mar-20230331

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, 2023


☐			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.)

7750 Wisconsin Avenue

Bethesda

Maryland

20814

(Address of principal executive offices)

(Zip Code)

(Registrant’s telephone number, including area code) (301) 380-3000

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 (§ 232.405 of this chapter) 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: 303,354,157 shares of Class A Common Stock, par value $0.01 per share, outstanding at April 25, 2023.

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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	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	13

	Cautionary Statement	13

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21

Item 4.	Controls and Procedures	21

Part II.	Other Information

Item 1.	Legal Proceedings	22

Item 1A.	Risk Factors	22

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22





Item 6.	Exhibits	23

	Signature	24

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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
	March 31, 2023		March 31, 2022
REVENUES
Base management fees	$	293	$	213
Franchise fees	639		500
Incentive management fees	201		102
Gross fee revenues	1,133		815
Contract investment amortization	(21)		(24)
Net fee revenues	1,112		791
Owned, leased, and other revenue	356		262
Cost reimbursement revenue	4,147		3,146
	5,615		4,199
OPERATING COSTS AND EXPENSES
Owned, leased, and other-direct	281		197
Depreciation, amortization, and other	44		48
General, administrative, and other	202		208
Merger-related charges and other	1		9
Reimbursed expenses	4,136		3,179
	4,664		3,641
OPERATING INCOME	951		558
Gains and other income, net	3		4

Interest expense	(126)		(93)
Interest income	15		5
Equity in earnings	1		2
INCOME BEFORE INCOME TAXES	844		476
Provision for income taxes	(87)		(99)
NET INCOME	$	757	$	377
EARNINGS PER SHARE
Earnings per share – basic	$	2.44	$	1.15
Earnings per share – diluted	$	2.43	$	1.14

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
	March 31, 2023		March 31, 2022
Net income	$	757	$	377
Other comprehensive income
Foreign currency translation adjustments	84		14
Other adjustments, net of tax	(2)		—



Total other comprehensive income, net of tax	82		14
Comprehensive income	$	839	$	391

See Notes to Condensed Consolidated Financial Statements.

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MARRIOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)


	(Unaudited)
	March 31, 2023		December 31, 2022
ASSETS
Current assets
Cash and equivalents	$	554	$	507
Accounts and notes receivable, net	2,462		2,571
Prepaid expenses and other	248		235

	3,264		3,313
Property and equipment, net	1,595		1,585
Intangible assets
Brands	5,836		5,812
Contract acquisition costs and other	2,996		2,935
Goodwill	8,904		8,872
	17,736		17,619
Equity method investments	334		335
Notes receivable, net	126		152
Deferred tax assets	240		240
Operating lease assets	984		987
Other noncurrent assets	584		584
	$	24,863	$	24,815
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	358	$	684
Accounts payable	722		746
Accrued payroll and benefits	1,027		1,299
Liability for guest loyalty program	3,381		3,314
Accrued expenses and other	1,481		1,296
	6,969		7,339
Long-term debt	10,299		9,380
Liability for guest loyalty program	3,350		3,280
Deferred tax liabilities	307		313
Deferred revenue	1,063		1,059
Operating lease liabilities	1,024		1,034
Other noncurrent liabilities	1,711		1,842
Stockholders’ equity
Class A Common Stock	5		5
Additional paid-in-capital	5,906		5,965
Retained earnings	12,975		12,342
Treasury stock, at cost	(18,099)		(17,015)
Accumulated other comprehensive loss	(647)		(729)
	140		568
	$	24,863	$	24,815

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, 2023		March 31, 2022
OPERATING ACTIVITIES
Net income	$	757	$	377
Adjustments to reconcile to cash provided by operating activities:
Depreciation, amortization, and other	65		72
Stock-based compensation	37		44
Income taxes	19		61
Liability for guest loyalty program	107		57
Contract acquisition costs	(58)		(26)
Merger-related charges and other	—		7
Working capital changes	(96)		(230)

Other	56		36
Net cash provided by operating activities	887		398
INVESTING ACTIVITIES

Capital and technology expenditures	(95)		(49)

Loan advances	(1)		—
Loan collections	31		7
Other	6		19
Net cash used in investing activities	(59)		(23)
FINANCING ACTIVITIES
Commercial paper/Credit Facility, net	117		(250)
Issuance of long-term debt	783		—
Repayment of long-term debt	(328)		(401)


Dividends paid	(124)		—
Purchase of treasury stock	(1,135)		—
Stock-based compensation withholding taxes	(72)		(78)
Other	(23)		—
Net cash used in financing activities	(782)		(729)
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	46		(354)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period (1)	525		1,421
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period (1)	$	571	$	1,067

(1)The 2023 amounts include beginning restricted cash of $18 million at December 31, 2022, and ending restricted cash of $17 million at March 31, 2023, 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 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, 2022 (“2022 Form 10-K”). Certain terms not otherwise defined in this Form 10-Q have the meanings specified in our 2022 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. 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, 2023 and December 31, 2022 and the results of our operations and cash flows for the three months ended March 31, 2023 and March 31, 2022. 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.

NOTE 2. EARNINGS PER SHARE

The table below illustrates the reconciliation of the earnings and number of shares used in our calculations of basic and diluted earnings per share, the latter of which uses the treasury stock method to calculate the dilutive effect of the Company’s potential common stock:


	Three Months Ended
(in millions, except per share amounts)	March 31, 2023		March 31, 2022
Computation of Basic Earnings Per Share
Net income	$	757	$	377
Shares for basic earnings per share	309.6		328.3
Basic earnings per share	$	2.44	$	1.15
Computation of Diluted Earnings Per Share
Net income	$	757	$	377
Shares for basic earnings per share	309.6		328.3
Effect of dilutive securities
Stock-based compensation	1.4		1.7
Shares for diluted earnings per share	311.0		330.0
Diluted earnings per share	$	2.43	$	1.14

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NOTE 3. STOCK-BASED COMPENSATION

We granted 1.0 million restricted stock units (“RSUs”) during the 2023 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 2023 first quarter to certain executives, which are earned subject to continued employment and the satisfaction of certain performance and market conditions based on the degree of achievement of pre-established targets for 2025 adjusted EBITDA performance and relative total stockholder return over the 2023 to 2025 performance period. RSUs, including PSUs, granted in the 2023 first quarter had a weighted average grant-date fair value of $167 per unit.

We recorded stock-based compensation expense for RSUs and PSUs of $33 million in the 2023 first quarter and $42 million in the 2022 first quarter. Deferred compensation costs for unvested awards for RSUs and PSUs totaled $315 million at March 31, 2023 and $179 million at December 31, 2022.

NOTE 4. INCOME TAXES

Our effective tax rate decreased to 10.3 percent for the 2023 first quarter compared to 20.7 percent for the 2022 first quarter, primarily due to the current year release of tax reserves.

Our unrecognized tax benefit balance decreased by $99 million to $156 million at March 31, 2023 from $255 million at December 31, 2022, primarily due to the completion of a prior year tax audit. Our unrecognized tax benefit balance included $145 million at March 31, 2023 and $241 million at December 31, 2022 of tax positions that, if recognized, would impact our effective tax rate. It is reasonably possible that within the next 12 months we will reach resolution of income tax examinations in one or more jurisdictions. The actual amount of any change to our unrecognized tax benefits could vary depending on the timing and nature of the settlement. Therefore, an estimate of the change cannot be provided.

We file income tax returns, including returns for our subsidiaries, in various jurisdictions around the world. The U.S. Internal Revenue Service (“IRS”) has examined our federal income tax returns, and as of March 31, 2023, we have settled all issues for tax years through 2019. Our 2020 through 2023 tax year audits are currently ongoing. Various foreign, state, and local income tax returns are also under examination by the applicable taxing authorities.

We paid cash for income taxes, net of refunds, of $68 million in the 2023 first quarter and $38 million in the 2022 first quarter.

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, 2023 in the following table:


(in millions) Guarantee Type	Maximum Potential Amount of Future Fundings		Recorded Liability for Guarantees
Debt service	$	60	$	6
Operating profit	182		98
Other	18		4
	$	260	$	108

Our maximum potential guarantees listed in the preceding table include $58 million of operating profit guarantees that will not be in effect until the underlying properties open and we begin to operate the properties or certain other events occur.

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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, 2023 and December 31, 2022.

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. The plaintiffs in the cases that remain pending, 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. The active U.S. cases are consolidated in the U.S. District Court for the District of Maryland (the “District Court”), pursuant to orders of the U.S. Judicial Panel on Multidistrict Litigation (the “MDL”). The District Court granted in part and denied in part class certification of various U.S. groups of consumers, and our appeal of this decision is pending in the U.S. Court of Appeals for the Fourth Circuit. A case brought by the City of Chicago (which is consolidated in the MDL proceeding) also remains pending. The Canadian cases have effectively been consolidated into a single case in the province of Ontario. We dispute the allegations in these lawsuits and are vigorously defending against such claims.

In addition, various 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. Although some of these matters have been resolved or no longer appear to be active, some remain open. We are in discussions with the Attorney General offices from 49 states and the District of Columbia and the Federal Trade Commission. Based on the ongoing discussions, we believe it is probable that we will incur losses, and we recorded an accrual in 2022 for an estimated loss contingency; the amount of this accrual is not material to our Financial Statements.

While we believe it is reasonably possible that we may incur losses in excess of the amounts recorded associated with the above described MDL proceedings and regulatory investigations related to the Data Security Incident, it is not possible to reasonably estimate the amount of such losses or range of loss that might result from adverse judgments, settlements, fines, penalties or other resolution of these proceedings and investigations based on: (1) in the case of the above described MDL proceedings, the current stage of these proceedings, 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, and the lack of resolution of significant factual and legal issues; and (2) in the case of the above described regulatory investigations, the lack of resolution with the Federal Trade Commission and the state Attorneys General.

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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, 2023 and year-end 2022:


(in millions)	March 31, 2023		December 31, 2022
Senior Notes:

Series P Notes, interest rate of 3.8%, face amount of $350, maturing October 1, 2025 (effective interest rate of 4.0%)	$	348	$	348

Series R Notes, interest rate of 3.1%, face amount of $750, maturing June 15, 2026 (effective interest rate of 3.3%)	747		747
Series U Notes, interest rate of 3.1%, face amount of $291, matured February 15, 2023 (effective interest rate of 3.1%)	—		291
Series V Notes, interest rate of 3.8%, face amount of $318, maturing March 15, 2025 (effective interest rate of 2.8%)

SEC Form 10-Q filed by Marriott International