Company Results

Marriott Q4 Net Income Up 30%

Fourth quarter 2014 net income totaled $197 million, a 30 percent increase over 2013 net income. Fourth quarter 2014 diluted earnings per share (EPS) totaled $0.68, a 39 percent increase from 2013 diluted EPS. On October 28, 2014, the company forecasted fourth quarter diluted EPS of $0.62 to $0.66.

Marriott

Marriott International, Inc. (NASDAQ: MAR) yesterday reported fourth quarter and full year 2014 results.

Fourth quarter 2014 net income totaled $197 million, a 30 percent increase over 2013 net income.  Fourth quarter 2014 diluted earnings per share (EPS) totaled $0.68, a 39 percent increase from 2013 diluted EPS.  On October 28, 2014, the company forecasted fourth quarter diluted EPS of $0.62 to $0.66.

HIGHLIGHTS

  • Fourth quarter diluted EPS totaled $0.68, a 39 percent increase over prior year results;
  • North American comparable systemwide RevPAR rose 6.7 percent in the fourth quarter and 7.0 percent for the full year;
  • On a constant dollar basis, worldwide comparable systemwide RevPAR rose 6.2 percent in the fourth quarter and 6.6 percent for the full year;
  • For full year 2014, Marriott repurchased 24.2 million shares of the company's common stock for $1.5 billion including 7.7 million shares for $544 million in the fourth quarter;
  • Comparable company-operated house profit margins increased 150 basis points in North America and 120 basis points worldwide for the full year;
  • At year-end, the company's worldwide development pipeline increased to nearly 240,000 rooms, including approximately 30,000 rooms approved, but not yet subject to signed contracts;
  • Over 46,000 rooms were added in 2014 including nearly 9,000 rooms converted from competitor brands and over 10,000 rooms associated with the Protea transaction;
  • The company signed a record 100,000 rooms in 2014;
  • Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $384 million in the quarter, a 20 percent increase over fourth quarter 2013 adjusted EBITDA;
  • Adjusted for cost reimbursements, the company's full year 2014 operating income margin increased to 42 percent.  Return on invested capital totaled 36 percent in 2014;
  • For full year 2015, Marriott expects North American and worldwide comparable systemwide constant dollar RevPAR to increase 5 to 7 percent.

Arne M. Sorenson, president and chief executive officer of Marriott International, said, "Today, we post both record earnings and unit growth and conclude 2014 with the strongest worldwide development pipeline of rooms in our history.  Our powerful portfolio of brands has never been better positioned or more in demand by our owners, franchisees and guests.  In 2014, we signed agreements for a record-breaking 100,000 rooms, boosting our development pipeline to nearly 240,000 rooms. At year-end, our system reached nearly 715,000 rooms in 79 countries and territories.  With the strength of our portfolio, we expect to reach one million rooms open or under development well before the end of 2015, offering a growing number of travel opportunities for our 49 million loyal Rewards members.

"In the fourth quarter, our worldwide systemwide RevPAR increased more than 6 percent.  In North America, business and leisure transient demand were strong, which drove limited-service systemwide RevPAR up 8 percent.  We expect transient demand to remain strong.  In fact, based on signings to date, we expect special corporate room rates across all our managed North American hotels will increase 5 to 6 percent in 2015.

"During the year, our calendar of group meeting business in North America favored the first three quarters of 2014, largely due to the timing of holidays.  As expected, this tempered results at our full-service hotels during the fourth quarter, particularly at our largest convention hotels.  We are seeing group business restrengthen for 2015.  Group revenue bookings for our managed full-service hotels are up almost 5 percent for the full year 2015 and 6 percent in the first quarter alone.

"Our international hotels performed well in the fourth quarter.  Strong leisure demand in the Caribbean and Mexico, good weather in Europe, increased travel to Egypt, and improving trends in India and Japan drove systemwide constant dollar RevPAR up nearly 5 percent.  However, on an actual dollar basis, our international systemwide RevPAR increased only 0.5 percent.  After hedges, the change in exchange rates reduced our income before taxes by $5 million in the fourth quarter and $23 million for the full year.  The full year impact included $11 million related to the Venezuela devaluation earlier in 2014.

"We remain committed to driving growth, delivering results and returning excess cash to shareholders.  In 2014, worldwide systemwide RevPAR increased just under 7 percent and we expanded our system size by 6 percent, net, including the rooms from the Protea transaction.  Earnings per share increased by 27 percent and adjusted EBITDA rose 15 percent.  In 2015, we expect worldwide systemwide constant dollar RevPAR will increase 5 to 7 percent, and we expect the number of rooms in our existing brands will increase by about 6 percent, net.  In addition, we expect to add an additional 10,000 rooms with the closing of the anticipated Delta transaction.  Excluding the impact of Delta, diluted EPS could total $3.00 to $3.12 in 2015, an 18 to 23 percent increase over 2014 and adjusted EBITDA could increase 13 to 16 percent.  We returned nearly $1.75 billion to shareholders through share repurchase and dividends in 2014 and we expect to return at least as much in 2015.  We are looking forward to another great year."

For the 2014 fourth quarter, RevPAR for worldwide comparable systemwide properties increased 6.2 percent (a 5.3 percent increase using actual dollars).  For the full year, RevPAR for worldwide comparable systemwide properties increased 6.6 percent (a 6.3 percent increase using actual dollars).

In North America, comparable systemwide RevPAR increased 6.7 percent in the fourth quarter of 2014, including a 4.2 percent increase in average daily rate.  RevPAR for comparable systemwide North American full-service hotels (including Marriott Hotels, The Ritz-Carlton, Renaissance Hotels, Gaylord Hotels and Autograph Collection Hotels) increased 5.2 percent with a 4.4 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 8.2 percent in the fourth quarter with a 4.6 percent increase in average daily rate.

International comparable systemwide RevPAR rose 4.6 percent (a 0.5 percent increase using actual dollars) in the fourth quarter.  For the full year, international comparable systemwide RevPAR rose 5.1 percent (a 4.0 percent increase using actual dollars).

Marriott added 70 new properties (14,605 rooms) to its worldwide lodging portfolio in the 2014 fourth quarter, including the Atlantis Paradise Island, an Autograph Collection hotel, the Miami Beach EDITION and the Ritz-Carlton, Bali.  Twenty-two properties (1,851 rooms) exited the system during the quarter.  At year-end, the company's lodging system encompassed 4,175 properties and timeshare resorts for a total of nearly 715,000 rooms.

The company's worldwide development pipeline increased to nearly 1,450 properties with nearly 240,000 rooms at year-end, including 180 properties with approximately 30,000 rooms approved for development, but not yet subject to signed contracts.  The company's pipeline at year-end 2014 does not include the approximately 10,000 rooms associated with the expected Delta transaction announced on January 27, 2015.

MARRIOTT REVENUES totaled nearly $3.6 billion in the 2014 fourth quarter compared to revenues of $3.2 billion for the fourth quarter of 2013.  Base management and franchise fees totaled $348 million compared to $315 million in the year-ago quarter, an increase of 10 percent.  The increase largely reflected higher RevPAR and new unit growth, partially offset by $2 million of unfavorable foreign exchange. 

Fourth quarter worldwide incentive management fees increased 12 percent to $82 million primarily due to higher RevPAR and house profit margins, partially offset by $3 million of unfavorable foreign exchange and $5 million of lower deferred fee recognition.   In the fourth quarter, 40 percent of worldwide company-managed hotels earned incentive management fees compared to 32 percent in the year-ago quarter.  For full year 2014, 50 percent of worldwide company-managed hotels earned incentive management fees compared to 38 percent in 2013.

Worldwide comparable company-operated house profit margins increased 90 basis points in the fourth quarter with higher room rates, improved productivity and solid cost controls.  House profit margins for comparable company-operated properties outside North America increased 70 basis points and North American comparable company-operated house profit margins increased 110 basis points from the year-ago quarter.

Owned, leased, and other revenue, net of direct expenses, totaled $73 million, compared to $63 million in the year-ago quarter.  The year-over-year improvement reflected higher residential and credit card branding fees, an increase in termination fees and the favorable impact of the Protea leased hotel portfolio acquired at the beginning of the second quarter, partially offset by $2 million of higher pre-opening expenses and $1 million of unfavorable foreign exchange. 

On October 28, 2014, the company estimated owned, leased, and other revenue, net of direct expenses for the fourth quarter would total approximately $65 million.  Actual results in the quarter were above the estimate largely due to $4 million of stronger results at owned and leased hotels and $4 million of higher than expected termination fees.

GENERAL, ADMINISTRATIVE, and OTHER expenses for the 2014 fourth quarter totaled $180 million compared to $178 million in the year-ago quarter.  Expenses in the quarter included $4 million of guarantee reserves relating to two hotels.   For full year 2014, general, administrative, and other expenses increased 2 percent to $659 million.

GAINS AND OTHER INCOME totaled $4 million in the fourth quarter.  Gains and other income in the fourth quarter of 2014 included a $5 million distribution related to the sale of a hotel in an investment fund. 

INTEREST EXPENSE, NET declined $9 million in the fourth quarter.  Interest expense for the fourth quarter decreased $6 million largely due to a $7 million one-time favorable interest expense true-up, partially offset by higher senior debt borrowings.  Interest income increased $3 million year-over-year as a result of an increase in loans receivable.

On October 28, 2014, the company estimated interest expense, net for the fourth quarter would total approximately $20 million.  Actual interest expense, net in the quarter was lower than the estimate largely due to the one-time favorable interest expense true-up.

EQUITY IN EARNINGS increased $3 million in the fourth quarter.  The increase largely reflected better operating results in one joint venture.

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

For the fourth quarter, adjusted EBITDA totaled $384 million, a 20 percent increase over fourth quarter 2013 adjusted EBITDA of $321 million.  See page A-8 for the adjusted EBITDA calculation.

Full year 2014 adjusted EBITDA totaled $1,524 million, a 15 percent increase over 2013 adjusted EBITDA of $1,325 million

BALANCE SHEET

At year-end, total debt was $3,781 million and cash balances totaled $104 million, compared to $3,199 million in debt and $126 million of cash at year-end 2013.

At the beginning of the 2014 fourth quarter, the company issued $400 million of Series N Senior Notes due in 2021 with a 3.1 percent interest rate coupon. 

COMMON STOCK

Weighted average fully diluted shares outstanding used to calculate diluted EPS totaled 289.0 million in the 2014 fourth quarter, compared to 307.5 million in the year-ago quarter.

The company repurchased 7.7 million shares of common stock in the fourth quarter at a cost of $544 million.  For full year 2014, Marriott repurchased 24.2 million shares of its stock for $1.5 billion at an average price of $62.09.  To date in 2015, the company has repurchased 3.6 million shares for $275 million.  On February 12, 2015, the board of directors increased the company's share authorization to repurchase shares by 25 million for a total authorization of 36.5 million shares as of February 18, 2015. 

OUTLOOK

For the 2015 first quarter, the company expects comparable systemwide RevPAR on a constant dollar basis will increase 5 to 7 percent in North America, 4 to 6 percent outside North America and 5 to 7 percent worldwide.

For full year 2015, the company expects comparable systemwide RevPAR on a constant dollar basis will increase 5 to 7 percent in North America, 3 to 5 percent outside North America and 5 to 7 percent worldwide.

The company anticipates gross room additions of approximately 7 percent, or 6 percent, net, worldwide for the full year 2015.  This does not include the approximately 10,000 rooms associated with the expected Delta transaction.

The company assumes full year fee revenue could total $1,875 million to $1,915 million, growth of 9 to 11 percent over 2014 fee revenue of $1,719 million.  

For 2015, the company anticipates general, administrative and other expenses will total $635 million to $645 million, a 2 to 4 percent decline compared to 2014 expenses of $659 million.

Given these assumptions, 2015 diluted EPS could total $3.00 to $3.12, an 18 to 23 percent increase year-over-year.  The guidance provided for 2015 does not include the impact of the expected Delta transaction.

 

First Quarter 2015

Full Year 2015

Total fee revenue

$440 million to $450 million

$1,875 million to $1,915 million

Owned, leased and other revenue, net of direct expenses

Approx. $60 million

Approx. $250 million

Depreciation, amortization, and other expenses

Approx. $30 million

Approx. $135 million

General, administrative, and other expenses

$150 million to $155 million

$635 million to $645 million

Operating income

$315 million to $330 million

$1,345 million to $1,395 million

Gains and other income 

Approx. $0 million

Approx. $0 million

Net interest expense1

Approx. $30 million

Approx. $135 million

Equity in earnings (losses)

Approx. $0 million

Approx. $5 million

Earnings per share 

$0.68 to $0.72

$3.00 to $3.12

Tax rate

32.3 percent

 1 Net of interest income

The company expects investment spending in 2015 will total approximately $600 million to $800 million, including approximately $125 million for maintenance capital and approximately $135 million for the expected Delta transaction.  Investment spending also includes other capital expenditures (including property acquisitions), new mezzanine financing and mortgage notes, contract acquisition costs, and equity and other investments.  Assuming this level of investment spending, at least $1.75 billion could be returned to shareholders through share repurchases and dividends.

Based upon the assumptions above, the company expects full year 2015 adjusted EBITDA will total $1,715 million to $1,765 million, a 13 to 16 percent increase over the 2014 full year adjusted EBITDA of $1,524 million.  See page A-9 for the adjusted EBITDA calculation.

Marriott International, Inc. (NASDAQ: MAR) is a global leading lodging company based in Bethesda, Maryland, USA, with more than 4,100 properties in 79 countries and territories.  Marriott International reported revenues of nearly $14 billion in fiscal year 2014.  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, Moxy Hotels, Courtyard, Fairfield Inn & Suites, SpringHill Suites, Residence Inn, TownePlace Suites, Protea Hotels, Marriott Executive Apartments and Marriott Vacation Club timeshare brand.  Marriott has been consistently recognized as a top employer and for its superior business ethics.  The company also manages the award-winning guest loyalty program, Marriott Rewards® and The Ritz-Carlton Rewards® program, which together surpass 49 million members. 

                                                                      IRPR#1

Tables follow

 

MARRIOTT INTERNATIONAL, INC.

PRESS RELEASE SCHEDULES

QUARTER 4, 2014

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

Return on Invested Capital

A-11

Non-GAAP Financial Measures

A-12

 

 

MARRIOTT INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

FOURTH QUARTER 2014 AND 2013

(in millions except per share amounts, unaudited)

 Percent 

Three Months Ended

Three Months Ended

 Better/ 

December 31, 2014

December 31, 2013

 (Worse) 

REVENUES

Base management fees

$                        163

$                        152

7

Franchise fees

185

163

13

Incentive management fees

82

73

12

Owned, leased, and other revenue 1

275

260

6

Cost reimbursements 2

2,854

2,571

11

   Total Revenues

3,559

3,219

11

OPERATING COSTS AND EXPENSES

Owned, leased, and other - direct 3

202

197

(3)

Reimbursed costs

2,854

2,571

(11)

Depreciation, amortization, and other 4

32

35

9

General, administrative, and other 5

180

178

(1)

   Total Expenses

3,268

2,981

(10)

OPERATING INCOME

291

238

22

Gains (losses) and other income 6

4

(3)

233

Interest expense

(26)

(32)

19

Interest income 

13

10

30

Equity in earnings (losses) 7

-

(3)

100

INCOME BEFORE INCOME TAXES

282

210

34

Provision for income taxes

(85)

(59)

(44)

NET INCOME

$                        197

$                        151

30

EARNINGS PER SHARE - Basic

   Earnings per share

$                       0.70

$                       0.50

40

EARNINGS PER SHARE - Diluted

   Earnings per share

$                       0.68

$                       0.49

39

Basic Shares

282.4

299.4

Diluted Shares

289.0

307.5

1  Owned, leased, and other revenue includes revenue from the properties we own or lease, termination fees, branding fees, and other revenue.

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

3  Owned, leased, and other - direct expenses include operating expenses related to our owned or leased hotels, including lease payments and pre-opening expenses.

4  Depreciation, amortization, and other expenses include depreciation for fixed assets, amortization of capitalized costs incurred to acquire management, franchise, and license agreements, and any related impairments, accelerations, or write-offs.

5  General, administrative, and other expenses include our corporate and business segments overhead costs and general expenses.

6  Gains (losses) and other income includes gains and losses on: the sale of real estate, the sale or other-than-temporary impairment of joint ventures and investments, and results from cost method investments.

7  Equity in earnings (losses) include our equity in earnings or losses of unconsolidated equity method investments.

A-1

 

 

MARRIOTT INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

FOURTH QUARTER YEAR-TO-DATE 2014 AND 2013

(in millions except per share amounts, unaudited)

 Percent 

Twelve Months Ended

Twelve Months Ended

 Better/ 

December 31, 2014

December 31, 2013

 (Worse) 

REVENUES

Base management fees

$                        672

$                        621

8

Franchise fees

745

666

12

Incentive management fees

302

256

18

Owned, leased, and other revenue 1

1,022

950

8

Cost reimbursements 2

11,055

10,291

7

   Total Revenues

13,796

12,784

8

OPERATING COSTS AND EXPENSES

Owned, leased, and other - direct 3

775

729

(6)

Reimbursed costs

11,055

10,291

(7)

Depreciation, amortization, and other 4

148

127

(17)

General, administrative, and other 5

659

649

(2)

   Total Expenses

12,637

11,796

(7)

OPERATING INCOME

1,159

988

17

Gains and other income 6

8

11

(27)

Interest expense

(115)

(120)

4

Interest income 

30

23

30

Equity in earnings (losses) 7

6

(5)

220

INCOME BEFORE INCOME TAXES

1,088

897

21

Provision for income taxes

(335)

(271)

(24)

NET INCOME

$                        753

$                        626

20

EARNINGS PER SHARE - Basic

   Earnings per share

$                       2.60

$                       2.05

27

EARNINGS PER SHARE - Diluted

   Earnings per share

$                       2.54

$                       2.00

27

Basic Shares

289.9

305.0

Diluted Shares

296.8

313.0

1  Owned, leased, and other revenue includes revenue from the properties we own or lease, termination fees, branding fees, and other revenue.

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

3  Owned, leased, and other - direct expenses include operating expenses related to our owned or leased hotels, including lease payments and pre-opening expenses.

4  Depreciation, amortization, and other expenses include depreciation for fixed assets, amortization of capitalized costs incurred to acquire management, franchise, and license agreements, and any related impairments, accelerations, or write-offs.

5  General, administrative, and other expenses include our corporate and business segments overhead costs and general expenses.

6  Gains and other income includes gains and losses on: the sale of real estate, the sale or other-than-temporary impairment of joint ventures and investments, and results from cost method investments.

7  Equity in earnings (losses) include our equity in earnings or losses of unconsolidated equity method investments.

A-2

 

 

MARRIOTT INTERNATIONAL, INC.

TOTAL LODGING PRODUCTS 

Number of Properties

Number of Rooms/Suites

Brand

December 31,

2014

December 31,

2013

vs. December 31,

2013

December 31,

2014

December 31,

2013

vs. December 31,

2013

Domestic Full-Service

    Marriott Hotels

347

344

3

140,575

138,860

1,715

    Renaissance Hotels

78

76

2

27,588

27,189

399

    Autograph Collection Hotels

44

32

12

10,082

8,410

1,672

    Gaylord Hotels 

5

5

-

8,098

8,098

-

    The Ritz-Carlton

39

37

2

11,424

11,040

384

    The Ritz-Carlton Residences

30

30

-

3,598

3,598

-

    EDITION

1

-

1

295

-

295

    EDITION Residences

1

-

1

25

-

25

Domestic Limited-Service

    Courtyard

861

836

25

120,894

117,693

3,201

    Fairfield Inn & Suites

704

691

13

64,362

62,921

1,441

    SpringHill Suites

314

306

8

36,968

35,888

1,080

    Residence Inn

648

629

19

78,518

76,056

2,462

    TownePlace Suites

240

222

18

23,973

22,039

1,934

    AC Hotels by Marriott 1

1

-

1

220

-

220

International

    Marriott Hotels 

231

215

16

71,428

66,041

5,387

    Renaissance Hotels

81

77

4

25,368

24,711

657

    Autograph Collection Hotels 1

31

24

7

7,428

3,053

4,375

    Protea Hotels

112

-

112

10,107

-

10,107

    Moxy Hotels

1

-

1

162

-

162

    Courtyard

127

117

10

24,906

22,856

2,050

    Fairfield Inn & Suites

17

17

-

2,089

2,044

45

    SpringHill Suites

2

2

-

299

299

-

    Residence Inn

27

24

3

3,645

3,349

296

    TownePlace Suites

4

2

2

518

278

240

    Marriott Executive Apartments

27

27

-

4,261

4,295

(34)

    The Ritz-Carlton 

48

47

1

14,090

13,950

140

    The Ritz-Carlton Residences

10

10

-

630

630

-

    The Ritz-Carlton Serviced Apartments

4

4

-

579

579

-

    Bulgari Hotels & Resorts

3

3

-

202

202

-

    Bulgari Residences

1

-

1

5

-

5

    EDITION

2

2

-

251

251

-

    AC Hotels by Marriott 1

76

75

1

9,311

8,491

820

Timeshare 2

58

62

(4)

12,866

12,802

64

Total

4,175

3,916

259

714,765

675,623

39,142

1  Results for all AC Hotels by Marriott properties and five Autograph Collection properties are presented in the "Equity in earnings (losses)" caption of our Consolidated Statements of Income.

2  Timeshare unit and room counts are as of January 2, 2015 and January 3, 2014, the end of Marriott Vacation Worldwide's fourth quarter for 2014 and 2013, respectively.

A-3

 

 

MARRIOTT INTERNATIONAL, INC.

KEY LODGING STATISTICS

Constant $

Comparable Company-Operated International Properties1

Three Months Ended December 31, 2014 and December 31, 2013

REVPAR

Occupancy

Average Daily Rate

Region

2014

vs. 2013

2014

 

vs. 2013

2014

vs. 2013

Caribbean & Latin America

$171.01

9.5%

71.6%

2.9%

pts.

$238.87

5.1%

Europe

$136.86

4.2%

74.5%

1.7%

pts.

$183.81

1.8%

Middle East & Africa

$129.24

15.7%

64.9%

10.0%

pts.

$199.27

-2.1%

Asia Pacific

$137.46

2.4%

76.1%

1.1%

pts.

$180.66

0.8%

Total International2

$140.54

5.3%

73.7%

2.6%

pts.

$190.74

1.7%

Worldwide3

$128.88

6.0%

71.1%

1.7%

pts.

$181.31

3.5%

Comparable Systemwide International Properties1

Three Months Ended December 31, 2014 and December 31, 2013

REVPAR

Occupancy

Average Daily Rate

Region



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