UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________
FORM 10-Q
_________________________________________________
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended September 30, 2022
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission File No. 1-13881
_________________________________________________
MARRIOTT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
_______________________________________
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |||||||||||||||||||
(Address of principal executive offices) | (Zip Code) | |||||||||||||||||||
(301 ) 380-3000
(Registrant’s telephone number, including area code)
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||||||||
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ý | Accelerated filer | ¨ | ||||||||||||||||||
| Non-accelerated filer | ¨ | Smaller reporting company | ||||||||||||||||||
| Emerging growth company | ||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ | ||||||||||||||||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 316,539,613 shares of Class A Common Stock, par value $0.01 per share, outstanding at October 27, 2022.
MARRIOTT INTERNATIONAL, INC.
FORM 10-Q TABLE OF CONTENTS
| Page No. | ||||||||
| Part I. | ||||||||
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Part II. | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 6. | ||||||||
2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
MARRIOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
($ in millions, except per share amounts)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | ||||||||||||||||||||
| REVENUES | |||||||||||||||||||||||
| Base management fees | $ | $ | $ | $ | |||||||||||||||||||
| Franchise fees | |||||||||||||||||||||||
| Incentive management fees | |||||||||||||||||||||||
| Gross fee revenues | |||||||||||||||||||||||
| Contract investment amortization | ( | ( | ( | ( | |||||||||||||||||||
| Net fee revenues | |||||||||||||||||||||||
| Owned, leased, and other revenue | |||||||||||||||||||||||
| Cost reimbursement revenue | |||||||||||||||||||||||
| OPERATING COSTS AND EXPENSES | |||||||||||||||||||||||
| Owned, leased, and other-direct | |||||||||||||||||||||||
| Depreciation, amortization, and other | |||||||||||||||||||||||
| General, administrative, and other | |||||||||||||||||||||||
| Restructuring, merger-related charges, and other | |||||||||||||||||||||||
| Reimbursed expenses | |||||||||||||||||||||||
| OPERATING INCOME | |||||||||||||||||||||||
| Gains and other income, net | |||||||||||||||||||||||
| Loss on extinguishment of debt | ( | ( | |||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Equity in earnings (losses) | ( | ( | |||||||||||||||||||||
| INCOME BEFORE INCOME TAXES | |||||||||||||||||||||||
| Provision for income taxes | ( | ( | ( | ( | |||||||||||||||||||
| NET INCOME | $ | $ | $ | $ | |||||||||||||||||||
| EARNINGS PER SHARE | |||||||||||||||||||||||
| Earnings per share - basic | $ | $ | $ | $ | |||||||||||||||||||
| Earnings per share - diluted | $ | $ | $ | $ | |||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements.
3
MARRIOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in millions)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | ||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | ( | ( | |||||||||||||||||||
| Other adjustments, net of tax | |||||||||||||||||||||||
| Total other comprehensive income (loss), net of tax | ( | ( | ( | ( | |||||||||||||||||||
| Comprehensive income | $ | $ | $ | $ | |||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements.
4
MARRIOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
| (Unaudited) | |||||||||||
| September 30, 2022 | December 31, 2021 | ||||||||||
| ASSETS | |||||||||||
| Current assets | |||||||||||
| Cash and equivalents | $ | $ | |||||||||
| Accounts and notes receivable, net | |||||||||||
| Prepaid expenses and other | |||||||||||
| Property and equipment, net | |||||||||||
| Intangible assets | |||||||||||
| Brands | |||||||||||
| Contract acquisition costs and other | |||||||||||
| Goodwill | |||||||||||
| Equity method investments | |||||||||||
| Notes receivable, net | |||||||||||
| Deferred tax assets | |||||||||||
| Operating lease assets | |||||||||||
| Other noncurrent assets | |||||||||||
| $ | $ | ||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities | |||||||||||
| Current portion of long-term debt | $ | $ | |||||||||
| Accounts payable | |||||||||||
| Accrued payroll and benefits | |||||||||||
| Liability for guest loyalty program | |||||||||||
| Accrued expenses and other | |||||||||||
| Long-term debt | |||||||||||
| Liability for guest loyalty program | |||||||||||
| Deferred tax liabilities | |||||||||||
| Deferred revenue | |||||||||||
| Operating lease liabilities | |||||||||||
| Other noncurrent liabilities | |||||||||||
| Stockholders’ equity | |||||||||||
| Class A Common Stock | |||||||||||
| Additional paid-in-capital | |||||||||||
| Retained earnings | |||||||||||
| Treasury stock, at cost | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| $ | $ | ||||||||||
See Notes to Condensed Consolidated Financial Statements.
5
MARRIOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
(Unaudited)
| Nine Months Ended | |||||||||||
| September 30, 2022 | September 30, 2021 | ||||||||||
| OPERATING ACTIVITIES | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile to cash provided by operating activities: | |||||||||||
| Depreciation, amortization, and other | |||||||||||
| Stock-based compensation | |||||||||||
| Income taxes | ( | ||||||||||
| Liability for guest loyalty program | ( | ||||||||||
| Contract acquisition costs | ( | ( | |||||||||
| Restructuring, merger-related charges, and other | ( | ( | |||||||||
| Working capital changes | ( | ||||||||||
Loss on extinguishment of debt | |||||||||||
| Deferred revenue changes and other | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
| INVESTING ACTIVITIES | |||||||||||
| Capital and technology expenditures | ( | ( | |||||||||
| Dispositions | |||||||||||
| Loan advances | ( | ( | |||||||||
| Loan collections | |||||||||||
| Other | ( | ||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| FINANCING ACTIVITIES | |||||||||||
| Credit Facility, net | ( | ( | |||||||||
| Issuance of long-term debt | |||||||||||
| Repayment of long-term debt | ( | ( | |||||||||
| Issuance of Class A Common Stock | |||||||||||
| Debt extinguishment costs | ( | ||||||||||
| Dividends paid | ( | ||||||||||
| Purchase of treasury stock | ( | ||||||||||
| Stock-based compensation withholding taxes | ( | ( | |||||||||
| Other | |||||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | ( | ( | |||||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period (1) | |||||||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period (1) | $ | $ | |||||||||
(1)The 2022 amounts include beginning restricted cash of $28 million at December 31, 2021, and ending restricted cash of $23 million at September 30, 2022, which we present in the “Prepaid expenses and other” and “Other noncurrent assets” captions of our Balance Sheets.
See Notes to Condensed Consolidated Financial Statements.
6
MARRIOTT INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The condensed consolidated financial statements present the results of operations, financial position, and cash flows of Marriott International, Inc. and subsidiaries (referred to in this report as “we,” “us,” “Marriott,” or the “Company”). In order to make this report easier to read, we also refer throughout to (1) our Condensed Consolidated Financial Statements as our “Financial Statements,” (2) our Condensed Consolidated Statements of Income as our “Income Statements,” (3) our Condensed Consolidated Balance Sheets as our “Balance Sheets,” (4) our Condensed Consolidated Statements of Cash Flows as our “Statements of Cash Flows,” (5) our properties, brands, or markets in the United States and Canada as “U.S. & Canada,” and (6) our properties, brands, or markets in our Caribbean and Latin America, Europe, Middle East and Africa, Greater China, and Asia Pacific excluding China regions, as “International.” In addition, references throughout to numbered “Notes” refer to these Notes to Condensed Consolidated Financial Statements, unless otherwise stated.
These Financial Statements have not been audited. We have condensed or omitted certain information and disclosures normally included in financial statements presented in accordance with U.S. generally accepted accounting principles (“GAAP”). The financial statements in this report should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (“2021 Form 10-K”). Certain terms not otherwise defined in this Form 10-Q have the meanings specified in our 2021 Form 10-K.
Preparation of financial statements that conform with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods, and the disclosures of contingent liabilities. The uncertainty created by the coronavirus pandemic (“COVID-19”) has made such estimates more difficult and subjective. Accordingly, ultimate results could differ from those estimates.
The accompanying Financial Statements reflect all normal and recurring adjustments necessary to present fairly our financial position as of September 30, 2022 and December 31, 2021, the results of our operations for the three and nine months ended September 30, 2022 and September 30, 2021, and cash flows for the nine months ended September 30, 2022 and September 30, 2021. Interim results may not be indicative of fiscal year performance because of seasonal and short-term variations, as well as the impact of COVID-19. We have eliminated all material intercompany transactions and balances between entities consolidated in these Financial Statements.
NOTE 2. EARNINGS PER SHARE
The table below presents the reconciliation of the earnings and number of shares used in our calculations of basic and diluted earnings per share:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| (in millions, except per share amounts) | September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||||||||
| Computation of Basic Earnings Per Share | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Shares for basic earnings per share | |||||||||||||||||||||||
| Basic earnings per share | $ | $ | $ | $ | |||||||||||||||||||
| Computation of Diluted Earnings Per Share | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Shares for basic earnings per share | |||||||||||||||||||||||
| Effect of dilutive securities | |||||||||||||||||||||||
| Stock-based compensation | |||||||||||||||||||||||
| Shares for diluted earnings per share | |||||||||||||||||||||||
| Diluted earnings per share | $ | $ | $ | $ | |||||||||||||||||||
7
NOTE 3. STOCK-BASED COMPENSATION
We granted 1.1 million restricted stock units (“RSUs”) during the 2022 first three quarters to certain officers and employees, and those units vest generally over four years in equal annual installments commencing one year after the grant date. We also granted 0.1 million performance-based RSUs (“PSUs”) in the 2022 first three quarters to certain executives, which are earned, subject to continued employment and the satisfaction of certain performance and market conditions, generally based on the degree of achievement of pre-established targets for 2024 adjusted EBITDA performance and relative total stockholder return over the 2022 to 2024 performance period. RSUs, including PSUs, granted in the 2022 first three quarters had a weighted average grant-date fair value of $169 per unit.
We recorded stock-based compensation expense for RSUs and PSUs of $45 million in the 2022 third quarter, $40 million in the 2021 third quarter, $136 million in the 2022 first three quarters, and $130 million in the 2021 first three quarters. Deferred compensation costs for unvested awards for RSUs and PSUs totaled $223 million at September 30, 2022 and $189 million at December 31, 2021.
NOTE 4. INCOME TAXES
Our effective tax rate was 27.5 percent for the 2022 third quarter compared to 21.1 percent for the 2021 third quarter. The increase in our effective tax rate was primarily due to the current year tax expense from the completion of prior years’ tax audits.
Our effective tax rate was 24.2 percent for the 2022 first three quarters compared to 0.2 percent for the 2021 first three quarters. The increase in our effective tax rate was primarily due to the prior year tax benefit from the release of tax reserves due to the favorable resolution of Legacy-Starwood tax audits, as well as the current year tax expense from the completion of prior years’ tax audits.
We paid cash for income taxes, net of refunds, of $341 million in the 2022 first three quarters and $293 million in the 2021 first three quarters.
NOTE 5. COMMITMENTS AND CONTINGENCIES
Guarantees
We present the maximum potential amount of our future guarantee fundings and the carrying amount of our liability for our debt service, operating profit, and other guarantees (excluding contingent purchase obligations) for which we are the primary obligor at September 30, 2022 in the following table:
($ in millions) Guarantee Type | Maximum Potential Amount of Future Fundings | Recorded Liability for Guarantees | ||||||||||||
| Debt service | $ | $ | ||||||||||||
| Operating profit | ||||||||||||||
| Other | ||||||||||||||
| $ | $ | |||||||||||||
Our maximum potential guarantees listed in the preceding table include $42 million of guarantees that will not be in effect until the underlying properties open and we begin to operate the properties or certain other events occur.
Contingent Purchase Obligation
Sheraton Grand Chicago. In 2017, we granted the owner a one-time right to require us to purchase the leasehold interest in the land and the hotel for $300 million in cash (the “put option”). In the 2021 third quarter, we entered into an amendment with the owner to move the exercise period of the put option from the 2022 first half to the 2024 first half. If the owner exercises the put option, the closing is expected to occur in the 2024 fourth quarter, and we have the option to purchase, at the same time the put transaction closes, the fee simple interest in the underlying land for an additional $200 million in cash. We account for the put option as a guarantee, and our recorded liability was $300
8
Starwood Data Security Incident
Description of Event
On November 30, 2018, we announced a data security incident involving unauthorized access to the Starwood reservations database (the “Data Security Incident”). Working with leading security experts, we determined that there was unauthorized access to the Starwood network since 2014 and that an unauthorized party had copied information from the Starwood reservations database and taken steps towards removing it. The Starwood reservations database is no longer used for business operations.
Litigation, Claims, and Government Investigations
Following our announcement of the Data Security Incident, approximately 100 lawsuits were filed by consumers and others against us in U.S. federal, U.S. state and Canadian courts related to the incident. The plaintiffs in the cases that remain pending, who generally purport to represent various classes of consumers, generally claim to have been harmed by alleged actions and/or omissions by the Company in connection with the Data Security Incident and assert a variety of common law and statutory claims seeking monetary damages, injunctive relief, costs and attorneys’ fees, and other related relief. The active U.S. cases are consolidated in the U.S. District Court for the District of Maryland (the “District Court”), pursuant to orders of the U.S. Judicial Panel on Multidistrict Litigation (the “MDL”). On May 3, 2022, the District Court granted in part and denied in part class certification of various U.S. groups of consumers. We appealed the District Court’s decision, and on July 14, 2022, the U.S. Court of Appeals for the Fourth Circuit granted our petition to appeal. On September 8, 2022, the District Court held that the City of Chicago (which brought claims against us that are consolidated in the MDL proceeding) could not pursue injunctive claims but could pursue monetary claims. The Canadian cases have effectively been consolidated into a single case in the province of Ontario. We dispute the allegations in these lawsuits and are vigorously defending against such claims.
In addition, various U.S. federal, U.S. state and foreign governmental authorities made inquiries, opened investigations, or requested information and/or documents related to the Data Security Incident and related matters. Although some of these matters have been resolved or no longer appear to be active, some remain open. We are in discussions with the Attorney General offices from 49 states and the District of Columbia and the Federal Trade Commission. Based on the ongoing discussions, we believe it is probable that we will incur losses and have recorded an accrual in the 2022 third quarter for an estimated loss contingency; the amount of this accrual is not material to our Financial Statements. We are also in discussion with the regulatory authority in Australia to resolve its investigation and requests.
While we believe it is reasonably possible that we may incur losses in excess of the amounts recorded associated with the above described MDL proceedings and regulatory investigations related to the Data Security Incident, it is not possible to reasonably estimate the amount of such losses or range of loss that might result from adverse judgments, settlements, fines, penalties or other resolution of these proceedings and investigations based on: (1) in the case of the above described MDL proceedings, the current stage of these proceedings, the absence of specific allegations as to alleged damages, the uncertainty as to the certification of a class or classes and the size of any certified class, and the lack of resolution of significant factual and legal issues; and (2) in the case of the above described regulatory investigations, the lack of resolution with the Federal Trade Commission and the state Attorneys General.
9
NOTE 6. LONG-TERM DEBT
We provide detail on our long-term debt balances, net of discounts, premiums, and debt issuance costs, in the following table as of September 30, 2022 and year-end 2021:
| ($ in millions) | September 30, 2022 | December 31, 2021 | |||||||||
| Senior Notes: | |||||||||||
Series L Notes, interest rate of (effective interest rate of | $ | $ | |||||||||
Series P Notes, interest rate of (effective interest rate of | |||||||||||
Series Q Notes, interest rate of (effective interest rate of | |||||||||||
Series R Notes, interest rate of (effective interest rate of | |||||||||||
Series U Notes, interest rate of (effective interest rate of | |||||||||||
Series V Notes, interest rate of (effective interest rate of | |||||||||||
Series W Notes, interest rate of (effective interest rate of | |||||||||||
Series X Notes, interest rate of (effective interest rate of | |||||||||||
Series Z Notes, interest rate of (effective interest rate of | |||||||||||
Series AA Notes, interest rate of (effective interest rate of | |||||||||||
Series CC Notes, interest rate of (effective interest rate of | |||||||||||
Series DD Notes, interest rate of (effective interest rate of | |||||||||||
Series EE Notes, interest rate of (effective interest rate of | |||||||||||
Series FF Notes, interest rate of (effective interest rate of | |||||||||||
Series GG Notes, interest rate of (effective interest rate of | |||||||||||
Series HH Notes, interest rate of (effective interest rate of | |||||||||||
Series II Notes, interest rate of (effective interest rate of | |||||||||||
Series JJ Notes, interest rate of (effective interest rate of | |||||||||||
| Credit Facility | |||||||||||
| Finance lease obligations | |||||||||||
| Other | |||||||||||
| $ | $ | ||||||||||
| Less current portion | ( | ( | |||||||||
| $ | $ | ||||||||||
We paid cash for interest, net of amounts capitalized, of $203 million in the 2022 first three quarters and $251 million in the 2021 first three quarters.
In September 2022, we issued $1.0 billion aggregate principal amount of 5.000 percent Series JJ Notes due October 15, 2027 (the “Series JJ Notes”). We will pay interest on the Series JJ Notes in April and October of each year, commencing in April 2023. We received net proceeds of approximately $983 million from the offering of the Series JJ Notes, after deducting the underwriting discount and estimated expenses, which were made available for general corporate purposes, including working capital, capital expenditures, acquisitions, stock repurchases or repayment of outstanding indebtedness.
10
In June 2022, we redeemed all $173 million aggregate principal amount of our outstanding Series L Notes due in September 2022.
We are party to a multicurrency revolving credit agreement (as amended, the “Credit Facility”) that provides for up to $4.5 billion of aggregate borrowings for general corporate needs, including working capital, capital expenditures, letters of credit, acquisitions, and to support our commercial paper program if and when we resume issuing commercial paper. Borrowings under the Credit Facility generally bear interest at LIBOR (the London Interbank Offered Rate) plus a spread, based on our public debt rating. We also pay quarterly fees on the Credit Facility at a rate based on our public debt rating. We classify outstanding borrowings under the Credit Facility and outstanding commercial paper borrowings (if any) as long-term based on our ability and intent to refinance the outstanding borrowings on a long-term basis. The Credit Facility expires on June 28, 2024.
We entered into amendments to the Credit Facility in April 2020 and January 2021 (the “Credit Facility Amendments”). The debt leverage covenant in the Credit Facility, which is tested each quarter and was waived pursuant to the Credit Facility Amendments through and including the fourth quarter of 2021, resumed beginning with the quarter that ended March 31, 2022. The Credit Facility Amendments adjusted the required leverage levels for this covenant starting at 5.50 to 1.00 for the test period that ended on March 31, 2022 and gradually stepping down to 4.00 to 1.00 over the succeeding five fiscal quarters, as further described in the Credit Facility. The Credit Facility Amendments also amended certain other terms of the Credit Facility, including reducing the rate floor for the LIBOR Daily Floating Rate and the Eurocurrency Rate.
NOTE 7. ACQUISITION
NOTE 8. FAIR VALUE OF FINANCIAL INSTRUMENTS
We believe that the fair values of our current assets and current liabilities approximate their reported carrying amounts. We present the carrying values and the fair values of noncurrent financial assets and liabilities that qualify as financial instruments in the following table:
| September 30, 2022 | December 31, 2021 | ||||||||||||||||||||||
| ($ in millions) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||
| Senior, mezzanine, and other loans | $ | $ | $ | $ | |||||||||||||||||||
| Total noncurrent financial assets | $ | $ | $ | $ | |||||||||||||||||||
| Senior Notes | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Credit Facility | ( | ( | |||||||||||||||||||||
| Other long-term debt | ( | ( | ( | ( | |||||||||||||||||||
| Other noncurrent liabilities | ( | ( | ( | ( | |||||||||||||||||||
| Total noncurrent financial liabilities | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
See Note 12. Fair Value of Financial Instruments and the “Fair Value Measurements” caption of Note 2. Summary of Significant Accounting Policies of our 2021 Form 10-K for more information on the input levels we use in determining fair value.
11
NOTE 9. ACCUMULATED OTHER COMPREHENSIVE LOSS AND STOCKHOLDERS’ EQUITY
The following tables detail the accumulated other comprehensive loss activity for the 2022 first three quarters and 2021 first three quarters:
| ($ in millions) | Foreign Currency Translation Adjustments | Other Adjustments | Accumulated Other Comprehensive Loss | ||||||||||||||
| Balance at year-end 2021 | $ | ( | $ | $ | ( | ||||||||||||
Other comprehensive (loss) income before reclassifications (1) | ( | ( | |||||||||||||||
| Reclassification adjustments | ( | ( | |||||||||||||||
| Net other comprehensive (loss) income | ( | ( | |||||||||||||||
| Balance at September 30, 2022 | $ | ( | $ | $ | ( | ||||||||||||
| ($ in millions) | Foreign Currency Translation Adjustments | Other Adjustments | Accumulated Other Comprehensive Loss | ||||||||||||||
| Balance at year-end 2020 | $ | ( | $ | $ | ( | ||||||||||||
Other comprehensive loss before reclassifications (1) | ( | ( | |||||||||||||||
| Reclassification adjustments | |||||||||||||||||
| Net other comprehensive loss | ( | ( | |||||||||||||||
| Balance at September 30, 2021 | $ | ( | $ | $ | ( | ||||||||||||
(1)Other comprehensive (loss) income before reclassifications for foreign currency translation adjustments includes intra-entity foreign currency transactions that are of a long-term investment nature, which resulted in gains of $76 million for the 2022 first three quarters and $30 million for the 2021 first three quarters.
The following tables detail the changes in common shares outstanding and stockholders’ equity for the 2022 first three quarters and 2021 first three quarters:
| (in millions, except per share amounts) | |||||||||||||||||||||||||||||||||||||||||
| Common Shares Outstanding | Total | Class A Common Stock | Additional Paid-in-Capital | Retained Earnings | Treasury Stock, at Cost | Accumulated Other Comprehensive Loss | |||||||||||||||||||||||||||||||||||
| Balance at year-end 2021 | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
| — | Net income | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| — | Other comprehensive income | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation plans | ( | — | ( | — | — | ||||||||||||||||||||||||||||||||||||
Balance at March 31, 2022 | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
| — | Net income | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| — | Other comprehensive loss | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||
| — | Dividends ($ | ( | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||
| — | Stock-based compensation plans | — | — | — | |||||||||||||||||||||||||||||||||||||
| ( | Purchase of treasury stock | ( | — | — | — | ( | — | ||||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
| — | Net income | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| — | Other comprehensive loss | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||
| — | Dividends ($ | ( | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||
| Stock-based compensation plans | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| ( | Purchase of treasury stock | ( | — | — | — | ( | — | ||||||||||||||||||||||||||||||||||
Balance at September 30, 2022 | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
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| Common Shares Outstanding | Total | Class A Common Stock | Additional Paid-in-Capital | Retained Earnings | Treasury Stock, at Cost | Accumulated Other Comprehensive Loss | |||||||||||||||||||||||||||||||||||
| Balance at year-end 2020 | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
| — | Net loss | ( | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||
| — | Other comprehensive loss | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||
| Stock-based compensation plans | ( | — | ( | — | — | ||||||||||||||||||||||||||||||||||||
Balance at March 31, 2021 | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
| — | Net income | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| — | Other comprehensive income | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation plans | — | — | — | ||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2021 | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
| — | Net income | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| — | Other comprehensive loss | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||
| Stock-based compensation plans | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
NOTE 10. CONTRACTS WITH CUSTOMERS
Our current and noncurrent liability for guest loyalty program increased by $175 million, to $6,646 million at September 30, 2022, from $6,471 million at December 31, 2021, primarily reflecting an increase in points earned by members. This includes a $191 million reclassification from deferred revenue to the liability for guest loyalty program primarily due to points that were earned during the period by members using our U.S.-issued co-brand credit cards, which were prepaid by the financial institutions in 2020. The increase was partially offset by $2,025 million of revenue recognized in the 2022 first three quarters, that was deferred as of December 31, 2021. The current portion of our liability for guest loyalty program increased compared to December 31, 2021, due to higher estimated redemptions in the short-term.
Current and noncurrent deferred revenue decreased by $162 million, to $1,365 million at September 30, 2022, from $1,527 million at December 31, 2021, primarily as a result of $256 million of revenue recognized in the 2022 first three quarters that was deferred as of December 31, 2021, as well as the reclassification from deferred revenue to the liability for guest loyalty program, which we discuss above. The decrease was partially offset by deferred revenue related to our co-brand credit cards, gift cards, certain centralized programs and services fees, and franchise application and relicensing fees.
Our allowance for credit losses increased to $195 million at September 30, 2022 from $187 million at December 31, 2021, primarily reflecting our provision for credit losses, partially offset by write-offs of amounts deemed uncollectible. In the 2022 third quarter, we recorded a $6 million net reversal of our provision for credit losses. In the 2022 first three quarters, we recorded a $27 million provision for credit losses.
NOTE 11. BUSINESS SEGMENTS
We discuss our operations in the following two operating segments, both of which meet the applicable criteria for separate disclosure as a reportable business segment: (1) U.S. & Canada and (2) International.
We evaluate the performance of our operating segments using “segment profit/loss” which is based largely on the results of the segment without allocating corporate expenses, income taxes, indirect general, administrative, and other expenses, merger-related costs, or most above-property restructuring charges. We assign gains and losses, equity in earnings or losses, direct general, administrative, and other expenses, and other restructuring charges to each of our segments. “Unallocated corporate and other” includes a portion of our revenues (including license fees we receive from our credit card programs and fees from vacation ownership licensing agreements), revenues and expenses for our Loyalty Program, general, administrative, and other expenses, restructuring, merger-related
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charges, and other expenses, equity in earnings or losses, and other gains or losses that we do not allocate to our segments.
Our chief operating decision maker monitors assets for the consolidated Company but does not use assets by operating segment when assessing performance or making operating segment resource allocations.
Segment Revenues
The following tables present our revenues disaggregated by segment and major revenue stream for the 2022 third quarter, 2021 third quarter, 2022 first three quarters, and 2021 first three quarters:
| Three Months Ended September 30, 2022 | Three Months Ended September 30, 2021 | ||||||||||||||||||||||||||||||||||
| ($ in millions) | U.S. & Canada | International | Total | U.S. & Canada | International | Total | |||||||||||||||||||||||||||||
| Gross fee revenues | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Contract investment amortization | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Net fee revenues | |||||||||||||||||||||||||||||||||||
| Owned, leased, and other revenue | |||||||||||||||||||||||||||||||||||
| Cost reimbursement revenue | |||||||||||||||||||||||||||||||||||
| Total reportable segment revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Unallocated corporate and other | |||||||||||||||||||||||||||||||||||
Total revenue | $ | $ | |||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2022 | Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||||||||||||
| ($ in millions) | U.S. & Canada | International | Total | U.S. & Canada | International | Total | |||||||||||||||||||||||||||||
| Gross fee revenues | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Contract investment amortization | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Net fee revenues | |||||||||||||||||||||||||||||||||||