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 MD&A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 >  Investing Activities Cash Flows Capital Expenditures and Other Investments. We made capital expenditures of $357 million in 2008, $671 million in 2007, and $529 million in 2006 that included expenditures related to the development and construction of new hotels and acquisitions of hotel properties, as well as improvements to existing properties and systems initiatives. Timeshare segment development expenditures, which are included in "Cash from Operations," as noted in that section, are not reflected in these numbers. Capital expenditures decreased primarily due to a reduction in development spending. We expect that near-term capital expenditures will be lower than 2008 levels. See the discussion of "Development and Financing Risks" within the Risk Factors section of this document for possible impacts of this reduction. Over time, we have sold lodging properties under development subject to long-term management agreements. The ability of third-party purchasers to raise the necessary debt and equity capital depends in part on the perceived risks inherent in the lodging industry and other constraints inherent in the capital markets as a whole. Although we expect to continue to consummate such real estate sales, if we were unable to do so, our liquidity could decrease and we could have increased exposure to the operating risks of owning real estate. We monitor the status of the capital markets and regularly evaluate the potential impact on our business operations of changes in capital market conditions. We also expect to continue to make other selective and opportunistic investments in connection with adding units to our lodging business. These investments include loans and minority equity investments. Fluctuations in the values of hotel real estate generally have little impact on the overall results of our Lodging and Timeshare segments because: (1) we own less than 1 percent of the total number of hotels that we operate or franchise; (2) management and franchise fees are generally based upon hotel revenues and profits rather than current hotel property values; and (3) our management agreements generally do not terminate upon hotel sale. Dispositions. Property and asset sales generated cash proceeds of $38 million in 2008, $745 million in 2007, and $798 million in 2006. In 2008, we closed on the sales of two properties, two land parcels, and an interest in an entity that leases four hotels. Loan Activity. We have made loans to owners of hotels that we operate or franchise, typically to facilitate the development of a new hotel. Based on historical experience, over time we expect these owners to repay the loans in accordance with the loan agreements, or earlier as the hotels mature and capital markets permit. Loan collections and sales, net of advances during 2008 and 2007, amounted to net loan advances of $17 million in 2008 and net loan collections and sales of $75 million in 2007. Lodging senior loans outstanding totaled $2 million, all of which was long-term, at year-end 2008 and $7 million (which included a current portion of $4 million) at year-end 2007. Lodging mezzanine and other loans totaled $236 million (which included a current portion of $15 million) at year-end 2008 and $206 million (which included a current portion of $17 million) at year-end 2007. In 2008, our notes receivable balance associated with Lodging senior loans and Lodging mezzanine and other loans, increased by $25 million and primarily reflected the funding and collection of several loans offset by the reserve against one loan. Equity and Cost Method Investments. Cash outflows of $25 million in 2008, $40 million in 2007, and $95 million in 2006 associated with equity and cost method investments primarily reflects our investments in a number of joint ventures. Cash from Financing Activities Our financial objectives include diversifying our financing sources, optimizing the mix and maturity of our long-term debt and reducing our working capital. At year-end 2008, our long-term debt had an average interest rate of 4.8 percent and an average maturity of approximately 4.6 years. The ratio of fixed-rate long-term debt to total long-term debt was 0.7 to 1.0 at year-end 2008. At the end of 2008, we had long-term public debt ratings of BBB from Standard and Poor's and Baa2 from Moody's. See the "Cash Requirements and Our Credit Facilities," caption within this "Liquidity and Capital Resources" section for additional information on our Credit Facility. In 2008, we repurchased, in the open market, $109 million of our Senior Notes, across multiple series. The debt extinguishment resulted in a gain of $28 million that was recorded for the difference between the purchase price of $77 million and the respective carrying amount of $105 million of the debt. Share Repurchases. We purchased 11.9 million shares of our Class A Common Stock in 2008 at an average price of $31.18 per share, 41.0 million shares of our Class A Common Stock in 2007 at an average price of $43.32 per share, and 41.5 million shares of our Class A Common Stock in 2006 at an average price of $38.13 per share. We purchase shares in the open market and in privately negotiated transactions. We did not repurchase any shares in the fourth quarter of 2008. As of year-end 2008, 21.3 million shares remained available for repurchase under authorizations from our Board of Directors. We do not expect share repurchase activity in 2009. The following graph shows our diluted weighted average shares count at year-end for each of the last five fiscal years.
Dividends. In April 2008, our Board of Directors increased the quarterly cash dividend by 17 percent to $0.0875 per share. Dividends of $115 million were paid in 2008, a 10 percent increase over 2007. > Back to top of page |
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