Hotel News: Marriott International,Inc (NASDAQ:MAR) Reports Strong Results

Hotel News: Marriott International,Inc (NASDAQ:MAR) Reports Strong Results
  • Second quarter reported diluted EPS totaled $0.96, a 10 percent increase over prior year results. Excluding transition and transaction costs related to the Starwood acquisition, second quarter adjusted diluted EPS totaled $1.03, an 18 percent increase over prior year results;

 

  • North American comparable systemwide constant dollar RevPAR rose 3.2 percent in the second quarter.  On a constant dollar basis, worldwide comparable systemwide RevPAR rose 2.9 percent in the second quarter;

 

  • At the end of the second quarter, Marriott’s worldwide development pipeline increased to more than 285,000 rooms, including approximately 33,000 rooms approved, but not yet subject to signed contracts;

 

  • Marriott added nearly 11,000 rooms during the second quarter, including approximately 1,700 rooms converted from competitor brands and roughly 3,600 rooms in international markets;

 

  • Second quarter reported net income totaled $247 million, a 3 percent increase over prior year results.  Excluding transition and transaction costs related to the Starwood acquisition, second quarter adjusted net income totaled $265 million, a 10 percent increase over prior year results;

 

  • Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $494 million in the quarter, an 8 percent increase over second quarter 2015 adjusted EBITDA;

 

  • Acquisition of Starwood Hotels & Resorts Worldwide is expected to close in the coming weeks.

Marriott International, Inc. (NASDAQ: MAR) today reported second quarter 2016 results.

Marriott reported net income totaled $247 million in the second quarter of 2016 compared to $240 million in the year-ago quarter.  Reported diluted earnings per share (EPS) was $0.96 in the second quarter of 2016 compared to $0.87 in the second quarter of 2015.

Second quarter 2016 adjusted net income totaled $265 million, a 10 percent increase over 2015 second quarter net income.  Adjusted diluted EPS in the second quarter totaled $1.03, an 18 percent increase from diluted EPS in the year-ago quarter.  Adjusted net income and adjusted diluted EPS for the second quarter of 2016 exclude $25 million ($18 million after-tax and $0.07 per diluted share) of transition and transaction costs related to the Starwood acquisition.  See page A-1 for the calculation of adjusted results.  On April 27, 2016, the company forecasted second quarter diluted EPS of $0.96 to $1.00, which did not include transition and transaction costs related to the Starwood acquisition.

Arne M. Sorenson, president and chief executive officer of Marriott International, said, “Marriott’s second quarter results demonstrate the company’s strength.  Leading brands and a focus on bottom line results delivered strong results in the second quarter.  While hotel performance reflected generally slower economic growth, leisure travel demand remained robust and group business performed well.  Attendance at group meetings was on track during the quarter, group cancellations remain low and we continue to see strong future group bookings.  We increased property-level house profit margins at our company-operated hotels, improving efficiency while delivering outstanding service to our guests.

“We added nearly 11,000 rooms to our lodging portfolio during the quarter, with one-third of those rooms in markets outside North America.  Owners continue to prefer our brands, increasing our development pipeline to more than 285,000 rooms at quarter-end.

“Our business model remains focused on managing or franchising the finest hotel brands around the world.  This asset-light strategy minimizes our exposure to economic cycles even as our brands grow their distribution.  We anticipate growing our worldwide rooms distribution by 6.5 percent, net, in 2016 from Marriott’s 19 legacy brands alone.

“We look forward to completing the acquisition of Starwood Hotels & Resorts Worldwide in the coming weeks.  After months of planning, we are confident that we will hit the ground running and are even more excited about the prospects presented by the combination of Marriott and Starwood.”

For the 2016 second quarter, RevPAR for worldwide comparable systemwide properties increased 2.9 percent (a 2.3 percent increase using actual dollars).

In North America, Marriott’s comparable systemwide RevPAR increased 3.2 percent (a 3.1 percent increase using actual dollars) in the second quarter of 2016, including a 2.2 percent increase (a 2.1 percent increase in actual dollars) in average daily rate.  RevPAR for comparable systemwide North American full-service hotels (including Marriott Hotels, Renaissance Hotels, Autograph Collection Hotels, Gaylord Hotels, The Ritz-Carlton and EDITION) increased 3.7 percent (a 3.5 percent increase in actual dollars) with a 1.8 percent increase (a 1.6 percent increase in actual dollars) in average daily rate.  RevPAR for comparable systemwide North American limited-service hotels (including Residence Inn, Courtyard, Fairfield Inn & Suites, TownePlace Suites, SpringHill Suites and AC Hotels by Marriott) increased 2.8 percent (a 2.7 percent increase in actual dollars) in the second quarter of 2016 with a 2.3 percent increase (a 2.2 percent increase in actual dollars) in average daily rate.

International comparable systemwide RevPAR rose 1.9 percent (a 0.8 percent decline using actual dollars) in the second quarter of 2016.

Marriott added 80 new properties (10,701 rooms) to its worldwide lodging portfolio in the 2016 second quarter, including the Skopje Marriott in Macedonia, the Minsk Marriott in Belarus and the Hotel Nassau Breda, an Autograph Collection hotel in the Netherlands.  Six properties (549 rooms) exited the system during the quarter.  At quarter-end, Marriott’s lodging system encompassed 4,554 properties and timeshare resorts for a total of more than 777,000 rooms.

Marriott’s worldwide development pipeline totaled 1,762 properties with more than 285,000 rooms at quarter-end, including 608 properties with roughly 106,000 rooms under construction and 219 properties with approximately 33,000 rooms approved for development, but not yet subject to signed contracts.

MARRIOTT REVENUES totaled $3.9 billion in the 2016 second quarter compared to revenues of approximately $3.7 billion for the second quarter of 2015.  Base management and franchise fees totaled $421 million compared to $412 million in the year-ago quarter.  The year-over-year increase largely reflects higher RevPAR and unit growth, partially offset by $9 million of lower deferred fee recognition, $6 million of unfavorable foreign exchange and $3 million of lower relicensing fees.

Second quarter worldwide incentive management fees increased 16 percent to $94 million, primarily due to higher RevPAR and house profit margins, as well as increased international distribution, partially offset by $2 million of unfavorable foreign exchange.  In North America alone, incentive management fees increased 22 percent.  In the second quarter, 64 percent of worldwide company-managed hotels earned incentive management fees compared to 59 percent in the year-ago quarter.

On April 27, the company estimated total fee revenue for the second quarter would total $520 million to $530 million.  Actual total fee revenue of $515 million in the quarter was modestly lower than estimated, reflecting RevPAR at the low end of the guidance range and $4 million of lower than expected relicensing fees.

Worldwide comparable company-operated house profit margins increased 60 basis points in the second quarter with higher room rates, improved productivity and lower utility costs.  House profit margins for comparable company-operated properties outside North America declined 10 basis points (reflecting lower house profit margins in the Middle East and Africa region), but North American comparable company-operated house profit margins increased 100 basis points from the year-ago quarter.

Owned, leased, and other revenue, net of direct expenses, totaled $72 million, compared to $60 million in the year-ago quarter.  The year-over-year increase largely reflects improved results at one owned and several leased hotels, including recently renovated hotels, $5 million of higher residential and credit card branding fees and $3 million of lower pre-opening expenses.  The increases were partially offset by the impact of the sale of one international owned property in the fourth quarter of 2015.

On April 27, Marriott estimated owned, leased, and other revenue, net of direct expenses for the second quarter would total approximately $75 million.  Actual results in the quarter were lower than expected largely due to slightly lower than expected branding fees.

DEPRECIATION, AMORTIZATION, and OTHER expenses totaled $30 million in the second quarter of 2016 compared to $32 million in the year-ago quarter.

GENERAL, ADMINISTRATIVE, and OTHER expenses for the 2016 second quarter totaled $168 million.  Excluding $14 million of transition and transaction costs related to the Starwood acquisition, adjusted general, administrative, and other expenses for the 2016 second quarter totaled $154 million compared to $152 million in the year-ago quarter. The increase in adjusted expenses year-over-year was largely due to higher routine administrative costs and growth, partially offset by lower reserves for guarantee funding.

On April 27, Marriott estimated general, administrative, and other expenses for the second quarter would total $155 million to $160 million, not including transition and transaction costs related to the Starwood acquisition.  Adjusted expenses recorded in the quarter were lower than expected largely due to solid cost controls.

INTEREST EXPENSE, NET increased $14 million in the second quarter to $50 million.  Excluding $11 million of transition and transaction costs related to the Starwood acquisition, adjusted interest expense, net increased $3 million in the second quarter to $39 million, largely due to higher interest expense associated with new debt issuances.

On April 27, Marriott estimated interest expense, net for the second quarter would total approximately $40 million, not including transition and transaction costs related to the Starwood acquisition.

EQUITY IN EARNINGS totaled $5 million in the second quarter.  On April 27, the company estimated equity in earnings for the second quarter would total approximately $0 million.  Actual results in the second quarter were above the estimate largely due to better than expected joint venture earnings.

Provision for Income Taxes
The provision for income taxes in the 2016 second quarter included $10 million of net favorable discrete tax items.

Adjusted Earnings before Interest Expense, Taxes, Depreciation and Amortization (EBITDA)
For the second quarter, adjusted EBITDA totaled $494 million, an 8 percent increase over second quarter 2015 adjusted EBITDA of $457 million.  See page A-8 for the adjusted EBITDA calculation.

Balance Sheet
At quarter-end, total debt was $4,360 million and cash balances totaled $679 million, compared to $4,107 million in debt and $96 million of cash at year-end 2015.

During the 2016 second quarter, the company issued $750 million of Series Q Senior Notes due in 2022 with a 2.3 percent interest rate coupon and $750 million of Series R Senior Notes due in 2026 with a 3.125 percent interest rate coupon.  The company also retired $289 million of Series H Senior Notes in the quarter and reduced outstanding commercial paper to $0.

In anticipation of completing the Starwood acquisition, the company extended its credit facility expiration to June 2021 and increased the facility from $2 billion to $4 billion, up to $2.5 billion of which is currently available.  Upon closing of the Starwood acquisition, the full $4 billion will be available to the company.  At the end of the 2016 second quarter, the company had no borrowings under the facility.

Marriott Common Stock
Weighted average fully diluted shares outstanding used to calculate diluted EPS totaled 258.0 million in the 2016 second quarter, compared to 277.3 million in the year-ago quarter.  Year-to-date, the company has repurchased 3.7 million shares for $225 million, but did not repurchase shares in the second quarter in anticipation of completing the Starwood acquisition.

OUTLOOK
Marriott’s outlook does not include the impact of the pending Starwood acquisition.

For full year 2016, Marriott expects standalone comparable systemwide RevPAR on a constant dollar basis will increase roughly 3 percent in North America, outside North America and worldwide.

The company anticipates gross room additions of roughly 7.5 percent, or 6.5 percent, net, worldwide for Marriott standalone for full year 2016.  These estimates are 50 basis points lower than anticipated a quarter ago due to delayed openings for some hotels in North America, as well as the Middle East and Africa.

On a standalone basis, Marriott expects full year 2016 adjusted EBITDA could total $1,889 million to $1,904 million.  On April 27, the company estimated full year adjusted EBITDA could total $1,900 million to $1,965 million.  At the mid-point, the full year adjusted EBITDA estimate decreased by $36 million from the prior outlook largely reflecting slower total fee revenue growth associated with the more modest outlook for both full year 2016 RevPAR and unit growth, and approximately $10 million of lower relicensing fees, as well as lower branding fees, partially offset by lower general and administrative expenses.  See page A-11 for the adjusted EBITDA calculation.

For the 2016 third quarter, Marriott expects standalone comparable systemwide RevPAR on a constant dollar basis will increase 3 to 4 percent in North America, outside North America and worldwide.

The company assumes third quarter standalone total fee revenue could total $495 million to $500 million, growth of 6 to 8 percent over third quarter 2015 total fee revenue of $465 million.  This fee revenue estimate reflects roughly $10 million of negative impact year-over-year from foreign exchange.

On a standalone basis, Marriott expects third quarter 2016 operating income could total $370 million to $375 million, a 9 to 11 percent increase compared to the 2015 third quarter, and adjusted EBITDA could total $476 million to $481 million, a 10 to 12 percent increase compared to the year-ago quarter.  See page A-9 for the adjusted EBITDA calculation.

For the 2016 fourth quarter, Marriott expects standalone comparable systemwide RevPAR on a constant dollar basis will increase 1 to 3 percent in North America, 3 to 4 percent outside North America and 2 to 3 percent worldwide.

The company assumes fourth quarter standalone total fee revenue could total $485 million to $490 million, growth of 7 to 8 percent over fourth quarter 2015 total fee revenue of $454 million.  These fee revenue estimates reflects roughly $5 million of negative impact year-over-year from foreign exchange.

On a standalone basis, Marriott expects fourth quarter 2016 operating income could total $361 million to $371 million, a 16 to 20 percent increase compared to the 2015 fourth quarter, and adjusted EBITDA could total $461 million to $471 million, a 15 to 17 percent increase compared to the year-ago quarter.  See page A-10 for the adjusted EBITDA calculation.

Third Quarter 2016

Fourth Quarter 2016

Total fee revenue

$495 million to $500 million

$485 million to $490 million

Owned, leased and other revenue,
net of direct expenses

Approx. $70 million

$80 million to $85 million

Depreciation, amortization, and
other expenses

Approx. $35 million

Approx. $34 million

General, administrative, and other
expenses

Approx. $160 million

Approx. $170 million

Operating income

$370 million to $375 million

$361 million to $371 million

Gains and other income

Approx. $5 million

Approx. $0 million

Equity in earnings (losses)

Approx. $5 million

Approx. $0 million

Adjusted EBITDA

$476 million to $481 million

$461 million to $471 million

 

Marriott expects standalone investment spending in 2016 will total approximately $450 million to $550 million, including approximately $100 million for maintenance capital.  Investment spending also includes other capital expenditures (including property acquisitions), new mezzanine financing and mortgage notes, contract acquisition costs, and equity and other investments.

Going forward, the company will continue to adjust reported results to exclude transition and transaction costs related to the Starwood acquisition.  While the company is unable to estimate transition costs, it expects transaction costs will total approximately $140 million.

Marriott International, Inc. (NASDAQ: MAR) will conduct its quarterly earnings review for the investment community and news media on Thursday, July 28, 2016 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 July 28, 2017.

The telephone dial-in number for the conference call is 706-679-3455 and the conference ID is 23009291.  A telephone replay of the conference call will be available from 1 p.m. ET, Thursday, July 28, 2016 until 8 p.m. ET, Thursday, August 4, 2016.  To access the replay, call 404-537-3406.  The conference ID for the recording is 23009291.

Note on forward-looking statements:  This press release and accompanying schedules contain “forward-looking statements” within the meaning of federal securities laws, including RevPAR, profit margin and earnings trends, estimates and assumptions; the number of lodging properties we expect to add to or remove from our system in the future; our expectations about investment spending; the anticipated closing date of the Starwood combination; and similar statements concerning anticipated future events and expectations that are not historical facts.  We caution you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including those we identify below and other risk factors that we identify in our most recent quarterly report on Form 10-Q.  Risks that could affect forward-looking statements in this press release include changes in market conditions; the pace of the economy; supply and demand changes for hotel rooms; competitive conditions in the lodging industry; relationships with clients and property owners; the availability of capital to finance hotel growth and refurbishment; receipt of the final outstanding required antitrust clearance for the Starwood combination; and the extent to which we are able to successfully integrate Starwood, manage our expanded operations, and realize the anticipated benefits of combining Starwood and Marriott.  Any of these factors could cause actual results to differ materially from the expectations we express or imply in this press release.  We make these forward-looking statements as of July 27, 2016.  We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Marriott International, Inc. (NASDAQ: MAR) is a global leading lodging company based in Bethesda, Maryland, USA, with more than 4,500 properties in 88 countries and territories.  Marriott International reported revenues of more than $14 billion in fiscal year 2015. The company operates and franchises hotels and licenses vacation ownership resorts under 19 brands, including: The Ritz-Carlton®, BVlgari®, EDITION®, JW Marriott®, Autograph Collection® Hotels, Renaissance® Hotels, Marriott Hotels®, Delta Hotels and Resorts®, Marriott Executive Apartments®, Marriott Vacation Club®, Gaylord Hotels®, AC Hotels by Marriott®, Courtyard®, Residence Inn®, SpringHill Suites®, Fairfield Inn & Suites®, TownePlace Suites®, Protea Hotels by Marriott® and Moxy Hotels®. Marriott has been consistently recognized as a top employer and for its superior business ethics. The company also manages the award-winning guest loyalty program, Marriott Rewards® and The Ritz-Carlton Rewards® program, which together comprise more than 57 million members. For more information or reservations, please visit our website at www.marriott.com, and for the latest company news, visit www.marriottnewscenter.com.

                                                                        IRPR#1

 

MARRIOTT INTERNATIONAL, INC.

PRESS RELEASE SCHEDULES

QUARTER 2, 2016

TABLE OF CONTENTS

Consolidated Statements of Income

A-1

Total Lodging Products

A-3

Key Lodging Statistics

A-4

Adjusted EBITDA

A-8

Adjusted EBITDA Third Quarter Forecast

A-9

Adjusted EBITDA Fourth Quarter Forecast

A-10

Adjusted EBITDA Full Year Forecast

A-11

Adjusted Operating Income Margin and Adjusted EBITDA Margin

A-12

Return on Invested Capital

A-13

Non-GAAP Financial Measures

A-14

 

 

MARRIOTT INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

SECOND QUARTER 2016 AND 2015

(in millions except per share amounts, unaudited)

As Reported

As Adjusted **

As Reported

Percent

Three Months Ended

Merger-Related

Three Months Ended

Three Months Ended

Better/(Worse)

June 30, 2016

Costs **

June 30, 2016

June 30, 2015

Adjusted 2016 vs. 2015

REVENUES

Base management fees

$                        186

$                        –

$                       186

$                       191

(3)

Franchise fees

235

235

221

6

Incentive management fees

94

94

81

16

Owned, leased, and other revenue 1

245

245

243

1

Cost reimbursements 2

3,142

3,142

2,953

6

   Total Revenues

3,902

3,902

3,689

6

OPERATING COSTS AND EXPENSES

Owned, leased, and other – direct 3

173

173

183

5

Reimbursed costs

3,142

3,142

2,953

(6)

Depreciation, amortization, and other 4

30

30

32

6

General, administrative, and other 5

168

14

154

152

(1)

   Total Expenses

3,513

14

3,499

3,320

(5)

OPERATING INCOME

389

(14)

403

369

9

Gains and other income, net 6

20

(100)

Interest expense

(57)

(11)

(46)

(42)

(10)

Interest income

7

7

6

17

Equity in earnings 7

5

5

2

150

INCOME BEFORE INCOME TAXES

344

(25)

369

355

4

Provision for income taxes

(97)

7

(104)

(115)

10

NET INCOME

$                        247

$                     (18)

$                       265

$                       240

10

EARNINGS PER SHARE

   Earnings per share – basic

$                       0.97

$                  (0.07)

$                      1.04

$                      0.88

18

   Earnings per share – diluted

$                       0.96

$                  (0.07)

$                      1.03

$                      0.87

18

Basic Shares

254.3

254.3

254.3

272.4

Diluted Shares

258.0

258.0

258.0

277.3

** As adjusted measures represent the results of our operations before the impact of Starwood merger-related costs. See page A-14 for more information about these

    non-GAAP measures.

Owned, leased, and other revenue includes revenue from the properties we own or lease, termination fees, branding fees, and other revenue.

Cost reimbursements include reimbursements from properties for Marriott-funded operating expenses.

Owned, leased, and other – direct expenses include operating expenses related to our owned or leased hotels, including lease payments

   and pre-opening expenses.

Depreciation, amortization, and other expenses include depreciation for fixed assets, amortization of capitalized costs incurred to acquire

   management, franchise, and license agreements, and any related impairments, accelerations, or write-offs.

General, administrative, and other expenses include our corporate and business segments overhead costs and general expenses.

6  Gains and other income, net includes gains and losses on the sale of real estate, the sale or other-than-temporary impairment of joint

    ventures and investments, and results from cost method investments.

Equity in earnings include our equity in earnings or losses of unconsolidated equity method investments.

A-1

 

 

MARRIOTT INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

SECOND QUARTER YEAR-TO-DATE 2016 AND 2015

(in millions except per share amounts, unaudited)

As Reported

As Adjusted **

As Reported

Percent

Six Months Ended

Merger-Related

Six Months Ended

Six Months Ended

Better/(Worse)

June 30, 2016

Costs **

June 30, 2016

June 30, 2015

Adjusted 2016 vs. 2015

REVENUES

Base management fees

$                        358

$                        –

$                       358

$                       356

1

Franchise fees

442

442

425

4

Incentive management fees

195

195

170

15

Owned, leased, and other revenue 1

492

492

500

(2)

Cost reimbursements 2

6,187

6,187

5,751

8

   Total Revenues

7,674

7,674

7,202

7

OPERATING COSTS AND EXPENSES

Owned, leased, and other – direct 3

339

339

377

10

Reimbursed costs

6,187

6,187

5,751

(8)

Depreciation, amortization, and other 4

61

61

76

20

General, administrative, and other 5

331

22

309

297

(4)

   Total Expenses

6,918

22

6,896

6,501

(6)

OPERATING INCOME

756

(22)

778

701

11

Gains and other income, net 6

20

(100)

Interest expense

(104)

(13)

(91)

(78)

(17)

Interest income

13

13

14

(7)

Equity in earnings 7

5

5

5

0

INCOME BEFORE INCOME TAXES

670

(35)

705

662

6

Provision for income taxes

(204)

10

(214)

(215)

0

NET INCOME

$                        466

$                     (25)

$                       491

$                       447

10

EARNINGS PER SHARE

   Earnings per share – basic

$                       1.83

$                  (0.10)

$                      1.93

$ 1.63

18

   Earnings per share – diluted

$                       1.80

$                  (0.10)

$                      1.90

$ 1.59

19

Basic Shares

254.3

254.3

254.3

275.1

Diluted Shares

258.7

258.7

258.7

280.6

** As adjusted measures represent the results of our operations before the impact of Starwood merger-related costs. See page A-14 for more information about these

    non-GAAP measures.

Owned, leased, and other revenue includes revenue from the properties we own or lease, termination fees, branding fees, and other revenue.

Cost reimbursements include reimbursements from properties for Marriott-funded operating expenses.

Owned, leased, and other – direct expenses include operating expenses related to our owned or leased hotels, including lease payments

   and pre-opening expenses.

Depreciation, amortization, and other expenses include depreciation for fixed assets, amortization of capitalized costs incurred to acquire

   management, franchise, and license agreements, and any related impairments, accelerations, or write-offs.

General, administrative, and other expenses include our corporate and business segments overhead costs and general expenses.

6  Gains and other income, net includes gains and losses on the sale of real estate, the sale or other-than-temporary impairment of joint

    ventures and investments, and results from cost method investments.

Equity in earnings include our equity in earnings or losses of unconsolidated equity method investments.

A-2

 

 

MARRIOTT INTERNATIONAL, INC.

TOTAL LODGING PRODUCTS

Number of Properties

Number of Rooms

Brand

June 30, 2016

June 30, 2015

vs. June 30, 2015

June 30, 2016

June 30, 2015

vs. June 30, 2015

North American Full-Service

Marriott Hotels

365

364

1

147,935

146,874

1,061

Renaissance Hotels

84

81

3

28,038

28,322

(284)

Autograph Collection Hotels

60

49

11

13,714

11,562

2,152

Gaylord Hotels

5

5

8,098

8,098

Delta Hotels and Resorts

37

37

9,784

9,595

189

The Ritz-Carlton Hotels

40

40

11,839

11,691

148

The Ritz-Carlton Residences

33

32

1

4,056

3,812

244

EDITION Hotels

2

2

567

568

(1)

EDITION Residences

1

1

25

25

North American Limited-Service

Courtyard

936

895

41

131,647

126,409

5,238

Residence Inn

703

681

22

86,088

83,227

2,861

TownePlace Suites

288

260

28

28,954

26,111

2,843

Fairfield Inn & Suites

793

743

50

72,856

68,375

4,481

SpringHill Suites

349

327

22

41,497

38,652

2,845

AC Hotels by Marriott1

8

5

3

1,352

911

441

Moxy Hotels

2

2

294

294

International

Marriott Hotels

247

228

19

75,684

69,892

5,792

Marriott Executive Apartments

27

27

4,131

4,149

(18)

Renaissance Hotels

78

78

23,913

24,361

(448)

Autograph Collection Hotels1

42

37

5

10,223

9,428

795

Protea Hotels

97

105

(8)

9,284

9,864

(580)

The Ritz-Carlton Hotels

52

48

4

14,686

14,057

629

The Ritz-Carlton Serviced Apartments

4

4

579

579

The Ritz-Carlton Residences

8

8

416

416

Bulgari Hotels & Resorts

3

3

202

202

Bulgari Residences

1

1

5

5

EDITION Hotels

2

2

251

251

Courtyard

127

107

20

25,753

21,374

4,379

Residence Inn

7

7

717

717

Fairfield Inn & Suites

8

4

4

1,234

622

612

AC Hotels by Marriott1

83

77

6

10,277

9,448

829

Moxy Hotels

2

1

1

414

162

252

Timeshare2

60

58

2

12,889

12,876

13

  Total Lodging

4,554

4,317

237

777,402

742,635

34,767

Results for all AC Hotels by Marriott properties and five Autograph Collection properties are presented in the “Equity in earnings” caption of our Consolidated Statements of Income. 

Timeshare property and room counts are as of June 17, 2016 and June 19, 2015, the end of Marriott Vacation Worldwide’s second quarter for 2016 and 2015, respectively.

A-3

 

 

MARRIOTT INTERNATIONAL, INC.

KEY LODGING STATISTICS

Constant $

Comparable Company-Operated International Properties1

Three Months Ended June 30, 2016 and June 30, 2015

REVPAR

Occupancy

Average Daily Rate

Region

2016

vs. 2015

2016

vs. 2015

2016

vs. 2015

Caribbean & Latin America

$153.47

-2.6%

70.2%

-1.7%

pts.

$218.68

-0.1%

Europe

$121.50

2.5%

76.7%

-0.3%

pts.

$158.42

2.9%

Middle East & Africa

$87.07

-7.1%

61.0%

-2.1%

pts.

$142.68

-3.8%

Asia Pacific

$106.95

5.2%

74.8%

4.2%

pts.

$142.97

-0.7%

Total International2

$112.91

1.1%

72.3%

0.8%

pts.

$156.25

-0.1%

Worldwide4

$134.89

2.8%

77.1%

1.3%

pts.

$174.92

1.1%

Comparable Systemwide International Properties1

Three Months Ended June 30, 2016 and June 30, 2015

REVPAR

Occupancy

Average Daily Rate

Region

2016

vs. 2015

2016

vs. 2015

2016

vs. 2015

Caribbean & Latin America

$144.97

-0.7%

69.2%

-0.7%

pts.

$209.44

0.2%

Europe

$114.17

3.4%

74.1%

0.3%

pts.

$154.18

2.9%

Middle East & Africa

$81.66

-5.9%

60.5%

-2.1%

pts.

$135.01

-2.6%

Asia Pacific

$113.21

5.7%

75.5%

3.7%

pts.

$149.94

0.5%

Total International3

$113.53

1.9%

71.4%

0.7%

pts.

$159.03

0.9%

Worldwide5

$118.97

2.9%

77.1%

0.8%

pts.

$154.25

1.9%

International includes properties located outside the United States and Canada, except for Worldwide which includes

  the United States and Canada.

2 Includes Marriott Hotels, Renaissance Hotels, Autograph Collection Hotels, Protea Hotels, The Ritz-Carlton, Bulgari, EDITION, Residence Inn,

  Courtyard, Fairfield Inn & Suites, and AC Hotels by Marriott.

3 Includes Marriott Hotels, Renaissance Hotels, Autograph Collection Hotels, Protea Hotels, The Ritz-Carlton, Bulgari, EDITION, Residence Inn,

  Courtyard, Fairfield Inn & Suites, AC Hotels by Marriott, and Moxy Hotels.

4Includes Marriott Hotels, Renaissance Hotels, Autograph Collection Hotels, Gaylord Hotels,  Protea Hotels, The Ritz-Carlton, Bulgari, EDITION,

  Residence Inn, Courtyard, Fairfield Inn & Suites, TownePlace Suites, SpringHill Suites, and AC Hotels by Marriott.

5 Includes Marriott Hotels, Renaissance Hotels, Autograph Collection Hotels, Gaylord Hotels,  Protea Hotels, The Ritz-Carlton, Bulgari, EDITION,

  Residence Inn, Courtyard, Fairfield Inn & Suites, TownePlace Suites, SpringHill Suites, AC Hotels by Marriott, and Moxy Hotels.

A-4

 

 

MARRIOTT INTERNATIONAL, INC.

KEY LODGING STATISTICS

Constant $

Comparable Company-Operated International Properties1

Six Months Ended June 30, 2016 and June 30, 2015

REVPAR

Occupancy

Average Daily Rate

Region

2016

vs. 2015

2016

vs. 2015

2016

vs. 2015

Caribbean & Latin America

$183.34

1.8%

72.6%

-1.0%

pts.

$252.69

3.2%

Europe

$106.12

2.4%

70.4%

-0.5%

pts.

$150.76

3.1%

Middle East & Africa

$99.27

-4.9%

65.4%

-0.7%

pts.

$151.71

-3.9%

Asia Pacific

$107.31

6.0%

72.9%

4.2%

pts.

$147.16

-0.2%

Total International2

$113.41

2.2%

70.6%

1.1%

pts.

$160.71

0.5%

Worldwide4

$130.26

3.1%

74.0%

1.1%

pts.

$175.91

1.6%

Comparable Systemwide International Properties1

Six Months Ended June 30, 2016 and June 30, 2015

REVPAR

Occupancy

Average Daily Rate

Region

2016

vs. 2015

2016

vs. 2015

2016

vs. 2015

Caribbean & Latin America

$156.18

1.8%

68.7%

-0.1%

pts.

$227.30

1.9%

Europe

$99.18

3.1%

67.6%

0.1%

pts.

$146.72

2.9%

Middle East & Africa

$92.00

-3.8%

64.3%

-0.7%

pts.

$142.97

-2.7%

Asia Pacific

$112.33

6.5%

73.7%

3.9%

pts.

$152.52

0.9%

Total International3

$111.22

2.7%

69.0%

1.0%

pts.

$161.20

1.2%

Worldwide5

$112.45

2.8%

73.2%

0.5%

pts.

$153.53

2.2%

International includes properties located outside the United States and Canada, except for Worldwide which includes

  the United States and Canada.

2 Includes Marriott Hotels, Renaissance Hotels, Autograph Collection Hotels, Protea Hotels, The Ritz-Carlton, Bulgari, EDITION, Residence Inn,

  Courtyard, Fairfield Inn & Suites, and AC Hotels by Marriott.

3 Includes Marriott Hotels, Renaissance Hotels, Autograph Collection Hotels, Protea Hotels, The Ritz-Carlton, Bulgari, EDITION, Residence Inn,

  Courtyard, Fairfield Inn & Suites, AC Hotels by Marriott, and Moxy Hotels.

4 Includes Marriott Hotels, Renaissance Hotels, Autograph Collection Hotels, Gaylord Hotels,  Protea Hotels, The Ritz-Carlton, Bulgari, EDITION,

  Residence Inn, Courtyard, Fairfield Inn & Suites, TownePlace Suites, SpringHill Suites, and AC Hotels by Marriott.

5 Includes Marriott Hotels, Renaissance Hotels, Autograph Collection Hotels, Gaylord Hotels,  Protea Hotels, The Ritz-Carlton, Bulgari, EDITION,

  Residence Inn, Courtyard, Fairfield Inn & Suites, TownePlace Suites, SpringHill Suites, AC Hotels by Marriott, and Moxy Hotels.

A-5

 

 

MARRIOTT INTERNATIONAL, INC.

KEY LODGING STATISTICS

Constant $

Comparable Company-Operated North American Properties

Three Months Ended June 30, 2016 and June 30, 2015

REVPAR

Occupancy

Average Daily Rate

Brand

2016

vs. 2015

2016

vs. 2015

2016

vs. 2015

Marriott Hotels

$165.48

3.2%

80.8%

1.5%

pts.

$204.79

1.2%

Renaissance Hotels

$160.06

7.6%

82.1%

3.0%

pts.

$194.98

3.7%

The Ritz-Carlton

$257.21

1.5%

74.5%

1.0%

pts.

$345.03

0.2%

Composite North American Full-Service1

$172.97

3.8%

80.1%

1.8%

pts.

$215.97

1.4%

Courtyard

$113.81

3.4%

78.6%

1.4%

pts.

$144.88

1.5%

SpringHill Suites

$107.94

3.2%

82.2%

1.3%

pts.

$131.25

1.5%

Residence Inn

$125.64

3.0%

82.5%

0.7%

pts.

$152.21

2.1%

TownePlace Suites

$86.56

4.3%

81.0%

0.2%

pts.

$106.92

4.0%

Composite North American Limited-Service2

$115.38

3.3%

79.9%

1.2%

pts.

$144.35

1.7%

Composite – All3

$148.04

3.6%

80.0%

1.6%

pts.

$185.01

1.6%

Comparable Systemwide North American Properties

Three Months Ended June 30, 2016 and June 30, 2015

REVPAR

Occupancy

Average Daily Rate

Brand

2016

vs. 2015

2016

vs. 2015

2016

vs. 2015

Marriott Hotels

$141.10

3.4%

77.7%

1.3%

pts.

$181.68

1.6%

Renaissance Hotels

$138.49

6.1%

79.7%

2.0%

pts.

$173.84

3.5%

Autograph Collection Hotels

$182.88

2.4%

78.5%

0.6%

pts.

$233.04

1.6%

The Ritz-Carlton

$257.21

1.5%

74.5%

1.0%

pts.

$345.03

0.2%

Composite North American Full-Service1

$149.68

3.7%

77.9%

1.4%

pts.

$192.26

1.8%

Courtyard

$111.32

3.2%

78.1%

0.7%

pts.

$142.56

2.3%

Fairfield Inn & Suites

$84.92

1.4%

74.7%

-0.4%

pts.

$113.62

2.0%

SpringHill Suites

$98.90

3.6%

79.5%

1.0%

pts.

$124.40

2.3%

Residence Inn

$120.63

2.6%

83.1%

0.3%

pts.

$145.15

2.3%

TownePlace Suites

$85.04

4.4%

79.7%

1.1%

pts.

$106.68

2.9%

Composite North American Limited-Service4

$105.09

2.8%

78.9%

0.4%

pts.

$133.15

2.3%

Composite – All5

$120.33

3.2%

78.6%

0.8%

pts.

$153.17

2.2%

1 Includes Marriott Hotels, Renaissance Hotels, Autograph Collection Hotels, Gaylord Hotels, The Ritz-Carlton, and EDITION.

2 Includes Residence Inn, Courtyard, Fairfield Inn & Suites, TownePlace Suites, and SpringHill Suites.

3 Includes Marriott Hotels, Renaissance Hotels, Autograph Collection Hotels, Gaylord Hotels, The Ritz-Carlton, EDITION,

  Residence Inn, Courtyard, Fairfield Inn & Suites, TownePlace Suites, and SpringHill Suites.

4 Includes Residence Inn, Courtyard, Fairfield Inn & Suites, TownePlace Suites, SpringHill Suites, and AC Hotels by Marriott.

5 Includes Marriott Hotels, Renaissance Hotels, Autograph Collection Hotels, Gaylord Hotels, The Ritz-Carlton, EDITION,

  Residence Inn, Courtyard, Fairfield Inn & Suites, TownePlace Suites, SpringHill Suites, and AC Hotels by Marriott.

A-6

 

 

MARRIOTT INTERNATIONAL, INC.

KEY LODGING STATISTICS

Constant $

Comparable Company-Operated North American Properties

Six Months Ended June 30, 2016 and June 30, 2015

REVPAR

Occupancy

Average Daily Rate

Brand

2016

vs. 2015

2016

vs. 2015

2016

vs. 2015

Marriott Hotels

$155.15

3.3%

76.9%

1.1%

pts.

$201.82

1.8%

Renaissance Hotels

$150.75

4.8%

78.6%

1.1%

pts.

$191.71

3.4%

The Ritz-Carlton

$268.08

3.9%

73.4%

1.4%

pts.

$365.46

2.0%

Composite North American Full-Service1

$165.25

3.7%

76.6%

1.2%

pts.

$215.86

2.0%

Courtyard

$105.85

3.3%

74.0%

1.0%

pts.

$143.00

1.9%

SpringHill Suites

$100.56

3.8%

77.7%

1.8%

pts.

$129.48

1.3%

Residence Inn

$118.06

3.0%

78.8%

0.3%

pts.

$149.87

2.6%

TownePlace Suites

$77.41

3.4%

73.7%

0.1%

pts.

$105.09

3.2%

Composite North American Limited-Service2

$107.71

3.3%

75.6%

0.9%

pts.

$142.52

2.1%

Composite – All3

$140.34

3.5%

76.1%

1.1%

pts.

$184.35

2.1%

Comparable Systemwide North American Properties

Six Months Ended June 30, 2016 and June 30, 2015

REVPAR

Occupancy

Average Daily Rate

Brand

2016

vs. 2015

2016

vs. 2015

2016

vs. 2015

Marriott Hotels

$133.46

3.1%

73.7%

0.7%

pts.

$181.09

2.1%

Renaissance Hotels

$130.42

3.9%

75.9%

0.6%

pts.

$171.82

3.0%

Autograph Collection Hotels

$175.75

2.6%

76.3%

1.0%

pts.

$230.42

1.2%

The Ritz-Carlton

$268.08

3.9%

73.4%

1.4%

pts.

$365.46

2.0%

Composite North American Full-Service1

$143.02

3.3%

74.2%

0.8%

pts.

$192.79

2.2%

Courtyard

$102.92

2.9%

73.5%

0.4%

pts.

$139.96

2.3%

Fairfield Inn & Suites

$76.83

1.0%

69.6%

-0.7%

pts.

$110.38

2.0%

SpringHill Suites

$91.36

2.4%

75.0%

0.2%

pts.

$121.78

2.1%

Residence Inn

$112.26

2.4%

78.9%

-0.1%

pts.

$142.26

2.6%

TownePlace Suites

$79.06

3.3%

75.1%

0.6%

pts.

$105.30

2.4%

Composite North American Limited-Service4

$97.04

2.4%

74.4%

0.1%

pts.

$130.51

2.3%

Composite – All5

$112.75

2.8%

74.3%

0.3%

pts.

$151.76

2.4%

1 Includes Marriott Hotels, Renaissance Hotels, Autograph Collection Hotels, Gaylord Hotels, The Ritz-Carlton, and EDITION.

2 Includes Residence Inn, Courtyard, Fairfield Inn & Suites, TownePlace Suites, and SpringHill Suites.

3 Includes Marriott Hotels, Renaissance Hotels, Autograph Collection Hotels, Gaylord Hotels, The Ritz-Carlton, EDITION,

  Residence Inn, Courtyard, Fairfield Inn & Suites, TownePlace Suites, and SpringHill Suites.

4 Includes Residence Inn, Courtyard, Fairfield Inn & Suites, TownePlace Suites, SpringHill Suites, and AC Hotels by Marriott.

5 Includes Marriott Hotels, Renaissance Hotels, Autograph Collection Hotels, Gaylord Hotels, The Ritz-Carlton, EDITION,

  Residence Inn, Courtyard, Fairfield Inn & Suites, TownePlace Suites, SpringHill Suites, and AC Hotels by Marriott.

A-7

 

MARRIOTT INTERNATIONAL, INC.

NON-GAAP FINANCIAL MEASURES

ADJUSTED EBITDA

($ in millions)

Fiscal Year 2016

First
Quarter

Second
Quarter

Total

Net income

$             219

$             247

$             466

Interest expense

47

57

104

Tax provision

107

97

204

Depreciation and amortization

31

30

61

Depreciation classified in Reimbursed costs

14

14

28

Interest expense from unconsolidated joint ventures

1

1

2

Depreciation and amortization from unconsolidated joint ventures

3

3

6

EBITDA **

422

449

871

Starwood transaction and transition costs

8

14

22

Share-based compensation (including share-based compensation reimbursed by third-party owners)

28

31

59

Adjusted EBITDA **

$             458

$             494

$             952

Increase over 2015 Quarterly Adjusted EBITDA **

7%

8%

7%

Fiscal Year 2015

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Total

Net income

$             207

$             240

$             210

$             202

$             859

Interest expense

36

42

43

46

167

Tax provision

100

115

99

82

396

Depreciation and amortization

32

32

31

32

127

Depreciation classified in Reimbursed costs

14

14

15

15

58

Interest expense from unconsolidated joint ventures

1

1

2

Depreciation and amortization from unconsolidated joint ventures

3

2

3

2

10

EBITDA **

393

445

402

379

1,619

EDITION impairment charge

12

12

Loss (gain) disposition of real estate

22

(7)

15

Gain on redemption of preferred equity ownership interest

(41)

(41)

Share-based compensation (including share-based compensation reimbursed by third-party owners)

24

31

29

29

113

Adjusted EBITDA **

$             429

$             457

$             431

$             401

$           1,718

** Denotes non-GAAP financial measures.  Please see page A-14 for information about our reasons for providing these alternative financial measures and the

    limitations on their use.

A-8

 

 

MARRIOTT INTERNATIONAL, INC.

NON-GAAP FINANCIAL MEASURES

ADJUSTED EBITDA THIRD QUARTER FORECAST

FORECASTED THIRD QUARTER 2016

($ in millions)

Range 1

Estimated Adjusted EBITDA
Third Quarter 2016

As Reported
Third Quarter 2015

Operating income

$            370

$            375

$                         339

Gains and other income, net

5

5

Interest income

12

12

5

Equity in earnings

5

5

8

Depreciation and amortization

35

35

31

Depreciation classified in Reimbursed costs

16

16

15

Interest expense from unconsolidated joint ventures

1

1

1

Depreciation and amortization from unconsolidated joint ventures

2

2

3

446

451

402

Share-based compensation (including share-based compensation reimbursed by third-party owners)

30

30

29

Adjusted EBITDA **

$            476

$            481

$                         431

Increase over Q3 2015 Adjusted EBITDA**

10%

12%

** Denotes non-GAAP financial measures.  See page A-14 for information about our reasons for providing these alternative

    financial measures and the limitations on their use.

1 Excludes the impact of pending Starwood acquisition, including transaction and transition costs.

A-9

 

 

MARRIOTT INTERNATIONAL, INC.

NON-GAAP FINANCIAL MEASURES

ADJUSTED EBITDA FOURTH QUARTER FORECAST

FORECASTED FOURTH QUARTER 2016

($ in millions)

Range 1

Estimated Adjusted EBITDA
Fourth Quarter 2016

As Reported
Fourth Quarter 2015

Operating income

$            361

$            371

$                         310

Gains and other income, net

7

Interest income

15

15

10

Equity in earnings

3

Depreciation and amortization

34

34

32

Depreciation classified in Reimbursed costs

16

16

15

Interest expense from unconsolidated joint ventures

2

2

Depreciation and amortization from unconsolidated joint ventures

2

2

2

430

440

379

Loss (gain) disposition of real estate

(7)

Share-based compensation (including share-based compensation reimbursed by third-party owners)

31

31

29

Adjusted EBITDA **

$            461

$            471

$                         401

Increase over Q4 2015 Adjusted EBITDA**

15%

17%

** Denotes non-GAAP financial measures.  See page A-14 for information about our reasons for providing these alternative

    financial measures and the limitations on their use.

1 Excludes the impact of pending Starwood acquisition, including transaction and transition costs.

A-10

 

 

MARRIOTT INTERNATIONAL, INC.

NON-GAAP FINANCIAL MEASURES

ADJUSTED EBITDA FULL YEAR FORECAST

FORECASTED 2016

($ in millions)

Range 1

Estimated Adjusted EBITDA
Fiscal Year 2016

As Reported
Fiscal Year 2015

Operating income

$         1,509

$         1,524

$                   1,350

Gains and other income, net

5

5

27

Interest income

40

40

29

Equity in earnings

10

10

16

Depreciation and amortization

130

130

127

Depreciation classified in Reimbursed costs

60

60

58

Interest expense from unconsolidated joint ventures

5

5

2

Depreciation and amortization from unconsolidated joint ventures

10

10

10

1,769

1,784

1,619

EDITION impairment charge

12

Loss (gain) disposition of real estate

15

Gain on redemption of preferred equity ownership interest

(41)

Share-based compensation (including share-based compensation reimbursed by third-party owners)

120

120

113

Adjusted EBITDA **

$         1,889

$         1,904

$                   1,718

Increase over 2015 Adjusted EBITDA**

10%

11%

** Denotes non-GAAP financial measures.  See page A-14 for information about our reasons for providing these alternative

    financial measures and the limitations on their use.

1 Excludes the impact of pending Starwood acquisition, including transaction and transition costs.

A-11

 

 

MARRIOTT INTERNATIONAL, INC.

NON-GAAP FINANCIAL MEASURES

ADJUSTED OPERATING INCOME MARGIN AND ADJUSTED EBITDA MARGIN

SECOND QUARTER 2016 and 2015

($ in millions)

Second
Quarter
2016

Second
Quarter
2015

Total revenues, as reported

$          3,902

$          3,689

Less: cost reimbursements

(3,142)

(2,953)

Total revenues, as adjusted **

$             760

$             736

Operating income, as reported

$             389

$             369

Add: Starwood transaction and transition costs

14

Operating income, as adjusted**

$             403

$             369

Adjusted operating income margin **

53%

50%

Adjusted EBITDA **

$             494

Adjusted EBITDA margin **

65%

** Denotes non-GAAP financial measures.  See page A-14 for information about our reasons for providing

   these alternative financial measures and the limitations on their use.

A-12

 

 

MARRIOTT INTERNATIONAL, INC.

NON-GAAP FINANCIAL MEASURES

RETURN ON INVESTED CAPITAL

($ in millions)

The reconciliation of net income to earnings before interest expense and taxes is as follows:

Twelve Months Ended

June 30, 2016

Net income

$                            878

Interest expense

193

Tax provision

385

Earnings before interest expense and taxes **

$                         1,456

The reconciliations of assets to invested capital are as follows:

June 30, 2016

June 30, 2015

Assets

$                         6,650

$                       6,311

Less: current liabilities, net of current portion of long-term debt

(2,941)

(2,903)

Less: deferred tax assets 1

(586)

(684)

Invested capital **

$                         3,123

$                       2,724

Average invested capital 2 **

$                         2,924

Return on invested capital **

49.8%

1  At June 30, 2015 “deferred tax assets” is net of current deferred income tax liabilities of $22M.

2  Calculated as “Invested capital” for June 30, 2016 and June 30, 2015, divided by two.

** Denotes non-GAAP financial measures.  See page A-14 for information about our reasons for providing these alternative financial

measures and the limitations on their use.

A-13

 

 

MARRIOTT INTERNATIONAL, INC.
NON-GAAP FINANCIAL MEASURES

In our press release and schedules, and on the related conference call, we report certain financial measures that are not required by, or presented in accordance with, United States generally accepted accounting principles (GAAP). We discuss management’s reasons for reporting these non-GAAP measures below, and the press release schedules reconcile the most directly comparable GAAP measure to each non-GAAP measure that we refer to (identified by a double asterisk on the preceding pages). Although management evaluates and presents these non-GAAP measures for the reasons described below, please be aware that these non-GAAP measures have limitations and should not be considered in isolation or as a substitute for revenue, operating income, income from continuing operations, net income, earnings per share or any other comparable operating measure prescribed by GAAP. In addition, we may calculate and/or present these non-GAAP financial measures differently than measures with the same or similar names that other companies report, and as a result, the non-GAAP measures we report may not be comparable to those reported by others.

Adjusted Measures That Exclude Merger-Related Costs. Management evaluates certain non-GAAP measures that exclude transaction and transition costs associated with the Starwood merger because those non-GAAP measures allow for period-over period comparisons of our ongoing operations before the impact of these charges. These non-GAAP measures, which are reconciled to the comparable GAAP measures on pages A-1 and A-2, include adjusted net income, adjusted general, administrative, and other expenses, adjusted interest expense, and adjusted EPS. Non-GAAP adjusted net income and its components and adjusted EPS are not, and should not be viewed as, substitutes for net income and EPS.

Earnings Before Interest Expense and Taxes (“EBIT”), and Adjusted Earnings Before Interest Expense, Taxes, Depreciation and Amortization (“Adjusted EBITDA”). EBIT, which we use as part of our return on invested capital calculation, reflects net income excluding the impact of interest expense and provision for income taxes, and EBITDA reflects EBIT excluding the impact of depreciation and amortization. Our non-GAAP measure of Adjusted EBITDA further adjusts EBITDA to exclude the following items: (1) the 2016 pre-tax transaction and transition costs associated with the Starwood merger, which we recorded in the “General, administrative, and other” caption of our Consolidated Statements of Income (our “Income Statements”); (2) the pre-tax EDITION impairment charges in the 2015 first quarter, which we recorded in the “Depreciation, amortization, and other” caption of our Income Statements; (3) the pre-tax expected loss on dispositions of real estate in the 2015 second quarter, the reversal of a portion of the pre-tax loss on disposition upon sale of one property in the 2015 fourth quarter, and the pre-tax preferred equity investment gain in the 2015 second quarter, all of which we recorded in the “Gains and other income, net” caption of our Income Statements; and (4) share-based compensation expense for all periods presented.

We believe that Adjusted EBITDA is a meaningful indicator of our operating performance because it permits period-over-period comparisons of our ongoing core operations before these items and facilitates our comparison of results before these items with results from other lodging companies. We use Adjusted EBITDA to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company’s capital structure, debt levels, and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provisions for income taxes can vary considerably among companies. Our Adjusted EBITDA also excludes depreciation and amortization expense which we report under “Depreciation, amortization, and other” as well as depreciation included under “Reimbursed costs” in our Income Statements, because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies. We also excluded share-based compensation expense in all periods presented in order to address considerable variability among companies in recording compensation expense because companies use share-based payment awards differently, both in the type and quantity of awards granted.

Adjusted Operating Income Margin and Adjusted EBITDA Margin. We calculate Adjusted Operating Income Margin by dividing adjusted operating income by adjusted total revenues. Adjusted EBITDA Margin reflects Adjusted EBITDA, defined above, divided by adjusted total revenues. We consider total revenues, as adjusted to exclude cost reimbursements, to be meaningful metrics as they represent that portion of revenue and operating income margin that allows for period-over-period comparisons. Cost reimbursements revenue represents reimbursements we receive for costs we incur on behalf of managed and franchised properties and relates, predominantly, to payroll costs at managed properties where we are the employer, but also includes reimbursements for other costs, such as those associated with our rewards programs. As we record cost reimbursements based on the costs we incur with no added markup, this revenue and the related expense have no impact on either our operating income or net income because cost reimbursements revenue net of reimbursed costs expense is zero. We consider operating income, as adjusted for the pre-tax Starwood transaction and transition costs, and Adjusted EBITDA Margin meaningful for the same reasons noted above.

Return on Invested Capital (“ROIC”). We calculate ROIC as EBIT divided by average invested capital. We consider ROIC to be a meaningful indicator of our operating performance, and we evaluate ROIC because it measures how effectively we use the money we invest in our operations. We calculate invested capital by deducting from total assets: (1) current liabilities, as we intend to satisfy them in the short term, net of current portion of long-term debt, as the numerator of the calculation excludes interest expense; and (2) deferred tax assets because the numerator of the calculation is a pre-tax amount. Prior to our adoption of ASU No. 2015-17 – “Balance Sheet Classification of Deferred Taxes” in the 2015 fourth quarter, deferred tax assets is presented net of current deferred tax liabilities.

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Shayne Heffernan Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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