Marriott's (MAR) CEO Arne Sorenson Q2 2016 Results - Earnings Call Transcript

| About: Marriott International, (MAR)

Marriott International, Inc. (NYSE:MAR)

Q2 2016 Earnings Conference Call

July 28, 2016 10:00 AM ET

Executives

Arne Sorenson - President & CEO

Leeny Oberg - EVP & CFO

Laura Paugh - SVP

Betsy Dahm - SD

Analysts

Harry Curtis - Nomura

Robin Farley - UBS

Joseph Greff - JPMorgan

Felicia Hendrix - Barclays

Sean Kelly - Bank of America

Ryan Meliker - Canaccord Genuity

Thomas Allen - Morgan Stanley

Jeffrey Donnelly - Wells Fargo

David Katz - Telsey Group

Rich Hightower - Evercore ISI

Chad Beynon - Macquarie Research Equities

Vince Ciepiel - Cleveland Research

William Crow - Raymond James

Operator

Welcome to Marriott International Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. And after the speaker’s remarks, there will be a question-and-answer session [Operator Instructions].

Thank you. I will now turn the conference over to Mr. Arne Sorenson, President and CEO of Marriott International.

Arne Sorenson

Good morning, everyone. Welcome to our second quarter 2016 earnings conference call. Joining me today are Leeny Oberg, Executive Vice President and Chief Financial Officer, Laura Paugh, Senior Vice President Investor Relations and Betsy Dahm, Senior Director Investor Relations.

Before we get started, let me remind everyone that many of our comments today are not historical facts and are considered forward-looking statements under Federal Securities Laws. These statements are subject to numerous risks and uncertainties as described in our SEC filings which could cause future results to differ materially from those expressed in or implied by our comments.

Forward-looking statements in the press release that we issued last night along with our comments today are effective only today July 28, 2016 and will not be updated as actual events unfold. You can find a reconciliation of our non-GAAP financial measures referred to in our remarks on our website at www.marriott.com/investor.

The big news this year for Marriott is the Starwood Acquisition. As you know we have received all of the necessary regulatory clearances throughout the world with the exception of China. We are in the second phase of China review and we have been working cooperatively with the regulatory authorities. Phase 2 review ends on August 9. We remain optimistic that we will receive clearance from China and will complete the transaction in the coming weeks.

Before we move to specifics, let me make three observations about our results in the quarter. First, you will not be surprised that U.S. economic growth has been slower than we anticipated when the year began. In fact over the last three quarters, room sales of our nearly 300 largest corporate customers have gradually weakened from 4% growth year-over-year in the fourth quarter to 2% in the first quarter and less than 1% in the second quarter.

Fortunately group business remains strong and discounted leisure business has picked up the slack. With half of the year complete our second half North America REVPAR guidance assumes economic growth remains on the same slow pace that we have seen year-to-date.

Second, with the stronger dollar we are seeing fewer international guests coming to our U.S. hotels. With the impact most pronounced in a few key gateway markets. We estimate the number of room nights occupied by international guests at comparable hotels in New York and Miami declined by 10% to 15% in the second quarter.

For the U.S. as a whole, t he number of room nights from international guests in our hotels declined by roughly 3%. Third, specific regional issues have had a meaningful impact on REVPAR growth. Terrorism in Brussels, Paris and Istanbul, Zika in the Caribbean and Latin America, oil prices in Houston and oil prices and unrest in the Middle East to name a few.

Combining the headwinds from the economy foreign exchange and regional issues Marriott's worldwide; systemwide comparable hotel REVPAR increased 2.9% in the second quarter just below our guidance. We were pleased with this performance because despite the environment REVPAR index data shows that we are taking share. Our already high system wide worldwide REVPAR index increased 90 basis points year-to-date as we extended our lead over our competitive set.

We are also increasing our share of new development. Driven by the strength of our brands we are already the largest hotel company in the world. Our global system totaled nearly 780,000 rooms at the end of the second quarter and our worldwide pipeline increased to more than 285,000 rooms, nearly 15% higher than the year ago quarter.

In 2016 we expect our worldwide distribution not including Starwood will increase by roughly 7.5% gross or 6.5% net. According to SER [ph] well Marriott has 11% of open rooms in the U.S. today. We have been selected to manage or franchise 30% of the rooms currently under construction, more than any other hotel brand company.

Our large pipeline is particularly impressive given today’s financing environment. New rules requiring banks to carry higher capital reserves have constrained lending, causing lender to be more selective on both refinancing and new hotel construction. This selectivity includes more conservative loan to value ratios, a bias towards smaller transactions and caution about concentrated exposures in individual markets. To our benefit, lenders continue to favor the strongest brand.

While our business is cyclical our cash flow is less sensitive than you might think. We estimate that one point of REVPAR worldwide over a full year moves our fee revenue by only about 1% or $25 million, and one point of REVPAR moves the net results of our owned and leased hotels by about $3 million.

Meaningful unit growth and low risk fee revenue yields terrific operating leverage. Our performance this quarter highlights the fact. Second quarter comparable worldwide actual dollar REVPAR increased 2.3%. Adjusted EBITDA increased 8% and adjusted EPS grew 18%.

Our business throws off outstanding cash flow. We may make investments from time to time for particularly attractive management or franchise agreements on high value of hotels, we also buy and build great brands and businesses, we’ve added five brands in as many years and the pending Starwood transaction will add another 11 brands. But if we can’t find an attractive investment we return cash to shareholders through dividends and share repurchases.

Over the past five years we have returned nearly $7.5 billion to shareholders, repurchasing nearly 130 million shares at an average price of $49 per share. We remain committed to minimizing owned assets and maximizing returns to shareholders. Our pre tax return on invested capital was 50% in the second quarter.

Before I turn things over to Leeny, I’d like to say I am incredibly impressed with the people at Starwood. Despite the disruption and uncertainty they have experienced over the last 15 months, the Starwood team has done a great job, acceralating their development pipeline, spinning off Vistana, launching new marketing initiatives and opening nearly 125 hotels all the while also taking care of the guests and managing the everyday business. Thank you. I’d also like to say that I have never been more proud of Marriott associates; this team has done a lot of transactions over the last five years. From the spin-off at Marriott vacations worldwide in 2011 to the more recent acquisitions of AC hotels, Gaylord, Protea and Delta.

With each of these transactions Marriott associates worked hard to first execute the transaction and then capture the strategic value of the deal, all while growing and managing our existing business. The Starwood transaction should be completed in the coming weeks bringing these terrific teams together. Both the Marriott and Starwood teams have done exhaustive planning to get ready and we are excited by our prospects. While we will see a lot of progress in the near term we expect that full integration will be a two year project.

We are bullish about the power of the combined company. Starwood is known for its very strong brands, marketing knowhow and outstanding frequent traveler program. Marriott has a proven track record in creating and growing leading brands, improving underperforming brands and expanding distribution. The combination of Marriott and Starwood should bring even more including cost savings in G&A and hotel operations and revenue opportunities. We expect to accelerate the growth of Starwood’s great brands and the ultimate combination of our rewards programs and Starwood preferred guests will create the most compelling frequent traveler program in the industry by far.

Now, I’d like to turn things over to Leeny to talk more about our second quarter results. Leeny?

Leeny Oberg

Thanks Arne. In the second quarter we reported diluted earnings per share of $0.96, a 10% increase from the prior year. Adjusted for the Starwood transaction expenses, diluted earnings per share totaled $1.03 an 18% increase from the prior year. Adjusted EPS was about $0.04 to $0.05 ahead of the midpoint of our guidance, fees were about $0.02 to $0.03 below those expectations due to weaker than expected REVPAR and lower than expected franchise re-licensing fees.

Our owned, leased and other lines was about $0.01 shy of our expectations due to slightly lower than expected branding fees. G&A came in about $0.01 favorable to expectations. The joint venture line was $0.01 to $0.02 better than expected largely due to strong hotel performance.

Finally, our tax rate generated $0.05 to $0.06 of better than expected EPS due to some favorable discreet tax items. Worldwide constant dollar system wide REVPAR rose roughly 3%. For our company managed hotels, worldwide house [ph] profit margins increased 60 basis points.

In North America, company managed REVPAR rose 3.6% and house profit margins rose 100 basis points. House profit margins benefitted from productivity gains and lower energy costs. On a system wide basis, North America’s system wide REVPAR rose 3.2% in the quarter with particular strength in Los Angeles, New Orleans and Atlanta.

Transient REVPAR rose 2% in the quarter as we maintained our occupancy by opening discount channel. Group REVPAR rose 7% and catering sales increased more than 5% in the quarter. Overall group cancellation rates remained normal and attendance at group meetings met our expectations. Group business continues to look solid for the second half of 2016 with system wide North America group revenue paced [ph] up 5% although the timing of holidays will influence quarterly comparison.

Third quarter system wide group revenue pace in North America is up 9% while fourth quarter pace is flat year-over-year. Encouragingly, 2017 group pace is up 7%. Outside North America, second quarter system wide comparable REVPAR rose 2% on a constant dollar basis or declined 1% using local currency. In Europe, constant dollar system wide REVPAR increased 3%. Germany’s REVPAR rose 9% with strong group business REVPAR in Spain rose at double digit rate benefitting from a stronger economy and large number of guests that would have visited hotels in the Middle East in the past.

REVPAR in France, Belgium and Turkey remained very weak. System wide REVPAR in the Asia-Pacific region increased nearly 6%, South-Korea’s REVPAR increased dramatically on easy comparison to last year’s MERS outbreak. REVPAR in Greater China rose 3% with very strong results in Shanghai and Beijing and modest growth in Hong Kong. Economic growth increased REVPAR in India by 10% in the quarter.

We saw occupancy declines in the Caribbean and Latin America largely due to weak economic conditions and the impact of the Zika virus. Occupancy rates were also lower in the Middle East and Africa region due to the earlier start of Ramadan, oversupply in Dubai, ongoing political unrest in many countries and the lower price of oil.

Total fee revenue in the second quarter increased 4% with incentive fees up 16%. Base fees declined 3% due to a tough comparison to deferred fees recognized in the year ago quarter and unfavorable FX rate.

Franchise fees increased 6% despite 3 million less in lower like in -- in relicensing fees reflecting pure asset sales among our franchise communities.

Total incentive fees increased 16% with North America hotel incentive fees up 22%. Worldwide 64% of our managed hotels paid incentive fees in the quarter compared to 59% in the year ago quarter. In North America alone, 62% of managed hotels paid incentive fees compared to 55% in the year ago quarter.

Owned leased and other revenues net of direct expenses increased 20% in the quarter reflecting renovations at the Tokyo, Ritz-Carlton and the Renaissance Jaragua, somewhat offset by the sale of our St. Thomas Ritz-Carlton last year.

In addition, results reflect an easy comparison to last year’s pre-opening cost for the New York addition hotel. Branding fees increased 14% with higher card holder sales from our co-branded credit card and higher sales of Ritz-Carlton residences.

Reported general and administrative costs increased 11% or 1% when adjusted for the $14 million of Starwood related transition and transaction cost in the second quarter. Reported operating margins totaled 10% for both the 2016 and 2015 quarters. Adjusting for cost reimbursement and Starwood transition and transaction costs, operating margins reached 53% in 2016 compared to 50% in the prior year in the second quarter.

Interest expense increased to $57 million in the second quarter, excluding the $11 million cost of a bridge facility commitment, adjusted interest expense totaled $46 million. In preparation for the upcoming transaction we raised $1.5 billion in senior unsecured debt during the second quarter. The 5.5 year and 10 year notes were priced at the lowest interest cost for comparable maturities in the company’s history. These offerings increased our long term debt to $4.1 billion paid off our standing commercial paper balances and increased our cash and cash equivalent to nearly $700 million.

Second quarter adjusted EBITDA increased 8% over the prior year and adjusted EBITDA margins totaled 65%. Making an EPS projection for 2016 is difficult. To assist the modelers, however we provided some P&L guidance for Marriott’s legacy business for the next two quarters.

For the third quarter we expect worldwide system wide constant dollar REVPAR will increase 3% to 4% benefitting from the favorable holiday pattern and strong group bookings including the Olympics in Brazil.

Total fee revenue for the Marriott standalone business totaled $495 million to $500 million, 6% to 8% growth over the 2015 third quarter and adjusted EBITDA as expected to total $476 million to $481 million a 10% to 12% growth over the prior year.

For the fourth quarter, we expect worldwide system wide constant dollar REVPAR will moderate to a 2% to 3% increase reflecting tougher holiday comparisons in North America.

Total fee revenue for the Marriott standalone business could total $485 million to $490 million, a 7% to 8% growth over the 2015 fourth quarter.

Adjusted EBITDA for the fourth quarter is expected to total $461 million to $471 million, a 15% to 17% increase over the prior year. We expect worldwide system wide REVPAR will increase roughly 3% for the full year of 2016. Given our expected 6.5% worldwide net unit growth and modest increases in G&A we anticipate that our legacy business will generate roughly $1.9 billion of adjusted EBITDA for the full year, 10% more than in 2015. We expect incentive fees to grow at a mid-teen’s rate.

Compared to our full year 2016 adjusted EBITDA forecast from last quarter, our current adjusted EBITDA outlook is $36 million lower at the midpoint with more modest REVPAR growth, some construction delays pushing hotel openings into early 2017 and fewer asset sales among our franchise community we’ve reduced our fee outlook by $40 million including $10 million in lower franchise re-licensing fees.

Elsewhere on the P&L, we’ve reduced our owned leased and other net forecast a bit due to some fine tuning of our branding fee estimate while our new forecast for G&A is about $10 million better than our prior forecast.

For the Marriott legacy business 2016 investments spending could total $450 million to $550 million including about $100 million in maintenance spending. Excluding Starwood, we anticipate recycling $200 million to $250 million through asset sales and loan repayments during 2016.

Given that transition and transaction costs are uncertain at this point, we are including these costs in our 2016 guidance but expect to break out such expenses as actual results are reported as we did this quarter.

Like you, we rely on Starwood’s publicly disclosed forecast of their REVPAR growth, unit growth and adjusted EBITDA for their business. When the transaction closes, we expect to assume Starwood’s outstanding debt issue roughly 136 million Marriott shares and increased net debt by roughly $3.5 billion for the cash component of the deal.

Given we and Starwood are still two separate companies, we can’t comment on the pace of Starwood’s asset sales in 2016. But with the completion of the transaction you can be sure we will focus very quickly on getting back to our targeted leverage level as quickly as possible.

With regard to future G&A spending, we expect to have our new organization largely in place by year end 2016, although some transition costs will carry over into 2017 and even a bit into 2018 as we integrate our systems and technology platforms.

We continue to believe we will achieve $250 million in steady state annual G&A savings. Once the transaction is complete, we will work to prepare 2015 and 2016 pro forma adjusted quarterly income statements to reflect the combination. These statements should be ready sometime this fall.

We believe the transaction will close in the coming weeks and now one more housekeeping matter for you. A typical schedule for declaring the third quarter dividend is immediately following our August board meeting scheduled this year for next week August 4. While we plan to pay a dividend in the third quarter, the announcement of the third quarter record and payment date made be delayed a bit until there is greater clarity around the actual transaction closing day.

We appreciate your patience as we work through these issues and particularly appreciate your interest in Marriott so that we can speak to as many of you as possible, we ask that you limit yourself to one question and one follow up. Crystal will take questions now.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from the line of Harry Curtis with Nomura.

Harry Curtis

Hi, good morning, everyone. Arne your comments about the sequential trend in the economy were reasonably downbeat yet your level of confidence seems to be pretty strong relative to the second half and your forward bookings in group for next year are fairly decent. What gives you the confidence that it actually won't get worse from here because history does tell us that it has got a reasonable shot at getting worse?

Arne Sorenson

Yes, well good morning Harry. Obviously the strength of the economy is the biggest question I think in terms of forecasting how we are likely to perform in the coming quarters. And to some extent is the place maybe you can see this up a little bit over the second quarter. I think as we guided a quarter ago we have an overly rosy view about the strength of GDP in the United States particularly and as a consequence we continue to stick with our 3% to 5% REVPAR for the full year that we have provided at the beginning of the year.

I think today we have obviously experienced actual second quarter number which came in essentially right at the low end of our guidance in the United States and a little bit below the end globally when you factor in some of what’s happening around the world. And that I think is fundamentally a reflection of lower GDP growth in the United States that wont’ be anticipated.

But it is still positive GDP growth, I think to some extent the question you and we could ask of ourselves is we what more solid, more confident in the kind of guidance we are giving today than what we gave a quarter ago. And I think the best answer to that is that we now are making forecast based on essentially the current face of GDP growth in the United States which is weak not on a more rosy scenario.

Is it possible the U.S. economy performs worse than that, of course it is. But when you look at the range of economic data that comes out including recent employment reports and consumer confidence reports and corporate profits and some of those sorts of things, it looks to us like it’s a reasonable good bet that the economy will continue to grow, albeit grow maybe somewhat anemically. And there does not appear to be data out there which would suggest that it is getting meaningfully weaker from a GDP perspective. But that is the question that continues to keep your eye on.

Harry Curtis

Thank you. And my follow-up question is how quickly do you think you can get to your target leverage ratio? And the reason I ask that is at that point you'll be generating some substantial free cash flow and if you could give us your thoughts on possibly taking the dividend up which investors seem to be paying more or attaching more value through these days?

Leeny Oberg

Thanks, Harry. As we said – as I said in my comments we'll obviously as soon as we get going with this transaction and close we'll be working on driving that leverage ratio down to our targeted levels of 3 to 3.25 as quickly as possible. I think as well and I think I would fully expect that we would be engaging in share repurchase and enjoying the flexibility that provides as we kind of move forward.

We always will continue to look at dividend, but for the moment we are comfortable with our 30%, roughly 30% payout ratio and would expect that once we get the target leverage ratios down to the levels that we'd like that we would begin being back in the market for share repurchase.

Harry Curtis

Very good. Thank you.

Operator

Your next question comes from the line of Robin Farley with UBS.

Robin Farley

Great. Thanks. I'm curious about the decline in the gross room additions for 2016. I guess, it was down about 50 basis, but I guess just given that we're halfway through year it seems like a lot of those projects would have been just sort of months from opening. So I'm just wondering how that supply could come down so close to when those additions were expected to hit?

Arne Sorenson

Yes. I think it’s good question Robin, and good morning. As we put out in the press release and the prepared remarks we have seen really some construction pace expand. And I would think about Europe and North America has been primarily examples of that. And that is about construction workers and supply and to some extent maybe a little bit about how essential it is to get open instantly.

And I think in some respects that in a somewhat weaker market, somewhat more anxious market that allowing the construction to take a little longer is a rational thing that some of our partners are doing. And as a consequence we see that the construction pace has expanding just a little bit. We are not seeing cancellations of projects however and I think generally what we're talking about is projects that formally we would have expected to open probably in the fourth quarter of the year opening some time in 2017.

We've looked really hard at the incoming deals in our development pipeline, and I think we've been pleasantly surprised to see that new signings in most regions of the world are comparable if not up a little bit compared to gangbuster year we had in 2015, including new deal signed in North America. And so we feel that actually it shows continued strong interest in growing with our brands and is not really a fundamental change, but is a bit of fine tuning on whether we open before or after New Year's Eve.

Robin Farley

Okay. Thank you. And then just as a follow-up. I'm just curious that your guidance for the full year being now at kind of a single point at that plus 3%, typically you give a range maybe early in the year is that sort of 200 basis points spread that, but even closing in on the year maybe 100 basis points spread. I guess just given the increase kind of uncertainty and visibility, I'm just curious why go with a more narrow range when maybe your visibility would theoretically be a little bit worst?

Arne Sorenson

Yes, it’s a good question. We of course talked about that. And often we start the year with the two point range and I think fairly if you look back over the number of years we've been doing this, we probably keep a two point range longer than we should as the year progresses. We talk about two point range here that's the fact of the matter is to have a two point range at this stage of the year implies on the low end a much, much worst potential performance than we think is even potential.

And on the high end in many respects requires us to envision a performance that is more optimistic than we think is really probable. And so, as we went through this and you can see obviously we give out four [ph] point range in our guidance for Q3 and then again for Q4. To some extend you can do the math and see how that impact, in the sense you could say that our roughly three is kind of like a 2.5 to 3.5 which would be the more normal range to look at. But we think we should be fairly close to three as the year comes in based on group and our present expectations about GDP growth.

Robin Farley

Okay. Great. Thank you.

Operator

Your next question comes from the line Joseph Greff with JPMorgan.

Joseph Greff

Good morning, guys.

Arne Sorenson

Hi, Joe.

Leeny Oberg

Good morning, Joe.

Joseph Greff

Just a question on the timing or how you're thinking about the timing of accelerating your capital return, I think a quarter ago you mentioned that maybe share buyback can resume at some point in the fourth quarter. Are you still thinking along the same lines? And then just in terms of the capital return and accelerating that how contingent is that on Starwood owned hotel asset dispositions?

Leeny Oberg

Great. Thanks Joe. So, obviously we would have loved to have been closed by now in terms of having this call. And as you move through the year, the later and later the close you get the harder it is to know exactly where we will be three months from now or four months from now given we haven't closed yet. We – I'm not going to pertain to know all the details about exactly where every transaction is on the asset sales side with Starwood and so we will need to get in there as soon as the assets – as soon as the deal closes and evaluate exactly where it is.

I think we do continue to feel very comfortable that as quickly as we can we will be back in the market and whether that frankly happens to be towards the end of the Q4, the beginning of Q1 does depend to some extend on exactly which deals close in the fourth quarter and first quarter. But I think give or take a few months I think we see it exactly the same place we did before. It just again, we don't have specific visibility on exact timing of the closing of asset sales.

And to get from where as we said before we would expect to be somewhere in the ballpark of 3.6 [ph] and then want to get down to 3 to 3.25 and if we don't close until sometime in August to get there by the end of Q4 definitely depends on the some asset sales. So, we'll be updating you as quickly as we can.

Joseph Greff

Great. Thank you. And just a follow-up on the question regarding some of the delays in these project openings, Arne, would you characterize those delays has been driven more by economic uncertainty or do you talk workers and things like that, can you sort of help understand or amplify that please?

Arne Sorenson

Yes. And remember this is the collective of decisions that are being made by our partners in many respects not by us. But I would say that it is probably in the U.S. more about construction pace and the level of construction that's going on around the country. I think in somewhere like the Middle East and Africa it's probably a little bit more about the sense that the market essentially that you don't need to rush to get it done. But they continue to move forward with it. I really don't think it is a significant or cataclysmic change.

Joseph Greff

Good enough. Thank you.

Arne Sorenson

You bet.

Operator

Your next question comes from the line of Felicia Hendrix with Barclays.

Felicia Hendrix

Hi. Thanks. I'll start with a bit of a housekeeping question, just you had mentioned that you're expecting the Phase 2 of the review in China to be complete by August. Is that it or is there another phase?

Arne Sorenson

Well, the Chinese government does have the ability to take deals into a Phase 3, and obviously we can't speak for the Chinese government and have no regard for the fact that they've got to run their process in a way that meets with their needs. Having said that, we obviously are in communication with the staff over there, we've provided very, very significant amounts of information over the course for the last six or eight months something like that. And believe that the information that they need they have in hand and based on what we hear we are optimistic again that we should be done in the next few weeks.

Felicia Hendrix

Okay. That's helpful. Thank you. Getting to larger picture questions, I was just wondering, Arne, you talked about and you clarified in some earlier comments about how you revised your view – how you're using GDP to generate your guidance going forward and that was helpful. So kind of in light of that as you look towards the second half of the year and given what is going on in business transient demand and in just in the corporate world. I was just wondering what level of business transient demand you're factoring into the guidance for the second half?

Arne Sorenson

Yes. I'm not sure if I'm going to answer that, off top of my head. I think that the kind of pace we saw in the second quarter is more or less what we'd expect to take place over the balance of the year with one significant clarification. And that is in part because of calendar timing and in part simply because of the rhythms of group business, group is meaningful stronger in Q3 than in Q4. Plus 10-ish in Q3 and a flattish in Q4, obviously that puts us around plus five for the second half for the year as a whole.

And so, I would expect that we will see a group B when you combined those two quarters a more powerful driver of RevPAR growth than a transient business, transient of course includes both corporate travel mostly during the week and leisure travel mostly during the week-end. We would continue to expect that leisure travel is going to be stronger than business travel. And that business travel will be kind of flattish maybe up a point – point or two depending on the way things go.

I think if you wanted to be optimistic you might say that we're bearing some of the consequences of the incredibly pessimistic mood that corporate had as 2016 begin, think about our perspectives in the first quarter. And that's maybe a little bit of a lingering impact and if there is because of the economic data that's coming out or corporate profits or other things, a little bit less anxiety going forward, maybe we could see that improve a little bit. But again we're essentially forecasting that kind of steady state, weak corporate transient demand, not falling off a cliff in any respect but just sort of continuing to bump along.

Felicia Hendrix

And then just to kind of understand on the leisure side, what we're looking at for the second half, I was just wondering how leisure transient grew in the first half and also how that compared to last year?

Arne Sorenson

Leisure transient, so let's see here, we've got a whole bunch of quarters in front for us, I mean, just make sure we're getting this right. We're probably leisure transient year to-date in the four-ish range something like 4% growth year-over-year. When you look at – so I guess that gives you a comparison to last year as well.

Felicia Hendrix

What about for all of that, like for all of last year, how does that? How did that grow?

Arne Sorenson

You mean last year compared to 2014?

Felicia Hendrix

No. I just mean how that leisure transient grew -- yes, how that leisure – what was the leisure transient growth last year?

Arne Sorenson

We should make sure we get that for you accurately.

Felicia Hendrix

Okay.

Leeny Oberg

Give me a call back and we'll see if we can pull back together.

Arne Sorenson

I think 4% is the number you can be fairly clear about now. Year to-date, first half of the year about 4% leisure growth.

Felicia Hendrix

Okay. That's helpful. And just one last quickie. Some of the companies that have reported so far as has said that they are looking or they're seeing weaker short-term group bookings, I mean, you gave us a lot of data on your group business and the pace and stuff and that's helpful. Just wondering if you've seen any difference between kind of small group versus large groups, or you're seeing any kind of difference in demand?

Arne Sorenson

Yes, we do. Interestingly from months to months sometimes by size that the data moves around, so we've seen bigger groups probably strongest but it does vary a little bit month to month. I think there is a piece of as though which is about availability. We've got really quite please to see occupancy continue to grow in Q2 delivering roughly half of our RevPAR growth. Our hotels are quite busy and we have clearly seen the booking window expand which is certainly one of the factors that would be impacting in the year for the year group bookings.

Felicia Hendrix

Okay. Thank you. Very helpful.

Operator

Your next question comes from the line Sean Kelly with Bank of America.

Sean Kelly

Hi, good morning. Arne, just looking back through the very opening comments you talked about some of the commentary and the trends from some of your largest corporate customers. I was curious as you see that trend unfolding is there any – are there any greenshoots that you guys are getting maybe anecdotally for many of those conversations as we start to lap some of things that oil and gas and some of the other things that maybe bringing down the broader corporate sector. I mean, anything people are talking about that probably isn't factoring in the GDP yet but that give you signs of encouragement?

Arne Sorenson

No. I mean, I think the – still I think you look at the economic data, corporate profits and GDP growth will be the best indication to Europe where we think where that should go. Greenshoots, I don't know, I guess I sort of hesitate to use that phrase anywhere, but not surprisingly though when you look underneath averages you'll see relatively greater strength in the tech world than you will see to pick the other extreme in the oil patch.

And Houston I think was down 10% if I remember right RevPAR in Q2, which is 10% of the oil patch in the United States obviously. And I think that's driven by bad aspect of our economy. The comparisons will get easier for oil certainly as the year ago along. I'm not sure that that means any of them will view business has been robust though in a way that causes them to get back to the level of activity that they might have had two years ago something like that.

It does maybe mean that it shouldn't continue. It shouldn't decline from here I suppose that might be an optimistic way of thinking about it. But again, I think looking at corporate profits and GDP growth those are going to be the best things that drive the averages as a whole.

Sean Kelly

That's helpful. And then, this one maybe a little bit specific, but just thinking about the sequential pattern as things unfold with all the shifts in the third quarter, could you give us a directional sense of due you expect RevPAR to improve as we move throughout the third quarter or the opposite, just sort of what you're kind of anticipation of how 3Q shapes up on monthly perspective?

Arne Sorenson

I think we believe August and September will be stronger than July.

Sean Kelly

Great. Thank you very much.

Operator

Your next question comes from the line of Ryan Meliker with Canaccord Genuity.

Ryan Meliker

Hey. Just I was hoping you guys could give us a little color on how things are progressing with your member pricing initiative. I know it wasn't in your prepared remarks but are you gaining any traction in terms of stealing customers away from the OTAs, growing your loyalty program platform? And then also any impact in the short term that's having on your RevPAR growth outlook over the back half of the year by offering the discounts?

Arne Sorenson

All good questions. Thank you. We are – I know one of our principal competitors talk about this yesterday in their call. They were a couple of months, maybe three months ahead of us particularly in the marketing of their programs, but their data is got a few months head start for us. But I think what we're seeing in our Marriott Rewards Member only rate is very encouraging.

We continue to see a strong year-over-year growth in Marriott Rewards Signups. We see that occupancy contribution from the rewards program is in the high 50% of contribution to the hotels. We see strong growth in apps download and Marriott.com business and mobile bookings and all those things. So, we're encouraged by that. It has had a modest impact, we think on RevPAR in Q2 probably in the 30 to 40 basis point range on reported RevPAR, which in a sense you could look at and say that is a negative impact of it. But this is a long term question for us.

And really what we want to make sure we're doing is communicating clearly to Marriott Rewards Members that will have value because we know them and because they have loyalty to us and make it clear crystal clear, sometime contrary to the advertising or perception that's out there in the market, but make it crystal clear that the rates through our channels are at least just good if not better than the rates that available anywhere else.

And obviously if that drives a meaningful share shift towards our channels that's a good thing and that's the bet we're making and we think it’s good bet.

Ryan Meliker

Thank you. That is helpful. I understand the long-term benefits of this and I would never question that. I'm just trying to understand kind of what is built into your guidance. You mentioned 30 to 40 bps of RevPAR headwind in the second quarter. Are you building that type of RevPAR headwind into the back half of the year as well as this program continues to ramp? Maybe a little bit more as the program continues to ramp? How are you thinking about that?

Arne Sorenson

I wouldn't think it’s going to get any worst, but it is reflected in our guidance.

Ryan Meliker

All right, that's helpful. Thanks.

Operator

Your next question comes from the line of Thomas Allen with Morgan Stanley.

Thomas Allen

Hey good morning. So you cut your G&A guidance for the year just I mean you have been very good in the past about streamlining cost I guess two questions one would be at what point or what level of REVPAR do you think you would need to make more drastic cuts and then two, how much kind of dry powder how much do you think you can cut there. Thanks.

Leeny Oberg

Well, so let's take both of those. So first of all just in general you are seeing good solid cost controls. You are watching the company do what it should do in a modest growth environment which is being very careful to look with adding positions and the reality is as we prepare for Starwood, I think we definitely have been keeping a very close eye knowing that we are going to be able to have great efficiencies by joining up with Starwood and so really not just kind of adding necessarily before the merger where we have an opportunity to do it afterwards and do it in combination with the reorganization of how we want to run the company on a combined basis.

So I think overall these are good solid the $10 million that you have seen is the what I would call a permanent sort of solid reduction in G&A relative to cost controls and I don't think we are imagining that there is with the current standalone Marriott business that we would be imagining that we are looking at an environment of needing to do a wholesale reorganization. We do continue to think that they are fantastic synergies related to the combination which as you’ve heard, we are still confident that the 250 million of steady state savings in the combined company is achievable.

Thomas Allen

Helpful. Thank you and then just as my follow-up you mentioned earlier that you hadn't seen any pick up in cancellations rates on the group business. I am wondering if what you are seeing on the trends inside what level of cancellations rates do you typically see and how is that been trending? Thank you.

Arne Sorenson

I am not sure I can answer the first part of that question. But the second part it's there about the same. We did make a change a year and half ago on our cancellations window so typical business would be until roughly the first of 15 or I can double check the calendar on this whether I am remembering it right but I think roughly the first of 2015 we began to require cancellations 24 hours before stay in other words the day before the check-in date. Prior to that time you could cancel up to 6 PM on the day of the stay. And that has obviously reduced cancellations in the last 24 hour period. But when you look after that time and look at cancellations day before 2-3 days before we are not really seeing the material change from what we have experienced previously.

Leeny Oberg

That occurred in February 2015.

Arne Sorenson

February 2015.

Thomas Allen

Helpful, thank you.

Operator

Your next question comes from the line of Jeffrey Donnelly with Wells Fargo.

Jeffrey Donnelly

Good morning guys. Actually on the topic Arne, you experienced with those trends that you see positive or negative in group cancellations attrition in the year pace or can I hear on the coal mine that have called accurately for shadows future trends or do you find it's something unreliable indicator given your experience?

Arne Sorenson

It's a good question. There is certainly in the group space if you have got a shrinkage that is recurring sort of real time so that groups are showing up with meaningfully lower number than what they anticipated before that could be a warning that group participants or the companies sponsoring groups are less bullish about things than they were when the reservation group booking was first made.

But again, we haven't really seen movement in that. So there is not data there that would tell us be where because of that in fact you can tell from our comments about group, group is one of those things that we look at that give us some solidity in our point of view about the future and the group attendance has been good and food and beverage spending has been good and so we that's sort of reassuring. It's a good question around transient cancellations again I don't think we have seen the shift there but I don't I can't tell you whether in prior cycles that would be a canary in the coal mine my guess is it's not very much because corporate transient business is booked so short before the stay that actually it doesn't show up so much in cancellations but probably just shows up in the booking itself.

Jeffrey Donnelly

Okay and maybe the follow-up in the perhaps this is for Leeny around the integration I recognize you probably got plan for all aspects of the Marriott integration but where in your mind do you think you are going to say some of the highest hurdles in the integration. Is it technology, is it branding and marketing, is it guest loyalty and maybe it's follow-up just so we can have our expectations that one to two years from now should we expect this will leave you guys to sort of a new state of the art technology system or you sort of more focused on just patching existing systems together?

Leeny Oberg

Very good question. So couple of things, I would say we are still in the lands where we don't have kind of open sesame into all the information. So full knowledge about exactly how we are thinking about some of these technological platforms and merging them and what we will choose and exactly how we will do it remains to be seen. I think we continue to believe this is a two year process.

But this integration of these two companies when you think about it kind of what we guided to get in there look at it and then figure out from the transition standpoint that it is a two year integration. It's definitely something that you should expect. In terms of loyalty, we have got a host of issues in addition to both the logical issues around platforms and reservation etcetera. We have also got some other things like credit cards and time share businesses where we need to work with our partners to get where we all want to go in terms of the relationship with the customer and that one is a little bit harder to pick exactly a time I think we have said before that we are hopeful by 2018 to emerge the loyalty program so I think the two year sort of estimate is for right now it's good as we can give you.

Jeffrey Donnelly

Great, thanks a lot.

Operator

Your next question comes from the line of David Katz with Telsey Group.

David Katz

Hi, good morning all.

Arne Sorenson

Hi David.

David Katz

Hi, so I wanted to just ask about the post closure asset sales program plan. How should we be, I assume that you have specific set of strategies around getting that done and as I listen to you talk about it in many respect it seems as though it is a forgoing conclusion that they will be sold and we do have a stated set of net proceeds coming out of that. Is there any color that you can give us around your assurances that it's going to happen the way you have mapped it out and some of the sort of issues in getting that done?

Leeny Oberg

Great. So, you are right we have talked about in general what we expect to do in terms of $1.5 billion to $2 billion of asset sales over the next couple of years. Once when we do this deal so first of all you can tell what Starwood has done so far this year they have done a great job of moving through their assets sale program and getting some nice deals done. We like you basically take our cue from them in terms of hearing how they are doing on that front and from that perspective we know that they are talking to a number of parties out there about some very good sized transactions and we look forward to as soon as the deal is closed to getting much more involved in understanding exactly where things are with the negotiations and the terms of the deals and the pace of those discussions.

So I wouldn't really be able to hazard where we are in Q3, Q4, Q1 of 2017 except to know that I am sure you have seen Marriott track record. And that is that we don't want to be a real estate owner and we will be moving as quickly as practicable to recycle that capital but frankly I would expect that you will hear more from us at the end of Q3 when we have closed and we have got a better handle on where things are.

David Katz

So it sounds like there is a series of processes that they have begun.

Leeny Oberg

Yes.

David Katz

That you will be taking the reins on that are at some wide range of sages?

Leeny Oberg

That's you hit the nail on the head. That's exactly right.

David Katz

Understood, okay, thank you very much.

Operator

Your next question comes from the line of Rich Hightower with Evercore ISI.

Rich Hightower

Hey good morning everyone.

Arne Sorenson

Good morning.

Rich Hightower

So I want to go back to an item in the prepared comments about the strategy in the second quarter of increasing occupancy via various different channels as a way to generate REVPAR. So it's sort of reminiscing of the heads and bed strategy that was employed much earlier in the cycle here and so my question is how much more occupancy or how much more REVPAR can you drive this way given that we are basically at or near a structural peak in occupancy and then going forward where will REVPAR come from if that avenue is eventually more or less closed off?

Arne Sorenson

Yes, there is lots of business out there that we don't have in our hotels by definition obviously. We think we got about 11% of the rooms in the United States on a smaller share in the rest of the world usually dramatically smaller than that 11%. We tend to run meaningfully higher rates than the market as a whole. And we obviously do that with the purpose that's partly because of the way our hotels are squeaked in terms of their level of luxury and level of services that's partly about simply our approach to pricing.

So there is lots of business out there that is more rates sensitive and can be persuade by us if we think it is in our interest to pursue it. Obviously we are also adding new units around the world. And whether that's 6.5% or 7% it is meaningful growth into our system and so we are with those new hotels making sure we can also grab new customers in order to fill them and do what we need to do and performance there has been great and so I think there is plenty of business for us to continue to go and grab. I think that business cannot always be grabbed at exactly the rates that the highest rate of business we have in the hotels but we do our best through revenue management and mix management and the like to drive optimal performance and I think we have done well with that.

Obviously that's top line focus sort of number I would, let me stress something on the bottom line too and maybe brag about it a little bit. But I think the 100 basis point improvement in margins in the managed portfolio in the United States, 3% REVPAR growth environment is extraordinarily impressive and that is a bit about good management at the top line but it's also great management of cost elements of those hotels and both of those things I think tell you that we have got tools that we can use even in this sort of a anemic GDP growth environment that we are experiencing today that can cause us to deliver yes maybe it's lowish single digit REVPAR growth but when you put unit growth and cost management and capital return shareholders into the equation you end up with this high teens or maybe even better EPS growth. 18% EPS growth in Q2 and that's with $20 million less in gains on assets sales because we had that in Q2 of 2015.

Rich Hightower

Okay that is of Arne, and maybe as a follow-up to that also related to prior comment you did mention that Marriott brands are continuing to take share from other than in the industry, but we are hearing a very similar story from some of the other big brands and so can you sort of describe the landscape of hotels of operators or branded, non-branded whatever where that share is coming from at this stage?

Arne Sorenson

Yes, I mean I think there are two big American lodging companies that are these brands are in first demand and of course we believe our brands are in first demand and we have got that to support that but I think there is a significant shift towards quality, I think that shift in many respects accelerates when there is more anxiety in the market and whether that anxiety is manifested by the way the equity investor approaches it or by the approach that the lender takes we obviously talking about that little bit in the prepared comments. Lenders are more cautious today and that caution is also going to force them to put their borrowers in the position where they are going with the strongest brands that pose the least risk in weaker environment and that's very much sure benefit.

Rich Hightower

Right and let me clarify that I did mean REVPAR index rather than development?

Arne Sorenson

REVPAR index. Who are we taking it from well remember the way REVPAR index is done. It's not Marriott against company B, but it is how does the Marriott Marquee in Time Square in New York compared to the four hotels or five hotels or six hotels that they have in that hotels competitive set. And as a consequence in some markets it's going to be for the Marriott Marquee I don't know on the top of my head what competitive set is but I suspect that it's a number of the big branded hotels within about a mile with that hotel. In other markets we may have Marriott that is competing against a limited service hotel because that's the other – only other hotel in the market or some other products like that or some independent hotels and all of these get rolled up and when we talk about 90 basis points of index growth that is a collection of taking from lots of different kind of competitors.

Rich Hightower

All right, that's helpful, thank you.

Operator

Your next question comes from the line of Chad Beynon with Macquarie Research Equities.

Chad Beynon

Hi, thanks for taking my questions. I wanted to shift gears to Asia-Pac since you are one of the largest now in post deal close, I believe you will be the largest player in the market and you talked about some pretty positive things going on, on a forward looking basis and in the quarter. I am wondering if you could elaborate a little bit more where you are seeing the strength where the occupancy is coming from and then are we starting to see an improvement in the F&B and banquets side as we saw several years ago? Thank.

Arne Sorenson

Yes, Asia is really a bright spot. You can look at it for total REVPAR numbers that we reported in the quarter we obviously call that a number of the individual markets but you look across the region and see more often than not good strong performance. Sometimes in markets like South Korea that is aided by an extraordinarily easy comparison because of the crisis last year but you look at India with its 10% REVPAR growth that is driven by core economic growth in the country China we talked about with Mainland China REVPAR of about 3% in Q2 and if anything that understates China's performance we did have a shift in the way we report REVPAR year-over-year which is something to do with service fees and service charges and some of the fine tuning of that which has about 2 point impact on reported REVPAR in China in the quarter. And so if anything China is doing even better than the numbers that we reported.

We have been pleased with China on the development side year-to-date we obviously read the same newspaper that you do and there is some anxiety there as there is in many other markets around the world but it seems that people are continuing to move forward with projects that have strength. And then, on the negative side Hong Kong has been sort of tougher market mostly because Chinese visitation has, Mainland Chinese visitation has declined. Some of that is currency driven given that Hong Kong's dollar is essentially pegged to the US dollar and so as a consequence has become more expensive as the US dollar has continued to appreciate around the world. We wouldn't expect that Hong Kong is going to change for the better anytime real soon. But it's time, but I think across the region generally we are pretty bullish about Asia-Pacific.

Chad Beynon

Okay. Thanks. My follow-up, asked in the quarter in the half year from a percentage basis and from a year-over-year basis very impressive for you and really particularly against your peers, particularly given the declining demands in the industries, so I am just trying to figure out if we do see REVPAR decelerate as you have guided. Are there many IMF players that are at risk of falling away or are those portfolios or operators that are just barely paying IMF so small in the grand scheme of your total fees from that segment? Thanks.

Arne Sorenson

Maybe Leeny will do that but before Leeny jumps in on this let me mention Australia given that you are with Macquarie, so I apologize for not having done that but Australia is a bright spot in Asia-Pacific.

Chad Beynon

Appreciate that. Thank you.

Leeny Oberg

So, on incentive fees you see that what we have got for the first half of the year and the back half of the year is fairly similar growth rate. Now we are looking so far this year where whatever 64% earning incentive fees and by the end of the year that will probably climb up a few percentage points. We have got a great breadth and depth now with greater international exposure across our portfolio where it's not quite the same in terms of the fall off. I think as long as we are staying in the kind of ballparks that we have talked about for REVPAR without a meaningful change I think we are in the right spot you have got the right kind of numbers. We aren't seeing that we automatically would have to kind of imagine that all of the sudden you are going to go back and reverse the one that you have.

We have got a large portfolio limited service hotels that added nicely to incentive fees in Q2 and their performance looks to continue to be strong. So it's IMF performance was really nice and broad both North America as well internationally obviously impacted buyers from tough international markets but overall kind of strong growth overall.

The other thing I would say on our IMF is that as you think about where we are from a margin perspective this performance is really top notch in terms of the kinds of IMF growth that we are having relative to the rep par growth it's really great performance and we feel great about the rest of the year in that regard.

Arne Sorenson

Just one other comment on that. If you look at our reported numbers and pay attention to the managed page as well as the system wide page obviously managed hotels deliver the IMF. Managed hotels have a higher group mix than the system as a whole. We only really end up talking about REVPAR. We often don't talk about food and beverage and other contribution that comes from group but that does very much drive profitability of the managed hotels and with the relatively stronger group there is, I think all the things that Leeny said are that much even clear because that performance in those hotels should continue to be a bit better than those that are more reliant on transient and less on food and beverage.

Chad Beynon

Okay. Helpful. Thank you very much.

Operator

Your next question comes from the line of Vince Ciepiel with Cleveland Research.

Vince Ciepiel

Hi, I just have one more on group, trying to better understand the booking curve there on the prior call you noted group pacing up 7% for the second quarter. It sounds like group REVPAR did finish up at that 7% level now you are noting that group paces up 5% for the second half and based on what you are seeing with in the quarter for the quarter group bookings would you expect group REVPAR to materialize close to that 5% for the second half?

Arne Sorenson

Yes, I mean, I think, its good question. I think our number for Q4 has gotten a bit better over the last quarter. I think we were obviously we are talking about three quarters a quarter ago left in the year not two and so we didn't give it to you for each quarter but I think we did say that Q3 was relatively stronger than Q4. I think Q4 numbers look a little better today than they did a quarter ago. My guess is that often the way this works is if Q3 for example were plus 10 or plus 9 point something in group business we are more likely to end up with group number which is a bit lower than that when the dust settles because there is not likely to be availability to take as much in the quarter for the quarter group business as we probably took last year. The opposite maybe the case for the fourth quarter though. So the fourth quarter hopefully will end up with actual group REVPAR numbers which are better than zero. How those two things balance out for the second half in the aggregate I couldn't tell you but it shouldn't be dramatically different than the kind of 5% number that we are talking about today for second half.

Vince Ciepiel

Okay great. And then as a follow-up on that I think heading into this year group was pacing up seven and based on those comments it sounds like it will materialize close to five for the full year 2016. I think you are noting the 2017 is pacing up seven is it possible to think that 2017 could finish it close to 5% for group holding everything constant?

Arne Sorenson

Yes, you are going – you are taking us well into next year and I think that's possible. I think that – the good news here though is the 7% booking is a really year-over-year comparison. So that is a data point that is compared to the same data point at the same time last year for 2016 and that is a real increase of 7% in group revenue.

Vince Ciepiel

Great, thank you.

Operator

Your next question comes from the line of William Crow with Raymond James.

William Crow

Good morning. Arne, I wanted to focus in on the Chinese approval real quick. It feels like its delay in the transaction by weeks or maybe months is this a straight yes or no vote by them? Is there a negotiation or demand for any changes as you operate in that market? And if we went into a phase three how long do you think that could take?

Arne Sorenson

Yes, I don't think there is much more we can say than what we have already said. I will give a little bit more color. I don't obviously we have got folks in China that are helping us navigate through this and through them and through our teams we have been in touch with the Chinese authorities who are doing this process. I don't think it's political. I don't think it is extraordinary. I think it is the wheels of government working and as you can tell from our comments we expect we at least hope that we will be done here real shortly and be able to close the transaction. And close it on the terms that we have explained all of you.

William Crow

Okay, I will leave it there, thank you.

Arne Sorenson

Okay.

Operator

Your final question comes from the line of [Indiscernible].

Unidentified Analyst

Hi, good morning. Thanks for taking my question. Just on your guidance so obviously sounds like you are assuming safe stage GDP environment but how is industry supply factored into the guidance as well and is it possible that from the accelerating supply that we are seeing including some of the short term rental capacity is driving some of the softness that you are seeing right now on the corporate side?

Arne Sorenson

Obviously REVPAR is a function of both supply and demand. Supply growing now at I don't know 1.5%, 1.6% something like that which is an historic terms is not particularly alarming maybe a little bit more than we have had last year or year before that but not a frightening sort of figure. It is very much factored into the guidance that we are providing both our supply growth and industry supply growth and we are trying to make a real world set of assumptions about the way we think our business will perform. Supply growth could be a little higher next year, but I wouldn't think it's going to be dramatically different than what we are seeing this year and that will continue to have an impact into performance.

Generally an incremental point of GDP growth is about 2 points of demand growth for the industry and as consequence we could see occupancy for comp hotels continue to grow even in this kind of supply growth environment but it does depend on GDP growth and the more GDP lose of the more occupancy is likely to move.

Unidentified Analyst

Okay that's helpful. Thank you. And then, you are obviously making some traction here with the direct bookings away from BOTAs but what sort of progress is being made with just the timing of when customers pay so I am specifically wondering about the percentage of reservations that are paid in advance versus on arrival. How is that trending and what can you do here to drive just more upfront payments?

Arne Sorenson

We have in some markets of the world push advance pay, market it a little bit more aggressively. I know the European team has driven a significant increase in advance pay reservations. I can't tell you off the top of my head what the percentage of transient business is, that is advance pay in but I know it's growing. I suspect it's growing modestly for the company but not dramatically. And but that is one of the tools obviously that can be used as well.

Unidentified Analyst

Okay thank you very much.

Arne Sorenson

You bet. Crystal are there any other questions?

Operator

No sir, not at this time.

Arne Sorenson

All right, thank you everybody very much. Have a great summer. And keep travelling. Bye, bye.

Operator

This concludes today's conference call. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!