Financial Information

PART II

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

Financing Activities Cash Flows

Debt. Debt increased by $1,109 million in 2018, to $9,347 million at year-end 2018 from $8,238 million at year-end 2017, primarily due to the issuance of our Series X, Y, Z, and AA Notes, partially offset by the maturity of our Series S Notes ($330 million) and lower outstanding commercial paper ($126 million). See Footnote 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 2018, our long-term debt had a weighted average interest rate of 3.3 percent and a weighted average maturity of approximately 4.8 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 2018.

See the “Cash Requirements and Our Credit Facility,” caption in this “Liquidity and Capital Resources” section for more information on our Credit Facility.

Share Repurchases. We purchased 21.5 million shares of our common stock in 2018 at an average price of $130.67 per share, 29.2 million shares in 2017 at an average price of $103.66 per share, and 8.0 million shares in 2016 at an average price of $71.55 per share. At year-end 2018, 10.7 million shares remained available for repurchase under Board approved authorizations, and on February 15, 2019, our Board of Directors further increased our common stock repurchase authorization by 25 million shares. For additional information, see “Fourth Quarter 2018 Issuer Purchases of Equity Securities” in Part II, Item 5.

Dividends. Our Board of Directors declared the following quarterly cash dividends in 2018: (1) $0.33 per share declared on February 9, 2018 and paid March 30, 2018 to shareholders of record on February 23, 2018, (2) $0.41 per share declared on May 4, 2018 and paid June 29, 2018 to shareholders of record on May 18, 2018, (3) $0.41 per share declared on August 9, 2018 and paid September 28, 2018 to shareholders of record on August 23, 2018, and (4) $0.41 per share declared on November 8, 2018 and paid December 31, 2018 to shareholders of record on November 21, 2018. Our Board of Directors declared a cash dividend of $0.41 per share on February 15, 2019, payable on March 29, 2019 to shareholders of record on March 1, 2019.

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

The following table summarizes our contractual obligations at year-end 2018:

⁽¹⁾  Includes principal as well as interest payments.

 

The preceding table does not reflect Transition Tax payments totaling $507 million as a result of the 2017 Tax Act. In addition, the table does not reflect unrecognized tax benefits at year-end 2018 of $559 million.

In addition to the purchase obligations noted in the preceding table, in the normal course of business we enter into purchase commitments to manage the daily operating needs of the hotels that we manage. Since we are reimbursed from the cash flows of the hotels, these obligations have minimal impact on our net income and cash flow.

Other Commitments

The following table summarizes our guarantee, investment, and loan commitments at year-end 2018:

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 our actions or the actions of the other joint venture owner.

In addition, we granted a hotel owner a one-time right to require us to purchase the leasehold interest in the land and hotel for $300 million in cash, exercisable in 2022. See Footnote 7. Commitments and Contingencies for more information.

For further information, including the nature of the commitments and their expirations, see the “Commitments” caption in Footnote 7. Commitments and Contingencies.

Letters of Credit

At year-end 2018, we had $136 million of letters of credit outstanding (all outside the Credit Facility, as defined in Footnote 10. Long-Term Debt), most of which were for our self-insurance programs. Surety bonds issued as of year-end 2018 totaled $152 million, most of which state governments requested in connection with our self-insurance programs.