10-QPeriod: Q1 FY2002

MARRIOTT INTERNATIONAL INC /MD/ Quarterly Report for Q1 Ended Mar 22, 2002

Filed April 24, 2002For Securities:MAR

Summary

Marriott International, Inc. reported a 32% decrease in net income for the first quarter of 2002, reaching $82 million ($0.32 per diluted share) on sales of $2.36 billion. This decline was primarily attributed to weaker hotel results and losses in the distribution services segment, impacted by the ongoing economic downturn and the aftermath of the September 11th attacks. Despite these headwinds, the company's lodging segments experienced a 12.7% decline in Revenue Per Available Room (REVPAR) for comparable U.S. properties, driven by lower occupancy and average daily rates. Positive developments include the continued growth in the Timeshare business with an 11% increase in contract sales and a 9% increase in sales for the Senior Living Services segment, which also saw a $5 million increase in operating profit. The adoption of FAS No. 142, eliminating goodwill amortization, provided a $7 million boost to net income in the quarter. The company also highlighted its strong liquidity position with over $2 billion in cash and available borrowing capacity, demonstrating its ability to manage through the challenging economic environment.

Key Highlights

  • 1Net income decreased 32% to $82 million ($0.32/diluted share) on sales of $2.36 billion, reflecting a challenging economic and post-9/11 environment.
  • 2Total lodging REVPAR for comparable U.S. properties declined by 12.7%, with occupancy and average daily rates decreasing across major brands.
  • 3Timeshare business showed resilience with an 11% increase in contract sales, though profits declined due to higher sales and marketing expenses.
  • 4Senior Living Services segment reported a 9% sales increase and a $5 million rise in operating profit, demonstrating stable occupancy.
  • 5Adoption of FAS No. 142 (Goodwill and other Intangible Assets) positively impacted net income by approximately $7 million due to the elimination of goodwill amortization.
  • 6The company maintains a strong liquidity position with over $2 billion in cash and available borrowing capacity, supporting operational needs and growth plans.
  • 7Distribution Services segment incurred a $6 million operating loss, with the company strategically reviewing this business segment.

Frequently Asked Questions

The primary reason for the 32% decrease in net income is the weaker performance of the hotel results, impacted by the overall economic downturn and the lingering effects of the September 11th attacks. Additionally, losses in the distribution services business contributed to the decline.

Marriott's lodging business is facing challenges, with Revenue Per Available Room (REVPAR) for comparable U.S. properties declining by an average of 12.7% in the first quarter of 2002. This decline was driven by an average 7.7% decrease in room rates and a 3.8 percentage point drop in occupancy.

The adoption of FAS No. 142, which eliminates the amortization of goodwill, resulted in an increase in net income of approximately $7 million for the first quarter of 2002. It also favorably impacted the adjusted earnings per share calculations for both 2002 and 2001.

Marriott International maintains a strong liquidity position, with cash balances and available borrowing capacity exceeding $2 billion at the end of the quarter. The company believes these resources, combined with expected cash flow from operations, are adequate to meet its short-term and long-term liquidity requirements, finance growth, and service debt.