Financial Information

PART II

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

Cash from Financing Activities

Debt. Debt increased by $336 million in 2015, to $4,107 million at year-end 2015 from $3,771 million at year-end 2014, and reflected $790 million ($800 million face amount) in Series O and P Notes issuances, partially offset by $314 million from the redemption of Series G Notes and a $134 million decrease in commercial paper borrowings. See Footnote No. 10a, “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 2015, our long-term debt had an average interest rate of 2.9 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 0.8 to 1.0 at year-end 2015.

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 25.7 million shares of our common stock in 2015 at an average price of $75.48 per share, 24.2 million shares in 2014 at an average price of $62.09 per share, and 20.0 million shares in 2013 at an average price of $41.46 per share. At year-end 2015, 14.4 million shares remained available for repurchase under authorizations from our Board of Directors. On February 11, 2016, 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 2015: (1) $0.20 per share declared on February 12, 2015 and paid March 27, 2015 to shareholders of record on February 27, 2015; (2) $0.25 per share declared on May 8, 2015 and paid June 26, 2015 to shareholders of record on May 22, 2015; (3) $0.25 per share declared on August 6, 2015 and paid September 25, 2015 to shareholders of record on August 20, 2015; and (4) $0.25 per share declared November 5 and paid December 28 to shareholders of record on November 19. Our Board of Directors declared a cash dividend of $0.25 per share on February 11, 2016, payable on March 31, 2016 to shareholders of record on February 25, 2016.

Contractual Obligations and Off Balance Sheet Arrangements

Contractual Obligations

The following table summarizes our contractual obligations at year-end 2015:

⁽¹⁾ Includes principal as well as interest payments.

The preceding table does not reflect unrecognized tax benefits at year-end 2015 of $24 million. See Footnote No. 6, “Income Taxes” for additional information.

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.

Guarantee Commitments

The following table summarizes our guarantee commitments at year-end 2015:

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.

Investment and Loan Commitments

We also had the following investment and loan commitments outstanding at year-end 2015:

For further information on our investment and loan commitments, including the nature of the commitments and their expirations, see the “Commitments” caption in Footnote No. 7, “Commitments and Contingencies.”

Letters of Credit

At year-end 2015, we also had $82 million of letters of credit outstanding (all outside the Credit Facility), the majority of which were for our self-insurance programs. Surety bonds issued as of year-end 2015 totaled $159 million, the majority of which federal, state, and local governments requested in connection with our self-insurance programs.