10-Q 1 mar-q12014x10q.htm 10-Q MAR-Q1.2014-10Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________ 
FORM 10-Q
_______________________________________ 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2014
OR
o
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
(Address of principal executive offices)
 
20817
(Zip Code)
(301) 380-3000
(Registrant’s telephone number, including area code) 
_______________________________________
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
 
ý
  
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
¨ (Do not check if a smaller reporting company)
  
Smaller Reporting Company
 
¨
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 292,765,045 shares of Class A Common Stock, par value $0.01 per share, outstanding at April 18, 2014.









MARRIOTT INTERNATIONAL, INC.
FORM 10-Q TABLE OF CONTENTS
 
 
 
Page No.
 
 
 
Part I.
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2014 and March 31, 2013
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Part II.
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 6.
 
 
 
 





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, 2014

March 31, 2013
REVENUES
 
 
 
Base management fees
$
155

 
$
153

Franchise fees
163

 
151

Incentive management fees
71

 
66

Owned, leased, and other revenue
234

 
224

Cost reimbursements
2,670

 
2,548

 
3,293

 
3,142

OPERATING COSTS AND EXPENSES
 
 
 
Owned, leased, and other-direct
185

 
179

Reimbursed costs
2,670

 
2,548

Depreciation and amortization
36

 
25

General, administrative, and other
148

 
164

 
3,039

 
2,916

OPERATING INCOME
254

 
226

Gains and other income

 
3

Interest expense
(30
)
 
(31
)
Interest income
5

 
3

Equity in earnings
2

 

INCOME BEFORE INCOME TAXES
231

 
201

Provision for income taxes
(59
)
 
(65
)
NET INCOME
$
172

 
$
136

EARNINGS PER SHARE-Basic
 
 
 
Earnings per share
$
0.58

 
$
0.44

EARNINGS PER SHARE-Diluted
 
 
 
Earnings per share
$
0.57

 
$
0.43

CASH DIVIDENDS DECLARED PER SHARE
$
0.1700

 
$
0.1300

See Notes to Condensed Consolidated Financial Statements

3


MARRIOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in millions)
(Unaudited)

 
Three Months Ended
 
March 31, 2014
 
March 31, 2013
Net income
$
172

 
$
136

Other comprehensive income (loss):
 
 
 
Foreign currency translation adjustments

 
(13
)
Other derivative instrument adjustments, net of tax
1

 
7

Unrealized gain on available-for-sale securities, net of tax
1

 
4

Reclassification of losses, net of tax
1

 

Total other comprehensive income (loss), net of tax
3

 
(2
)
Comprehensive income
$
175

 
$
134


See Notes to Condensed Consolidated Financial Statements


4


MARRIOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
 
 
(Unaudited)
 
 
 
March 31,
2014
 
December 31,
2013
ASSETS
 
 
 
Current assets
 
 
 
Cash and equivalents
$
184

 
$
126

Accounts and notes receivable, net
1,035

 
1,081

Current deferred taxes, net
235

 
252

Prepaid expenses
59

 
67

Other
52

 
27

Assets held for sale

 
350

 
1,565

 
1,903

Property and equipment
1,569

 
1,543

Intangible assets
 
 
 
Goodwill
874

 
874

Contract acquisition costs and other
1,126

 
1,131

 
2,000

 
2,005

Equity and cost method investments
222

 
222

Notes receivable, net
141

 
142

Deferred taxes, net
627

 
647

Other
541

 
332

 
$
6,665

 
$
6,794

LIABILITIES AND SHAREHOLDERS’ DEFICIT
 
 
 
Current liabilities
 
 
 
Current portion of long-term debt
$
7

 
$
6

Accounts payable
616

 
557

Accrued payroll and benefits
732

 
817

Liability for guest loyalty programs
661

 
666

Other
580

 
629

 
2,596

 
2,675

Long-term debt
3,295

 
3,147

Liability for guest loyalty programs
1,512

 
1,475

Other long-term liabilities
887

 
912

Shareholders’ deficit
 
 
 
Class A Common Stock
5

 
5

Additional paid-in-capital
2,664

 
2,716

Retained earnings
3,917

 
3,837

Treasury stock, at cost
(8,170
)
 
(7,929
)
Accumulated other comprehensive loss
(41
)
 
(44
)
 
(1,625
)
 
(1,415
)
 
$
6,665

 
$
6,794


See Notes to Condensed Consolidated Financial Statements

5


MARRIOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
(Unaudited)
 
 
Three Months Ended
 
March 31, 2014
 
March 31, 2013
OPERATING ACTIVITIES
 
 
 
Net income
$
172

 
$
136

Adjustments to reconcile to cash provided by operating activities:
 
 
 
Depreciation and amortization
36

 
25

Share-based compensation
25

 
30

Income taxes
16

 
33

Liability for guest loyalty programs
30

 
8

Working capital changes
(121
)
 
(154
)
Other
24

 
40

Net cash provided by operating activities
182

 
118

INVESTING ACTIVITIES
 
 
 
Capital expenditures
(61
)
 
(70
)
Dispositions
292

 

Loan advances
(3
)
 
(3
)
Loan collections
9

 
20

Equity and cost method investments
(1
)
 
(14
)
Contract acquisition costs
(6
)
 
(14
)
Protea escrow deposit
(192
)
 

Other
4

 
(7
)
Net cash provided by (used in) investing activities
42

 
(88
)
FINANCING ACTIVITIES
 
 
 
Commercial paper/Credit Facility, net
149

 
722

Repayment of long-term debt
(2
)
 
(402
)
Issuance of Class A Common Stock
57

 
41

Dividends paid
(50
)
 
(41
)
Purchase of treasury stock
(320
)
 
(217
)
Net cash (used in) provided by financing activities
(166
)
 
103

INCREASE IN CASH AND EQUIVALENTS
58

 
133

CASH AND EQUIVALENTS, beginning of period
126

 
88

CASH AND EQUIVALENTS, end of period
$
184

 
$
221

See Notes to Condensed Consolidated Financial Statements


6


MARRIOTT INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1.
BASIS OF PRESENTATION
The condensed consolidated financial statements present the results of operations, financial position, and cash flows of Marriott International, Inc. (“Marriott,” and together with its subsidiaries “we,” “us,” or the “Company”). In order to make this report easier to read, we refer throughout to (i) our Condensed Consolidated Financial Statements as our “Financial Statements,” (ii) our Condensed Consolidated Statements of Income as our “Income Statements,” (iii) our Condensed Consolidated Balance Sheets as our “Balance Sheets,” (iv) our properties, brands, or markets in the United States and Canada as “North America” or “North American,” and (v) our properties, brands, or markets outside of the United States and Canada as “International.” In addition, references throughout to numbered "Footnotes" refer to the numbered Notes in these Notes to Condensed Consolidated Financial Statements, unless otherwise noted.
During the 2014 first quarter, we modified the information that our President and Chief Executive Officer, who is our "chief operating decision maker" ("CODM"), reviews to be consistent with our continent structure. This structure aligns our business around geographic regions and is designed to enable us to operate more efficiently and to accelerate worldwide growth. We changed our operating segments to reflect this continent structure and have revised our prior period business segment information accordingly. See Footnote No. 11, "Business Segments."
Beginning with the 2014 first quarter, we reclassified amounts attributable to depreciation and amortization that we previously reported under the "General, administrative, and other" and "Owned, leased, and other-direct" captions of our Consolidated Statements of Income and presented these amounts in a separate "Depreciation and amortization" caption. We continue to report depreciation amounts that third party owners reimburse to us under "Reimbursed costs" in our Consolidated Statements of Income. In addition, in our Consolidated Statements of Cash Flows, we reclassified depreciation that third party owners reimburse to us from the "Depreciation and amortization" caption to the "Other" caption. We have reclassified the prior period amounts presented to conform to our 2014 first quarter presentation of these items.
These condensed consolidated Financial Statements have not been audited. We have condensed or omitted certain information and footnote 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, 2013 (“2013 Form 10-K”). Certain terms not otherwise defined in this Form 10-Q have the meanings specified in our 2013 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.
In 2013, we changed our financial reporting cycle to a calendar year-end reporting cycle and an end-of-month quarterly reporting cycle. Accordingly, our 2013 fiscal year began on December 29, 2012 (the day after the end of the 2012 fiscal year) and ended on December 31, 2013, and our 2013 quarters include the three month periods ended March 31, June 30, September 30, and December 31, except that the period ended March 31, 2013 also included December 29, 2012 through December 31, 2012.
The table below shows the reporting periods as we refer to them in this report, their date ranges, and the number of days in each. As shown below, our 2014 first quarter had three fewer days of activity than our 2013 first quarter. Our 2014 calendar year will also have three fewer days of activity than our 2013 fiscal year.

7


Reporting Period
Date Range
Number of Days
2014 first quarter
January 1, 2014 - March 31, 2014
90
2013 first quarter
December 29, 2012 - March 31, 2013
93
2014
January 1, 2014 - December 31, 2014
365
2013
December 29, 2012 - December 31, 2013
368
Our Financial Statements reflect all normal and recurring adjustments necessary to present fairly our financial position as of March 31, 2014, and December 31, 2013, the results of our operations for the three months ended March 31, 2014, and March 31, 2013, and cash flows for the three months ended March 31, 2014, and March 31, 2013. Interim results may not be indicative of fiscal year performance because of seasonal and short-term variations. We have eliminated all material intercompany transactions and balances between entities consolidated in these Financial Statements.
New Accounting Standards
We do not expect that accounting standard updates issued to date and that are effective after March 31, 2014 will have a material effect on our Financial Statements.

2.
INCOME TAXES
Our effective tax rate decreased from 32.3% to 25.5% for the three months ended March 31, 2014 and included a $21 million favorable resolution of an issue with U.S. federal taxing authorities related to guest marketing. This benefit was partially offset by a $3 million benefit we recognized in the 2013 first quarter, which will not recur in 2014, due to retroactive provisions of the American Taxpayer Relief Act of 2012 and higher income before income taxes in the United States which were taxed at a higher rate.
For the 2014 first quarter, our unrecognized tax benefits balance was $14 million, decreasing $20 million from year-end 2013. The unrecognized tax benefits balance included $12 million of tax positions that, if recognized, would impact our effective tax rate.
We file income tax returns, including returns for our subsidiaries, in various jurisdictions around the world. The Internal Revenue Service ("IRS") has examined our federal income tax returns, and we have settled all issues for tax years through 2009. We participate in the IRS Compliance Assurance Program, which accelerates IRS examination of key transactions with the goal of resolving any issues before the taxpayer files its return. As a result, the audits of our open tax years 2010 through 2012 are complete, including all matters that could affect the Company's cash tax benefits related to our spin-off in 2011 of our timeshare operations and timeshare development business, while the 2013 and 2014 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 $25 million in the 2014 first quarter and $15 million in the 2013 first quarter.

3.
SHARE-BASED COMPENSATION
Under our Stock and Cash Incentive Plan (the “Stock Plan”), we award: (1) stock options (our "Stock Option Program") to purchase our Class A Common Stock (our “common stock”); (2) stock appreciation rights (“SARs”) for our common stock (our “SAR Program”); (3) restricted stock units (“RSUs”) of our common stock; and (4) deferred stock units. We grant awards at exercise prices or strike prices that equal the market price of our common stock on the date of grant.

8


We recorded share-based compensation expense for award grants of $25 million for the 2014 first quarter and $30 million for the 2013 first quarter. Deferred compensation costs related to unvested awards totaled $195 million at March 31, 2014 and $108 million at December 31, 2013.
RSUs
We granted 1.9 million RSUs during the 2014 first quarter to certain officers and key employees, and those units vest generally over four years in equal annual installments commencing one year after the grant date. We also granted 0.2 million performance-based RSUs ("PSUs") during the 2014 first quarter to certain named executive officers and their direct reports, subject to the satisfaction of certain performance conditions over, or at the end of, a three-year vesting period. RSUs, including PSUs, granted in the 2014 first quarter had a weighted average grant-date fair value of $51.
SARs and Stock Options
We granted 0.3 million SARs and 0.1 million stock options to officers and key employees during the 2014 first quarter. These SARs and options generally expire ten years after the grant date and both vest and may be exercised in cumulative installments of one quarter at the end of each of the first four years following the grant date. The weighted average grant-date fair value of SARs granted in the 2014 first quarter was $17 and the weighted average exercise price was $53. The weighted average grant-date fair value of stock options granted in the 2014 first quarter was $17 and the weighted average exercise price was $53.
On the grant date, we use a binomial lattice-based valuation model to estimate the fair value of each SAR and option granted. This valuation model uses a range of possible stock price outcomes over the term of the SAR and option, discounted back to a present value using a risk-free rate. Because of the limitations with closed-form valuation models, such as the Black-Scholes model, we have determined that this more flexible binomial model provides a better estimate of the fair value of our options and SARs because it takes into account employee exercise behavior based on changes in the price of our stock and also allows us to use other dynamic assumptions.
We used the following assumptions to determine the fair value of the SARs and stock options we granted during the 2014 first quarter:
Expected volatility
30
%
Dividend yield
1.14
%
Risk-free rate
2.3 - 2.5%

Expected term (in years)
7

In making these assumptions, we base expected volatility on the historical movement of Marriott's stock price. We base risk-free rates on the corresponding U.S. Treasury spot rates for the expected duration at the date of grant, which we convert to a continuously compounded rate. The dividend yield assumption takes into consideration both historical levels and expectations of future payout. The weighted average expected terms for SARs and options are an output of our valuation model which utilizes historical data in estimating the period of time that the SARs and options are expected to remain unexercised. We calculate the expected terms for SARs and options for separate groups of retirement eligible and non-retirement eligible employees. Our valuation model also uses historical data to estimate exercise behaviors, which includes determining the likelihood that employees will exercise their SARs and options before expiration at a certain multiple of stock price to exercise price.
Other Information
As of the end of the 2014 first quarter, we had reserved 29 million shares under the Stock Plan, including 9 million shares under the Stock Option Program and the SAR Program.

9


4.FAIR VALUE OF FINANCIAL INSTRUMENTS
We believe that the fair values of our current assets and current liabilities approximate their reported carrying amounts. We show the carrying values and the fair values of noncurrent financial assets and liabilities that qualify as financial instruments, determined under current guidance for disclosures on the fair value of financial instruments, in the following table:
 
At March 31, 2014
 
At December 31, 2013
($ in millions)
Carrying
Amount
 
Fair Value
 
Carrying
Amount
 
Fair Value
Senior, mezzanine, and other loans
$
141

 
$
142

 
$
142

 
$
145

Marketable securities and other debt securities
111

 
111

 
111

 
111

Total long-term financial assets
$
252

 
$
253

 
$
253

 
$
256

 
 
 
 
 
 
 
 
Senior Notes
$
(2,186
)
 
$
(2,310
)
 
$
(2,185
)
 
$
(2,302
)
Commercial paper
(984
)
 
(984
)
 
(834
)
 
(834
)
Other long-term debt
(121
)
 
(124
)
 
(123
)
 
(124
)
Total long-term financial liabilities
$
(3,291
)
 
$
(3,418
)
 
$
(3,142
)
 
$
(3,260
)

We estimate the fair value of our senior, mezzanine, and other loans, including the current portion, by discounting cash flows using risk-adjusted rates, both of which are Level 3 inputs.
We carry our marketable securities at fair value. Our marketable securities include debt securities of the U.S. Government, its sponsored agencies and other U.S. corporations invested for our self-insurance programs, as well as shares of a publicly traded company, which we value using directly observable Level 1 inputs. The carrying value of these marketable securities at the end of our 2014 first quarter was $111 million. We also have a $65 million mandatorily redeemable preferred equity ownership interest in an entity that owns three hotels that we manage. We account for this investment as a debt security (with an amortized cost of $71 million at the end of the 2014 first quarter, including accrued interest income), and we included it in the "Marketable securities and other debt securities" caption in the preceding table. We estimated the $71 million fair value of this debt security by discounting cash flows using risk-adjusted rates, both of which are Level 3 inputs. The debt security matures in 2015 subject to annual extensions through 2018. We do not intend to sell the debt security and it is not more likely than not that we will be required to sell the investment before recovery of the amortized cost basis, which may be maturity.
We estimate the fair value of our other long-term debt, including the current portion and excluding leases, using expected future payments discounted at risk-adjusted rates, both of which are Level 3 inputs. We determine the fair value of our senior notes using quoted market prices, which are directly observable Level 1 inputs. As noted in Footnote No. 8, "Long-term Debt," even though our commercial paper borrowings generally have short-term maturities of 30 days or less, we classify outstanding commercial paper borrowings as long-term based on our ability and intent to refinance them on a long-term basis. As we are a frequent issuer of commercial paper, we use pricing from recent transactions as Level 2 inputs in estimating fair value. At the end of the 2014 first quarter and year-end 2013, we determined that the carrying value of our commercial paper approximated its fair value due to the short maturity.
See the “Fair Value Measurements” caption of Footnote No. 1, “Summary of Significant Accounting Policies” of our 2013 Form 10-K for more information on the input levels we use in determining fair value.


10


5.
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:
 
 
Three Months Ended
 
March 31, 2014
 
March 31, 2013
(in millions, except per share amounts)
 
 
 
Computation of Basic Earnings Per Share
 
 
 
Net income
$
172

 
$
136

Weighted average shares outstanding
296.1

 
311.8

Basic earnings per share
$
0.58

 
$
0.44

Computation of Diluted Earnings Per Share
 
 
 
Net income
$
172

 
$
136

Weighted average shares outstanding
296.1

 
311.8

Effect of dilutive securities
 
 
 
Employee stock option and SARs plans
3.4

 
4.3

Deferred stock incentive plans
0.8

 
0.8

Restricted stock units
3.0

 
3.1

Shares for diluted earnings per share
303.3

 
320.0

Diluted earnings per share
$
0.57

 
$
0.43

We compute the effect of dilutive securities using the treasury stock method and average market prices during the period. We have excluded the following antidilutive stock options and SARs in our calculation of diluted earnings per share because their exercise prices were greater than the average market prices for the applicable periods:
(a)
for the 2014 first quarter, 0.2 million options and SARs; and
(b)
for the 2013 first quarter, 0.4 million options and SARs.

6.
PROPERTY AND EQUIPMENT
The following table shows the composition of our property and equipment balances at the end of the 2014 first quarter and year-end 2013:
 
 
At Period End
($ in millions)
March 31,
2014
 
December 31,
2013
Land
$
536

 
$
535

Buildings and leasehold improvements
777

 
786

Furniture and equipment
777

 
789

Construction in progress
374

 
338

 
2,464

 
2,448

Accumulated depreciation
(895
)
 
(905
)
 
$
1,569

 
$
1,543


The following table shows the composition of these property and equipment balances that we recorded as capital leases:

11


 
At Period End
($ in millions)
March 31,
2014
 
December 31,
2013
Land
$
8

 
$
8

Buildings and leasehold improvements
57

 
68

Furniture and equipment
22

 
37

Construction in progress
1

 
1

 
88

 
114

Accumulated depreciation
(58
)
 
(83
)
 
$
30

 
$
31

See Footnote No. 12, "Acquisitions and Dispositions" for information on a $10 million impairment charge we recorded on three EDITION hotels in the "Depreciation and amortization" caption of our Income Statement.
7.
NOTES RECEIVABLE
The following table shows the composition of our notes receivable balances (net of reserves and unamortized discounts) at the end of the 2014 first quarter and year-end 2013:
 
At Period End
($ in millions)
March 31,
2014
 
December 31,
2013
Senior, mezzanine, and other loans
$
173

 
$
178

Less current portion
(32
)
 
(36
)
 
$
141

 
$
142

The following table shows the expected future principal payments (net of reserves and unamortized discounts) as well as interest rates for our notes receivable as of the end of the 2014 first quarter:
 
Notes Receivable Principal Payments (net of reserves and unamortized discounts) and Interest Rates ($ in millions)
 
Amount
2014
 
$
32

2015
 
82

2016
 
3

2017
 
3

2018
 
4

Thereafter
 
49

Balance at March 31, 2014
 
$
173

Weighted average interest rate at March 31, 2014
 
4.5
%
Range of stated interest rates at March 31, 2014
 
0 - 8.0%

The following table shows the unamortized discounts for our notes receivable at the end of the 2014 first quarter and year-end 2013:

Notes Receivable Unamortized Discounts ($ in millions)
 
Total
Balance at year-end 2013
 
$
12

Balance at March 31, 2014
 
$
12


At the end of the 2014 first quarter, our recorded investment in impaired “Senior, mezzanine, and other loans” was $102 million, and we had a $90 million notes receivable reserve representing an allowance for credit losses, leaving $12 million of our investment in impaired loans, for which we had no related allowance for credit losses. At year-end 2013, our recorded investment in impaired “Senior, mezzanine, and other loans” was $99 million, and we had a $90 million notes receivable reserve representing an allowance for credit losses, leaving $9 million of our

12


investment in impaired loans, for which we had no related allowance for credit losses. Our average investment in impaired “Senior, mezzanine, and other loans” totaled $101 million for the 2014 first quarter and $94 million for the 2013 first quarter.
We had no activity related to our “Senior, mezzanine, and other loans” notes receivable reserve during the 2014 first quarter. We do not have any past due senior, mezzanine, and other loans as of the end of the 2014 first quarter.

8.
LONG-TERM DEBT
We provide detail on our long-term debt balances in the following table as of the end of the 2014 first quarter and year-end 2013:
 
At Period End
($ in millions)
March 31,
2014
 
December 31,
2013
Senior Notes:
 
 
 
Series G, interest rate of 5.8%, face amount of $316, maturing November 10, 2015
(effective interest rate of 6.6%)(1)
$
312

 
$
312

Series H, interest rate of 6.2%, face amount of $289, maturing June 15, 2016
(effective interest rate of 6.3%)(1)
289

 
289

Series I, interest rate of 6.4%, face amount of $293, maturing June 15, 2017
(effective interest rate of 6.5%)(1)
292

 
292

Series K, interest rate of 3.0%, face amount of $600, maturing March 1, 2019
(effective interest rate of 4.4%)(1)
596

 
595

Series L, interest rate of 3.3%, face amount of $350, maturing September 15, 2022
(effective interest rate of 3.4%)(1)
349

 
349

Series M, interest rate of 3.4%, face amount of $350, maturing October 15, 2020
(effective interest rate of 3.6%)(1)
348

 
348

Commercial paper, average interest rate of 0.3% at March 31, 2014
984

 
834

$2,000 Credit Facility

 

Other
132

 
180

 
3,302

 
3,199

Less current portion classified in:
 
 
 
Other current liabilities (liabilities held for sale)

 
(46
)
Current portion of long-term debt
(7
)
 
(6
)
 
$
3,295

 
$
3,147

 
(1) 
Face amount and effective interest rate are as of March 31, 2014.
All of our long-term debt was, and to the extent currently outstanding is, recourse to us but unsecured. Other debt in the preceding table includes capital leases, among other items.
We are a party to a multicurrency revolving credit agreement (the “Credit Facility”) that provides for $2,000 million of aggregate borrowings to support general corporate needs, including working capital, capital expenditures, share repurchases, and letters of credit. The availability of the Credit Facility also supports our commercial paper program. Borrowings under the Credit Facility generally bear interest at LIBOR (the London Interbank Offered Rate) plus a spread, based on our public debt rating. We also pay quarterly fees on the Credit Facility at a rate based on our public debt rating. While any outstanding commercial paper borrowings and/or borrowings under our Credit Facility generally have short-term maturities, we classify the outstanding borrowings as long-term based on our ability and intent to refinance the outstanding borrowings on a long-term basis. The Credit Facility expires on July 18, 2018. See the “Cash Requirements and Our Credit Facilities” caption later in this report in the “Liquidity and Capital Resources” section for information on our available borrowing capacity at March 31, 2014.
We show future principal payments for our debt as of the end of the 2014 first quarter in the following table:


13


Debt Principal Payments ($ in millions)
 
Amount
2014
 
$
5

2015
 
319

2016
 
297

2017
 
301

2018
 
993

Thereafter
 
1,387

Balance at March 31, 2014
 
$
3,302

We paid cash for interest, net of amounts capitalized, of $11 million in the 2014 first quarter and $21 million in the 2013 first quarter.

9.
COMPREHENSIVE INCOME AND SHAREHOLDERS' (DEFICIT) EQUITY

The following table details the accumulated other comprehensive income activity for the 2014 first quarter:

($ in millions)
Foreign Currency Translation Adjustments
 
Other Derivative Instrument Adjustments
 
Unrealized Gains on Available-For-Sale Securities
 
Accumulated Other Comprehensive Loss
Balance at year-end 2013
$
(31
)
 
$
(19
)
 
$
6

 
$
(44
)
Other comprehensive income before reclassifications (1)

 
1

 
1

 
2

Amounts reclassified from accumulated other comprehensive loss

 
1

 

 
1

Net other comprehensive income

 
2

 
1

 
3

Balance at March 31, 2014
$
(31
)
 
$
(17
)
 
$
7

 
$
(41
)
(1) 
We present the portions of other comprehensive income before reclassifications for the 2014 first quarter that relate to unrealized gains on available-for-sale securities net of $1 million of deferred taxes.
The following table details the changes in common shares outstanding and shareholders’ deficit for the 2014 first quarter:

(in millions, except per share amounts)
 
 
Common
Shares
Outstanding
 
 
Total
 
Class A
Common
Stock
 
Additional
Paid-in-
Capital
 
Retained
Earnings
 
Treasury Stock,
at Cost
 
Accumulated
Other
Comprehensive
Loss
298.0

 
Balance at year-end 2013
$
(1,415
)
 
$
5

 
$
2,716

 
$
3,837

 
$
(7,929
)
 
$
(44
)

 
Net income
172

 

 

 
172

 

 


 
Other comprehensive income
3

 

 

 

 

 
3


 
Cash dividends ($0.1700 per share)
(50
)
 

 

 
(50
)
 

 

3.4

 
Employee stock plan issuance
21

 

 
(52
)
 
(42
)
 
115

 

(7.0
)
 
Purchase of treasury stock
(356
)
 

 

 

 
(356
)
 

294.4

 
Balance at March 31, 2014
$
(1,625
)
 
$
5

 
$
2,664

 
$
3,917

 
$
(8,170
)
 
$
(41
)


10.
CONTINGENCIES
Guarantees
We issue guarantees to certain lenders and hotel owners, chiefly to obtain long-term management contracts. The guarantees generally have a stated maximum funding amount and a term of four to ten years. The terms of guarantees to lenders generally require us to fund if cash flows from hotel operations are inadequate to cover annual

14


debt service or to repay the loan at the end of the term. The terms of the guarantees to hotel owners generally require us to fund if the hotels do not attain specified levels of operating profit. Guarantee fundings to lenders and hotel owners are generally recoverable as loans repayable to us out of future hotel cash flows and/or proceeds from the sale of hotels. We also enter into project completion guarantees with certain lenders in conjunction with hotels that we or our joint venture partners are building.
We measure and record our liability for the fair value of a guarantee on a nonrecurring basis, that is when we issue or modify a guarantee, using Level 3 internally developed inputs. We generally base our calculation of the estimated fair value of a guarantee on the income approach or the market approach, depending on the type of guarantee. For the income approach, we use internally developed discounted cash flow and Monte Carlo simulation models that include the following assumptions, among others: projections of revenues and expenses and related cash flows based on assumed growth rates and demand trends; historical volatility of projected performance; the guaranteed obligations; and applicable discount rates. We base these assumptions on our historical data and experience, industry projections, micro and macro general economic condition projections, and our expectations. For the market approach, we use primarily market comparable data and assumptions about market capitalization rates, credit spreads, growth rates, and inflation. We show the maximum potential amount of our future guarantee fundings and the carrying amount of our liability for guarantees for which we are the primary obligor at March 31, 2014 in the following table:
($ in millions)
Guarantee Type
Maximum Potential
Amount  of Future Fundings
 
Liability for  Guarantees
Debt service
$
77

 
$
3

Operating profit
92

 
34

Other
330

 
4

Total guarantees where we are the primary obligor
$
499

 
$
41

We included our liability at March 31, 2014 for guarantees for which we are the primary obligor on our Balance Sheet in “Other long-term liabilities.”
Our guarantees listed in the preceding table that will not be in effect until the underlying properties open and we begin to operate the properties or certain other events occur consist of $20 million of debt service guarantees, $12 million of operating profit guarantees, and $315 million of other guarantees.
Other guarantees that were not currently in effect include a "put option" agreement we entered into in the 2014 first quarter with the lenders for a construction loan. In conjunction with entering into a management agreement for the Times Square EDITION hotel in New York City (currently projected to open in 2017), and the hotel's ownership group obtaining acquisition financing and entering into agreements concerning future construction financing for the mixed use project (which includes both the hotel and adjacent retail space), we agreed in the first quarter of 2014 to provide credit support to the lenders through a "put option" agreement. Under this agreement, we granted the lenders the right, upon an uncured event of default by the hotel owner under, and an acceleration of, the mortgage loan, to require us to purchase the hotel component of the property during the first two years after opening for $315 million. The lenders may extend this period for up to three years to complete foreclosure if the loan has been accelerated and certain other conditions are met. We do not expect that the lenders will exercise this "put option." We have no ownership interest in this hotel.
The preceding table does not include the following guarantees:
$97 million of guarantees for Senior Living Services lease obligations of $71 million (expiring in 2018) and lifecare bonds of $26 million (estimated to expire in 2016), for which we are secondarily liable. Sunrise Senior Living, Inc. (“Sunrise”) is the primary obligor on both the leases and $4 million of the lifecare bonds; HCP, Inc., as successor by merger to CNL Retirement Properties, Inc. (“CNL”), is the primary obligor on $21 million of the lifecare bonds; and Five Star Senior Living is the primary obligor on the remaining $1 million of lifecare bonds. Before we sold the Senior Living Services business in 2003, these were our guarantees of obligations of our then consolidated Senior Living Services subsidiaries. Sunrise and CNL have indemnified us for any fundings we may be called upon to make under these guarantees. Our

15


liability for these guarantees had a carrying value of $3 million at March 31, 2014. Sunrise previously provided us $5 million of cash collateral to cover potential exposure under the existing lease and bond obligations for 2012 and 2013. In conjunction with our consent of the extension in 2011 of certain lease obligations for an additional five-year term until 2018, Sunrise provided us an additional $1 million of cash collateral and an $85 million letter of credit issued by Key Bank to secure our exposure under the lease guarantees and certain other obligations of Sunrise. The letter of credit balance was $81 million at the end of the 2014 first quarter, which decreased as a result of lease payments made and lifecare bonds redeemed. During the extension term, Sunrise agreed to make an annual payment to us from the cash flow of the continuing lease facilities, subject to a $1 million annual minimum.
Lease obligations, for which we became secondarily liable when we acquired the Renaissance Hotel Group in 1997, consisting of annual rent payments of approximately $6 million and total remaining rent payments through the initial term of approximately $34 million. Most of these obligations expire by the end of 2020. CTF Holdings Ltd. (“CTF”) had originally provided €35 million in cash collateral in the event that we are required to fund under such guarantees, approximately $4 million (€3 million) of which remained at March 31, 2014. Our exposure for the remaining rent payments through the initial term will decline to the extent that CTF obtains releases from the landlords or these hotels exit the system. Since the time we assumed these guarantees, we have not funded any amounts, and we do not expect to fund any amounts under these guarantees in the future.
Certain guarantees and commitments relating to the timeshare business, which were outstanding at the time of the 2011 Timeshare spin-off and for which we became secondarily liable as part of the spin-off. These Marriott Vacations Worldwide Corporation ("MVW") payment obligations, for which we currently have a total exposure of $16 million, relate to various letters of credit and several other guarantees. MVW has indemnified us for these obligations. At the end of the 2014 first quarter, we expect these obligations will expire as follows: $1 million in 2014, $3 million in 2017, and $12 million (14 million Singapore Dollars) in 2022. We have not funded any amounts under these obligations, and do not expect to do so in the future. Our liability for these obligations had a carrying value of $2 million at March 31, 2014.
A guarantee for a lease, originally entered into in 2000, for which we became secondarily liable in 2012 as a result of our sale of the ExecuStay corporate housing business to Oakwood Worldwide ("Oakwood"). Oakwood has indemnified us for the obligations under this guarantee. Our total exposure at the end of the 2014 first quarter for this guarantee is $6 million in future rent payments through the end of the lease in 2019. Our liability for this guarantee had a carrying value of $1 million at March 31, 2014.
In addition to the guarantees described in the preceding paragraphs, in conjunction with financing obtained for specific projects or properties owned by joint ventures in which we are a party, we may provide industry standard indemnifications to the lender for loss, liability, or damage occurring as a result of the actions of the other joint venture owner or our own actions.
Commitments and Letters of Credit
In addition to the guarantees we note in the preceding paragraphs, as of March 31, 2014, we had the following commitments outstanding:
A commitment to invest up to $10 million of equity for a noncontrolling interest in a partnership that plans to purchase North American full-service and limited-service properties, or purchase or develop hotel-anchored mixed-use real estate projects. We expect to fund $8 million of this commitment in 2014. We do not expect to fund the remaining $2 million of this commitment.
A commitment to invest up to $22 million of equity for noncontrolling interests in a partnership that plans to purchase or develop limited-service properties in Asia. We expect to fund this commitment as follows: $10 million in 2014 and $12 million in 2015.
A commitment, with no expiration date, to invest up to $11 million in a joint venture for development of a new property. We expect to fund this commitment as follows: $6 million in 2014 and $5 million in 2015.

16


A commitment to invest $18 million in the renovation of a leased hotel. We expect to fund this commitment by the end of 2014.
We have a right and under certain circumstances an obligation to acquire our joint venture partner’s remaining 45 percent interest in two joint ventures over the next seven years at a price based on the performance of the ventures. We made a $12 million (€9 million) deposit in conjunction with this contingent obligation in 2011 and $8 million (€6 million) in deposits in 2012. In the 2013 first quarter we acquired an additional five percent noncontrolling interest in each venture, applying $5 million (€4 million) of those deposits. The remaining deposits are refundable to the extent we do not acquire our joint venture partner’s remaining interests.
Various commitments for the purchase of information technology hardware, software, as well as accounting, finance, and maintenance services in the normal course of business totaling $85 million. We expect to fund these commitments as follows: $78 million in 2014, $5 million in 2015, and $2 million in 2016. The majority of these commitments will be recovered through cost reimbursement charges to properties in our system.
Several commitments aggregating $35 million with no expiration date and which we do not expect to fund.
A commitment to invest up to $10 million under certain circumstances for additional mandatorily redeemable preferred equity ownership interest in an entity that owns three hotels. We may fund this commitment, which expires in 2015 subject to annual extensions through 2018; however, we have not yet determined the amount or timing of any potential funding.
A $9 million loan commitment that we extended to the owner of a property to cover the cost of renovation shortfalls which we expect to fund in 2015. The commitment will expire at the end of the 2016 second quarter.
At March 31, 2014, we had $78 million of letters of credit outstanding ($77 million outside the Credit Facility and $1 million under our Credit Facility), the majority of which were for our self-insurance programs. Surety bonds issued as of March 31, 2014, totaled $123 million, the majority of which federal, state and local governments requested in connection with our self-insurance programs.
Legal Proceedings
On January 19, 2010, several former Marriott employees (the "plaintiffs") filed a putative class action complaint against us and the Stock Plan (the "defendants"), alleging that certain equity awards of deferred bonus stock granted to the plaintiffs and other current and former employees for fiscal years 1963 through 1989 are subject to vesting requirements under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), that are in certain circumstances more rapid than those set forth in the awards. The plaintiffs seek damages, class attorneys' fees and interest, with no amounts specified. The action is proceeding in the United States District Court for the District of Maryland (Greenbelt Division) and Dennis Walter Bond Sr. and Michael P. Steigman are the current named plaintiffs. The parties completed limited discovery concerning Marriott's defense of statute of limitations with respect to Mr. Bond and Mr. Steigman and completed discovery concerning class certification. We opposed plaintiffs' motion for class certification and sought summary judgment on the issue of statute of limitations in 2012. On August 9, 2013, the court denied our motion for summary judgment on the issue of statute of limitations and deferred its ruling on class certification. We moved to amend the court's judgment on our motion for summary judgment in order to certify an interlocutory appeal, which was denied. On January 7, 2014, the court denied plaintiffs' motion for class certification, and issued a Scheduling Order for full discovery of the remaining issues in this case. The parties filed a joint motion to modify the Scheduling Order on March 26, 2014. We and the Stock Plan have denied all liability, and while we intend to vigorously defend against the claims being made by the plaintiffs, we can give you no assurance about the outcome of this lawsuit. We currently cannot estimate the range of any possible loss to the Company because an amount of damages is not claimed, there is uncertainty as to the number of parties for whom the claims may be pursued, and the possibility of our prevailing on our statute of limitations defense on appeal may significantly limit any claims for damages.

17


In March 2012, the Korea Fair Trade Commission ("KFTC") obtained documents from two of our managed hotels in Seoul, Korea in connection with an investigation which we believe is focused on pricing of hotel services within the Seoul region. Since then, the KFTC has conducted additional fact-gathering at those two hotels and also has collected information from another Marriott managed hotel located in Seoul. We understand that the KFTC also has sought documents from numerous other hotels in Seoul and other parts of Korea that we do not operate, own or franchise. We have not yet received a complaint or other legal process. We are cooperating with this investigation.

11.
BUSINESS SEGMENTS
We are a diversified global lodging company. During the 2014 first quarter, we modified the information that our President and Chief Executive Officer, who is our CODM, reviews to be consistent with our continent structure. This structure aligns our business around geographic regions and is designed to enable us to operate more efficiently and to accelerate worldwide growth. As a result of modifying our reporting information, we revised our operating segments to eliminate our former Luxury segment, which we allocated between our existing North American Full-Service operating segment, and the following four new operating segments: Asia Pacific, Caribbean and Latin America, Europe, and Middle East and Africa.
Although our North American Full-Service and North American Limited-Service segments meet the applicable accounting criteria to be reportable business segments, our four new operating segments do not meet the criteria for separate disclosure as reportable business segments. Accordingly, we combined our four new operating segments into an "all other" category which we refer to as "International" and have revised our prior period business segment information to conform to our new business segment presentation.
As of the end the 2014 first quarter, our three business segments include the following brands:
North American Full-Service: Marriott Hotels, Marriott Conference Centers, JW Marriott, Renaissance Hotels, Renaissance ClubSport, Gaylord Hotels, The Ritz-Carlton (together with residential properties associated with some of The Ritz-Carlton hotels), and Autograph Collection properties located in the United States and Canada;
North American Limited-Service: Courtyard, Fairfield Inn & Suites, SpringHill Suites, Residence Inn, and TownePlace Suites properties located in the United States and Canada;
International: Marriott Hotels, JW Marriott, Renaissance Hotels, Autograph Collection, Courtyard, AC Hotels by Marriott, Fairfield Inn & Suites, Residence Inn, The Ritz-Carlton (together with residential properties associated with some The Ritz-Carlton hotels), Bulgari Hotels & Resorts, EDITION and Marriott Executive Apartments properties located outside the United States and Canada.
We evaluate the performance of our business segments based largely on the results of the segment without allocating corporate expenses, income taxes, or indirect general, administrative, and other expenses. We allocate gains and losses, equity in earnings or losses from our joint ventures, and divisional general, administrative, and other expenses to each of our segments. “Other unallocated corporate” represents a portion of our revenues, general, administrative, and other expenses, equity in earnings or losses, and other gains or losses that we do not allocate to our segments. It also includes license fees we receive from our credit card programs and license fees from MVW. Our CODM monitors assets for the consolidated company but does not use assets by business segment when assessing performance or making business segment resource allocations.





18


Revenues
 
 
Three Months Ended
($ in millions)
March 31, 2014

March 31, 2013
North American Full-Service Segment
$
2,049

 
$
2,028

North American Limited-Service Segment
667

 
608

International Segment
520

 
445

Total segment revenues
3,236

 
3,081

Other unallocated corporate
57

 
61

 
$
3,293

 
$
3,142



Net Income (Loss)
 
 
Three Months Ended
($ in millions)
March 31, 2014
 
March 31, 2013
North American Full-Service Segment
$
131

 
$
133

North American Limited-Service Segment
115

 
106

International Segment
65

 
50

Total segment financial results
311

 
289

Other unallocated corporate
(55
)
 
(60
)
Interest expense and interest income
(25
)
 
(28
)
Income taxes
(59
)
 
(65
)
 
$
172

 
$
136

As a result of the changes to our operating segments discussed above, we reallocated goodwill among our affected reporting units based on the relative fair value of each remaining or newly identified reporting unit. We also determined that the estimated fair value of each reporting unit exceeded its carrying amount. The following table shows the reclassification of goodwill we previously associated with our former Luxury segment to our North American Full-Service and International segments.

Goodwill
($ in millions)
North American
Full-Service
Segment
 
North American
Limited-Service
Segment
 
International
Segment
 
Former Luxury
Segment
 
Total
Goodwill
Year-end 2013 balance:
 
 
 
 
 
 
 
 
 
Goodwill
$
335

 
$
125

 
$
298

 
$
170

 
$
928

Accumulated impairment losses

 
(54
)
 

 

 
(54
)
 
$
335

 
$
71

 
$
298

 
$
170

 
$
874

 
 
 
 
 
 
 
 
 
 
Segment reclassifications
$
57

 
$

 
$
113

 
$
(170
)
 
$

 
 
 
 
 
 
 
 
 
 
March 31, 2014 balance:
 
 
 
 
 
 
 
 
 
Goodwill
$
392

 
$
125

 
$
411

 
$

 
$
928

Accumulated impairment losses

 
(54
)
 

 

 
(54
)
 
$
392

 
$
71

 
$
411

 
$

 
$
874


12.
ACQUISITIONS AND DISPOSITIONS

19



2014 Acquisitions

On the first day of our 2014 second quarter, we acquired Protea Hotels' brands and hotel management business ("Protea Hotels") for $193 million (ZAR 2.046 billion) in cash and recognized approximately: $183 million (ZAR 1.931 billion) in intangible assets consisting of deferred contract acquisition costs, a brand intangible, and goodwill; and $10 million (ZAR 115 million) of tangible assets consisting of property and equipment, equity method investments, and other current assets at the acquisition date. At the end of the 2014 first quarter, we transferred $192 million in cash to a third party in the form of an escrow deposit. As part of the transaction, Protea Hospitality Holdings created an independent property ownership company that retained ownership of the hotels Protea Hospitality Holdings formerly owned, and entered into long-term management and lease agreements with Marriott for these hotels. The property ownership company also retained a number of minority interests in other Protea-managed hotels. As a result of the transaction, we added over 100 hotels (over 10,000 rooms) across three brands in South Africa and six other Sub-Saharan African countries to our International segment portfolio and currently manage approximately 45 percent, franchise approximately 39 percent, and lease approximately 16 percent of those rooms.

2014 Dispositions

In the 2014 first quarter, we sold The London EDITION to a third party, received approximately $230 million in cash, and simultaneously entered into definitive agreements to sell The Miami and The New York EDITION hotels that we are currently developing to the same third party. The total sales price for the three EDITION hotels will be approximately $816 million. We expect to sell The Miami EDITION in the second half of 2014 and The New York EDITION in the first half of 2015, when we anticipate that construction will be complete. We will retain long-term management agreements for each of the three hotels sold. We did not reclassify The Miami EDITION or The New York EDITION assets and liabilities as held for sale because the hotels are under construction and not available for immediate sale in their present condition. In the 2014 first quarter, we evaluated the three hotels for recovery and subsequently recorded a $10 million impairment charge in the "Depreciation and amortization" caption of our Income Statement as our current cost estimates exceed our total fixed sales price. We did not allocate that charge to any of our segments.
In the 2014 first quarter, we sold our right to acquire the landlord’s interest in a leased real estate property and certain attached assets of the property, consisting of $106 million (€77 million) in property and equipment and $48 million (€35 million) in liabilities. We received $62 million (€45 million) in cash and transferred $45 million (€33 million) of related obligations. We continue to operate the property under a long-term management agreement.



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
We make forward-looking statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report based on the beliefs and assumptions of our management and on information currently available to us. Forward-looking statements include information about our possible or assumed future results of operations, which follow under the headings “Business and Overview,” “Liquidity and Capital Resources,” and other statements throughout this report preceded by, followed by or that include the words “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions.
Any number of risks and uncertainties could cause actual results to differ materially from those we express in our forward-looking statements, including the risks and uncertainties we describe below and other factors we describe from time to time in our periodic filings with the U.S. Securities and Exchange Commission (the “SEC”). We therefore caution you not to rely unduly on any forward-looking statement. The forward-looking statements in this report speak only as of the date of this report, and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments, or otherwise.
In addition, see the “Item 1A. Risk Factors” caption in the “Part II-OTHER INFORMATION” section of this report.
BUSINESS AND OVERVIEW
Change in Reporting Cycle
As further detailed in Footnote No. 1, "Basis of Presentation," beginning with our 2013 fiscal year, we changed our financial reporting cycle to a calendar year-end reporting cycle and an end-of-month quarterly reporting cycle. The table below shows the reporting periods as we refer to them in this report, their date ranges, and the number of days in each. As shown below, our 2014 first quarter had three fewer days of activity than our 2013 first quarter and our 2014 calendar year will have three fewer days of activity than our 2013 fiscal year.
Reporting Period
Date Range
Number of Days
2014 first quarter
January 1, 2014 - March 31, 2014
90
2013 first quarter
December 29, 2012 - March 31, 2013
93
2014
January 1, 2014 - December 31, 2014
365
2013
December 29, 2012 - December 31, 2013
368
We discuss the estimated impact of the three fewer days of activity in our 2014 first quarter within the "Revenues" and "Operating Income" sections of this report.
Overview
We are a worldwide operator, franchisor, and licensor of hotels and timeshare properties in 71 countries and territories under numerous brand names. We also develop, operate, and market residential properties and provide services to home/condominium owner associations. At the end of the 2014 first quarter, we had 3,934 properties (679,321 rooms) in our system, including 40 home and condominium products (4,228 units) for which we manage the related owners’ associations.
We earn base management fees and in many cases incentive management fees from the properties that we manage, and we earn franchise fees on the properties that others operate under franchise agreements with us. Base fees typically consist of a percentage of property-level revenue while incentive fees typically consist of a percentage of net house profit adjusted for a specified owner return. Net house profit is calculated as gross operating profit (house profit) less management fees and noncontrollable expenses such as insurance, real estate taxes, capital spending reserves.

21


Under our business model, we typically manage or franchise hotels, rather than own them. At March 31, 2014, we operated 42 percent of the hotel rooms in our worldwide system under management agreements; our franchisees operated 55 percent under franchise agreements; and we owned or leased only 2 percent. The remainder represented our interest in unconsolidated joint ventures that manage hotels and provide services to franchised properties.
Our emphasis on long-term management contracts and franchising tends to provide more stable earnings in periods of economic softness, while adding new hotels to our system generates growth, typically with little or no investment by the company. This strategy has driven substantial growth while minimizing financial leverage and risk in a cyclical industry. In addition, we believe minimizing our capital investments and adopting a strategy of recycling the investments that we do make maximizes and maintains our financial flexibility.
We remain focused on doing the things that we do well; that is, selling rooms, taking care of our guests, and making sure we control costs both at company-operated properties and at the corporate level ("above-property"). Our brands remain strong as a result of skilled management teams, dedicated associates, superior customer service with an emphasis on guest and associate satisfaction, significant distribution, our Marriott Rewards and The Ritz-Carlton Rewards loyalty programs, a multichannel reservations system, and desirable property amenities. We strive to effectively leverage our size and broad distribution.
We, along with owners and franchisees, continue to invest in our brands by means of new, refreshed, and reinvented properties, new room and public space designs, and enhanced amenities and technology offerings. We address, through various means, hotels in the system that do not meet standards. We continue to enhance the appeal of our proprietary, information-rich, and easy-to-use website, Marriott.com, and of our associated mobile smartphone applications and mobile website that connect to Marriott.com, through functionality and service improvements, and we expect to continue capturing an increasing proportion of property-level reservations via this cost-efficient channel.
Our profitability, as well as that of owners and franchisees, has benefited from our approach to property-level and above-property productivity. Properties in our system continue to maintain very tight cost controls. We also control above-property costs, some of which we allocate to hotels, by remaining focused on systems, processing, and support areas.
Performance Measures
We believe Revenue per Available Room ("RevPAR"), which we calculate by dividing room sales for comparable properties by room nights available to guests for the period, is a meaningful indicator of our performance because it measures the period-over-period change in room revenues for comparable properties. RevPAR may not be comparable to similarly titled measures, such as revenues. References to RevPAR statistics, including occupancy and average daily rate, throughout this report for the 2013 first quarter reflect the calendar period from January 1, 2013 to March 31, 2013. For the properties located in countries that use currencies other than the U.S. dollar, the comparisons to the prior year period are on a constant U.S. dollar basis. We calculate constant dollar statistics by applying exchange rates for the current period to the prior comparable period.
We define our comparable properties as those that were open and operating under one of our brands for at least one full calendar year as of the end of the current period and have not, in either the current or previous periods presented, (i) undergone significant room or public space renovations or expansions, (ii) been converted between company operated and franchised, or (iii) sustained substantial property damage or business interruption. Comparable properties represented the following percentage of our properties for the three months ended March 31, 2014 and March 31, 2013, respectively: (1) 91% and 95% of North American properties; (2) 79% and 68% of International properties; and (3) 90% and 91% of total properties.
We also believe company-operated house profit margin, which is the ratio of property-level gross operating profit (also known as house profit) to total property-level revenue, is a meaningful indicator of our performance because this ratio measures our overall ability as the operator to produce property-level profits by generating sales and controlling the operating expenses over which we have the most direct control. House profit includes room, food and beverage, and other revenue and the related expenses including payroll and benefits expenses, as well as repairs and maintenance, utility, general and administrative, and sales and marketing expenses. House profit does

22


not include the impact of management fees, furniture, fixtures and equipment replacement reserves, insurance, taxes, or other fixed expenses.
Operating Results
Our 2014 first quarter results reflected a favorable economic climate in many markets around the world, low supply growth in most markets in the U.S. and Europe, improved pricing in most markets globally, and a year-over-year increase in the number of properties in our system. For the three months ended March 31, 2014, comparable worldwide systemwide RevPAR increased 6.2 percent to $103.72, average daily rates increased 3.2 percent on a constant dollar basis to 150.02, and occupancy increased 1.9 percentage points to 69.1 percent, compared to the same period a year ago.
Strong U.S. group demand as well as the shift in Easter to the 2014 second quarter contributed to increased RevPAR growth. The strength in group business during the quarter also contributed to increased food and beverage revenue at our company-operated hotels. Transient demand in the 2014 first quarter was strong in the western U.S. and Florida, where we continued to eliminate discounts, shift business into higher rated price categories, and raise room rates. New supply in New York City and the prior year comparison to the Presidential Inauguration in Washington D.C. somewhat constrained the RevPAR growth in the 2014 first quarter.
Our U.S. group bookings for future short-term group business strengthened during the quarter. For group business, two-thirds is typically booked before the year of arrival and one-third is booked in the year of arrival. As of the end of the 2014 first quarter, the group revenue pace for company-operated Marriott Hotels brand properties in North America was up over five percent for stays in 2014, compared to 2013 first quarter booking pace for stays in 2013, reflecting improved group demand and greater pricing power.
In Europe, the United Kingdom and Germany had strong demand in the 2014 first quarter, while weak demand in France reflected a weak economy. Eastern Europe experienced more moderate RevPAR growth, constrained by the political turmoil in Russia and the Ukraine. In the Middle East and Africa, demand was strong in the United Arab Emirates and Jordan, but remained weak in Egypt due to political instability. Demand in the Asia Pacific region strengthened during the quarter, as Greater China, Japan, Australia, and India experienced higher RevPAR growth, benefiting from increased special corporate and transient business. Thailand lodging demand was weakened by political instability during the quarter, and new supply continued to constrain growth in certain markets in Southern China. In the Caribbean and Latin America, strong RevPAR growth throughout the region was driven by group demand with particular strength in Mexico.
We monitor market conditions and carefully price our rooms daily in accordance with individual property demand levels, generally adjusting room rates as demand changes. We also modify the mix of our business to increase revenue as demand changes. Demand for higher rated rooms improved in most markets in the 2014 first quarter, which allowed us to reduce discounting and special offers for transient business in many markets. This mix improvement benefited average daily rates. For our company-operated properties, we continue to focus on enhancing property-level house profit margins and actively pursue productivity improvements.
System Growth and Pipeline
During the 2014 first quarter, we added 5,855 rooms (gross) to our system. Approximately 56 percent of new rooms are located outside the United States and 18 percent of the room additions are conversions from competitor brands. At the end of the 2014 first quarter, we had over 200,000 rooms in our lodging development pipeline, which includes hotel rooms under construction and under signed contracts, as well as nearly 30,000 hotel rooms approved for development but not yet under signed contracts. Our pipeline does not include the over 10,000 rooms associated with the Protea transaction which closed on April 1, 2014. We expect the number of our hotel rooms (gross) will increase by approximately 6 percent in 2014, including the addition of rooms associated with the Protea transaction, and approximately 5 percent, net of deletions. The figures in this paragraph do not include residential or timeshare units.



23


CONSOLIDATED RESULTS
The following discussion presents our analysis of the significant items of the results of our operations for the 2014 first quarter compared to the 2013 first quarter.
Revenues
First Quarter. Revenues increased by $151 million (5 percent) to $3,293 million in the 2014 first quarter from $3,142 million in the 2013 first quarter as a result of higher cost reimbursements revenue ($122 million), higher franchise fees ($12 million), higher owned, leased, and other revenue ($10 million), higher incentive management fees ($5 million) primarily due to increases outside of North America, and higher base management fees ($2 million). We estimate that the three fewer days of activity in the 2014 first quarter compared to the 2013 first quarter reduced fee revenues by approximately $5 million.
Cost reimbursements revenue represents reimbursements of costs incurred on behalf of managed, franchised, and licensed 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 Marriott Rewards and Ritz-Carlton Rewards programs. As we record cost reimbursements based upon costs incurred with no added markup, this revenue and related expense has no impact on either our operating income or net income. The $122 million increase in total cost reimbursements revenue, to $2,670 million in the 2014 first quarter from $2,548 million in the 2013 first quarter, reflected the impact of higher demand at our properties and growth across the system. Since the end of the 2013 first quarter, our managed rooms decreased by 1,822 rooms and our franchised rooms increased by 18,312 rooms, net of hotels exiting the system.
The $2 million increase in total base management fees, to $155 million in the 2014 first quarter from $153 million in the 2013 first quarter, mainly reflected stronger RevPAR due to increased demand ($8 million), partially offset by decreased fees due to properties that converted from managed to franchised ($3 million), foreign exchange losses ($2 million), and three fewer days of activity (approximately $2 million). The $12 million increase in total franchise fees, to $163 million in the 2014 first quarter from $151 million in the 2013 first quarter, primarily reflected stronger RevPAR due to increased demand ($8 million) and the impact of unit growth across the system and properties that converted to franchised from managed ($5 million), partially offset by three fewer days of activity (approximately $3 million). The $5 million increase in total incentive management fees, to $71 million in the 2014 first quarter from $66 million in the 2013 first quarter largely reflected higher net property-level revenue, predominantly for International segment hotels, which resulted in higher property-level income and margins.
The $10 million increase in owned, leased, and other revenue, to $234 million in the 2014 first quarter from $224 million in the 2013 first quarter, predominantly reflected $13 million of higher owned and leased revenue, partially offset by $3 million of lower termination fees. Higher owned and leased revenue reflected $8 million in revenue from a North American Full-Service managed property we acquired in the 2013 fourth quarter as well as strong demand at several leased properties. Combined branding fees for credit card endorsements and the sale of branded residential real estate by others totaled $26 million in the 2014 first quarter and $25 million in the 2013 first quarter.

Operating Income
First Quarter. Operating income increased by $28 million to $254 million in the 2014 first quarter from $226 million in the 2013 first quarter. The $28 million increase in operating income reflected a $16 million decrease in general, administrative and other expenses, $12 million increase in franchise fees, $5 million increase in incentive management fees, $4 million of higher owned, leased, and other revenue net of direct expenses, and a $2 million increase in base management fees, partially offset by an $11 million increase in depreciation and amortization expense. We estimate that the three fewer days of activity in the 2014 first quarter decreased operating income by approximately $5 million. We discuss the reasons for the increases in base management fees, franchise fees, and incentive management fees compared to the 2013 first quarter in the preceding “Revenues” section.

24


The $4 million (9 percent) increase in owned, leased, and other revenue net of direct expenses was largely attributable to $7 million of higher owned and leased revenue, net of direct expenses, partially offset by $3 million of lower termination fees. Higher owned and leased revenue, net of direct expenses reflected $4 million in net favorable results at several leased properties and $3 million of revenue, net of direct expenses for a North American Full-Service managed property that we acquired in the 2013 fourth quarter.
General, administrative, and other expenses decreased by $16 million (10 percent) to $148 million in the 2014 first quarter from $164 million in the 2013 first quarter. The decrease largely reflected $5 million of foreign exchange gains, $4 million of lower compensation and other overhead expenses, $3 million of lower legal expenses, and $2 million of lower expenses related to brand initiatives. The $16 million decrease in total general, administrative, and other expenses included $14 million that we did not allocate to any of our segments, and $2 million that we allocated as follows: $1 million to our North American Full-Service segment and $1 million to our International segment.
Depreciation and amortization expense increased by $11 million (44 percent) to $36 million in the 2014 first quarter from $25 million in the 2013 first quarter. The increase primarily reflected the $10 million impairment charge on the three EDITION hotels discussed in Footnote No. 12, "Acquisitions and Dispositions."

Interest Income and Income Tax
First Quarter. Interest income increased by $2 million (67 percent) to $5 million in the 2014 first quarter compared to $3 million in the 2013 first quarter. This increase in interest income primarily reflected $2 million earned on the $65 million mandatorily redeemable preferred equity ownership interest acquired in the 2013 second quarter. See Footnote No. 4, "Fair Value of Financial Instruments" for more information on this interest.
Our tax provision decreased by $6 million (9 percent) to $59 million in the 2014 first quarter compared to $65 million in the 2013 first quarter. The decrease was primarily due to the $21 million favorable resolution of a U.S. federal tax issue relating to a guest marketing program, which was partially offset by an increase in tax provision resulting from higher pre-tax earnings due to increased demand.
Net Income
First Quarter. Net income increased by $36 million to $172 million in the 2014 first quarter from $136 million in the 2013 first quarter, and diluted earnings per share increased by $0.14 per share (33 percent) to $0.57 per share in the 2014 first quarter from $0.43 per share in the 2013 first quarter. As discussed in more detail in the preceding sections beginning with “Revenues” or as shown in the Condensed Consolidated Statements of Income, the $36 million increase in net income compared to the year-ago quarter was due to lower general, administrative, and other expenses ($16 million), higher franchise fees ($12 million), lower income taxes ($6 million), higher incentive management fees ($5 million), higher owned, leased, and other revenue net of direct expenses ($4 million), higher base management fees ($2 million), higher interest income ($2 million), higher equity in earnings ($2 million), and lower interest expense ($1 million). These increases were partially offset by higher depreciation and amortization expense ($11 million) and lower gains and other income ($3 million).
Earnings Before Interest Expense, Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted EBITDA
EBITDA, a financial measure that is not prescribed or authorized by United States generally accepted accounting principles (“GAAP”), reflects earnings excluding the impact of interest expense, provision for income taxes, depreciation and amortization. We believe that EBITDA is a meaningful indicator of operating performance because we use it to measure our ability to service debt, fund capital expenditures, and expand our business. We also use EBITDA, as do analysts, lenders, investors and others, 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

25


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 provision for income taxes can vary considerably among companies. EBITDA also excludes depreciation and amortization expense which we report under "Depreciation and amortization" as well as depreciation we include under "Reimbursed costs" in our Consolidated Statements of Income, 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 believe that Adjusted EBITDA, another non-GAAP financial measure, is a meaningful indicator of operating performance. Our Adjusted EBITDA reflects an adjustment to exclude share-based compensation expense for all periods presented. Because companies use share-based payment awards differently, both in the type and quantity of awards granted, we excluded share-based compensation expense to address considerable variability among companies in recording compensation expense. We believe that Adjusted EBITDA that excludes this item is a meaningful measure of our operating performance because it permits period-over-period comparisons of our ongoing core operations before this item and facilitates our comparison of results before this item with results from other lodging companies.
EBITDA and Adjusted EBITDA have limitations and should not be considered in isolation or as substitutes for performance measures calculated under GAAP. Both of these non-GAAP measures exclude certain cash expenses that we are obligated to make. In addition, other companies in our industry may calculate EBITDA and in particular Adjusted EBITDA differently than we do or may not calculate them at all, limiting EBITDA's and Adjusted EBITDA's usefulness as comparative measures.
We show our EBITDA and Adjusted EBITDA calculations for the 2014 and 2013 first quarters that reflect the changes we describe above and reconcile those measures with Net Income in the following table:
 
Three Months Ended
($ in millions)
March 31, 2014
 
March 31, 2013
Net Income
$
172

 
$
136

Interest expense
30

 
31

Tax provision
59

 
65

Depreciation and amortization
36

 
25

Depreciation classified in reimbursed costs
12

 
12

Interest expense from unconsolidated joint ventures
1

 
1

Depreciation and amortization from unconsolidated joint ventures
4

 
3

EBITDA
$
314

 
$
273

Share-based compensation (including share-based compensation reimbursed by third-party owners)
25

 
30

Adjusted EBITDA
$
339

 
$
303


BUSINESS SEGMENTS
We are a diversified global lodging company. During the 2014 first quarter, we modified the information that our President and Chief Executive Officer reviews to be consistent with our continent structure. This structure aligns our business around geographic regions and is designed to enable us to operate more efficiently and to accelerate worldwide growth. As a result of modifying our reporting information, we revised our operating segments to eliminate our former Luxury segment, which we allocated between our existing North American Full-Service operating segment, and the following four new operating segments: Asia Pacific, Caribbean and Latin America, Europe, and Middle East and Africa.
Although our North American Full-Service and North American Limited-Service segments meet the applicable accounting criteria to be reportable business segments, the four new operating segments do not meet the criteria to be reportable and were combined into an "all other" category, which we refer to as "International." We

26


revised prior period business segment information to conform to our new business segment presentation. See Footnote No. 11, “Business Segments,” to our Financial Statements for further information on our segment changes and other information about each segment, including revenues and a reconciliation of segment results to net income.
We added 163 properties (26,158 rooms) and 54 properties (10,131 rooms) exited our system since the end of the 2013 first quarter. These figures do not include residential units. During that time we also added three residential properties (161 units) and no residential properties exited the system.
See the "CONSOLIDATED RESULTS" caption earlier in this report for further information.
First Quarter. Total segment financial results increased by $22 million to $311 million in the 2014 first quarter from $289 million in the 2013 first quarter, and total segment revenues increased by $155 million to $3,236 million in the 2014 first quarter, a 5 percent increase from revenues of $3,081 million in the 2013 first quarter.
The quarter-over-quarter increase in segment revenues of $155 million was a result of $128 million of higher cost reimbursements revenue, a $12 million increase in franchise fees, $8 million of higher owned, leased, and other revenue, a $5 million increase in incentive management fees, and $2 million of higher base management fees. The quarter-over-quarter increase in segment results of $22 million across our business reflected a $12 million increase in franchise fees, $5 million of higher incentive management fees, a $2 million increase in base management fees, $2 million of higher owned, leased, corporate housing, and other revenue net of direct expenses, a $2 million decrease in general, administrative, and other expenses, and a $1 million increase in equity in earnings, partially offset by a $2 million increase in depreciation and amortization expense. For more information on the variances see the preceding sections beginning with “Revenues.”
In the 2014 first quarter, 36 percent of our managed properties paid incentive management fees to us versus 33 percent in the 2013 first quarter. Also, 34 International segment properties that did not earn any incentive management fees in the year-ago quarter earned a combined $4 million in incentive management fees in the 2014 first quarter. In addition, in the 2014 first quarter, 55 percent of our incentive fees came from properties outside the United States, versus 52 percent in the 2013 first quarter. In North America, 21 percent of managed properties paid incentive management fees to us in the 2014 first quarter, compared to 19 percent in the 2013 first quarter.
See “Statistics” below for detailed information on Systemwide RevPAR and Company-operated RevPAR by segment, region, and brand.
Compared to the 2013 first quarter, worldwide comparable company-operated house profit margins in the 2014 first quarter increased by 1.3 percentage points and worldwide comparable company-operated house profit per available room ("HP-PAR") increased by 10.6 percent on a constant U.S. dollar basis, reflecting higher occupancy, rate increases, and improved productivity. These same factors contributed to North American company-operated house profit margins increasing by 1.6 percentage points compared to the 2013 first quarter. HP-PAR at those same properties increased by 12.9 percent. International company-operated house profit margins increased by 0.7 percentage points, and HP-PAR at those properties increased by 6.3 percent reflecting increased demand and higher RevPAR in most locations and improved productivity.


27


Summary of Properties by Brand
Including residential properties, we added 32 lodging properties (5,855 rooms) during the 2014 first quarter, while 14 properties (2,154 rooms) exited the system, increasing our total properties to 3,934 (679,321 rooms). These figures include 40 home and condominium products (4,228 units), for which we manage the related owners’ associations.
Unless otherwise indicated, our references to Marriott Hotels throughout this report include JW Marriott and Marriott Conference Centers, references to Renaissance Hotels include Renaissance ClubSport, and references to Fairfield Inn & Suites include Fairfield Inn.

28


At March 31, 2014, we operated, franchised, and licensed the following properties by brand :
 
 
Company-Operated
 
Franchised / Licensed
 
Other (3)
Brand
Properties
 
Rooms
 
Properties
 
Rooms
 
Properties
 
Rooms
U.S. Locations
 
 
 
 
 
 
 
 
 
 
 
Marriott Hotels
130

 
67,762

 
182

 
55,534

 

 

Marriott Conference Centers
10

 
2,915

 

 

 

 

JW Marriott
15

 
9,735

 
7

 
2,911

 

 

Renaissance Hotels
33

 
15,035

 
41

 
11,805

 

 

Renaissance ClubSport

 

 
2

 
349

 

 

Gaylord Hotels
5

 
8,098

 

 

 

 

Autograph Collection

 

 
34

 
8,842

 

 

The Ritz-Carlton
37

 
11,040

 

 

 

 

The Ritz-Carlton-Residential (1)
30

 
3,598

 

 

 

 

Courtyard
274

 
43,127

 
563

 
74,991

 

 

Fairfield Inn & Suites
4

 
1,197

 
691

 
62,022

 

 

SpringHill Suites
29

 
4,582

 
281

 
31,852

 

 

Residence Inn
118

 
17,090

 
508

 
58,544

 

 

TownePlace Suites
19

 
2,123

 
203

 
19,964

 

 

Timeshare (2)

 

 
47

 
10,578

 

 

Total U.S. Locations
704

 
186,302

 
2,559

 
337,392

 

 

 
 
 
 
 
 
 
 
 
 
 
 
Non-U.S. Locations
 
 
 
 
 
 
 
 
 
 
 
Marriott Hotels
139

 
41,070

 
39

 
11,545

 

 

JW Marriott
38

 
13,982

 
4

 
1,016

 

 

Renaissance Hotels
54

 
17,772

 
24

 
7,037

 

 

Autograph Collection
3

 
584

 
18

 
2,543

 
5

 
348

The Ritz-Carlton
47

 
13,777

 

 

 

 

The Ritz-Carlton-Residential (1)
9

 
575

 
1

 
55

 

 

The Ritz-Carlton Serviced Apartments
4

 
579

 

 

 

 

EDITION
2

 
251

 

 

 

 

AC Hotels by Marriott

 

 

 

 
74

 
8,329

Bulgari Hotels & Resorts
2

 
117

 
1

 
85

 

 

Marriott Executive Apartments
28

 
4,423

 

 

 

 

Courtyard
63

 
13,300

 
56

 
9,898

 

 

Fairfield Inn & Suites
1

 
148

 
16

 
1,944

 

 

SpringHill Suites

 

 
2

 
299

 

 

Residence Inn
6

 
749

 
18

 
2,600

 

 

TownePlace Suites

 

 
2

 
278

 

 

Timeshare (2)

 

 
15

 
2,323

 

 

Total Non-U.S. Locations
396

 
107,327

 
196

 
39,623

 
79

 
8,677

 
 
 
 
 
 
 
 
 
 
 
 
Total
1,100

 
293,629

 
2,755

 
377,015

 
79

 
8,677

 
(1)
Represents projects where we manage the related owners’ association. We include residential products once they possess a certificate of occupancy.
(2)
Timeshare properties licensed by MVW under the Marriott Vacation Club, The Ritz-Carlton Destination Club, The Ritz-Carlton Residences, and Grand Residences by Marriott brand names. MVW's property and room counts are reported on a period-end basis for the MVW quarter ended March 28, 2014 and includes products that are in active sales as well as those that are sold out.
(3)
Properties operated by unconsolidated joint ventures that hold management agreements and also provide services to franchised properties.


29


Total Lodging Properties by Segment
At March 31, 2014, we operated, franchised, and licensed the following properties by segment:
 
 
Total Lodging Properties
 
Properties
 
Rooms
 
U.S.
 
Non-U.S.
 
Total
 
U.S.
 
Non-U.S.
 
Total
North American Full-Service Segment (1)
 
 
 
 
 
 
 
 
 
 
 
Marriott Hotels
312

 
15

 
327

 
123,296

 
5,355

 
128,651

Marriott Conference Centers
10

 

 
10

 
2,915

 

 
2,915

JW Marriott
22

 
1

 
23

 
12,646

 
221

 
12,867

Renaissance Hotels
74

 
2

 
76

 
26,840

 
790

 
27,630

Renaissance ClubSport
2

 

 
2

 
349

 

 
349

Gaylord Hotels
5

 

 
5

 
8,098

 

 
8,098

Autograph Collection
34

 
1

 
35

 
8,842

 
233

 
9,075

The Ritz-Carlton
37

 
1

 
38

 
11,040

 
267

 
11,307

The Ritz-Carlton-Residential (2)
30

 
2

 
32

 
3,598

 
214

 
3,812

The Ritz-Carlton Serviced Apartments

 

 

 

 

 

 
526

 
22

 
548

 
197,624

 
7,080

 
204,704

North American Limited-Service Segment (1)
 
 
 
 
 
 
 
 
 
 
 
Courtyard
837

 
21

 
858

 
118,118

 
3,835

 
121,953

Fairfield Inn & Suites
695

 
14

 
709

 
63,219

 
1,610

 
64,829

SpringHill Suites
310

 
2

 
312

 
36,434

 
299

 
36,733

Residence Inn
626

 
20

 
646

 
75,634

 
2,928

 
78,562

TownePlace Suites
222

 
2

 
224

 
22,087

 
278

 
22,365

 
2,690

 
59

 
2,749

 
315,492

 
8,950

 
324,442

International Segment (1)
 
 
 
 
 
 
 
 
 
 
 
Marriott Hotels

 
163

 
163

 

 
47,260

 
47,260

JW Marriott

 
41

 
41

 

 
14,777

 
14,777

Renaissance Hotels

 
76

 
76

 

 
24,019

 
24,019

Autograph Collection (3)

 
25

 
25

 

 
3,242

 
3,242

Courtyard

 
98

 
98

 

 
19,363

 
19,363

Fairfield Inn & Suites

 
3

 
3

 

 
482

 
482

Residence Inn

 
4

 
4

 

 
421

 
421

AC Hotels by Marriott (3)

 
74

 
74

 

 
8,329

 
8,329

Marriott Executive Apartments

 
28

 
28

 

 
4,423

 
4,423

The Ritz-Carlton

 
46

 
46

 

 
13,510

 
13,510

Bulgari Hotels & Resorts

 
3

 
3

 

 
202

 
202

EDITION

 
2

 
2

 

 
251

 
251

The Ritz-Carlton-Residential (2)

 
8

 
8

 

 
416

 
416

The Ritz-Carlton Serviced Apartments

 
4

 
4

 

 
579

 
579

 

 
575

 
575

 

 
137,274

 
137,274

 
 
 
 
 
 
 
 
 
 
 
 
Timeshare (4)
47

 
15

 
62

 
10,578

 
2,323

 
12,901

 


 


 


 


 


 


Total
3,263

 
671

 
3,934

 
523,694

 
155,627

 
679,321

 
(1)
North American includes properties located in the United States and Canada. International includes properties located outside the United States and Canada.
(2)
Represents projects where we manage the related owners’ association. We include residential products once they possess a certificate of occupancy.
(3)
All AC Hotels by Marriott properties and five Autograph Collection properties included in this table are operated by unconsolidated joint ventures that hold management agreements and also provide services to franchised properties.
(4)
Timeshare properties licensed by MVW under the Marriott Vacation Club, The Ritz-Carlton Destination Club, The Ritz-Carlton Residences, and Grand Residences by Marriott brand names. MVW's property and room counts are reported on a period-end basis for the MVW quarter ended March 28, 2014 and includes products that are in active sales as well as those that are sold out.



30


The following tables show occupancy, average daily rate, and RevPAR for comparable properties, for each of the brands in our North American Full-Service and North American Limited-Service segments, and for our International segment by region. Systemwide statistics include data from our franchised properties, in addition to our owned, leased, and managed properties.
 
Comparable Company-Operated
North American Properties (1)
 
Comparable Systemwide
North American Properties (1)
 
 
Three Months Ended
March 31, 2014
 
Change vs.
Three Months Ended March 31, 2013
 
Three Months Ended
March 31, 2014
 
Change vs.
Three Months Ended March 31, 2013
 
Marriott Hotels
 
 
 
 
 
 
 
 
Occupancy
73.1
%
 
1.7
%
pts. 
70.5
%
 
1.9
%
pts. 
Average Daily Rate
$
186.20

 
3.0
%
 
$
171.30

 
3.5
%
 
RevPAR
$
136.07

 
5.5
%
 
$
120.80

 
6.3
%
 
Renaissance Hotels
 
 
 
 
 
 
 
 
Occupancy
71.1
%
 
1.5
%
pts. 
69.9
%
 
2.2
%
pts. 
Average Daily Rate
$
172.46

 
1.5
%
 
$
157.92

 
2.6
%
 
RevPAR
$
122.63

 
3.8
%
 
$
110.37

 
5.9
%
 
Autograph Collection
 
 
 
 
 
 
 
 
Occupancy
*

 
*

 
75.8
%
 
1.5
%
pts.
Average Daily Rate
*

 
*

 
$
230.70

 
10.7
%
 
RevPAR
*

 
*

 
$
174.82

 
13.0
%
 
The Ritz-Carlton North America