Monday, February 18, 2008

Marriott International Where Is The Balance Sheet?

Marriott 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.