10-QPeriod: Q1 FY2004

MARRIOTT INTERNATIONAL INC /MD/ Quarterly Report for Q1 Ended Mar 26, 2004

Filed May 5, 2004For Securities:MAR

Summary

Marriott International, Inc. reported solid financial performance for the twelve weeks ended March 26, 2004, demonstrating a significant increase in revenue and income from continuing operations compared to the same period in the prior year. The company's lodging segment showed robust growth, driven by strong performance in its Timeshare division and increased fees across its hotel brands, evidenced by a notable rise in REVPAR. This growth was partially offset by a decline in results from its synthetic fuel operations, a segment that has undergone ownership changes and is now accounted for differently. The company also highlighted its ongoing commitment to shareholder value through share repurchases and indicated adequate liquidity to meet its financial obligations and growth plans.

Key Highlights

  • 1Revenues increased by 11% to $2.25 billion, driven by strong performance in the lodging segment, particularly timeshare sales and increased hotel fees.
  • 2Income from continuing operations surged by 31% to $114 million, with diluted EPS from continuing operations rising to $0.47.
  • 3The Timeshare segment experienced exceptional growth, with revenues up 44% to $385 million and segment results more than doubling to $50 million.
  • 4Systemwide REVPAR for comparable North American properties increased by 5.4%, indicating improved occupancy and average daily rates across Marriott's hotel portfolio.
  • 5The company repurchased 6.6 million shares of Class A Common Stock during the quarter, demonstrating a commitment to returning capital to shareholders.
  • 6Marriott finalized the adoption of FIN 46(R), leading to the consolidation of synthetic fuel joint ventures and a change in accounting for that segment.
  • 7A significant subsequent event is Cendant Corporation's redemption of Marriott's interest in the Ramada and Days Inn US trademarks for $200 million, expected in September 2004, with a pre-tax gain of $13 million anticipated.

Frequently Asked Questions

The primary drivers were strong performance in the Timeshare segment, which saw a 44% increase in revenue, and the broader lodging business. Increased base, incentive, and franchise fees, supported by a 5.4% rise in systemwide REVPAR for comparable North American properties and new unit growth, contributed significantly to higher revenues and income.

The synthetic fuel segment's financial impact has changed due to ownership adjustments. While it generated $11 million in net income in the current period compared to $19 million in the prior year, its contribution to operating income has shifted from losses to equity in earnings/losses due to a change in ownership structure and accounting treatment following the adoption of FIN 46(R). Despite operational losses, the segment benefits from tax credits.

The REVPAR figures indicate a healthy recovery and growth in the hotel market. A 5.4% increase in systemwide REVPAR for comparable North American properties, coupled with improvements in occupancy and average daily rates across various brands like Marriott Hotels & Resorts and The Ritz-Carlton, suggests positive momentum and effective pricing strategies. International performance also showed strong REVPAR growth in several regions.

The sale of Marriott's interest in the Two Flags joint venture, which owns the Ramada and Days Inn US trademarks, to Cendant Corporation for $200 million is a notable event. This transaction is expected to result in a $13 million pre-tax gain and will provide substantial funds that Marriott plans to use for its share repurchase program, signaling a strategic shift and a focus on capital return to shareholders.