10-QPeriod: Q1 FY2016

MARRIOTT INTERNATIONAL INC /MD/ Quarterly Report for Q1 Ended Mar 31, 2016

Filed April 28, 2016For Securities:MAR

Summary

Marriott International Inc. reported solid financial results for the first quarter ended March 31, 2016. Total revenues increased by 7% year-over-year to $3.77 billion, driven by a 5% increase in fee revenues and a significant 9% rise in cost reimbursements. Operating income saw a healthy increase of 10.5% to $367 million. The company is actively progressing towards its major acquisition of Starwood Hotels & Resorts, with shareholder approvals obtained and antitrust reviews clearing in key jurisdictions. The expected closing is mid-2016, and Marriott is arranging significant financing, including amending its credit facility and exploring a bridge loan facility. While the integration presents opportunities, it also introduces complexities and potential integration costs. Marriott's operational performance, particularly in comparable systemwide RevPAR, showed a 2.6% increase globally, indicating positive demand trends. The company's focus on brand growth, cost control, and strategic capital allocation remains evident, even as it navigates the substantial undertaking of combining with Starwood.

Financial Highlights

48 data points
Beta

Revenue

$3.77B

Net Income

$219.00M

5.8% Net Margin

EPS (Diluted)

$0.85

Total Assets

$6.12B

Cash & Equivalents

$99.00M

Free Cash Flow

$352.00M

Financial Statements
Beta
Revenue$3.77B
Operating Expenses$3.40B
Operating Income$367.00M
Interest Expense$47.00M
Net Income$219.00M
EPS (Basic)$0.86
EPS (Diluted)$0.85
Shares Outstanding (Basic)254.40M
Shares Outstanding (Diluted)258.90M

Key Highlights

  • 1Total revenues increased 7% to $3.77 billion for Q1 2016 compared to Q1 2015, driven by growth in management, franchise, and incentive fees, as well as cost reimbursements.
  • 2Operating income grew 10.5% to $367 million, reflecting higher fee revenues and improved operating results, partially offset by increased general, administrative, and other expenses.
  • 3Net income rose to $219 million ($0.85 diluted EPS) from $207 million ($0.73 diluted EPS) year-over-year, showing improved profitability.
  • 4The significant pending acquisition of Starwood Hotels & Resorts is advancing, with shareholder approvals secured and key regulatory reviews progressing; expected closing is mid-2016.
  • 5Comparable systemwide RevPAR increased by 2.6% globally, indicating a healthy demand for Marriott's brands across various regions.
  • 6Marriott is actively managing its capital structure, amending its credit facility to $3.75 billion and securing a commitment for a $3.5 billion bridge loan facility to support the Starwood acquisition.
  • 7Share-based compensation expense was $28 million for Q1 2016, up from $24 million in Q1 2015, reflecting the company's use of equity incentives.

Frequently Asked Questions

In the first quarter of 2016, Marriott International reported a 7% increase in total revenues to $3.77 billion and a 10.5% increase in operating income to $367 million. Net income rose to $219 million, or $0.85 per diluted share, compared to $207 million, or $0.73 per diluted share, in the prior year period. Comparable systemwide RevPAR increased by 2.6% globally.

The acquisition of Starwood Hotels & Resorts is progressing towards its expected mid-2016 closing. Shareholders from both companies have approved the transaction, and antitrust reviews in major jurisdictions like the U.S. and Canada have been cleared. Marriott is arranging substantial financing, including amending its credit facility and securing a bridge loan commitment.

Marriott International is actively managing its liquidity. The company is amending its revolving credit facility to increase borrowing capacity to $3.75 billion and extend its maturity. Additionally, it has secured a commitment for a $3.5 billion senior bridge term loan facility to help finance the cash component of the Starwood acquisition. The company believes its existing credit facilities, capital markets access, and operational cash flow are sufficient to meet its liquidity requirements.

Marriott continues to operate across three segments: North American Full-Service, North American Limited-Service, and International. For Q1 2016, comparable systemwide RevPAR increased across all segments. The company reported adding 68 lodging properties (10,023 rooms) in the quarter, while 12 properties (1,781 rooms) exited. The international segment showed strong RevPAR growth, despite some regional constraints.