Marriott International Reports Fourth Quarter Results !

Marriott International Reports Fourth Quarter Results



February 11, 2010



The following information was released to the media today







Marriott International today reported fourth quarter and full year 2009 results.



FOURTH QUARTER 2009 RESULTS



Fourth quarter 2009 adjusted income from continuing operations attributable to Marriott totaled $118 million, a 2 percent decline over the year-ago quarter, and adjusted diluted earnings per share (“EPS”) from continuing operations attributable to Marriott shareholders totaled $0.32, down 3 percent. On October 8, 2009, the company forecasted fourth quarter adjusted diluted EPS of $0.20 to $0.23.



Reported income from continuing operations attributable to Marriott was $106 million in the fourth quarter of 2009 compared to a reported loss from continuing operations attributable to Marriott of $10 million in the year-ago quarter. Reported diluted EPS from continuing operations attributable to Marriott shareholders was $0.28 in the fourth quarter of 2009 compared to reported diluted losses per share from continuing operations attributable to Marriott shareholders of $0.03 in the fourth quarter of 2008.



Adjusted results for the 2009 fourth quarter exclude $19 million pretax ($12 million after-tax and $0.03 per diluted share) of restructuring costs and other charges. Restructuring charges totaled $7 million pretax and included severance and facilities exit costs. Other charges totaled $12 million pretax and primarily included $11 million of charges against lodging assets and $3 million of reserves for Timeshare contract cancellations, offset by the $2 million favorable impact of the revaluation of Timeshare note residuals. Of the total restructuring costs and other charges in the fourth quarter, cash payments are expected to be $6 million. See the table on page A-15 of the accompanying schedules for the detail of these charges and their placement on the Consolidated Statements of Income.



Adjusted results for the 2008 fourth quarter exclude $192 million pretax ($124 million after-tax and $0.35 per diluted share) of restructuring costs and other charges, $152 million of which were non-cash, as well as $7 million of charges ($0.02 per diluted share) in the provision for income taxes.



J.W. Marriott, Jr., chairman and chief executive officer of Marriott International, said, “While the global business climate remained difficult, fourth quarter results exceeded our expectations. We grew our system, reduced total debt, and continued to improve efficiencies worldwide.



“In the fourth quarter, leisure travelers responded to aggressive marketing campaigns and special offers and, even adjusting for easier year-over-year comparisons, business travel showed signs of improvement, particularly in international markets. With solid cost controls, we translated the stronger-than-expected occupancy to better-than-expected incentive fee revenue. Demand for timeshare intervals improved modestly from third quarter levels which, combined with a successful note sale and reductions in investment spending, allowed the timeshare business to generate over $150 million of cash flow after investing activities for full year 2009.



“We are pleased that we remain an investment grade company. For the full year, we reduced investment spending by two-thirds and we were able to lower total debt by nearly $800 million.



“We opened over 38,000 rooms during 2009 and we’re thrilled to have two new exciting brands, EDITION and the Autograph Collection, opening their first hotels in 2010 with more expected to come. Our global development pipeline totals nearly 100,000 rooms. Our efforts have positioned us quite well for future earnings growth.”



Revenue per available room (REVPAR) for the company’s worldwide comparable company-operated properties declined 12.2 percent (12.4 percent using constant dollars) in the 2009 fourth quarter and REVPAR for the company’s worldwide comparable systemwide properties declined 12.3 percent (12.5 percent using constant dollars).



Outside North America, the fourth quarter included the months from September to December in both years. International comparable company-operated REVPAR declined 11.1 percent (11.7 percent using constant dollars), including an 11.6 percent decline in average daily rate (12.2 percent using constant dollars) in the fourth quarter of 2009.



In North America, comparable company-operated REVPAR declined 13.1 percent in the fourth quarter of 2009. REVPAR at the company’s comparable company-operated North American full-service and luxury hotels (including Marriott Hotels & Resorts, The Ritz-Carlton and Renaissance Hotels & Resorts) was down 11.8 percent with an 11.0 percent decline in average daily rate.



Marriott’s 2009 fiscal year ended on January 1, 2010 and included 52 weeks compared to 53 weeks in fiscal 2008. Similarly, the fourth quarter ended on January 1, 2010 and included 16 weeks compared to 17 weeks in the 2008 fiscal quarter. Key lodging statistics are included in the schedules accompanying the press release beginning on page A-7. While fiscal fourth quarter REVPAR statistics for North America are included, they are not comparable due to differences in the length and seasonality of the reporting periods. As a result, the company has also provided North American and worldwide REVPAR statistics adjusted for the shift in the fiscal calendar.



On a calendar quarter basis, which includes the months of October, November and December, North American comparable company-operated REVPAR declined 10.7 percent while worldwide comparable company-operated REVPAR declined 10.1 percent (10.8 percent using constant dollars).



Marriott added 65 new properties (10,626 rooms) to its worldwide lodging portfolio in the 2009 fourth quarter, including 45 limited-service hotels in North America. Seven properties (1,635 rooms) exited the system during the quarter. Rooms converted from competitor hotels accounted for nearly 18 percent of gross room additions during the quarter. At year-end, the company’s lodging group encompassed 3,420 properties and timeshare resorts for a total of over 595,000 rooms.



The company’s worldwide pipeline of hotels under construction, awaiting conversion or approved for development totaled nearly 100,000 rooms at year-end. Nearly 35 percent of these development pipeline rooms are Marriott, Ritz-Carlton, Renaissance, EDITION or Autograph rooms, of which nearly 75 percent are located outside North America.



Reported results for the 2009 fourth quarter, the adjusted results and the associated reconciliations are shown on pages A-1, A-13, A-15, and A-19 of the accompanying schedules. The following paragraphs reflect adjusted results where indicated.



MARRIOTT REVENUES totaled approximately $3.4 billion in the 2009 fourth quarter compared to $3.8 billion for the fourth quarter of 2008. Base management and franchise fees declined 12 percent to $282 million reflecting lower REVPAR, offset in part by fees from new hotels. Fourth quarter incentive management fees declined 28 percent to $59 million. The percentage of company-managed hotels earning incentive management fees decreased to 22 percent in the 2009 fourth quarter compared to 39 percent in the year-ago quarter. Approximately 70 percent of incentive management fees came from hotels outside North America in the 2009 quarter compared to 55 percent in the 2008 quarter.



Worldwide comparable company-operated house profit margins declined 260 basis points in the fourth quarter reflecting the weak REVPAR environment, offset in part by significant cost reductions from productivity improvements, lower management wages and procurement savings through volume discounts and compliance. House profit margins for comparable company-operated properties outside North America declined 100 basis points and North American comparable company-operated house profit margins declined 360 basis points from the year-ago quarter.



Owned, leased, corporate housing and other revenue, net of direct expenses, declined $23 million in the 2009 fourth quarter, to $22 million, primarily reflecting the impact of lower operating results in owned and leased hotels and lower termination fees and other income, partially offset by an increase in branding fee revenue.



Fourth quarter adjusted Timeshare segment contract sales declined 7 percent to $203 million excluding a $28 million allowance for fractional and residential contract cancellations recorded in the quarter. In the prior year’s quarter, adjusted Timeshare segment contract sales totaled $218 million excluding a $115 million allowance for contract cancellations.



In the fourth quarter, adjusted timeshare sales and services revenue declined 3 percent to $375 million and, net of expenses, totaled $72 million for the quarter, a $62 million increase from the 2008 adjusted fourth quarter. Development revenue, net of expense, benefited from higher closing efficiency and cost savings. Financing revenue, net of expense, increased largely as a result of a $38 million note sale gain recorded in the fourth quarter of 2009, compared to the absence of a note sale in the fourth quarter of 2008, and cost savings, partially offset by lower interest income.



Adjusted Timeshare segment results, which includes Timeshare sales and services revenue, net of direct expenses, as well as base management fees, equity earnings, gains and other income, noncontrolling interest and general, administrative and other expenses associated with the timeshare business, totaled $62 million in the 2009 fourth quarter compared to a loss of $2 million in the prior year quarter.



ADJUSTED GENERAL, ADMINISTRATIVE and OTHER expenses for the 2009 fourth quarter declined 13 percent to $207 million, compared to $238 million in the year-ago quarter. The 2009 fourth quarter benefited from cost savings throughout the organization, as well as $3 million in foreign exchange gains and the $3 million reversal of a loan loss reserve partially offset by $12 million of accruals and reserves related to the performance of 12 hotels and $8 million of lower capitalized development costs. The 2009 quarter also included a $21 million unfavorable impact associated with deferred compensation compared to the 2008 quarter (offset by a similar decrease in the provision for taxes). Excluding the impact of deferred compensation, adjusted general administrative and other expenses declined 20 percent in the fourth quarter, as shown on page A-19 of the accompanying schedules.



GAINS AND OTHER INCOME totaled $4 million and included a $3 million gain on the sale of investments and $1 million of net gains on the sale of real estate. The prior year’s fourth quarter adjusted gains and other income totaled $28 million and included a $28 million gain on the extinguishment of debt and $7 million of gains on the sale of real estate offset by a $4 million loss on the sale of an investment and $3 million unfavorable impact of preferred returns from joint venture investments and other income.



INTEREST EXPENSE decreased $16 million in the fourth quarter primarily due to lower interest rates and lower debt balances.



ADJUSTED EQUITY IN (LOSSES) EARNINGS totaled a $10 million loss in the quarter compared to $5 million in earnings in the year-ago quarter. The $15 million decline reflected lower operating results in two joint ventures.



ADJUSTED INCOME TAXES

The adjusted provision for taxes in the fourth quarter of 2009 reflected a $21 million favorable impact associated with deferred compensation (offset by a similar unfavorable impact in general, administrative and other expenses) compared with the 2008 fourth quarter.



FULL YEAR 2009 RESULTS



For the full year 2009, adjusted income from continuing operations attributable to Marriott totaled $342 million, a decline of 38 percent, and adjusted diluted EPS from continuing operations attributable to Marriott shareholders was $0.93, a decline of 38 percent.



The reported loss from continuing operations attributable to Marriott was $346 million for full year 2009 compared to reported income from continuing operations attributable to Marriott of $359 million a year ago. Reported diluted losses per share from continuing operations attributable to Marriott was $0.97 for 2009 compared to reported diluted EPS from continuing operations attributable to Marriott of $0.97 for 2008.



Adjusted income from continuing operations attributable to Marriott and adjusted diluted EPS from continuing operations attributable to Marriott shareholders for 2009 exclude the $213 million pretax ($130 million after-tax and $0.37 per diluted share) restructuring costs and other charges, $182 million of which were non-cash, as well as $752 million pretax ($502 million after-tax and $1.41 per diluted share) of primarily non-cash Timeshare impairment charges. See the table on pages A-15 and A-16 of the accompanying schedules for the detail of these charges and their placement on the Consolidated Statements of Income. Adjusted results for full year 2009 also exclude the $56 million ($0.16 per diluted share) impact of non-cash charges in the provision for income taxes.



Adjusted income from continuing operations attributable to Marriott and adjusted diluted EPS from continuing operations attributable to Marriott shareholders for 2008 exclude the $192 million pretax ($124 million after-tax and $0.33 per diluted share) restructuring costs and other charges. Adjusted results for full year 2008 also exclude the $72 million ($0.19 per diluted share) impact of charges, $67 million of which were non-cash, included in the tax provision.



REVPAR for the company’s worldwide comparable company-operated properties declined 20.0 percent (18.3 percent using constant dollars) in 2009. REVPAR for the company’s worldwide comparable systemwide properties declined 18.4 percent (17.3 percent using constant dollars) in 2009.



International comparable company-operated REVPAR for 2009 declined 23.5 percent (18.0 percent using constant dollars), including a 17.8 percent decline in average daily rate (11.9 percent using constant dollars).



In North America, comparable company-operated REVPAR declined 18.5 percent in 2009. REVPAR at the company’s comparable company-operated North American full-service and luxury hotels (including Marriott Hotels & Resorts, The Ritz-Carlton and Renaissance Hotels & Resorts) was down 17.8 percent with an average daily rate decline of 12.2 percent.



Reported results for full year 2009, the adjusted results and the associated reconciliations are shown on pages A-2, A-14, A-15, A-16, and A-19 of the accompanying schedules. The following paragraphs reflect adjusted results where indicated.



MARRIOTT REVENUES totaled $10.9 billion in 2009 compared to $12.9 billion in 2008. Total fees in 2009 were $1,084 million, a decrease of 22 percent from the prior year. Base management and franchise fees declined $156 million in 2009, reflecting the decline in worldwide REVPAR offset in part by unit growth across the system. Incentive management fees declined 50 percent reflecting lower property-level margins due to worldwide REVPAR declines, partially offset by strong cost controls. For full year 2009, 25 percent of company-operated hotels earned incentive management fees compared to 56 percent in the prior year. Approximately two-thirds of incentive management fees came from hotels outside North America in 2009 compared to 49 percent in 2008.



Owned, leased, corporate housing and other revenue, net of direct expenses, totaled $68 million in 2009 compared to $137 million in 2008. Results were primarily impacted by lower operating results at owned and leased properties, the conversion of some owned properties to management agreements, and lower termination fees, partially offset by higher branding fees and a transaction cancellation fee.



Reflecting weak demand, adjusted Timeshare segment contract sales in 2009 declined 37 percent to $748 million, excluding allowances for anticipated contract cancellations of $83 million in 2009 and $115 million in 2008.



Adjusted Timeshare sales and services revenue declined 23 percent to $1,147 million in 2009 and adjusted Timeshare sales and services revenue, net of direct expenses, totaled $106 million in 2009, a decrease of 28 percent. Development revenue, net of expense, declined in 2009 reflecting soft demand, partially offset by favorable reportability and reduced marketing and sales costs. Services revenue, net of expense, also declined largely reflecting lower rental revenues and higher carry costs on unsold units. Financing revenue, net of expense, increased in 2009 reflecting a $9 million increase in note sale gains and cost savings, partially offset by lower interest income. Timeshare direct expenses in 2008 included a $22 million impairment charge at a fractional and residential joint venture project referred to below.



Adjusted Timeshare segment results, which includes timeshare sales and services revenue, net of direct expenses, as well as base management fees, equity earnings, gains and other income, noncontrolling interest and general, administrative and other expenses associated with the timeshare business, totaled $87 million in 2009 compared to $121 million in the prior year. The segment results for 2008 reflected a net $10 million pretax impairment charge for a fractional and residential consolidated joint venture project, adjusting the carrying value of the real estate to its estimated fair market value. The $10 million charge in 2008 included a $22 million negative adjustment in timeshare direct expenses partially offset by a $12 million pretax ($8 million after-tax) benefit associated with the joint venture partner’s share, which is reflected in net losses attributable to noncontrolling interest, net of tax.



The Timeshare segment also generated over $150 million of pretax cash flow in 2009.



ADJUSTED GENERAL, ADMINISTRATIVE and OTHER expenses decreased $127 million to $622 million in 2009 reflecting cost savings and lower incentive compensation, partially offset by the $43 million unfavorable impact associated with deferred compensation compared to 2008 (offset by a similar decrease in the provision for taxes) and $12 million of accruals and reserves related to the performance of 12 hotels. Excluding the impact of deferred compensation, adjusted general, administrative and other expenses declined 22 percent in 2009, as shown on page A-19 of the accompanying schedules.



GAINS AND OTHER INCOME totaled $31 million in 2009 and included a $21 million gain on the extinguishment of debt, net gains of $10 million from the sale of real estate, a $3 million gain on the sale of investments and $2 million of preferred returns from joint venture investments, partially offset by a $5 million impairment charge on an investment. Adjusted gains and other income of $47 million in 2008 included gains of $14 million from the sale of real estate, a $28 million gain on the extinguishment of debt, $6 million of preferred returns from several joint venture investments and other income and $3 million of gains on the sale of the company’s interests in two joint ventures, partially offset by a $4 million loss on the sale of an investment.



INTEREST EXPENSE declined 28 percent in 2009 partially due to lower interest rates, repayment of debt and the repurchase of Senior Notes.



ADJUSTED EQUITY IN (LOSSES) EARNINGS totaled a $27 million loss in 2009 compared to $31 million of earnings in 2008. Losses in 2009 primarily reflected losses in five joint ventures and the impairment of one investment. Earnings in 2008 primarily reflected a $15 million gain on the sale of a joint venture’s assets, insurance proceeds of $5 million received through a joint venture and $11 million of earnings from joint ventures.



ADJUSTED INCOME TAXES

The adjusted provision for taxes reflected a $43 million favorable impact associated with deferred compensation (offset by a similar unfavorable impact in general, administrative and other expenses) compared to 2008.



NET LOSSES ATTRIBUTABLE TO NONCONTROLLING INTERESTS, NET OF TAX decreased $8 million in 2009 to $7 million. The decrease largely reflected the adjustment of the carrying value of a fractional and residential project in 2008. Since the project is a consolidated joint venture, the partner’s share of the adjustment was an $8 million after-tax benefit to noncontrolling interests in 2008.



ADJUSTED EBITDA

Adjusted EBITDA totaled $898 million in 2009, a 31 percent decline from 2008 adjusted EBITDA of $1,298 million.



BALANCE SHEET

At year-end 2009, total debt was $2,298 million and cash balances totaled $115 million, compared to $3,095 million in debt and $134 million of cash at year-end 2008. The company repurchased $119 million of its Senior Notes in 2009. At year-end 2009, Marriott had borrowings of $425 million under its $2.4 billion bank revolver.



COMMON STOCK

Weighted average fully diluted shares outstanding used to calculate adjusted diluted earnings per share amounts totaled 372.2 million in the 2009 fourth quarter compared to 363.1 million in the year-ago quarter.



On November 5, 2009, the Board of Directors declared a stock dividend payable on December 3, 2009, to shareholders of record on November 19, 2009. For periods prior to the stock dividend, all share and per share data in our financial statements have been retroactively adjusted to reflect the stock dividend.



On February 4, 2010, the Board of Directors declared the issuance of a $0.04 per share cash dividend payable on April 9, 2010 to shareholders of record on February 19, 2010.



The remaining share repurchase authorization, as of January 1, 2010, totaled 21.3 million shares. No share repurchases are planned for 2010.



IMPACT OF ACCOUNTING CHANGES

The company adopted ASU Nos. 2009-16 and 2009-17 (formerly referred to as FAS 166 and 167) at the beginning of 2010, which requires consolidating previously sold Timeshare notes and will impact the ongoing accounting for those notes. With the consolidation of the existing portfolio of sold loans on the first day of 2010, the company expects assets to increase by approximately $1,010 million, liabilities to increase by approximately $1,115 million, and shareholders’ equity to decline by approximately $105 million. No change in cash flow from the business is anticipated as a result of the accounting changes. Adjusted pretax earnings for fiscal 2009 would have been $1 million lower had the accounting change occurred at the beginning of 2009. See the tables on page A-22, A-23, A-24, A-25 and A-26 of the accompanying schedules for 2009 quarterly and full year Timeshare segment results adjusted as if the accounting changes had been made on the first day of fiscal 2009.



OUTLOOK

While Marriott typically provides a range of guidance for future performance, the current global economic and financial climate continues to make predictions very difficult. Therefore, the company is unable to give guidance. Instead, the company is providing the following assumptions for the 2010 first quarter and full year which it is using for internal planning purposes.



FIRST QUARTER 2010

For the first quarter, the company assumes worldwide comparable systemwide hotel REVPAR declines 5 to 7 percent on a constant dollar basis. For North American comparable systemwide hotels, the company assumes REVPAR declines of 7 to 8 percent and for comparable systemwide hotels outside North America, REVPAR could decline 2 to 3 percent on a constant dollar basis.



Given these REVPAR assumptions, total fee revenue could be $235 million to $245 million. Owned, leased, corporate housing and other revenue, net of direct expenses, could total approximately $5 million.



In the 2010 first quarter, the company assumes Timeshare contract sales total $165 million to $175 million and Timeshare sales and services revenue, net of direct expenses, total approximately $35 million to $45 million including the impact of ASU Nos. 2009-16 and 2009-17. With these assumptions, Timeshare segment results for the first quarter could total $30 million to $40 million.



The company anticipates that general, administrative and other expenses could total about $130 million to $140 million in the first quarter 2010, roughly flat from the adjusted 2009 first quarter amount. The company also assumes net interest expense of approximately $40 million in the quarter, reflecting the impact of ASU Nos. 2009-16 and 2009-17, as well as continued debt reduction.



Based upon the above assumptions and a 36.5 percent tax rate, diluted EPS from continuing operations attributable to Marriott shareholders for the 2010 first quarter could total $0.15 to $0.21.



FULL YEAR 2010

For full year 2010, the company expects hotel occupancies to improve, although the pace of such improvement is difficult to predict. The company continues to expect that both domestic and international comparable systemwide REVPAR comparisons to the prior year will turn positive sometime in 2010. For worldwide comparable systemwide hotels, the company assumes full year 2010 REVPAR will be down 2 percent to up 2 percent on a constant dollar basis with performance strengthening over the year. North American comparable systemwide REVPAR could be flat to down 3 percent in 2010, while REVPAR at comparable systemwide hotels outside North America could be flat to up 5 percent.



The company expects to open 25,000 to 30,000 rooms in 2010 as most hotels expected to open are already under construction or undergoing conversion from other brands. Given these assumptions, full year 2010 fee revenue could total $1,080 million to $1,120 million. The company expects that incentive management fees in 2010 would largely derive from international markets. Owned, leased, corporate housing and other, net of direct expense, could total $65 million to $70 million. The company continues to estimate that, on a full-year basis, one point of worldwide systemwide REVPAR impacts total fees by approximately $10 million to $15 million pretax and owned, leased, corporate housing and other revenue, net of direct expense, by roughly $4 million pretax.



For its timeshare business, the company assumes 2010 timeshare contract sales could be slightly higher than 2009 levels. Including the impact of the accounting changes under this scenario Timeshare sales and services revenue, net of direct expenses, could total $170 million to $180 million. Timeshare segment results for 2010 could total $145 million to $155 million and the segment’s net cash flow could total $175 million to $200 million.



The company expects its 2010 general, administrative and other expenses to total $635 million to $645 million reflecting modest salary increases and assumes interest expense to total $165 million to $170 million for the full year.



While the company cannot forecast results with any certainty, based upon the above assumptions, EBITDA could total $910 million to $970 million and diluted EPS from continuing operations for 2010 could total $0.82 to $0.94. Assuming the investment spending levels below, adjusted total debt, net of cash, could decline $400 million to $500 million by year end 2010.



The company expects investment spending in 2010 will total approximately $500 million, including capital expenditures totaling $150 million to $200 million, of which maintenance capital spending could total $50 million. Investment spending will also include new mezzanine financing and mortgage loans, contract acquisition costs, and equity and other investments. The investment in net timeshare development is not included above as the company expects cost of goods sold in the timeshare business will exceed timeshare inventory spending in 2010.

Stocks Rally higher , jobs lost , less than expected

Stocks continued rallying just before the closing bell on Thursday, with the Dow dancing on both sides of 10,000 once again, after investors digested better-than-expected jobless claims data and productivity numbers reached a six-year high.
The Dow Jones Industrial Average, which surged over 200 points earlier to top the five-figure mark, was recently up 189 points, or 2%, at 9,991. The S&P 500 gained 18 points, or 1.7%, at 1064, and the Nasdaq was up 45 points, or 2.2%, to 2101.
Initial claims for unemployment benefits fell to its lowest since January. First-time claims fell by 20,000 to a seasonally adjusted 512,000 last week vs. a consensus forecast of 522,000. That's also down from the prior week's revised 532,000. Continuing claims fell to 5.75 million from a revised 5.82 million.
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Boosting markets further were macro figures showing nonfarm productivity grew by an annual rate of 9.5% in the third quarter vs. consensus estimates at 6.5%.
"In these numbers today, we have those that are focused on long-term fundamentals and those that are focused on the short-term trading opportunity both looking for a positive day," says Marc Pado, U.S. market strategist for Cantor Fitzgerald.
In the afternoon, all stocks on the Dow were in positive territory. But Cisco(CSCO Quote), which was adding 3% today following an earnings beat, helped boost the markets. The tech bellwether reported adjusted earnings at 36 cents a share vs. a consensus estimate of 31 cents. In an earnings call, CEO John Chambers gave a hopeful, but cautious, assessment about the economic recovery that had Wall Street cheering.
"John Chambers was successful in calling the bottom last quarter in his markets," says Art Hogan, chief market analyst for Jeffries. "This quarter, he was much more upbeat, not just about the bottom markets but about the middle markets."
Tech stocks were rising in kind, with the NYSE Arca Tech 100 Index adding 2.1% in the afternoon. IBM(IBM Quote) was up 1.2%. Chipmaker Intel(INTC Quote) was ticking higher by 1.8%.
On Friday morning, employment data will again be in focus, as the markets await highly anticipated nonfarm payroll and unemployment rate figures. Analysts anticipate the rate will move higher to 9.9% from 9.8% in September, with 175,000 jobs slashed. With initial claims and ADP figures already in the books, one expert says investors are gaining confidence about what's in store.
"I think part of the selloff from yesterday was about lingering concerns," adds Pado. "So to get some numbers this morning that are supportive of where you had your projections is important."
"Anything over 200,000 [job cuts] isn't going to sit well with people," adds Kenny Landgraf, President of Kenjol Capital Management, speaking of Friday's jobs figures. "It's going to be a volatile day."
CVS Caremark(CVS Quote) was the S&P's biggest decliner, down 21%. Though it beat forecasts in posting earnings at 65 cents a share, the drugstore concern lost billions worth in contracts in its pharmacy benefits segment.
The S&P Retail Index was up 1.5% after a mix of same-store sales numbers came in, highlighted by high-end operators like Nordstrom(JWN Quote) and Saks(SKS Quote) topping expectations.
In other earnings news, Toyota(TM Quote) surprised with a second-quarter profit, while Time Warner Cable(TWC Quote) reported net income of 76 cents a share. Analysts were expecting 75 cents.
Overseas, the Bank of England maintained its key interest rate at 0.5%. After a slide before the announcement, stocks in Europe turned positive. The FTSE in London grew 0.4%, while the DAX in Frankfurt added 0.7%. In Asia, Hong Kong's Hang Seng lost 0.6%, as Japan's Nikkei fell 1.3%.
Crude oil slid 78 cents to settle at $79.62 a barrel. Gold gained $2 to settle at $1,089.30 an ounce.

Johnson & Johnson's ( JNJ ) Earnings report good or bad ?

Johnson & Johnson's (JNJ) second-quarter profit declined nearly 4%, with sales hurt by unfavorable currency rates, generic competition for prescription drugs and tighter consumer spending.

Analysts and investors knew it would be a difficult quarter for the New Brunswick, N.J., maker of Tylenol and Band-Aid, but the results turned out better than Wall Street expected, helped by cost cuts and higher sales of some products. And J&J reiterated its full-year profit forecast despite incurring costs from recent acquisitions.

J&J shares rose 62 cents, or 1%, to $58.34 Tuesday morning.

"This was one of the most challenging quarters for year-over-year comparisons in our history," J&J Chief Financial Officer Dominic Caruso told analysts on a conference call. But he said the company was financially strong and well-positioned for long-term profitable growth.

Analysts said the upside came from cost controls, less harmful currency rates than expected, and higher-than-expected sales of some products, including the blockbuster drug Remicade for arthritis and other conditions. Leerink Swann analyst Rick Wise said results reflected "a very strong operational quarter."

J&J reported second-quarter net income of $3.2 billion, or $1.15 a share, compared with $3.3 billion, or $1.17 a share, a year earlier. Analysts surveyed by Thomson Reuters had expected J&J to post second-quarter earnings of $1.11 a share.

Second-quarter sales declined 7.4% to $15.24 billion from $16.45 billion, but exceeded the Thomson estimate by about $200 million. The relatively stronger U.S. dollar accounted for 6 percentage points of the decline. J&J's U.S. sales dropped 6.7% while non-U.S. sales declined 8%.

J&J's pharmaceutical unit lost its status as the company's biggest, slipping below the medical-device and diagnostics unit for the first time in recent memory. Pharmaceutical sales dropped 13% to $5.5 billion, with U.S. sales declining 16.4% and non-U.S. sales down 8.7%. The pharma division was hurt by J&J's loss of market exclusivity for two of its top sellers, the antipsychotic Risperdal, whose sales dropped 66%, and epilepsy and migraine treatment Topamax, with sales down 73%.

Combined sales of anti-anemia drugs Procrit and Eprex declined 11.5% to $577 million, continuing a two-year trend of weakness sparked by safety concerns.

Another top J&J drug, however, had a rebound. The Remicade treatment for rheumatoid arthritis saw second-quarter sales rise 24% to $1.1 billion. Sales growth had slipped to just 3% for the first quarter, amid signs that high-priced biologics were feeling the pinch of tighter spending by patients. The second quarter's big gain could be a good sign for other biologics such as Abbott Laboratories' (ABT) Humira and Enbrel from Wyeth (WYE) and Amgen Inc. (AMGN). Schering-Plough Corp. (SGP) markets Remicade outside the U.S.

The device unit's sales dropped 3.1% to $5.89 billion. The DePuy division of the device unit, which makes joint-reconstruction and other products, had roughly flat sales of $1.3 billion. The Ethicon surgical-products unit saw sales rise 2.1% to $1.04 billion. Increased competition continued to hurt sales of J&J's drug-eluting stents.

J&J's consumer unit sales fell 4.5% to $3.85 billion. Sales dropped for baby care, oral care and skin-care products. But sales increased for wound care products.

Caruso said the weak economy continued to take a bite out of sales of J&J products that require consumers to pay out of pocket, including contact lenses to diabetes test strips.

J&J hopes an economic recovery and new pharmaceutical products will help it return to solid sales and earnings growth in future years. The company has had a flurry of new drug applications - with some approvals but other applications still pending.

And J&J continues to try to beef up its drug pipeline. This month, J&J has agreed to pay $1.5 billion for a minority stake in Elan Corp. (ELN) and control of Elan's rights to experimental Alzheimer's-disease drugs, and it closed its $1 billion acquisition of Cougar Biotechnology Inc., which is developing cancer drugs.

Bank of America beats profit !

Some Good News for Bank of America

Anxious shareholders got a bit of good news Monday from Bank of America, which reported that its first-quarter net income more than tripled.

The bank said its profit rose to $4.2 billion in the first quarter, from $1.2 billion a year earlier, as it posted revenue of $36 billion. It also reported diluted earnings per share of 44 cents, compared with analysts expectations of about 4 cents a share. It added $6.4 billion to its loan-loss reserves.

“The fact that we were able to post strong, positive net income for the quarter is extremely welcome news in this environment,” Kenneth D. Lewis, the bank’s chairman and chief executive said in a statement. “It shows the power of our diversified business model as well as the ability of our associates to execute.”

“However, we understand that we continue to face extremely difficult challenges primarily from deteriorating credit quality driven by weakness in the economy and growing unemployment,” Mr. Lewis said.

Despite the reports, the news might not have come in time to save Mr. Lewis’s from angry shareholders.

For more than 70 years, through good times and bad, the Eliasberg family stood by their bank. Their tiny lender grew up to become part of what is now Bank of America — tying the family’s fortunes to that of the nation’s largest bank.

But now Richard Eliasberg, whose father helped found Baltimore National Bank, in 1933, says he is losing faith in Bank of America, and in Mr. Lewis.

Like a growing number of shareholders, Mr. Eliasberg is alarmed by the daunting challenges confronting Bank of America. Mr. Lewis, the chairman and chief executive, is under growing pressure, both from within and without, to turn things around fast.

“For the first time, I’m disappointed,” said Mr. Eliasberg, speaking before the earnings release. He owns a substantial number of Bank of America shares for an individual, though he has sold a third of his shares in the last year.

But Mr. Lewis, who built Bank of America into an industry behemoth by making a string of acquisitions, still has much to prove. Many of his investors are growing restive, and they are unlikely to be quieted by one quarter’s results.

Indeed, Mr. Lewis seems to be losing the support of an important constituency: Scores of longtime shareholders like Mr. Eliasberg, who have ties to Bank of America through businesses the bank and its predecessor acquired over the decades.

Of particular concern is Mr. Lewis’s latest conquest, Merrill Lynch. Bank of America shareholders signed off on the acquisition in early December, only to discover that gaping losses at Merrill would force Bank of America to seek assistance from the government for a second time. Some investors are suing, claiming that Mr. Lewis failed to fully disclose the risks of the deal.

Bank of America said Monday that “the Merrill Lynch integration is on track and expected to meet targeted cost savings” and that Merrill had contributed $3 billion to its net income. It also said the integration of Countrywide Financial, the mortgage lender it bought last year, “is on track. Cost savings from the acquisition are ahead of schedule.”

The bank also said it had added to reserves across “most” consumer portfolios and on commercial portfolios. Its nonperforming assets rose to $25.7 billion from $18.2 billion at the end of 2008, and from $7.8 billion on March 31, 2008.

Many worry that Bank of America’s board is too cozy with Mr. Lewis. Some are campaigning to push him out.

On Friday, two investor advisory firms issued reports recommending that shareholders vote to remove Mr. Lewis from the board. The bank’s proxy is in circulation in anticipation of what is likely to be a contentious annual meeting on April 29 in Charlotte, North Carolina, where Bank of America is based.

The reports, issued by the RiskMetrics Group and Glass, Lewis and Company, carry a lot of weight because some institutional shareholders follow the groups’ recommendations without exception.

A Bank of America spokesman said Friday that the company was disappointed with the conclusions of the reports, including an initiative to strip Mr.

Lewis of his chairmanship and another that would unseat him altogether. The spokesman also said that the bank believed that it had acted appropriately in its disclosures about the merger with Merrill.

Angry shareholders are not the only problem confronting Mr. Lewis. Bank of America is also awaiting the results of “stress tests” that federal regulators are administering to large banks. While Mr. Lewis has said his bank has sufficient capital, many analysts believe it will need to raise money. The bank also faces an inquiry into the Merrill merger by the New York attorney general.

Inside Bank of America, there is resentment over the Merrill acquisition.

Bank employees are also among the largest voices among individual stockholders.

Still, outside shareholders have been the most vocal. The Finger family, based in Texas, set up a Web site campaign bacproxyvote.com and broadcast television commercials urging shareholders to vote against Mr. Lewis. The family sold its Houston-based bank, Charter Bancshares, to Bank of America’s predecessor in 1996, and say they now control about 1.1 million shares.

The bank has tried to engage the Fingers, sending executives and a board member by corporate jet to visit the family three times in Texas.

The Fingers’ story line is familiar to others who became part of the Bank of America family tree. In the last few decades, the bank was cobbled together out of more than 50 financial companies, mostly local banks. The oldest was Massachusetts Bank, founded in 1784, which was absorbed through the company’s acquisition of FleetBoston Financial.

Another family, the Spanglers, controlled about 32 million shares as of spring of 2008, many of which were acquired when they sold their Bank of North Carolina to Bank of America’s predecessor, NationsBank, in the early 1980s. Assuming the family did not sell their stock, they would have lost more than $1 billion in the last year.

The Spanglers have not actively expressed a public opinion on the state of the company, though one member of the family stepped down from the bank’s board because she had reached retirement age.

The acquisitions were not only on the Bank of America side. Many of the companies that the bank acquired had built themselves up over the years in a similar fashion.

Tom Sharkey Jr., for instance, owns shares of the bank because his family sold its 100-year-old insurance business to FleetBoston in 2001, and then Fleet was acquired by Bank of America in 2004. Now, Mr. Sharkey says, he and several family members in New Jersey have lost significant wealth because of the bank’s “catastrophically bad mistakes.”

Some people, of course, support Mr. Lewis. The CtW Investment Group, which represents pension funds, is leading a campaign against Mr. Lewis, but the organization has received e-mail messages from people who believe the current management is good, according to a spokesman for the group.

“Please give Ken Lewis a chance,” wrote Luis F. Valenzuela, a shareholder who supported the bank in one of the e-mail messages provided by CtW to The New York Times. “He will prove you guys wrong. Don’t make the mistake of looking dumb.”

Mr. Valenzuela said in an e-mail message that he was a student in Arizona and that the bank’s past dividend helped him afford his education. Another person, Ivan Rudnitsky, wrote to CtW to say that the bank’s combination with Merrill has strong long-term value, which is the argument that the bank’s management gives for its actions. Mr. Rudnitsky did not reply to an e-mail inquiry.

Charles Elson, a professor at the University of Delaware, was given most of his tens of thousands of Bank of America shares by his father more than 30 years ago. Back then, the stock he owned was in Citizens & Southern Bank of Georgia, based in Atlanta, where he grew up.

“It was always a strong bank and a strong investment — something we’d never sell,” said Mr. Elson, whose father was on the board of the Atlanta bank before it was taken over in 1991 by a predecessor of Bank of America.

Mr. Elson, who teaches courses on corporate governance, has been concerned about the structure of Bank of America’s board since the late 1990s. He said he had once contacted the company about his concerns — to no avail.

“I knew it was there, the problems with corporate governance,” Mr. Elson said. “The biggest mistake I made was I did not sell. Put it this way: had I known this 40 years ago, I would have invested in something else.”

USA Economy Falls off a Cliff ? Warren Buffet States on CNBC ! Watch Here for free !

Linn Pops Up Higher Today !

NEW YORK, Dec 28 (Reuters) - Despite plummeting natural-gas and oil prices in the past six months that sent Linn Energy's stocks falling, and frozen capital markets that could make it hard for the company to make acquisitions, concerns about the oil and gas driller are probably unwarranted, Barron's wrote in its Dec. 29 edition.

Linn, which is a master limited partnership that pays out about 60 percent to 70 percent of its quarterly cash flow to shareholders in tax-advantaged distributions, has used hedging to lock in the high prices of last summer's energy price bubble for the next three to four years, Barron's wrote.

on its third-quarter distribution of 63 cents per unit, the company is offering a current yield of more than 20 percent, Barron's wrote.

One Citigroup (nyse: C - news - people ) analyst said Linn's distribution level is 'relatively secure,' and has a one-year price target on its stock of $22, while another, at RBC Capital Markets, has a target price of $27, Barron's wrote.

Linn Energy shares closed at $11.98 on Friday in trading on the Nasdaq.
Linn Energy, LLC (Linn Energy) is an independent oil and gas company focused on the development and acquisition of long-lived properties in the United States. The Company’s oil, gas and natural gas liquids (NGL) properties are located in three regions in the United States: Mid-Continent, which includes the core operating areas Texas Panhandle and Oklahoma; Appalachian Basin, which includes fields in West Virginia and Pennsylvania, and Western, which includes the Brea Olinda Field of the Los Angeles Basin in California. The Company’s proved reserves, at December 31, 2007, were 1,616.1 billion cubic feet equivalent (Bcfe), of which approximately 64% were gas, 20% were oil, and 16% were NGL. Approximately 73% were classified as proved developed. At December 31, 2007, Linn Energy operated 5,638, or 77%, of its 7,305 gross productive wells

Mr. Marriott, Says Tough Year Ahead 2009 !!!!!!

NEW YORK (Reuters) - Hotel operator Marriott International Inc (MAR.N: Quote, Profile, Research, Stock Buzz) on Thursday said third-quarter profit fell as its time-share business slowed and the company warned that 2009 would be tough.
Marriott, which typically manages hotels instead of owning them, reported income from continuing operations of $94 million compared with $122 million in the year-ago quarter.
The company reported diluted earnings per share from continuing operations of 26 cents compared with 31 cents in the third quarter of 2007.
Third-quarter Revenue rose 1 percent to $3 billion.
Looking ahead, Marriott said it expects the 2009 business environment to remain "unusually challenging."
The company expects its worldwide revenue-per-available room (RevPAR), a key industry measure, to decline 1 percent to 3 percent in the fourth quarter of 2008.

Walmart Climbs 17% Higher on Profit !

The company raised its full-year forecast but said that its customers worldwide are feeling economic pressure and suppliers are pressing for price increases. It also said that investments to update systems for merchandising, finance and human resources will continue to meet headwinds for the rest of the year and for several years to come.

Net income at the world's biggest retailer rose to $3.45 billion, or 87 cents a share, from $2.95 billion or 72 cents a share a year earlier, the Bentonville, Ark.-based retailer reported. Revenue rose 10.4% to $102.7 billion.
WMT 58.68, +0.80, +1.4%) said it would have earned 86 cents a share. On that basis, analysts on average estimated that Wal-Mart would earn profit of 83 cents a share on sales of $101.8 billion, according to FactSet. It also has forecast a slower sales-growth rate in August and warned that shoppers are spending more cautiously with the last of the government's stimulus checks mailed out.
The company estimates a third-quarter profit of 73 cents to 76 cents a share and raised its full-year expectation to $3.43 and $3.50 from an earlier projection of as much as $3.43 a share. Analysts surveyed by FactSet estimated profit of 76 cents a share in the third quarter and $3.49 for the year.
"The guidance is appropriate," said Goldman Sachs analyst Adrianne Shapira in an interview. "It's tough out there. Their execution is very strong, and that won't fade."
Shares of Wal-Mart, part of the Dow Jones Industrial Average, rose 0.1% to $57.94 in midday trading. They've risen 22% this year, compared with a 4.2% decline in the S&P Retail Index.
'They've gone back to their roots. You have to give management some credit.'
— Matt Finn, Thrivent Investment Management
The economic downturn that's started in North America has spread to Europe and even to emerging markets, affecting Wal-Mart's customers and leading shoppers to change their behaviors like buying cheaper cuts of meat; in Puerto Rico, customers are eating more sandwiches and buying more private-label merchandise in the United Kingdom. In turn, rising food and energy costs are squeezing Wal-Mart's suppliers and leading them to pass price increases along to retailers, Chief Executive Lee Scott said Thursday in a previously recorded call.
Wal-Mart is managing inventory, keeping growth rate at less than half the rate of sales and leveraging its global-sourcing clout to keep costs down, according to Scott. He said that lowering capital spending also has allowed Wal-Mart to keep prices low.
In the United States, Wal-Mart has increased the number of temporary price cuts, known as rollbacks, in groceries to mitigate price increases, said the head of its namesake chain's U.S. business, Eduardo Castro-Wright.
"We continue to be diligent that any price increase is justified," Scott said on the call. "There's a great deal of pressure on the customers. What we see is a global economy that's difficult."
Strategy's working
Wal-Mart has benefited from its strategy of offering low prices, using its slogan "Save money. Live better" to lure economy-battered shoppers. It also has benefited from cashing 2.9 million of the U.S. government's tax-rebate checks and improving store layouts to make it easier to shop.
To spur the company's lagging apparel and home-goods sales after it failed to draw more higher-end shoppers, Wal-Mart has returned its focus to price and unveiled exclusives such as Hannah Montana, Ocean Pacific and l.e.i. junior apparel lines and Canopy bed sheets, analysts said.
U.S. sales at stores open at least a year rose 4.5%, excluding the impact of fuel sales and exceeding the company's own internal projection. Wal-Mart chain stores were up 4.6% while Sam's Club rose 3.7%, excluding fuel.
The company also has touted meals for families of four for under $10, clothing below $10 and attractions such as $4 generic-prescription drugs. In addition to exclusive products, Wal-Mart made itself a more-desirable shopping destination by adding major brands like Sony and Apple to its electronics lineup, according to analysts.
'There's a great deal of pressure on the customers. What we see is a global economy that's difficult.'
— CEO Lee Scott
"They have a strong competitive position," said Matt Finn, who helps manage $73.2 billion in assets at Thrivent Investment Management, which owns shares of Wal-Mart. "Their apparel is doing better than they've been for years. They've gone back to their roots. You have to give management some credit."

Chicken Scraps for earnings from Tyson Foods

July 28 (Bloomberg) -- Tyson Foods Inc., the second-largest U.S. chicken producer, said fiscal third-quarter profit fell 92 percent as surging corn and soybean prices boosted the cost of feeding poultry.
Net income in the three months through June declined to $9 million, or 3 cents a share, from $111 million, or 31 cents, a year earlier, Springdale, Arkansas-based Tyson said today in a statement. Tyson had a profit of 1 cent a share, excluding certain items. The average estimate of nine analysts surveyed by Bloomberg was for a profit of 12 cents.
Chief Executive Officer Richard L. Bond couldn't increase prices fast enough to make up for rising animal-feed expenses. The chicken unit, the biggest profit contributor last year, posted an operating loss of $44 million, its second loss in a row. Pilgrim's Pride Corp. and other chicken producers have been reducing output to boost prices.
``Profitability in the chicken business has been very poor for the bulk of the past two quarters,'' Stephens Inc. analyst Farha Aslam said in a July 24 report. ``Chicken producers must be very diligent about reducing production through a combination of head and weight.''
Aslam rates the shares ``overweight'' and had forecast per- share profit of 12 cents excluding one-time items.
Tyson fell 71 cents, or 4.4 percent, to $15.52 at 9:41 a.m. in New York Stock Exchange trading. Before today, the shares had increased 5.9 percent this year.
Corn Prices
The price of corn, a key feed ingredient, was 69 percent higher on average during the quarter than a year earlier and reached a record $7.9925 a bushel on June 27 in Chicago because of rising demand for food, livestock feed and ethanol. Soybean prices averaged 78 percent higher and reached a record $16.3675 a bushel on July 3.
``The chicken segment remains under pressure from higher input costs,'' Bond said in the statement. ``I am confident our chicken business will be well-positioned when the economics improve.''
Sales gained 3.5 percent to $6.85 billion. Grain costs rose by $140 million during the quarter from the year-earlier period and the company expects costs to increase about $550 million for fiscal 2008.
Tyson in April estimated grain costs will increase $600 million this year, higher than its January forecast of $500 million, and double its November estimate.
Skinless and boneless chicken breast prices averaged 16 percent lower at $1.4942 a pound during the same period, according to the U.S. Department of Agriculture.
Beef Profit
Operating profit from the beef unit, which accounted for almost half of last year's sales, plunged 92 percent to $3 million, partly because of a $75 million charge related to the value of its cattle purchases and forward boxed-beef sales.
Earnings from prepared foods fell 77 percent to $6 million because of rising costs for wheat, dairy and cooking ingredients. The unit also took a $7 million charge related to flood damage at its plant in Jefferson, Wisconsin.
Profit from the pork unit rose 46 percent to $54 million