Marriott International Reports Second Quarter 2015 Results
Marriott International , Inc (NASDAQ:MAR) today reported second quarter 2015 results.
Second quarter 2015 net income totaled $240 million, a 25 percent increase over 2014 second quarter net income. Diluted earnings per share (EPS) in the second quarter totaled $0.87, a 36 percent increase from diluted EPS in the year-ago quarter. Second quarter 2015 results reflect a $41 million pretax gain ($25 million after-tax and $0.09 per diluted share) on the redemption of a preferred equity ownership interest and $22 million of pretax losses ($13 million after-tax and $0.04 per diluted share) on the expected disposition of real estate. Excluding these items, second quarter 2015 adjusted net income totaled $228 million and adjusted diluted EPS was $0.82. These two items were not included in the company’s April 29, 2015 second quarter forecasted EPS of $0.78 to $0.83.
Second quarter 2014 net income totalled $192 million and diluted EPS totalled $0.64. Second quarter 2014 results reflected $33 million pretax ($21 million after-tax and $0.07 per diluted share) of previously disclosed charges. Excluding those items, second quarter 2014 adjusted net income totalled $213 million and adjusted diluted EPS was $0.71. See page A-11 for the adjusted EPS calculations for the second quarters of 2015 and 2014.
Arne M. Sorenson, President and Chief Executive Officer of Marriott International, said, “We were pleased with our results in the quarter. Our worldwide RevPAR grew more five percent and rooms growth increased more than 6 percent. With many hotels reporting peak occupancy rates, room rates continue to move higher.
“We opened over 20,000 rooms in the second quarter including 9,600 rooms in Canada from our acquisition of the Delta Hotels and Resorts brand. We see great growth potential for Delta around the world. In just the last two months, we have received inquiries regarding the possible conversion of more than 50 hotels in the U.S. and Canada to the Delta brand.
“At quarter-end, our worldwide development pipeline exceeded 1,500 hotels with more than 250,000 rooms, a new record. We have already reached our goal to have one million rooms open or under development nearly six months ahead of plan. We continue to expect to increase our open rooms distribution by eight percent gross, seven percent net, in 2015.
“As of today, we have returned nearly $1.5 billion to our shareholders through share repurchases and dividends in 2015. We expect to return more than $2.0 billion in 2015. Over the past 24 months, we have returned $3.4 billion to shareholders and have reduced our fully diluted weighted average share count by nearly 12 percent.”
For the 2015 second quarter, RevPAR for worldwide comparable systemwide properties increased 5.3 percent (a 3.1 percent increase using actual dollars).
The company’s worldwide development pipeline totalled over 1,500 properties with more than 250,000 rooms at quarter-end, including roughly 520 properties with nearly 93,000 rooms under construction and roughly 225 properties with approximately 35,000 rooms approved for development, but not yet subject to signed contracts.
For the 2015 third quarter, the company expects comparable systemwide RevPAR on a constant dollar basis will increase four to six percent in North America, three to five percent outside North America and four to six percent worldwide. Third quarter RevPAR growth should moderate from the second quarter as a result of the unfavourable year-over-year holiday shifts.
For the 2015 fourth quarter, the company expects comparable systemwide RevPAR on a constant dollar basis will increase five to seven percent in North America, four to six percent outside North America and five to seven percent worldwide.
For full year 2015, the company expects comparable systemwide RevPAR on a constant dollar basis will increase 5.5 to 6.5 percent in North America, 4.5 to 5.5 percent outside North America and 5.5 to 6.5 percent worldwide.
The company anticipates gross room additions of approximately eight percent, or seven percent, net, worldwide for the full year 2015, including the 9,600 rooms from the recently completed acquisition of the Delta brand.
The company assumes full year fee revenue could total $1,890 million to $1,910 million, growth of 10 to 11 percent over 2014 fee revenue of $1,719 million. Compared to the company’s prior 2015 fee estimate, the current forecast assumes higher unfavorable foreign exchange, as well as more modest incentive management fees in Hong Kong and South Korea. The company anticipates incentive management fees alone will increase at a low teens rate for full year 2015.
The company estimates depreciation, amortization, and other expenses for full year 2015 will total approximately $140 million, reflecting lower depreciation expense related to assets held for sale and a refinement of the Protea and Delta purchase price allocation estimates.
For 2015, the company anticipates general, administrative and other expenses will total $630 million to $640 million, a three to four percent decline compared to 2014 expenses of $659 million. Compared to the company’s prior estimate of 2015 general and administrative costs, the current estimate assumes lower legal expenses and lower net development costs, partially offset by approximately $10 million of transition and transaction costs associated with the Delta acquisition.
Given these assumptions, 2015 diluted EPS could total $3.10 to $3.18, a 22 to 25 percent increase year-over-year. This full year EPS outlook includes the $0.09 gain on the redemption of a preferred equity ownership interest, $0.04 of losses on the expected disposition of real estate and full year Delta transition and transaction costs of approximately $0.02. These items were not included in the company’s April 29 forecast.
|Third Quarter 2015||Full Year 2015|
|Total fee revenue||$470 million to $480 million||$1,890 million to $1,910 million|
|Owned, leased, and other revenue, net of direct expenses||$50 million to $55 million||$250 million to $255 million|
|Depreciation, amortization, and other expenses||Approx. $35 million||Approx. $140 million|
|General, administrative, and other expenses||Approx. $165 million||$630 million to $640 million|
|Operating income||$320 million to $335 million||$1,360 million to $1,395 million|
|Gains and other income, net||Approx. $0 million||Approx. $20 million|
|Net interest expense1||Approx. $35 million||Approx. $135 million|
|Equity in earnings (losses)||Approx. $0 million||Approx. $5 million|
|Earnings per share||$0.72 to $0.76||$3.10 to $3.18|
|Tax rate||32.1 percent|