Marriott International, Inc. (NYSE: MAR) today reported its fourth quarter and full year 2012 results, including the following highlights:
• Fourth quarter diluted EPS totaled $0.56, a 22 percent increase over prior year adjusted results. Full year 2012 diluted EPS increased 31 percent over 2011 adjusted results to $1.72;
• North American comparable systemwide REVPAR rose 5.9 percent in the fourth quarter and 6.4 percent for full year 2012;
• On a constant dollar basis, worldwide comparable systemwide REVPAR rose 5.2 percent in the fourth quarter and 6.1 percent for full year 2012;
• Worldwide comparable company-operated house profit margins increased 90 basis points in the fourth quarter and 120 basis points for the full year;
• At year-end, the company’s worldwide pipeline of hotels under construction, awaiting conversion or approved for development increased to nearly 130,000 rooms, including almost 59,000 rooms outside North America;
• Over 27,000 rooms were added to the system in 2012. In the fourth quarter alone, nearly 14,000 rooms were added, including 8,100 Gaylord-branded rooms and 2,800 rooms in international markets. The company signed a record 57,000 rooms in 2012;
• EBITDA for full year 2012 totaled $1,146 million, a 16 percent increase over 2011 adjusted EBITDA;
• For full year 2012, Marriott repurchased 31.2 million shares of the company’s common stock for $1.2 billion including 6.9 million shares for $257 million in the fourth quarter;
• For full year 2013, Marriott expects North American and worldwide systemwide constant dollar REVPAR to increase 4 to 7 percent.
Fourth quarter 2012 net income totaled $181 million, a 14 percent increase compared to fourth quarter 2011 adjusted net income. Diluted earnings per share (EPS) totaled $0.56, a 22 percent increase from adjusted diluted EPS in the year-ago quarter. On October 3, 2012, the company forecasted fourth quarter diluted EPS of $0.52 to $0.56.
For the fourth quarter of 2011, reported net income totaled $141 million and reported diluted EPS was $0.41. Adjusted net income and adjusted diluted EPS for the year-ago quarter excluded $14 million pretax ($18 million after-tax and $0.05 per diluted share) of timeshare spin-off adjustments. 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. See page A-1 for fourth quarter 2011 reported results, the timeshare spin-off adjustments and adjusted results.
Arne M. Sorenson, president and chief executive officer of Marriott International, said, “We were delighted with our 2012 results. Full year earnings per share grew 31 percent over 2011 adjusted levels to $1.72 and EBITDA increased 16 percent to over $1.1 billion. We also returned over $1.3 billion to shareholders through dividends and share repurchases.
“Worldwide international travel increased to record levels in 2012 while hotel supply growth was low in most markets around the world, especially in the U.S. Despite low levels of new construction in the industry and modest economic growth in some regions of the world, we added over 27,000 rooms to our worldwide system in 2012, increased our worldwide systemwide REVPAR by 6 percent and increased room rates by 4 percent. Our development team had a record year, signing more than 57,000 new rooms and increasing our global development pipeline to nearly 130,000 rooms at year-end. To date in 2013, we’ve already signed over 9,000 rooms with nearly 90 percent of those in Asia.
“Twenty percent of our room additions in 2012 were conversions from other brands and 30 percent came from the acquisition of the Gaylord brand. Thirty percent of all new rooms were located in international markets. We are excited about our new brand platforms such as the Autograph Collection and EDITION. Now on four continents, the Autograph Collection has grown to nearly 40 hotels in less than three years. We’ll soon open our London EDITION hotel and we have six more EDITIONs in our development pipeline. Today, our luxury brands, Ritz-Carlton, Ritz-Carlton Reserve, Bulgari, and JW Marriott, together with our luxury lifestyle brand, EDITION, have broad distribution with nearly 150 hotels and over 50,000 rooms.
“Our unit growth is built on our strong brand portfolio fueled by outstanding marketing and service engines. In 2012, our award-winning Marriott Rewards program topped 40 million members and marriott.com booked over $8 billion in property-level revenue, making it one of the largest retail websites in the world.
“In January 2013, North American comparable company-operated REVPAR rose 8 percent. While this year is off to a strong start, we are providing a somewhat broader and more conservative range for 2013 REVPAR growth due to the potential effect on the travel industry of the impending federal budget sequestration.”
For the 2012 fourth quarter, revenue per available room (REVPAR) for worldwide comparable systemwide properties increased 5.2 percent (a 4.7 percent increase using actual dollars).
In North America, comparable systemwide REVPAR increased 5.9 percent in the fourth quarter of 2012, including a 4.0 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 5.7 percent with a 3.4 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 6.0 percent in the fourth quarter with a 4.4 percent increase in average daily rate.
International comparable systemwide REVPAR rose 3.2 percent (a 0.7 percent increase using actual dollars), including a 0.5 percent increase in average daily rate (a 1.9 percent decline using actual dollars) in the fourth quarter of 2012.
Marriott added 37 new properties (13,982 rooms) to its worldwide lodging portfolio in the 2012 fourth quarter, including five Gaylord properties (8,098 rooms) from the acquisition of the brand and hotel management business. The JW Marriott Marquis Hotel Dubai, the tallest dedicated hotel building in the world, and Dorado Beach, a Ritz-Carlton Reserve, in Puerto Rico were also added in the quarter while the Brown Palace Hotel in Denver joined the Autograph Collection. Six properties (1,398 rooms) exited the system during the quarter. At quarter-end, the company’s lodging group encompassed 3,801 properties and timeshare resorts for a total of over 660,000 rooms.
The company’s worldwide pipeline of hotels under construction, awaiting conversion or approved for development increased to approximately 800 properties with nearly 130,000 rooms at year-end.
MARRIOTT REVENUES totaled over $3.7 billion in the 2012 fourth quarter compared to adjusted revenues of $3.4 billion for the fourth quarter of 2011. Base management and franchise fees rose 7 percent over prior year adjusted levels to $369 million, reflecting higher REVPAR at existing hotels and fees from new hotels. Fourth quarter worldwide incentive management fees increased 22 percent to $90 million including a $3 million favorable impact of the recognition of previously deferred fees. In the fourth quarter, 30 percent of worldwide company-managed hotels earned incentive management fees compared to 27 percent in the year-ago quarter. For full year 2012, 33 percent of worldwide company-managed hotels earned incentive management fees compared to 29 percent in 2011.
Worldwide comparable company-operated house profit margins increased 90 basis points in the fourth quarter. North American comparable company-operated house profit margins increased 120 basis points and house profit margins for comparable company-operated properties outside North America increased 30 basis points from the year-ago quarter. For full year 2012, comparable company-operated house profit margins increased 140 basis points in North America, 90 basis points outside North America and 120 basis points worldwide.
Owned, leased, corporate housing and other revenue, net of direct expenses, totaled $56 million, unchanged compared to the year-ago quarter. Improved results at owned and leased hotels and higher credit card branding fees were largely offset by lower termination and residential branding fees year-over-year.
GENERAL, ADMINISTRATIVE and OTHER expenses for the 2012 fourth quarter declined 6 percent to $206 million compared to adjusted expenses of $219 million in the 2011 fourth quarter. Fourth quarter 2012 expenses reflected routine increases in compensation and other expenses, as well as unfavorable foreign exchange. These were largely offset by a $6 million reversal of guarantee reserves for two hotels, as well as lower legal and bad debt expenses. Expenses in the prior year quarter included a $6 million write-off of deferred contract acquisition costs, a $5 million guarantee reserve for one hotel and a $2 million loan reserve.
EQUITY IN EARNINGS (LOSSES) totaled a $3 million loss in the quarter compared to a $7 million loss in the year-ago quarter. The decline in equity losses largely reflected the sale of the Courtyard joint venture, which had losses in the fourth quarter of 2011 and was sold in the third quarter of 2012.
EBITDA totaled $358 million in the 2012 fourth quarter, a 13 percent increase over 2011 fourth quarter adjusted EBITDA of $316 million. For full year 2012, EBITDA totaled $1,146 million, a 16 percent increase over 2011 adjusted EBITDA of $992 million. See page A-9 for the EBITDA and adjusted EBITDA calculations.
At year-end 2012, total debt was $2,935 million and cash balances totaled $88 million, compared to $2,171 million in debt and $102 million of cash at year-end 2011.
Weighted average fully diluted shares outstanding used to calculate diluted EPS totaled 322.2 million in the 2012 fourth quarter, compared to 346.4 million in the year-ago quarter.
The company repurchased 6.9 million shares of common stock in the fourth quarter at a cost of $257 million. For the full year 2012, Marriott repurchased 31.2 million shares of its stock for $1.2 billion. On February 15, 2013, the board of directors increased the company’s authorization to repurchase shares by 25 million shares to yield a total share authorization of 34.2 million shares.
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. The first quarter of 2013 will include 93 days compared to 84 days in the 2012 first quarter in part due to the fact that fiscal 2012 ended on December 28, 2012. Prior year results will not be restated or reported on a pro forma basis for the change in calendar, although REVPAR statistics will be adjusted to calendar quarters for purposes of comparability.
For the first quarter, the company expects comparable systemwide calendar REVPAR on a constant dollar basis will increase 4 to 7 percent in North America, 2 to 4 percent outside North America and 3 to 6 percent worldwide.
The company expects first quarter 2013 operating profit could total $205 million to $230 million, a $30 million to $55 million increase over the prior year quarter. The company estimates that approximately $15 million to $20 million of the year-over-year operating profit increase in the first quarter is attributable to the change in the fiscal calendar.
The company expects full year 2013 comparable systemwide REVPAR on a constant dollar basis will increase 4 to 7 percent in North America, 3 to 5 percent outside North America and 4 to 7 percent worldwide.
The company anticipates adding approximately 30,000 to 35,000 rooms worldwide for the full year 2013. The company also expects approximately 10,000 rooms will leave the system during the year.
The company assumes full year fee revenue could total $1,525 million to $1,575 million, growth of 7 to 11 percent over 2012 fee revenue of $1,420 million.
The company expects owned, leased, corporate housing and other revenue, net of expenses could total $135 million to $145 million in 2013, a 12 to 18 percent decline year-over-year. 2013 expected results reflect tougher year-over-year comparisons due to the London Olympics, renovations at some international leased hotels in 2013, higher pre-opening expenses, and lower termination and residential branding fees.
For 2013, the company anticipates general, administrative and other expenses will total $665 million to $675 million, an increase of 3 to 5 percent over 2012 expenses of $645 million.
Given these assumptions, 2013 diluted EPS could total $1.90 to $2.05, a 10 to 19 percent increase year-over-year. In 2012, the company recorded a $41 million pretax ($25 million after-tax and $0.08 per diluted share) gain on the sale of the equity interest in the Courtyard joint venture. Excluding that gain from 2012 diluted EPS, the company estimates 2013 diluted EPS could increase 16 to 25 percent year-over-year as shown on page A-12.