Financial Information
Investing Activities Cash Flows
Capital Expenditures and Other Investments. We made capital expenditures of $411 million in 2014, $296 million in 2013, and $437 million in 2012. These included expenditures related to the development and construction of new hotels and acquisitions of hotel properties, improvements to existing properties, and systems initiatives. Capital expenditures in 2014 increased by $115 million compared to 2013, primarily related to developing two EDITION hotels and our 2014 acquisition of a property in our International Segment, partially offset by the completion of The London EDITION in the 2013 fourth quarter (see Footnote No. 3, “Acquisitions and Dispositions” for more information). Capital expenditures in 2013 decreased by $141 million compared to 2012, primarily due to the 2012 acquisition of land and a building that we used to develop an EDITION hotel.
We expect 2015 investment spending will total approximately $600 million to $800 million, including approximately $125 million for maintenance capital spending and approximately $135 million (C$168 million) for the expected acquisition of Delta Hotels. Investment spending also includes other capital expenditures (including property acquisitions, construction, and renovations), loan advances, contract acquisition costs, and equity and other investments.
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 inherent in the lodging industry and other constraints inherent in the capital markets as a whole. We monitor the status of the capital markets and regularly evaluate the potential impact of changes in capital market conditions on our business operations. We expect to continue making selective and opportunistic investments to add units to our lodging business, which may include loans and noncontrolling equity investments.
Fluctuations in the values of hotel real estate generally have little impact on our overall business results because: (1) we own less than one percent 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 or foreclosure.
Dispositions. Property and asset sales generated $435 million cash proceeds in 2014 and $65 million in 2012. See Footnote No. 3, “Acquisitions and Dispositions,” for more information on completed dispositions and planned 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 $69 million in 2014 compared to net collections of $70 million in 2013. At year-end 2014, we had a $3 million senior loan and $239 million of mezzanine and other loans ($215 million noncurrent and $24 million current) outstanding, compared with a $3 million senior loan and $175 million of mezzanine and other loans ($142 million noncurrent and $36 million current) outstanding at year-end 2013. In 2014, our notes receivable balance for senior, mezzanine, and other loans increased by $64 million, primarily reflecting the issuance of the $85 million mezzanine loan (net of a $15 million discount) described in Footnote No. 13, “Notes Receivable,” partially offset by $31 million of collections on MVW notes receivable issued to us in 2011 in conjunction with our Timeshare spin-off.
Equity and Cost Method Investments. Cash outflows of $6 million in 2014, $16 million in 2013, and $15 million in 2012 for equity and cost method investments primarily reflects our investments in a number of joint ventures.
Cash from Financing Activities
Debt. Debt increased by $582 million in 2014, to $3,781 million at year-end 2014 from $3,199 million at year-end 2013, and reflected our 2014 fourth quarter issuance of $394 million (book value) of Series N Notes and a $238 million increase in commercial paper borrowings, partially offset by a $53 million reduction in other debt. Debt increased by $264 million in 2013, to $3,199 million at year-end 2013 from $2,935 million at year-end 2012, and reflected our 2013 third quarter issuance of $348 million (book value) of Series M Notes and a $333 million increase in commercial paper borrowings, partially offset by the $400 million (book value) retirement, at maturity, of our Series J Notes, $15 million in decreased borrowings under our Credit Facility, and a $2 million reduction in other debt. See Footnote No. 10, “Long-Term Debt” for additional information on the debt issuances.
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 2014, our long-term debt had an average interest rate of 3.0 percent and an average maturity of approximately 4.6 years. The ratio of our fixed-rate long-term debt to our total long-term debt was 0.7 to 1.0 at year-end 2014.
See the “Cash Requirements and Our Credit Facilities,” caption in this “Liquidity and Capital Resources” section for more information on our Credit Facility.
Share Repurchases. We purchased 24.2 million shares of our common stock in 2014 at an average price of $62.09 per share, 20.0 million shares in 2013 at an average price of $41.46 per share, and 31.2 million shares in 2012 at an average price of $37.15 per share. At year-end 2014, 15.1 million shares remained available for repurchase under authorizations from our Board of Directors. On February 12, 2015, we announced that our Board of Directors increased, by 25 million shares, the authorization to repurchase our common stock. We purchase shares in the open market and in privately negotiated transactions.
Dividends. Our Board of Directors declared and paid the following quarterly cash dividends in 2014: (1) $0.17 per share declared February 14 and paid March 28 to shareholders of record as of February 28; (2) $0.20 per share declared May 9 and paid June 27 to shareholders of record as of May 23; (3) $0.20 per share declared August 7 and paid September 26 to shareholders of record as of August 21; and (4) $0.20 per share declared November 7 and paid December 26 to shareholders of record on November 20. Our Board of Directors declared a cash dividend of $0.20 per share on February 12, 2015, payable on March 27, 2015 to shareholders of record on February 27, 2015.