UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
_______________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 21, 2017
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MARRIOTT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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Delaware | 1-13881 | 52-2055918 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
10400 Fernwood Road, Bethesda, Maryland | 20817 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (301) 380-3000
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 7.01. | Regulation FD Disclosure. |
Marriott International, Inc. (“Marriott”) issued a press release describing certain information that will be presented as part of its investor and security analyst conference, which is being webcast today, Tuesday, March 21, 2017 from approximately 8:30 a.m. to 2:30 p.m. Eastern Daylight Time from the New York Marriott Marquis. A copy of Marriott’s press release is attached as Exhibit 99.1 and incorporated herein by reference. Marriott will provide a live webcast of the investor and security analyst conference, presentation materials, and and the webcast replay on its investor relations web site at http://www.marriott.com/investor (click on the Security Analyst Meeting link under the “Recent & Upcoming Events” tab). | |
Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits. The following exhibits are furnished with this report: | |
Exhibit 99.1 | Press release issued March 21, 2017 |
Exhibit 99.2 | Non-GAAP financial measures and reconciliations |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
MARRIOTT INTERNATIONAL, INC. | ||||||||
Date: March 21, 2017 | By: | /s/ Bao Giang Val Bauduin | ||||||
Bao Giang Val Bauduin | ||||||||
Controller and Chief Accounting Officer | ||||||||
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EXHIBIT INDEX
Exhibit No. | Description | |
99.1 | Press release issued March 21, 2017 | |
99.2 | Non-GAAP financial measures and reconciliations | |
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Exhibit 99.1
 |  | |||
NEWS
CONTACT: Connie Kim
(301) 642-1918
connie.kim@marriott.com
Marriott International Maps Future Growth at Investor Day
Growing Global Distribution and Integration of Starwood Expected to Drive Record Cash Flow to Shareholders
BETHESDA, MD - March 21, 2017 - Marriott International (NASDAQ: MAR) today will unveil the company’s three-year growth plan, which includes opening approximately one hotel every 14 hours around the world, at its meeting with security analysts and institutional investors at the New York Marriott Marquis.
In its presentation, Marriott will outline plans to accelerate its growth, adding 285,000 to 300,000 rooms worldwide by 2019, which could yield a record $675 million in annual stabilized fees from these rooms. The expansion would also allow the company to further capitalize on its industry leading loyalty programs - Marriott Rewards, which includes The Ritz-Carlton Rewards, and Starwood Preferred Guest. The programs now have over 100 million members - growing at a record pace of roughly one million net new members per month since the company’s historic acquisition of Starwood Hotels and Resorts in September 2016.
“We are more optimistic than ever about our future,” said Arne Sorenson, Marriott International president and chief executive officer. “Marriott has made a significant leap forward in distribution and scale with its once-in-a-generation acquisition of Starwood. With global travel estimated to increase at a 7 percent compounded rate over the next 10 years and international trips expected to top 1.8 billion by 2030, Marriott is well positioned to benefit given its strong global footprint now in 122 countries and territories and an unmatched portfolio of 30 lodging brands.”
In its three-year growth plan, the company expects to earn $675 million in stabilized fees from hotel rooms added to its system in 2017 through 2019. In addition, non-property related franchise fees, largely credit card branding fees, should increase by $100 million during the three years. The plan assumes, but does not forecast RevPAR (Revenue per Available Room) growth of 1 to 3 percent compounded annually through 2019. Given these assumptions, the company could produce the following results over the next three years:
• | Diluted earnings per share of $5.25 to $5.80 by 2019, a compound growth rate of 17 to 21 percent over 2016 combined results; |
• | Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) increasing by 7 to 10 percent compounded, excluding the impact of asset sales, with net income increasing by 11 to 14 percent compounded, each compared to combined results in 2016; |
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Exhibit 99.1
• | Cash available for shareholders could total $8.3 to $9.3 billion for the three years (2017 through 2019); |
• | Shareholders could see $1.4 to $1.5 billion in dividends, assuming a continued 30 percent payout ratio, and $6.9 to $7.8 billion in share repurchases over the three-year period. |
Starwood Integration Brings Meaningful Savings and Revenue Opportunities
Marriott has already made great progress on integrating Starwood, including immediately linking loyalty programs, integrating its development organization, and rolling out its unified guest feedback system, guestVoice, across legacy-Starwood properties.
Looking ahead, with broader distribution and applying the company’s operating expertise, Marriott can offer enhanced guest choice, a more powerful loyalty program, improved sales and marketing efficiency and effectiveness, and meaningful cost efficiencies. In addition, with anticipated increasing loyalty program participation, number of credit card holders, and credit card spend, Marriott expects to see an increase in payments from its co-brand loyalty credit cards benefiting loyalty programs, Marriott’s hotel owners and Marriott.
“While the acquisition has provided us with enviable distribution, scale and global footprint, Marriott’s strategy hasn’t changed,” said Leeny Oberg, Marriott International executive vice president and chief financial officer. “We remain focused on growing our superior brand portfolio through signing long-term, high quality contracts with minimal investment. We expect to deliver significant free cash flow and sustained earnings growth as we expand our footprint strategically around the world. Our integration plans are on track and we are excited about the potential we see for additional benefits still being developed and not included in today’s plan.”
Premium Global Footprint, Unmatched Portfolio Drives Unit Growth
The Starwood acquisition had a transformative impact on Marriott’s global footprint. Marriott went from operating in 87 countries and territories at the end of 2015 to 122 by the end of 2016, taking a significant lead in market share over its next largest competitor. Marriott now has over 8 percent of worldwide hotel rooms when including existing hotels and the signed new construction pipeline, with leading market share in North America, Asia Pacific, and the Middle East and Africa. Over the next three years, the company expects net room growth to accelerate to an annual compound rate of 6.5 percent, compared to a 5 percent annual compound rate over the last three years (including the legacy Starwood brands).
Record Unit Growth Fuels Marketing and Loyalty Efforts
With over 100 million unique members, the company’s loyalty programs are Marriott’s most powerful marketing platform. The company is investing in marketing partnerships and innovations designed to make loyalty programs even more valuable and scalable. Earlier today, the company announced an investment in a strategic, technology-based partner called PlacePass. This partnership will allow Marriott to offer guests and members more experiential opportunities when they travel.
Marriott will provide a live webcast of today’s investor and security analyst conference. The live webcast will be available for investors on March 21, 2017 from approximately 8:30 am to 2:30 pm Eastern Daylight Time in the U.S. Slides and video from the meeting will be provided through a live webcast via Marriott’s investor relations web site. The slides contain financial models for the three-year period, including estimates of net income, adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) and cash from operations, as well as non-GAAP financial measure reconciliations for those estimates as appropriate. Copies of slides will be available for download approximately one hour before the start of the presentations. Those wishing to access the webcast should log onto http://www.marriott.com/investor, and click on the Security Analyst Meeting link under the “Recent & Upcoming Events”
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Exhibit 99.1
tab. Presentation materials from the meeting and the webcast replay will be available online after the meeting as well.
About Marriott International Marriott International, Inc. (NASDAQ: MAR) is the world’s largest hotel company based in Bethesda, Maryland, USA, with more than 6,000 properties in 122 countries and territories. Marriott operates and franchises hotels and licenses vacation ownership resorts. The company’s 30 leading brands include: Bulgari®, The Ritz-Carlton® and The Ritz-Carlton Reserve®, St. Regis®, W®, EDITION®, JW Marriott®, The Luxury Collection®, Marriott Hotels®, Westin®, Le Méridien®, Renaissance® Hotels, Sheraton®, Delta Hotels by MarriottSM, Marriott Executive Apartments®, Marriott Vacation Club®, Autograph Collection® Hotels, Tribute Portfolio™, Design Hotels™, Gaylord Hotels®, Courtyard®, Four Points® by Sheraton, SpringHill Suites®, Fairfield Inn & Suites®, Residence Inn®, TownePlace Suites®, AC Hotels by Marriott®, Aloft®, Element®, Moxy® Hotels, and Protea Hotels by Marriott®. The company also operates award-winning loyalty programs: Marriott Rewards®, which includes The Ritz-Carlton Rewards®, and Starwood Preferred Guest®. For more information, please visit our website at www.marriott.com, and for the latest company news, visit www.marriottnewscenter.com and @MarriottIntl.
Note on Forward-Looking Statements: This news release and the conference presentations contain “forward-looking statements” within the meaning of federal securities laws, including RevPAR, profit margin and earnings trends; the number of lodging properties the company may add or remove in future years; Marriott’s potential investment spending and share repurchases; the amount of and timing for realizing anticipated synergies from the acquisition of Starwood, and similar statements concerning possible future events or expectations that are not historical facts. We caution you that these statements are not guarantees of future performance and are subject to a number of risks and uncertainties, including changes in market conditions; changes in global and regional economies; supply and demand changes for hotel rooms; competitive conditions in the lodging industry; relationships with clients and property owners; the availability of capital to finance hotel growth and refurbishment; and other risk factors that the company identifies in its most recent annual report on Form 10-K; any of which could cause actual results to differ materially from the expectations we express or imply here. We make these statements as of March 21, 2017 and we assume no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
IRPR#1
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Exhibit 99.2
MARRIOTT INTERNATIONAL, INC.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
We report certain financial measures that are not required by, or presented in accordance with, United States generally accepted accounting principles (“GAAP”). We discuss management’s reasons for reporting these non-GAAP measures below, and the tables on the following pages reconcile the most directly comparable GAAP measure to each non-GAAP measure that we present. Although management evaluates and presents these non-GAAP measures for the reasons described below, please be aware that these non-GAAP measures have limitations and should not be considered in isolation or as a substitute for revenue, operating income, income from continuing operations, net income, earnings per share or any other comparable operating measure prescribed by GAAP. In addition, we may calculate and/or present these non-GAAP financial measures differently than measures with the same or similar names that other companies report, and as a result, the non-GAAP measures we report may not be comparable to those reported by others.
Financial information in these non-GAAP measures for the years 2016 and 2015 gives effect to Marriott’s acquisition of Starwood, and Starwood’s sale of its timeshare business, as if these two transactions had occurred on January 1, 2015, excludes merger-related costs and charges, and reflects other adjustments described in the Form 8-K relating to certain combined information and lodging statistics that we filed on February 15, 2017 with the U.S. Securities and Exchange Commission.
Earnings Before Interest Expense and Taxes (“EBIT”), Earnings Before Interest Expense, Taxes, Depreciation and Amortization (“EBITDA”), and Adjusted EBITDA. EBIT reflects net income excluding the impact of interest expense and provision for income taxes, and EBITDA reflects EBIT excluding the impact of depreciation and amortization expense. Our non-GAAP measure of Adjusted EBITDA further adjusts EBITDA to exclude the following items: (1) gains and losses on asset dispositions and impairments; (2) the pre-tax EDITION impairment charges in the 2015 first quarter; (3) the pre-tax preferred equity investment gain in the 2015 second quarter; and (4) share-based compensation expense for all periods presented.
We believe that Adjusted EBITDA is a meaningful indicator of our operating performance because it permits period-over-period comparisons of our ongoing core operations before these items and facilitates our comparison of results before these items with results from other lodging companies. We use such measures to evaluate companies because they exclude certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company’s capital structure, debt levels, and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provisions for income taxes can vary considerably among companies. Our Adjusted EBITDA also excludes depreciation and amortization expense which we report under “Depreciation, amortization, and other” as well as depreciation included under “Reimbursed costs” in our Consolidated Statements of Income, because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies. We also excluded share-based compensation expense in all periods presented in order to address considerable variability among companies in recording compensation expense because companies use share-based payment awards differently, both in the type and quantity of awards granted.
Adjusted Debt/Earnings Before Interest Expense, Taxes, Depreciation and Amortization, Rent (“EBITDAR”) Coverage. We calculate adjusted debt as the sum of total debt, anticipated future operating lease payments and guarantee funding. EBITDAR reflects combined 2016 operating income excluding the elements described in EBITDA and Adjusted EBITDA (described above) and rent expenses from operating leases. We calculate the coverage ratio by dividing adjusted debt by adjusted EBITDAR. We consider Adjusted Debt/EBITDAR coverage to be a meaningful indicator of operating performance because credit rating agencies use it to assess our credit quality.
Investment Spending. We consider this non-GAAP measure to be a meaningful metric and evaluate it because it provides detail on our estimated cumulative capital allocations for the three-year period from 2017 to 2019.
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Cash Available for Investment and Return to Shareholders. We calculate cash available for investment as the sum of net cash provided by operating activities, net debt issuance, issuance of common stock and other, and capital recycling. We calculate cash available for return to shareholders as cash available for investment less anticipated investment spending. We consider cash available for investment and return to shareholders to be meaningful indicators of our operating performance and evaluate them because they represent the cash we expect to have for debt service requirements, incremental investments, share repurchases, and other purposes.
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MARRIOTT INTERNATIONAL, INC.
NON-GAAP FINANCIAL MEASURES
ADJUSTED EBITDA
($ in millions)
2019 Estimate | |||||||||||||||
Combined 2015 | Combined 2016 | 1% RevPAR Growth 1 | 3% RevPAR Growth 2 | ||||||||||||
Net income | $ | 1,164 | $ | 1,301 | $ | 1,775 | $ | 1,915 | |||||||
Interest expense | 314 | 312 | 340 | 360 | |||||||||||
Tax provision | 558 | 652 | 780 | 850 | |||||||||||
Depreciation and amortization | 335 | 313 | 260 | 260 | |||||||||||
Depreciation classified in reimbursed costs | 125 | 132 | 110 | 110 | |||||||||||
Interest expense from unconsolidated joint ventures | 16 | 16 | 15 | 15 | |||||||||||
Depreciation and amortization from unconsolidated joint ventures | 42 | 45 | 40 | 40 | |||||||||||
EBITDA † | 2,554 | 2,771 | 3,320 | 3,550 | |||||||||||
Loss on asset dispositions and impairments, net | 29 | 23 | — | — | |||||||||||
Gain on redemption of preferred equity ownership interest | (41 | ) | — | — | — | ||||||||||
EDITION impairment charges | 12 | — | — | — | |||||||||||
Share-based compensation (including share-based compensation reimbursed by third-party owners) | 189 | 193 | 185 | 185 | |||||||||||
Adjusted EBITDA † | $ | 2,743 | $ | 2,987 | $ | 3,505 | $ | 3,735 | |||||||
† Denotes non-GAAP financial measures. Please see pages 1 and 2 for information about our reasons for providing these alternative financial measures and the limitations on their use.
1 | Assumes 1% annual RevPAR growth in 2017 through 2019. |
2 | Assumes 3% annual RevPAR growth in 2017 through 2019. |
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MARRIOTT INTERNATIONAL, INC.
NON-GAAP FINANCIAL MEASURES
INVESTMENT SPENDING
($ in billions)
2017 - 2019 Estimate 1 | % of Investment Spending | ||||||
Net cash provided by investing activities | $ | (0.2 | ) | ||||
Less cash provided by: | |||||||
Dispositions | (1.6 | ) | |||||
Loan collections and sales | (0.1 | ) | |||||
Other investing activities | (0.1 | ) | |||||
Investment spending † | $ | 1.6 | |||||
Detail of investment spending | |||||||
Capital expenditures | $ | 0.5 | 33 | % | |||
Loan advances | 0.3 | 19 | % | ||||
Equity and cost method investments | 0.1 | 3 | % | ||||
Contract acquisition costs | 0.7 | 45 | % | ||||
Investment spending † | $ | 1.6 | 100 | % | |||
† Denotes non-GAAP financial measures. Please see pages 1 and 2 for information about our reasons for providing these alternative financial measures and the limitations on their use.
1 | Based on mid-point of 2017 through 2019E investment spending guidance of $1.5 billion to $1.7 billion. |
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MARRIOTT INTERNATIONAL, INC.
NON-GAAP FINANCIAL MEASURES
CASH AVAILABLE FOR INVESTMENT AND RETURN TO SHAREHOLDERS
($ in billions)
2017-2019 Estimate 1 | |||
Net Income | $ | 4.9 | |
Share-based compensation | 0.6 | ||
Depreciation and amortization | 0.8 | ||
Income Taxes | (0.2 | ) | |
Other operating profit adjustment and working capital changes | 0.2 | ||
Liability for Guest Loyalty Program | 0.7 | ||
Net cash provided by operating activities | 7.0 | ||
Capital recycling | 2.4 | ||
Net debt issuance | 1.3 | ||
Issuance of common stock and other | (0.3 | ) | |
Cash available for investment † | 10.4 | ||
Less: investment spending † | 1.6 | ||
Cash available for return to shareholders † | $ | 8.8 | |
† Denotes non-GAAP financial measures. Please see pages 1 and 2 for information about our reasons for providing these alternative financial measures and the limitations on their use.
1 | Based on mid-point of estimated range of cash available for return to shareholders of $8.3 billion to $9.3 billion. |
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