Marriott International : Q3 2019 10-Q

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, 2019

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)

_______________________________________

Delaware	52-2055918
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)
10400 Fernwood Road Bethesda Maryland	20817
(Address of principal executive offices)	(Zip Code)

[phone]

(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
Class A Common Stock, $0.01 par value	MAR	Nasdaq Global Select Market
Class A Common Stock, $0.01 par value	MAR	Chicago Stock Exchange

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 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.

Large accelerated filer	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 checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 326,937,219 shares of Class A Common Stock, par value $0.01 per share, outstanding at October 25, 2019.

MARRIOTT INTERNATIONAL, INC.

FORM 10-Q TABLE OF CONTENTS

		Page No.
Part I.	Financial Information (Unaudited):
Item 1.	Financial Statements
	Condensed Consolidated Statements of Income	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
	Forward-Looking Statements	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
Part II.	Other Information:
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 6.	Exhibits	49
	Signature	50

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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,			September 30,			September 30,			September 30,
		2019			2018			2019			2018
REVENUES
Base management fees	$	291	$	279	$	882	$	852
Franchise fees		530			502			1,505			1,394
Incentive management fees		134			151			462			482
Gross fee revenues		955			932			2,849			2,728
Contract investment amortization		(16)			(13)			(45)			(44)
Net fee revenues		939			919			2,804			2,684
Owned, leased, and other revenue		393			397			1,186			1,226
Cost reimbursement revenue		3,952			3,735			11,611			11,559
		5,284			5,051			15,601			15,469
OPERATING COSTS AND EXPENSES
Owned, leased, and other-direct		326			315			982			985
Depreciation, amortization, and other		52			52			162			164
General, administrative, and other		220			221			671			685
Merger-related costs and charges		9			12			191			64
Reimbursed expenses		4,070			3,855			12,069			11,627
		4,677			4,455			14,075			13,525
OPERATING INCOME		607			596			1,526			1,944
Gains and other income, net		10			18			16			191
Interest expense		(100)			(86)			(299)			(246)
Interest income		8			5			20			16
Equity in earnings		2			61			10			95
INCOME BEFORE INCOME TAXES		527			594			1,273			2,000
Provision for income taxes		(140)			(91)			(279)			(410)
NET INCOME	$	387	$	503	$	994	$	1,590
EARNINGS PER SHARE
Earnings per share - basic	$	1.17	$	1.45	$	2.97	$	4.51
Earnings per share - diluted	$	1.16	$	1.43	$	2.95	$	4.45

See Notes to Condensed Consolidated Financial Statements.

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MARRIOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

($ in millions)

(Unaudited)

		Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,	September 30,
		2019		2018				2019			2018
Net income	$	387	$	503	$	994		$	1,590
Other comprehensive income (loss):
Foreign currency translation adjustments		(182)			(66)			(111)			(313)
Derivative instrument adjustments and other, net of tax		8			(1)			6			7
Reclassification of (income) loss, net of tax		(4)			2			(8)			18
Total other comprehensive income (loss), net of tax		(178)			(65)			(113)			(288)
Comprehensive income	$	209	$	438	$	881		$	1,302

See Notes to Condensed Consolidated Financial Statements.

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MARRIOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

		(Unaudited)
		September 30,			December 31,
ASSETS		2019			2018
Current assets
Cash and equivalents	$	276	$	316
Accounts and notes receivable, net		2,394			2,133
Prepaid expenses and other		230			257
		2,900			2,706
Property and equipment, net		1,960			1,956
Intangible assets
Brands		5,908			5,790
Contract acquisition costs and other		2,642			2,590
Goodwill		8,990			9,039
		17,540			17,419
Equity method investments		580			732
Notes receivable, net		109			125
Deferred tax assets		169			171
Operating lease assets		955			-
Other noncurrent assets		599			587
	$	24,812	$	23,696
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt	$	227	$	833
Accounts payable		813			767
Accrued payroll and benefits		1,207			1,345
Liability for guest loyalty program		2,185			2,529
Accrued expenses and other		1,306			963
		5,738			6,437
Long-term debt		10,552			8,514
Liability for guest loyalty program		3,439			2,932
Deferred tax liabilities		291			485
Deferred revenue		799			731
Operating lease liabilities		868			-
Other noncurrent liabilities		2,287			2,372
Shareholders' equity
Class A Common Stock		5			5
Additional paid-in-capital		5,773			5,814
Retained earnings		9,522			8,982
Treasury stock, at cost		(13,958)			(12,185)
Accumulated other comprehensive loss		(504)			(391)
		838			2,225
	$	24,812	$	23,696

See Notes to Condensed Consolidated Financial Statements.

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