2006 Annual Report

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3 Forward foreign exchange contracts to manage the foreign currency exposure related to certain monetary assets. The aggregate dollar equivalent of the notional amounts of the forward contracts was $217 million and they expire throughout 2007. 3 Oil price hedges to manage the volatility associated with oil prices and the uncertainty surrounding the potential The following table sets forth the scheduled maturities and the total fair value of our derivatives and other financial instruments as of year-end 2006: Maturities by Period Total Total Carrying Fair ($ in millions) 2007 2008 2009 2010 2011 Thereafter Amount Value Assets—Maturities represent expected principal receipts, fair values represent assets. Timeshare segment notes receivable $ 70 $ 40 $ 35 $ 30 $ 30 $ 181 $ 386 $ 386 Average interest rate 12.35% Fixed-rate notes receivable $ 13 $ 6 $ 2 $ 83 $ 3 $ 26 $ 133 $ 136 Average interest rate 10.94% Floating-rate notes receivable $ 20 $ 19 $ 3 $ 7 $ 36 $ 59 $ 144 $ 145 Average interest rate 7.99% Residual interests $ 84 $ 50 $ 33 $ 21 $ 13 $ 20 $ 221 $ 221 Average interest rate 9.22% Liabilities—Maturities represent expected principal payments, fair values represent liabilities. Fixed-rate debt $ (11) $(103) $(89) $(13) $(14) $(1,243) $(1,473) $(1,504) Average interest rate 6.07% Floating-rate debt $ (1) $ — $ — $ — $ — $ (315) $ (316) $ (316) Average interest rate NOTE: We classify commercial paper as long-term debt based on our ability and intent to refinance it on a long-term basis. 4.80% Derivatives—Maturities represent notional amounts, fair values represent assets (liabilities). Interest Rate Swaps: Fixed to variable $ — $ — $ — $ 93 $ — $ 161 $ 8 $ 8 Average pay rate 3.90% Average receive rate 5.29% Variable to fixed $ — $ — $ — $ — $ — $ 47 $ (2) $ (2) Average pay rate 5.88% Average receive rate Forward Foreign Exchange Contracts: 4.01% Fixed (EUR) to Fixed (USD) $162 $ — $ — $ — $ — $ — $ — $ — Average exchange rate 1.32 Fixed (GBP) to Fixed (USD) $ 75 $ — $ — $ — $ — $ — $ — $ — Average exchange rate 1.96 Fixed (HKD) to Fixed (USD) $ 49 $ — $ — $ — $ — $ — $ — $ — Average Exchange Rate 0.13 Fixed (MXN) to Fixed (USD) $ 7 $ — $ — $ — $ — $ — $ — $ — Average Exchange Rate 0.09 Fixed (AUD) to Fixed (USD) $ 3 $ — $ — $ — $ — $ — $ — $ — Average Exchange Rate 0.79 Fixed (CAD) to Fixed (USD) $ 11 $ — $ — $ — $ — $ — $ — $ — Average Exchange Rate 0.86 Oil Price Hedges: Contract Amount (Weighted Average Price per Gallon is $1.37) (Contract volume is 5 million barrels) $ 7 $ — $ — $ — $ — $ — $ 5 $ 5 36 | MARRIOTT INTERNATIONAL, INC. 2006 phase-out of tax credits in 2007. The hedges cover 5 million barrels of oil and expire on December 31, 2007. 3 Forward foreign exchange contracts to manage currency exchange rate volatility associated with certain investments in foreign operations. The contracts had a dollar notional equivalent of $43 million and they expire throughout 2007.
Consolidated Statement of Income Fiscal Years 2006, 2005 and 2004 2006 2005 2004 ($ in millions, except per share amounts) REVENUES Base management fees (1) $ 553 $ 497 $ 435 Franchise fees 390 329 296 Incentive management fees (1) 281 201 142 Owned, leased, corporate housing and other revenue (1) 1,119 944 730 Timeshare sales and services 1,577 1,487 1,247 Cost reimbursements (1) 8,075 7,671 6,928 Synthetic fuel 165 421 321 12,160 11,550 10,099 OPERATING COSTS AND EXPENSES Owned, leased and corporate housing-direct 936 778 629 Timeshare-direct 1,220 1,228 1,039 Reimbursed costs (1) 8,075 7,671 6,928 General, administrative and other (1) 677 753 607 Synthetic fuel 241 565 419 11,149 10,995 9,622 OPERATING INCOME 1,011 555 477 Gains and other income (1) 59 181 164 Interest expense (124) (106) (99) Interest income (1) 45 79 146 Reversal of provision for (provision for) loan losses (1) 3 (28) 8 Equity in (losses) earnings —Synthetic fuel (1) — — (28) —Other (1) 3 36 (14) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST 997 717 654 Provision for income taxes (286) (94) (100) Minority interest 6 45 40 INCOME FROM CONTINUING OPERATIONS 717 668 594 Cumulative effect of change in accounting principle, net of tax (109) — — Discontinued operations, net of tax — 1 2 NET INCOME $ 608 $ 669 $ 596 EARNINGS PER SHARE-Basic Earnings from continuing operations $ 1.77 $ 1.55 $ 1.31 Losses from cumulative effect of accounting change (0.27) — — Earnings from discontinued operations — — — Earnings per share $ 1.50 $ 1.55 $ 1.31 EARNINGS PER SHARE-Diluted Earnings from continuing operations $ 1.66 $ 1.45 $ 1.24 Losses from cumulative effect of accounting change (0.25) — — Earnings from discontinued operations — — — Earnings per share $ 1.41 $ 1.45 $ 1.24 DIVIDENDS DECLARED PER SHARE $0.2400 $0.2000 $0.1650 (1) See Footnote No. 22,“Related Party Transactions,” of the Notes to Consolidated Financial Statements for disclosure of related party amounts. See Notes to Consolidated Financial Statements MARRIOTT INTERNATIONAL, INC. 2006 | 37
Page 1 and 2: MARRIOTT INTERNATIONAL, INC. 2006 A
Page 3 and 4: Our Brands The Ritz-Carlton ® Hote
Page 5 and 6: As the brand catering to the “enj
Page 7 and 8: A Place to Achieve At Marriott, we
Page 9 and 10: A Place to Let Go For many, leisure
Page 11 and 12: To Our Shareholders J.W. MARRIOTT,
Page 13 and 14: Risk Factors FORWARD-LOOKING STATEM
Page 15 and 16: ownership could prevent potential c
Page 17 and 18: Management’s Discussion and Analy
Page 19 and 20: eceipt in 2005, of a $10 million te
Page 21 and 22: “Accounting for Real Estate Time-
Page 23 and 24: everage and other revenue, and new
Page 25 and 26: Comparable Company- Comparable Oper
Page 27 and 28: 2006 COMPARED TO 2005 Across our No
Page 29 and 30: increase in base management and inc
Page 31 and 32: The table below details the impact
Page 33 and 34: production, our synthetic fuel prod
Page 35 and 36: Dividends. In April 2006, our Board
Page 37: previously deferred and recognize t
Page 41 and 42: Consolidated Statement of Cash Flow
Page 43 and 44: Notes to Consolidated Financial Sta
Page 45 and 46: “Other long-term assets” line i
Page 47 and 48: FIN 48, only tax positions that mee
Page 49 and 50: 3 | INCOME TAXES See the “Future
Page 51 and 52: weighted average remaining term was
Page 53 and 54: 7 | PROPERTY AND EQUIPMENT ($ in mi
Page 55 and 56: 2004 Dispositions We sold two lodgi
Page 57 and 58: At year-end 2006, $1,123 million of
Page 59 and 60: the Series F Notes and Series G Not
Page 61 and 62: Audit of Employee Stock Ownership P
Page 63 and 64: Depreciation and Amortization ($ in
Page 65 and 66: JWM Family Enterprises, L.P. JWM Fa
Page 67 and 68: Selected Historical Financial Data
Page 69 and 70: Non-GAAP Financial Measure Reconcil
Page 71 and 72: Report of Independent Registered Pu
Page 73 and 74: Board of Directors [BACK ROW, LEFT

2006 Annual Report

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