MD&A
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements
Notes to Financial Statements
Shareholder Return Performance Graph
Quarterly Financial Data
Selected Historical Financial Data
Non-GAAP Financial Measure Reconciliation
Management’s Reports
Reports of Independent Registered Public Accounting Firm
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS – UNAUDITED
We report certain financial measures that are not prescribed or authorized by U.S. generally accepted accounting principles (“GAAP”). We discuss management’s reasons for reporting these non-GAAP measures below, and the accompanying tables reconcile the most directly comparable GAAP measures to the non-GAAP measures (identified by a double asterisk) that we refer to. Although management evaluates and presents these non-GAAP measures for the reasons described below, please be aware that these non-GAAP measures are not alternatives to revenue, operating income, income from continuing operations, net income, or any other comparable operating measure prescribed by GAAP. In addition, these non-GAAP financial measures may be calculated and/or presented differently than measures with the same or similar names that are reported by other companies, and as a result, the non-GAAP measure we report may not be comparable to those reported by others.
Earnings Before Interest and Taxes
Earnings Before Interest and Taxes (“EBIT”) reflects earnings excluding the impact of interest expense and tax expense. The calculation of EBIT adds back to income (loss) from continuing operations attributable to Marriott: 1) the provision (benefit) for income taxes; 2) the provision for income taxes related to noncontrolling interest in losses of consolidated subsidiaries; 3) interest expense; and 4) timeshare interest (for periods prior to the date of our spin-off of our timeshare operations and timeshare development business) representing previously capitalized interest that was a component of product cost.
EBIT is used by analysts, lenders, investors and others, as well as by us, to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company’s capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and tax expense can vary considerably among companies.
Return on Invested Capital
Return on Invested Capital (“ROIC”) is calculated as EBIT, divided by average invested capital. We consider ROIC to be a meaningful indicator of our operating performance, and we evaluate this metric because it measures how effectively we use the money invested in our lodging operations.
The calculation of invested capital deducts from total assets: 1) current liabilities as they will be satisfied in the short term; 2) assets net of current liabilities associated with discontinued operations because the ROIC metric we analyze is related to our core lodging business (continuing operations); 3) deferred tax assets net of current deferred income tax liabilities because the numerator of the calculation is a pre-tax number; and 4) timeshare capitalized interest (for periods prior to the date of our spin-off of our timeshare operations and timeshare development business) because the numerator of the calculation is a pre-interest expense number.