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| Title | Marriott Corporation, 1983 Annual Report |
| Creator (LCNAF) |
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| Publisher | Marriott International, Inc. |
| Date | 1983 |
| Description | Marriott Corporation Annual Report for calendar year 1983. |
| Subject.Topical (LCSH) |
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| Subject.Name (LCNAF) |
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| Genre (AAT) |
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| Language | English |
| Type (DCMI) |
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| Original Item Location | Marriott Hotels Collection |
| Digital Collection | Annual Reports from the Hospitality Industry Archives |
| Digital Collection URL | http://digital.lib.uh.edu/collection/hiltonar |
| Repository | Hospitality Industry Archives, Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston |
| Repository URL | http://www.uh.edu/hilton-college/About/hospitality-industry-archives |
| Use and Reproduction | No Copyright - United States |
| File Name | index.cpd |
| Title | Image 24 |
| Format (IMT) |
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| File Name | hiltonar_201609_055_024.jpg |
| Transcript | Capital Productivity Remains High Return on Shareholders'Equity (ROE) was 20%, and return on total capital was 14%. Since 1975, ROE has more than doubled in response to Marriott's aggressive program to improve capital efficiency. Marriott plans to continue performing at these levels through the 1980s by carefully managing the balance sheet and continuing to expand hotels—primarily under management agreements. Several major transactions in 1983 boosted this program: □ Financings totaling $609 million were negotiated on eight hotels, including a $329 million non-recourse loan that will provide both construction and permanent financing for the 1,878-room New York Marriott Marquis Hotel. These properties will be syndicated, thereby largely eliminating Marriott's capital commitment to these hotels. Marriott will retain profitable management agreements. □ Roy Rogers successfully completed the sale of 108 Rustler steak house restaurants, and has sold 137 of the former Gino's units to date. The sale or conversion of the remaining units is anticipated in 1984. □ The company entered into an agreement to sell the Santa Clara theme park land and improvements to the City of Santa Clara for $101 million, with closing to take place in September 1984. The Santa Clara theme park will continue in operation through the 1984 season. Capitalization Optimized Marriott's ambitious capital investment and acquisition program is financed by a combination of retained Discretionary Cash Flow, incremental debt on an expanding asset base and sales of hotels with management agreements. Disciplined management of Marriott's highly liquid hotel assets and debt structure enables the company to maintain targeted leverage and minimize capital costs. Marriott bases target debt levels on cashflow coverage of four times interest expense. Marriott's coverage objective is what lenders require to provide the company debt financing at prime rates. Despite aggressive expansion, Marriott financing techniques maintained coverage at targeted levels, as shown on page 20. Total capital spending of $499 million in 1983 and $667 million in 1982 (including the Gino's and Host acquisitions) was financed primarily from internal cash flow and hotel dispositions. The 1984 capital program of about $800 million will be financed in a similar manner. The ability to grow aggressively yet maintain planned coverage demonstrates once again that Marriott's high Discretionary Cash Flow ($8.85 per share versus EPS of $4.15), combined with the declining capital intensity of the company's hotel business, has allowed Marriott to expand hotel rooms 20% annually without commensurate capital requirements. As a result, investment capacity can be released to fund additional corporate growth such as the successful 1982 Host and Gino's acquisitions. This is the prime reason that the company's compound five-year EPS growth of 24% has exceeded its target of 20%. Marriott's objective is to minimize the cost of capital by optimizing the mix of fixed and floating interest rate debt obligations. Marriott's operating cash flows have a high correlation with inflation and short interest rates. Thus, an optimal debt structure requires a significant quantity of floating rate debt to minimize capital cost and risk. In addition, the company requires that construction in progress be financed in the traditional manner with floating rate debt. Excluding construction financing, long-term debt with floating interest rates averaged 58% of total debt capitalization in 1983, compared to 60% in 1982. 22 |