rewards of ownership. We reduced gains on sales of real estate due to maximum exposure to loss by $16 million in 2001, $18 million in 2000 and $8 million in 1999. We contribute to a profit sharing plan for the benefit of employees meeting certain eligibility requirements and electing participation in the plan. Contributions are determined based on a specified percentage of salary deferrals by participating employees. We rec- ognized compensation cost from profit sharing of $58 million in 2001, $55 million in 2000 and $46 million in 1999. We are self-insured for certain levels of general liability, workers’ compensation, employment practices and employee medical cover- age. We accrue estimated costs of these self-insurance programs at the present value of projected settlements for known and incurred but not reported claims. We use a discount rate of 5 percent to deter- mine the present value of the projected settlements, which we con- sider to be reasonable given our history of settled claims, including payment patterns and the fixed nature of the individual settlements. Marriott Rewards is our frequent guest incentive marketing pro- gram. Marriott Rewards members earn points based on their spending at our lodging operations and, to a lesser degree, through participation in affiliated partners’ programs, such as those offered by airlines and credit card companies. Points can be redeemed at most Marriott company-operated and franchised properties. Points cannot be redeemed for cash. Points which we accumulate and track on the members’ behalf can be redeemed for hotel stays at most of our lodging operations, airline tickets, airline frequent flier program miles, rental cars, and a variety of other awards. We provide Marriott Rewards as a marketing program to  participating hotels. We charge the cost of operating the pro- gram, including the estimated cost of award redemption, to hotels based on members’ qualifying expenditures. Effective January 1, 2000, we changed certain aspects of our method of accounting for the Marriott Rewards program in accor- dance with Staff Accounting Bulletin (SAB) No. 101. Under the new accounting method, we defer revenue received from managed, fran- chised, and Marriott-owned/leased hotels and program partners equal to the fair value of our future redemption obligation. We deter- mine the fair value of the future redemption obligation based on statistical formulas which project timing of future point redemption based on historical levels, including an estimate of the “breakage” for points that will never be redeemed, and an estimate of the points that will eventually be redeemed. These factors determine the required liability for outstanding points. Our management and franchise agreements require that we be reimbursed currently for the costs of operating the program, including marketing, promotion, and com- municating with, and performing member services for the Marriott Rewards members. Due to the requirement that hotels reimburse us for program operating costs as incurred, we receive and recognize the balance of the revenue from hotels in connection with the Marriott Rewards program at the time such costs are incurred and expensed. We recognize the component of revenue from program partners that corresponds to program maintenance services over the expected life of the points awarded. Upon the redemption of points, we recognize 26 Marriott International, Inc. 2001 Annual Report We account for the sales of real estate in accordance with FAS No. 66. We reduce gains on sales of real estate by the maximum exposure to loss if we have continuing involvement with the property and do not transfer substantially all of the risks and We are both the lessor and lessee of land under long-term operating leases, which include scheduled increases in mini- mum rents. We recognize these scheduled rent increases on a straight-line basis over the initial lease terms. 2000 Senior Living Distribution Lodging Services Services Total ($ in millions) SALES Management and  franchise fees $ 907 $ 33 $ — $ 940 Other 1,702 300 1,500 3,502 2,609 333 1,500 4,442 Other revenues from  managed properties 5,302 336 — 5,638 7,911 669 1,500 10,080 OPERATING COSTS AND EXPENSES Operating costs 1,673 351 1,496 3,520 Other costs from  managed properties 5,302 336 — 5,638 6,975 687 1,496 9,158 Operating profit (loss)  before corporate  expenses and interest $ 936 $(18) $ 4 $ 922 1999 Senior Living Distribution Lodging Services Services Total ($ in millions) SALES Management and  franchise fees $ 800 $ 23 $ — $ 823 Other 1,326 267 1,139 2,732 2,126 290 1,139 3,555 Other revenues from  managed properties 4,915 269 — 5,184 7,041 559 1,139 8,739 OPERATING COSTS AND EXPENSES Operating costs 1,299 308 1,118 2,725 Other costs from  managed properties 4,915 269 — 5,184 6,214 577 1,118 7,909 Operating profit (loss)  before corporate  expenses and interest $ 827 $(18) $ 21 $ 830 Ground Leases Real Estate Sales Marriott Rewards Profit Sharing Plan Self-Insurance Programs