WASHINGTON, D.C. - April 18, 2002 - Marriott International, Inc. (NYSE:MAR) today reported diluted earnings per share of 32 cents in its 2002 first quarter ended March 22, down 32 percent from the first quarter of 2001. Net income for the quarter was $82 million compared to $121 million a year ago. Systemwide sales totaled $4.6 billion, a decrease of four percent compared to the 2001 first quarter.
J.W. Marriott, Jr., chairman and chief executive officer of Marriott International, said he was pleased that the company`s 2002 first quarter performance came in ahead of expectations. “We are encouraged by the first quarter trends in occupancy. While the company`s overall occupancy at comparable hotels in the U.S. declined nearly four percentage points, stronger than expected leisure and group business, especially at our Marriott, Hotels, Resorts and Suites hotels, helped offset the impact of continued soft business transient demand. Our efforts to keep our guests satisfied have proven successful as well. Even with discounting prevalent in the industry, our brands` REVPAR (revenue per available room) premiums have increased over our competitors during the past several months.
“Our results in controlling costs this quarter were truly outstanding. With U.S. REVPAR down 12.7 percent during the first quarter, the house profit margins at our hotels declined approximately 1 percent, reflecting the strength of our management team and the dedication of our associates.
“Room openings for 2002 are on track, with 7,000 new rooms opened in the first quarter. Interest in converting hotels to a Marriott brand has increased, reflecting owners` and franchisees` desire to have the best performing lodging brands in this challenging economic environment. For the year, we continue to expect to add between 25,000 and 30,000 hotel rooms to our worldwide lodging portfolio. At the end of the first quarter, the company`s pipeline of properties either under construction or approved for development was approximately 55,000 rooms.”
MARRIOTT LODGING reported a 31 percent decrease in operating profit and 7 percent sales decline in the 2002 first quarter. Results reflected weaker lodging demand and lower profits in the vacation timeshare business, partially offset by contributions from new properties worldwide.
Across Marriott’s lodging brands, REVPAR for comparable U.S. properties declined by an average of 12.7 percent in the 2002 first quarter. Average room rates for these hotels decreased nearly 8 percent, while occupancy declined to 67 percent. Marriott`s full service brands (including Marriott Hotels, Resorts and Suites, The Ritz-Carlton, and Renaissance Hotels, Resorts and Suites) experienced a REVPAR decline of 13.2 percent in the quarter, driven largely by an 8 percent decline in rate. Marriott`s select service and extended stay brands (including Courtyard, Fairfield Inn, Residence Inn, TownePlace Suites, and SpringHill Suites) posted a REVPAR decline of 12.0 percent in the first quarter of 2002, with declines in both rate and occupancy.
Results for international lodging operations reflected slightly better trends than in the United States in the 2002 first quarter, with REVPAR in constant U.S. dollars down only 7 percent and improved margins. Demand was particularly healthy in Hong Kong, China and Central Europe.
Marriott`s timeshare business achieved an 11 percent increase in contract sales in the quarter. Sales growth was especially robust at timeshare resorts in Colorado, Hawaii, and California, but remained soft in Orlando. Profits for the quarter in the timeshare business declined 28 percent largely as a result of higher sales and marketing expenses.
The company has added 281 hotels and timeshare resorts (44,751 rooms) to its worldwide lodging portfolio over the past 12 months, while 16 properties (3,456 rooms) exited the system. A net total of 30 hotels and resorts (6,784 rooms) were added in the 2002 first quarter, including four Marriott Hotels, Resorts and Suites (1,208 rooms) and nine Courtyard hotels (1,752 rooms). At quarter-end, the Marriott lodging group encompassed 2,428 hotels and timeshare resorts (442,767 rooms).
MARRIOTT SENIOR LIVING SERVICES posted 9 percent sales growth in the quarter. The division produced $6 million in operating profit, a substantial improvement from $1 million a year ago, due to the continued maturation of communities and a $2 million one-time payment relating to the sale of the communities owned by Crestline Capital Corporation. Occupancy for comparable communities was 83 percent in the quarter, stable with a year ago. The company operates 156 facilities totaling 26,218 residential units.
MARRIOTT DISTRIBUTION SERVICES reported a 4 percent increase in sales in the 2002 first quarter. The division posted an operating loss of $6 million, primarily resulting from lower margins on existing business and reduced levels of Sodexho business. Results were also impacted by a $2 million (pre-tax) write-off relating to an investment in a customer contract. Marriott is continuing its strategic review of this business.
CORPORATE EXPENSES decreased 3 percent in the 2002 first quarter, benefiting substantially from cost containment plans implemented in 2001. Corporate expenses for the quarter also included a $5 million reserve related to the pending sale of a land parcel. Interest expense was down $3 million, reflecting lower average borrowings and lower interest rates. Long-term debt at the end of the quarter, net of cash reserves, was $2.2 billion, down slightly from $2.3 billion at year end. Interest income totaled $19 million for the quarter, up $3 million from a year ago, largely due to income associated with higher average loan balances and cash reserves.
The company`s synthetic fuel investment began to produce results sooner than anticipated and posted an operating deficit of $6 million, pre-tax, for the first quarter of 2002. As a result of this investment, taxes declined by $8 million, resulting in almost $0.01 per share of earnings in the quarter. The company’s effective income tax rate decreased to approximately 30.5 percent in the first quarter of 2002, compared to 36.5 percent in the 2001 first quarter.
During the 2002 first quarter, the company sold four hotels for approximately $100 million. The company ended the first quarter owning just six open hotels. Contingent liabilities at the end of the quarter remained essentially flat compared to year end 2001 levels.
Given the strong margin performance in our lodging business, lower than anticipated average borrowings and corporate expenses, and higher than expected volumes from synthetic fuel, the company believes that earnings per share of $1.65 to $1.70 is achievable in 2002. This outlook assumes an average REVPAR decline of 2 to 3 percent and a house profit margin decline of approximately 1 to 2 percentage points. The following table provides updated quarterly earnings guidance for the remainder of 2002 - 2002 Fully Diluted Earnings Per Share / First Quarter Actual $.32 / Second Quarter Estimate $.41 to $.43 / Third Quarter Estimate $.41 to $.43 / Fourth Quarter Estimate $.51 to $.53 / Full Year 2002 Estimate $1.65 to $1.70
The company expects investment spending in 2002 to include approximately $50 million for maintenance spending and approximately $300 million for new company-developed hotels. We anticipate timeshare spending to total approximately $200 million. We expect to invest $300 million in equity slivers, mezzanine financing and mortgage loans for hotels developed by our partners.