Marriott International (MAR) 10-Q 17 Jul 09 2009 Q2 Quarterly report Financial data

Statement Of Income Alternative

Statement Of Income Alternative (USD $)
In Millions, except Per Share data	3 Months Ended Jun. 19, 2009		3 Months Ended Jun. 13, 2008		6 Months Ended Jun. 19, 2009		6 Months Ended Jun. 13, 2008
REVENUES
Base management fees	$126		$161		$251		$309
Franchise fees	93		110		181		206
Incentive management fees	35		103		78		177
Owned, leased, corporate housing, and other revenue	238		319		458		589
Timeshare sales and services (including note sale losses of $1 for the twenty-four weeks ended June 19, 2009 and note sale gains of $29 for the twelve weeks and twenty-four weeks ended June 13, 2008)	283		388		492		714
Cost reimbursements	1,787		2,104		3,597		4,137
Revenues, Total	2,562		3,185		5,057		6,132
OPERATING COSTS AND EXPENSES
Owned, leased, and corporate housing-direct	217		273		424		517
Timeshare-direct	279		311		499		624
Reimbursed costs	1,787		2,104		3,597		4,137
Restructuring costs	33		0		35		0
General, administrative, and other	146		184		320		346
Costs and Expenses, Total	2,462		2,872		4,875		5,624
OPERATING INCOME	100		313		182		508
Gains and other income (including gain on debt extinguishment of $21 for the twenty-four weeks ended June 19, 2009)	3		9		28		12
Interest expense	(28)		(38)		(57)		(80)
Interest income	9		9		15		20
(Provision for) reversal of provision for loan losses	(1)		0		(43)		2
Equity in (losses) earnings	(4)		(3)		(38)		24
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	79		290		87		486
Provision for income taxes	(44)		(139)		(77)		(214)
INCOME FROM CONTINUING OPERATIONS	35		151		10		272
Discontinued operations, net of tax	0		4		0		3
NET INCOME	35		155		10		275
Add: Net losses attributable to noncontrolling interests, net of tax	2		2		4		3
NET INCOME ATTRIBUTABLE TO MARRIOTT	$37		$157		$14		$278
EARNINGS PER SHARE-Basic
Earnings from continuing operations attributable to Marriott shareholders	0.1	[1]	0.43	[1]	0.04	[1]	0.77	[1]
Earnings from discontinued operations attributable to Marriott shareholders	$0		0.01		$0		0.01
Earnings per share attributable to Marriott shareholders	0.1		0.44		0.04		0.78
EARNINGS PER SHARE-Diluted
Earnings from continuing operations attributable to Marriott shareholders	0.1	[1]	0.41	[1]	0.04	[1]	0.74	[1]
Earnings from discontinued operations attributable to Marriott shareholders	$0		0.01		$0		0.01
Earnings per share attributable to Marriott shareholders	0.1		0.42		0.04		0.75
CASH DIVIDENDS DECLARED PER SHARE	$0		0.0872		0.0872		0.1619
[1]See Footnote No. 8, "Earnings Per Share," for income from continuing operations attributable to Marriott used to calculate earnings from continuing operations per share attributable to Marriott shareholders.

1_Statement Of Income Alternati

Statement Of Income Alternative (Parenthetical) (USD $)
In Millions	3 Months Ended Jun. 19, 2009	3 Months Ended Jun. 13, 2008	6 Months Ended Jun. 19, 2009	6 Months Ended Jun. 13, 2008
Timeshare sales and services, note sale gains and losses	$0	$29	($1)	$29
Gains and other income, gain on debt extinguishment	$0	$0	$21	$0

Statement Of Financial Position

Statement Of Financial Position Classified (USD $)
In Millions	Jun. 19, 2009	Jan. 02, 2009
Current assets
Cash and equivalents	$125	$134
Accounts and notes receivable	863	898
Inventory	2,001	1,981
Current deferred taxes, net	175	186
Prepaid expenses	96	72
Other	138	135
Assets, Current, Total	3,398	3,406
Property and equipment	1,455	1,443
Intangible assets
Goodwill	875	875
Contract acquisition costs and other	716	710
Intangible Assets, Net, Total	1,591	1,585
Equity and cost method investments	326	346
Notes receivable
Loans to equity method investees	51	50
Loans to timeshare owners	399	607
Other notes receivable	141	173
Notes and Loans Receivable, Net, Noncurrent, Total	591	830
Other long-term receivables	90	158
Deferred taxes, net	841	727
Other	451	408
Assets, Total	8,743	8,903
Current liabilities
Current portion of long-term debt	136	120
Accounts payable	579	704
Accrued payroll and benefits	582	633
Liability for guest loyalty program	440	446
Timeshare segment deferred revenue	70	70
Other payables and accruals	598	560
Liabilities, Current, Total	2,405	2,533
Long-term debt	2,713	2,975
Liability for guest loyalty program	1,163	1,090
Self-insurance reserves	222	204
Other long-term liabilities	821	710
Marriott shareholders' equity
Class A Common Stock	5	5
Additional paid-in-capital	3,538	3,590
Treasury stock dividends distributable	31	0
Retained earnings	3,540	3,565
Treasury stock, at cost	(5,695)	(5,765)
Accumulated other comprehensive loss	(4)	(15)
Shareholders' Equity Attributable to Marriott	1,415	1,380
Noncontrolling interests	4	11
Total Shareholders' Equity	1,419	1,391
Liabilities and Stockholders' Equity, Total	$8,743	$8,903

Statement Of Cash Flows Indirec

Statement Of Cash Flows Indirect (USD $)
In Millions	6 Months Ended Jun. 19, 2009	6 Months Ended Jun. 13, 2008
OPERATING ACTIVITIES
Net income	$10	$275
Adjustments to reconcile to cash provided by operating activities:
Depreciation and amortization	81	87
Income taxes	27	116
Timeshare activity, net	80	(34)
Liability for guest loyalty program	63	70
Restructuring costs and other charges, net	17	0
Asset impairments and write-offs	60	2
Working capital changes and other	9	(159)
Net cash provided by operating activities	347	357
INVESTING ACTIVITIES
Capital expenditures	(83)	(152)
Dispositions	1	19
Loan advances	(18)	(16)
Loan collections and sales	7	29
Equity and cost method investments	(14)	5
Contract acquisition costs	(14)	(96)
Other	48	(48)
Net cash used in investing activities	(73)	(259)
FINANCING ACTIVITIES
Commercial paper/credit facility, net	(73)	217
Issuance of long-term debt	0	16
Repayment of long-term debt	(157)	(183)
Issuance of Class A Common Stock	8	30
Dividends paid	(61)	(54)
Purchase of treasury stock	0	(347)
Other	0	16
Net cash used in financing activities	(283)	(305)
DECREASE IN CASH AND EQUIVALENTS	(9)	(207)
CASH AND EQUIVALENTS, beginning of period	134	332
CASH AND EQUIVALENTS, end of period	$125	$125

Notes to Financial Statements

Notes to Financial Statements
	6 Months Ended Jun. 19, 2009 USD / shares
Notes to Financial Statements [Abstract]
1.Basis of Presentation	1. Basis of Presentation The condensed consolidated financial statements present the results of operations, financial position, and cash flows of Marriott International, Inc. (Marriott, and together with its subsidiaries we, us, or the Company). In accordance with Financial Accounting Standards (FAS) No.160, Noncontrolling Interests in Consolidated Financial Statements-an Amendment of ARB No.51 (FAS No.160), references in this report to our earnings per share, net income and shareholders equity attributable to Marriott do not include noncontrolling interests (previously known as minority interests), which we report separately. Please see Footnote No.2, New Accounting Standards, for additional information on this accounting standard adopted in the 2009 first quarter. The accompanying condensed consolidated financial statements have not been audited. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP). We believe our disclosures are adequate to make the information presented not misleading. You should, however, read the condensed consolidated financial statements in conjunction with the consolidated financial statements and notes to those financial statements in our Annual Report on Form 10-K for the fiscal year ended January2, 2009, (2008 Form 10-K). Certain terms not otherwise defined in this quarterly report have the meanings specified in our 2008 Form 10-K. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods, and the disclosures of contingent liabilities. Accordingly, ultimate results could differ from those estimates. We have reclassified certain prior year amounts to conform to our 2009 presentation. Because we discontinued our synthetic fuel business in 2007, we have segregated the balances and activities of the synthetic fuel reportable segment and reported them as discontinued operations for all periods presented. On May1, 2009, the Board of Directors declared the issuance of a stock dividend of 0.00369 shares of common stock for each outstanding share of common stock of the Company, payable on July30, 2009, to shareholders of record on June25, 2009. For periods prior to the stock dividend, all share and per share data in our condensed consolidated financial statements and related notes have been retroactively adjusted to reflect the stock dividend using a factor of 0.00360, adjusted downward to reflect cash that will be paid in lieu of fractional shares to shareholders as of the date of record. Our 2009 second quarter ended on June19, 2009; our 2008 fourth quarter ended on January2, 2009; and our 2008 second quarter ended on June13, 2008. In our opinion, the accompanying condensed consolidated financial statements reflect all normal and recurring adjustments necessary to present fairly our financial position as of June19, 2009, a
2.New Accounting Standards	2. New Accounting Standards Financial Accounting Standards No.141 (Revised 2007), Business Combinations (FAS No.141(R)) We adopted FAS No.141(R) on January3, 2009, the first day of our 2009 fiscal year. FAS No.141(R) significantly changed the accounting for business combinations. Under FAS No.141(R), an acquiring entity is required to recognize all the assets acquired and all the liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. Transaction costs are no longer included in the measurement of the business acquired. Instead, these costs are expensed as they are incurred. FAS No.141(R) also includes a substantial number of new disclosure requirements. FAS No.141(R) applies to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December15, 2008, which for us was the beginning of our 2009 fiscal year. The adoption of FAS No.141(R) did not have a material impact on our financial statements. Financial Accounting Standards No.157, Fair Value Measurements (FAS No.157) We adopted FAS No.157 on December29, 2007, the first day of our 2008 fiscal year. FASB Staff Position (FSP) FAS No.157-2, Effective Date of Financial Accounting Standards Board (FASB) Statement No.157 (FSP FAS No.157-2), amended FAS No.157 by delaying its effective date, by one year, for non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. In accordance with FSP FAS No.157-2, we adopted the provisions of FAS No.157 to non-financial assets and non-financial liabilities in the first quarter of 2009. See Footnote No.6, Fair Value Measurements, for additional information. The adoption did not have a material impact on our financial statements. Financial Accounting Standards No.160, Noncontrolling Interests in Consolidated Financial Statements-an Amendment of ARB No.51 (FAS No.160) We adopted FAS No.160 on January3, 2009, the first day of our 2009 fiscal year. FAS No.160 establishes new accounting and reporting standards for noncontrolling interests, previously known as minority interest, in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this statement requires the recognition of noncontrolling interests as equity in the consolidated financial statements separate from the parents equity. The amount of net income or loss attributable to the noncontrolling interests is included in consolidated net income on the face of the income statement. FAS No.160 clarifies that changes in a parents ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, this statement requires that a parent recognize a gain or loss in net income attributable to Marriott when a subsidiary is deconsolidated. Such gain or loss is measured using the fair value of the noncontrolling equity investment on the deconsolidation date. FAS No.160 also includes expanded disclosure requirements regarding the interests of the parent a
3.Income Taxes	3. Income Taxes Our federal income tax returns have been examined and we have settled all issues for tax years through 2004 with the exception of one 1994 transaction as discussed in Footnote No.2, Income Taxes, in our 2008 Form 10-K. The 2005, 2006 and 2007 Internal Revenue Service (IRS) field examinations have been completed, and the unresolved issues from those years are now at the IRS Appeals Division. The 2008 and 2009 IRS examinations are ongoing as part of the IRSs Compliance Assurance Program. Various state, local, and foreign income tax returns are also under examination by taxing authorities. In 2009, we recorded a $17 million income tax expense in the second quarter and a $26 million income tax expense in the first quarter primarily related to the treatment of funds received from foreign subsidiaries. We are contesting the issue with the IRS for tax years 2005, 2006, and 2007. The balance of unrecognized tax benefits was $226 million at the end of the 2009 second quarter. For the second quarter of 2009, we increased unrecognized tax benefits by $19 million (from $207 million at the end of the 2009 first quarter) primarily representing an increase for the foreign subsidiaries issue. For the first half of 2009, we increased unrecognized tax benefits by $85 million (from $141 million at year-end 2008), primarily representing an increase for the foreign subsidiaries issue. The unrecognized tax benefits balance of $226 million at the end of the 2009 second quarter included $119 million of tax positions that, if recognized, would impact the effective tax rate. As a large taxpayer, we are under continual audit by the IRS and other taxing authorities. It is possible that the amount of the liability for unrecognized tax benefits could change during the next 52-week period, but we do not anticipate that a significant impact to the unrecognized tax benefit balance will occur.
4.Discontinued Operations-Synthetic Fuel	4. Discontinued Operations-Synthetic Fuel Our synthetic fuel operations consisted of four coal-based synthetic fuel production facilities (the Facilities). Because tax credits under Section45K of the Internal Revenue Code were only available for the production and sale of synthetic fuel produced from coal before 2008, and because we estimated that high oil prices during 2007 would result in the phase-out of a significant portion of the tax credits available for synthetic fuel produced and sold in 2007, we permanently shut down the Facilities on November3, 2007. Accordingly, we now report this business as a discontinued operation. See Footnote No.3, Discontinued Operations-Synthetic Fuel, in our 2008 Annual Report on Form 10-K for additional information. The following table provides additional balance sheet information relating to the discontinued synthetic fuel operations. The discontinued synthetic fuel operations reflected in the income statement for the twelve and twenty-four weeks ended June13, 2008, only represent activity related to Marriott and there were no noncontrolling interests. Income Statement Summary TwelveWeeksEnded Twenty-FourWeeksEnded ($ in millions) June19,2009 June13,2008 June19,2009 June13,2008 Revenue $ $ $ $ 1 Loss from discontinued operations before income taxes $ $ (2 ) $ $ (3 ) Tax benefit (3 ) (3 ) Tax credits 9 9 Total tax benefit 6 6 Income from discontinued operations $ $ 4 $ $ 3 Balance Sheet Summary At Period End ($ in millions) June19,2009 January2,2009 Liabilities (3 )
5.Share-Based Compensation	5. Share-Based Compensation Under our 2002 Comprehensive Stock and Cash Incentive Plan (the Comprehensive Plan), we award: (1)stock options to purchase our ClassA Common Stock (Stock Option Program); (2)share appreciation rights (SARs) for our ClassA Common Stock (Stock Appreciation Right Program); (3)restricted stock units of our ClassA Common Stock; and (4)deferred stock units. We grant awards at exercise prices or strike prices that are equal to the market price of our ClassA Common Stock on the date of grant. Restricted Stock Units We granted 0.8million restricted stock units during the first half of 2009 to certain officers and key employees and those units vest generally over four years in equal annual installments commencing one year after the date of grant. The weighted average grant-date fair value of the restricted stock units granted in the first half of 2009 was $19. SARs We granted 0.5million SARs to officers and key employees during the first half of 2009. These SARs expire 10 years after the date of grant and both vest and are exercisable in cumulative installments of one quarter at the end of each of the first four years following the date of grant. The weighted average grant-date fair value of these SARs was $5, and the weighted average exercise price was $15. During the second quarter of 2009, we also granted 5,600 non-employee director SARs to a director with a weighted average exercise price of $23 and a weighted average grant-date fair value of $10. These non-employee director SARs expire 10 years after the date of grant and vest upon grant, but are generally not exercisable until one year after grant. To estimate the fair value of each SAR granted, we use a lattice-based valuation model that incorporates a range of assumptions for inputs. Historical data is used to estimate exercise behaviors for separate groups of retirement eligible and non-retirement eligible employees. The expected terms of the SARs granted are derived from the outputs of the valuation model and represent the periods of time that the SARs granted are expected to be outstanding. The range of assumptions for the SARs granted during the first half of 2009 is shown in the following table. Expected volatility 32%-33 % Dividend yield 0.95 % Risk-free rate 2.0%-3.2 % Expected term (in years) 6-10 The risk-free rates are based on the corresponding U.S. Treasury spot rates for the expected duration at the date of grant, converted to a continuously compounded rate. Deferred Stock Units We issued 32,000 deferred stock units with a weighted average grant-date fair value of $23 to Non-employee directors during the second quarter of 2009. These non-employee director deferred stock units vest within one year and are distributed upon election. Other Information At the end of the 2009 second quarter, 70.2million shares were reserved under the Comprehensive Plan, including 37.8million shares under the Stock Option Program and Stock Appreciation Right Program. On May1, 2009, the shareholders approved an amendment to the Comprehensive Plan to increase the number of shares of the Comp
6.Fair Value Measurements	6. Fair Value Measurements FAS No.157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. FAS No.157 details the disclosures that are required for items measured at fair value. We have various financial instruments we must measure on a recurring basis under FAS No.157 including certain marketable securities, derivatives, and residual interests related to our asset securitizations. We also apply the provisions of FAS No.157 to various non-recurring measurements for our financial and non-financial assets and liabilities, which included the impairment of a joint venture investment, and two security deposits in the first quarter of 2009. See Footnote No.18, Restructuring Costs and Other Charges, for further information. We measure our assets and liabilities using inputs from the following three levels of the fair value hierarchy: Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). Level 3 includes unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability. We develop these inputs based on the best information available, including our own data. In accordance with the fair value hierarchy, the following table shows the fair value as of June19, 2009, of those assets and liabilities that we must measure at fair value on a recurring basis and that we classify as Other current assets, Other assets, Other payables and accruals, and Other long-term liabilities: ($ in millions) FairValueMeasurementsasofJune19,2009 Description Balanceat June19, 2009 Level1 Level2 Level3 Assets: Residual interests $ 180 $ $ $ 180 Marketable securities 32 13 19 Liabilities: Derivative instruments (9 ) (4 ) (4 ) (1 ) The following tables summarize the changes in fair value of our Level 3 assets and liabilities for the twelve and twenty-four weeks ended June19, 2009: ($ in millions) FairValueMeasurementsofAssets andLiabilitiesUsingLevel3Inputs Residual Interests Derivative Instruments Beginning balance at March28, 2009 $ 205 $ (2 ) Total gains (losses)
7.Fair Value of Financial Instruments	7. Fair Value of Financial Instruments We adopted FSP FAS No.107-1 and APB Opinion No.28-1 as of March28, 2009, the first day of our 2009 second quarter. The guidance requires quarterly fair value disclosures for financial instruments rather than annual disclosure. We believe that the fair values of our current assets and current liabilities approximate their reported carrying amounts. The carrying values and the fair values of non-current financial assets and liabilities, that qualify as financial instruments per FAS No.107, Disclosures about Fair Value of Financial Instruments, are shown in the following table. At June19, 2009 At Year-End 2008 ($ in millions) Carrying Amount Fair Value Carrying Amount Fair Value Cost method investments $ 39 $ 33 $ 37 $ 36 Long-term notes receivable 591 568 830 817 Residual interests and effectively owned notes 202 202 135 135 Restricted cash 20 20 51 51 Marketable securities 32 32 24 24 Other long-term receivables 22 20 24 24 Total long-term financial assets $ 906 $ 875 $ 1,101 $ 1,087 Long-term debt $ (2,682 ) $ (2,606 ) $ (2,941 ) $ (2,720 ) Other long-term liabilities (88 ) (88 ) (92 ) (92 ) Long-term derivative liabilities (5 ) (5 ) (20 ) (20 ) Total long-term financial liabilities $ (2,775 ) $ (2,699 ) $ (3,053 ) $ (2,832 ) We estimate the fair value of our cost method investments by applying a cap rate to stabilized earnings. We estimate the fair value of our long term notes receivables using various methods, which include discounting cash flows using risk-adjusted rates and applying historical results from our most recent securitization transaction to our unsold notes receivables. The carrying value of our restricted cash approximates its fair value, and we estimate the fair value of our other long term receivables by discounting future cash flows at risk-adjusted rates. The carrying value of our marketable securities at June19, 2009, of $32 million includes $13 million in equity securities in one entity and $19 million in debt securities of the U.S. Government, its sponsored agencies and other U.S. corporations invested for our self-insurance programs. Our residual interests, marketable securities, and restricted cash are included within the Other long-term assets caption on our Condensed Consolidated Balance Sheets. We estimate the fair value of our long-term debt, excluding leases, using a combination of quoted market prices and expected future payments discounted at risk-adjusted rates. Other long-term liabilities represent guarantee costs and reserves and deposit liabilities. The carrying value of these liabilities approximates their fair values. Our residual interests related to our timeshare securitizations, marketable securities, and derivative
8.Earnings Per Share	8. Earnings Per Share The table below illustrates the reconciliation of the earnings (losses) and number of shares used in our calculations of basic and diluted earnings per share attributable to Marriott shareholders. TwelveWeeksEnded Twenty-FourWeeksEnded (in millions, except per share amounts) June19,2009 June13,2008 June19,2009 June13,2008 Computation of Basic Earnings Per Share Attributable to Marriott Shareholders Income from continuing operations $ 35 $ 151 $ 10 $ 272 Net losses attributable to noncontrolling interests 2 2 4 3 Income from continuing operations attributable to Marriott shareholders 37 153 14 275 Weighted average shares outstanding 353.7 354.8 352.7 355.2 Basic earnings per share from continuing operations attributable to Marriott shareholders $ 0.10 $ 0.43 $ 0.04 $ 0.77 Computation of Diluted Earnings Per Share Attributable to Marriott Shareholders Income from continuing operations attributable to Marriott shareholders $ 37 $ 153 $ 14 $ 275 Weighted average shares outstanding 353.7 354.8 352.7 355.2 Effect of dilutive securities Employee stock option and SARs plans 7.4 13.8 6.3 13.9 Deferred stock incentive plans 1.4 1.5 1.5 1.6 Restricted stock units 1.0 1.2 1.1 1.8 Shares for diluted earnings per share attributable to Marriott shareholders 363.5 371.3 361.6 372.5 Diluted earnings per share from continuing operations attributable to Marriott shareholders $ 0.10 $ 0.41 $ 0.04 $ 0.74 We compute the effect of dilutive securities using the treasury stock method and average market prices during the period. We determine dilution based on earnings from continuing operations attributable to Marriott shareholders. In accordance with FAS No.128, Earnings per Share, we have not included the following stock options and SARs in our calculation of diluted earnings per share attributable to Marriott shareholders because the exercise prices were greater than the average market prices for the applicable periods: (a) for the twelve-week period ended June19, 2009, 12.6million options and SARs, with exercise prices ranging from $21.95 to $49.03; (b) for the twelve-week period ended June13, 2008, 2.6million options and SARs, with exercise prices ranging from $34.11 to $49.03; (c) for the twenty-four week period ended June19, 2009, 12.9million options and SARs, with exercise prices ranging from $18.94 to $49.03; and (d) for the twenty-four week period ended June13, 2008, 2.6million options and SARs, with exercise prices ranging from $34.11 to $49.03. In addition, for both the twelve and twenty-four week periods ended June 19, 2009, we have also not included 1.3 millio
9.Inventory	9. Inventory Inventory, totaling $2,001 million and $1,981 million as of June19, 2009, and January2, 2009, respectively, consists primarily of Timeshare segment interval, fractional ownership, and residential products totaling $1,980 million and $1,959 million as of June19, 2009, and January2, 2009, respectively. Inventory totaling $21 million and $22 million as of June19, 2009, and January2, 2009, respectively, primarily relates to hotel operating supplies for the limited number of properties we own or lease. We value Timeshare segment interval, fractional ownership, and residential products at the lower of cost or net realizable value, and generally value operating supplies at the lower of cost (using the first-in, first-out method) or market. Consistent with recognized industry practice, we classify Timeshare segment interval, fractional ownership, and residential products inventory, which has an operating cycle that exceeds 12 months, as a current asset. As noted throughout this report, the economic recession has resulted in weaker demand for our Timeshare segment products, in particular our residential (or whole ownership) products, but also to a lesser extent our fractional ownership and timeshare products. During the 2009 second quarter, we were able to increase sales over the 2009 first quarter through various sales promotions, including pricing adjustments. We continue to assess our strategic alternatives for each of our projects to address the weaker demand environment, including among other things, future development plans, inventory requirements and determining what, if any, pricing adjustments may be appropriate to stimulate sales and accelerate cash flows and returns. It is possible that changes to our plans could have a material impact on the carrying value of certain projects in our inventory and result in impairment or other charges.
10.Property and Equipment	10. Property and Equipment The following table details the composition of our property and equipment balances at June19, 2009, and January2, 2009. ($ in millions) June19,2009 January2,2009 Land $ 479 $ 469 Buildings and leasehold improvements 916 852 Furniture and equipment 959 954 Construction in progress 210 244 2,564 2,519 Accumulated depreciation (1,109 ) (1,076 ) $ 1,455 $ 1,443
11.Notes Receivable	11. Notes Receivable The following table details the composition of our notes receivable balances at June19, 2009, and January2, 2009. ($ in millions) June19,2009 January2,2009 Loans to timeshare owners $ 468 $ 688 Lodging senior loans 2 2 Lodging mezzanine and other loans 200 236 670 926 Less current portion (79 ) (96 ) $ 591 $ 830 We classify notes receivable due within one year as current assets in the caption Accounts and notes receivable in the accompanying Condensed Consolidated Balance Sheets, including $69 million and $81 million, at June19, 2009, and January2, 2009, respectively, related to Loans to timeshare owners. In the first quarter of 2009, we fully reserved two notes receivable balances that we deemed uncollectible, one of which relates to a project that is in development. We recorded a total charge of $42 million in the first quarter of 2009 in the Provision for loan losses caption in our Condensed Consolidated Statements of Income related to these two notes receivable balances. We also recorded a $1 million charge in the second quarter of 2009 related to two notes receivable balances. See Footnote No.18, Restructuring Costs and Other Charges for additional information.
12.Asset Securitizations	12. Asset Securitizations As noted in Footnote No.12, Asset Securitizations, in our 2008 Form 10-K, we periodically sell, without recourse, through special purpose entities, notes receivable originated by our Timeshare segment in connection with the sale of timeshare interval and fractional products. We continue to service the notes and transfer all proceeds collected to special purpose entities. We retain servicing assets and other interests in the notes and account for these assets and interests as residual interests. Residual interests at June19, 2009, and January2, 2009, totaled $180 million and $221 million, respectively, and included servicing assets totaling $13 million and $12 million, respectively. The interests are limited to the present value of cash available after paying financing expenses and program fees and absorbing credit losses. We have inherent risk for changes in fair value of the servicing assets but do not deem the risk significant and therefore, do not use other financial instruments to mitigate this risk. The changes in servicing assets for the twelve weeks and twenty-four weeks ended June19, 2009, measured using the fair value method appear in the following table: ($ in millions) ServicingAssets Twelve Weeks EndedJune19,2009 ServicingAssets Twenty-Four Weeks EndedJune19,2009 Fair value at beginning of period $ 14 $ 12 Servicing from securitizations 3 Changes in fair value (1) (1 ) (2 ) Fair value at end of period $ 13 $ 13 (1) Principally represents changes due to collection/realization of expected future cash flows over time and changes in fair value due to changes in key variables listed below. At the end of the second quarter of 2009, $1,260 million of principal due from timeshare interval and fractional owners remained outstanding in 13 special purpose entities formed in connection with our timeshare note sales. Delinquencies of more than 90 days amounted to $22 million. The impact to us from delinquencies, and our maximum exposure to loss as a result of our involvement with these special purpose entities, is limited to our residual interests, which we value based on a discounted cash flow model, as discussed in Footnote No.6, Fair Value Measurements. Please see the Timeshare Residual Interests Valuation caption within the Restructuring Costs and Other Charges section of the Managements Discussion and Analysis of Financial Condition and Results of Operations section for additional information on the risks associated with our residual interests. Under the terms of our timeshare note sales, we have the right, at our option, to repurchase a limited amount of defaulted mortgage notes at par. In cases where we have chosen to exercise this repurchase right, we have been able to resell the timeshare units underlying the defaulted loans without incurring material losses, although we may not be able to do so in the future. Cash flows between us and third-party purchasers during the twenty-four weeks ended June19, 2009, and June13, 2008 were as follows: net proceeds to us from new
13.Long-term Debt	13. Long-term Debt Our long-term debt at June19, 2009, and January2, 2009, consisted of the following: ($ in millions) June19, 2009 January2, 2009 Senior Notes: Series C, interest rate of 7.875%, face amount of $76, maturing September15, 2009 $ 76 $ 76 Series F, interest rate of 4.625%, face amount of $348, maturing June15, 2012 347 347 Series G, interest rate of 5.810%, face amount of $316, maturing November10, 2015 301 349 Series H, interest rate of 6.200%, face amount of $289, maturing June15, 2016 289 314 Series I, interest rate of 6.375%, face amount of $293, maturing June15, 2017 291 335 Series J, interest rate of 5.625%, face amount of $400, maturing February15, 2013 398 397 $2.4B Effective Credit Facility, average interest rate of 0.959% at June19, 2009 896 969 Other 251 308 2,849 3,095 Less current portion (136 ) (120 ) $ 2,713 $ 2,975 As of the end of our 2009 second quarter, all debt was unsecured. At the end of the 2009 second quarter, we had long-term public debt ratings of BBB- from Standard and Poors and Baa3 from Moodys. In the first half of 2009, we repurchased $122 million principal amount of our Senior Notes in the open market, across multiple series. We recorded a gain of $21 million for the debt extinguishment representing the difference between the acquired debts purchase price of $98 million and its carrying amount of $119 million. As discussed in more detail in Footnote No.13, Long-term debt, of our 2008 Form 10-K, we are party to a multicurrency revolving credit agreement (the Credit Facility) that provides for borrowings and letters of credit and supported our commercial paper program. The effective size of the Credit Facility is approximately $2.4 billion. Until the 2008 fourth quarter, we regularly issued short-term commercial paper primarily in the United States and, to a much lesser extent, in Europe. We classified outstanding commercial paper as long-term debt based on our ability and intent to refinance it on a long-term basis. We reserved unused capacity under our Credit Facility to repay outstanding commercial paper borrowings in the event that the commercial paper market was not available to us for any reason when outstanding borrowings mature. Disruptions in the financial markets beginning in September 2008 significantly reduced liquidity in the commercial paper market. Accordingly, in September 2008 we borrowed under the Credit Facility to fund anticipated short-term commercial paper maturities and, to a lesser extent, other general corporate needs, including working capital and capital expenditures, and suspended issuing commercial paper. All of our previously issued commercial paper matured and was repaid in the 2008 fourth quarter. Our Standard and Poors commercial paper rating at the end of the 2009 second quarter was A3 and the market for A3 commercial paper is currently very limited. It would be very difficult to rely on the use of this
14.Comprehensive Income and Capital Structure	14. Comprehensive Income and Capital Structure The following tables detail comprehensive income attributable to Marriott, comprehensive income attributable to noncontrolling interests, and consolidated comprehensive income for the twelve and twenty-four weeks ended June19, 2009, and June13, 2008. AttributabletoMarriott Attributable to NoncontrollingInterests Consolidated ($ in millions) Twelve Weeks Ended Twelve Weeks Ended TwelveWeeksEnded June19, 2009 June13, 2008 June19, 2009 June13, 2008 June19, 2009 June13, 2008 Net income (loss) $ 37 $ 157 $ (2 ) $ (2 ) $ 35 $ 155 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments 23 3 23 3 Other derivative instrument adjustments (5 ) 19 (5 ) 19 Unrealized gains (losses) on available-for-sale securities 5 (1 ) 5 (1 ) Total other comprehensive (loss) income, net of tax 23 21 23 21 Comprehensive (loss) income $ 60 $ 178 $ (2 ) $ (2 ) $ 58 $ 176 AttributabletoMarriott Attributable to NoncontrollingInterests Consolidated ($ in millions) Twenty-FourWeeksEnded Twenty-FourWeeksEnded Twenty-FourWeeksEnded June 19, 2009 June 13, 2008 June 19, 2009 June 13, 2008 June19, 2009 June13, 2008 Net income (loss) $ 14 $ 278 $ (4 ) $ (3 ) $ 10 $ 275 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments 12 16 12 16 Other derivative instrument adjustments (4 ) 10 (4 ) 10 Unrealized gains (losses) on available-for-sale securities 3 (6 ) 3 (6 ) Total other comprehensive (loss) income, net of tax 11 20 11 20 Comprehensive (loss) income $ 25 $ 298 $ (4 ) $ (3 ) $ 21 $ 295 The following table details changes in shareholders equity, including changes in equity attributable to Marriott shareholders and changes in equity attributable to the noncontrolling interests. We have restated common shares outstanding to reflect the stock dividend that was declared on May1, 2009. The stock dividend will be distributed in the 2009 third quarter on July30, 2009, to shareholders of record as of June25, 2009. (in millions, except per share amounts) Equity Attributable to Marriott Shareholders Common Shares Outstanding Total Class A Common Stock Additional Paid-in-Capital Retained Earnings
15.Contingencies	15. Contingencies Guarantees We issue guarantees to certain lenders and hotel owners primarily to obtain long-term management contracts. The guarantees generally have a stated maximum amount of funding and a term of three to 10 years. The terms of guarantees to lenders generally require us to fund if cash flows from hotel operations are inadequate to cover annual debt service or to repay the loan at the end of the term. The terms of the guarantees to hotel owners generally require us to fund if the hotels do not attain specified levels of operating profit. Guarantee fundings to lenders and hotel owners are generally recoverable as loans repayable to us out of future hotel cash flows and/or proceeds from the sale of hotels. We also enter into project completion guarantees with certain lenders in conjunction with hotels and Timeshare segment properties that we or our joint venture partners are building. The maximum potential amount of future fundings for guarantees where we are the primary obligor and the carrying amount of the liability for expected future fundings at June19, 2009, are as follows: ($ in millions) Guarantee Type MaximumPotential Amount of Future Fundings Liabilityfor ExpectedFuture Fundings at June19, 2009 Debt service $ 37 $ 1 Operating profit 158 25 Other 96 7 Total guarantees where we are the primary obligor $ 291 $ 33 The liability for expected future fundings at June19, 2009, is included in our Condensed Consolidated Balance Sheets as follows: $5 million in the Other payables and accruals line item and $28 million in the Other long-term liabilities line item. Our guarantees of $291 million listed in the preceding table include $31 million of operating profit guarantees that will not be in effect until the underlying properties open and we begin to operate the properties, along with $3 million of debt service guarantees that will not be in effect until the underlying debt has been funded, and $5 million of other guarantees that will not be in effect until certain requirements are met. The guarantees of $291 million in the preceding table do not include $188 million of guarantees that we anticipate will expire in the years 2011 through 2013, related to Senior Living Services lease obligations totaling $131 million and lifecare bonds of $57 million for which we are secondarily liable. Sunrise Senior Living, Inc. (Sunrise) is the primary obligor of the leases and $8 million of the lifecare bonds, and CNL Retirement Properties, Inc., which subsequently merged with Health Care Property Investors, Inc. (HCP), is the primary obligor of $47 million of the lifecare bonds. Five Star is the primary obligor of the remainder of the lifecare bonds. Prior to our sale of the Senior Living Services business in 2003, these preexisting guarantees were guarantees by us of obligations of consolidated Senior Living Services subsidiaries. Sunrise and HCP have indemnified us for any guarantee fundings we may be called on to make in connection with these lease obligations and lifecare bonds. While we currently do not ex
16.Derivative Instruments	16. Derivative Instruments We adopted FAS No.161 on January3, 2009, the first day of our 2009 fiscal year. FAS No.161 enhances the current disclosure framework for derivative instruments and hedging activities. In this initial year of adoption, we have elected not to present earlier periods for comparative purposes. The designation of a derivative instrument as a hedge and its ability to meet the FAS No.133 hedge accounting criteria determines how the change in fair value of the derivative instrument will be reflected in the Condensed Consolidated Financial Statements. A derivative qualifies for hedge accounting if, at inception, the derivative is expected to be highly effective in offsetting the underlying hedged cash flows or fair value and the documentation standards of FAS No.133 are fulfilled at the time we enter into the derivative contract. A hedge is designated as a cash flow hedge, fair value hedge, or a net investment in foreign operations hedge based on the exposure being hedged. The asset or liability value of the derivative will change in tandem with its fair value. Changes in fair value, for the effective portion of qualifying hedges, are recorded in other comprehensive income (OCI). The derivatives gain or loss is released from OCI to match the timing of the underlying hedged cash flows effect on earnings. We review the effectiveness of our hedging instruments on a quarterly basis, we recognize current period hedge ineffectiveness immediately in earnings, and we discontinue hedge accounting for any hedge that we no longer consider to be highly effective. We recognize changes in fair value for derivatives not designated as hedges or those not qualifying for hedge accounting in current period earnings. Upon termination of cash flow hedges, we release gains and losses from OCI based on the timing of the underlying cash flows, unless the termination results from the failure of the intended transaction to occur in the expected timeframe. Such untimely transactions require us to immediately recognize in earnings gains and losses previously recorded in OCI. Changes in interest rates, foreign exchange rates, and equity securities expose us to market risk. We manage our exposure to these risks by monitoring available financing alternatives, as well as through development and application of credit granting policies. We also use derivative instruments, including cash flow hedges, net investment in foreign operations hedges, fair value hedges, and other derivative instruments, as part of our overall strategy to manage our exposure to market risks associated with fluctuations in interest rates and foreign currency exchange rates. As a matter of policy, we only enter into transactions that we believe will be highly effective at offsetting the underlying risk and we do not use derivatives for trading or speculative purposes. Our use of derivative instruments to manage market risks exposes us to the risk that a counterparty could default on a derivative contract. Our financial instrument counterparties are high-quality investment or commercial banks with significant experience with such instruments. We manage our exposur
17.Business Segments	17. Business Segments We are a diversified hospitality company with operations in five business segments: North American Full-Service Lodging, which includes the Marriott Hotels Resorts, Marriott Conference Centers, JW Marriott Hotels Resorts, Renaissance Hotels Resorts, and Renaissance ClubSport properties located in the continental United States and Canada; North American Limited-Service Lodging, which includes the Courtyard, Fairfield Inn, SpringHill Suites, Residence Inn, TownePlace Suites, and Marriott ExecuStay properties located in the continental United States and Canada; International Lodging, which includes the Marriott Hotels Resorts, JW Marriott Hotels Resorts, Renaissance Hotels Resorts, Courtyard, Fairfield Inn, Residence Inn, and Marriott Executive Apartments properties located outside the continental United States and Canada; Luxury Lodging, which includes The Ritz-Carlton and Bulgari Hotels Resorts properties worldwide (together with adjacent residential properties associated with some Ritz-Carlton hotels), as well as Edition, for which no properties are yet open; and Timeshare, which includes the development, marketing, operation, and sale of Marriott Vacation Club, The Ritz-Carlton Club and Residences, and Grand Residences by Marriott timeshare, fractional ownership, and residential properties worldwide. We evaluate the performance of our segments based primarily on the results of the segment without allocating corporate expenses, interest expense, income taxes, or indirect general, administrative, and other expenses. With the exception of the Timeshare segment, we do not allocate interest income to our segments. Because note sales are an integral part of the Timeshare segment, we include note sale gains or (losses) in our Timeshare segment results. We also include interest income associated with our Timeshare segment notes in our Timeshare segment results because financing sales are an integral part of that segments business. Additionally, we allocate other gains and losses, equity in earnings or losses from our joint ventures, divisional general, administrative, and other expenses, and income or losses attributable to noncontrolling interests to each of our segments. Other unallocated corporate represents that portion of our revenues, general, administrative, and other expenses, equity in earnings or losses, and other gains or losses that are not allocable to our segments. We aggregate the brands presented within our North American Full-Service, North American Limited-Service, International, Luxury, and Timeshare segments considering their similar economic characteristics, types of customers, distribution channels, the regulatory business environment of the brands and operations within each segment and our organizational and management reporting structure. Revenues TwelveWeeksEnded Twenty-FourWeeksEnded ($ in millions) June19,2009 June13,2008 June19,2009 June13,2008 North American Full-Service Segment $ 1,142 $ 1,371 $ 2,308 $ 2,678 North
18.Restructuring Costs and Other Charges	18. Restructuring Costs and Other Charges During the latter part of 2008, we experienced a significant decline in demand for hotel rooms both domestically and internationally as a result, in part, of the recent failures and near failures of a number of large financial service companies in the fourth quarter of 2008 and the dramatic downturn in the economy. Our capital intensive Timeshare business was also hurt both domestically and internationally by the downturn in market conditions and particularly the significant deterioration in the credit markets, which resulted in our decision not to complete a note sale in the fourth quarter of 2008 (although we did complete a note sale in the first quarter of 2009). These declines resulted in reduced management and franchise fees, cancellation of development projects, reduced timeshare contract sales, and anticipated losses under guarantees and loans. In the fourth quarter of 2008, we put certain company-wide cost-saving measures in place in response to these declines, with individual company segments and corporate departments implementing further cost saving measures. Upper-level management responsible for the Timeshare segment, hotel operations, development, and above-property level management of the various corporate departments and brand teams individually led these decentralized management initiatives. The various initiatives resulted in aggregate restructuring costs of $55 million that we recorded in the fourth quarter of 2008. We also recorded $137 million of other charges in the 2008 fourth quarter. For information regarding the fourth quarter 2008 charges, see Footnote No.20, Restructuring Costs and Other Charges, in our 2008 Form 10-K. Restructuring Costs As part of the restructuring actions we began in the fourth quarter of 2008, we initiated further cost savings measures in the 2009 first and second quarters associated with our Timeshare segment, hotel development, above-property level management, and corporate overhead. These further measures resulted in additional restructuring costs of $35 million in the first half of 2009, $33 million of which were incurred in the second quarter. These first half 2009 restructuring costs included: (1)$12 million in severance costs related to the reduction of 854 employees, $10 million of which were incurred in the second quarter for 749 employees terminated during the quarter (the majority of whom were given notice of termination by June19, 2009); (2)$22 million in facilities exit costs incurred in the second quarter of 2009; and (3)$1 million related to the write-off of capitalized costs relating to development projects no longer deemed viable in the second quarter of 2009. The severance costs do not reflect amounts billed out separately to owners for property-level severance costs. The $10 million of severance costs we recorded in the 2009 second quarter reflected a portion of the $8 million to $13 million in costs that, as disclosed in our 2009 First Quarter Form 10-Q, we expected to incur in the second through fourth quarter of 2009. Of the $22 million of facilities exit costs we recorded in the 2009 second quarter, $5 million refl
19.Variable Interest Entities	19. Variable Interest Entities In accordance with FASB Interpretation No.46 (revised December 2003), Consolidation of Variable Interest Entities (FIN 46(R)), we analyze our variable interests including loans, guarantees, and equity investments, to determine if the entity in which we have a variable interest is a variable interest entity. Our analysis includes both quantitative and qualitative reviews. We base our quantitative analysis on the forecasted cash flows of the entity, and our qualitative analysis on our review of the design of the entity, its organizational structure including decision-making ability and financial agreements. We also use our quantitative and qualitative analyses to determine if we must consolidate a variable interest entity as the primary beneficiary. We have an equity investment in and a loan receivable due from a variable interest entity that develops and markets fractional ownership and residential interests, and we consolidate the entity because we are the primary beneficiary. We concluded that the entity is a variable interest entity because the voting rights are not proportionate to the economic interests. The loan we provided to the entity replaced the original senior loan, and at June19, 2009, had a principal balance of $74 million and an accrued interest balance of $22 million. The variable interest entity uses the loan facility to fund its net cash flow. The loans outstanding principal balance increased by $2 million compared to the quarter ended March27, 2009. At June19, 2009, the carrying amount of consolidated assets included within our Condensed Consolidated Balance Sheet that are collateral for the variable interest entitys obligations totaled $109 million and comprised $107 million of real estate held for development, property, equipment, and other assets and $2 million of cash. Further, at June19, 2009, the carrying amount of the consolidated liabilities and noncontrolling interests included within our Condensed Consolidated Balance Sheets for this variable interest entity totaled $22 million and $5 million, respectively. The creditors of this entity do not have general recourse to our credit. Our Timeshare segment uses several special purpose entities to maintain ownership of real estate in certain jurisdictions in order to facilitate sales within the Asia Pacific Points Club (the Club). Although we have no equity ownership in the Club itself, we absorb the variability in the assets of the Club to the extent that inventory has not been sold to the ultimate Club member. The Club is a variable interest entity because the equity investment at risk is not sufficient to permit the entity to finance its activities without additional support from other parties. We determined that we were the primary beneficiary of these entities based upon the proportion of variability that we absorb compared to Club members. At June19, 2009, the carrying amount of inventory associated with the Club was $70 million, of which $40 million resulted from the consolidation of these special purpose entities and $30 million resulted from inventory and deposits in wholly owned subsidiaries that will be transferre

Document Information

Document Information
	6 Months Ended Jun. 19, 2009 USD / shares
Document Information [Text Block]
Document Type	10-Q
Amendment Flag	false
Amendment Description	N.A.
Document Period End Date	2009-06-19

Entity Information

Entity Information (USD $)
	6 Months Ended Jun. 19, 2009	Jun. 13, 2008
Entity [Text Block]
Trading Symbol	MAR
Entity Registrant Name	MARRIOTT INTERNATIONAL INC /MD/
Entity Central Index Key	0001048286
Current Fiscal Year End Date	--01-02
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	354,045,738
Entity Public Float		$7,851,648,093