Deferred interest and
financing expenses .
July 28, 1972 July 30, 1971
$ 4,664,332 $2,393,932
Costs incurred prior to the opening of a new hotel or a
major hotel addition are deferred and amortized over three
years. Pre-opening expenses of other major operations
are deferred and amortized over one year. Other pre-
opening expenses are expensed as incurred. Deferred financing expenses are amortized over the term of the loans
and are considered interest expense. Miscellaneous deferred charges are amortized over the periods benefitted.
The costs of developing data processing systems and research and development costs are expensed as incurred.
Miscellaneous assets consist of the following:
July 28, 1972 July 30, 1971
Long-term receivables $4,839,417 $6,623,785
Escrow and lease deposits. . 1,922,591 1,709,000
Franchise rights, copyrights
and trademarks 919,842 919,842
Miscellaneous investments . . 160,403 186,581
2. FEDERAL INCOME TAXES:
The Company and its subsidiaries file separate income
tax returns. An Internal Revenue Agent's Report covering
the tax returns for 1964 through 1967 has been received
and certain deficiencies are being contested. Returns for
1968 through 1970 are currently being reviewed by the
Internal Revenue Service. In the opinion of management,
any adjustments will not have a material adverse effect on
the accompanying consolidated financial statements.
3. DEBT (EXCLUDING CONVERTIBLE SUBORDINATED
DEBT) AND COMMITMENTS:
Maturities of mortgages, notes and lease-purchase obligations at July 28, 1972:
The above debt includes $49,246,692 at interest rates
which vary based on the prime lending rate.
Summary of Pledging of Assets:
The Company's investment in property, improvements
and equipment, at cost, excluding construction in progress, is $379,575,331. Of this amount, $130,456,468 is
pledged under mortgage loans, $88,072,279 under lease-
purchase obligations, and $161,046,584 is free of lien.
As of July 28, 1972, the Company has commenced major construction projects, aggregating $78,935,000 to be
completed over the next three years, of which $32,789,000
has been expended. The Company has obtained permanent mortgage loan commitments of $47,700,000 on certain of these projects. During the construction period, the
Company uses interim construction financing consisting
of short-term bank loans and commercial paper (whose
maturity averages 30 days) which will be refinanced by
mortgage loan proceeds upon completion of the projects.
Until completion of such projects, the interim construction
financing must be refinanced or replaced by use of the
Company's regular bank credit lines which aggregate $84
million with 25 commercial banks.
Lease-purchases and Other Leases:
Lease-purchase obligations are in substance installment purchases and are recorded as leasehold interest
at the discounted amount of future rentals. These leases
are made with corporations owned by the Marriott Foundation and provide for the recovery of principal and interest and a nominal profit.
In addition to the foregoing leases, the Company has
other leases which are not installment purchases and
which have an average remaining term of 15 years as of
July 28, 1972. Minimum annual rentals amount to approximately $7,900,000 as of July 28, 1972. Most of the leases
require additional rentals under percentage clauses relating to sales and have renewal privileges.
4. CONVERTIBLE SUBORDINATED DEBT:
61A% Subordinated Guaranteed Debentures due 1989, convertible at $19.00
per share $1,066,000
41A % Convertible Subordinated Notes due
1992, convertible at $45.00 per share 5,000,000
All conversion prices are subject to anti-dilution provisions. The 41A % notes have cash dividend restrictions,
but at July 28, 1972, all of the retained earnings are unrestricted. Annual principal payments of $500,000 begin
July, 1983 on the 41A% notes.
5. STOCK COMPENSATION, STOCK PURCHASE PLAN
AND OTHER RESERVED SHARES:
The Company has deferred stock compensation programs represented by deferred stock bonus awards and
contract agreements. Certain of the agreements have restrictions which are released each year dependent upon
increases in consolidated earnings per share. Under
these plans, 684,759 shares of common stock have been
awarded of which 127,675 shares are fully vested at July
Under some programs, shares are issued after the period earned; while under other programs, restricted shares
are issued prior to the period earned. The amounts payable in the future in stock and the unamortized compensation for shares already issued are as follows:
July 28, 7972 July 30, 1971
Stock payable in future $2,656,000 $2,306,000
Unamort. compensation ... . (417,978) (469,882)
Net $2,238,022 $1,836,118
The Company has a qualified stock purchase plan for
employees to purchase up to 78,192 shares of common
stock. The purchase price for the shares to be purchased
on January 31, 1973, is the market value at January 3,
1972, ($25.66 per share, adjusted for the 1972 stock split)
or 100% of the market value at January 31, 1973, whichever is less.
As of July 28, 1972, there was one warrant outstanding,
expiring in 1981, to purchase 12,000 shares of common
stock at $25 per share.
6. CAPITAL STOCK:
1,000,000 shares of preferred stock, without par value,
are authorized. As of July 28, 1972, none has been issued.
45,000,000 shares of common stock with a par value of
$1 per share are authorized, of which 29,336,745 were
issued at July 28, 1972, and 14,069,042 at July 30, 1971,
including treasury shares of 49,000 and 39,500, respectively. Total common stock shares reserved at July 28,
1972, for exercise of options, warrants and conversions of
debt are 942,167.