The total cost of shares purchased pursuant to the offer, including
estimated fees and expenses, will approximate $178,750,000.
The stock repurchase will be financed through the sale of six
hotels and the incurrence of additional debt.
The Equitable Life Assurance Society of the United States
has approved, subject to the execution of definitive agreements,
the purchase of six hotels (three existing and three under development) from the Company. Net proceeds to the Company from
the sale will approximate $159,000,000 after payment of related
mortgage indebtedness and before giving effect to the development costs of the three hotels under development. Approximately
$60,000,000 will be received in 1980 and the remainder through
1982. The Company will continue to operate these hotels under
long-term lease agreements with rentals based solely on future
profits. In addition, on February 29,1980, the Company signed a
term loan agreement with The Equitable for $146,000,000
maturing between 1986 and 1988 and bearing interest at 137's%.
The Company is required to make prepayments of the loan out of
the entire proceeds of the hotel sale discussed above.
The Company will borrow the balance of approximately
$32,750,000 required to consummate the Offer pursuant to lines
of credit from a group of major commercial banks. The Company
has obtained letters of commitment from these banks under
which existing Revolving Credit Agreements may be amended
or superseded to permit the stock repurchase and to increase the
aggregate available lines of credit up to $554,000,000 from the
$129,000,000 which existed at December 28,1979. These
amended lines of credit substantially mature from 1984 to 1989.
The Company anticipates that certain covenants of its 8%%
Senior Notes due 1983-1997 of which $40,000,000 principal
amount remains outstanding will be amended to permit the stock
repurchase. If an amendment cannot be obtained, the Senior
Notes will be refinanced through borrowings under the Revolving Credit facilities.
The pro forma effects of the stock repurchase, assuming the
entire transaction occurred on December 30,1978, and excluding
the effects of the anticipated sale of six hotels to The Equitable,
are summarized below (dollars in thousands except per share
At and for the Fiscal Year-
Ended December 28,1979
Balance Sheet Items
Senior debt and capital lease obligations
Convertible subordinated debt
Deferred income taxes and other liabilities
Income Statement Items
Cost of sales and other expenses
Net interest expense
Income before income taxes
Provision for income taxes
Earnings per share
—at fiscal year-end
As Reported Shares
$ (10,777) $ (10,777)
891,866 $ 891,866
To the Shareholders of Marriott Corporation:
We have examined the consolidated balance sheet of
MARRIOTT CORPORATION (a Delaware corporation) and
Subsidiaries as of December 28,1979 and December 29,1978,
and the related statements of consolidated income, shareholders'
equity and changes in financial position for the fiscal years then
ended. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such
tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the consolidated financial statements referred
to above present fairly the financial position of Marriott Corporation and Subsidiaries as of December 28,1979 and December 29,1978, and the results of their operations and the changes
in their financial position for the fiscal years then ended, in conformity with generally accepted accounting principles applied on
a consistent basis.
ARTHUR ANDERSEN & CO.
January 30, 1980 (the date with respect to the Subsequent
Event discussed in the Notes to Consolidated Financial Statements is February 29,1980).
Management is responsible for the integrity and objectivity
of the consolidated financial statements and other financial information presented in this Annual Report. In meeting this responsibility, the Company maintains a highly developed system of
internal controls, policies and procedures including an internal
auditing function that continually evaluates the adequacy and
effectiveness of our control system. We believe this system
provides reasonable assurance that transactions are properly
authorized and recorded to adequately safeguard the Company's
assets and to permit preparation of the consolidated financial
statements in accordance with generally accepted accounting
The consolidated financial statements have been examined
by Arthur Andersen & Co., independent public accountants. The
auditors' report expresses an informed judgment as to whether
management's consolidated financial statements, considered in
their entirety, present fairly the Company's financial position
and operating results in conformity with generally accepted
The Board of Directors pursues its responsibility for the consolidated financial statements through its Audit Committee,
composed of three directors not otherwise employed by the Company, headed by the Vice Chairman. The Committee meets a
minimum of three times during the year with the independent
public accountants, representatives of management and the
internal auditors to review the scope and results of the internal
and external audits, the accounting principles applied in financial reporting and financial and operational controls. The independent public accountants and internal auditors have full and
free access to the Audit Committee with or without the presence