What changed in this filing

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Item 1. Financial Statements

2023-11-02 compared with 2023-08-01 · 81 added, 51 removed, 339 unchanged (28% of the section changed)

3 unchanged sentences

(in millions, except per share amounts)

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Base management fees $ 306 $ 275 $ 917 $ 757

29 unchanged sentences

(in millions)

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Net income $ 752 $ 630 $ 2,235 $ 1,685

8 unchanged sentences

(in millions)

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Current assets

38 unchanged sentences

(in millions)

Six Months Ended

June 30, 2023 June 30, 2022

Nine Months Ended

September 30, 2023 September 30, 2022

OPERATING ACTIVITIES

8 unchanged sentences

Working capital changes ( 141 ) ( 225 )

Other 64 ( 37 )

Net cash provided by operating activities 2,419 1,922

2 unchanged sentences

Asset acquisition ( 102 ) —

Dispositions 61 —

Loan advances ( 77 ) ( 10 )

5 unchanged sentences

Repayment of long-term debt ( 332 ) ( 578 )

Issuance of Class A Common Stock 29 —

Dividends paid ( 435 ) ( 195 )

6 unchanged sentences

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period (1)

(1) The 2023 amounts include beginning restricted cash of $ 18 million at December 31, 2022, and ending restricted cash of $ 16 million at June 30, 2023, which we present in the “Prepaid expenses and other” and “Other noncurrent assets” captions of our Balance Sheets.

$ 743 $ 1,068

(1) The 2023 amounts include beginning restricted cash of $ 18 million at December 31, 2022, and ending restricted cash of $ 26 million at September 30, 2023, which we present in the “Prepaid expenses and other” and “Other noncurrent assets” captions of our Balance Sheets.

See Notes to Condensed Consolidated Financial Statements.

13 unchanged sentences

Accordingly, ultimate results could differ from those estimates.

The accompanying Financial Statements reflect all normal and recurring adjustments necessary to present fairly our financial position as of June 30, 2023 and December 31, 2022, the results of our operations for the three and six months ended June 30, 2023 and June 30, 2022, and cash flows for the six months ended June 30, 2023 and June 30, 2022.

The accompanying Financial Statements reflect all normal and recurring adjustments necessary to present fairly our financial position as of September 30, 2023 and December 31, 2022, the results of our operations for the three and nine months ended September 30, 2023 and September 30, 2022, and cash flows for the nine months ended September 30, 2023 and September 30, 2022.

Interim results may not be indicative of fiscal year performance because of seasonal and short-term variations.

2 unchanged sentences

The table below illustrates the reconciliation of the earnings and number of shares used in our calculations of basic and diluted earnings per share, the latter of which uses the treasury stock method to calculate the dilutive effect of the Company’s potential common stock:

Three Months Ended Six Months Ended

(in millions, except per share amounts) June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Three Months Ended Nine Months Ended

(in millions, except per share amounts) September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Computation of Basic Earnings Per Share

10 unchanged sentences

STOCK-BASED COMPENSATION

We granted 1.0 million restricted stock units (“RSUs”) during the 2023 first half to certain officers and employees, and those units vest generally over four years in equal annual installments commencing one year after the grant date.

We also granted 0.1 million performance-based RSUs (“PSUs”) in the 2023 first half to certain executives, which are earned subject to continued employment and the satisfaction of certain performance and market conditions based on the degree of achievement of pre-established targets for 2025 adjusted EBITDA performance and relative total stockholder return over the 2023 to 2025 performance period.

RSUs, including PSUs, granted in the 2023 first half had a weighted average grant-date fair value of $ 166 per unit.

We recorded stock-based compensation expense for RSUs and PSUs of $ 49 million in the 2023 second quarter, $ 49 million in the 2022 second quarter, $ 82 million in the 2023 first half, and $ 91 million in the 2022 first half.

Deferred compensation costs for unvested awards for RSUs and PSUs totaled $ 267 million at June 30, 2023 and $ 179 million at December 31, 2022.

Our effective tax rate increased to 24.7 percent for the 2023 second quarter compared to 22.8 percent for the 2022 second quarter, primarily due to a shift in earnings to jurisdictions with higher tax rates.

Our effective tax rate decreased to 18.0 percent for the 2023 first half compared to 22.1 percent for the 2022 first half, primarily due to the current year release of tax reserves, partially offset by the shift in earnings to jurisdictions with higher tax rates.

Our unrecognized tax benefit balance decreased by $ 98 million to $ 157 million at June 30, 2023 from $ 255 million at December 31, 2022, primarily due to the completion of a prior year tax audit.

Our unrecognized tax benefit balance included $ 146 million at June 30, 2023 and $ 241 million at December 31, 2022 of tax positions that, if recognized, would impact our effective tax rate.

We granted 1.0 million restricted stock units (“RSUs”) during the 2023 first three quarters to certain officers and employees, and those units vest generally over four years in equal annual installments commencing one year after the grant date.

We also granted 0.1 million performance-based RSUs (“PSUs”) in the 2023 first three quarters to certain executives, which are earned subject to continued employment and the satisfaction of certain performance and market conditions based on the degree of achievement of pre-established targets for 2025 adjusted EBITDA performance and relative total stockholder return over the 2023 to 2025 performance period.

RSUs, including PSUs, granted in the 2023 first three quarters had a weighted average grant-date fair value of $ 167 per unit.

We recorded stock-based compensation expense for RSUs and PSUs of $ 47 million in the 2023 third quarter compared to $ 45 million in the 2022 third quarter, and $ 129 million in the 2023 first three quarters compared to $ 136 million in the 2022 first three quarters.

Deferred compensation costs for unvested awards for RSUs and PSUs totaled $ 217 million at September 30, 2023 and $ 179 million at December 31, 2022.

Our effective tax rate decreased to 23.9 percent for the 2023 third quarter compared to 27.5 percent for the 2022 third quarter, primarily due to the prior year expense from the completion of tax audits and the increase in tax deductions from stock-based compensation, partially offset by the shift in earnings to jurisdictions with higher tax rates.

Our effective tax rate decreased to 20.1 percent for the 2023 first three quarters compared to 24.2 percent for the 2022 first three quarters, primarily due to the current year release of tax reserves and the prior year expense from the completion of tax audits, partially offset by the shift in earnings to jurisdictions with higher tax rates.

Our unrecognized tax benefit balance decreased by $ 101 million to $ 154 million at September 30, 2023 from $ 255 million at December 31, 2022, primarily due to the completion of a prior year tax audit.

Our unrecognized tax benefit balance included $ 143 million at September 30, 2023 and $ 241 million at December 31, 2022 of tax positions that, if recognized, would impact our effective tax rate.

It is reasonably possible that within the next 12 months we will reach resolution of income tax examinations in one or more jurisdictions.

2 unchanged sentences

We file income tax returns, including returns for our subsidiaries, in various jurisdictions around the world.

Internal Revenue Service (“IRS”) has examined our federal income tax returns, and as of June 30, 2023, we have settled all issues for tax years through 2019.

Internal Revenue Service (“IRS”) has examined our federal income tax returns, and as of September 30, 2023, we have settled all issues for tax years through 2019.

Our 2020 through 2023 tax year audits are currently ongoing.

Various foreign, state, and local income tax returns are also under examination by the applicable taxing authorities.

We paid cash for income taxes, net of refunds, of $ 406 million in the 2023 first half and $ 125 million in the 2022 first half.

We paid cash for income taxes, net of refunds, of $ 669 million in the 2023 first three quarters and $ 341 million in the 2022 first three quarters.

COMMITMENTS AND CONTINGENCIES

We present the maximum potential amount of our future guarantee fundings and the carrying amount of our liability for our debt service, operating profit, and other guarantees (excluding contingent purchase obligations) for which we are the primary obligor at June 30, 2023 in the following table:

(in millions)

9 unchanged sentences

If the owner exercises the put option, the closing is expected to occur in the 2024 fourth quarter, and we have the option to purchase, at the same time the put transaction closes, the fee simple interest in the underlying land for an additional $ 200 million in cash.

We account for the put option as a guarantee, and our recorded liability was $ 300 million at June 30, 2023 and December 31, 2022.

We account for the put option as a guarantee, and our recorded liability was $ 300 million at September 30, 2023 and December 31, 2022.

Starwood Data Security Incident

13 unchanged sentences

The District Court granted in part and denied in part class certification of various U.S.

groups of consumers, and our appeal of this decision is pending in the U.S.

Court of Appeals for the Fourth Circuit.

groups of consumers.

In August 2023, the U.S.

Court of Appeals for the Fourth Circuit vacated the District Court’s class certification decision because the District Court failed to first consider the effect of a class-action waiver signed by all putative class members.

The Fourth Circuit remanded for further proceedings consistent with its opinion.

A case brought by the City of Chicago (which is consolidated in the MDL proceeding) also remains pending.

6 unchanged sentences

We are in discussions with the Attorney General offices from 49 states and the District of Columbia and the Federal Trade Commission.

Based on the ongoing discussions, we believe it is probable that we will incur losses, and as of June 30, 2023, we have an accrual for an estimated loss contingency, which is not material to our Financial Statements.

Based on the ongoing discussions, we believe it is probable that we will incur losses, and as of September 30, 2023, we have an accrual for an estimated loss contingency, which is not material to our Financial Statements.

While we believe it is reasonably possible that we may incur losses in excess of the amounts recorded associated with the above described MDL proceedings and regulatory investigations related to the Data Security Incident, it is not possible to reasonably estimate the amount of such losses or range of loss that might result from adverse judgments, settlements, fines, penalties or other resolution of these proceedings and investigations based on:

2 unchanged sentences

LONG-TERM DEBT

We provide detail on our long-term debt balances, net of discounts, premiums, and debt issuance costs, in the following table as of June 30, 2023 and year-end 2022:

(in millions) June 30,

We provide detail on our long-term debt balances, net of discounts, premiums, and debt issuance costs, in the following table as of September 30, 2023 and year-end 2022:

(in millions) September 30,

2023 December 31,

32 unchanged sentences

(effective interest rate of 5.3 %)

Series LL Notes, interest rate of 5.5 %, face amount of $ 450 , maturing September 15, 2026

(effective interest rate of 5.9 %)

Series MM Notes, interest rate of 5.6 %, face amount of $ 700 , maturing October 15, 2028

(effective interest rate of 5.9 %)

Commercial paper 973 871

4 unchanged sentences

$ 10,870 $ 9,380

We paid cash for interest, net of amounts capitalized, of $ 196 million in the 2023 first half and $ 179 million in the 2022 first half.

We paid cash for interest, net of amounts capitalized, of $ 266 million in the 2023 first three quarters and $ 203 million in the 2022 first three quarters.

In September 2023, we issued $ 450 million aggregate principal amount of 5.45 percent Series LL Notes due September 15, 2026 (the “Series LL Notes”) and $ 700 million aggregate principal amount of 5.55 percent Series MM Notes due October 15, 2028 (the “Series MM Notes”).

We will pay interest on the Series LL Notes in March and September of each year, commencing in March 2024, and we will pay interest on the Series MM Notes in April and October of each year, commencing in April 2024.

We received net proceeds of approximately $ 1.135 billion from the offering of the Series LL Notes and Series MM Notes, after deducting the underwriting discount and estimated expenses, which were made available for general corporate purposes, including working capital, capital expenditures, acquisitions, stock repurchases, or repayment of outstanding indebtedness.

In March 2023, we issued $ 800 million aggregate principal amount of 4.90 percent Series KK Notes due April 15, 2029 (the “Series KK Notes”).

We will pay interest on the Series KK Notes in April and October of each year, commencing in October 2023.

We received net proceeds of approximately $ 783 million from the offering of the Series KK Notes, after deducting the underwriting discount and estimated expenses, which were made available for general corporate purposes, including working capital, capital expenditures, acquisitions, stock repurchases, or repayment of outstanding indebtedness.

We pay interest on the Series KK Notes in April and October of each year, commencing in October 2023.

We received net proceeds of approximately $ 783 million from the offering of the Series KK Notes, after deducting the underwriting discount and expenses, which were made available for general corporate purposes, including working capital, capital expenditures, acquisitions, stock repurchases, or repayment of outstanding indebtedness.

We are party to a $ 4.5 billion multicurrency revolving credit agreement (the “Credit Facility”).

11 unchanged sentences

We present the carrying amounts and the fair values of noncurrent financial assets and liabilities that qualify as financial instruments in the following table:

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(in millions) Carrying Amount Fair Value Carrying Amount Fair Value

9 unchanged sentences

ACCUMULATED OTHER COMPREHENSIVE LOSS AND STOCKHOLDERS’ EQUITY

The following tables detail the accumulated other comprehensive loss activity for the 2023 first half and 2022 first half:

The following tables detail the accumulated other comprehensive loss activity for the 2023 first three quarters and 2022 first three quarters:

(in millions) Foreign Currency Translation Adjustments Other Adjustments Accumulated Other Comprehensive Loss

Balance at year-end 2022 $ ( 740 ) $ 11 $ ( 729 )

Other comprehensive income before reclassifications (1)

Other comprehensive (loss) income before reclassifications (1)

( 129 ) 11 ( 118 )

Reclassification adjustments ( 3 ) 1 ( 2 )

Net other comprehensive income 7 6 13

Balance at June 30, 2023 $ ( 733 ) $ 17 $ ( 716 )

Net other comprehensive (loss) income

( 132 ) 12 ( 120 )

Balance at September 30, 2023 $ ( 872 ) $ 23 $ ( 849 )

(in millions) Foreign Currency Translation Adjustments Other Adjustments Accumulated Other Comprehensive Loss

4 unchanged sentences

Net other comprehensive (loss) income ( 653 ) 5 ( 648 )

Balance at June 30, 2022 $ ( 664 ) $ 13 $ ( 651 )

(1) Other comprehensive income (loss) before reclassifications for foreign currency translation adjustments includes intra-entity foreign currency transactions that are of a long-term investment nature, which resulted in losses of $ 14 million for the 2023 first half and gains of $ 44 million for the 2022 first half.

The following tables detail the changes in common shares outstanding and stockholders’ equity for the 2023 first half and 2022 first half:

Balance at September 30, 2022 $ ( 1,004 ) $ 14 $ ( 990 )

(1) Other comprehensive loss before reclassifications for foreign currency translation adjustments includes intra-entity foreign currency transactions that are of a long-term investment nature, which resulted in losses of $ 1 million for the 2023 first three quarters and gains of $ 76 million for the 2022 first three quarters.

The following tables detail the changes in common shares outstanding and stockholders’ equity for the 2023 first three quarters and 2022 first three quarters:

(in millions, except per share amounts)

17 unchanged sentences

$ ( 224 ) $ 5 $ 5,952 $ 13,544 $ ( 19,009 ) $ ( 716 )

— Net income 752 — — 752 — —

— Other comprehensive loss ( 133 ) — — — — ( 133 )

— Dividends ($ 0.52 per share)

( 154 ) — — ( 154 ) — —

0.4 Stock-based compensation plans 56 — 44 — 12 —

( 4.8 ) Purchase of treasury stock ( 958 ) — — — ( 958 ) —

295.2 Balance at September 30, 2023

$ ( 661 ) $ 5 $ 5,996 $ 14,142 $ ( 19,955 ) $ ( 849 )

Outstanding Total Class A Common Stock Additional Paid-in-Capital Retained Earnings Treasury Stock, at Cost Accumulated Other Comprehensive Loss

13 unchanged sentences

$ 1,772 $ 5 $ 5,872 $ 11,262 $ ( 14,716 ) $ ( 651 )

— Net income 630 — 630 — —

— Other comprehensive loss ( 339 ) — — — — ( 339 )

— Dividends ($ 0.30 per share)

( 97 ) — — ( 97 ) — —

0.1 Stock-based compensation plans 47 — 47 — — —

( 6.2 ) Purchase of treasury stock ( 950 ) — — — ( 950 ) —

319.3 Balance at September 30, 2022

$ 1,063 $ 5 $ 5,919 $ 11,795 $ ( 15,666 ) $ ( 990 )

CONTRACTS WITH CUSTOMERS

Our current and noncurrent liability for guest loyalty program increased by $ 191 million, to $ 6,785 million at June 30, 2023, from $ 6,594 million at December 31, 2022, primarily reflecting an increase in points earned by members.

Our current and noncurrent liability for guest loyalty program increased by $ 200 million, to $ 6,794 million at September 30, 2023, from $ 6,594 million at December 31, 2022, primarily reflecting an increase in points earned by members.

This includes a $ 91 million reclassification from deferred revenue to the liability for guest loyalty program primarily due to points that were earned during the period by members using our U.S.-issued co-branded credit cards, which were prepaid by the financial institutions in 2020.

The increase was partially offset by $ 1,572 million of revenue recognized in the 2023 first half, that was deferred as of December 31, 2022.

Our current and noncurrent deferred revenue decreased by $ 48 million, to $ 1,283 million at June 30, 2023, from $ 1,331 million at December 31, 2022, primarily as a result of $ 148 million of revenue recognized in the 2023 first half that was deferred as of December 31, 2022, as well as the reclassification from deferred revenue to the liability for guest loyalty program, which we discuss above .

The decrease was partially offset by revenue deferred in the 2023 first half related to our co-branded credit cards, gift cards, certain centralized programs and services fees, and franchise application and relicensing fees.

Our allowance for credit losses decreased to $ 187 million at June 30, 2023 from $ 191 million at December 31, 2022.

The increase was partially offset by $ 2,325 million of revenue recognized in the 2023 first three quarters, that was deferred as of December 31, 2022.

Our current and noncurrent deferred revenue decreased by $ 113 million, to $ 1,218 million at September 30, 2023, from $ 1,331 million at December 31, 2022, primarily as a result of $ 213 million of revenue recognized in the 2023 first three quarters that was deferred as of December 31, 2022, as well as the reclassification from deferred revenue to the liability for guest loyalty program, which we discuss above .

The decrease was partially offset by revenue deferred in the 2023 first three quarters related to our co-branded credit cards, gift cards, franchise application and relicensing fees, and certain centralized programs and services fees.

Our allowance for credit losses decreased to $ 189 million at September 30, 2023 from $ 191 million at December 31, 2022.

BUSINESS SEGMENTS

6 unchanged sentences

Segment Revenues

The following tables present our revenues disaggregated by segment and major revenue stream for the 2023 second quarter, 2022 second quarter, 2023 first half, and 2022 first half:

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022

The following tables present our revenues disaggregated by segment and major revenue stream for the 2023 third quarter, 2022 third quarter, 2023 first three quarters, and 2022 first three quarters:

Three Months Ended September 30, 2023 Three Months Ended September 30, 2022

(in millions) U.S.

10 unchanged sentences

$ 5,928 $ 5,313

Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022

(in millions) U.S.

11 unchanged sentences

Segment Profits

Three Months Ended Six Months Ended

(in millions) June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Three Months Ended Nine Months Ended

(in millions) September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

& Canada $ 707 $ 652 $ 2,120 $ 1,833

1 unchanged sentence

Unallocated corporate and other

103 83 203 92

Interest expense, net of interest income ( 139 ) ( 93 ) ( 391 ) ( 270 )

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements