Summary
Marriott International, Inc. reported its second-quarter 2005 results, showing a year-over-year decrease in net income from $160 million to $138 million, or $0.67 to $0.59 per diluted share. This decline was primarily driven by a significant increase in general and administrative expenses, including a $94 million pre-tax charge related to the write-off of deferred contract acquisition costs from management agreements, and a $29 million pre-tax expense for a bedding incentive program. Despite these one-time charges, the underlying business demonstrated strength with a 11% increase in total revenues to $2.66 billion, fueled by robust demand across its lodging segments and a notable 9.8% increase in comparable systemwide RevPAR. The timeshare segment also showed strong performance, with revenues up 9% and segment results up 57% year-over-year, driven by increased development revenue and higher margins. Operationally, Marriott continued to expand its footprint, adding 136 properties to its system in the last year, with over 29% of new rooms coming from competitor conversions. The company also successfully navigated significant corporate activity, including the acquisition of 32 properties from CTF Holdings Ltd. for $1.45 billion and the formation of a joint venture with Whitbread to acquire 46 hotels. Despite the reported net income decrease due to charges, the core lodging business showed positive trends in revenue and RevPAR, indicating resilience in demand. The company also strengthened its financial position by entering into a new $2 billion credit facility.
Key Highlights
- 1Net income decreased by 13.8% to $138 million ($0.59 per diluted share) compared to $160 million ($0.67 per diluted share) in the prior year, primarily due to a substantial increase in general and administrative expenses, including a $94 million pre-tax charge.
- 2Total revenues increased by 11% to $2.66 billion for the twelve weeks ended June 17, 2005, driven by strong lodging demand and unit expansion.
- 3Comparable systemwide Revenue per Available Room (RevPAR) increased by 9.8% year-over-year, indicating healthy demand and pricing power across the portfolio.
- 4The Timeshare segment reported a 57% increase in segment results to $80 million on a 9% revenue increase, highlighting its strong performance.
- 5Marriott completed a significant acquisition of 32 properties from CTF Holdings Ltd. for $1.45 billion and formed a joint venture with Whitbread for 46 hotels, demonstrating active portfolio management and growth initiatives.
- 6The company entered into a new $2 billion multicurrency revolving credit facility, enhancing its liquidity and financial flexibility.
- 7Share repurchases remained a focus, with 12.3 million shares bought back during the first half of 2005 for $753 million.