On March 25, 1996, the company formerly named “Marriott International, Inc.” (Old Marriott) issued $540 million (princi- pal amount at maturity) of zero coupon convertible subordi- nated debt in the form of LYONs due 2011. The LYONs were issued and recorded at a discount representing a yield to matu- rity of 4.25 percent. Accretion was recorded as interest expense and an increase to the carrying value. Gross proceeds from the LYONs issuance were $288 million. We assumed the LYONs when we were spun off (the Spinoff) as a separate entity by Old Marriott in March 1998, and Old Marriott, renamed Sodexho Marriott Services, Inc. (SMS), assumed a 9 percent share of the LYONs obligation based on the relative equity values of SMS and the Company at the Spinoff. In November 1998, we sold, through a private placement, $400 million of unsecured senior notes (Series A and B Notes). Proceeds net of discounts totaled $396 million. On April 23, 1999, we commenced a registered exchange offer to exchange the privately placed Series A and B Notes for publicly registered new notes on identical terms. All of the privately placed Series A and B Notes were tendered for exchange, and new notes were issued to the holders on May 31, 1999. In July 2001 and February 1999, respectively, we entered into $1.5 billion and $500 million multicurrency revolving credit facilities (the Facilities) each with terms of five years. Borrowings bear interest at the London Interbank Offered Rate (LIBOR) plus a spread, based on our public debt rating. Additionally, annual fees are paid on the Facilities at a rate  also based on our public debt rating. At December 29, 2000, commercial paper, which was supported by the Facilities, is classified as long-term debt based on our ability and intent to refinance it on a long-term basis. We are in compliance with covenants in our loan agree- ments, which require the maintenance of certain financial ratios and minimum shareholders’ equity, and also include, among other things, limitations on additional indebtedness and the pledging of assets. The 2001 and 2000 statement of cash flows excludes  $109 million and $79 million, respectively, of financing and joint venture investments made by us in connection with asset sales. The 1999 statement of cash flows excludes $215 million of convertible subordinated debt that was converted to equity in November 1999, $54 million of debt that we assumed during 1999, and $15 million of notes receivable we received in a 1999 asset sale that we subsequently sold for cash. Aggregate debt maturities, excluding convertible debt are: 2002 – $43 million; 2003 – $239 million; 2004 – $16 million; 2005 – $518 million; 2006 – $915 million; and $720 million thereafter. Cash paid for interest, net of amounts capitalized was $68 mil- lion in 2001, $74 million in 2000 and $30 million in 1999. On May 8, 2001, we received cash proceeds of $405 million from the sale of zero-coupon convertible senior notes due 2021, known as LYONs. CONVERTIBLE DEBT EARNINGS PER SHARE The following table illustrates the reconciliation of the earnings and number of shares used in the basic and diluted earnings per share calculations (in millions, except per share amounts). The LYONs were redeemable by us at any time on or after March 25, 1999, for cash equal to the issue price plus accrued original issue discount. On October 7, 1999, we delivered a mandatory redemption notice to the holders of the LYONs indi- cating our plan to redeem them on November 8, 1999, for $619.65 in cash per LYON. Holders of 347,000 LYONs elected to convert each LYON into 17.52 shares of our Class A Common Stock and 2.19 shares of SMS common stock prior to the close of business on November 8, 1999. The aggregate redemption payment for the remaining 193,000 LYONs totaled $120 mil- lion. Pursuant to the LYONs Allocation Agreement entered into with SMS as part of the Spinoff, SMS funded 9 percent of the aggregate LYONs redemption payment. We funded the redemp- tion payment with proceeds from commercial paper borrow- ings. Unamortized deferred financing costs of $2 million relating to the LYONs that were redeemed were recognized as interest expense in 1999. The LYONs are convertible into approximately 6.4 million shares of our Class A Common Stock and carry a yield to maturity of 0.75 percent. We may not redeem the LYONs prior to May 8, 2004, but may at the option of the holders be required to purchase the LYONs at their accreted value on May 8 of each of 2002, 2004, 2011 and 2016. We may choose to pay the purchase price for redemptions or repurchases in cash and/or shares of our Class A Common Stock. We are amortizing the issuance costs of the LYONs into interest expense over the one-year period ending May 8, 2002. The LYONs are classified as long-term based on our ability and intent to refinance the obligation with long-term debt if we are required to repurchase the LYONs. Marriott International, Inc. 2001 Annual Report 34 2001 2000 1999 Computation of Basic Earnings Per Share Net income $ 236 $ 479 $ 400 Weighted average shares outstanding 243.3 241.0 247.5 Basic Earnings Per Share $ .97 $ 1.99 $ 1.62 Computation of Diluted Earnings Per Share Net income $ 236 $ 479 $ 400 After-tax interest expense on  convertible debt — — 7 Net income for diluted earnings  per share $ 236 $ 479 $ 407 Weighted average shares outstanding 243.3 241.0 247.5 Effect of Dilutive Securities Employee stock purchase plan — 0.1 0.2 Employee stock option plan 7.9 7.5 8.7 Deferred stock incentive plan 5.5 5.4 5.4 Convertible debt — — 8.0 Shares for diluted earnings per share 256.7 254.0 269.8 Diluted Earnings Per Share $ .92 $ 1.89 $ 1.51