10-KPeriod: FY2006

MARRIOTT INTERNATIONAL INC /MD/ Annual Report, Year Ended Dec 29, 2006

Filed February 21, 2007For Securities:MAR

Summary

Marriott International, Inc. (MAR) filed its 10-K for the fiscal year ending December 29, 2006, on February 20, 2007. The report indicates a strong financial performance with notable revenue growth across its lodging segments. The company also highlighted its effective management of market risks, including interest rate and foreign exchange fluctuations, through the use of derivative instruments. Significant accounting policy changes were adopted, including those for real estate timesharing transactions and stock-based compensation, which impacted reported earnings. Despite operational challenges in its synthetic fuel business, the company maintained effective internal controls over financial reporting, as attested by its independent auditors. Investors should note the company's ongoing strategic initiatives, including property dispositions and acquisitions, which are geared towards optimizing its portfolio and driving future growth.

Key Highlights

  • 1Marriott International reported overall revenue growth, with lodging segments showing strength.
  • 2The company actively manages market risks (interest rates, foreign exchange) using derivative instruments.
  • 3Significant accounting changes were adopted for timeshare transactions and stock-based compensation, impacting 2006 results.
  • 4Internal controls over financial reporting were assessed as effective by management and auditors.
  • 5The synthetic fuel business faced operational challenges and is slated for permanent shutdown at the end of 2007.
  • 6Marriott executed strategic property dispositions and acquisitions throughout the year.
  • 7The company's guest loyalty program, Marriott Rewards, saw a significant increase in its liability.

Frequently Asked Questions

In 2006, Marriott adopted Statement of Position 04-2, "Accounting for Real Estate Time-Sharing Transactions," and FASB Statement No. 123(R), "Share-Based Payment." The adoption of SOP 04-2 resulted in a non-cash after-tax charge of $109 million, while FAS No. 123(R) impacted the recognition of share-based compensation expenses.

Marriott manages exposure to interest rates, foreign exchange rates, and debt/equity prices through monitoring financing alternatives, credit policies, and derivative arrangements. They do not use derivatives for trading or speculative purposes.

The synthetic fuel business is expected to cease production and permanently shut down at the end of 2007, as tax credits expire. The business faced operational challenges in 2006 due to oil price volatility and mine closures, but tax credits have historically offset significant operating losses.

Management assessed its internal control over financial reporting as of December 29, 2006, and concluded that it was effective. Ernst & Young LLP, the independent registered public accounting firm, also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting.