Notes tO Consolidated Financial Statements Marriott Corporation And Subsidiaries
(1) ACQUISITIONS AND PRINCIPLES OF
All subsidiaries have been included in the consolidated
financial statements. The accounts of foreign subsidiaries are included in the consolidated financial statements after conversion to U.S. dollars.
All of the 1968 acquisitions were accounted for as purchases. The cost in excess of net assets of acquired
businesses has a continuing value and is not being
amortized. In connection with the acquisition of Roy
Rogers Western Foods, Inc., the Company may be required to issue additional shares of common stock in
1970. Such additional shares, if any, will be based on
1970 sales and, therefore, can not be determined at this
(2) LONG-TERM OBLIGATIONS:
Various loan agreements require the Company to (a)
maintain working capital of $4,000,000 (b) restrict long-
term debt and (c) limit cash dividends not to exceed
income after July 30, 1967 plus $3,000,000.
Maturities of long-term obligations, excluding the convertible subordinated notes,are as follows:
4 1/2% to 8%
5% to 6%
Lease-purchase obligations are in substance installment
purchases and are recorded as leasehold interests 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. Additional lease-purchase commitments of $25,725,000 for construction
which will be completed during the next 12 months
have been made against which the Company has obtained construction financing of $2,500,000 at July 28,
In addition to the forgoing leases, the Company has
other leases which are not installment purchases and
which have an average remaining term of 16 years as
of July 28, 1968. Minimum annual rentals amount to
approximately $3,100,000 as of July 28, 1968. Most
of these leases have renewal privileges and require additional rentals under percentage clauses relating to
(3) FEDERAL INCOME TAXES:
The Company and its subsidiaries file separate income
tax returns. Federal income tax returns for years prior
to 1961 have been examined and settled or accepted as
filed. The Internal Revenue Agent's Report covering
the years 1961 through 1963 has been received and the
issues have been resolved subject to receiving the final
adjusted report. The Federal income tax returns for the
years 1964 through 1967 are currently being reviewed
by the Internal Revenue Service. In the opinion of management, the adjustments for all years will not have, in
the aggregate, a material adverse effect on the Company's consolidated financial position or consolidated
earnings set forth in the accompanying financial statements.
The provision for income taxes has been reduced by
the investment credit in the amount of $827,000 and
$462,000 for fiscal periods 1968 and 1967, respectively.
The provision includes deferred income taxes of
$1,770,000 and $1,645,906 for fiscal periods 1968 and
1967, respectively, relating to accelerated depreciation
taken on fixed assets and on leasehold interests under
(4) DEFERRED STOCK COMPENSATION:
Deferred stock bonus awards and contracts have been
made with 175 employees. The shares contingently vest
pro rata until retirement, after which they are distributed
in 10 annual installments. Adjusted for forfeitures, stock
dividends and splits, a total of 251,047 shares have
been awarded, of which 71,734 shares had vested on
July 28, 1968.
(5) CONVERTIBLE SUBORDINATED 5% NOTES:
During 1968, the Company issued $10,000,000 of 5%
convertible subordinated notes due in 1988. These
notes can be converted into common shares at any
time at $26.70 per share, subject to anti-dilution provisions. A total of 374,532 shares of unissued common
stock has been reserved for issuance upon conversion
of the notes. Annual principal payments of $1,000,000
commence April 1, 1979.
The Company did not assign a value to the conversion
privilege granted with these notes. A future opinion of
the Accounting Principles Board of the American Institute of Certified Public Accountants may propose a
retroactive adjustment which, if required, would not
have a significant effect on the accompanying financial
statements since the notes were issued during the last
quarter of the fiscal year.
(6) INTEREST ON CONSTRUCTION LOANS:
In accordance with the practice generally followed by
real estate investment companies, interest on loans,
specifically made to finance major construction projects is capitalized as part of the construction cost. Total
interest capitalized was $428,000 in 1968 and $567,000
in 1967. Such interest is expensed for tax purposes and
the tax benefits are deferred.
(7) DEPRECIATION AND AMORTIZATION OF BUILDINGS
Depreciation and amortization are calculated on the
straight-line method for financial statement purposes
and, where permitted, on accelerated methods for tax
purposes. Deferred taxes are recorded where appropriate.
(8) COMMON STOCK:
Shares issued and outstanding are exclusive of 44,069
shares in 1968 and 21,393 shares in 1967 held by a
wholly owned subsidiary. The accounting treatment of
these shares has been to offset them against capital
stock and captial surplus as though they had been retired, since management warrants that these shares will
be officially retired when deemed practical.
Earnings per share are based on the weighted average shares outstanding of 11,277,747 in 1968 and
10,418,843 in 1967.
(9) TAX EXEMPT SECURITIES:
The Company's policy is to invest surplus cash in tax
exempt securities until required for other purposes.
On July 29 and 30, 1968, the Company purchased
$4,829,000 additional tax exempt securities.
(10) EMPLOYEE STOCK PURCHASE PLAN:
The Board of Directors adopted an Employee Stock
Purchase Plan, subject to shareholders' approval at the
Annual Meeting to be held November 19, 1968. A total
of 100,000 shares of common stock may be purchased
under the Plan at fair market value.