Company Results

Marriott International Reports Fourth Quarter And Full Year 2013 Results

Full year diluted EPS totaled $2.00, a 16 percent increase over prior year results. Excluding the $0.08 per share Courtyard joint venture gain in 2012, diluted EPS grew 22 percent year-over-year

Marriott

HIGHLIGHTS

  • Full year diluted EPS totaled $2.00, a 16 percent increase over prior year results. Excluding the $0.08 per share Courtyard joint venture gain in 2012, diluted EPS grew 22 percent year-over-year;
  • North American comparable company-operated REVPAR rose 5.1 percent in the fourth quarter and 5.4 percent for full year 2013;
  • On a constant dollar basis, worldwide comparable systemwide REVPAR rose 4.3 percent in the fourth quarter and 4.6 percent for full year 2013;
  • Comparable company-operated house profit margins increased 130 basis points in North America and 90 basis points worldwide for the full year;
  • At year-end, the company's worldwide development pipeline increased to over 195,000 rooms, including nearly 30,000 rooms approved, but not yet subject to signed contracts;
  • Nearly 26,000 rooms were added in 2013.  In the fourth quarter alone, nearly 7,700 rooms were added, including over 3,900 rooms in international markets;
  • The company signed a record 67,000 rooms in 2013;
  • For full year 2013, Marriott repurchased 20.0 million shares for $829 million including 4.4 million shares for $200 million in the fourth quarter;
  • For full year 2014, Marriott expects North American and worldwide Systemwide constant dollar REVPAR to increase 4 to 6 percent;
  • Return on invested capital totaled 32 percent in 2013.

Marriott International, Inc. (NASDAQ: MAR) reported fourth quarter and full year 2013 results.  Due to the company's change in the fiscal calendar beginning in 2013, the fourth quarter of 2013 reflects the period from October 1, 2013 through December 31, 2013 (92 days) compared to the 2012 fourth quarter, which reflects the period from September 8, 2012 through December 28, 2012 (112 days).  Full year 2013 reflects the period from December 29, 2012 through December 31, 2013 (368 days) compared to full year 2012, which reflects the period from December 31, 2011 through December 28, 2012 (364 days).  Prior year results have not been restated for the change in fiscal calendar, although revenue per available room (REVPAR), occupancy and average daily rate statistics are reported for calendar quarters for purposes of comparability.

Full year 2013 net income totaled $626 million compared to $571 million for full year 2012.  Full year 2012 net income included the $25 million after-tax Courtyard joint venture gain. 

Full year 2013 diluted earnings per share (EPS) totaled $2.00 compared to $1.72 in 2012.  On October 30, 2013, the company forecasted full year diluted EPS of $1.98 to $2.01.

Arne M. Sorenson, president and chief executive officer of Marriott International, said, "2013 was a year of firsts.  Strong REVPAR growth and new hotels drove Marriott's fee revenue to a record $1.5 billion.  We signed contracts with owners and franchisees for 67,000 new rooms, the most productive year in our history averaging more than one hotel every day.  Our development pipeline reached a record 195,000 rooms.

"Our North American group sales organization booked $3.4 billion in new group business in 2013 for all future periods, eclipsing their prior record from 2007.  Group revenue on the books for 2014 is running more than 4 percent higher than 2013 levels for the Marriott brand.  Special corporate negotiated rates are nearly complete with room rates expected to rise about 5 percent in 2014.

"Marriott Rewards and Ritz-Carlton Rewards signed a combined 3.4 million new members, contributing to the nearly 50 percent growth in membership over the last 5 years.  Roughly 45 percent of that 5-year growth was outside the U.S.  In 2013, a record 25 percent of room nights were booked on Marriott.com.  Marriott mobile reservations surged by 67 percent in 2013 and we introduced mobile check-in for all Marriott Hotels in the United States, another industry first.

"For 2014, we expect worldwide systemwide REVPAR to increase 4 to 6 percent.  With our strong development pipeline and the anticipated addition of the Protea hotels in Africa, we expect rooms growth will accelerate to approximately 6 percent gross or roughly 5 percent, net of deletions.

"During 2013, we were pleased to return over $1 billion to our shareholders through dividends and share repurchases, the top end of our expectations for the year.  In 2014 we could return an additional $1.25 billion to $1.5 billion to our shareholders.  In fact, we have already repurchased 5 million shares for $246 million dollars year-to-date.  Over the last three years, we have returned over $3.9 billion to our shareholders through share repurchases and dividends and reduced our average fully diluted shares by 17 percent."

For the 2013 fourth quarter, REVPAR for worldwide comparable systemwide properties increased 4.3 percent (a 4.1 percent increase using actual dollars).

In North America, comparable systemwide REVPAR increased 4.7 percent in the fourth quarter of 2013, including a 3.3 percent increase in average daily rate.  REVPAR for comparable systemwide North American full-service and luxury hotels (including Marriott Hotels, The Ritz-Carlton, Renaissance Hotels and Autograph Collection Hotels) increased 5.9 percent with a 4.3 percent increase in average daily rate.  REVPAR for comparable systemwide North American limited-service hotels (including Courtyard, Residence Inn, SpringHill Suites, TownePlace Suites and Fairfield Inn & Suites) increased 3.6 percent in the fourth quarter with a 2.5 percent increase in average daily rate.

International comparable systemwide REVPAR rose 3.2 percent (a 2.3 percent increase using actual dollars) in the fourth quarter.

Marriott added 47 new properties (7,681 rooms) to its worldwide lodging portfolio in the 2013 fourth quarter, including The Ritz-Carlton Almaty in Kazahkstan, the JW Marriott Hotel Hanoi and the Hotel Am Steinplatz, an Autograph Collection hotel in Berlin.  Fourteen properties (2,532 rooms) exited the system during the quarter.  At year-end, the company's lodging group encompassed 3,916 properties and timeshare resorts for a total of nearly 676,000 rooms.

The company's worldwide development pipeline increased to approximately 1,165 properties with over 195,000 rooms at year-end, including approximately 170 properties with nearly 30,000 rooms approved for development, but not yet subject to signed contracts.  The company's pipeline at year-end 2013 does not include the approximately 10,000 rooms associated with the Protea transaction.

MARRIOTT REVENUES totaled $3.2 billion in the 2013 fourth quarter compared to revenues of over $3.7 billion for the fourth quarter of 2012.  Base management and franchise fees totaled $315 million compared to $369 million in the year-ago quarter.  The company estimates that the change in fiscal calendar resulted in approximately $72 million of lower fees year-over-year.  The calendar change impact was partially offset by higher REVPAR and non-room sales at existing hotels, as well as fees from new hotels.

Fourth quarter worldwide incentive management fees totaled $73 million compared to $90 million in the fourth quarter of 2012.  The company estimates $19 million of the lower year-over-year fees relates to the change in the fiscal calendar.  In the year-ago quarter, incentive management fees included the $3 million favorable impact of the recognition of previously deferred fees.  In the fourth quarter, 32 percent of worldwide company-managed hotels earned incentive management fees compared to 30 percent in the year-ago quarter.  For full year 2013, 39 percent of worldwide company-managed hotels earned incentive management fees compared to 33 percent in the year-ago quarter.

Owned, leased, corporate housing and other revenue, net of direct expenses, totaled $50 million, compared to $56 million in the year-ago quarter.  The company estimates that approximately $10 million of the year-over-year decrease relates to the change in the fiscal calendar.  Increased results at several leased hotels and higher residential and credit card branding fees partially offset the effect of the calendar change.  The 2013 fourth quarter included $2 million of pre-opening costs largely related to the London EDITION hotel.

On October 30, the company estimated fourth quarter owned, leased, corporate housing and other revenue, net of direct expenses would total approximately $40 million for the fourth quarter.  Actual results in the quarter exceeded those expectations largely due to $3 million of residential and credit card branding fees, as well as better than expected performance at a few owned and leased hotels.

GENERAL, ADMINISTRATIVE and OTHER expenses for the 2013 fourth quarter totaled $200 million.  On October 30, the company estimated general and administrative expenses for the fourth quarter would total $170 million to $175 million.  Actual expenses in the quarter were higher than expected largely due to higher costs related to new unit development and increases in incentive compensation (mainly associated with the company's very strong development pipeline), as well as higher than anticipated legal expenses, impairment of deferred contract acquisition costs and bad debt reserves.

INTEREST EXPENSE totaled $32 million in the fourth quarter, compared to interest expense of $41 million in the year-ago quarter.  The company estimates that approximately $5 million of the year-over-year decrease relates to the change in the fiscal calendar.  The decrease in interest expense in the quarter also reflects the impact of a senior debt retirement and new senior debt issuance at a lower interest rate, partially offset by lower capitalized interest.  Capitalized interest totaled $7 million in the quarter, compared to $10 million in the year-ago quarter.

Provision for Income Taxes

The provision for income taxes in the fourth quarter was lower than anticipated largely reflecting the $12 million benefit related to adjustments of state and foreign tax provisions based on recent tax filings for prior years.

Adjusted Earnings before Interest Expense, Taxes, Depreciation and Amortization (EBITDA)

To facilitate comparisons with its competitors, the company has revised its presentation of EBITDA to now present depreciation expense that owners and franchisees reimburse to the company as a separate line item and revised its presentation of adjusted EBITDA to add back share-based compensation expense.

On this basis, adjusted EBITDA in 2013 totaled $1,325 million, a 9 percent increase over 2012 adjusted EBITDA of $1,217 million.  For the fourth quarter, adjusted EBITDA totaled $321 million, an 18 percent decline from fourth quarter 2012 adjusted EBITDA of $390 million.  See page A-8 for the adjusted EBITDA calculation.

Beginning in the first quarter of 2014, the company plans to reclassify depreciation and amortization expense from "Owned, leased and corporate housing - direct" and "General and administrative and other" and present it as a separate line item on its Consolidated Statements of Income for all periods presented.  The income statements for each quarter and full year 2013 reflecting this revised presentation are presented on pages A-13 to A-17.  The company's outlook for 2014 reflects this new presentation.

In connection with this change, in the fourth quarter of 2013, the company revised its presentation of depreciation and amortization on its Consolidated Statements of Cash Flows in the Form 10-K report that it expects to file later this week.  Please see the Form 10-K report for additional information on these changes.

BALANCE SHEET

At the end of the fourth quarter, total debt was $3,199 million and cash balances totaled $126 million, compared to $2,935 million in debt and $88 million of cash at year-end 2012.

COMMON STOCK

Weighted average fully diluted shares outstanding used to calculate diluted EPS totaled 307.5 million in the 2013 fourth quarter, compared to 322.2 million in the year-ago quarter.

The company repurchased 4.4 million shares of common stock in the fourth quarter at a cost of $200 million.  For full year 2013, Marriott repurchased 20.0 million shares of its stock for $829 million.  To date in 2014, Marriott has repurchased 5.0 million shares of its stock for $246 million.  On February 14, 2014, the board of directors increased the company's authorization to repurchase shares by 25.0 million shares for a total authorization of 34.3 million shares as of February 19, 2014.

OUTLOOK

For the 2014 first quarter, the company expects comparable systemwide calendar REVPAR on a constant dollar basis will increase 4 to 6 percent in North America, 3 to 5 percent outside North America and 4 to 6 percent worldwide. 

The company expects full year 2014 comparable systemwide REVPAR on a constant dollar basis will increase 4 to 6 percent in North America, 3 to 5 percent outside North America and 4 to 6 percent worldwide.

The company anticipates gross room additions of 6 percent worldwide for the full year 2014 including the Protea hotels.  Net of deletions, the company expects its portfolio of rooms will increase by approximately 5 percent by year-end 2014. 

The company assumes full year fee revenue could total $1,650 million to $1,700 million, growth of 7 to 10 percent over 2013 fee revenue of $1,543 million.  The company's estimated first quarter total fee revenue reflects roughly $5 million of lower fees due to the three additional days in the year-ago quarter related to the change in the fiscal calendar.

As depreciation and amortization will be presented as a separate line item in its Consolidated Statements of Income beginning in the first quarter of 2014, the company is presenting the guidance table below consistent with this change.  See pages A-13 to A-17 for quarterly and full year 2013 results restated for the change in presentation.

For 2014, the company anticipates general, administrative and other expenses will total $640 million to $650 million, flat to down 2 percent compared to 2013 expenses of $651 million, excluding depreciation and amortization.

Given these assumptions, 2014 diluted EPS could total $2.29 to $2.45, a 15 to 23 percent increase year-over-year. 

 

First Quarter 2014

Full Year 2014

Total fee revenue

$380 million to $395 million

$1,650 million to $1,700 million

Owned, leased, corporate housing 

        and other revenue, net of direct 

        expenses

Approx. $45 million

$210 million to $220 million

Depreciation and amortization

Approx. $30 million

Approx. $120 million

General, administrative and other 

        expenses

$155 million to $160 million

$640 million to $650 million

Operating income

$235 million to $255 million

$1,090 million to $1,160 million

Gains and other income

Approx. $5 million

Approx. $10 million

Net interest expense1

Approx. $30 million

Approx. $110 million

Equity in earnings (losses)

Approx. $0 million

Approx. $0 million

Earnings per share

$0.47 to $0.52

$2.29 to $2.45

Tax rate

32.0 percent

 1 Net of interest income

The company expects investment spending in 2014 will total approximately $800 million to $1.0 billion, including approximately $150 million for maintenance capital spending.  Investment spending also includes other capital expenditures (including property acquisitions), new mezzanine financing and mortgage notes, contract acquisition costs (including the approximately $200 million payment associated with the Protea transaction), and equity and other investments.  Assuming this level of investment spending, approximately $1.25 billion to $1.5 billion could be returned to shareholders through share repurchases and dividends.

Based upon the assumptions above, the company expects full year 2014 adjusted EBITDA will total $1,425 million to $1,495 million, an 8 to 13 percent increase over the 2013 full year adjusted EBITDA of $1,325 million.  See page A-9 for the adjusted EBITDA calculation.

Marriott International, Inc. (NASDAQ: MAR) is a leading lodging company based in Bethesda, Maryland, USA, with more than 3,900 properties in 72 countries and territories and reported revenues of nearly $13 billion in fiscal year 2013.  The company operates and franchises hotels and licenses vacation ownership resorts under 18 brands, including Marriott Hotels, The Ritz-Carlton, JW Marriott, Bulgari, EDITION, Renaissance, Gaylord Hotels, Autograph Collection, AC Hotels by Marriott, Courtyard, Fairfield Inn & Suites, SpringHill Suites, Residence Inn, TownePlace Suites, Marriott Executive Apartments, Marriott Vacation Club, Grand Residences by Marriott and The Ritz-Carlton Destination Club.  There are approximately 330,000 employees at headquarters, managed and franchised properties.  Marriott is consistently recognized as a top employer and for its superior business operations, which it conducts based on five core values: put people first, pursue excellence, embrace change, act with integrity, and serve our world.

MARRIOTT INTERNATIONAL, INC.

PRESS RELEASE SCHEDULES

QUARTER 4, 2013

TABLE OF CONTENTS

Consolidated Statements of Income ________________________________________________________

A-1

Total Lodging Products __________________________________________________________________

A-3

Key Lodging Statistics ___________________________________________________________________

A-4

EBITDA and Adjusted EBITDA _____________________________________________________________

A-8

EBITDA and Adjusted EBITDA Full Year Forecast ______________________________________________

A-9

Adjusted Operating Income Margin Excluding Cost Reimbursements _______________________________

A-10

Adjusted 2012 EPS Excluding Gain on Courtyard JV Sale, Net of Tax ______________________________

A-11

Return on Invested Capital ________________________________________________________________

A-12

Adjusted Owned and Leased Expenses and Adjusted General, Administrative and Other Expenses _____

A-13

Non-GAAP Financial Measures ____________________________________________________________

A-18

 

 

MARRIOTT INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

FOURTH QUARTER 2013 AND 2012

(in millions, except per share amounts)

 Percent 

92 Days Ended

112 Days Ended

 Better/ 

December 31, 20131

December 28, 2012 1

 (Worse) 

REVENUES

Base management fees

$                            152

$                          182

(16)

Franchise fees

163

187

(13)

Incentive management fees

73

90

(19)

Owned, leased, corporate housing and other revenue 2

260

308

(16)

Cost reimbursements 3

2,571

2,990

(14)

   Total Revenues

3,219

3,757

(14)

OPERATING COSTS AND EXPENSES

Owned, leased and corporate housing - direct 4

210

252

17

Reimbursed costs

2,571

2,990

14

General, administrative and other 5

200

206

3

   Total Expenses

2,981

3,448

14

OPERATING INCOME

238

309

(23)

Gains/(losses) and other income 6

(3)

(1)

(200)

Interest expense

(32)

(41)

22

Interest income 

10

7

43

Equity in losses 7

(3)

(3)

-

INCOME BEFORE INCOME TAXES

210

271

(23)

Provision for income taxes

(59)

(90)

34

NET INCOME

$                            151

$                          181

(17)

EARNINGS PER SHARE - Basic

   Earnings per share

$                           0.50

$                         0.58

(14)

EARNINGS PER SHARE - Diluted

   Earnings per share

$                           0.49

$                         0.56

(13)

Basic Shares

299.4

312.7

Diluted Shares 

307.5

322.2

1  – Last year results were reported on a period basis.  They have not been restated to a calendar basis. Accordingly, 2013 reflects 92 days versus 112 days in 2012.

2  – Owned, leased, corporate housing and other revenue includes revenue from the properties we own or lease, termination fees, branding fees, 

       and other revenue.

3  – Cost reimbursements include reimbursements from properties for Marriott-funded operating expenses.

4  – Owned, leased and corporate housing - direct expenses include operating expenses related to our owned or leased hotels, including lease payments,

       pre-opening expenses and depreciation.

5  – General, administrative and other expenses include the overhead costs allocated to our segments, and our corporate overhead costs and general expenses.

6  – Gains/(losses) and other income includes gains and losses on the sale of real estate, note sales or repayments, the sale or other-than-temporary

       impairment of joint ventures and investments, debt extinguishments, and income from cost method joint ventures.

 – Equity in losses includes our equity in earnings or losses of unconsolidated equity method joint ventures.

 

A-1

 

 

MARRIOTT INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

FOURTH QUARTER YEAR-TO-DATE 2013 AND 2012

(in millions, except per share amounts)

 Percent 

368 Days Ended

364 Days Ended

 Better/ 

December 31, 20131

December 28, 20121

 (Worse) 

REVENUES

Base management fees

$                            621

$                          581

7

Franchise fees

666

607

10

Incentive management fees

256

232

10

Owned, leased, corporate housing and other revenue 2

950

989

(4)

Cost reimbursements 3

10,291

9,405

9

   Total Revenues

12,784

11,814

8

OPERATING COSTS AND EXPENSES

Owned, leased and corporate housing - direct 4

779

824

5

Reimbursed costs

10,291

9,405

(9)

General, administrative and other 5

726

645

(13)

   Total Expenses

11,796

10,874

(8)

OPERATING INCOME 

988

940

5

Gains and other income 6

11

42

(74)

Interest expense

(120)

(137)

12

Interest income 

23

17

35

Equity in losses 7

(5)

(13)

62

INCOME BEFORE INCOME TAXES

897

849

6

Provision for income taxes

(271)

(278)

3

NET INCOME 

$                            626

$                          571

10

EARNINGS PER SHARE - Basic

   Earnings per share

$                           2.05

$                         1.77

16

EARNINGS PER SHARE - Diluted

   Earnings per share

$                           2.00

$                         1.72

16

Basic Shares

305.0

322.6

Diluted Shares 

313.0

332.9

1  – Last year results were reported on a period basis.  They have not been restated to a calendar basis. Accordingly, 2013 reflects 368 days versus 364 days in 2012.

2  – Owned, leased, corporate housing and other revenue includes revenue from the properties we own or lease, termination fees, branding fees, 

       other revenue and revenue from our corporate housing business through our sale of that business on April 30, 2012.

3  – Cost reimbursements include reimbursements from properties for Marriott-funded operating expenses.

4  – Owned, leased and corporate housing - direct expenses include operating expenses related to our owned or leased hotels, including lease payments,

       pre-opening expenses and depreciation, plus expenses related to our corporate housing business through our sale of that business on April 30, 2012.

5  – General, administrative and other expenses include the overhead costs allocated to our segments, and our corporate overhead costs and general expenses.

6  – Gains and other income includes gains and losses on the sale of real estate, note sales or repayments, the sale or other-than-temporary

        impairment of joint ventures and investments, debt extinguishments, and income from cost method joint ventures.

 – Equity in losses includes our equity in earnings or losses of unconsolidated equity method joint ventures.

 

A-2

 

 

MARRIOTT INTERNATIONAL, INC.

TOTAL LODGING PRODUCTS 

Number of Properties

Number of Rooms/Suites

Brand

December 31, 2013

December 28, 2012

vs. December 28, 2012

December 31, 2013

December 28, 2012

vs. December 28, 2012

Domestic Full-Service

    Marriott Hotels

344

352

(8)

138,860

141,677

(2,817)

    Renaissance Hotels

76

79

(3)

27,189

28,597

(1,408)

    Autograph Collection

32

24

8

8,410

6,609

1,801

    Gaylord Hotels 

5

5

-

8,098

8,098

-

Domestic Limited-Service

    Courtyard

836

817

19

117,693

114,948

2,745

    Fairfield Inn & Suites

691

678

13

62,921

61,477

1,444

    SpringHill Suites

306

297

9

35,888

34,844

1,044

    Residence Inn

629

602

27

76,056

72,642

3,414

    TownePlace Suites

222

208

14

22,039

20,803

1,236

International

    Marriott Hotels 

215

206

9

66,041

63,240

2,801

    Renaissance Hotels

77

76

1

24,711

24,692

19

    Autograph Collection

19

8

11

2,705

1,056

1,649

    Courtyard

117

112

5

22,856

21,605

1,251

    Fairfield Inn & Suites

17

13

4

2,044

1,568

476

    SpringHill Suites

2

2

-

299

299

-

    Residence Inn

24

23

1

3,349

3,229

120

    TownePlace Suites

2

2

-

278

278

-

    Marriott Executive Apartments

27

25

2

4,295

4,066

229

Luxury

    The Ritz-Carlton - Domestic

37

38

(1)

11,040

11,357

(317)

    The Ritz-Carlton - International

47

42

5

13,950

12,410

1,540

    Bulgari Hotels & Resorts

3

3

-

202

202

-

    EDITION

2

1

1

251

78

173

    The Ritz-Carlton Residential

40

35

5

4,228

3,927

301

    The Ritz-Carlton Serviced Apartments

4

4

-

579

579

-

Unconsolidated Joint Ventures

    AC Hotels by Marriott

75

79

(4)

8,491

8,736

(245)

    Autograph Collection

5

5

-

348

348

-

Timeshare 1

62

65

(3)

12,802

13,029

(227)

Total

3,916

3,801

115

675,623

660,394

15,229

1  Timeshare unit and room counts are as of January 3, 2014 and December 28, 2012, the end of Marriott Vacation Worldwide's fourth quarter for 2013 and 2012, respectively.

 

 

 

A-3

 

 

MARRIOTT INTERNATIONAL, INC.

KEY LODGING STATISTICS

Constant $

Comparable Company-Operated International Properties1

Three Months Ended December 31, 2013 and December 31, 2012

REVPAR

Occupancy




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