Financial Information

PART II

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Uses of Cash

Cash, cash equivalents, and restricted cash totaled $894 million at December 31, 2020, an increase of $641 million from year-end 2019, primarily reflecting Senior Notes issuances, net of repayments ($1,797 million), Credit Facility borrowings, net of repayments ($900 million), net cash provided by operating activities ($1,639 million), and dispositions ($260 million). The following cash outflows partially offset these cash inflows: commercial paper repayments, net of borrowings ($3,190 million), dividend payments ($156 million), purchase of treasury stock ($150 million), capital and technology expenditures ($135 million), other debt repayments, net of borrowings ($123 million), and financing outflows for employee stock-based compensation withholding taxes ($103 million).

Cash from Operations

Net cash provided by operating activities decreased by $46 million in 2020 compared to 2019, primarily due to the net loss that we recorded in 2020 (adjusted for non-cash items) due to COVID-19, partially offset by net cash inflows from our Loyalty Program, including the one-time cash payments as a result of the amendments to our co-brand credit card agreements discussed in Note 2, a cash benefit from working capital changes, and lower cash paid for income taxes. Working capital changes primarily reflect lower accounts receivable due to lower fee and cost reimbursement revenues and a higher allowance for credit losses, lower accounts payable due to lower purchasing activity, and lower bonus accruals.

Our ratio of current assets to current liabilities was 0.5 to 1.0 at both year-end 2020 and year-end 2019. We have significant borrowing capacity under our Credit Facility should we need additional working capital.

Investing Activities Cash Flows

Capital Expenditures and Other Investments. We made capital expenditures, including expenditures on technology, of $135 million in 2020 and $653 million in 2019. Capital expenditures in 2020 decreased by $518 million compared to 2019, primarily reflecting the net lower spending on owned and leased properties and our worldwide systems and the 2019 acquisitions of a U.S. & Canada property and Elegant Hotels Group plc (“Elegant”).

We expect spending on capital expenditures and other investments will total approximately $575 million to $650 million for 2021, including contract acquisition costs, equity and other investments, loan advances, and various capital expenditures (including approximately $220 million for maintenance capital spending and our new headquarters).

Over time, we have sold lodging properties, both completed and under development, subject to long-term management agreements. The ability of third-party purchasers to raise the debt and equity capital necessary to acquire such properties depends in part on the perceived risks in the lodging industry and other constraints inherent in the capital markets. We monitor the status of the capital markets and regularly evaluate the potential impact of changes in capital market conditions on our business operations. In the Starwood Combination, we acquired various hotels and equity interests in various hotels, many of which we have sold or are seeking to sell. We have made, and expect to continue making, selective and opportunistic investments to add units to our lodging business, which may include property acquisitions and renovations (such as our 2019 acquisitions of the W New York - Union Square and Elegant), new construction, loans, guarantees, and noncontrolling equity investments. Over time, we seek to minimize capital invested in our business through asset sales subject to long-term management or franchise agreements.

Dispositions. Property and asset sales generated $260 million cash proceeds in 2020 and $395 million in 2019. See Note 4 for more information on dispositions.

Loan Activity. From time to time, we make loans to owners of hotels that we operate or franchise. Loan advances, net of loan collections, amounted to $33 million in 2020, compared to net collections of $21 million in 2019. At year-end 2020, we had $163 million of senior, mezzanine, and other loans outstanding, compared to $126 million outstanding at year-end 2019.

Financing Activities Cash Flows

Debt. Debt decreased by $564 million in 2020, to $10,376 million at year-end 2020 from $10,940 million at year-end 2019. See “Sources of Liquidity,” caption in this “Liquidity and Capital Resources” section and Note 10 for additional information on the Senior Note and Credit Facility transactions in 2020.

Share Repurchases. We purchased 1.0 million shares of our common stock in 2020 (in the 2020 first quarter) at an average price of $145.42 per share and 17.3 million shares in 2019 at an average price of $130.79 per share. At year-end 2020, 17.4 million shares remained available for repurchase under Board approved authorizations. We do not anticipate repurchasing additional shares until business conditions improve, and are prohibited from doing so for the duration of the Covenant Waiver Period under our Credit Facility, with certain exceptions. For additional information, see “Fourth Quarter 2020 Issuer Purchases of Equity Securities” in Part II, Item 5.

Dividends. On February 14, 2020, our Board of Directors declared a cash dividend of $0.48 per share payable to stockholders of record on February 28, 2020, which we paid on March 31, 2020. We do not anticipate declaring further cash dividends until business conditions improve and are prohibited from doing so for the duration of the Covenant Waiver Period under our Credit Facility.