Document and Entity Information
Document and Entity Information | ||
3 Months Ended
Mar. 26, 2010 | Apr. 09, 2010
| |
Document Type | 10-Q | |
Amendment Flag | true | |
Amendment Description | Marriott International, Inc. is filing this Amendment No. 1 (the "Form 10-Q/A") to our Quarterly Report on Form 10-Q for the quarter ended March 26, 2010 (the "Form 10-Q"), filed with the Securities and Exchange Commission ("SEC") on April 23, 2010, for the sole purpose of correcting the Interactive Data File furnished as Exhibit 101. The previously furnished Interactive Data File showed that in our Document and Entity Information, the share count as of April 9, 2010 was 361,332,043 shares of Class A Common Stock and that this share data was "in millions." However, this data was in actual shares and we have deleted the "in millions" from our Document and Entity Information in our Exhibit 101 to this Form 10-Q/A. No other changes have been made to the Form 10-Q. This Form 10-Q/A continues to speak as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update any related disclosures made in the Form 10-Q. | |
Document Period End Date | 2010-03-26 | |
Document Fiscal Year Focus | 2,010 | |
Document Fiscal Period Focus | Q1 | |
Entity Registrant Name | MARRIOTT INTERNATIONAL INC /MD/ | |
Entity Central Index Key | 0001048286 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 361,332,043 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $) | ||
In Millions, except Per Share data | 3 Months Ended
Mar. 26, 2010 | 3 Months Ended
Mar. 27, 2009 |
REVENUES | ||
Base management fees | $125 | $125 |
Franchise fees | 91 | 88 |
Incentive management fees | 40 | 43 |
Owned, leased, corporate housing, and other revenue | 229 | 220 |
Timeshare sales and services (including net note sale losses of $1 for twelve weeks ended March 27, 2009) | 285 | 209 |
Cost reimbursements | 1,860 | 1,810 |
Revenues, Total | 2,630 | 2,495 |
OPERATING COSTS AND EXPENSES | ||
Owned, leased, and corporate housing-direct | 217 | 207 |
Timeshare-direct | 235 | 220 |
Reimbursed costs | 1,860 | 1,810 |
Restructuring costs | 0 | 2 |
General, administrative, and other | 138 | 216 |
Costs and Expenses, Total | 2,450 | 2,455 |
OPERATING INCOME | 180 | 40 |
Gains and other income (including gain on debt extinguishment of $21 for the twelve weeks ended March 27, 2009) | 1 | 25 |
Interest expense | (45) | (29) |
Interest income | 4 | 6 |
Equity in losses | (11) | (34) |
INCOME BEFORE INCOME TAXES | 129 | 8 |
Provision for income taxes | (46) | (33) |
NET INCOME (LOSS) | 83 | (25) |
Add: Net losses attributable to noncontrolling interests, net of tax | 0 | 2 |
NET INCOME (LOSS) ATTRIBUTABLE TO MARRIOTT | $83 | ($23) |
EARNINGS PER SHARE-Basic | ||
Earnings (losses) per share attributable to Marriott shareholders-Basic | 0.23 | -0.06 |
EARNINGS PER SHARE-Diluted | ||
Earnings (losses) per share attributable to Marriott shareholders-Diluted | 0.22 | -0.06 |
CASH DIVIDENDS DECLARED PER SHARE | 0.04 | 0.0866 |
1_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Parenthetical) (USD $) | |
In Millions | 3 Months Ended
Mar. 27, 2009 |
CONDENSED CONSOLIDATED STATEMENT OF INCOME (Parenthetical) | |
Timeshare sales and services, note sale losses | $1 |
Gain on debt extinguishment | $21 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | ||
In Millions | Mar. 26, 2010
| Jan. 01, 2010
|
Current assets | ||
Cash and equivalents (including from VIEs of $3 and $6, respectively) | $118 | $115 |
Accounts and notes receivable (including from VIEs of $114 and $3, respectively) | 946 | 838 |
Inventory (including from VIEs of $45 and $96, respectively) | 1,503 | 1,444 |
Current deferred taxes, net | 254 | 255 |
Prepaid expenses | 110 | 68 |
Other (including from VIEs of $31 and $0, respectively) | 84 | 131 |
Assets, Current, Total | 3,015 | 2,851 |
Property and equipment (including from VIEs of $19 and $0, respectively) | 1,339 | 1,362 |
Intangible Assets | ||
Goodwill | 875 | 875 |
Contract acquisition costs and other | 743 | 731 |
Goodwill And Intangible Assets, Net, Total | 1,618 | 1,606 |
Equity and cost method investments | 243 | 249 |
Notes receivable (including from VIEs of $897 and $0, respectively) | 1,268 | 452 |
Deferred taxes, net | 1,091 | 1,020 |
Other (including from VIEs of $17 and $0, respectively) | 219 | 393 |
Assets, Total | 8,793 | 7,933 |
Current liabilities | ||
Current portion of long-term debt (including from VIEs of $120 and $2, respectively) | 145 | 64 |
Accounts payable | 499 | 562 |
Accrued payroll and benefits | 543 | 519 |
Liability for guest loyalty program | 457 | 454 |
Other (including from VIEs of $5 and $7, respectively) | 669 | 688 |
Liabilities, Current, Total | 2,313 | 2,287 |
Long-term debt (including from VIEs of $926 and $3, respectively) | 3,124 | 2,234 |
Liability for guest loyalty program | 1,216 | 1,193 |
Other long-term liabilities | 1,070 | 1,077 |
Marriott shareholders' equity | ||
Class A Common Stock | 5 | 5 |
Additional paid-in-capital | 3,524 | 3,585 |
Retained earnings | 3,038 | 3,103 |
Treasury stock, at cost | (5,497) | (5,564) |
Accumulated other comprehensive income | 0 | 13 |
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Total | 1,070 | 1,142 |
Liabilities and Stockholders' Equity, Total | $8,793 | $7,933 |
2_CONDENSED CONSOLIDATED BALANC
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | ||
In Millions | Mar. 26, 2010
| Jan. 01, 2010
|
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) | ||
Cash and equivalents - from VIEs | $3 | $6 |
Accounts and notes receivable - from VIEs | 114 | 3 |
Inventory - from VIEs | 45 | 96 |
Other assets - from VIEs | 31 | 0 |
Property and equipment - from VIEs | 19 | 0 |
Notes receivable - from VIEs | 897 | 0 |
Other noncurrent assets - from VIEs | 17 | 0 |
Current portion of long-term debt - from VIEs | 120 | 2 |
Other current liabilities - from VIEs | 5 | 7 |
Long-term debt - from VIEs | $926 | $3 |
3_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | ||
In Millions | 3 Months Ended
Mar. 26, 2010 | 3 Months Ended
Mar. 27, 2009 |
OPERATING ACTIVITIES | ||
Net income (loss) | $83 | ($25) |
Adjustments to reconcile to cash provided by (used in) operating activities: | ||
Depreciation and amortization | 39 | 39 |
Income taxes | 22 | 20 |
Timeshare activity, net | 68 | 152 |
Liability for guest loyalty program | 24 | 59 |
Restructuring costs, net | (4) | (9) |
Asset impairments and write-offs | 2 | 50 |
Working capital changes and other | (74) | (83) |
Net cash provided by operating activities | 160 | 203 |
INVESTING ACTIVITIES | ||
Capital expenditures | (25) | (50) |
Dispositions | 0 | 1 |
Loan advances | (2) | (4) |
Loan collections and sales | 2 | 4 |
Equity and cost method investments | (3) | (4) |
Contract acquisition costs | (16) | (5) |
Other | 20 | 17 |
Net cash used in investing activities | (24) | (41) |
FINANCING ACTIVITIES | ||
Commercial paper/credit facility, net | (29) | 31 |
Repayment of long-term debt | (121) | (130) |
Issuance of Class A Common Stock | 17 | 2 |
Dividends paid | 0 | (31) |
Net cash used in financing activities | (133) | (128) |
INCREASE IN CASH AND EQUIVALENTS | 3 | 34 |
CASH AND EQUIVALENTS, beginning of period | 115 | 134 |
CASH AND EQUIVALENTS, end of period | $118 | $168 |
Basis of Presentation
Basis of Presentation | |
3 Months Ended
Mar. 26, 2010 | |
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 the guidance for noncontrolling interests in consolidated financial statements, 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. 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 January 1, 2010, (2009 Form 10-K). Certain terms not otherwise defined in this quarterly report have the meanings specified in our 2009 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. Our 2010 first quarter ended on March 26, 2010; our 2009 fourth quarter ended on January 1, 2010; and our 2009 first quarter ended on March 27, 2009. In our opinion, the accompanying condensed consolidated financial statements reflect all normal and recurring adjustments necessary to present fairly our financial position as of March 26, 2010, and January 1, 2010, and the results of our operations and cash flows for the twelve weeks ended March 26, 2010, and March 27, 2009. Interim results may not be indicative of fiscal year performance because of seasonal and short-term variations. We have eliminated all material intercompany transactions and balances between entities consolidated in these financial statements. We have reclassified certain prior year amounts to conform to our 2010 presentation. On January 2, 2010, the first day of the 2010 fiscal year, we adopted Financial Accounting Standards No. 166, Accounting for Transfers of Financial Assets, an Amendment of FASB Statement No. 140 (FAS No. 166) or Accounting Standards Update No. 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets (ASU No. 2009-16) and Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R) (FAS No. 167) or Accounting Standards Update No. 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (ASU N |
New Accounting Standards
New Accounting Standards | |
3 Months Ended
Mar. 26, 2010 | |
New Accounting Standards | 2. New Accounting Standards FAS No. 166 or ASU No. 2009-16 and FAS No. 167 or ASU No. 2009-17 We adopted FAS No. 166 or ASU No. 2009-16 on the first day of our 2010 fiscal year, which amended FAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, by: eliminating the concept of a qualifying special-purpose entity (QSPE); clarifying and amending the derecognition criteria for a transfer to be accounted for as a sale; amending and clarifying the unit of account eligible for sale accounting; and requiring that a transferor initially measure at fair value and recognize all assets obtained (for example beneficial interests) and liabilities incurred as a result of a transfer of an entire financial asset or group of financial assets accounted for as a sale. In addition, as a reporting entity, this topic requires us to evaluate existing QSPEs (as defined under previous accounting guidance) for consolidation in accordance with the applicable consolidation guidance. The topic requires us to supplement our disclosures about, among other things, our continuing involvement with transfers of financial assets previously accounted for as sales, our inherent risks in our retained financial assets, and the nature and financial effect of restrictions on our assets that continue to be reported in our statement of financial position. We adopted FAS No. 167 or ASU No. 2009-17 on the first day of our 2010 fiscal year, which changes the consolidation guidance applicable to variable interest entities (VIEs). It also amends the guidance governing the determination of whether an enterprise is the primary beneficiary of a VIE, and is, therefore, required to consolidate an entity, by requiring a qualitative analysis rather than a quantitative analysis. The qualitative analysis includes, among other things, consideration of who has the power to direct the activities of the entity that most significantly impact the entitys economic performance and who has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. This topic also requires continuous reassessments of whether an enterprise is the primary beneficiary of a VIE. Previously, the applicable standard required reconsideration of whether an enterprise was the primary beneficiary of a VIE only when specific events had occurred. QSPEs, which were previously exempt from the application of this topic, are now subject to the provisions of this topic. The topic also requires additional disclosures about an enterprises involvement with a VIE. See Footnote No. 1, Basis of Presentation for the impact of the adoption of these topics. Accounting Standards Update No. 2010-06 Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements (ASU No. 2010-06) We adopted certain provisions of ASU No. 2010-06 in the 2010 first quarter. These provisions of ASU No. 2010-06 amended Subtopic 820-10, Fair Value Measurements and Disclosures Overall, by requiring additional disclosures for transfers in and out of Level 1 and Level 2 fai |
Income Taxes
Income Taxes | |
3 Months Ended
Mar. 26, 2010 | |
Income Taxes | 3. Income Taxes Our federal income tax returns have been examined and we have settled all issues for tax years through 2004. We filed a refund claim relating to 2000 and 2001. The Internal Revenue Service (IRS) disallowed the claims, and in July 2009, we protested the disallowance. This issue is pending in the IRS Appeals Division. The 2005, 2006, and 2007 field examinations have been completed, and the unresolved issues from those years are now with the IRS Appeals Division. The Revenue Agents Report for 2008 has been received and that year is in the process of being sent to Appeals. The 2009 and 2010 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. As noted in Footnote No. 1, Basis of Presentation, we recorded a one-time non-cash pre-tax reduction to shareholders equity of approximately $238 million in conjunction with the adoption of ASU Nos. 2009-16 and 2009-17 in the 2010 first quarter. That amount included a $92 million reduction in net deferred taxes. For the first quarter of 2010, we decreased unrecognized tax benefits by $27 million (from $249 million at year-end 2009), primarily representing the settlement of an unfavorable U.S. Court of Federal Claims decision involving a refund claim associated with a 1994 transaction. The unrecognized tax benefits balance of $222 million at the end of the 2010 first quarter included $110 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. We anticipate concluding U.S. federal appeals negotiations for the 2005, 2006, 2007, and 2008 tax years in the next 12 months where the items under consideration include the taxation of our loyalty and gift card programs and the treatment of funds received from foreign subsidiaries. The conclusion of the negotiations could have a material impact on our unrecognized tax benefit balances. |
Share-Based Compensation
Share-Based Compensation | |
3 Months Ended
Mar. 26, 2010 | |
Share-Based Compensation | 4. Share-Based Compensation Under our 2002 Comprehensive Stock and Cash Incentive Plan (the Comprehensive Plan), we award: (1) stock options to purchase our Class A Common Stock (Stock Option Program); (2) stock appreciation rights (SARs) for our Class A Common Stock (Stock Appreciation Right Program); (3) restricted stock units (RSUs) of our Class A 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 Class A Common Stock on the date of grant. RSUs We granted 3.7 million RSUs during the first quarter of 2010 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 RSUs granted in the first quarter of 2010 was $27. SARs We granted 1.1 million SARs to officers and key employees during the 2010 first quarter. 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 $10, and the weighted average exercise price was $27. To estimate the fair value of each SAR granted, we use a binomial method. The weighted average expected SARs terms were a product of the lattice-based binomial valuation model that uses suboptimal exercise factors to calculate the expected terms. Historical data is used to estimate exercise behaviors for separate groups of retirement eligible and non-retirement eligible employees. The assumptions for the Employee SARs granted during the first quarter of 2010 are shown in the following table. Expected volatility 32 % Dividend yield 0.71 % Risk-free rate 3.3 % Expected term (in years) 7 The risk-free rates are based on the corresponding U.S. Treasury spot rates for the expected duration at the date of grant, converted to a continuously compounded rate. SARs granted during the first quarter of 2010 utilized a weighted average historical volatility where periods with atypical stock movement were given a lower weight to reflect stabilized long-term mean volatility. Other Information At the end of the 2010 first quarter, 65.6 million shares were reserved under the Comprehensive Plan, including 36 million shares under the Stock Option Program and Stock Appreciation Right Program. |
Fair Value Of Financial Instrum
Fair Value Of Financial Instruments | |
3 Months Ended
Mar. 26, 2010 | |
Fair Value of Financial Instruments | 5. Fair Value of Financial Instruments We believe that the fair values of our current assets and current liabilities approximate their reported carrying amounts. The following table shows the carrying values and the fair values of non-current financial assets and liabilities that qualify as financial instruments, determined in accordance with the guidance for disclosures about fair value of financial instruments. At March26, 2010 At Year-End 2009 ($ in millions) CarryingAmount FairValue CarryingAmount FairValue Cost method investments $ 42 $ 41 $ 41 $ 43 Loans to timeshare owners securitized 897 975 0 0 Loans to timeshare owners non-securitized 276 288 352 368 Senior, mezzanine, and other loans non-securitized 95 74 100 77 Residual interests and effectively owned notes 0 0 197 197 Restricted cash 36 36 22 22 Marketable securities 18 18 18 18 Total long-term financial assets $ 1,364 $ 1,432 $ 730 $ 725 Non-recourse debt associated with securitized notes receivable $ (923 ) $ (923 ) $ 0 $ 0 Senior Notes (1,628 ) (1,722 ) (1,627 ) (1,707 ) $2,404 Effective Credit Facility (396 ) (396 ) (425 ) (425 ) Other long-term debt (151 ) (143 ) (154 ) (154 ) Other long-term liabilities (78 ) (70 ) (86 ) (75 ) Long-term derivative liabilities (2 ) (2 ) (1 ) (1 ) Total long-term financial liabilities $ (3,178 ) $ (3,256 ) $ (2,293 ) $ (2,362 ) We estimate the fair value of our securitized and a portion of our non-securitized long-term loans to timeshare owners using a discounted cash flow model. We believe this model is comparable to what would be used in the current market by an independent third party. Our model uses default rates, prepayment rates, coupon rates and loan terms for the legally sold note portfolio as key drivers of risk and relative value, that when applied in combination with pricing parameters, determines the fair value of the underlying notes receivable. For those non-securitized loans to timeshare owners that we do not value using our pricing model, we believe their carrying value approximates fair value as the loans stated interest rates are consistent with current market rates and the reserve for these loans accounts for risks in default rates, prepayment rates, and loan terms. We estimate the fair value of our senior, mez |
Earnings Per Share
Earnings Per Share | |
3 Months Ended
Mar. 26, 2010 | |
Earnings per Share | 6. 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. Twelve Weeks Ended (in millions, except per share amounts) March26,2010 March27,2009 Computation of Basic Earnings Per Share Attributable to Marriott Shareholders Income (loss) attributable to Marriott shareholders $ 83 $ (23 ) Weighted average shares outstanding 359.4 354.4 Basic earnings (losses) per share attributable to Marriott shareholders $ 0.23 $ (0.06 ) Computation of Diluted Earnings Per Share Attributable to Marriott Shareholders Income (loss) attributable to Marriott shareholders $ 83 $ (23 ) Weighted average shares outstanding 359.4 354.4 Effect of dilutive securities Employee stock option and SARs plans 9.9 0 Deferred stock incentive plans 1.2 0 Restricted stock units 2.8 0 Shares for diluted earnings per share attributable to Marriott shareholders 373.3 354.4 Diluted earnings (losses) per share attributable to Marriott shareholders $ 0.22 $ (0.06 ) 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 attributable to Marriott shareholders. As there was a loss for the 2009 first quarter, the Effect of dilutive securities caption in the preceding table does not include 3.9 million employee stock option and SARs plan shares, 1.7 million deferred stock incentive plans shares, or 0.5 million restricted stock units shares because including those shares would have been antidilutive. Additionally, in accordance with the guidance for calculating 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 March26, 2010, 3.8million options and SARs, with exercise prices ranging from $31.05 to $49.03; and (b) for the twelve-week period ended March27, 2009, 19.5million options and SARs, with exercise prices ranging from $16.22 to $49.03. |
Inventory
Inventory | |
3 Months Ended
Mar. 26, 2010 | |
Inventory | 7. Inventory Inventory, totaling $1,503 million and $1,444 million as of March 26, 2010, and January 1, 2010, respectively, consists primarily of Timeshare segment interval, fractional ownership, and residential products totaling $1,485 million and $1,426 million as of March 26, 2010, and January 1, 2010, respectively. Inventory totaling $18 million as of both March 26, 2010, and January 1, 2010, primarily relates to hotel operating supplies for the limited number of properties we own or lease. We primarily value Timeshare segment interval, fractional ownership, and residential products at the lower of cost or fair market value, as defined in the accounting guidance for the impairment or disposal of long-lived assets, and generally value operating supplies at the lower of cost (using the first-in, first-out method) or market. Consistent with recognized industry practice, we classify Timeshare segment interval, fractional ownership, and residential products inventory, which has an operating cycle that exceeds 12 months, as a current asset. The following table details the composition of our Timeshare segment inventory balances at March 26, 2010, and January 1, 2010. ($ in millions) March26,2010 January1,2010 Finished goods $ 797 $ 721 Work-in-process 168 198 Land and infrastructure 520 507 $ 1,485 $ 1,426 |
Property And Equipment
Property And Equipment | |
3 Months Ended
Mar. 26, 2010 | |
Property and Equipment | 8. Property and Equipment The following table details the composition of our property and equipment balances at March 26, 2010, and January 1, 2010. ($ in millions) March26,2010 January1,2010 Land $ 453 $ 454 Buildings and leasehold improvements 926 935 Furniture and equipment 985 996 Construction in progress 173 163 2,537 2,548 Accumulated depreciation (1,198 ) (1,186 ) $ 1,339 $ 1,362 |
Notes Receivable
Notes Receivable | |
3 Months Ended
Mar. 26, 2010 | |
Notes Receivable | 9. Notes Receivable As discussed in Footnote No. 1, Basis of Presentation, on the first day of fiscal year 2010, we consolidated certain entities associated with past timeshare notes receivable securitization transactions. Prior to the 2010 first quarter, we were not required to consolidate the special purpose entities utilized to securitize the notes. The following table details the composition of our notes receivable balances (net of reserves) at March 26, 2010, and January 1, 2010. ($ in millions) March26,2010 January1,2010 Loans to timeshare owners securitized $ 1,009 $ 0 Loans to timeshare owners non-securitized 334 424 Senior, mezzanine, and other loans non-securitized 188 196 1,531 620 Less current portion Loans to timeshare owners securitized (112 ) 0 Loans to timeshare owners non-securitized (58 ) (72 ) Senior, mezzanine, and other loans non-securitized (93 ) (96 ) $ 1,268 $ 452 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. Total long-term notes receivable as of March 26, 2010, and January 1, 2010, of $1,268 million and $452 million, respectively, consisted of loans to timeshare owners of $1,173 million and $352 million, respectively, loans to equity method investees of $6 million and $10 million, respectively, and other notes receivable of $89 million and $90 million, respectively. The following tables provide securitized and non-securitized notes receivable detail regarding: 1) future notes receivable principal payments due (net of reserves and unamortized discounts), weighted average interest rates and ranges of stated interest rates; 2) notes receivable reserves; and 3) unamortized discounts. Notes Receivable Principal Payments (net of reserves and unamortized discounts) and Interest Rates ($ in millions) Non-SecuritizedNotesReceivable SecuritizedNotesReceivable Total 2010 $ 143 $ 93 $ 236 2011 49 114 163 2012 55 118 173 2013 34 122 156 2014 32 123 155 Thereafter 209 439 648 Balance at March 26, 2010 $ 522 $ 1,009 $ 1,531 Weighted average interest rate at March 26, 2010 10.0 % 13.0 % 12.0 % Range of stated interest rates at March 26, 2010 0to19.5 % 5.2to19.5 % 0to19.5 % Notes Receivable Reserves ($ in millions) Non-SecuritizedNotesReceivable SecuritizedNotesReceiv |
Long-term Debt
Long-term Debt | |
3 Months Ended
Mar. 26, 2010 | |
Long-term Debt | 10. Long-term Debt As discussed in Footnote No. 1, Basis of Presentation, on the first day of fiscal year 2010, we consolidated certain entities associated with past timeshare notes receivable securitization transactions, resulting in consolidation of the related debt obligations. Prior to the 2010 first quarter, we were not required to consolidate these entities. We securitized the notes receivable through bankruptcy-remote entities, and the entities creditors have no recourse to us. Our long-term debt at March 26, 2010, and January 1, 2010, consisted of the following: ($ in millions) March26,2010 January1,2010 Non-recourse debt associated with securitized notes receivable, interest rates ranging from 0.22% to 7.20% (weighted average interest rate of 5.20%) $ 1,043 $ 0 Less current portion (120 ) 0 923 0 Senior Notes: Series F, interest rate of 4.625%, face amount of $348, maturing June15, 2012 (effective interest rate of 5.02%) 347 347 Series G, interest rate of 5.810%, face amount of $316, maturing November10, 2015 (effective interest rate of 6.53%) 303 302 Series H, interest rate of 6.200%, face amount of $289, maturing June15, 2016 (effective interest rate of 6.30%) 289 289 Series I, interest rate of 6.375%, face amount of $293, maturing June15, 2017 (effective interest rate of 6.45%) 291 291 Series J, interest rate of 5.625%, face amount of $400, maturing February15, 2013 (effective interest rate of 5.71%) 398 398 $2,404 Effective Credit Facility, average interest rate of 0.7794% at March26, 2010 396 425 Other 202 246 2,226 2,298 Less current portion (25 ) (64 ) 2,201 2,234 $ 3,124 $ 2,234 At March 26, 2010, except for non-recourse debt associated with securitized notes receivable that was secured by the related notes receivable, all other debt was recourse to us and unsecured. At March 26, 2010, we had long-term public debt ratings associated with our Senior Notes of BBB- from Standard and Poors and Baa3 from Moodys Investor Service. We are party to a multicurrency revolving credit agreement (the Credit Facility) that provides for $2.404 billion of aggregate effective borrowings to support general corporate needs, including working capital and capital expenditures, and letters of credit that have supported our commercial paper program. The Credit Facility expires on May 14, 2012. Borrowings under the Credit Facility bear interest at the London Interbank Offered Rate (LIBOR) plus a fixed spread. We also pay quarterly fees on the Credit Facility at a rate based on our public debt rating. Each of our securitized notes receivable pools contains various triggers relating to the performance of the underlying notes receivable. |
Comprehensive Income And Capita
Comprehensive Income And Capital Structure | |
3 Months Ended
Mar. 26, 2010 | |
Comprehensive Income and Capital Structure | 11. Comprehensive Income and Capital Structure The following tables detail comprehensive income attributable to Marriott, comprehensive income attributable to noncontrolling interests, and consolidated comprehensive income for the twelve weeks ended March 26, 2010, and March 27, 2009. AttributabletoMarriott Attributable toNoncontrollingInterests Consolidated ($ in millions) Twelve Weeks Ended Twelve Weeks Ended TwelveWeeksEnded March 26,2010 March 27,2009 March 26,2010 March 27,2009 March26,2010 March27,2009 Net income (loss) $ 83 $ (23 ) $ 0 $ (2 ) $ 83 $ (25 ) Other comprehensive income (loss), net of tax: Foreign currency translation adjustments (13 ) (11 ) 0 0 (13 ) (11 ) Other derivative instrument adjustments 0 1 0 0 0 1 Unrealized losses on available-for-sale securities 0 (2 ) 0 0 0 (2 ) Total other comprehensive (loss) income, net of tax (13 ) (12 ) 0 0 (13 ) (12 ) Comprehensive income (loss) $ 70 $ (35 ) $ 0 $ (2 ) $ 70 $ (37 ) The following table details changes in shareholders equity attributable to Marriott shareholders. Equity attributable to the noncontrolling interests was zero as of March 26, 2010 and January 1, 2010. The following table also includes the cumulative effect of a change in accounting principle of $146 million recorded directly to retained earnings on the first day of the 2010 fiscal year as a result of our adopting ASU Nos. 2009-16 and 2009-17. See Footnote No. 1, Basis of Presentation for additional information regarding the adoption of those updates. ($ in millions, except per share amounts) Equity Attributable to Marriott Shareholders CommonSharesOutstanding Total Class ACommonStock AdditionalPaid-in-Capital RetainedEarnings TreasuryStock, atCost AccumulatedOtherComprehensiveIncome 358.2 Balance at year-end 2009 $ 1,142 $ 5 $ 3,585 $ 3,103 $ (5,564 ) $ 13 0 Impact of adoption of ASU 2009-16 and ASU 2009-17 (146 ) 0 0 (146 ) 0 0 358.2 Opening balance fiscal year 2010 $ 996 $ 5 $ 3,585 $ 2,957 $ (5,564 ) $ 13 0 Net income 83 0 0 83 0 |
Contingencies
Contingencies | |
3 Months Ended
Mar. 26, 2010 | |
Contingencies | 12. 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 March 26, 2010, are as follows: ($ in millions) Guarantee Type MaximumPotentialAmount of FutureFundings LiabilityforExpectedFutureFundings atMarch 26, 2010 Debt service $ 37 $ 3 Operating profit 132 23 Other 59 2 Total guarantees where we are the primary obligor $ 228 $ 28 The liability for expected future fundings at March 26, 2010, is included in our Condensed Consolidated Balance Sheets as follows: $6 million in the Other current liabilities line item and $22 million in the Other long-term liabilities line item. Our guarantees of $228 million listed in the preceding table include $32 million of operating profit guarantees that will not be in effect until the underlying properties open and we begin to operate the properties, $3 million of debt service guarantees that will not be in effect until the underlying debt has been funded, and $8 million of other guarantees. The guarantees of $228 million in the preceding table do not include $162 million of guarantees related to Senior Living Services lease obligations totaling $109 million (expiring in 2013) and lifecare bonds of $53 million (estimated to expire in 2016), 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. (CNL), which subsequently merged with Health Care Property Investors, Inc., is the primary obligor of $43 million of the lifecare bonds. Five Star Senior Living 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 CNL have indemnified us for any guarantee fundings we may be called upon to make in connection with these lease obligations and lifecare bonds. While we currently do |
Business Segments
Business Segments | |
3 Months Ended
Mar. 26, 2010 | |
Business Segments | 13. 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, Renaissance Hotels, Renaissance ClubSport, and Autograph Collection properties located in the continental United States and Canada; North American Limited-Service Lodging, which includes the Courtyard, Fairfield Inn Suites, 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, Renaissance Hotels, Courtyard, Fairfield Inn Suites, 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 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 Destination Club, The Ritz-Carlton 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, income taxes, or indirect general, administrative, and other expenses. With the exception of the Timeshare segment, we do not allocate interest income or interest expense to our segments. Prior to the 2010 first quarter, we included note sale gains/(losses) in our Timeshare segment results. Due to our adoption of ASU Nos. 2009-16 and 2009-17, as discussed in Footnote No. 1, Basis of Presentation, we no longer account for note receivable securitizations as sales but rather as secured borrowings as defined in these topics, and therefore, we do not expect to recognize gains or losses on future note receivable securitizations. We include interest income and interest expense associated with our Timeshare segment notes in our Timeshare segment results because financing sales and securitization transactions are an integral part of that segments business. In addition, 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 o |
Restructuring Costs And Other C
Restructuring Costs And Other Charges | |
3 Months Ended
Mar. 26, 2010 | |
Restructuring Costs and Other Charges | 14. Restructuring Costs and Other Charges During the latter part of 2008, we experienced a significant decline in demand for domestic and international hotel rooms based in part on the 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 globally 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 note sales in the first and fourth quarters 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. As part of the restructuring actions we began in the fourth quarter of 2008, we initiated further cost savings measures in 2009 associated with our Timeshare segment, hotel development, above-property level management, and corporate overhead that resulted in additional restructuring costs of $51 million in 2009, including $2 million in restructuring costs in the 2009 first quarter. We completed this restructuring in 2009 and do not expect to incur additional expenses in connection with these initiatives. We also recorded $162 million of other charges in 2009, including $127 million of other charges in the 2009 first quarter. For information regarding the 2009 charges, see Footnote No. 21, Restructuring Costs and Other Charges, in our 2009 Form 10-K. Summary of Restructuring Costs and Liability The following table provides additional information regarding our restructuring, including the balance of the liability at the end of the first quarter of 2010 and total costs incurred through the end of the restructuring in 2009. ($ in millions) RestructuringCostsLiability atJanuary1,2010 CashPaymentsinthe 2010FirstQuarter RestructuringCostsLiability atMarch26,2010 TotalCumulativeRestructuringCosts through2009(1) Severance-Timeshare $ 4 $ 2 $ 2 $ 29 Facilities exit costs-Timeshare 18 1 17 34 Development cancellations-Timeshare 0 0 0 10 Total restructuring costs-Timeshare 22 3 19 73 Severance-hotel development 1 0 1 4 Development |
Variable Interest Entities
Variable Interest Entities | |
3 Months Ended
Mar. 26, 2010 | |
Variable Interest Entities | 15. Variable Interest Entities In accordance with the guidance for the consolidation of variable interest entities, we analyze our variable interests, including loans, guarantees, and equity investments, to determine if an 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 relevant financial agreements. We also use our qualitative analyses to determine if we must consolidate a variable interest entity as the primary beneficiary. 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. These securitizations provide funding for the Company and transfer the economic risks and substantially all the benefits of the loans to third parties. In a securitization, various classes of debt securities that the special purpose entities issue are generally collateralized by a single tranche of transferred assets, which consist of timeshare notes receivable. The Company services the notes receivable. With each securitization, we may retain a portion of the securities, subordinated tranches, interest-only strips, subordinated interests in accrued interest and fees on the securitized receivables or, in some cases, overcollateralization and cash reserve accounts. Pursuant to generally accepted accounting principles that existed prior to fiscal year 2010, these entities met the definition of QSPEs, and we were not required to evaluate them for consolidation. Upon implementation in the 2010 first quarter of the new accounting topics related to transfers of financial assets (see Footnote No. 1, Basis of Presentation for additional information), the Company evaluated these entities for consolidation. We created these entities to serve as a mechanism for holding assets and related liabilities, and the entities have no equity investment at risk, making them variable interest entities. We continue to service the notes and transfer all proceeds collected to these special purpose entities and retain rights to receive benefits that are potentially significant to the entities. Thus, under the new accounting topics, we have concluded that we are the entities primary beneficiary and, therefore, we consolidate them. Please see Footnote No. 1, Basis of Presentation for the impact of initial consolidation of these entities. At March 26, 2010, the carrying amount of consolidated assets included within our Condensed Consolidated Balance Sheet that are collateral for the variable interest entities obligations totaled $1,056 million, comprised primarily of $112 million and $897 million of current and long-term notes receivable (net of reserves), respectively. In addition, we consolidated $31 million and $16 million of current and long-term restricted cash, respectively. Further, at March 26, 2010, the carrying amount of the |