Edgar Filing: Hyatt Hotels Corp

H Q2 6.30.13

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-34521

HYATT HOTELS CORPORATION

(Exact Name of Registrant as Specified in Its Charter)



Delaware		20-1480589
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

71 South Wacker Drive 12th Floor, Chicago, Illinois		60606
(Address of Principal Executive Offices)		(Zip Code)

(312) 750-1234

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check One):



Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of July 26, 2013, there were 44,088,521 shares of the registrant’s Class A common stock, $0.01 par value, outstanding and 112,527,463 shares of the registrant’s Class B common stock, $0.01 par value, outstanding.

HYATT HOTELS CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED JUNE 30, 2013

TABLE OF CONTENTS




	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	54

	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3.	Defaults Upon Senior Securities	57
Item 4.	Mine Safety Disclosures	57
Item 5.	Other Information	57
Item 6.	Exhibits	58

Signatures		59

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

HYATT HOTELS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions of dollars, except per share amounts)

(Unaudited)



	Three Months Ended						Six Months Ended
	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
REVENUES:
Owned and leased hotels	$	572		$	528		$	1,064		$	1,001
Management and franchise fees	96			80			171			159
Other revenues	21			20			41			37
Other revenues from managed properties	403			386			791			775
Total revenues	1,092			1,014			2,067			1,972
DIRECT AND SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES:
Owned and leased hotels	413			389			804			766
Depreciation and amortization	85			89			173			175
Other direct costs	8			7			15			13
Selling, general, and administrative	75			70			159			163
Other costs from managed properties	403			386			791			775
Direct and selling, general, and administrative expenses	984			941			1,942			1,892
Net gains (losses) and interest income from marketable securities held to fund operating programs	—			(4		)	10			10
Equity losses from unconsolidated hospitality ventures	(5		)	—			(6		)	(1		)
Interest expense	(16		)	(17		)	(33		)	(35		)
Asset impairments	(3		)	—			(11		)	—
Gains on sales of real estate	99			—			99			—
Other income (loss), net	(16		)	5			(14		)	17
INCOME BEFORE INCOME TAXES	167			57			170			71
PROVISION FOR INCOME TAXES	(55		)	(18		)	(50		)	(22		)
NET INCOME	112			39			120			49
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	—			—			—			—
NET INCOME ATTRIBUTABLE TO HYATT HOTELS CORPORATION	$	112		$	39		$	120		$	49
EARNINGS PER SHARE - Basic
Net income	$	0.70		$	0.24		$	0.75		$	0.30
Net income attributable to Hyatt Hotels Corporation	$	0.70		$	0.24		$	0.75		$	0.30
EARNINGS PER SHARE - Diluted
Net income	$	0.70		$	0.24		$	0.75		$	0.30
Net income attributable to Hyatt Hotels Corporation	$	0.70		$	0.24		$	0.75		$	0.30

See accompanying notes to condensed consolidated financial statements.

HYATT HOTELS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions of dollars)

(Unaudited)



	Three Months Ended						Six Months Ended
	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Net income	$	112		$	39		$	120		$	49
Other comprehensive loss, net of taxes:
Foreign currency translation adjustments, net of income tax of $- and $1 for the three months ended and $- and $1 for the six months ended June 30, 2013 and 2012, respectively	(24		)	(23		)	(26		)	(5		)
Unrealized (losses) gains on available for sale securities, net of income tax of $- and $- for the three months ended and $- and $1 for the six months ended June 30, 2013 and 2012, respectively	—			(1		)	—			1
Other comprehensive loss	(24		)	(24		)	(26		)	(4		)
COMPREHENSIVE INCOME	88			15			94			45
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	—			—			—			—
COMPREHENSIVE INCOME ATTRIBUTABLE TO HYATT HOTELS CORPORATION	$	88		$	15		$	94		$	45

See accompanying notes to condensed consolidated financial statements.

HYATT HOTELS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions of dollars, except per share amounts)

(Unaudited)



	June 30, 2013			December 31, 2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	718		$	413
Restricted cash	151			72
Short-term investments	87			514
Receivables, net of allowances of $12 and $11 at June 30, 2013 and December 31, 2012, respectively	606			531
Inventories	74			80
Prepaids and other assets	85			83
Prepaid income taxes	22			12
Deferred tax assets	1			19
Assets held for sale	95			34
Total current assets	1,839			1,758
Investments	348			293
Property and equipment, net	3,942			4,139
Financing receivables, net of allowances	125			126
Goodwill	133			133
Intangibles, net	512			388
Deferred tax assets	170			183
Other assets	638			620
TOTAL ASSETS	$	7,707		$	7,640
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt	$	14		$	4
Accounts payable	110			138
Accrued expenses and other current liabilities	386			338
Accrued compensation and benefits	120			137
Liabilities held for sale	4			1
Total current liabilities	634			618
Long-term debt	1,265			1,229
Other long-term liabilities	1,094			962
Total liabilities	2,993			2,809
Commitments and contingencies (see Note 11)
EQUITY:
Preferred stock, $0.01 par value per share, 10,000,000 shares authorized and none outstanding as of June 30, 2013 and December 31, 2012	—			—
Class A common stock, $0.01 par value per share, 1,000,000,000 shares authorized, 44,670,413 outstanding and 44,706,686 issued at June 30, 2013, Class B common stock, $0.01 par value per share, 444,521,875 shares authorized, 112,527,463 shares issued and outstanding at June 30, 2013 and Class A common stock, $0.01 par value per share, 1,000,000,000 shares authorized, 46,631,778 outstanding and 46,668,051 issued at December 31, 2012, Class B common stock, $0.01 par value per share, 448,985,467 shares authorized 115,434,342 shares issued and outstanding at December 31, 2012	2			2
Additional paid-in capital	3,052			3,263
Retained earnings	1,725			1,605
Treasury stock at cost, 36,273 shares at June 30, 2013 and December 31, 2012	(1		)	(1		)
Accumulated other comprehensive loss	(74		)	(48		)
Total stockholders’ equity	4,704			4,821
Noncontrolling interests in consolidated subsidiaries	10			10
Total equity	4,714			4,831
TOTAL LIABILITIES AND EQUITY	$	7,707		$	7,640

See accompanying notes to condensed consolidated financial statements.

HYATT HOTELS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions of dollars)

(Unaudited)



	Six Months Ended
	June 30, 2013			June 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	120		$	49
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	173			175
Deferred income taxes	41			5
Asset impairments	11			—
Equity losses from unconsolidated hospitality ventures and distributions received	17			9
Foreign currency losses	3			2
Gains on sales of real estate	(99		)	—
Realized gains from other marketable securities	—			(7		)
Net unrealized gains from other marketable securities	—			(10		)
Working capital changes and other	(104		)	8
Net cash provided by operating activities	162			231
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities and short-term investments	(51		)	(123		)
Proceeds from marketable securities and short-term investments	484			231
Contributions to investments	(58		)	(41		)
Acquisitions, net of cash acquired	(85		)	(179		)
Capital expenditures	(92		)	(157		)
Issuance of notes receivable	—			(52		)
Proceeds from sales of real estate and assets held for sale	208			—
Sales proceeds transferred to escrow as restricted cash	(135		)	—
Real estate sale proceeds transferred from escrow to cash and cash equivalents	44			—
(Increase) Decrease in restricted cash - investing	3			(14		)
Other investing activities	(6		)	(18		)
Net cash provided by (used in) investing activities	312			(353		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt, net of issuance costs of $3 million	356			—
Repayments of long-term debt	(304		)	—
Repurchase of common stock	(223		)	—
Other financing activities	(4		)	(3		)
Net cash used in financing activities	(175		)	(3		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH	6			(5		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	305			(130		)
CASH AND CASH EQUIVALENTS—BEGINNING OF YEAR	413			534
CASH AND CASH EQUIVALENTS—END OF PERIOD	$	718		$	404
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	38		$	34
Cash paid during the period for income taxes	$	35		$	21
Non-cash operating activities are as follows:
Non-cash performance guarantee (see Note 11)	$	117		$	—
Non-cash investing activities are as follows:
Non-cash contract acquisition costs (see Note 7)	$	117		$	—
Change in accrued capital expenditures	$	(4	)	$	(38	)

See accompanying notes to condensed consolidated financial statements.

HYATT HOTELS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(amounts in millions of dollars, unless otherwise indicated)

(Unaudited)

1. ORGANIZATION

Hyatt Hotels Corporation, a Delaware corporation, and its consolidated subsidiaries ("Hyatt Hotels Corporation") provide hospitality services on a worldwide basis through the management, franchising and ownership of hospitality related businesses. As of June 30, 2013, we operated or franchised 265 full service, Hyatt-branded hotels, consisting of 108,434 rooms throughout the world. We hold ownership interests in certain of these hotels. As of June 30, 2013, we operated or franchised 234 select service, Hyatt-branded hotels with 31,279 rooms, of which 232 hotels are located in the United States. We operate these hotels in 46 countries throughout the world. We hold ownership interests in certain of these hotels. We develop, operate, manage, license or provide services to Hyatt-branded timeshare, fractional and other forms of residential or vacation properties.

As used in these Notes and throughout this Quarterly Report on Form 10-Q, the terms "Company," "HHC," "we," "us," or "our" mean Hyatt Hotels Corporation and its consolidated subsidiaries.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information or footnotes required by GAAP for complete annual financial statements. As a result, this Quarterly Report on Form 10-Q should be read in conjunction with the Consolidated Financial Statements and accompanying Notes in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (the "2012 Form 10-K").

We have eliminated all intercompany transactions in our condensed consolidated financial statements. We consolidate entities for which we either have a controlling financial interest or are considered to be the primary beneficiary.

Management believes that the accompanying condensed consolidated financial statements reflect all adjustments, which are all of a normal recurring nature, considered necessary for a fair presentation of the interim periods.

2. RECENTLY ISSUED ACCOUNTING STANDARDS

Adopted Accounting Standards

In December 2011, the Financial Accounting Standards Board ("FASB") released Accounting Standards Update No. 2011-10 ("ASU 2011-10"), Property, Plant and Equipment (Topic 360): Derecognition of in Substance Real Estate-a Scope Clarification (a consensus of the FASB Emerging Issues Task Force). ASU 2011-10 clarifies when a parent (reporting entity) ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary's nonrecourse debt, the reporting entity should apply the guidance for Real Estate Sales (Subtopic 360-20). The provisions of ASU 2011-10 are effective for public companies for fiscal years and interim periods within those years, beginning on or after June 15, 2012. The adoption of ASU 2011-10 did not materially impact our condensed consolidated financial statements.

In December 2011, the FASB released Accounting Standards Update No. 2011-11 ("ASU 2011-11"), Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities and in January 2013 the FASB released Accounting Standards Update No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 requires companies to provide new disclosures about offsetting and related arrangements for financial instruments and derivatives. ASU 2013-01 clarified the scope of ASU 2011-11. The provisions of ASU 2011-11 and ASU 2013-01 are effective for annual reporting periods beginning on or after January 1, 2013, and are required to be applied retrospectively. The adoption of ASU 2011-11 and ASU 2013-01 did not materially impact our condensed consolidated financial statements.

In July 2012, the FASB released Accounting Standards Update No. 2012-02 ("ASU 2012-02"), Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. ASU 2012-02 gives companies the option to perform a qualitative assessment before calculating the fair value of the indefinite-lived

intangible asset. Under the guidance in ASU 2012-02, if this option is selected, a company is not required to calculate the fair value of the indefinite-lived intangible unless the entity determines it is more likely than not that its fair value is less than its carrying amount. The provisions of ASU 2012-02 are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, but early adoption was permitted. The adoption of ASU 2012-02 did not materially impact our condensed consolidated financial statements.

In February 2013, the FASB released Accounting Standards Update No. 2013-02 ("ASU 2013-02"), Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. ASU 2013-02 requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income (loss) by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income (loss) by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. The provisions of ASU 2013-02 are effective for reporting periods beginning after December 15, 2012. The adoption of ASU 2013-02 resulted in additional disclosure within our equity footnote, see Note 12.

Future Adoption of Accounting Standards

In February 2013, the FASB released Accounting Standards Update No. 2013-04 ("ASU 2013-04"), Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date (a consensus of the FASB Emerging Issues Task Force). ASU 2013-04 requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The provisions of ASU 2013-04 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. When adopted, ASU 2013-04 is not expected to materially impact our condensed consolidated financial statements.

In March 2013, the FASB released Accounting Standards Update No. 2013-05 ("ASU 2013-05"), Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force). ASU 2013-05 requires that when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity, the parent is required to release any related cumulative translation adjustment into net income. The provisions of ASU 2013-05 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. When adopted, ASU 2013-05 is not expected to materially impact our condensed consolidated financial statements.

3. EQUITY AND COST METHOD INVESTMENTS

We have investments that are recorded under both the equity and cost methods of accounting. These investments are considered to be an integral part of our business and are strategically and operationally important to our overall results. Our equity and cost method investment balances recorded at June 30, 2013 and December 31, 2012 are as follows:



	June 30, 2013		December 31, 2012
Equity method investments	$	277	$	222
Cost method investments	71		71
Total investments	$	348	$	293

During the six months ended June 30, 2013, we increased our investment in a hospitality venture by $40 million, which is classified as an equity method investment, to develop, own and operate a hotel property in the state of Hawaii.

Income from cost method investments included in other income (loss), net in our condensed consolidated statements of income for the three and six months ended June 30, 2013 represents a $4 million preferred return. The three and six months ended June 30, 2012 included insignificant income from cost method investments.

The following table presents summarized financial information for all unconsolidated ventures in which we hold an investment that is accounted for under the equity method.



	Three Months Ended June 30,					Six Months Ended June 30,
	2013			2012		2013			2012
Total revenues	$	249		$	251	$	475		$	494
Gross operating profit	84			82		158			153
Income (loss) from continuing operations	(7		)	5		(4		)	3
Net income (loss)	(7		)	5		(4		)	3

4. FAIR VALUE MEASUREMENT

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). GAAP establishes a valuation hierarchy for prioritizing the inputs that places greater emphasis on the use of observable market inputs and less emphasis on unobservable inputs. When determining fair value, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of the hierarchy are as follows:

Level One—Fair values based on unadjusted quoted prices in active markets for identical assets and liabilities;

Level Two—Fair values based on quoted market prices for similar assets and liabilities in active markets, quoted prices in inactive markets for identical assets and liabilities, and inputs other than quoted market prices that are observable for the asset or liability;

Level Three—Fair values based on inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. Valuation techniques could include the use of discounted cash flow models and similar techniques.

We have various financial instruments that are measured at fair value including certain marketable securities and derivative instruments. We currently do not have non-financial assets or non-financial liabilities that are required to be measured at fair value on a recurring basis.

We utilize the market approach and income approach for valuing our financial instruments. The market approach utilizes prices and information generated by market transactions involving identical or similar assets and liabilities and the income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). For instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the classification of fair value assets and liabilities within the fair value hierarchy.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of June 30, 2013 and December 31, 2012, we had the following financial assets and liabilities measured at fair value on a recurring basis:



	June 30, 2013		Quoted Prices in Active Markets for Identical Assets (Level One)		Significant Other Observable Inputs (Level Two)		Significant Unobservable Inputs (Level Three)
Marketable securities recorded in cash and cash equivalents
Interest bearing money market funds	$	141	$	141	$	—	$	—
Commercial paper	192		—		192		—
Marketable securities included in short-term investments, prepaids and other assets and other assets
Mutual funds	293		293		—		—
Equity securities	10		10		—		—
U.S. government obligations	112		—		112		—
U.S. government agencies	50		—		50		—
Corporate debt securities	145		—		145		—
Mortgage-backed securities	22		—		22		—
Asset-backed securities	14		—		14		—
Municipal and provincial notes and bonds	9		—		9		—
Derivative instruments
Foreign currency forward contracts	1		—		1		—



	December 31, 2012			Quoted Prices in Active Markets for Identical Assets (Level One)		Significant Other Observable Inputs (Level Two)			Significant Unobservable Inputs (Level Three)
Marketable securities recorded in cash and cash equivalents
Interest bearing money market funds	$	117		$	117	$	—		$	—
Marketable securities included in short-term investments, prepaids and other assets and other assets
Mutual funds	275			275		—			—
Equity securities	10			10		—			—
U.S. government obligations	111			—		111			—
U.S. government agencies	68			—		68			—
Corporate debt securities	540			—		540			—
Mortgage-backed securities	22			—		22			—
Asset-backed securities	10			—		10			—
Municipal and provincial notes and bonds	15			—		15			—
Derivative instruments
Interest rate swaps	1			—		1			—
Foreign currency forward contracts	(1		)	—		(1		)	—

During the three and six months ended June 30, 2013 and June 30, 2012, there were no transfers between levels of the fair value hierarchy. Our policy is to recognize transfers in and transfers out as of the end of each quarterly reporting period.

Marketable Securities

Our portfolio of marketable securities consists of various types of U.S. Treasury securities, mutual funds, common stock, and fixed income securities, including government agencies, municipal, provincial and corporate bonds. The fair value of our mutual funds and certain equity securities were classified as Level One as they trade with sufficient frequency and volume to enable us to obtain pricing information on an ongoing basis. The remaining securities were classified as Level Two due to the use and weighting of multiple market inputs being considered in the final price of the security. Market inputs include quoted market prices from active markets for identical securities, quoted market prices for identical securities in inactive markets, and quoted market prices in active and inactive markets for similar securities.

We invest a portion of our cash balance into short-term interest bearing money market funds and commercial paper that have a maturity of less than ninety days. Consequently, the balances are recorded in cash and cash equivalents. The funds are held with open-ended registered investment companies and the fair value of the funds is classified as Level One as we are able to obtain market available pricing information on an ongoing basis. The commercial paper is classified as Level Two as we are able to obtain market prices for similar assets in active markets, quoted prices in inactive markets for identical assets and inputs other than quoted market prices that are observable for the asset.

Included in our portfolio of marketable securities are investments in debt and equity securities classified as available for sale. At June 30, 2013 and December 31, 2012 these were as follows:



	June 30, 2013
	Cost or Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Corporate debt securities	$	40	$	8	$	(8	)	$	40
U.S. government agencies and municipalities	7		—		—			7
Equity securities	9		1		—			10
Total	$	56	$	9	$	(8	)	$	57



	December 31, 2012
	Cost or Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Corporate debt securities	$	443	$	8	$	(8	)	$	443
U.S. government agencies and municipalities	31		—		—			31
Equity securities	9		1		—			10
Total	$	483	$	9	$	(8	)	$	484

Gross realized gains and losses on available for sale securities were insignificant for the three and six months ended June 30, 2013 and 2012.

The table below summarizes available for sale fixed maturity securities by contractual maturity at June 30, 2013. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid with or without call or prepayment penalties. Securities not due at a single date are allocated based on weighted average life. Although a portion of our available for sale fixed maturity securities mature after one year, we have chosen to classify the entire portfolio as current. The portfolio's objectives are to preserve capital, provide liquidity to satisfy operating requirements, working capital purposes and strategic initiatives and capture a market rate of return. Therefore, since these securities represent funds available for current operations, the entire investment portfolio is classified as current assets.



	June 30, 2013
Contractual Maturity	Cost or Amortized Cost		Fair Value
Due in one year or less	$	43	$	43
Due in one to two years	4		4
Total	$	47	$	47

The impact to net income from total gains or losses included in net gains and interest income from marketable securities held to fund operating programs due to the change in unrealized gains or losses relating to assets still held at the reporting date for the three and six months ended June 30, 2013 and 2012 was insignificant.

Derivative Instruments

Our derivative instruments are foreign currency exchange rate instruments and interest rate swaps. The instruments are valued using an income approach with factors such as interest rates and yield curves, which represent market observable inputs and are generally classified as Level Two. Credit valuation adjustments may be made to ensure that derivatives are recorded at fair value. These adjustments include amounts to reflect counterparty credit quality and our nonperformance risk. During the three months ended June 30, 2013, we redeemed all of our 2015 Notes and settled the related outstanding interest rate swaps, see Note 8 for further details on our debt settlement. As of December 31, 2012, the credit valuation adjustments were insignificant. See Note 9 for further details on our derivative instruments.

Mortgage Backed Securities

As of January 1, 2012, the balance of our Level Three mortgage backed securities was $2 million. During the six months ended June 30, 2012 we sold these securities for $2 million. There were no other significant purchases, issuances, settlements or gains or losses (realized or unrealized) related to our Level Three mortgage backed securities in the three and six months ended June 30, 2012. During the three and six months ended June 30, 2013, there were no purchases, issuances, settlements or gains or losses (realized or unrealized) related to our Level Three mortgage backed securities. As of June 30, 2013 and December 31, 2012, we had no Level Three mortgage backed securities.

Other Financial Instruments

We estimated the fair value of financing receivables using discounted cash flow analyses based on current market assumptions for similar types of arrangements. Based upon the availability of market data, we have classified our financing receivables as Level Three. The primary sensitivity in these calculations is based on the selection of appropriate interest and discount rates. Fluctuations in these assumptions will result in different estimates of fair value. For further information on financing receivables, see Note 5.

We estimated the fair value of debt, excluding capital leases, which, as of June 30, 2013, consisted primarily of $250 million of 3.875% senior notes due 2016 (the "2016 Notes"), $196 million of 6.875% senior notes due 2019 (the "2019 Notes"), $250 million of 5.375% senior notes due 2021 (the "2021 Notes"), and $350 million of 3.375% senior notes due 2023 (the "2023 Notes" which, together with the 2016 Notes, the 2019 Notes, and the 2021 Notes are collectively referred to as the "Senior Notes"), and construction loans. As of December 31, 2012 the fair value of our debt included our $250 million of 5.750% senior notes due in 2015 (the "2015 Notes") which were redeemed in the quarter ended June 30, 2013, our 2016 Notes, our 2019 Notes, a portion of which were tendered during the quarter ended June 30, 2013, our 2021 Notes and our construction loans. Our Senior Notes are classified as Level Two due to the use and weighting of multiple market inputs in the final price of the security. Market inputs include quoted market prices from active markets for identical securities, quoted market prices for identical securities in

inactive markets, and quoted market prices in active and inactive markets for similar securities. Our construction loans have been classified as Level Three, as we subjectively determine the risk rating which impacts the discount rate.

The carrying amounts and fair values of our other financial instruments are as follows:



	Asset (Liability)
	June 30, 2013
	Carrying Value			Fair Value			Quoted Prices in Active Markets for Identical Assets (Level One)		Significant Other Observable Inputs (Level Two)			Significant Unobservable Inputs (Level Three)
Financing receivables
Secured financing to hotel owners	$	310		$	315		$	—	$	—		$	315
Vacation ownership mortgage receivable	38			38			—		—			38
Unsecured financing to hotel owners	63			63			—		—			63
Debt, excluding capital lease obligations	(1,065		)	(1,113		)	—		(1,091		)	(22		)



	Asset (Liability)
	December 31, 2012
	Carrying Value			Fair Value			Quoted Prices in Active Markets for Identical Assets (Level One)		Significant Other Observable Inputs (Level Two)			Significant Unobservable Inputs (Level Three)
Financing receivables
Secured financing to hotel owners	$	310		$	314		$	—	$	—		$	314
Vacation ownership mortgage receivable	39			39			—		—			39
Unsecured financing to hotel owners	64			64			—		—			64
Debt, excluding capital lease obligations	(1,017		)	(1,137		)	—		(1,126		)	(11		)

5. FINANCING RECEIVABLES

We have divided our financing receivables, which include loans and other financing arrangements, into three portfolio segments based on their initial measurement, risk characteristics and our method for monitoring or assessing credit risk. These portfolio segments correspond directly with our assessed class of receivables and are as follows:

•

Secured Financing to Hotel Owners—These financing receivables are senior secured mortgage loans and are collateralized by hotel properties currently in operation. These loans consist primarily of a $277 million mortgage loan receivable to an unconsolidated hospitality venture which was formed to acquire ownership of a hotel property in Waikiki, Hawaii. This mortgage receivable has interest set at 30-day LIBOR +3.75% due monthly and a stated maturity date of July 2013. As a result, it is classified as a current receivable. This receivable was settled timely in July 2013. Secured financing to hotel owners also includes financing provided to certain franchisees for the renovation and conversion of certain franchised hotels. These franchisee loans accrue interest at fixed rates ranging between 5.0% and 5.5%.


•	Vacation Ownership Mortgage Receivables—These financing receivables are comprised of various mortgage loans related to our financing of vacation ownership interval sales. As of June 30, 2013, the weighted-average interest rate on vacation ownership mortgage receivables was 14.0%.

•

Unsecured Financing to Hotel Owners—These financing receivables are primarily made up of individual unsecured loans and other types of financing arrangements provided to hotel owners. During 2012, we entered into a loan agreement to provide a $50 million mezzanine loan for the construction of a hotel that we will manage. Under the loan agreement, interest accrues at the greater of one-month LIBOR plus 5.0%, or 6.5%. Our other financing receivables have stated maturities and interest rates. However, the expected repayment terms may be dependent on the future cash flows of the hotels and these instruments, therefore, are not considered loans as the repayment dates are not fixed or determinable. Because these arrangements are not considered loans, we do not include them in our impaired loans analysis. Since these receivables may come due earlier than the stated maturity date, the expected maturity dates have been excluded from the maturities table below.

The three portfolio segments of financing receivables and their balances at June 30, 2013 and December 31, 2012 are as follows:



	June 30, 2013			December 31, 2012
Secured financing to hotel owners	$	317		$	317
Vacation ownership mortgage receivables at various interest rates with varying payments through 2022	45			48
Unsecured financing to hotel owners	145			147
	507			512
Less allowance for losses	(96		)	(99		)
Less current portion included in receivables, net	(286		)	(287		)
Total long-term financing receivables, net	$	125		$	126

Financing receivables held by us as of June 30, 2013 are scheduled to mature as follows:



Year Ending December 31,	Secured Financing to Hotel Owners			Vacation Ownership Mortgage Receivables
2013	$	278		$	4
2014	1			8
2015	38			7
2016	—			6
2017	—			5
2018	—			4
Thereafter	—			11
Total	317			45
Less allowance	(7		)	(7		)
Net financing receivables	$	310		$	38

Allowance for Losses and Impairments

We individually assess all loans in the secured financing to hotel owners portfolio and the unsecured financing to hotel owners portfolio for impairment. We assess the vacation ownership mortgage receivables portfolio, which consists entirely of loans, for impairment on an aggregate basis. In addition to loans, we include other types of financing arrangements in unsecured financing to hotel owners which we do not assess individually for impairment. However, we do regularly evaluate our reserves for these other financing arrangements and record provisions in the financing receivables allowance as necessary. Impairment charges for loans within all three portfolios and reserves related to our other financing arrangements are recorded as provisions in the financing receivables allowance. We consider the provisions on all of our portfolio segments to be adequate based on the economic environment and our assessment of the future collectability of the outstanding loans.

The following tables summarize the activity in our financing receivables allowance for the three and six months ended June 30, 2013 and 2012:



	Secured Financing		Vacation Ownership			Unsecured Financing			Total
Allowance at January 1, 2013	$	7	$	9		$	83		$	99
Provisions	—		—			2			2
Write-offs	—		(1		)	—			(1		)
Recoveries	—		—			—			—
Other Adjustments	—		—			—			—
Allowance at March 31, 2013	$	7	$	8		$	85		$	100
Provisions	—		—			—			—
Write-offs	—		(1		)	(2		)	(3		)
Recoveries	—		—			—			—
Other Adjustments	—		—			(1		)	(1		)
Allowance at June 30, 2013	$	7	$	7		$	82		$	96



	Secured Financing		Vacation Ownership			Unsecured Financing			Total
Allowance at January 1, 2012	$	7	$	8		$	75		$	90
Provisions	—		1			3			4
Write-offs	—		(1		)	(3		)	(4		)
Recoveries	—		—			—			—
Other Adjustments	—		—			—			—
Allowance at March 31, 2012	$	7	$	8		$	75		$	90
Provisions	—		2			3			5
Write-offs	—		(2		)	—			(2		)
Recoveries	—		—			(2		)	(2		)
Other Adjustments	—		—			—			—
Allowance at June 30, 2012	$	7	$	8		$	76		$	91

Note: Amounts included in other adjustments represent currency translation on foreign currency denominated financing receivables.

We routinely evaluate loans within financing receivables for impairment. To determine whether an impairment has occurred, we evaluate the collectability of both interest and principal. A loan is considered to be impaired when the Company determines that it is probable that we will not be able to collect all amounts due under the contractual terms. We do not recognize interest income for impaired loans unless cash is received, in which case the payment is recorded to other income (loss), net in the accompanying condensed consolidated statements of income. During the three and six months ended June 30, 2013, we did not record any impairment charges for loans to hotel owners. During the three and six months ended June 30, 2012, we recorded impairment charges of $2 million and $3 million respectively, for loans to hotel owners. The gross value of our impaired loans and related reserve does increase, outside of impairments recognized, due to the accrual and related reserve of interest income on these loans.

An analysis of our loans included in secured financing to hotel owners and unsecured financing to hotel owners had the following impaired amounts at June 30, 2013 and December 31, 2012, all of which had a related allowance recorded against them:



Impaired Loans
June 30, 2013
	Gross Loan Balance (Principal and Interest)		Unpaid Principal Balance		Related Allowance			Average Recorded Loan Balance
Secured financing to hotel owners	$	40	$	40	$	(7	)	$	40
Unsecured financing to hotel owners	52		38		(52		)	53



Impaired Loans
December 31, 2012
	Gross Loan Balance (Principal and Interest)		Unpaid Principal Balance		Related Allowance			Average Recorded Loan Balance
Secured financing to hotel owners	$	40	$	39	$	(7	)	$	40
Unsecured financing to hotel owners	53		40		(53		)	51

Interest income recognized on these impaired loans within other income (loss), net on our condensed consolidated statements of income for the three and six months ended June 30, 2013 and 2012 was as follows:



Interest Income
	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Secured financing to hotel owners	$	1	$	—	$	1	$	1
Unsecured financing to hotel owners	—		—		—		—

Credit Monitoring

On an ongoing basis, we monitor the credit quality of our financing receivables based on payment activity.


•	Past-due Receivables—We determine financing receivables to be past-due based on the contractual terms of each individual financing receivable agreement.

•

Non-Performing Receivables—Receivables are determined to be non-performing based upon the following criteria: (1) if interest or principal is more than 90 days past due for secured financing to hotel owners and unsecured financing to hotel owners; (2) if interest or principal is more than 120 days past due for vacation ownership mortgage receivables; or (3) if an impairment charge has been recorded for a loan or a provision established for our other financing arrangements. For the three and six months ended June 30, 2013 and 2012, no interest income was accrued for secured financing to hotel owners and unsecured financing to hotel owners more than 90 days past due or for vacation ownership receivables more than 120 days past due. For the three and six months ended June 30, 2013 and 2012, insignificant interest income was accrued for vacation ownership receivables past due more than 90 days but less than 120 days.

If a financing receivable is non-performing, we place the financing receivable on non-accrual status. We only recognize interest income when cash is received for financing receivables on non-accrual status. Accrual of interest income is resumed when the receivable becomes contractually current and collection doubts are removed.

The following tables summarize our aged analysis of past-due financing receivables by portfolio segment, the gross balance of financing receivables greater than 90 days past-due and the gross balance of financing receivables on non-accrual status as of June 30, 2013 and December 31, 2012:



Analysis of Financing Receivables
June 30, 2013
	Receivables Past Due		Greater than 90 Days Past Due		Receivables on Non-Accrual Status
Secured financing to hotel owners	$	—	$	—	$	40
Vacation ownership mortgage receivables	2		—		—
Unsecured financing to hotel owners *	3		3		81
Total	$	5	$	3	$	121



Analysis of Financing Receivables
December 31, 2012
	Receivables Past Due		Greater than 90 Days Past Due		Receivables on Non-Accrual Status
Secured financing to hotel owners	$	—	$	—	$	40
Vacation ownership mortgage receivables	2		—		—
Unsecured financing to hotel owners *	3		3		81
Total	$	5	$	3	$	121

* Certain of these receivables have been placed on non-accrual status and we have recorded allowances for these receivables based on estimates of the future cash flows available for payment of these financing receivables. However, a majority of these payments are not past due.

6. ACQUISITIONS AND DISPOSITIONS

We continually assess strategic acquisitions and dispositions to complement our current business.

Acquisitions

The Driskill—During the six months ended June 30, 2013, we acquired The Driskill hotel in Austin, Texas ("The Driskill") for a purchase price of approximately $85 million. The Driskill has a long-standing presence in a market which we view as a key location for our guests. Due to the iconic nature of the hotel and its membership in the Historic Hotels of America and Associated Luxury Hotels International, we have chosen to retain The Driskill name. Of the total $85 million purchase price, significant assets acquired consist of $72 million of property and equipment, a $7 million indefinite-lived brand intangible, a $5 million management intangible and $1 million of other assets which have been included primarily in our owned and leased hotel segment.

Hyatt Regency Mexico City—During the six months ended June 30, 2012, we acquired all of the outstanding shares of capital stock of a company that owned a full service hotel in Mexico City, Mexico in order to expand our presence in the region. The total purchase price was approximately $202 million. As part of the purchase, we acquired cash and cash equivalents of $12 million, resulting in a net purchase price of $190 million. We began managing this property during the second quarter of 2012 as the Hyatt Regency Mexico City.

In conjunction with the acquisition, we entered into a holdback escrow agreement. Pursuant to the holdback escrow agreement, we withheld $11 million from the purchase price and placed it into an escrow account, which was classified as restricted cash on our condensed consolidated balance sheet. As of June 30, 2013, the funds in the escrow account had been released to the seller.

The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed for Hyatt Regency Mexico City as of the acquisition date, primarily in our owned and leased hotels segment (in millions):



Cash and cash equivalents	$	12
Other current assets	4
Land, property, and equipment	190
Intangibles	12
Goodwill	29
Total assets	247
Current liabilities	4
Other long-term liabilities	41
Total liabilities	45
Total net assets acquired	$	202

The acquisition created goodwill of Mexican Peso 404 million, or $29 million as of the date of acquisition, which is not deductible for tax purposes and is recorded within our owned and leased segment. The definite lived intangibles, which are substantially comprised of management intangibles, are being amortized over a weighted average useful life of 17 years. The other long-term liabilities acquired consist primarily of a $41 million deferred tax liability, the majority of which relates to property and equipment.

Dispositions

Hyatt Place—During the six months ended June 30, 2013, we sold three Hyatt Place properties for a combined $36 million, net of closing costs, to an unrelated third party, resulting in a pre-tax gain of approximately $2 million. These properties had been classified as assets and liabilities held for sale as of December 31, 2012. The Company retained long-term management agreements for each hotel with the purchaser of the hotels. The gain on sale has been deferred and is being recognized in management and franchise fees over the term of the management contracts, within our Americas management and franchising segment. The operations of the hotels prior to the sale remain within our owned and leased hotels segment. See "Like-Kind Exchange Agreements", below, as proceeds from two of the three properties sold have been held as restricted for use in a potential like-kind exchange.

Hyatt Fisherman's Wharf—During the three months ended June 30, 2013, we sold Hyatt Fisherman's Wharf for $100 million, net of closing costs, to an unrelated third party, and entered into a long-term franchise agreement with the owner of the property. The sale resulted in a pre-tax gain of $55 million, which has been recognized in gains on sales of real estate on our condensed consolidated statements of income during the three and six months ended June 30, 2013. The operating results and financial position of this hotel prior to the sale remain within our owned and leased hotels segment. See "Like-Kind Exchange Agreements" below, as proceeds from the sale of Hyatt Fisherman's Wharf have been held as restricted for use in a potential like-kind exchange.

Hyatt Santa Barbara—During the three months ended June 30, 2013, we sold Hyatt Santa Barbara for $60 million, net of closing costs, to an unrelated third party, and entered into a long-term franchise agreement with the owner of the property. The sale resulted in a pre-tax gain of $44 million, which has been recognized in gains on sales of real estate on our condensed consolidated statements of income during the three and six months ended June 30, 2013. The operating results and financial position of this hotel prior to the sale remain within our owned and leased hotels segment.

Artwork - During the three months ended March 31, 2013, we committed to a plan to sell artwork. As a result, we classified the value of the artwork as assets held for sale in the amount of $4 million as of March 31, 2013. During the three months ended June 30, 2013, we closed on the sale of the artwork to an unrelated third party and recognized a pre-tax gain of $29 million which was recognized in other income (loss), net on our condensed consolidated statements of income. As of June 30, 2013 a portion of the proceeds had been received and the

remaining proceeds have been recognized within accounts receivable and are expected to be received in the third quarter of 2013. See "Like-Kind Exchange Agreements" below, as proceeds from the sale of artwork have been held as restricted for use in a potential like-kind exchange.

Like-Kind Exchange Agreements

In conjunction with the second quarter 2013 sale of Hyatt Fisherman's Wharf, we entered into a like-kind exchange agreement with an intermediary. Pursuant to the like-kind exchange agreement, the proceeds from the sale of this hotel were placed into an escrow account administered by an intermediary. Accordingly, we classified net proceeds of $100 million related to this property as restricted cash on our condensed consolidated balance sheets as of June 30, 2013.

In conjunction with the first quarter 2013 sale of two of the three Hyatt Place properties discussed above, we entered into a like-kind exchange agreement with an intermediary. Pursuant to the like-kind exchange agreement, the proceeds from the sales of these two hotels were placed into an escrow account administered by an intermediary. Accordingly, we classified the net proceeds of $23 million related to these two properties as restricted cash on our condensed consolidated balance sheets as of June 30, 2013.

During the six months ended June 30, 2013, we released the net proceeds from the 2012 sales of four Hyatt Place properties of $44 million from restricted cash on our condensed consolidated balance sheets, as a like-kind exchange agreement was not consummated within allowable time periods.

In conjunction with the second quarter sale of artwork, we placed proceeds received into restricted cash pursuant to a like-kind exchange agreement administered by an intermediary. We intend to use a portion of the proceeds to fund future artwork purchases and we anticipate receiving the remainder of the proceeds in the third quarter of 2013.

Assets Held for Sale

During the second quarter of 2013, we committed to a plan to sell a full service hotel and classified the related assets and liabilities within our owned and leased hotels segment as held for sale at June 30, 2013. Assets held for sale related to this full service hotel were $95 million, of which $91 million related to property and equipment, net. Liabilities held for sale were $4 million. As this property is classified as held for sale, we are required to record the value at the lower of cost or market. We determined that in order to record this property at the lower of cost or market, as determined by a best estimate of expected sales price, it was necessary to record a $3 million impairment charge. The charge was recorded to asset impairments, and was based on the aforementioned best estimate of the sales price, net of closing costs.

7. GOODWILL AND INTANGIBLE ASSETS

We review the carrying value of our goodwill and indefinite lived brand intangible by performing either a qualitative assessment or a two-step process. Under step one, we compare the carrying value of our brand intangible, and our goodwill at the reporting unit level, to their respective fair values during our annual impairment test in the fourth quarter or more often as needed. We define a reporting unit at the individual property or business level. When determining fair value in step one, we utilize internally developed discounted future cash flow models, third party appraisals and, if appropriate, current estimated net sales proceeds from pending offers. We then compare the estimated fair value to our carrying value. If the carrying value of our indefinite lived brand intangible is in excess of the fair value, an impairment charge is recognized in an amount equal to the excess. If the carrying value of our goodwill is in excess of the fair value, we must determine our implied fair value of goodwill to evaluate if any impairment charge is necessary. During the three and six months ended June 30, 2013 and 2012, no impairment charges were recorded related to goodwill or our indefinite lived intangible asset.

Goodwill was $133 million at June 30, 2013 and December 31, 2012. During the three months ended March 31, 2013, we preliminarily recognized $9 million of goodwill in conjunction with the acquisition of The Driskill (see Note 6). Our final valuation resulted in higher value attributed to the assets acquired and therefore we determined the acquisition did not result in goodwill. As part of The Driskill acquisition, we acquired an indefinite-lived brand intangible of $7 million, see Note 6.

Definite lived intangible assets primarily include contract acquisition costs, acquired lease rights, and acquired franchise and management intangibles. Contract acquisition costs and franchise and management intangibles are generally amortized on a straight-line basis over their contract terms, which range from approximately 5 to 40 years and 20 to 30 years, respectively. Acquired lease rights are amortized on a straight-line basis over the lease term. Definite lived intangibles are tested for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. During the six months ended June 30, 2013, we entered into 30 year management agreements for four hotels in France. Using exchange rates at June 30, 2013, the value of the contract acquisition cost at inception was $117 million. The intangible is being amortized into expense on a straight-line basis over the 30 year term of the management agreements, which began in the second quarter of 2013 in conjunction with the conversion of the hotels to Hyatt management. There were no impairment charges related to intangible assets with definite lives during the three and six months ended June 30, 2013 and 2012.

The following is a summary of intangible assets at June 30, 2013 and December 31, 2012:



	June 30, 2013			Weighted Average Useful Lives in Years	December 31, 2012
Contract acquisition costs	$	333		26	$	203
Acquired lease rights	132			112	139
Franchise and management intangibles	128			25	122
Brand Intangible	7			—	—
Other	7			14	10
	607				474
Accumulated amortization	(95		)		(86		)
Intangibles, net	$	512			$	388

Amortization expense relating to intangible assets was as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Amortization expense	$	6	$	7	$	12	$	12

8. DEBT

Long-term debt, net of current maturities, at June 30, 2013 and December 31, 2012 was $1,265 million and $1,229 million, respectively.

Senior Notes—During the three months ended June 30, 2013, we issued and sold $350 million 3.375% Senior Notes due July 15, 2023 at a public offering price of 99.498%. We received net proceeds of $345 million from the sale of the 2023 Notes, after deducting underwriters' discounts and offering expenses. We used the net proceeds to pay the redemption price (as defined below) in connection with the redemption of the 2015 Notes and to repurchase the 2019 Notes tendered in the cash tender offer, with any remaining proceeds intended to be used for general corporate purposes. Interest on the 2023 Notes is payable semi-annually on January 15 and July 15 of each year, beginning on January 15, 2014. See Note 9 for the interest rate lock associated with the 2023 Notes.

Debt Redemption—During the three months ended June 30, 2013, we redeemed all of our outstanding 2015 Notes, of which an aggregate principal amount of $250 million was outstanding. The redemption price, which was calculated in accordance with the terms of the 2015 Notes and included principal plus a make-whole premium, was $278 million. See Note 9 for the settlement of the interest rate swaps associated with the 2015 Notes.

After the issuance of our 2015 Notes, we entered into eight $25 million interest rate swap contracts. During the year ended December 31, 2012, we terminated four of the eight interest rate swap contracts, for which we received cash payments of $8 million to settle the fair value of the swaps. The cash received from the termination of the four swaps was being amortized from the settlement date as a benefit to interest expense over the remaining term of the 2015 Notes. During the three months ended June 30, 2013 we settled the remaining four outstanding interest rate swap agreements. At the time the 2015 Notes were redeemed, we recognized a gain of $7 million, which included the remaining unamortized benefit from the settlement of the initial four swaps during 2012 of $5 million and a gain on the remaining four swaps of $2 million that were terminated in 2013 in anticipation of the 2015

Note redemption. The gain is included within debt settlement costs in other income (loss), net on the condensed consolidated statements of income. See Note 9 for the settlement of the interest rate swaps associated with the 2015 Notes.

Tender Offer—During the three months ended June 30, 2013, we completed a cash tender offer (the "cash tender offer") for any and all of our 2019 Notes, of which an aggregate principal amount of $250 million was outstanding. We purchased $54 million aggregate principal amount of 2019 Notes in the cash tender offer at a purchase price of $66 million, which included premiums payable in connection with the cash tender offer. Following the cash tender offer, $196 million aggregate principal amount of 2019 Notes remains outstanding.

Floating Average Rate Construction Loan—During the year ended December 31, 2012, we obtained a construction loan in order to develop a hotel in Brazil. The term of this loan is up to 18 years and the interest is at a floating average rate estimated at 7.5%. As of June 30, 2013, we had borrowed $11 million against this construction loan of which $4 million has not yet been utilized in construction and is therefore held in restricted cash.

9. DERIVATIVE INSTRUMENTS

It is our policy that derivative transactions are executed only to manage exposures arising in the normal course of business and not for the purpose of creating speculative positions or trading. As a result of the use of derivative instruments, we are exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate the counterparty credit risk, we have a policy of only entering into contracts with carefully selected major financial institutions based upon their credit rating and other factors. Our derivative instruments do not contain credit-risk related contingent features.

All derivatives are recognized on the balance sheet at fair value. On the date the derivative contract is entered, we designate the derivative as one of the following: a hedge of a forecasted transaction or the variability of cash flows to be paid (cash flow hedge), a hedge of the fair value of a recognized asset or liability (fair value hedge), or an undesignated hedge instrument. Changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge are recorded in accumulated other comprehensive loss on the condensed consolidated balance sheet until they are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Changes in the fair value of a derivative that is qualified, designated and highly effective as a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk are recorded in current earnings. Changes in the fair value of undesignated derivative instruments and the ineffective portion of designated derivative instruments are reported in current period earnings. Cash flows from designated derivative financial instruments are classified within the same category as the item being hedged on the statement of cash flows. Cash flows from undesignated derivative financial instruments are included in the investing category on the condensed consolidated statement of cash flows. We do not offset any derivative assets or liabilities in the balance sheet and none of our derivatives are subject to master netting arrangements.

Interest Rate Swap Agreements—In the normal course of business, we are exposed to the impact of interest rate changes due to our borrowing activities. Our objective is to manage the risk of interest rate changes on the results of operations, cash flows, and the market value of our debt by creating an appropriate balance between our fixed and floating-rate debt. Interest rate derivative transactions, including interest rate swaps, are entered into to maintain a level of exposure to interest rates which the Company deems acceptable.

As of December 31, 2012, we held a total of four $25 million interest rate swap contracts, each of which were set to expire on August 15, 2015. Taken together, these swap contracts effectively converted a total of $100 million of the $250 million of our 2015 Notes to floating rate debt based on three-month LIBOR plus a fixed rate component. The fixed rate component of the four swaps varied by contract, ranging from 4.5675% to 4.77%. The interest rate swaps were designated as fair value hedges, as their objective was to protect the 2015 Notes against changes in fair value due to changes in the three-month LIBOR interest rate. The swaps were designated as fair value hedges at inception and at December 31, 2012 were highly effective in offsetting fluctuations in the fair value of the 2015 Notes prior to their redemption during the three month period ended June 30, 2013. The swaps were settled in anticipation of the redemption of the 2015 Notes. We received $2 million of cash payments to settle the fair value of the swaps during the three and six months ended June 30, 2013 which included an insignificant amount of accrued interest. The cash received offset premiums paid at the time of the settlement of the 2015 Notes. See Note 8 for a discussion of the settlement of our 2015 Notes.

At December 31, 2012, the fixed to floating interest rate swaps were recorded within other assets at a value of $1 million offset by a fair value adjustment to long-term debt of $1 million. At December 31, 2012, the difference

between the other asset value and fair market value adjustment to long-term debt includes the ineffective portion of the swap life-to-date which was insignificant.

Interest Rate Lock—During the three months ended June 30, 2013, we entered into treasury-lock derivative instruments with $175 million of notional value to hedge a portion of the risk of changes in the benchmark interest rate associated with the 2023 Notes issued during the three months ending June 30, 2013, see Note 8, as changes in the benchmark interest rate would result in variability in cash flows related to such debt. These derivative instruments were designated as cash flow hedges at inception and were highly effective in offsetting fluctuations in the benchmark interest rate.

During the three months ended June 30, 2013, we settled the aforementioned treasury-lock derivative instruments at the date of issuance of the 2023 Notes. The $1 million loss on the settlement was recorded to accumulated other comprehensive loss and will be amortized to interest expense over the life of the 2023 Notes. For the three and six months ended June 30, 2013, the amount of incremental interest expense was insignificant.

Foreign Currency Exchange Rate Instruments—We transact business in various foreign currencies and utilize foreign currency forward contracts to offset the risks associated with the effects of certain foreign currency exposures. Our strategy is to have increases or decreases in our foreign currency exposures offset by gains or losses on the foreign currency forward contracts to mitigate the risks and volatility associated with foreign currency transaction gains or losses. These foreign currency exposures typically arise from intercompany loans and other intercompany transactions. Our foreign currency forward contracts generally settle within 12 months. We do not use these forward contracts for trading purposes. We do not designate these forward contracts as hedging instruments. Accordingly, we record the fair value of these contracts as of the end of our reporting period to our condensed consolidated balance sheets with changes in fair value recorded in our condensed consolidated statements of income within other income (loss), net for both realized and unrealized gains and losses. The balance sheet classification for the fair values of these forward contracts is to prepaids and other assets for unrealized gains and to accrued expenses and other current liabilities for unrealized losses. At June 30, 2013, the foreign currency forward contracts were recorded within prepaids and other assets at a value of $1 million while contracts recorded within accrued expenses and other current liabilities were insignificant. At December 31, 2012, the foreign currency forward contracts were recorded within accrued expenses and other current liabilities at a value of $1 million while contracts recorded within prepaids and other assets were insignificant.

The U.S. dollar equivalent of the notional amount of the outstanding forward contracts, the majority of which relate to intercompany loans, with terms of less than one year, is as follows (in U.S. dollars):



	June 30, 2013		December 31, 2012
Pound Sterling	$	156	$	161
Korean Won	34		31
Swiss Franc	29		32
Canadian Dollar	—		30
Total notional amount of forward contracts	$	219	$	254

Certain energy contracts at our hotel facilities include derivatives. However, we qualify for and have elected the normal purchases or sales exemption for these derivatives.

The effects of derivative instruments on our condensed consolidated financial statements were as follows for the three and six months ended June 30, 2013 and 2012:

Effect of Derivative Instruments on Income



		Three Months Ended June 30,					Six Months Ended June 30,
	Location of Gain (Loss)	2013		2012			2013		2012
Fair value hedges:
Interest rate swaps
Gains on derivatives	Other income (loss), net*	$	—	$	1		$	—	$	1
Losses on borrowings	Other income (loss), net*	—		(1		)	—		(1		)



		Three Months Ended June 30,				Six Months Ended June 30,
	Location of Gain (Loss)	2013		2012		2013		2012
Derivatives not designated as hedges:
Foreign currency forward contracts	Other income (loss), net	$	—	$	4	$	11	$	(2	)

For the three and six months ended June 30, 2013, there was an insignificant gain recognized in income related to the ineffective portion of these hedges. For the three and six months ended June 30, 2012, there was an insignificant loss recognized in income related to the ineffective portion of these hedges. No amounts were excluded from the assessment of hedge effectiveness for the three and six months ended June 30, 2013 and 2012.

10. INCOME TAXES

The effective income tax rates for the three months ended June 30, 2013 and 2012 were 33.2% and 30.3% respectively. The effective income tax rates for the six months ended June 30, 2013 and 2012 were 29.7% and 30.8% respectively.

For the three months ended June 30, 2013, the effective tax rate differs from the U.S. statutory federal income tax rate of 35% primarily due to a benefit of $4 million (including $2 million of interest and penalties) related to the expiration of statutes of limitations in certain foreign locations and a benefit of $2 million with respect to foreign currency fluctuations on uncertain tax positions. For the six months ended June 30, 2013, the effective tax rate differs from the U.S. statutory federal income tax rate of 35% primarily due to a $4 million benefit for an adjustment to certain deferred tax assets that should have been recorded in prior periods, a benefit of $3 million (including $1 million interest) related to the settlement of tax audits, a benefit of $4 million (including $2 million of interest and penalties) related to the expiration of statutes of limitations in certain foreign locations, and a benefit of $2 million with respect to foreign currency fluctuations related to uncertain tax positions.

For the three months ended June 30, 2012, the effective tax rate was lower than the U.S. statutory federal income tax rate of 35% primarily due to foreign earnings subject to tax at rates below the U.S. rate and the recognition of foreign tax credits of $10 million. These benefits are partially offset by a provision of approximately $7 million resulting from a reduction in the deferred tax assets of certain non-consolidated investments. For the six months ended June 30, 2012, the effective tax rate was lower than the U.S. statutory federal income tax rate of 35% primarily due to the recognition of foreign tax credits of $10 million and a release of $5 million in reserves for interest related to our treatment for expensing certain renovation costs in prior years. The rate was further reduced by foreign earnings subject to tax at rates below the U.S. rate. These benefits are partially offset by the $7 million provision described above as well as a provision of approximately $4 million (including $2 million of interest and penalties) for uncertain tax positions in foreign jurisdictions.

Total unrecognized tax benefits were $51 million and $75 million at June 30, 2013 and December 31, 2012, respectively, of which $27 million and $42 million, respectively, would impact the effective tax rate if recognized. It is reasonably possible that a reduction of up to $6 million of unrecognized tax benefits could occur within twelve months resulting from the resolution of tax audits and the expiration of certain statutes of limitations.

11. COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, we enter into various commitments, guarantees, surety bonds, and letter of credit agreements, which are discussed below:

Commitments—As of June 30, 2013, we are committed, under certain conditions, to lend or invest up to $490 million, net of any related letters of credit, in various business ventures.

Significant items included in the $490 million in commitments are the following:

•

Our share of a hospitality venture’s commitment to purchase a hotel within a to-be completed building in New York City for a total purchase price of $375 million. The hospitality venture will be funded upon the purchase of the hotel, and our share of the purchase price commitment is 66.67% (or approximately $250 million). In accordance with the purchase agreement, we have agreed to fund a $50 million letter of credit as security towards this future purchase obligation. The agreement stipulates that the purchase of the completed property is contingent upon the completion of certain contractual milestones. The $50 million funded letter of credit is included as part of our total letters of credit outstanding at June 30, 2013, and therefore netted against our future commitments amount disclosed above. For further discussion, see the "Letters of Credit" section of this footnote.


•	Our commitment to develop, own and operate a hotel property in the state of Hawaii through a hospitality venture formed in 2010. The expected remaining commitment under the hospitality venture agreement at June 30, 2013 is $18 million. The hotel is expected to open in the second half of 2013.

Performance Guarantees—Certain of our contractual arrangements with third party owners require us to guarantee payments to the owners if specified levels of operating profit are not achieved by their hotels. During the three and six months ended June 30, 2013, we recorded an insignificant and $1 million charge related to these agreements, respectively. Under these agreements, we had $115 million, net of amortization and currency translation, recorded as of June 30, 2013. The remaining maximum potential payments related to these agreements are $512 million.

Included within the remaining maximum potential performance guarantees of $512 million is a performance guarantee agreement which we entered into during the six months ended June 30, 2013 related to management agreements for four hotels in France. In connection with the inception of the performance guarantee we recognized a liability for the fair value of our guarantee obligation within other long term liabilities on our condensed consolidated balance sheets in the amount of Euro 90 million, or $117 million using exchange rates as of June 30, 2013. The performance guarantee does not have an annual cap and the maximum total commitment under the performance guarantee is Euro 377 million, or $490 million, as of June 30, 2013. The performance guarantee liability is being amortized using a systematic and rational, risk-based approach over the seven year term of the performance guarantee. During the three and six months ended June 30, 2013, we amortized $1 million of this liability as income to other income (loss), net on the condensed consolidated statements of income.

Additionally, we enter into certain management contracts where we have the right, but not an obligation, to make payments to certain hotel owners if their hotels do not achieve specified levels of operating profit. If we choose not to fund the shortfall, the hotel owner has the option to terminate the management contract. As of June 30, 2013, there were no amounts recorded in accrued expenses and other current liabilities related to these performance test clauses.

Debt Repayment Guarantees—We have entered into various debt repayment guarantees related to our hospitality venture investments in certain properties. The maximum exposure under these agreements as of June 30, 2013 was $291 million. As of June 30, 2013, we had a $10 million liability representing the carrying value of these guarantees. Included within the $291 million in debt repayment guarantees are the following:



Property Description	Maximum Guarantee Amount		Amount Recorded at June 30, 2013
Vacation ownership development	$	110	$	1
Hotel property in Brazil	75		3
Hawaii hotel development	48		1
Hotel property in Minnesota	25		5
Other	33		—
Total Debt Repayment Guarantees	$	291	$	10

With respect to debt repayment guarantees related to certain hospitality venture properties, the Company has agreements with its respective partners that require each partner to pay a pro-rata portion of the guarantee amount based on each partner’s ownership percentage. Assuming successful enforcement of these agreements, our maximum exposure under our various debt repayment guarantees as of June 30, 2013, would be $155 million.

Surety Bonds—Surety bonds issued on our behalf totaled $23 million at June 30, 2013, and primarily relate to workers’ compensation, taxes, licenses, and utilities related to our lodging operations.

Letters of Credit—Letters of credit outstanding on our behalf as of June 30, 2013 totaled $114 million, the majority of which relate to our ongoing operations. Of the $114 million letters of credit outstanding, $101 million reduces the available capacity under our revolving credit facility.

Capital Expenditures—As part of our ongoing business operations, significant expenditures are required to complete renovation projects that have been approved.

Other —We act as general partner of various partnerships owning hotel properties that are subject to mortgage indebtedness. These mortgage agreements generally limit the lender’s recourse to security interests in assets financed and/or other assets of the partnership and/or the general partner(s) thereof.

In conjunction with financing obtained for our unconsolidated hospitality ventures, we may provide standard indemnifications to the lender for loss, liability or damage occurring as a result of our actions or actions of the other hospitality venture owners.

We are subject from time to time to various claims and contingencies related to lawsuits, taxes, and environmental matters, as well as commitments under contractual obligations. Many of these claims are covered under current insurance programs, subject to deductibles. We reasonably recognize a liability associated with commitments and contingencies when a loss is probable and reasonably estimable. Although the ultimate liability for these matters cannot be determined at this point, based on information currently available, we do not expect that the ultimate resolution of such claims and litigation will have a material effect on our condensed consolidated financial statements.

12. EQUITY

Stockholders’ Equity and Noncontrolling Interests—The following table details the equity activity for the six months ended June 30, 2013 and 2012, respectively.



	Stockholders’ equity			Noncontrolling interests in consolidated subsidiaries		Total equity
Balance at January 1, 2013	$	4,821		$	10	$	4,831
Net income	120			—		120
Other comprehensive loss	(26		)	—		(26		)
Repurchase of common stock	(223		)	—		(223		)
Directors compensation	1			—		1
Employee stock plan issuance	1			—		1
Share based payment activity	10			—		10
Balance at June 30, 2013	$	4,704		$	10	$	4,714


Balance at January 1, 2012	$	4,818		$	10	$	4,828
Net income	49			—		49
Other comprehensive loss	(4		)	—		(4		)
Directors compensation	1			—		1
Share based payment activity	9			—		9
Balance at June 30, 2012	$	4,873		$	10	$	4,883

Accumulated Other Comprehensive Loss—The following table details the accumulated other comprehensive loss activity for the six months ended June 30, 2013 and 2012, respectively.



	Balance at January 1, 2013			Current period other comprehensive loss before reclassification			Amount Reclassified from Accumulated Other Comprehensive Loss (a)			Balance at June 30, 2013
Foreign currency translation adjustments	$	(35	)	$	(28	)	$	2		$	(61	)
Unrealized gain (loss) on AFS securities	—			—						—
Unrecognized pension cost	(6		)	—						(6		)
Unrealized loss on derivative instruments	(7		)	—						(7		)
Accumulated Other Comprehensive Loss	$	(48	)	$	(28	)	$	2		$	(74	)
(a) Foreign currency translation adjustments, net of an insignificant tax impact, reclassified from accumulated other comprehensive loss were recognized within equity losses from unconsolidated hospitality ventures on the condensed consolidated statements of income.

	Balance at January 1, 2012			Current period other comprehensive income (loss)						Balance at June 30, 2012
Foreign currency translation adjustments	$	(64	)	$	(5				)	$	(69	)
Unrealized gain (loss) on AFS securities	(2		)	1						(1		)
Unrecognized pension cost	(6		)	—						(6		)
Unrealized loss on derivative instruments	(8		)	—						(8		)
Accumulated Other Comprehensive Loss	$	(80	)	$	(4				)	$	(84	)

Share Repurchase—During the six months ended June 30, 2013, we announced that the Board of Directors authorized the repurchase of up to an additional $200 million of the Company's common stock, in addition to the authorization to repurchase $200 million of the Company's common stock in 2012. These repurchases may be made from time to time in the open market, in privately negotiated transactions, or otherwise, including pursuant to a Rule 10b5-1 plan, at prices that the Company deems appropriate and subject to market conditions, applicable law and other factors deemed relevant in the Company's sole discretion. During the six months ended June 30, 2013, the Company repurchased 5,433,587 shares of common stock at a weighted average price of $41.13 per share, for an aggregate purchase price of $223 million, excluding related expenses, which were insignificant. The shares repurchased represented approximately 3% of the Company's total shares of common stock outstanding as of December 31, 2012. The shares of Class A common stock that were repurchased on the open market were retired and returned to authorized and unissued status while the shares of Class B common stock that were repurchased were retired and the total number of authorized Class B shares was reduced by the number of shares repurchased. As of June 30, 2013 we had $40 million remaining under the current share repurchase authorization.

13. STOCK-BASED COMPENSATION

As part of our long-term incentive plan, we award Stock Appreciation Rights ("SARs"), Restricted Stock Units ("RSUs"), Performance Share Units ("PSUs"), and Performance Vested Restricted Stock ("PSSs") to certain employees. Compensation expense and unearned compensation figures within this note exclude amounts related to employees of our managed hotels as this expense has been and will continue to be reimbursed by our third party hotel owners and is recorded in other revenues from managed properties and other costs from managed properties in our condensed consolidated statements of income. Expenses for awards that are not reimbursed to us by our third party hotel owners for the three and six months ended June 30, 2013 and 2012 are as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Stock appreciation rights	$	2	$	2	$	4	$	4
Restricted stock units	4		3		8		6
Performance share units and Performance vested restricted stock	—		—		1		1

Stock Appreciation Rights—Each vested SAR gives the holder the right to the difference between the value of one share of our Class A common stock at the exercise date and the value of one share of our Class A common stock at the grant date. Vested SARs can be exercised over their life as determined by the plan. All SARs have a 10-year contractual term and are settled in shares of our Class A common stock. The Company is accounting for these SARs as equity instruments.

During the six months ended June 30, 2013, the Company granted 526,917 SARs to employees with a weighted average grant date fair value of $17.98. The fair value of each SAR was estimated on the date of grant using the Black-Scholes-Merton option-valuation model.

Restricted Stock Units—The Company grants both RSUs that may be settled in stock and RSUs that may be settled in cash. Each vested stock-settled RSU will be settled with a single share of our Class A common stock. The value of the stock-settled RSUs was based on the closing stock price of our Class A common stock as of the grant date. We record compensation expense earned for RSUs on a straight-line basis from the date of grant. In certain situations we also grant cash-settled RSUs which are recorded as a liability instrument. The liability and related expense for cash-settled RSUs are insignificant as of, and for the three and six months ended June 30, 2013. During the six months ended June 30, 2013, the Company granted a total of 455,328 RSUs (an insignificant portion of which are cash-settled RSUs) to employees which, with respect to stock-settled RSUs, had a weighted average grant date fair value of $43.43.

Performance Share Units and Performance Vested Restricted Stock—The Company has granted to certain executive officers both PSUs, which are performance stock units, and PSSs, which are performance vested restricted stock. The number of PSUs that will ultimately vest and be paid out in Class A common stock and the number of PSSs that will ultimately vest, with no further restrictions, on transfer depends upon the performance of the Company at the end of the applicable three year performance period relative to the applicable performance target. During the six months ended June 30, 2013, the Company granted to its executive officers a total of 218,686 PSSs, which vest in full if the maximum performance metric is achieved. At the end of the performance period, the PSSs that do not vest will be forfeited. The PSSs had a weighted average grant date fair value of $43.44. The

performance period is three years beginning January 1, 2013 and ending December 31, 2015. The PSSs will vest at the end of the performance period only if the performance threshold is met; there is no interim performance metric.

Our total unearned compensation for our stock-based compensation programs as of June 30, 2013 was $18 million for SARs, $39 million for RSUs and $6 million for PSUs and PSSs, which will be recorded to compensation expense primarily over the next four years with respect to SARs and RSUs and over the next three years with respect to PSUs and PSSs. The amortization for certain RSU awards extends to seven years.

14. RELATED-PARTY TRANSACTIONS

In addition to those included elsewhere in the notes to the condensed consolidated financial statements, related-party transactions entered into by us are summarized as follows:

Leases—Our corporate headquarters has been located at the Hyatt Center in Chicago, Illinois, since 2005. A subsidiary of the Company holds a master lease for a portion of the Hyatt Center and has entered into sublease agreements with certain related parties. During the six months ended June 30, 2012, one of these sublease agreements was amended to reduce the related party's occupied space. As a result, we received a payment of $4 million in 2012, representing the discounted future sublease payments, less furniture and fixtures acquired. Future sublease income from sublease agreements with related parties under our master lease is $10 million.

Legal Services—A partner in a law firm that provided services to us throughout the six months ended June 30, 2013 and 2012 is the brother-in-law of our Executive Chairman. We incurred insignificant legal fees with this firm for the three months ended June 30, 2013 and 2012, respectively. We incurred $1 million in legal fees with this firm in each six month period ended June 30, 2013 and 2012. Legal fees, when expensed, are included in selling, general and administrative expenses. As of June 30, 2013, and December 31, 2012, we had $1 million and insignificant amounts due to the law firm, respectively.

Other Services—A member of our board of directors is a partner in a firm whose affiliates own hotels from which we recorded management and franchise fees of $2 million and $1 million during the three months ended June 30, 2013 and 2012, respectively, and $4 million and $3 million during the six months ended June 30, 2013 and 2012, respectively. As of June 30, 2013 and December 31, 2012, we had $1 million in receivables due from these properties.

Equity Method Investments—We have equity method investments in entities that own properties for which we provide management and/or franchise services and receive fees. We recorded fees of $8 million and $9 million for the three months ended June 30, 2013 and 2012, respectively. We recorded fees of $16 million and $19 million for the six months ended June 30, 2013 and 2012, respectively. As of June 30, 2013 and December 31, 2012, we had receivables due from these properties of $11 million and $7 million, respectively. In addition, in some cases we provide loans (see Note 5) or guarantees (see Note 11) to these entities. Our ownership interest in these equity method investments generally varies from 8% to 65%.

Share Repurchase—During 2013, we repurchased 2,906,879 shares of Class B common stock at a weighted average price of $41.36 per a share, for an aggregate purchase price of approximately $120 million. The shares repurchased represented approximately 2% of the Company's total shares of common stock outstanding prior to the repurchase. The shares of Class B common stock were repurchased from trusts held for the benefit of certain Pritzker family members in privately-negotiated transactions and were retired, thereby reducing the total number of shares outstanding and reducing the shares of Class B common stock authorized and outstanding by the repurchased share amount.

15. SEGMENT INFORMATION

Our operating segments are components of the business which are managed discretely and for which discrete financial information is reviewed regularly by the chief operating decision maker to assess performance and make decisions regarding the allocation of resources. Our chief operating decision maker is the Chief Executive Officer. Our results for the three and six months ended June 30, 2013 reflect the segment structure of our organization following our realignment, which was effective during the fourth quarter of 2012. Segment results presented here for the three and six months ended June 30, 2012 have been recast to show our results as if our new operating structure had existed in this period.

Following the realignment, our four operating segments, which comprise our reportable segments and are defined below, are (1) owned and leased hotels; (2) Americas management and franchising; (3) ASPAC management and franchising; and (4) EAME/SW Asia management. Our unallocated corporate overhead, the results of our vacation ownership business, and the results of our Hyatt co-branded credit card continue to be reported within corporate and other. We define our reportable segments as follows:

Owned and Leased Hotels—This segment derives its earnings from owned and leased hotel properties located predominantly in the United States but also in certain international locations and for purposes of segment Adjusted EBITDA, includes our pro rata share of the Adjusted EBITDA of our unconsolidated hospitality ventures, based on our ownership percentage of each venture.

Americas Management and Franchising—This segment derives its earnings primarily from a combination of hotel management and licensing of our family of brands to franchisees located in the U.S., Latin America, Canada and the Caribbean. This segment’s revenues also include the reimbursement of costs incurred on behalf of managed hotel property owners and franchisees with no added margin. These costs relate primarily to payroll costs at managed properties where the Company is the employer. These revenues and costs are recorded on the lines other revenues from managed properties and other costs from managed properties, respectively. The intersegment revenues relate to management fees that are collected from the Company’s owned hotels, which are eliminated in consolidation.

ASPAC Management and Franchising—This segment derives its earnings primarily from a combination of hotel management and licensing of our family of brands to franchisees located in Southeast Asia, as well as China, Australia, South Korea and Japan. This segment’s revenues also include the reimbursement of costs incurred on behalf of managed hotel property owners and franchisees with no added margin. These costs relate primarily to reservations, marketing and IT costs. These revenues and costs are recorded on the lines other revenues from managed properties and other costs from managed properties, respectively. The intersegment revenues relate to management fees that are collected from the Company’s owned hotels, which are eliminated in consolidation.

EAME/SW Asia Management—This segment derives its earnings primarily from hotel management of our family of brands located primarily in Europe, Africa and the Middle East as well as countries along the Persian Gulf, the Arabian Sea, and India. This segment’s revenues also include the reimbursement of costs incurred on behalf of managed hotel property owners with no added margin. These costs relate primarily to reservations, marketing and IT costs. These revenues and costs are recorded on the lines other revenues from managed properties and other costs from managed properties, respectively. The intersegment revenues relate to management fees that are collected from the Company’s owned hotels, which are eliminated in consolidation.

Our chief operating decision maker evaluates performance and makes decisions regarding the allocation of resources based on each segment’s Adjusted EBITDA. We define Adjusted EBITDA as net income attributable to Hyatt Hotels Corporation plus our pro-rata share of unconsolidated hospitality ventures' Adjusted EBITDA before equity losses from unconsolidated hospitality ventures; asset impairments; other income (loss), net; gains on sales of real estate; depreciation and amortization; interest expense; and provision for income taxes.

The table below shows summarized consolidated financial information by segment. Included within corporate and other are unallocated corporate expenses, revenues and expenses on our vacation ownership properties, and the results of our co-branded credit card.



(in millions)	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Owned and Leased Hotels (a)
Revenues	$	572		$	528		$	1,064		$	1,001
Adjusted EBITDA	145			132			240			225
Depreciation and Amortization	77			81			158			161
Americas Management and Franchising
Revenues	443			436			865			870
Intersegment Revenues (b)	24			22			43			40
Adjusted EBITDA	62			54			110			100
Depreciation and Amortization	4			6			9			10
ASPAC Management and Franchising
Revenues	40			29			75			60
Intersegment Revenues (b)	—			—			1			1
Adjusted EBITDA	14			11			23			22
Depreciation and Amortization	—			—			—			—
EAME/SW Asia Management
Revenues	40			23			65			44
Intersegment Revenues (b)	5			4			8			7
Adjusted EBITDA	20			8			28			14
Depreciation and Amortization	2			1			2			1
Corporate and other
Revenues	26			24			50			45
Adjusted EBITDA	(29		)	(25		)	(58		)	(56		)
Depreciation and Amortization	2			1			4			3
Eliminations (b)
Revenues	(29		)	(26		)	(52		)	(48		)
Adjusted EBITDA	—			—			—			—
Depreciation and Amortization	—			—			—			—
TOTAL
Revenues	$	1,092		$	1,014		$	2,067		$	1,972
Adjusted EBITDA	212			180			343			305
Depreciation and Amortization	85			89			173			175


(a)