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
RETURN ON INVESTED CAPITAL** – UNAUDITED
The reconciliations of income (loss) from continuing operations attributable to Marriott to earnings (losses) before interest expense and income taxes are as follows:
The reconciliations of asset to invested capital are as follows:
** Denotes a non-GAAP financial measure.
1 Timeshare interest represents (for periods prior to the date of our spin-off of our timeshare operations and timeshare development business) previously capitalized interest that was a component of product cost.
2 At year-end 2011, 2010, and 2009, “Deferred tax assets, net” was also net of “current deferred income tax liabilities” of $12 million, $19 million, and $19 million respectively. Current deferred income tax liabilities were $0 for each prior year presented.
3 Calculated as “Invested capital” for the current year and prior year, divided by two, with the exception of 2010. For comparability of beginning and ending 2010 balances, 2010 is the average of: 1) the 2010 beginning balance (reflecting the impact of the adoption on the first day of fiscal year 2010 of ASU No. 2009-16 and ASU No. 2009-17); and 2) the Year-End 2010 balance.
4 As discussed in more detail in Footnote No. 17, “Spin-off” of the Notes to our Financial Statements in this report, on November 21, 2011 we completed a spin-off of our timeshare operations and timeshare development business through a special tax-free dividend to our shareholders of all of the issued and outstanding common stock of our wholly owned subsidiary Marriott Vacations Worldwide Corporation (“MVW”). As of the spin-off date, Marriott no longer beneficially owns any shares of MVW common stock and does not for periods after the spin-off date consolidate MVW’s financial results as part of Marriott’s financial reporting. However, because of Marriott’s significant continuing involvement in MVW future operations (by virtue of the license and other agreements between Marriott and MVW), we continue to include our former Timeshare segment’s historical financial results for periods before the spin-off date in our historical financial results as a component of continuing operations. The results for 2011 include the results of the former Timeshare segment prior to the spin-off date while results for all other fiscal years presented include the former Timeshare segment for those entire fiscal years.
Adjusted Measures That Reflect The Timeshare Spin-off As If It Had Occurred On The First Day of 2010 (“Timeshare Spin-off Adjustments”)
See Footnote No. 17, “Spin-off” of the Notes to our Financial Statements in this report for additional information on the spin-off of our timeshare operations and timeshare development business. In order to perform year-over-year comparisons on a comparable basis, management evaluates non-GAAP measures that, for periods prior to the spin-off date, assume the spin-off had occurred on the first day of 2010. Please see the “Earnings Before Interest Expense, Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted EBITDA” caption within the Management’s Discussion and Analysis section of this report for additional information on the Timeshare Spin-off Adjustments.
We provide the following adjusted measures that reflect Timeshare Spin-off Adjustments for illustrative and informational purposes only. These adjusted measures are not necessarily indicative of, and do not purport to represent, what our operating results would have been had the spin-off actually occurred on the first day of 2010. This information also does not reflect certain financial and operating benefits we expect to realize as a result of the spin-off. For additional information on the nature of the Timeshare Spin-off Adjustments, see the Form 8-K we filed with the Securities and Exchange Commission on November 21, 2011 upon completion of the spin-off.
Adjusted Measures That Exclude Other Charges And Certain Tax items
Management evaluates non-GAAP measures that exclude $28 million of other charges for 2011, $98 million of other charges for 2010, and certain tax items including an $85 million benefit recorded for income tax in 2010 because those non-GAAP measures allow for period-over-period comparisons of our on-going core operations before the impact of material charges. These non-GAAP measures also facilitate management’s comparison of results from our on-going operations before material charges with results from other lodging companies. Please see the “Earnings Before Interest Expense, Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted EBITDA” caption within the Management’s Discussion and Analysis section of this report for additional information on these 2011 and 2010 other charges. Certain tax items reflect the tax impact of the other charges of $28 million in 2011 and $98 million in 2010. Additionally, certain tax items in 2010 also reflect an $85 million decrease in tax expense we recorded in the 2010 fourth quarter for a settlement with the Appeals Division of the IRS that resolved all issues that arose in the audit of tax years 2005 through 2008. This settlement was due to the release of previously established tax liabilities for the treatment of funds received from certain non-U.S. subsidiaries.