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Exhibit 1 Financial History of Marriott Corporation (dollars in millions, except per share amounts) MORE > > > > 1978
1979
1980
1981
1982
Summary of Operations
Sales Earnings before interest expense and income taxes Interest Expense Income before income taxes Income taxes Income from continuing operations Net Income Funds provided from cont. operation
1,174.1
1,426.0
1,633.9
1,905.7
2,458.9
107.1 23.7 83.5 35.4 48.1 54.3 101.2
133.5 27.8 105.6 43.8 61.8 71.0 117.5
150.3 46.8 103.5 40.6 92.9 72.0 125.8
173.3 52.0 121.3 45.2 76.1 86.1 160.8
205.5 71.8 133.7 50.2 83.5 94.3 203.6
1,000.3 826.9 309.9 37.5% 418.7
1,080.4 891.9 365.3 41.0% 413.5
1,214.3 977.7 536.6 54.9% 311.5
1,454.9 1,167.5 607.7 52.1% 421.7
2,062.6 1,634.5 889.3 54.4% 516.0
0.25 0.29 0.026 2.28 2.43 183.6 13.9%
0.34 0.39 0.034 2.58 3.48 160.5 17.0%
0.45 0.52 0.042 2.49 6.35 125.3 23.8%
0.57 0.64 0.051 3.22 7.18 130.8 23.4%
0.61 0.69 0.063 3.89 11.70 132.8 20.0%
Capitalization and Returns
Total Assets Total capital(c) Long-term debt Percent to total capital Sharholders' equity Per Share and Other Data
Earnings per share: Continuing operations (a) Net income Cash Dividends Shareholders' equity Market price at year end Shares outstanding (in millions) Return on avg. shareholders' equity
Source: Company Reports (a) The Company's theme park operations were discontinued in 1984 (b) Funds provided from continuing operations consist of income from continuing operations plus depreciatio deferred income taxes, and other items not currently affecting workign capital. (c) Total capital represents total assets less current liabilities
Exhibit 2 Financial Summary of Marriott by Business Segment, Segment, 1982-1987 (dollars in millions) 1982
1983
1984
1985
1986
1987
$1,091.7 132.6 909.7
$1,320.5 139.7 1,264.6
$1,640.8 161.2 1,786.3
$1,898.4 185.8 2,108.9
$2,233.1 215.7 2,236.7
$2,673.3 263.9 2,777.4
Lodging:
Sales Operating profit Identifiable assets
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Depreciation Capital expenditures
22.7 371.5
27.4 377.2
31.3 366.4
32.4 808.3
37.1 966.6
43.9 1,241.9
819.8 51.0 373.3 22.9 127.7
950.6 71.7 391.6 26.1 43.8
1,111.3 86.8 403.9 28.9 55.6
1,586.3 118.6 624.4 40.2 125.9
2,236.1 154.9 1,070.2 61.1 448.7
2,969.0 170.6 1,237.7 75.3 112.7
547.4 48.5 452.2 25.1 199.6
679.4 63.8 483.0 31.8 65.0
707.0 79.7 496.7 35.5 72.3
757.0 78.2 582.6 34.8 128.4
797.3 79.1 562.3 38.1 64.0
879.9 82.4 567.6 42.1 79.6
Contract Services:
Sales Operating profit Identifiable assets Depreciation Capital expenditures Retaurants:
Sales Operating profit Identifiable assets Depreciation Capital expenditures Source: Company Reports
Exhibit 3 Information on Comparable Hotel and Restaurant Companies
Aritmetic (a) Average Return
Equity (b) Beta
Market (c) Leverage
1987 Revenues ($ billions)
22.40%
1.11
41%
6.52
HILTON HOTELS CORPORATION (owns, manages, and licenses hotels. Operates casinos.)
13.30%
0.76
14%
0.77
HOLIDAY CORPORATION (Owns, operates, and licenses hotels and restaurants. Operates casinos.)
28.80%
1.35
79%
1.66
LA QUINTA MOTOR INNS (Owns, operates, and licenses motor inns.)
-6.40%
0.89
69%
0.17
RAMADA INNS, INC. (Owns and operates hotels and restaurants.)
11.70%
1.36
65%
0.75
-3.20%
1.45
4%
0.39
MARRIOTT CORPORATION (owns, operates, and manages hotels, restaurants, and airline and institutional food services.) Hotels:
Restaurants:
CHURCH'S FRIED CHICKEN
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(owns and franchises restaurants and gaming businesses.)
COLLINS FOODS INTERNATIONAL (Operates Kentucky Fried Chicken franchise and moderately prices restaurants.)
20.30%
1.45
10%
0.57
FRISCH'S RESTAURANTS (Operates and franchises restaurants.)
56.90%
0.57
6%
0.14
LUBY'S CAFETERIAS (Operates Cafeterias.)
15.10%
0.76
1%
0.23
MCDONALD'S (Operates, franchises, and services restaurants.)
22.50%
0.94
23%
4.89
WENDY'S INTERNATIONAL (Operates, franchises, and services restaurants.)
4.60%
1.32
21%
1.05
Source: Casewriter estimates. (a) Calculated over the five-year priod of 1983-1987 (b) Estimated using five years of monthly data over the 1983-1987 period by ordinary least squares (c) Book value of debt divided by the sum of the book value of debt plus the market value of equity.
Exhibit 4 Annual Holding-Period Returns for Selected Securities and market Indexes, 1926-1987
Arimethic Average
Years
Standard Deviation
Short-term Treasury bills: 1926-87 1926-50 1951-75 1976-80 1981-85 1986 1987
3.54% 1.01% 3.67% 7.80% 10.32% 6.16% 5.46%
0.94% 0.40% 0.56% 0.83% 0.75% 0.19% 0.22%
Long-term U.S. Government bonds returns: 1926-87 1926-50 1951-75 1976-80 1981-85 1986 1987
4.58% 4.14% 2.39% 1.95% 17.85% 24.44% -2.69%
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7.58% 4.17% 6.45% 11.15% 14.26% 17.30% 10.28%
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Long-term, high-grade corporate bond returns: 1926-87 1926-50 1951-75 1976-80 1981-85 1986 1987
5.24% 4.82% 3.05% 2.70% 18.96% 19.85% -0.27%
6.97% 3.45% 6.04% 10.87% 14.17% 8.19% 9.64%
Standard and Poor's 500 Composit Stock Index returns: 1926-87 1926-50 1951-75 1976-80 1981-85 1986 1987
12.01% 10.90% 11.87% 14.81% 15.49% 18.47% 5.23%
20.55% 27.18% 13.57% 14.60% 13.92% 17.94% 30.50%
Source: Casewriter estimates based on data from the University of Chicago's Center for Research in Security Prices.
Exhibit 5
Spreads between S&P 500 Composite Returns and Bond Rates
Arimethic Average
Years
Standard Deviation
Spread between S&P 500 Compsoite returns and short-term U.S. Treasury bill returns: 1926-87 1926-50 1951-75 1976-80 1981-85 1986 1987
8.47% 9.89% 8.20% 7.01% 5.17% 12.31% -0.23%
20.60% 27.18% 13.71% 14.60% 14.15% 17.92% 30.61%
Spread between S&P 500 Compsoite returns and long-term U.S. Government bond returns: 1926-87 1926-50 1951-75 1976-80 1981-85 1986
7.43% 6.76% 9.48% 12.86% -2.36% -5.97%
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20.78% 26.94% 14.35% 15.58% 13.70% 14.76%
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1987
7.92%
35.35%
Spread between S&P 500 Compsoite returns and long-term high-grade corporate bond returns: 1926-87 1926-50 1951-75 1976-80 1981-85 1986 1987
6.77% 6.06% 8.82% 12.11% -3.47% -1.38% 5.50%
20.31% 26.70% 13.15% 15.84% 13.59% 14.72% 34.06%
Source: Casewriter estimates based on data from the University of Chicago's Center for Research in Security Prices.
Marriott Corporation: The Cost of Capital (Abridged)
Harvard Business School Case Software 2-293-753 Copyright (c) 1993 by the President and Fellows of Harvard College.
Professor Richard S. Ruback prepared this case as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation
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This worksheet contains the data from the following exhibits: Exhibit Exhibit Exhibit Exhibit
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Financial History of Marriott Corporation Financial Summary of Marriott by Business Segment, 1982-1987 Information on Comparable Hotel and Restaurant Companies Exhibit 4 Annual Holding-Period Returns for Selected Securities and market Indexes, 1926-1987 Exhibit 5: Spreads between S&P 500 Composite Returns and Bond Rates The first exhibit is located in the A1 position. To view each succeeding exhibit, use the SCROLL Bar to view the next exhibit
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>> 1983
1984
1985
1986
1987
2,950.5
3,524.9
4,241.7
5,266.5
6,522.2
247.9 62.8 185.1 76.7 108.4 115.2 272.7
297.7 61.6 236.1 100.8 135.3 139.8 322.5
371.3 75.6 295.7 128.3 167.4 167.4 372.3
420.5 60.3 360.2 168.5 191.7 191.7 430.3
489.4 90.5 398.9 175.9 223.0 223.0 472.8
2,501.4 2,007.5 1,071.6 53.4% 628.2
2,904.7 2,330.7 1,115.3 47.9% 675.6
3,663.8 2,861.4 1,192.3 41.7% 848.5
4,579.3 3,561.8 1,662.8 46.7% 991.0
5,370.5 4,247.8 2,498.8 58.8% 810.8
0.78 0.83 0.076 4.67 14.25 134.4 20.0%
1.00 1.04 0.093 5.25 14.70 128.8 22.1%
1.24 1.24 0.113 6.48 21.58 131.0 22.1%
1.40 1.40 0.136 7.59 29.75 130.6 20.6%
1.67 1.67 0.170 6.82 30.00 118.8 22.2%
,
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