Financial Information
Timeshare Cash Flows
While our former Timeshare segment historically generated positive operating cash flow, year-to-year cash flow varied based on the timing of both cash outlays for the acquisition and development of new resorts and cash received from purchaser financing. We included timeshare reportable sales we financed in cash from operations when we collected cash payments. We show the net operating activity from our former Timeshare segment before the spin-off (which did not include income from our former Timeshare segment) in the following table. New Timeshare segment mortgages totaled $214 million in 2011 and $256 million in 2010, and collections totaled $273 million in 2011 (which included collections on securitized notes of $187 million) and $347 million in 2010 (which included collections on securitized notes of $230 million).
For more information on our timeshare note securitizations, including a discussion of the cash flows on securitized notes, see Footnote No. 10, “Asset Securitizations,” to our Financial Statements.
We expect that our 2011 spin-off of our timeshare operations and timeshare development business will result in our realization through 2014 of approximately $480 million of cash tax benefits, relating to the value of the timeshare business. We realized $152 million of cash tax benefits in 2012 and $76 million in 2011.We expect to realize approximately $140 million in 2013. For more information on the spin-off, please see Footnote No. 16, “Spin-off,” to our Financial Statements.
Investing Activities Cash Flows
Capital Expenditures and Other Investments. We made capital expenditures of $437 million in 2012, $183 million in 2011, and $307 million in 2010. These included expenditures for the development and construction of new hotels, acquisitions of hotel properties, improvements to existing properties, and systems initiatives. These numbers do not reflect former Timeshare segment development expenditures, which we included in “Cash from Operations” before the spin-off, as noted in that section. Capital expenditures in 2012 increased by $254 million compared to 2011. Capital expenditures primarily reflected acquisition of land and a building, as well as renovations of buildings associated with plans to develop three EDITION hotels. Over time, we anticipate selling these properties subject to our retaining long-term management agreements. We also purchased land for an EDITION hotel, which we anticipate will be developed by a third party.
Contract acquisition costs in 2012 increased by $179 million compared to 2011, primarily due to the $192 million acquisition of the Gaylord hotel management company. Separately, we classified the $18 million acquisition of the Gaylord brand name in 2012 as “Other investing activities.” Capital expenditures in 2011 decreased by $124 million compared to 2010, primarily due to the purchase of two hotels in 2010. See Footnote No. 7, “Acquisitions and Dispositions,” to our Financial Statements for more information on these acquisitions. We expect 2013 investment spending will total approximately $600 million to $800 million, including approximately $100 million for maintenance capital spending. Investment spending also includes other capital expenditures (including property acquisitions), 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 cash proceeds of $65 million in 2012, $20 million in 2011, and $114 million in 2010. See Footnote No. 7, “Acquisitions and Dispositions,” to our Financial Statements for more information on dispositions.
Loan Activity. From time to time we make loans to owners of hotels that we operate or franchise. Loan collections and sales, net of loan advances, amounted to $138 million in 2012 and $84 million in 2011. At year-end 2012, we had a $15 million long-term senior loan and $227 million of mezzanine and other loans ($165 million long-term and $62 million short-term) outstanding, compared with no senior loans and $382 million of mezzanine and other loans ($298 million long-term and $84 million short-term) outstanding at year-end 2011. In 2012, our notes receivable balance for senior, mezzanine, and other loans decreased by $140 million, primarily reflecting collection of a $69 million note receivable for a recoverable guarantee that we previously funded and $77 million of collections on two MVW notes receivable issued to us in conjunction with the spin-off. See the “Senior, Mezzanine, and Other Loans” caption in Footnote No. 1, “Summary of Significant Accounting Policies.”
Equity and Cost Method Investments. Cash outflows of $15 million in 2012, $83 million in 2011, and $29 million in 2010 for equity and cost method investments primarily reflects our investments in a number of joint ventures.
Cash from Financing Activities
Debt. Debt increased by $764 million in 2012, to $2,935 million at year-end 2012 from $2,171 million at year-end 2011, and reflected our 2012 issuance of $594 million (book value) of Series K Senior Notes, our 2012 issuance of $349 million (book value) of Series L Senior Notes, a $170 million increase in commercial paper, and $15 million of borrowings under our Credit Facility, partially offset by the $348 million (book value) retirement, at maturity, of our Series F Senior Notes and decreases of $16 million in other debt (which includes capital leases). See Footnote No. 11, “Long-Term Debt” for additional information on the debt issuances. Debt decreased by $658 million in 2011, to $2,171 million at year-end 2011 from $2,829 million at year-end 2010, and reflected a $1,016 million decrease in nonrecourse debt for previously securitized notes which we transferred to MVW as part of the spin-off, partially offset by a $331 million increase in commercial paper and increases of $27 million in other debt (which includes capital leases).
On February 15, 2013 (after year-end 2012), we made a $411 million cash payment of principal and interest to retire, at maturity, all of our outstanding Series J Notes.
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 2012, our long-term debt had an average interest rate of 3.9 percent and an average maturity of approximately 4.7 years. The ratio of our fixed-rate long-term debt to our total long-term debt was 0.8 to 1.0 at year-end 2012.
See the “Cash Requirements and Our Credit Facilities,” caption within this “Liquidity and Capital Resources” section for more information on our Credit Facility.
Share Repurchases. We purchased 31.2 million shares of our common stock in 2012 at an average price of $37.15 per share, purchased 43.4 million shares in 2011 at an average price of $32.79 per share, and purchased 1.5 million shares in 2010 at an average price of $39.02 per share. As of year-end 2012, 9.3 million shares remained available for repurchase under authorizations from our Board of Directors. On February 15, 2013, 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 a cash dividend of $0.10 per share on February 10, 2012 and a cash dividend of $0.13 per share on each of May 4, August 9, and November 8, 2012, and February 15, 2013.
Contractual Obligations and Off Balance Sheet Arrangements
The following table summarizes our contractual obligations as of year-end 2012: