BETHESDA, Maryland--Marriott International today reported first quarter 2012 results.
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FIRST QUARTER 2012 RESULTS
First quarter 2012 net income totaled $104 million, an 18 percent increase compared to first quarter 2011 adjusted net income. Diluted EPS totaled $0.30, a 30 percent increase from adjusted diluted EPS in the year-ago quarter. On February 15, 2012, the company forecasted first quarter diluted EPS of $0.26 to $0.30.
Reported net income totaled $104 million in the first quarter of 2012 compared to $101 million in the year-ago quarter. Reported diluted EPS was $0.30 in the first quarter of 2012 compared to $0.26 in the first quarter of 2011.
Adjusted net income and adjusted diluted EPS for the first quarter of 2011 exclude $21 million ($13 million after-tax and $0.03 per diluted share) of timeshare spin-off adjustments. Timeshare spin-off adjustments include 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 first quarter 2011 reported results, the timeshare spin-off adjustments and adjusted results.
Arne M. Sorenson, president and chief executive officer of Marriott International, said, "Results were terrific in the first quarter of 2012. There is tremendous strength in global travel today; travelers are on the road, attending meetings, making sales calls and taking family vacations.
"Group business strengthened in the first quarter with increasing occupancy, room rates and greater group spend on food, beverage and other services. Transient business was also strong. Revenue from special corporate guests increased over 9 percent in the quarter with increasing room rates. Our largest customers tell us they expect to travel more in 2012.
"Industry supply growth continues to be a great story, especially in the U.S. where the dearth of construction starts signals favorable market conditions for the next few years. At the same time, our worldwide development pipeline increased to 115,000 rooms in the first quarter as we continue to increase our global market share.
"Our balance sheet continues to be in great shape. With strong cash flow, we are investing in our business while returning significant cash to our shareholders through dividends and share repurchases."
For the 2012 first quarter, REVPAR for worldwide comparable systemwide properties increased 6.8 percent (a 6.7 percent increase using actual dollars).
International comparable systemwide REVPAR rose 5.9 percent (a 5.3 percent increase using actual dollars), including a 2.7 percent increase in average daily rate (a 2.1 percent increase using actual dollars) in the first quarter of 2012.
In North America, comparable systemwide REVPAR increased 6.9 percent in the first quarter of 2012, including a 3.6 percent increase in average daily rate. REVPAR for comparable systemwide North American full-service and luxury hotels (including Marriott Hotels & Resorts, The Ritz-Carlton and Renaissance Hotels) increased 7.1 percent with a 3.5 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 6.7 percent in the first quarter with a 3.6 percent increase in average daily rate.
Marriott added 24 new properties (3,234 rooms) to its worldwide lodging portfolio in the 2012 first quarter, including three Autograph Collection hotels in the United States, two Courtyards in France and the Residence Inn Manama Juffair in Bahrain. Ten properties (2,487 rooms) exited the system during the quarter. At quarter-end, the company's lodging group encompassed 3,732 properties and timeshare resorts for a total of nearly 644,000 rooms. The company expects to add 25,000 to 30,000 rooms and expects 7,000 to 8,000 rooms to exit the system in 2012.
The company's worldwide pipeline of hotels under construction, awaiting conversion or approved for development totaled 700 properties with approximately 115,000 rooms at quarter-end.
MARRIOTT REVENUES totaled over $2.5 billion in the 2012 first quarter compared to adjusted revenues of over $2.4 billion for the first quarter of 2011. Base management fees rose 3 percent to $124 million over prior year adjusted levels reflecting higher REVPAR and the unfavorable impact of $3 million of fee reversals at two hotels due to contract revisions. Franchise fees rose 8 percent to $126 million over prior year adjusted levels reflecting higher REVPAR and fees from new hotels. In the first quarter, 29 percent of worldwide company-managed hotels earned incentive management fees compared to 25 percent in the year-ago quarter.
Worldwide comparable company-operated house profit margins increased 120 basis points in the first quarter. House profit margins for comparable company-operated properties outside North America increased 70 basis points and North American comparable company-operated house profit margins increased 130 basis points from the year-ago quarter.
Owned, leased, corporate housing and other revenue, net of direct expenses, increased 10 percent in the 2012 first quarter, to $22 million, largely due to improved operating results at leased hotels, partially offset by lower termination fees.
GENERAL, ADMINISTRATIVE and OTHER expenses for the 2012 first quarter increased 4 percent to $147 million, compared to adjusted expenses of $141 million in the year-ago quarter.
INTEREST INCOME totaled $4 million in the first quarter compared to adjusted interest income of $7 million in the year-ago quarter. The decline in interest income was primarily due to repayments of notes receivable.
EQUITY IN EARNINGS (LOSSES) totaled a $1 million loss in the quarter compared to a $4 million loss in the year-ago quarter. The decline in equity losses largely reflected the improved performance of hotels in two joint ventures.
Earnings before Interest Expense, Taxes, Depreciation and Amortization (EBITDA)
EBITDA totaled $215 million in the 2012 first quarter, a 9 percent increase over 2011 first quarter adjusted EBITDA of $197 million. See page A-6 for the EBITDA and adjusted EBITDA calculations.
At the end of the first quarter 2012, total debt was $2,527 million and cash balances totaled $290 million, compared to $2,171 million in debt and $102 million of cash at year-end 2011.
During the first quarter, the company issued $600 million of Series K bonds due in 2019 with a 3 percent interest rate coupon. The company expects to use the net proceeds for general corporate purposes.
Weighted average fully diluted shares outstanding used to calculate diluted EPS totaled 344.6 million in the 2012 first quarter compared to 381.8 million in the year-ago quarter.
The company repurchased 4.2 million shares of common stock in the first quarter at a cost of $150 million. Year-to-date through April 17, 2012, Marriott repurchased 6.7 million shares of its stock for $245 million. The remaining share repurchase authorization, as of April 17, 2012, totaled 33.8 million shares.
SECOND QUARTER 2012 OUTLOOK
For the second quarter, the company expects comparable systemwide REVPAR on a constant dollar basis will increase 6 to 8 percent in North America, outside North America and worldwide.
The company expects full year 2012 comparable systemwide REVPAR on a constant dollar basis will increase 6 to 8 percent in North America, outside North America and worldwide.
The company expects to open 25,000 to 30,000 rooms in 2012 as most hotels expected to open are already under construction or undergoing conversion from other brands.
For 2012, assuming a strong U.S. dollar and modest fee revenue growth in hotels in Washington, DC, the company expects full year fee revenue could total $1,425 million to $1,465 million, growth of 9 to 12 percent over 2011 adjusted total fee revenue of $1,307 million. The company expects owned, leased, corporate housing and other revenue, net of direct expense, could total $140 million to $145 million in 2012.
For 2012, the company expects general, administrative and other expenses to total $660 million to $670 million, an increase of 3 to 4 percent over 2011 adjusted expenses of $643 million.
Given these assumptions, 2012 diluted EPS could total $1.58 to $1.69.
The company expects investment spending in 2012 will total approximately $600 million to $800 million, including approximately $100 million for maintenance capital spending. Investment spending will also include other capital expenditures (including property acquisitions), new mezzanine financing and mortgage notes, contract acquisition costs, and equity and other investments. Assuming this level of investment spending, roughly $1 billion could be returned to shareholders through share repurchases and dividends.
Based upon the assumptions above, full year 2012 EBITDA is expected to total $1,105 million to $1,160 million, an 11 to 17 percent increase over the prior year's adjusted EBITDA. Adjusted EBITDA for full year 2011 totaled $992 million and is shown on page A-7.
Marriott International will conduct its quarterly earnings review for the investment community and news media on Thursday, April 19, 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 April 19, 2013.
The telephone dial-in number for the conference call is 706-679-3455 and the conference ID is 62456951. A telephone replay of the conference call will be available from 1 p.m. ET, Thursday, April 19, 2012 until 8 p.m. ET, Thursday, April 26, 2012. To access the replay, call 404-537-3406. The reservation number for the recording is 62456951.