
operating profit totaling $158 million (excluding charges), a decline of
18 percent, with 7 percent lower comparable REVPAR. The company's extended-stay
brands, Residence Inn, TownePlace Suites and ExecuStay, reported $71 million
in operating profit (excluding charges), a 26 percent decline from 2000
levels.
Marriott Vacation Club International's (MVCI) contract sales increased
22 percent in 2001, largely resulting from sales arising from the purchase
of the Grand Summit interval ownership resort in Lake Tahoe, California.
MVCI operating profits increased eight percent to $149 million (excluding
charges) due to higher timeshare note sale gains for the year, partly offset
by higher marketing costs. During the fourth quarter, MVCI profits (excluding
charges) declined 14 percent while contract sales declined 2 percent. Fourth
quarter results reflected significantly higher marketing costs.
The company added a record 313 hotels and timeshare resorts (49,200
rooms) to its worldwide lodging portfolio during 2001 while 14 properties
(3,719 rooms) closed or exited the system, including the World Trade Center
Marriott and the New York Financial Center Marriott Hotel. The New York
Financial Center hotel has since reopened. At year-end, the Marriott lodging
group encompassed 2,398 hotels and timeshare resorts (436,000 rooms). In
addition, ExecuStay by Marriott managed 6,100 furnished corporate apartments.
MARRIOTT SENIOR LIVING SERVICES
operating income reached $17 million in 2001 (excluding restructuring and
other charges). Excluding the impact of cost reimbursements, revenues increased
10 percent. In the fourth quarter, senior living services reported $8 million
in operating income (excluding charges). For the year and the quarter,
results reflected maturing communities and an improving industry supply
environment.
MARRIOTT DISTRIBUTION SERVICES reported
a 2001 operating loss of $1 million (excluding restructuring and other
charges). During the quarter, Distribution Services' operating loss totaled
$7 million on the same basis. Transportation inefficiencies and the loss
of a portion of the Sodexho business negatively impacted the division's
2001 results. Marriott commenced a strategic review of this business in
January 2002.
CORPORATE EXPENSES, excluding restructuring
and other charges, decreased 3 percent in 2001, primarily due to cost containment
efforts. Fourth quarter corporate expenses, excluding charges, increased
13 percent, reflecting the impact of cost containment efforts offset by
higher foreign exchange losses and expenses associated with the company's
new synthetic fuel investment, discussed below.
INTEREST EXPENSE increased 9 percent
during 2001, reflecting higher debt levels.
INTEREST INCOME excluding restructuring
and other charges increased 73 percent in 2001, as a result of higher loan
balances, particularly the Courtyard joint venture mezzanine loan.
The company acquired 6 million shares of its common stock during 2001
and is authorized to repurchase an additional 13 million shares. Long-term
debt at year-end, net of cash reserves, was approximately $2.3 billion,
approximately $200 million higher than a year ago.
Asset sales totaled $663 million in 2001, including $46 million in
the fourth quarter. The company owned ten hotels at year-end 2001, including
6 properties subject to sales agreements totaling $150 million (and expected
to close in 2002).
Outlook:
The company expects lodging unit expansion to remain strong in 2002
and 2003 with 25,000 to 30,000 new rooms opening each year. We forecast
that RevPAR will decline 2 to 3 percent in 2002 and house profit margins
will decline by 1 to 2 percent.
A change in accounting rules pertaining to goodwill will increase earnings
per share in 2002 by approximately $.12.
In late 2001, the company invested $46 million in synthetic fuel assets.
This investment is covered under Section 29 of the Internal Revenue Code
and is expected to generate tax credits through 2007. The amount of the
tax credit will be based on the amount of qualified fuel produced and sold.
The costs of operating the machines will be reflected as an operating loss
under a new line of business, but the losses will be more than offset by
reduced book and cash taxes. The company expects earnings per share benefits
to total $0.10 to $0.12 per share in 2002. Excluding the impact of the
synthetic fuel investment, the company's tax rate is expected to decline
to 35.0 percent.
The company expects 2002 earnings to total $1.55 to $1.60 per share,
including the impact of the change in accounting for goodwill, the synthetic
fuel investment and a projected loss in the distribution business of about
$20 million. Earnings in 2003 are expected to total $1.95 to $2.05, assuming
a 5 to 10 percent increase in RevPAR, the addition of 25,000 to 30,000
rooms, 1 to 2 points of house profit margin improvement, improvement in
MDS results, and expansion of the synthetic fuel operations. The following
table provides quarterly earnings guidance.
Change in RevPAR
Fully diluted
vs prior year
Earnings per Share
First Quarter
(13%) to (15%)
$.26 to $.27
Second Quarter
(5%) to (7%)
$.38 to $.39
Third Quarter
0 to (3%)
$.41 to $.42
Fourth Quarter
14% to 20%
$.50 to $.52
Full Year 2002
(2%) to (3%)
$1.55 to $1.60
Full Year 2003
5% to 10%
$1.95 to $2.05
The company expects investment spending in 2002 will include approximately
$50 million for maintenance spending and approximately $300 million for
new company-developed hotels. We anticipate timeshare spending to total
approximately $200 million. We expect to invest $300 million in equity
slivers, mezzanine financing and mortgage loans for hotels developed by
our partners.
Charges:
During the fourth quarter, the company began to actively engage in
efforts to sell 25 Village Oaks senior living communities, a companion-style
moderate-priced assisted living brand. The assets of Village Oaks have
been reclassified as assets held for sale, and recorded at their estimated
fair value (resulting in a charge of $60 million). The company will continue
to operate the Village Oaks communities in the near term. Village Oaks'
operating profit is not material to the results of the senior living services
segment. The company plans to continue to operate its portfolio of
131 other senior living services communities.
Restructuring charges related to downsizing totaled $64 million and
included costs related to severance, cancellation of development projects,
lease terminations and charges associated with unneeded corporate office
space.
Other charges include reserves and write-offs relating to guarantees
primarily on 6 hotels ($42 million pre-tax), loan impairments on 10 hotels
($43 million pre-tax), accounts receivable deemed uncollectible ($17 million
pre-tax), a technology investment and other investments ($32 million pre-tax),
and writedowns on properties held for sale ($13 million pre-tax).
In total, approximately 25 percent of the restructuring and other charges
taken in the fourth quarter of 2001 were cash and the remaining 75 percent
were non-cash.
MARRIOTT INTERNATIONAL, INC.
Financial Highlights
52 Weeks Ended
December 28, 2001
(in millions, except per share amounts)
Senior
Living Distribution
Sales
Lodging Services Services
Total
Management and franchise
fees $794
$35 $-
$829
Other
1,755 332
1,637 3,724
2,549 367
1,637 4,553
Other revenues from
managed
properties
5,237 362
- 5,599
7,786 729
1,637 10,152
Operating costs
and expenses
Restructuring costs
44 60
2 106
Other operating
costs
1,864 352
1,641 3,857
Other costs from
managed
properties
5,237 362
- 5,599
7,145 774
1,643 9,562
Operating profit
(loss) before
corporate
expenses and interest 641
(45) (6)
590
Restructuring costs
(18)
Corporate expenses
(139)
Interest expense
(109)
Interest income
46
Income before income
taxes
370
Provision for income
taxes
134
Net income
$236
Basic Earnings Per
Share
$0.97
Diluted Earnings
Per Share
$0.92
Diluted Shares
256.7
Basic Shares
243.3
52 Weeks Ended
December 29, 2000
2001 %
Senior
B(W)
Living Distribution Than
Sales
Lodging Services Services Total 2000
Management and franchise
fees $907 $33
$- $940
Other
1,702 300 1,500
3,502
2,609 333 1,500
4,442
Other revenues from
managed
properties
5,302 336
- 5,638
7,911 669 1,500
10,080 1%
Operating costs
and expenses
Restructuring costs
- -
- -
Other operating
costs
1,673 351 1,496
3,520
Other costs from
managed
properties
5,302 336
- 5,638
6,975 687 1,496
9,158 -4%
Operating profit
(loss) before
corporate
expenses and interest 936 (18)
4 922 -36%
Restructuring costs
-
Corporate expenses
(120)
Interest expense
(100)
Interest income
55
Income before income
taxes
757 -51%
Provision for income
taxes
278
Net income
$479 -51%
Basic Earnings Per
Share
$1.99 -51%
Diluted Earnings
Per Share
$1.89 -51%
Diluted Shares
254.0
Basic Shares
241.0
MARRIOTT INTERNATIONAL, INC.
Financial Highlights
16 Weeks Ended
December 28, 2001
(in millions, except per share amounts)
Senior
Living Distribution
Sales
Lodging Services Services
Total
Management and franchise
fees $200
$11 $ -
$211
Other
461 107
494 1,062
661 118
494 1,273
Other revenues from
managed
properties
1,478 117
- 1,595
2,139 235
494 2,868
Operating costs
and expenses
Restructuring costs
44 60
2 106
Other operating
costs
604 112
504 1,220
Other costs from
managed
properties
1,478 117
- 1,595
2,126 289
506 2,921
Operating profit
(loss) before
corporate
expenses and interest 13
(54) (12)
(53)
Restructuring costs
(18)
Corporate expenses
(67)
Interest expense
(34)
Interest income
(13)
Income (loss) before
income taxes
(185)
Provision for income
taxes
(69)
Net income (loss)
$(116)
Basic Earnings Per
Share
$(0.48)
Diluted Earnings
Per Share
$(0.48)
Diluted Shares
241.3
Basic Shares
241.3
16 Weeks Ended
December 29, 2000
2001 %
Senior
B(W)
Living Distribution Than
Sales
Lodging Services Services Total 2000
Management and franchise
fees $295 $12
$- $307
Other
523 94
456 1,073
818 106 456
1,380
Other revenues from
managed
properties
1,688 111
- 1,799
2,506 217 456
3,179 -10%
Operating costs
and expenses
Restructuring costs
- -
- -
Other operating
costs
545 118 451
1,114
Other costs from
managed
properties
1,688 111
- 1,799
2,233 229 451
2,913 0%
Operating profit
(loss) before
corporate
expenses and interest 273 (12)
5 266 -120%
Restructuring costs
-
Corporate expenses
(40)
Interest expense
(28)
Interest income
36
Income (loss) before
income taxes
234 -179%
Provision for income
taxes
85
Net income (loss)
$149 -178%
Basic Earnings Per
Share
$0.62 -177%
Diluted Earnings
Per Share
$0.59 -181%
Diluted Shares
253.7
Basic Shares
240.2
MARRIOTT INTERNATIONAL, INC.
2001 FISCAL YEAR NORMALIZED EARNINGS
(in millions, except per share amounts)
FISCAL YEAR
2001 2001
2001 Restructuring
Other
Actual
Costs Costs
SALES
Excluding
Cost Reimbursements $4,553
$ -- $--
OPERATING PROFIT/(LOSS)
Lodging
641
44 71
Senior
Living Services
(45)
60
2
Marriott
Distribution Services (6)
2
3
Operating
Profit before Corporate
Expenses and Interest
590
106 76
Corporate
Expenses
(157)
18 22
Interest
Expense
(109)
-- --
Interest
Income
46
-- 49
Income
before Income Taxes 370
124 147
Income
Taxes
134
45 54
Net
Income
$236
$79 $93
Diluted
Earnings Per Share $0.92
$0.33 $0.39
Diluted
Shares
256.7 241.3
241.3
Effective
Tax Rate
36.25% 36.50%
36.50%
FISCAL YEAR
2001
Normalized
2001
2000 % B/(W) than
Normalized Actual
2000
SALES
Excluding
Cost Reimbursements $ 4,553
$4,442
2
OPERATING PROFIT/(LOSS)
Lodging
756
936 (19)
Senior
Living Services
17
(18) 194
Marriott
Distribution Services (1)
4 (125)
Operating
Profit before Corporate
Expenses and Interest
772
922 (16)
Corporate
Expenses
(117) (120)
3
Interest
Expense
(109) (100)
(9)
Interest
Income
95
55 73
Income
before Income Taxes 641
757 (15)
Income
Taxes
233
278 16
Net
Income
$408
$479 (15)
Diluted
Earnings Per Share $1.58
$1.89 (16)
Diluted
Shares
260.8 254.0
Effective
Tax Rate
36.35% 36.75%
MARRIOTT INTERNATIONAL, INC.
FOURTH QUARTER 2001 NORMALIZED EARNINGS
(in millions, except per share amounts)
FOURTH QUARTER
2001
2001
2001 Other
Actual Restructing Costs Costs
SALES
Excluding
Cost Reimbursements $1,273
$-- $--
OPERATING PROFIT
/(LOSS)
Lodging
13
44 71
Senior
Living Services
(54)
60
2
Marriott
Distribution Services (12)
2
3
Operating
Profit (Loss) before
Corporate Expenses and Interest (53)
106 76
Corporate
Expenses
(85)
18 22
Interest
Expense
(34)
-- --
Interest
Income
(13)
-- 49
Income
(Loss) before
Income Taxes
(185)
124 147
Income
Taxes
(69)
45 54
Net
Income (Loss)
$(116)
$79 $93
Diluted
Earnings (Loss)
Per Share
$ (0.48) $ 0.33
$ 0.39
Diluted
Shares
241.3 241.3
241.3
Effective
Tax Rate
37.12% 36.50%
36.50%
FOURTH QUARTER
2001
Normalized
2001
2000 % B(W) than
Normalized Actual
2000
SALES
Excluding
Cost Reimbursements $1,273
$1,380
(8)
OPERATING PROFIT
/(LOSS)
Lodging
128
273 (53)
Senior
Living Services
8
(12) 167
Marriott
Distribution Services (7)
5 (240)
Operating
Profit (Loss) before
Corporate Expenses and Interest 129
266 (52)
Corporate
Expenses
(45)
(40) (13)
Interest
Expense
(34)
(28) (21)
Interest
Income
36
36 --
Income
(Loss) before Income Taxes 86
234 (63)
Income
Taxes
30
85 65
Net
Income (Loss)
$56 $149
(62)
Diluted
Earnings (Loss)
Per Share
$0.22 $0.59
(63)
Diluted
Shares
252.2 253.7
Effective
Tax Rate
35.18% 36.18%
MARRIOTT INTERNATIONAL, INC.
2001 Restructuring and Other Charges (1)
Living Distribution
Lodging Services Services Subtotal
Restructuring Charges:
Elimination of Product Line $-
$60 $-
$60
Downsizing
44 -
2 46
44 60
2 106
Other Charges:
Loan and Guarantee
Reserves and Write-offs 36
- -
36
Impairment of Technology
Related Investments and Other 10
- -
10
Accounts Receivable
Reserves
12 2
3 17
Write-down of Properties
Held for Sale
13 -
- 13
71 2
3 76
Total Restructuring
and
Other Charges
$115 $62
$5 $182
Corporate Interest
Expenses Income Total
Restructuring Charges:
Elimination of Product
Line
$ - $ -
$60
Downsizing
18 -
64
18 -
124
Other Charges:
Loan and Guarantee
Reserves and Write-offs -
49 85
Impairment of Technology
Related Investments
and Other
22 -
32
Accounts Receivable
Reserves
- -
17
Write-down of Properties
Held for Sale
- -
13
22 49
147
Total Restructuring
and
Other Charges
$40 $49
$271
(1) Charges related
to guarantees are predominantly netted against lodging
operating income, while charges related to notes receivable are netted
against interest income.
MARRIOTT INTERNATIONAL, INC.
Business Segment Results
2001 Full Year and Fourth Quarter
52 weeks ended
December 28, 2001
Before
Operating profit
(loss)
Restructuring Restructuring
before corporate
expenses As
and Other and Other December
and interest
Reported Costs
Costs 29, 2000
Full Service
$294 $84
$378 $510
Select Service
145 13
158 192
MVCI
147 2
149 138
Extended Stay
55 16
71 96
Total Lodging
641 115
756 936
Senior Living Services (45)
62 17
(18)
Distribution Services
(6) 5
(1) 4
$590 $182
$772 $922
16 weeks ended
December 28, 2001
Before
Operating profit
(loss)
Restructuring Restructuring
before corporate
expenses As
and Other and Other December
and interest
Reported Costs
Costs 29, 2000
Full Service
$(20) $84
$64 $156
Select Service
12 13
25 53
MVCI
28 2
30 35
Extended Stay
(7) 16
9 29
Total Lodging
13 115
128 273
Senior Living Services (54)
62
8 (12)
Distribution Services (12)
5 (7)
5
$(53) $182
$129 $266
MARRIOTT INTERNATIONAL, INC.
Condensed Consolidated Balance Sheet
$ in millions
December 29, December 28,
2000 2001
ASSETS
Cash & Equivalents
$334 $817
Other Current Assets
1,311 1,313
Property & Equipment
3,011 2,930
Intangibles
1,833 1,764
Investments in Affiliates
747 823
Notes & Other Receivables
661 1,038
Other
340 422
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities
$1,917 $1,802
Long-Term Debt
2,016 2,408
Self-Insurance
122
86
Other Long-Term Liabilities
915 926
Convertible Debt
-- 407
Shareholders' Equity
3,267 3,478 |
MARRIOTT INTERNATIONAL, INC.
KEY LODGING STATISTICS
Fourth Quarter
2001
REVPAR
Average Daily
vs. 2000 Occupancy
Rate
Brand
2001 vs. 2000
2001 vs. 2000
Marriott Hotels,
Resorts
and Suites
-27.0% 61.1% -13.2% pts. $135.83 -11.2%
Ritz-Carlton
-29.8% 56.1% -15.4% pts. $220.85 -10.5%
Renaissance Hotels,
Resorts
and Suites
-29.5% 54.7% -14.6% pts. $131.04 -10.8%
Residence Inn
-18.6% 71.9% -8.3% pts. $97.88
-9.3%
Courtyard
-19.7% 63.7% -11.3% pts. $94.48
-5.4%
Fairfield Inn
-7.9% 60.6% -4.4% pts. $62.02
-1.3%
Fourth Quarter Year-to-Date
2001
REVPAR
Average Daily
vs. 2000 Occupancy
Rate
Brand
2001 vs. 2000 2001 vs. 2000
Marriott Hotels,
Resorts
and Suites
-11.8% 70.4% -7.1% pts. $142.96
-2.9%
Ritz-Carlton
-11.5% 66.9% -10.4% pts. $249.94 +2.3%
Renaissance Hotels,
Resorts
and Suites
-13.1% 65.6% -7.7% pts. $137.79
-2.9%
Residence Inn
-7.5% 77.8% -5.1% pts. $105.46
-1.4%
Courtyard
-7.0% 71.6% -6.4% pts. $99.45
+1.2%
Fairfield Inn
-2.6% 66.3% -3.2% pts. $64.70
+2.1%
Note: Statistics
for above tables are based on comparable company-operated
U.S. properties, except for Fairfield Inn, which data also include franchised
units.
Number of
Number of
Properties
Rooms/Suites
Dec. vs. Dec.
Dec. vs. Dec.
Brand
2001 2000
2001 2000
Marriott Hotels,
Resorts and Suites 424
+39 158,100 +8,900
Ritz-Carlton
45 +8 14,800
+1,800
Renaissance Hotels,
Resorts and
Suites
123 +22 44,800
+4,700
Ramada International
133 +107 19,200
+10,000
Residence Inn
392 +48 46,100
+4,700
Courtyard
553 +50 78,700
+4,800
Fairfield Inn
480 +50 45,900
+4,500
TownePlace Suites
99 +22 10,300
+1,800
SpringHill Suites
84 +31 9,500
+3,100
Marriott Vacation
Club International* 54
+9 6,600 +1,000
Other**
11 +2
1,900 +200
Total
2,398 +388 435,900
+45,500
* Includes
The Ritz-Carlton Club, Horizons and Grand Residences by Marriott Vacation
Club International.
** Includes Marriott
Executive Apartments. Excludes ExecuStay by Marriott. |
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
expected to be added in future years; expected investment spending; anticipated
results from synthetic fuel operations; and similar statements concerning
anticipated future events and expectations that are not historical facts.
MARRIOTT INTERNATIONAL, INC. is a leading worldwide hospitality company
with nearly 2,600 operating units in the United States and 64 other countries
and territories. |
