Marriott 4Q Profit Down

2012-02-16

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Marriott Reported net income totaled $141 million in the fourth quarter of 2011 compared to $173 million in the year-ago quarter. Reported diluted EPS was $0.41 in the fourth quarter of 2011 compared to $0.46 in the fourth quarter of 2010.

FOURTH QUARTER HIGHLIGHTS

Fourth quarter adjusted diluted earnings per share (EPS) totaled $0.46, a 31 percent increase over prior year adjusted results;

Fourth quarter worldwide comparable systemwide REVPAR rose 6.3 percent using actual dollars. Average daily rate rose 3.7 percent using actual dollars;

At year-end, the company’s worldwide pipeline of hotels under construction, awaiting conversion or approved for development totaled over 110,000 rooms, including over 52,000 rooms outside North America;

Over 6,900 rooms opened during the quarter, including over 1,800 rooms converted from competitor brands and nearly 3,500 rooms in international markets;

For full year 2011, Marriott repurchased 43.4 million shares of the company’s common stock for $1.4 billion;

For full year 2012, Marriott expects comparable systemwide REVPAR on a constant dollar basis to increase 5 to 7 percent in North America, outside North America and worldwide

At year-end 2011, group revenue bookings for 2012 North American comparable Marriott Hotels & Resorts properties were 9 percent higher than group revenue bookings at year-end 2010 for stays in 2011.

Marriott International, Inc. (NYSE: MAR) today reported fourth quarter and full year 2011 results.

The company completed the spin-off of its Timeshare segment on November 21, 2011. Because of Marriott’s significant continuing involvement in the business after the spin-off through licensing and other agreements, Timeshare segment results for periods prior to the spin-off date continue to be included in the company’s historical financial results. However, to evaluate the performance of the company excluding the impact of the timeshare business, the company is adjusting results and previously provided guidance as if the spin-off had occurred on the first day of fiscal 2010. Timeshare spin-off adjustments include items such as the removal of timeshare business operating results and spin-off transaction costs, as well as the addition of license fees and other related items. See pages A-1 through A-6 for reported results, the timeshare spin-off adjustments and adjusted results.

FOURTH QUARTER 2011 RESULTS

Fourth quarter 2011 adjusted net income totaled $159 million, an 18 percent increase compared to fourth quarter 2010 adjusted net income. Adjusted diluted EPS totaled $0.46, a 31 percent increase from adjusted diluted EPS in the year-ago quarter. On October 5, 2011, the company forecasted fourth quarter diluted EPS of $0.45 to $0.50, which assumed the timeshare spin-off would occur at year-end 2011. Adjusting for the timeshare spin-off as if the spin-off had occurred the first day of fiscal 2010, the company’s guidance would have been $0.40 to $0.44 as shown on page A-18.

Reported net income totaled $141 million in the fourth quarter of 2011 compared to $173 million in the year-ago quarter. Reported diluted EPS was $0.41 in the fourth quarter of 2011 compared to $0.46 in the fourth quarter of 2010.

Adjusted net income and adjusted diluted EPS for the fourth quarter of 2011 exclude $14 million ($18 million after-tax and $0.05 per diluted share) of timeshare spin-off adjustments.

Adjusted net income and adjusted diluted EPS for the fourth quarter of 2010 exclude $22 million ($13 million after-tax and $0.04 per diluted share) of timeshare spin-off adjustments. Adjusted results for the fourth quarter of 2010 also exclude $25 million after-tax ($0.07 per diluted share) of impairment charges and certain tax items, including an $85 million ($0.22 per diluted share) non-cash benefit in the provision for income taxes.

J.W. Marriott, Jr., chairman and chief executive officer of Marriott International, said, “2011 was a great year. Occupancies and room rates improved at our hotels in most markets around the world. We increased our global hotel distribution and spun off our timeshare business as Marriott Vacations Worldwide Corporation, a new separately traded public company. Return on invested capital increased dramatically and meaningful top line growth in our lodging business helped drive base and franchise fees beyond their prior peak in 2008. Adjusted earnings per share was outstanding and we returned over $1.5 billion to our shareholders through share repurchases and dividends.

“Our system has never looked better. We opened 210 properties with nearly 32,000 rooms during the year, including 80 hotels flying our new AC Hotels by Marriott flag in Europe. With great momentum in international markets, the growth rate for our hotel rooms outside the U.S. was higher than within the U.S. The Autograph Collection made its debut in Europe adding nine properties, including the four spectacular Boscolo hotels. And our EDITION brand kicked into high gear with new hotel announcements, including the iconic Clock Tower building in New York. In total, our hotel development pipeline increased to over 110,000 rooms as we signed new management and franchise agreements for more than 320 hotels with over 50,000 rooms in 2011, most for hotels yet to open.

“We are bullish about the long-term growth prospects for both Marriott and the global lodging industry. With a growing middle class and rapid economic growth in many emerging markets, global demand is increasing steadily. In the U.S., supply growth remains modest. As a result, we expect revenue per available room to continue to improve in most markets. Marriott is well positioned to benefit from these global macro trends. Our products are high quality, our guest satisfaction is very high, and our brands are preferred by owners and franchisees. New hotel openings and renovations of existing hotels continue to energize our brands, and with new designs and services, we continue to find new ways to engage our guests. We expect 2012 to be an exciting year.”

For the 2011 fourth quarter, REVPAR for worldwide comparable systemwide properties increased 5.9 percent (a 6.3 percent increase using actual dollars). Excluding the Middle East and Japan markets, worldwide comparable systemwide REVPAR rose 6.2 percent (a 6.5 percent increase using actual dollars).

International comparable systemwide REVPAR rose 4.1 percent (a 5.9 percent increase using actual dollars), including a 4.5 percent increase in average daily rate (a 6.3 percent increase using actual dollars) in the fourth quarter of 2011. Excluding the Middle East and Japan markets, international comparable systemwide REVPAR increased 5.6 percent (a 6.9 percent increase using actual dollars).

In North America, comparable systemwide REVPAR increased 6.4 percent in the fourth quarter of 2011, including a 3.2 percent increase in average daily rate. REVPAR for comparable systemwide North American full-service and luxury hotels (including Marriott Hotels & Resorts, The Ritz-Carlton and Renaissance Hotels) increased 5.8 percent with a 3.4 percent increase in average daily rate. REVPAR for comparable systemwide North American limited-service hotels (including Courtyard, Residence Inn, SpringHill Suites, TownePlace Suites and Fairfield Inn & Suites) increased 7.0 percent in the fourth quarter with a 3.4 percent increase in average daily rate.

Marriott added 40 new properties (6,925 rooms) to its worldwide lodging portfolio in the 2011 fourth quarter, including Shanghai Marriott City Centre, the Renaissance and Courtyard Doha City Center hotels and the Scrub Island Resort, Spa and Marina, an Autograph Collection hotel in the British Virgin Islands. Nine properties (1,946 rooms) exited the system during the quarter. At year-end, the company’s lodging group encompassed 3,718 properties and timeshare resorts for a total of 643,196 rooms.

The company’s worldwide pipeline of hotels under construction, awaiting conversion or approved for development totaled nearly 700 properties with over 110,000 rooms at year-end. During 2011, the company signed new management and franchise agreements for more than 320 hotels with over 50,000 rooms.

MARRIOTT ADJUSTED REVENUES totaled $3.4 billion in the 2011 fourth quarter compared to approximately $3.2 billion for the fourth quarter of 2010. Adjusted base management and franchise fees rose 9 percent to $346 million reflecting higher REVPAR and fees from new hotels. Incentive fees declined 1 percent reflecting lower incentive fees in the Middle East and continued weakness in the greater Washington, DC market. In the fourth quarter, 27 percent of worldwide company-managed hotels earned incentive management fees compared to 26 percent in the year-ago quarter.

Worldwide comparable company-operated house profit margins increased 60 basis points in the fourth quarter reflecting higher occupancy, rate increases and strong productivity. House profit margins for comparable company-operated properties outside North America increased 20 basis points and North American comparable company-operated house profit margins increased 100 basis points from the year-ago quarter.

Owned, leased, corporate housing and other revenue, net of direct expenses, increased $15 million in the 2011 fourth quarter, to $56 million, largely due to higher credit card and residential branding fee revenues and improved operating results at owned and leased hotels.

ADJUSTED GENERAL, ADMINISTRATIVE and OTHER expenses for the 2011 fourth quarter increased 2 percent to $219 million, compared to adjusted expenses of $215 million in the year-ago quarter.

ADJUSTED GAINS AND OTHER INCOME totaled $1 million compared to $8 million in the year-ago quarter, primarily reflecting net gains on the sale of real estate in the 2010 fourth quarter.

Adjusted Earnings before Interest Expense, Taxes, Depreciation and Amortization (EBITDA)

Adjusted EBITDA totaled $316 million in the 2011 fourth quarter, a 12 percent increase over 2010 fourth quarter adjusted EBITDA of $282 million. See pages A-12 for the EBITDA and adjusted EBITDA calculations.

FULL YEAR 2011 RESULTS

For the full year 2011, adjusted net income totaled $475 million, a 23 percent increase over full year 2010 adjusted net income. Adjusted diluted EPS totaled $1.31, an increase of 28 percent from adjusted diluted EPS a year ago.

Reported net income totaled $198 million for full year 2011 compared to reported net income of $458 million a year ago. Reported diluted EPS was $0.55 for 2011 compared to reported diluted EPS of $1.21 for 2010.

Adjusted net income and adjusted diluted EPS for full year 2011 exclude $300 million ($260 million after-tax and $0.72 per diluted share) of timeshare spin-off adjustments. Adjusted results for the full year 2011 also exclude $28 million pretax ($17 million after-tax and $0.05 per diluted share) of non-cash impairment and other charges.

Adjusted net income and adjusted diluted EPS for full year 2010 exclude $76 million ($47 million after-tax and $0.12 per diluted share) of timeshare spin-off adjustments. Adjusted results for full year 2010 also exclude $25 million after-tax ($0.07 per diluted share) of impairment charges and certain tax items, including an $85 million ($0.23 per diluted share) non-cash benefit in the provision for income taxes.

REVPAR for the company’s worldwide comparable systemwide properties increased 6.4 percent (a 7.1 percent increase using actual dollars) in 2011. Excluding the Middle East and Japan markets, worldwide comparable systemwide REVPAR rose 6.9 percent (a 7.4 percent increase using actual dollars).

International comparable systemwide REVPAR for 2011 increased 6.3 percent (a 9.6 percent increase using actual dollars), including a 0.9 percent increase in occupancy and a 4.9 percent increase in average daily rate (an 8.1 percent increase using actual dollars). Excluding the Middle East and Japan markets, international comparable systemwide REVPAR increased 8.9 percent (an 11.9 percent increase using actual dollars).

In North America, comparable systemwide REVPAR increased 6.5 percent in 2011. REVPAR at the company’s comparable systemwide North American full-service and luxury hotels (including Marriott Hotels & Resorts, The Ritz-Carlton and Renaissance Hotels) increased 5.8 percent with a 1.3 percent increase in occupancy and an average daily rate increase of 3.7 percent. REVPAR for comparable systemwide North American limited-service hotels (including Courtyard, Residence Inn, SpringHill Suites, TownePlace Suites and Fairfield Inn & Suites) increased 7.0 percent with a 3.0 percent increase in average daily rate.

MARRIOTT ADJUSTED REVENUES totaled nearly $11.0 billion in 2011 compared to $10.2 billion in 2010. Total adjusted fees in 2011 were $1,307 million, an increase of 10 percent from the prior year. Stronger base management and franchise fees reflected the increase in worldwide REVPAR and unit growth across the system. Incentive management fees increased 7 percent reflecting higher property-level profit due to worldwide REVPAR increases and continued cost control, as well as international unit growth. For full year 2011, 29 percent of company-operated hotels earned incentive management fees compared to 27 percent in the prior year. Approximately two-thirds of incentive management fees came from hotels outside North America in both 2011 and 2010.

Owned, leased, corporate housing and other revenue, net of direct expenses, totaled $140 million in 2011 compared to $91 million in 2010. Results were primarily impacted by an increase in credit card and residential branding fees, stronger results at owned and leased hotels and an increase in termination fees net of property closing costs.

ADJUSTED GENERAL, ADMINISTRATIVE and OTHER expenses in 2011 increased $50 million to $643 million, an 8 percent increase compared to adjusted expenses in 2010, largely due to higher compensation costs, higher costs associated with growth in international markets and a year-over-year increase in legal expenses.

ADJUSTED GAINS AND OTHER INCOME totaled $8 million in 2011 primarily reflecting net gains on the sale of real estate. Adjusted gains and other income of $15 million in 2010 included $13 million of net gains on the sale of real estate.

Adjusted EBITDA

Adjusted EBITDA totaled $992 million in 2011 compared to 2010 adjusted EBITDA of $885 million, a 12 percent increase. See pages A-13 for the EBITDA and adjusted EBITDA calculations.

BALANCE SHEET

At year-end 2011, total debt was $2,171 million and cash balances totaled $102 million, compared to $2,829 million in debt and $505 million of cash at year-end 2010. The $658 million decline in total debt from year-end 2010 primarily resulted from the spin-off of the Timeshare segment and the transfer of its non-recourse debt, which was partially offset by a $331 million increase in commercial paper borrowings.

COMMON STOCK

Weighted average fully diluted shares outstanding used to calculate adjusted diluted EPS totaled 346.4 million in the 2011 fourth quarter compared to 382.0 million in the year-ago quarter.

The company repurchased 6.9 million shares of common stock in the fourth quarter at a cost of $200 million. For the full year 2011, the company repurchased 43.4 million shares of common stock at a cost of $1.4 billion. On February 10, 2012, the board of directors increased the company’s authorization to repurchase shares by 35 million shares to yield a total share authorization of 40.5 million shares.

FIRST QUARTER 2012 OUTLOOK

For the first quarter, the company expects comparable systemwide REVPAR on a constant dollar basis will increase 5 to 6 percent in North America, 4 to 5 percent outside North America and 5 to 6 percent worldwide.

2012 OUTLOOK

The company expects full year 2012 comparable systemwide REVPAR on a constant dollar basis will increase 5 to 7 percent in North America, outside North America and worldwide.

The company expects to open about 30,000 rooms in 2012 as most hotels expected to open are already under construction or undergoing conversion from other brands.

For 2012, assuming a strong U.S. dollar and modest fee revenue growth in hotels in Washington, DC, the company expects full year fee revenue could total $1,410 million to $1,450 million, growth of 8 to 11 percent over 2011 adjusted total fee revenue. The company expects owned, leased, corporate housing and other revenue, net of direct expense, could total $130 million to $140 million in 2012.

Compared to prior assumptions for 2012 operating profit provided by the company on October 5, 2011, expectations today reflect 2011 actual results and greater precision resulting from the property-level budgeting process completed in the fourth quarter.

The company estimates that, on a full year basis, one point of worldwide systemwide REVPAR impacts total fees by approximately $20 million pretax and owned, leased, corporate housing and other revenue, net of direct expense, by approximately $5 million pretax.

For 2012, the company expects general, administrative and other expenses to total $660 million to $670 million, an increase of 3 to 4 percent over 2011 adjusted expenses of $643 million.

Given these assumptions, 2012 diluted EPS could total $1.52 to $1.64.

The company expects investment spending in 2012 will total approximately $550 million to $750 million, including $50 million to $100 million for maintenance capital spending. Investment spending will also include other capital expenditures (including property acquisitions), new mezzanine financing and mortgage notes, contract acquisition costs, and equity and other investments. Assuming additional investment opportunities do not appear, roughly $1 billion could be returned to shareholders through share repurchases and dividends.

Based upon the assumptions above, full year 2012 EBITDA is expected to total $1,090 million to $1,150 million, a 10 to 16 percent increase over the prior year’s adjusted EBITDA. Adjusted EBITDA for full year 2011 totaled $992 million and is shown on page A-13.

MARRIOTT INTERNATIONAL, INC. (NYSE: MAR) is a leading lodging company with over 3,700 lodging properties in 73 countries and territories. Marriott International operates and franchises hotels under the Marriott, JW Marriott, The Ritz-Carlton, EDITION, Autograph Collection, Renaissance, AC Hotels by Marriott, Residence Inn, Courtyard, TownePlace Suites, Fairfield Inn & Suites, SpringHill Suites and Bulgari brand names; licenses the development and operation of vacation ownership resorts under the Marriott Vacation Club and Grand Residences by Marriott brands and licenses the development of The Ritz-Carlton Destination Club brand to the newly independent Marriott Vacations Worldwide Corporation; licenses and manages whole-ownership residential brands, including The Ritz-Carlton Residences, JW Marriott Residences and Marriott Residences; operates Marriott Executive Apartments; provides furnished corporate housing through its Marriott ExecuStay division; and operates conference centers. The company is headquartered in Bethesda, Maryland, USA, and had approximately 120,000 employees at 2011 year-end. It is ranked by FORTUNE as the lodging industry’s most admired company and one of the best companies to work for. In fiscal year 2011, Marriott International reported revenues of over $12 billion.

IRPR#1

Tables follow

MARRIOTT INTERNATIONAL, INC.
NON-GAAP FINANCIAL MEASURES
ADJUSTED CONSOLIDATED STATEMENTS OF INCOME
FOURTH QUARTER 2011 AND 2010
(in millions, except per share amounts)

	As Reported 16 Weeks Ended December 30, 2011	Timeshare Spin-off Adjustments(10)	As Adjusted 16 Weeks Ended December 30, 2011 **	As Reported 16 Weeks Ended December 31, 2010	Timeshare Spin-off Adjustments(10)	Other Charges and Certain Tax Items	As Adjusted 16 Weeks Ended December 31, 2010 **	Percent Better (Worse) Adjusted 2011 vs. Adjusted 2010


REVENUES
Base management fees	$ 183	$ (12)	$ 171	$ 178	$ (18)	$ -	$ 160	7
Franchise fees	159	16	175	136	20	-	156	12
Incentive management fees	74	-	74	75	-	-	75	(1)
Owned, leased, corporate housing and other revenue (1)	356	-	356	342	-	-	342	4
Timeshare sales and services (2)	238	(238)	-	372	(372)	-	-	-
Cost reimbursements (3)	2,683	(58)	2,625	2,539	(78)	-	2,461	7
Total Revenues	3,693	(292)	3,401	3,642	(448)	-	3,194	6

OPERATING COSTS AND EXPENSES
Owned, leased and corporate housing - direct (4)	300	-	300	301	-	-	301	-
Timeshare - direct	209	(209)	-	329	(329)	-	-	-
Timeshare strategy - impairment charges (5)	-	-	-	-	-	-	-	-
Reimbursed costs	2,683	(58)	2,625	2,539	(78)	-	2,461	(7)
General, administrative and other (6)	254	(35)	219	351	(38)	(98)	215	(2)
Total Expenses	3,446	(302)	3,144	3,520	(445)	(98)	2,977	(6)

OPERATING INCOME (LOSS)	247	10	257	122	(3)	98	217	18

Gains (losses) and other income (7)	4	(3)	1	28	(20)	-	8	(88)
Interest expense	(47)	5	(42)	(50)	11	-	(39)	(8)
Interest income	5	2	7	8	3	-	11	(36)
Equity in (losses) earnings (8)	(7)	-	(7)	2	(13)	-	(11)	36

INCOME (LOSS) BEFORE INCOME TAXES	202	14	216	110	(22)	98	186	16

(Provision) benefit for income taxes	(61)	4	(57)	63	9	(123)	(51)	(12)

NET INCOME (LOSS)	$ 141	$ 18	$ 159	$ 173	$ (13)	$ (25)	$ 135	18

EARNINGS (LOSSES) PER SHARE - Basic
Earnings (losses) per share (9)	$ 0.42	$ 0.05	$ 0.47	$ 0.48	$ (0.04)	$ (0.07)	$ 0.37	27

EARNINGS (LOSSES) PER SHARE - Diluted
Earnings (losses) per share (9)	$ 0.41	$ 0.05	$ 0.46	$ 0.46	$ (0.04)	$ (0.07)	$ 0.35	31


Basic Shares	335.6	335.6	335.6	365.6	365.6	365.6	365.6
Diluted Shares	346.4	346.4	346.4	382.0	382.0	382.0	382.0


See page A-6 for footnote references.

A-1

MARRIOTT INTERNATIONAL, INC.
NON-GAAP FINANCIAL MEASURES
ADJUSTED CONSOLIDATED STATEMENTS OF INCOME
FULL YEAR 2011 AND 2010
(in millions, except per share amounts)

	As Reported 52 Weeks Ended December 30, 2011	Timeshare Spin-off Adjustments(10)	Other Charges and Certain Tax Items	As Adjusted 52 Weeks Ended December 30, 2011 **	As Reported 52 Weeks Ended December 31, 2010	Timeshare Spin-off Adjustments(10)	Other Charges and Certain Tax Items	As Adjusted 52 Weeks Ended December 31, 2010 **	Percent Better (Worse) Adjusted 2011 vs. Adjusted 2010


REVENUES
Base management fees	$ 602	$ (56)	$ -	$ 546	$ 562	$ (60)	$ -	$ 502	9
Franchise fees	506	60	-	566	441	64	-	505	12
Incentive management fees	195	-	-	195	182	-	-	182	7
Owned, leased, corporate housing and other revenue (1)	1,083	-	-	1,083	1,046	-	-	1,046	4
Timeshare sales and services (2)	1,088	(1,088)	-	-	1,221	(1,221)	-	-	-
Cost reimbursements (3)	8,843	(268)	-	8,575	8,239	(251)	-	7,988	7
Total Revenues	12,317	(1,352)	-	10,965	11,691	(1,468)	-	10,223	7