Marriott International Reports Third Quarter 2012 Results

Listen to the quarterly earnings review at http://www.marriott.com/investor (click “recent and upcoming events” tab and click on the quarterly conference call link).

THIRD QUARTER HIGHLIGHTS

• Diluted earnings per share (EPS) totaled $0.44, a 52 percent increase over prior year adjusted results;

• During the third quarter, the company completed the sale of its equity interest in the Courtyard joint venture resulting in cash proceeds of $96 million and a $41 million pre-tax gain;

• North America comparable company-operated REVPAR rose 7.0 percent in the third quarter.  On a constant dollar basis, worldwide comparable systemwide REVPAR rose 6.0 percent and average daily rate rose 4.7 percent using constant dollars;

• At the end of the third quarter, the company’s worldwide pipeline of hotels under construction, awaiting conversion or approved for development totaled over 120,000 rooms, not including the 8,100 rooms from the acquisition of the Gaylord brand and hotel management business;

• Nearly 5,000 rooms opened during the quarter, including over 1,400 rooms converted from competitor brands and over 1,600 rooms in international markets.  The company signed nearly 13,000 rooms in the third quarter;

• Marriott repurchased 9.6 million shares of the company’s common stock for $353 million during the quarter.  Year-to-date through the third quarter, the company repurchased 24.3 million shares for $903 million;

• For comparable Marriott Hotels & Resorts properties in North America, group room revenue increased 8 percent in the third quarter compared to the year ago quarter. 

BETHESDA, MD – 2012-10-4 — /travelprnews.com/ — Marriott International, Inc. (NYSE: MAR) today reported third quarter 2012 results.

THIRD QUARTER 2012 RESULTS
Third quarter 2012 net income totaled $143 million, a 40 percent increase compared to third quarter 2011 adjusted net income.  Diluted EPS totaled $0.44, a 52 percent increase from adjusted diluted EPS in the year-ago quarter.  On July 11, 2012, the company forecasted third quarter diluted EPS of $0.39 to $0.41.

For the third quarter of 2011, the company reported a net loss of $179 million and reported diluted losses per share of $0.52.  Adjusted net income and adjusted diluted EPS for the year-ago quarter excluded $349 million pretax ($281 million after-tax and $0.81 per diluted share) of timeshare spin-off adjustments totaling $321 million pretax and other charges totaling $28 million pretax.  Timeshare spin-off adjustments included items such as the removal of timeshare business operating results and spin-off transaction costs, as well as the addition of license fees and other related items as if the spin-off had occurred on the first day of fiscal 2011.  Other charges included an $18 million pretax impairment charge on an investment in equity securities and a $10 million pretax write-off related to one property whose owner filed for bankruptcy. See page A-1 for third quarter 2011 reported results, the timeshare spin-off adjustments, other charges and adjusted results.

Arne M. Sorenson, president and chief executive officer of Marriott International, said, “We were pleased with our third quarter performance.  Pricing power continued to improve in the quarter as hotel occupancy levels approached prior peaks.  Group revenue at comparable Marriott Hotels and Resorts in North America rose 8 percent in the third quarter with room rates up 3 percent.  Transient REVPAR rose 6 percent with strong last-minute retail demand and reduced discounting.

“Looking ahead, we expect 2013 worldwide constant dollar REVPAR to increase at a mid single-digit rate despite moderate economic growth in many markets around the world.  We are particularly bullish about our prospects in North America and expect North American systemwide REVPAR to increase 5 to 7 percent in 2013.  In that market, negotiations for special corporate business are already underway and we are targeting room rates to increase at a high single-digit rate.  Group revenue on the books for 2013 for the Marriott brand in North America is up over 7 percent with rates up nearly 4 percent.

“Worldwide we opened nearly 5,000 rooms during the quarter and signed 13,000 rooms.  We are delighted to welcome the Gaylord brand and its five hotels located in Orlando, Nashville, Dallas and Washington, DC to our system in the fourth quarter.  Across 14 lodging brands worldwide, our pipeline of hotels under development, under construction or pending conversion increased to over 120,000 rooms during the quarter.  Around the world, we expect to add 28,000 rooms in 2012, 30,000 to 35,000 rooms in 2013 and 90,000 to 105,000 for the three-year period from 2012 to 2014.  Our market share of hotels continues to grow around the world.”

For the 2012 third quarter, REVPAR for worldwide comparable systemwide properties increased 6.0 percent (a 4.6 percent increase using actual dollars).

In North America, comparable systemwide REVPAR increased 6.3 percent in the third quarter of 2012, including a 4.9 percent increase in average daily rate.  REVPAR for comparable systemwide North American full-service and luxury hotels (including Marriott Hotels & Resorts, The Ritz-Carlton, Renaissance Hotels and Autograph Collection Hotels) increased 6.8 percent with a 4.6 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 5.9 percent in the third quarter with a 5.0 percent increase in average daily rate.

International comparable systemwide REVPAR rose 5.0 percent (a 1.5 percent decline using actual dollars), including a 3.8 percent increase in average daily rate (a 2.6 percent decline using actual dollars) in the third quarter of 2012.

Marriott added 35 new properties (4,874 rooms) to its worldwide lodging portfolio in the 2012 third quarter, including the Renaissance Shanghai Caohejing, the Renaissance Istanbul Bosphorus and The Ritz-Carlton, Vienna.  Thirteen properties (3,103 rooms) exited the system during the quarter.  At quarter-end, the company’s lodging group encompassed 3,770 properties and timeshare resorts for a total of nearly 648,000 rooms.

The company’s worldwide pipeline of hotels under construction, awaiting conversion or approved for development totaled approximately 730 properties with over 120,000 rooms at quarter-end, not including the 8,100 Gaylord rooms joining the system in the fourth quarter.

MARRIOTT REVENUES totaled over $2.7 billion in the 2012 third quarter compared to adjusted revenues of $2.5 billion for the third quarter of 2011.  Base management and franchise fees rose 9 percent over prior year adjusted levels to $283 million, reflecting higher REVPAR at existing hotels and fees from new hotels, as well as $7 million of deferred base management fees recognized in the quarter related to the sale of the Courtyard joint venture.  Third quarter worldwide incentive management fees increased 24 percent to $36 million.  In the third quarter, 28 percent of worldwide company-managed hotels earned incentive management fees compared to 24 percent in the year-ago quarter.

Worldwide comparable company-operated house profit margins increased 180 basis points in the third quarter.  House profit margins for comparable company-operated properties outside North America increased 160 basis points and North American comparable company-operated house profit margins increased 200 basis points from the year-ago quarter.

Owned, leased, corporate housing and other revenue, net of direct expenses, totaled $26 million, compared to $35 million in the year-ago quarter.  The $9 million decline reflected a $7 million decline in termination fees and a $2 million decrease in residential branding fees.

GENERAL, ADMINISTRATIVE and OTHER expenses for the 2012 third quarter declined 8 percent in the 2012 third quarter, to $132 million compared to adjusted expenses of $143 million in the 2011 third quarter.  Third quarter 2012 expenses reflected a favorable litigation settlement, partially offset by higher legal expenses, netting to a favorable $5 million.  In the prior year, expenses reflected the $5 million combined impact of the guarantee reserve for one hotel and the write-off of deferred contract acquisition costs.

GAINS AND OTHER INCOME totaled $36 million in the quarter, primarily reflecting the $41 million gain related to the sale of the Courtyard joint venture offset by a $7 million impairment charge on an investment.

INTEREST EXPENSE totaled $29 million in the third quarter, compared to adjusted interest expense of $32 million in the year-ago quarter.  Capitalized interest totaled $7 million in the quarter, compared to $5 million in the year-ago quarter.

EBITDA totaled $284 million in the 2012 third quarter, a 27 percent increase over 2011 third quarter adjusted EBITDA of $223 million.  See page A-9 for the EBITDA and adjusted EBITDA calculations.

BALANCE SHEET
At the end of the third quarter 2012, total debt was $2,509 million and cash balances totaled $105 million, compared to $2,171 million in debt and $102 million of cash at year-end 2011.

At the beginning of the fourth quarter, the company issued $350 million of Series L bonds due in 2022 with a 3.25 percent interest rate coupon.  The company expects to use the net proceeds for general corporate purposes.

COMMON STOCK
Weighted average fully diluted shares outstanding used to calculate diluted EPS totaled 329.3 million in the 2012 third quarter, compared to 356.8 million in the year-ago quarter.

The company repurchased 9.6 million shares of common stock in the third quarter at a cost of $353 million.  Year-to-date through the third quarter, Marriott repurchased 24.3 million shares of its stock for $903 million.  The remaining share repurchase authorization, as of September 7, 2012, totaled 16.2 million shares.

FOURTH QUARTER 2012 OUTLOOK
For the fourth quarter, the company expects comparable systemwide REVPAR on a constant dollar basis will increase 5 to 7 percent in North America, increase roughly 3 percent outside North America and improve 4 to 6 percent worldwide.

The company expects to add approximately 28,000 rooms worldwide for the full year 2012.  The company also expects approximately 10,000 rooms will leave the system during the year.

	Fourth Quarter 2012	Full Year 2012
Total fee revenue	$445 million to $455 million	$1,406 million to $1,416 million
Owned, leased, corporate housing and other revenue, net of direct expenses	Approx $55 million	Approx $164 million
General, administrative and other expenses	$200 million to $210 million	$639 million to $649 million
Operating income	$290 million to $310 million	$921 million to $941 million
Gains and other income	Approx $1 million	Approx $44 million
Net interest expense1	Approx $30 million	Approx $116 million
Equity in earnings (losses)	Approx $(5) million	Approx $(15) million
Earnings per share	$0.52 to $0.56	$1.68 to $1.72
Tax rate		33.0 percent

¹Net of interest income

The company expects investment spending in 2012 will total approximately $850 million to $950 million, including approximately $100 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 $210 million payment associated with the Gaylord transaction), and equity and other investments.  Assuming this level of investment spending, approximately $1.1 billion could be returned to shareholders through share repurchases and dividends.

Based upon the assumptions above, the company expects full year 2012 EBITDA will total $1,129 million to $1,149 million, a 14 to 16 percent increase over the prior year’s adjusted EBITDA.  Adjusted EBITDA for full year 2011 totaled $992 million and is shown on page A-10.

The company will report its 2013 results on a calendar basis, with fiscal quarters ending on March 31, June 30, September 30 and December 31.  Prior year periods will not be restated or reported on a pro forma basis for the change in calendar.

Marriott International, Inc. (NYSE: MAR) will conduct its quarterly earnings review for the investment community and news media on Thursday, October 4, 2012 at 10 a.m. Eastern Time (ET).  The conference call will be webcast simultaneously via Marriott’s investor relations website at http://www.marriott.com/investor, click the “Recent and Upcoming Events” tab and click on the quarterly conference call link.  A replay will be available at that same website until October 4, 2013.

The telephone dial-in number for the conference call is 706-679-3455 and the conference ID is 24533249.  A telephone replay of the conference call will be available from 1 p.m. ET, Thursday, October 4, 2012 until 8 p.m. ET, Thursday, October 11, 2012.  To access the replay, call 404-537-3406.  The conference ID for the recording is 24533249.

Note on forward-looking statements:  This press release and accompanying schedules contain “forward-looking statements” within the meaning of federal securities laws, including REVPAR, profit margin and earnings trends, estimates and assumptions; the number of lodging properties we expect to add to or remove from our system in the future; our expectations about investment spending; and similar statements concerning anticipated future events and expectations that are not historical facts.  We caution you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including those we identify below and other risk factors that we identify in our most recent quarterly report on Form 10-Q.    Risks that could affect forward-looking statements in this press release include changes in market conditions; the continuation and pace of the economic recovery; supply and demand changes for hotel rooms; competitive conditions in the lodging industry; relationships with clients and property owners; and the availability of capital to finance hotel growth and refurbishment.  Any of these factors could cause actual results to differ materially from the expectations we express or imply in this press release.  We make these forward-looking statements as of October 3, 2012.  We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Marriott International, Inc. (NYSE: MAR) is a leading lodging company based in Bethesda, Maryland, USA with more than 3,700 properties in 74 countries and territories and reported revenues of over $12 billion in fiscal year 2011.  The company operates and franchises hotels and licenses vacation ownership resorts under 18 brands, including Marriott Hotels & Resorts, 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 300,000 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. For more information or reservations, please visit our website at www.marriott.com, and for the latest company news, visit www.marriottnewscenter.com.

Download Marriott International Q3 Financial Tables.

Connect with thomas.marder@marriott.com

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