mar-20220331

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 March 31, 2022


☐			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
incorporation or organization)

(IRS Employer
Identification No.)

10400 Fernwood Road

Bethesda

Maryland

20817

(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

Class A Common Stock, $0.01 par value

MAR

Nasdaq Global Select Market

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

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: 327,298,386 shares of Class A Common Stock, par value $0.01 per share, outstanding at April 27, 2022.

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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 (Loss)	3

	Condensed Consolidated Statements of Comprehensive Income (Loss)	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	15

	Cautionary Statement	15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22

Item 4.	Controls and Procedures	23

Part II.	Other Information:

Item 1.	Legal Proceedings	24

Item 1A.	Risk Factors	24

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

Item 5.	Other Information	25



Item 6.	Exhibits	26

	Signature	27

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

MARRIOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

($ in millions, except per share amounts)

(Unaudited)


	Three Months Ended
	March 31, 2022		March 31, 2021
REVENUES
Base management fees	$	213	$	106
Franchise fees	500		306
Incentive management fees	102		33
Gross fee revenues	815		445
Contract investment amortization	(24)		(17)
Net fee revenues	791		428
Owned, leased, and other revenue	262		108
Cost reimbursement revenue	3,146		1,780
	4,199		2,316
OPERATING COSTS AND EXPENSES
Owned, leased, and other-direct	197		135
Depreciation, amortization, and other	48		52
General, administrative, and other	208		211
Restructuring, merger-related charges, and other	9		1
Reimbursed expenses	3,179		1,833
	3,641		2,232
OPERATING INCOME	558		84
Gains and other income, net	4		1

Interest expense	(93)		(107)
Interest income	5		7
Equity in earnings (losses)	2		(12)
INCOME (LOSS) BEFORE INCOME TAXES	476		(27)
(Provision) benefit for income taxes	(99)		16
NET INCOME (LOSS)	$	377	$	(11)
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share - basic	$	1.15	$	(0.03)
Earnings (loss) per share - diluted	$	1.14	$	(0.03)

See Notes to Condensed Consolidated Financial Statements.

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MARRIOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

($ in millions)

(Unaudited)


	Three Months Ended
	March 31, 2022		March 31, 2021
Net income (loss)	$	377	$	(11)
Other comprehensive income (loss):
Foreign currency translation adjustments	14		(155)
Other adjustments, net of tax	—		—



Total other comprehensive income (loss), net of tax	14		(155)
Comprehensive income (loss)	$	391	$	(166)

See Notes to Condensed Consolidated Financial Statements.

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MARRIOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)


	(Unaudited)
	March 31, 2022		December 31, 2021
ASSETS
Current assets
Cash and equivalents	$	1,042	$	1,393
Accounts and notes receivable, net	2,112		1,982
Prepaid expenses and other	264		251

	3,418		3,626
Property and equipment, net	1,531		1,503
Intangible assets
Brands	5,974		5,979
Contract acquisition costs and other	2,917		2,947
Goodwill	9,069		9,073
	17,960		17,999
Equity method investments	361		387
Notes receivable, net	141		144
Deferred tax assets	228		228
Operating lease assets	1,024		1,062
Other noncurrent assets	575		604
	$	25,238	$	25,553
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	731	$	805
Accounts payable	737		726
Accrued payroll and benefits	1,052		1,187
Liability for guest loyalty program	2,626		2,522
Accrued expenses and other	1,276		1,167
	6,422		6,407
Long-term debt	8,738		9,333
Liability for guest loyalty program	3,963		3,949
Deferred tax liabilities	179		169
Deferred revenue	1,121		1,181
Operating lease liabilities	1,066		1,098
Other noncurrent liabilities	1,977		2,002
Stockholders’ equity
Class A Common Stock	5		5
Additional paid-in-capital	5,831		5,892
Retained earnings	10,682		10,305
Treasury stock, at cost	(14,418)		(14,446)
Accumulated other comprehensive loss	(328)		(342)
	1,772		1,414
	$	25,238	$	25,553

See Notes to Condensed Consolidated Financial Statements.

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MARRIOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

(Unaudited)


	Three Months Ended
	March 31, 2022		March 31, 2021
OPERATING ACTIVITIES
Net income (loss)	$	377	$	(11)
Adjustments to reconcile to cash provided by operating activities:
Depreciation, amortization, and other	72		69
Stock-based compensation	44		53
Income taxes	61		(50)
Liability for guest loyalty program	57		74
Contract acquisition costs	(26)		(47)
Restructuring, merger-related charges, and other	7		(6)
Working capital changes	(230)		(27)

Deferred revenue changes and other	36		(28)
Net cash provided by operating activities	398		27
INVESTING ACTIVITIES

Capital and technology expenditures	(49)		(30)
Dispositions	—		7
Loan advances	—		(2)
Loan collections	7		3
Other	19		(7)
Net cash used in investing activities	(23)		(29)
FINANCING ACTIVITIES
Credit Facility, net	(250)		(500)
Issuance of long-term debt	—		1,089
Repayment of long-term debt	(401)		(752)
Issuance of Class A Common Stock	—		2



Stock-based compensation withholding taxes	(78)		(82)
Other	—		(7)
Net cash used in financing activities	(729)		(250)
DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(354)		(252)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period (1)	1,421		894
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period (1)	$	1,067	$	642

(1)The 2022 amounts include beginning restricted cash of $28 million at December 31, 2021, and ending restricted cash of $25 million at March 31, 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.

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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 (Loss) 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 and efforts to contain it (“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 March 31, 2022 and December 31, 2021, the results of our operations for the three months ended March 31, 2022 and March 31, 2021, and cash flows for the three months ended March 31, 2022 and March 31, 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.

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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
(in millions, except per share amounts)	March 31, 2022		March 31, 2021
Computation of Basic Earnings Per Share
Net income (loss)	$	377	$	(11)
Shares for basic earnings per share	328.3		326.7
Basic earnings (loss) per share	$	1.15	$	(0.03)
Computation of Diluted Earnings Per Share
Net income (loss)	$	377	$	(11)
Shares for basic earnings per share	328.3		326.7
Effect of dilutive securities
Stock-based compensation (1)	1.7		—
Shares for diluted earnings per share	330.0		326.7
Diluted earnings (loss) per share	$	1.14	$	(0.03)

(1) For the calculation of diluted loss per share for the three months ended March 31, 2021, we excluded stock-based compensation securities of 2.3 million because the effect was anti-dilutive.

NOTE 3. STOCK-BASED COMPENSATION

We granted 1.0 million restricted stock units (“RSUs”) during the 2022 first quarter 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 quarter 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 quarter had a weighted average grant-date fair value of $169 per unit.

We recorded stock-based compensation expense for RSUs and PSUs of $42 million in the 2022 first quarter and $49 million in the 2021 first quarter. Deferred compensation costs for unvested awards for RSUs and PSUs totaled $320 million at March 31, 2022 and $189 million at December 31, 2021.

NOTE 4. INCOME TAXES

We recorded a provision of $99 million with an effective tax rate of 20.7 percent for the 2022 first quarter and a benefit of $16 million with an effective tax rate of 59.2 percent for the 2021 first quarter. The change in our effective tax rate was primarily due to a less favorable impact from stock-based compensation as a percentage of our pre-tax income in the 2022 first quarter compared to a percentage of our pre-tax loss in the 2021 first quarter.

We paid cash for income taxes, net of refunds, of $38 million in the 2022 first quarter and $33 million in the 2021 first quarter.

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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 March 31, 2022 in the following table:


($ in millions) Guarantee Type	Maximum Potential Amount of Future Fundings		Recorded Liability for Guarantees
Debt service	$	20	$	5
Operating profit	182		112
Other	17		4
	$	219	$	121

Our maximum potential guarantees listed in the preceding table include $45 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 million at March 31, 2022 and December 31, 2021.

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. All but one of the U.S. cases were consolidated and transferred to the U.S. District Court for the District of Maryland, pursuant to orders of the U.S. Judicial Panel on Multidistrict Litigation (the “MDL”). The plaintiffs in the U.S. and Canadian cases, 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. Among the U.S. cases consolidated in the MDL proceeding was a putative class action lawsuit that was filed on December 1, 2018 against the Company and certain of our current and former officers and directors, alleging violations of the federal securities laws in connection with statements regarding our cybersecurity systems and controls, and seeking certification of a class of affected persons, unspecified monetary damages, costs and attorneys’ fees, and other related relief (the “Securities Case”). We filed motions to dismiss in connection with all of the U.S. cases. Our motions to dismiss the Securities Case and three shareholder derivative complaints (two included in the MDL proceeding and one filed in the Delaware Court of Chancery) were granted in 2021. The plaintiff in the Securities Case appealed the dismissal and the dismissal was affirmed by the U.S. Court of Appeals for the Fourth Circuit in April 2022. Motions to dismiss in the other MDL cases have been denied in part or in

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whole and these cases remain at varying stages. On May 3, 2022, the U.S. District Court for the District of Maryland granted in part and denied in part class certification of various U.S. groups of consumers and we are evaluating how to proceed. The Canadian cases have effectively been consolidated into a single case in the province of Ontario. We dispute the allegations in the lawsuits described above and are vigorously defending against such claims. In April 2019, we received a letter purportedly on behalf of a stockholder of the Company (also one of the named plaintiffs in the Securities Case described above) demanding that our Board of Directors take action against certain of the Company’s current and former officers and directors to recover damages for alleged breaches of fiduciary duties and related claims arising from the Data Security Incident. In October 2021, we received a letter purportedly on behalf of another stockholder of the Company (also one of the named plaintiffs in one of the dismissed MDL Derivative Cases described above) demanding that our Board of Directors take action against certain of the Company’s current and former officers and directors to recover damages for alleged breaches of fiduciary duties and other claims related to the Data Security Incident or associated disclosures. The Board of Directors has constituted a demand review committee to investigate the claims made in these demand letters, and the committee has retained independent counsel to assist with the investigations. The committee has completed its investigation and reported its findings and recommendations to our Board of Directors, which thereafter resolved, in February 2022, to reject the demands in their entirety. In addition, on August 18, 2020, a purported representative action was brought against us in the High Court of Justice for England and Wales on behalf of an alleged claimant class of English and Welsh residents alleging breaches of the General Data Protection Regulation and/or the U.K. Data Protection Act 2018 (the “U.K. DPA”) in connection with the Data Security Incident. On November 5, 2020, the court issued an order with the consent of all parties staying this action pending resolution of another case raising similar issues, but not involving the Company. That other case was decided by the U.K. Supreme Court on November 10, 2021. The plaintiffs have informed us that they have decided not to pursue this case and the parties are in the process of preparing formal dismissal papers.

In addition, numerous 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, including Attorneys General offices from all 50 states and the District of Columbia, the Federal Trade Commission, the Securities and Exchange Commission, certain committees of the U.S. Senate and House of Representatives, the Information Commissioner’s Office in the United Kingdom (the “ICO”) as lead supervisory authority in the European Economic Area, and regulatory authorities in various other jurisdictions. With the exception of the ICO proceeding, which was resolved in October 2020, these matters generally remain open. We are in discussions with the U.S. state Attorneys General, the U.S. Federal Trade Commission, and certain regulatory authorities in other jurisdictions to resolve their investigations and requests.

While we believe it is reasonably possible that we may incur additional losses associated with the above described proceedings and investigations related to the Data Security Incident, it is not possible to estimate the amount of loss or range of loss, if any, in excess of the amounts already incurred that might result from adverse judgments, settlements, fines, penalties or other resolution of these proceedings and investigations based on the current stage of these proceedings and investigations, 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, if applicable, and/or the lack of resolution of significant factual and legal issues.

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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 March 31, 2022 and year-end 2021:


($ in millions)	March 31, 2022		December 31, 2021
Senior Notes:
Series L Notes, interest rate of 3.3%, face amount of $173, maturing September 15, 2022 (effective interest rate of 3.4%)	$	173

SEC Form 10-Q filed by Marriott International