10-QPeriod: Q2 FY2002

MARRIOTT INTERNATIONAL INC /MD/ Quarterly Report for Q2 Ended Jun 14, 2002

Filed July 19, 2002For Securities:MAR

Summary

Marriott International, Inc. reported its financial results for the quarter ended June 14, 2002, reflecting a challenging economic environment that impacted its core lodging business. Net income for the quarter was $129 million, a slight decrease from $130 million in the prior year, with diluted earnings per share remaining flat at $0.50. Sales saw a modest increase to $2.586 billion from $2.450 billion year-over-year, driven by 'Other' revenue categories and managed/franchised property revenues, while management and franchise fees and distribution services revenue saw declines. The company's lodging segment experienced a decline in operating profit despite increased sales, with comparable U.S. managed properties showing an 8.0% decrease in Revenue Per Available Room (RevPAR). This was attributed to weaker hotel demand and a weaker economy. However, the company is taking strategic steps, including the decision to exit its distribution services business by the end of 2002 and initiating a strategic review of its Senior Living Services segment, which may include a spin-off. The company's balance sheet shows a decrease in cash and equivalents to $200 million from $817 million at year-end 2001, primarily due to debt repayment.

Key Highlights

  • 1Net income for the quarter was $129 million, down slightly from $130 million in the prior year, with diluted EPS remaining flat at $0.50.
  • 2Total sales increased by 6% to $2.586 billion, but the core lodging segment saw a 17% decrease in operating profit.
  • 3Comparable U.S. managed lodging properties experienced an 8.0% decline in RevPAR due to weaker economic conditions and reduced hotel demand.
  • 4The company announced its decision to exit the Distribution Services business by the end of 2002, expecting to incur material exit costs.
  • 5Marriott is conducting a strategic review of its Senior Living Services segment, considering options including a potential spin-off.
  • 6Cash and equivalents decreased significantly to $200 million from $817 million at year-end 2001, mainly due to debt repayment.
  • 7The company is in negotiations to modify its management agreements with Host Marriott, aiming to enhance long-term strength and growth, with anticipated completion in the third quarter.

Frequently Asked Questions

For the quarter ended June 14, 2002, Marriott International reported net income of $129 million, a slight decrease from $130 million in the same period last year. Diluted earnings per share remained flat at $0.50. Total sales increased by 6% to $2.586 billion, but operating profit in the core lodging segment declined by 17% due to weaker demand and economic conditions.

The lodging segment's performance was impacted by a weaker economy and reduced hotel demand, leading to a decrease in Revenue Per Available Room (RevPAR) for comparable U.S. managed properties by 8.0%. Average room rates and occupancy also declined across most of the company's established brands.

Marriott is implementing several strategic initiatives. Most notably, it has decided to exit its Distribution Services business by the end of 2002. Additionally, the company is undertaking a strategic review of its Senior Living Services segment, which could lead to a spin-off. Negotiations are also underway to modify management agreements with Host Marriott.

Cash and equivalents decreased substantially to $200 million as of June 14, 2002, down from $817 million at the end of 2001. This decrease is primarily attributed to debt repayment. Despite this, the company believes its available cash, credit facilities, and expected operational cash flow are adequate to meet its short-term and long-term liquidity requirements.