Marriott International: Where Is Your Balance Sheet?

Marriott (MAR) released Q4 and year end numbers on Thursday and then followed up with a conference call. The press release headline said the results were solid. Revpar was up; an extremely important metric in the lodging business. But pray tell, where is the balance sheet in all this?

The press release, which is supposed to disclose to investors what the results are, had a tremendous amount of operating detail. But the press release did not contain a balance sheet. The conference call covered many topics at great length, but analysts and management essentially ignored the balance sheet.

Several tidbits of information were thrown out. In the past year they spent approximately $1.8 billion in share buy backs. Thanks a lot; the share price has been moving constantly downward. They continued in the fourth quarter repurchasing 12 million shares for $462 million. From the conference call we learnt that they deployed $900 million in capital expenditures, loan advances, net time share development, and equity and other investments.They glossed over the fact that that have increased long term debt by approximately $1 Billion. This will naturally cost them in a large increase in interest expense and eventual repayment obligations. Basic business school stuff that was left out.

Seems to me that management is overly focused on Revpar and associated metrics. The lodging business is bricks and mortar intensive and more transparency on balance sheet issues would be appropriate. By the way, you finally find the balance sheet in the 10-k. Most companies announce it to the world and let it figure prominently.

Comments

[Liebs:]

MAR is not a typical hotel company. They don't actually own most of their properties so their balance sheet is not AS relevant as other hotel chains. Of course the balance sheet is very important regardless the type of company. But that is why they will tend to concentrate on metrics in their releases more than the other chains. Most analysts accept this, knowing they can find the 10K/Q whenever they need to.

2008 Feb 19 12:14 PM

[umbraf:]

Can't remember which investment bank the article came out of, but the basic premise is that Marriott's balance sheet consists of a file cabinet full of contracts. Since they are not a hotel owning company, but a hotel management company, what matters is cash flow and eps, not the balance sheet.

2008 Mar 31 03:34 PM

[Outtanames999:]

Watch for slieght of hand. The balance sheet counts. And isn't it interesting that they pay a $1 B fine to the IRS for some kind of stock pricing sales to employees and an equal amount shows up as a loan? Not to mention the buy backs. So was the stock bought in effect on margin?

2008 May 02 08:49 AM