10-QPeriod: Q3 FY2008

MARRIOTT INTERNATIONAL INC /MD/ Quarterly Report for Q3 Ended Sep 5, 2008

Filed October 3, 2008For Securities:MAR

Summary

Marriott International Inc. (MAR) reported its third quarter and year-to-date results for the period ending September 5, 2008. The company experienced a slight revenue increase of 1% for the quarter, reaching $2.96 billion, driven by cost reimbursements and a modest rise in base management fees. However, net income for the quarter declined to $94 million from $131 million in the prior year's comparable period, resulting in diluted earnings per share of $0.26, down from $0.33. This downturn was primarily attributed to a decrease in gains and other income, higher tax provisions, and lower owned/leased revenues, partially offset by reduced interest expense and a higher minority interest benefit. For the first nine months of 2008, revenues grew 2% to $9.09 billion, but net income fell significantly to $372 million from $520 million in the same period last year, with diluted EPS dropping to $1.01 from $1.29. The company highlighted a challenging economic environment impacting lodging demand, particularly in North America, though international demand remained relatively stronger. The Timeshare segment saw a notable revenue decrease, partly due to a $22 million impairment charge on a real estate project and soft market conditions. Despite these headwinds, Marriott continues to expand its development pipeline and focus on cost control measures.

Financial Highlights

26 data points
Beta

Revenue

$2.96B

Net Income

$94.00M

3.2% Net Margin

EPS (Diluted)

$0.25

Cash & Equivalents

$117.00M

Free Cash Flow

$130.00M

Financial Statements
Beta
Revenue$2.96B
Operating Expenses$2.76B
Operating Income$203.00M
Interest Expense$33.00M
Net Income$94.00M
EPS (Basic)$0.27
EPS (Diluted)$0.25

Key Highlights

  • 1Net income decreased to $94 million for the third quarter of 2008, down from $131 million in the prior year's quarter.
  • 2Diluted earnings per share (EPS) for the third quarter was $0.26, down from $0.33 in the same period last year.
  • 3Total revenues for the third quarter increased slightly by 1% to $2.96 billion.
  • 4Year-to-date net income significantly decreased to $372 million from $520 million in the prior year.
  • 5The Timeshare segment experienced a notable revenue decrease, impacted by market conditions and a $22 million impairment charge.
  • 6Operating income for the third quarter decreased to $203 million from $210 million in the prior year.
  • 7The company continues to expand its development pipeline, with over 130,000 rooms planned.

Frequently Asked Questions

The primary drivers for the decline in net income and EPS were lower gains and other income (down $23 million), higher income tax provisions (up $10 million), and decreased owned, leased, corporate housing, and other revenue net of direct expenses (down $7 million). These were partially offset by lower interest expense and a higher minority interest benefit.

The Timeshare segment's revenues remained flat for the quarter, but segment results increased by 26% to $49 million. However, year-to-date revenues decreased by 8% to $1.33 billion, and segment results decreased by 35% to $123 million. This segment was impacted by soft market conditions, a $22 million impairment charge on a fractional ownership real estate project, and a decrease in contract sales. Despite these challenges, gains from services and financing revenue provided some offset.

Marriott acknowledged a slowing economic environment impacting lodging demand, particularly in North America, leading to strategies focused on enhancing property-level house profit margins through cost controls and modified operations. While international demand was stronger, it also softened throughout 2008. The company noted that the volatility in capital markets could lead to reevaluation of development pipeline projects.

Marriott reported $117 million in cash and equivalents at the end of the quarter. Due to increased volatility in capital markets, the company borrowed $908 million under its revolving credit facility in September 2008 to supplement liquidity from the commercial paper market. The company believes its credit facility and operating cash flow remain adequate to meet liquidity requirements.