10-QPeriod: Q2 FY2013

MARRIOTT INTERNATIONAL INC /MD/ Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 1, 2013For Securities:MAR

Summary

Marriott International, Inc. (MAR) reported solid financial results for the second quarter and first half of 2013. The company experienced significant revenue growth, driven primarily by increased cost reimbursements and growth in base and franchise fees across its lodging segments. This top-line expansion, coupled with careful cost management, led to a healthy increase in operating income and net income compared to the prior year periods. Key operational highlights include improved RevPAR (Revenue per Available Room) across most segments, particularly in North America and Luxury Lodging. The company also continued to expand its global footprint, adding a substantial number of rooms to its development pipeline. While facing some headwinds like government spending restrictions impacting group demand in the US, Marriott demonstrated resilience and strategic growth. The company also successfully managed its capital structure, including extending its credit facility and continuing its share repurchase program, reflecting confidence in its ongoing operational performance and future prospects.

Financial Highlights

49 data points
Beta

Revenue

$3.26B

Net Income

$179.00M

5.5% Net Margin

EPS (Diluted)

$0.57

Total Assets

$6.38B

Cash & Equivalents

$108.00M

Free Cash Flow

$414.00M

Financial Statements
Beta
Revenue$3.26B
Operating Expenses$2.98B
Operating Income$279.00M
Interest Expense$29.00M
Net Income$179.00M
EPS (Basic)$0.58
EPS (Diluted)$0.57
Shares Outstanding (Basic)306.70M
Shares Outstanding (Diluted)314.00M

Key Highlights

  • 1Revenue increased by 18% in Q2 2013 and 20% in the first half of 2013 compared to the prior year periods, driven by higher cost reimbursements and growth in management and franchise fees.
  • 2Operating income saw a substantial increase, up 15% in Q2 and 21% in the first half of 2013, reflecting improved revenues and efficient cost management.
  • 3Net income grew by 25% in Q2 and 30% in the first half of 2013, demonstrating strong profitability.
  • 4Diluted Earnings Per Share (EPS) increased by 36% in Q2 and 38% in the first half of 2013, indicating enhanced shareholder value.
  • 5Comparable systemwide RevPAR increased by 4.7% in Q2 and 4.7% in the first half of 2013, highlighting improved room revenue generation.
  • 6Marriott added 11,460 gross rooms to its system in the first half of 2013 and maintained a substantial development pipeline of over 140,000 rooms.
  • 7The company amended and restated its credit facility, increasing its size to $2,000 million and extending its expiration date, enhancing financial flexibility.

Frequently Asked Questions

Marriott's revenue growth was primarily driven by a significant increase in cost reimbursements, which rose by $440 million in Q2 and $953 million in the first half of 2013. Additionally, growth in base management fees, franchise fees, and incentive management fees, fueled by system-wide unit growth and improved RevPAR, contributed substantially to the top-line increase.

Marriott transitioned to a calendar year-end reporting cycle. This resulted in a longer reporting period for the 2013 second quarter (91 days vs. 84 days in 2012) and the 2013 first half (184 days vs. 168 days in 2012). The company estimates that this change contributed approximately $25 million to revenues and $20 million to operating income in the second quarter, and $62 million to revenues and $45 million to operating income in the first half.

Marriott reported adding 11,460 rooms in the first half of 2013 and expects to add approximately 30,000 rooms in total for the full year 2013. The company also highlighted a robust development pipeline of over 140,000 rooms as of the end of the second quarter, indicating a strong commitment to future expansion.

Marriott faces several risks, including intense competition within the lodging industry, economic uncertainties impacting travel demand, the potential for premature termination of management or franchise agreements, and risks associated with international operations, such as currency fluctuations and complex regulations. Additionally, the success of new brands, potential disruptions from natural disasters or geopolitical events, and cybersecurity threats are identified as significant concerns.