10-QPeriod: Q2 FY2016

MARRIOTT INTERNATIONAL INC /MD/ Quarterly Report for Q2 Ended Jun 30, 2016

Filed July 28, 2016For Securities:MAR

Summary

Marriott International, Inc. (MAR) reported strong performance for the six months ended June 30, 2016. Net income rose to $466 million from $447 million in the prior year period, driven by increased revenues across its segments, particularly in franchise and incentive management fees. Operating income also saw a significant increase, reflecting efficient cost management and revenue growth. The company is in the advanced stages of its planned combination with Starwood Hotels & Resorts Worldwide, Inc., with shareholder approvals secured and antitrust reviews progressing. The expected closing in the third quarter of 2016 positions Marriott for substantial future growth and brand portfolio expansion. Despite ongoing investments and some cost pressures, such as Starwood transaction costs, Marriott's operational execution and strategic initiatives appear to be on track, supporting a positive outlook.

Financial Highlights

49 data points
Beta

Revenue

$3.90B

Net Income

$247.00M

6.3% Net Margin

EPS (Diluted)

$0.96

Total Assets

$6.65B

Cash & Equivalents

$679.00M

Free Cash Flow

$432.00M

Financial Statements
Beta
Revenue$3.90B
Operating Expenses$3.51B
Operating Income$389.00M
Interest Expense$57.00M
Net Income$247.00M
EPS (Basic)$0.97
EPS (Diluted)$0.96
Shares Outstanding (Basic)254.30M
Shares Outstanding (Diluted)258.00M

Key Highlights

  • 1Net income for the six months ended June 30, 2016, increased to $466 million from $447 million in the same period last year.
  • 2Total revenues for the six months increased by 7% to $7.67 billion, primarily driven by growth in franchise and incentive management fees.
  • 3Operating income for the six months rose to $756 million from $701 million year-over-year.
  • 4The proposed acquisition of Starwood Hotels & Resorts is progressing, with expected closure in Q3 2016, pending final approvals.
  • 5Comparable worldwide systemwide RevPAR increased by 2.8% for the first half of 2016, indicating healthy demand across its brands.
  • 6The company added 148 properties (20,724 rooms) in the first half of 2016, expanding its global footprint.
  • 7Despite an increase in interest expense due to new debt issuances, overall financial health remains robust, supported by a strong credit facility and operational cash flow.

Frequently Asked Questions

Marriott International entered into an Agreement and Plan of Merger with Starwood Hotels & Resorts Worldwide, Inc. in November 2015. Shareholders of both companies have approved the transaction, and antitrust reviews are largely complete. The company expects the combination to close in the third quarter of 2016, subject to remaining customary conditions and final regulatory approvals.

Total revenues for the six months ended June 30, 2016, increased by 7% to $7.67 billion. This growth was driven by higher franchise fees ($442 million vs. $425 million) and incentive management fees ($195 million vs. $170 million), as well as increased cost reimbursements ($6.19 billion vs. $5.75 billion), reflecting system growth and higher property occupancies.

Marriott reported increased net income and operating income for the first half of 2016. The company believes its credit facility, access to capital markets, and operational cash flow are adequate to meet its liquidity needs, finance growth plans, and service debt. The upcoming Starwood acquisition is expected to be financed through a combination of debt and existing credit facilities.

While the company experienced an increase in general, administrative, and other expenses, largely due to $22 million in Starwood transaction and transition costs, overall operating income still grew. The company focuses on property-level and above-property cost controls and productivity improvements to maintain margins. The integration of Starwood will be a key focus post-closing.