10-KPeriod: FY2004

MARRIOTT INTERNATIONAL INC /MD/ Annual Report, Year Ended Dec 31, 2004

Filed February 23, 2005For Securities:MAR

Summary

Marriott International, Inc. (MAR) reported strong financial performance for the fiscal year ended December 31, 2004. The company experienced a significant increase in revenues, driven by robust demand across its lodging segments, particularly in Full-Service and Timeshare. This growth was attributed to a recovery in business travel, favorable international economic conditions, and the company's strategic initiatives, such as expanding high-speed internet access in its properties. Marriott demonstrated effective cost management, which, combined with revenue growth, led to a substantial increase in operating income and net income. The company's diverse portfolio, encompassing full-service, select-service, and extended-stay hotels, as well as its growing timeshare business, contributed to its resilience. The synthetic fuel segment also continued to provide a tax benefit, although it incurred operating losses. Marriott's disciplined approach to capital allocation included debt reduction and strategic share repurchases, indicating a focus on shareholder value. Despite facing a challenging litigation regarding synthetic fuel facility tax credits, the company expressed confidence in a favorable resolution.

Key Highlights

  • 1Revenues increased 12% to $10,099 million in 2004, driven by higher fees due to increased demand and unit expansion, alongside strong timeshare sales.
  • 2Operating income rose by $100 million to $477 million, primarily due to higher fees from strong REVPAR growth and unit expansion, coupled with positive timeshare results, partially offset by increased administrative expenses.
  • 3Net income grew to $596 million, with diluted earnings per share from continuing operations reaching $2.47, a 27% increase from the prior year.
  • 4Lodging segment results improved significantly, with total lodging financial results reaching $835 million in 2004, up from $702 million in 2003, driven by strong REVPAR increases across multiple brands.
  • 5The company opened 144 properties totaling 24,380 rooms in 2004 and has a development pipeline of over 55,000 rooms expected to be added in 2005.
  • 6Marriott reduced its long-term debt by $130 million during 2004 and repurchased 14.0 million shares of its common stock.
  • 7The company is facing an IRS challenge regarding the 'placed-in-service' dates for three synthetic fuel facilities, which could impact future tax credits, though Marriott believes its facilities meet the requirements.

Frequently Asked Questions

Marriott's revenue growth in 2004 was primarily driven by an increase in fees from higher demand for hotel rooms and unit expansion across its lodging portfolio. Strong sales in the Timeshare segment also contributed significantly to the revenue increase.

Marriott reduced its long-term debt by $130 million in 2004 through debt repayments and repurchases. The company also repurchased 14.0 million shares of its common stock, demonstrating a commitment to returning value to shareholders. Its financial flexibility was supported by significant cash balances and available borrowing capacity under its credit facilities.

Marriott's synthetic fuel operations generate tax credits under Section 29 of the Internal Revenue Code, which offset operating losses. However, the IRS is challenging the 'placed-in-service' dates for three of the four facilities, a matter that could impact future tax credits. Marriott believes its facilities meet the requirements and is engaged in discussions with the IRS, expressing confidence in a favorable resolution.

The Full-Service Lodging segment saw revenue and financial results increase, driven by strong REVPAR growth. The Select-Service and Extended-Stay segments also experienced revenue growth due to improved occupancy and rates, with the Extended-Stay segment benefiting from a shift towards franchising for the ExecuStay brand. The Timeshare segment delivered strong revenue growth and improved margins.