STARWOOD HOTEL & RESORTS WORLDWIDE, INC - FORM 10-Q

STARWOOD HOTEL & RESORTS WORLDWIDE, INC - FORM 10-Q - October 29, 2014

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STARWOOD HOTEL & RESORTS WORLDWIDE, INC Reports

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EXCEL - IDEA: XBRL DOCUMENT - STARWOOD HOTEL & RESORTS WORLDWIDE, INC	Financial_Report.xls
EX-32.1 - EX-32.1 - STARWOOD HOTEL & RESORTS WORLDWIDE, INC	d791357dex321.htm
EX-32.2 - EX-32.2 - STARWOOD HOTEL & RESORTS WORLDWIDE, INC	d791357dex322.htm
EX-31.2 - EX-31.2 - STARWOOD HOTEL & RESORTS WORLDWIDE, INC	d791357dex312.htm
EX-31.1 - EX-31.1 - STARWOOD HOTEL & RESORTS WORLDWIDE, INC	d791357dex311.htm
EX-10.4 - EX-10.4 - STARWOOD HOTEL & RESORTS WORLDWIDE, INC	d791357dex104.htm
EX-10.3 - EX-10.3 - STARWOOD HOTEL & RESORTS WORLDWIDE, INC	d791357dex103.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2014

¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period from to

Commission File Number: 1-7959

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

(Exact name of Registrant as specified in its charter)

Maryland

(State or other jurisdiction

of incorporation or organization)

52-1193298

(I.R.S. employer identification no.)

One StarPoint

Stamford, CT 06902

(Address of principal executive

offices, including zip code)

(203) 964-6000

(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 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.

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

Indicate the number of shares outstanding of the issuer’s classes of common stock, as of the latest practicable date:

178,575,327 shares of common stock, par value $0.01 per share, outstanding as of October 21, 2014.

TABLE OF CONTENTS


		Page
	PART I. Financial Information

Item 1.	Financial Statements		2

	Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013		3

	Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2014 and 2013		4

	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2014 and 2013		5

	Consolidated Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2014 and 2013		6

	Notes to Consolidated Financial Statements		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		42

Item 4.	Controls and Procedures		42

	PART II. Other Information

Item 1.	Legal Proceedings		43

Item 1A.	Risk Factors		43

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		43

Item 6.	Exhibits		44

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements.

The following unaudited consolidated financial statements of Starwood Hotels & Resorts Worldwide, Inc. (“we”, “us” or the “Company”) are provided pursuant to the requirements of this Item. In the opinion of management, all adjustments necessary for fair presentation, consisting of normal recurring adjustments, have been included. The consolidated financial statements presented herein have been prepared in accordance with the accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2013 filed on February 24, 2014. See the notes to consolidated financial statements for the basis of presentation. Certain reclassifications have been made to the prior year’s financial statements to conform to the current year presentation. The consolidated financial statements should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this filing. Results for the three and nine months ended September 30, 2014 are not necessarily indicative of results to be expected for the full fiscal year ending December 31, 2014.

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)


	September 30, 2014			December 31, 2013
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	454		$	616
Restricted cash		60			134
Accounts receivable, net of allowance for doubtful accounts of $67 and $59		624			643
Inventories		198			217
Securitized vacation ownership notes receivable, net of allowance for doubtful accounts of $5 and $6		48			54
Deferred income taxes		202			211
Prepaid expenses and other		166			121

Total current assets		1,752			1,996
Investments		233			251
Plant, property and equipment, net		2,942			3,034
Goodwill and intangible assets, net		1,998			2,032
Deferred income taxes		575			591
Other assets		680			543
Securitized vacation ownership notes receivable, net		246			315

Total assets	$	8,426		$	8,762

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings and current maturities of long-term debt	$	3		$	2
Accounts payable		90			105
Current maturities of long-term securitized vacation ownership debt		81			97
Accrued expenses		1,110			1,092
Accrued salaries, wages and benefits		396			404
Accrued taxes and other		251			224

Total current liabilities		1,931			1,924
Long-term debt		2,163			1,265
Long-term securitized vacation ownership debt		191			258
Deferred income taxes		42			48
Other liabilities		1,949			1,904

Total liabilities		6,276			5,399

Commitments and contingencies

Stockholders’ equity:
Common stock; $0.01 par value; authorized 1,000,000,000 shares; outstanding 180,402,209 and 191,897,809 shares at September 30, 2014 and December 31, 2013, respectively		2			2
Additional paid-in capital		28			661
Accumulated other comprehensive loss		(417	)		(335	)
Retained earnings		2,535			3,032

Total Starwood stockholders’ equity		2,148			3,360
Noncontrolling interests		2			3

Total equity		2,150			3,363

Total liabilities and equity	$	8,426		$	8,762

The accompanying notes to financial statements are an integral part of the above statements.

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share data)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Revenues
Owned, leased and consolidated joint venture hotels	$	393		$	398		$	1,171		$	1,196
Vacation ownership and residential sales and services		159			200			504			748
Management fees, franchise fees and other income		255			247			763			700
Other revenues from managed and franchised properties		686			663			2,052			1,965

		1,493			1,508			4,490			4,609
Costs and Expenses
Owned, leased and consolidated joint venture hotels		308			318			923			966
Vacation ownership and residential sales and services		121			141			374			503
Selling, general, administrative and other		96			100			293			278
Restructuring and other special charges (credits), net		—			(22	)		(3	)		(23	)
Depreciation		65			59			188			174
Amortization		7			6			22			21
Other expenses from managed and franchised properties		686			663			2,052			1,965

		1,283			1,265			3,849			3,884
Operating income		210			243			641			725
Equity earnings and gains from unconsolidated ventures, net		3			—			21			17
Interest expense, net of interest income of $0, $1, $2 and $2		(27	)		(25	)		(73	)		(77	)
Loss on early extinguishment of debt, net		(1	)		—			(1	)		—
Gain (loss) on asset dispositions and impairments, net		(22	)		3			(55	)		(5	)

Income from continuing operations before taxes and noncontrolling interests		163			221			533			660
Income tax expense		(54	)		(64	)		(135	)		(223	)

Income from continuing operations		109			157			398			437
Discontinued operations:
Gain on dispositions, net of tax expense (benefit) of $0, $0, $(1) and $(70)		—			—			1			70

Net income		109			157			399			507
Net loss (income) attributable to noncontrolling interests		—			—			—			—

Net income attributable to Starwood	$	109		$	157		$	399		$	507


Earnings Per Share – Basic
Continuing operations	$	0.60		$	0.82		$	2.12		$	2.28
Discontinued operations		—			—			0.01			0.37

Net income	$	0.60		$	0.82		$	2.13		$	2.65


Earnings Per Share – Diluted
Continuing operations	$	0.59		$	0.81		$	2.10		$	2.25
Discontinued operations		—			—			0.01			0.36

Net income	$	0.59		$	0.81		$	2.11		$	2.61


Amounts attributable to Starwood’s Common Stockholders
Income from continuing operations	$	109		$	157		$	398		$	437
Discontinued operations		—			—			1			70

Net income	$	109		$	157		$	399		$	507


Weighted average number of shares		185			192			188			192

Weighted average number of shares assuming dilution		186			194			190			194

Dividends declared per share	$	1.00		$	—		$	3.00		$	—

The accompanying notes to financial statements are an integral part of the above statements.

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


	Three Months Ended September 30,					Nine Months Ended September 30,
	2014			2013		2014			2013
Net income	$	109		$	157	$	399		$	507
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments		(88	)		31		(84	)		(19	)
Defined benefit pension and postretirement plans activity		—			1		1			2
Cash flow hedges net gains		1			—		1			1

Total other comprehensive income (loss), net of taxes		(87	)		32		(82	)		(16	)

Total comprehensive income		22			189		317			491
Comprehensive income attributable to noncontrolling interests		—			—		—			—
Foreign currency translation adjustments attributable to noncontrolling interests		—			—		—			—

Comprehensive income attributable to Starwood	$	22		$	189	$	317		$	491

The accompanying notes to financial statements are an integral part of the above statements.

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Nine Months Ended September 30,
	2014			2013
Operating Activities
Net income	$	399		$	507
Adjustments to net income:
Discontinued operations:
(Gain) loss on dispositions, net		(1	)		(70	)
Depreciation and amortization		210			195
Amortization of deferred gains		(65	)		(68	)
Non-cash portion of restructuring and other special charges (credits), net		(3	)		—
(Gain) loss on debt extinguishment, net		1			(4	)
(Gain) loss on asset dispositions and impairments, net		55			5
Stock-based compensation expense		38			40
Excess stock-based compensation tax benefit		(9	)		(30	)
Distributions in excess of equity earnings		1			2
Non-cash portion of income tax expense		10			109
Other non-cash adjustments to net income		39			34
(Increase) decrease in restricted cash		(21	)		42
Other changes in working capital		(1	)		80
Securitized VOI notes receivable activity, net		76			105
Unsecuritized VOI notes receivable activity, net		(82	)		(116	)
Accrued income taxes and other		30			24

Cash from operating activities		677			855


Investing Activities
Purchases of plant, property and equipment		(221	)		(235	)
Proceeds from asset sales, net of transaction costs		225			139
Acquisitions, net of acquired cash		(24	)		(43	)
(Issuance) collection of notes receivable, net		—			2
Distributions from investments, net		4			4
Other, net		(2	)		1

Cash used for investing activities		(18	)		(132	)


Financing Activities
Commercial paper, net		106			—
Decrease (increase) in restricted cash		94			(19	)
Long-term debt issued		656			—
Long-term debt repaid		(3	)		(1	)
Long-term securitized debt repaid		(83	)		(136	)
Dividends paid		(562	)		(3	)
Proceeds from employee stock option exercises		24			64
Excess stock-based compensation tax benefit		9			30
Share repurchases		(1,027	)		(237	)
Other, net		(27	)		(24	)

Cash used for financing activities		(813	)		(326	)

Exchange rate effect on cash and cash equivalents		(8	)		(8	)

(Decrease) increase in cash and cash equivalents		(162	)		389
Cash and cash equivalents — beginning of period		616			305

Cash and cash equivalents — end of period	$	454		$	694


Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest	$	43		$	38

Income taxes, net of refunds	$	112		$	107

Non-cash capital lease obligation	$	153		$	—

The accompanying notes to financial statements are an integral part of the above statements.

Note 1. Basis of Presentation

The accompanying consolidated financial statements represent the consolidated financial position and consolidated results of operations of Starwood Hotels & Resorts Worldwide, Inc. and our subsidiaries (we, us, the Company or Starwood). We are one of the world’s largest hotel and leisure companies. Our principal business is hotels and leisure, which is comprised of a worldwide hospitality network of 1,206 full-service hotels, vacation ownership resorts and residential developments primarily serving two markets: luxury and upper-upscale. The principal operations of Starwood Vacation Ownership, Inc. (SVO) include the development and operation of vacation ownership resorts; and marketing, selling and financing of vacation ownership interests (VOIs) in the resorts.

The consolidated financial statements include our assets, liabilities, revenues and expenses and those of our controlled subsidiaries and partnerships. In consolidating, all material intercompany transactions are eliminated. We have evaluated all subsequent events through the date the consolidated financial statements were filed with the Securities and Exchange Commission.

Following the guidance for noncontrolling interests in Accounting Standards Codification (ASC) Topic 810, Consolidation, references in this report to our earnings per share, net income and stockholders’ equity attributable to Starwood’s common stockholders do not include amounts attributable to noncontrolling interests.

Note 2. Recently Issued Accounting Standards

Future Accounting Standards

In January 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-04, “Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.” This topic clarifies when an in-substance repossession or foreclosure occurs and requires certain additional interim and annual disclosures related to such activity. The amendments in this ASU are effective for reporting periods beginning after December 15, 2014, and we expect to adopt this ASU on a prospective basis on January 1, 2015. We do not believe the adoption of this update will have a material impact on our financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” This topic provides for five principles which should be followed to determine the appropriate amount and timing of revenue recognition for the transfer of goods and services to customers. The principles in this ASU should be applied to all contracts with customers regardless of industry. The amendments in this ASU are effective for reporting periods beginning after December 15, 2016, with two transition methods of adoption allowed. Early adoption is not permitted. We are still evaluating the financial statement impacts of the guidance in this ASU and determining which transition method we will utilize.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40) Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” This topic provides guidance on management’s responsibility to evaluate whether there is substantial doubt about the ability to continue as a going concern and to provide related interim and annual footnote disclosures. The amendments in this ASU are effective for reporting periods ending after December 15, 2016, and we plan to adopt this ASU for the annual period ending on December 31, 2016. We do not believe the adoption of this update will have a material impact on our financial statements.

Adopted Accounting Standards

In April 2014, the FASB issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” This topic amends the requirements for reporting discontinued operations. The disposal of a component must represent a strategic shift that will have a major effect on our operations and financial results in order to be reported as discontinued operations and requires certain additional interim and annual disclosures. The amendments in this ASU are effective for reporting periods beginning after December 15, 2014 with early adoption permitted, and we adopted this ASU on a prospective basis on July 1, 2014. We believe the adoption of this update will reduce the number of disposals that are presented as discontinued operations in our financial statements.

In July 2013, the FASB issued ASU No. 2013-11, “Income Taxes (Topic 740) Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” This topic provides guidance on whether an unrecognized tax benefit should be presented as a reduction to a deferred tax asset or as a separate liability. This update was effective for annual and interim periods beginning after December 15, 2013, and we adopted this ASU on January 1, 2014. The adoption of this update did not have a material impact on our financial statements.

In March 2013, the FASB issued ASU No. 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.” This topic clarifies that when a reporting entity 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 apply the guidance in Subtopic 830-30 to release any related cumulative translation adjustment into net income. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. The amendments in this ASU were effective prospectively for reporting periods beginning after December 15, 2013, and we adopted this ASU on January 1, 2014. The adoption of this update did not have a material impact on our financial statements.

Note 3. Earnings per Share

The following is a reconciliation of basic earnings per share to diluted earnings per share for income from continuing operations attributable to our common stockholders (in millions, except per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Income from continuing operations	$	109	$	157	$	398	$	437

Weighted average common shares for basic earnings per share		185		192		188		192
Effect of dilutive stock options and restricted stock awards		1		2		2		2

Weighted average common shares for diluted earnings per share		186		194		190		194

Basic earnings per share	$	0.60	$	0.82	$	2.12	$	2.28

Diluted earnings per share	$	0.59	$	0.81	$	2.10	$	2.25

Approximately 0.3 million shares for the three months ended September 30, 2013 and 0.4 million shares and 0.7 million shares for the nine months ended September 30, 2014 and 2013, respectively, were excluded from the computation of diluted shares, as their impact would have been anti-dilutive. No shares were excluded from the computation for the three months ended September 30, 2014.

Note 4. Asset Dispositions and Impairments

During the three months ended September 30, 2014, we terminated our leasehold interest in a hotel and entered into a long-term franchise agreement with the hotel’s owner. In connection with the termination, we recognized a pre-tax loss of $7 million, which was recorded to the gain (loss) on asset dispositions and impairments, net line item.

Additionally, during the three months ended September 30, 2014, we recognized an impairment charge of $13 million, related to one owned hotel in the Americas, whose book value exceeded its fair value. The fair value of the hotel was estimated primarily using the income approach and the use of discounted cash flows models. The impairment charge was recorded to the gain (loss) on asset dispositions and impairments, net line item.

During the nine months ended September 30, 2014, we converted a leased hotel to a managed hotel subject to a long-term management agreement, and recorded a pre-tax loss of $21 million, which was recorded to the gain (loss) on asset dispositions and impairments, net line item. We provided financing to the hotel owner in the form of a note receivable to fund the transaction price. We will provide additional financing over the next few years to fund a significant renovation of the hotel.

Additionally, during the nine months ended September 30, 2014, we sold two wholly-owned hotels for net cash proceeds of approximately $223 million. One hotel was sold subject to a long-term management agreement. The sale of this hotel resulted in a pre-tax gain of approximately $91 million, which we deferred and are recognizing into management fees, franchise fees and other income over the initial term of the management agreement. The other hotel was sold at a pre-tax loss of $6 million, and is subject to a long-term franchise agreement. During the nine months ended September 30, 2014, we also recorded a $7 million impairment associated with one of our foreign unconsolidated joint ventures, which we recorded to the gain (loss) on asset dispositions and impairments, net line item.

During the subsequent period of October 2014, we sold one hotel for gross proceeds of approximately €110 million subject to a long-term management agreement. The gain realized in connection with the sale will be deferred and recognized into management fees, franchise fees and other income over the initial term of the management agreement.

During the three months ended September 30, 2013, we sold a non-core asset for net cash proceeds of approximately $12 million and recorded a gain of $4 million related to this sale, which was recorded to the gain (loss) on asset dispositions and impairments, net line item.

Additionally, during the nine months ended September 30, 2013, we sold four wholly-owned hotels for net cash proceeds of approximately $126 million. One hotel was sold subject to a long-term management agreement. The sale of this hotel resulted in a pre-tax gain of approximately $3 million, which we deferred and are recognizing into management fees, franchise fees and other income over the initial term of the management agreement. Two hotels were sold subject to long-term franchise agreements. The fourth hotel was sold at a loss, subject to a long-term management agreement. During the nine months ended September 30, 2013, we recorded a pre-tax loss of $8 million, net, related to the sales of these hotels.

Note 5. Transfers of Financial Assets

We have variable interests in the entities associated with our four outstanding securitization transactions. As these securitizations consist of similar, homogenous loans, they have been aggregated for disclosure purposes. We applied the variable interest model and determined we are the primary beneficiary of these variable interest entities (VIEs). In making this determination, we evaluated the activities that significantly impact the economics of the VIEs, including the management of the securitized notes receivable and any related non-performing loans. We are the servicer of the securitized mortgage receivables. We also have the option, subject to certain limitations, to repurchase or replace VOI notes receivable, that are in default, at their outstanding principal amounts. Such activity totaled $4 million and $13 million and during the three and nine months ended September 30, 2014, respectively compared to $5 million and $16 million during the three and nine months ended September 30, 2013. We have been able to resell the VOIs underlying the VOI notes repurchased or replaced under these provisions without incurring significant losses. We hold the risk of potential loss (or gain), as the last to be paid out by proceeds of the VIEs under the terms of the agreements. As such, we hold both the power to direct the activities of the VIEs and obligation to absorb the losses (or benefits) from the VIEs.

The securitization agreements are without recourse to us, except for breaches of representations and warranties. We have the right to fund defaults at our option, subject to certain limitations, and we intend to do so until the debt is extinguished to maintain the credit rating of the underlying notes.

Upon transfer of VOI notes receivable to the VIEs, the receivables and certain cash flows derived from them become restricted for use in meeting obligations to the VIE creditors. The VIEs utilize trusts which have ownership of cash balances that also have restrictions, the amounts of which are reported in restricted cash. Our interests in trust assets are subordinate to the interests of third-party investors and, as such, may not be realized by us if needed to absorb deficiencies in cash flows that are allocated to the investors in the trusts’ debt (see Note 8). We are contractually obligated to receive the excess cash flows (spread between the collections on the notes and third party obligations defined in the securitization agreements) from the VIEs. Such activity totaled $9 million and $30 million during the three and nine months ended September 30, 2014, respectively, compared to $13 million and $40 million during the three and nine months ended September 30, 2013, respectively, and is classified in cash and cash equivalents.

During the nine months ended September 30, 2013, we terminated a securitization we completed in 2005.

Note 6. Vacation Ownership Notes Receivable

Notes receivable (net of reserves) related to our vacation ownership loans consisted of the following (in millions):


	September 30, 2014			December 31, 2013
Vacation ownership loans – securitized	$	294		$	369
Vacation ownership loans – unsecuritized		311			247

		605			616
Less: current portion
Vacation ownership loans – securitized		(48	)		(54	)
Vacation ownership loans – unsecuritized		(31	)		(30	)

	$	526		$	532

We include the current and long-term maturities of unsecuritized VOI notes receivable in accounts receivable and other assets, respectively, in our consolidated balance sheets.

We record interest income associated with VOI notes in our vacation ownership and residential sales and services line item in our consolidated statements of income. Interest income related to our VOI notes receivable was as follows (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Vacation ownership loans – securitized	$	11	$	15	$	35	$	49
Vacation ownership loans – unsecuritized		10		6		27		14

	$	21	$	21	$	62	$	63

The following table presents future maturities of gross VOI notes receivable (in millions) and interest rates:


	Securitized			Unsecuritized			Total
2014	$	13		$	15		$	28
2015		53			30			83
2016		54			30			84
2017		50			33			83
2018		43			34			77
Thereafter		112			239			351

Balance at September 30, 2014	$	325		$	381		$	706

Weighted Average Interest Rates		13.02	%		13.03	%		13.03	%

Range of interest rates		6.0% to 17.0%			5.0% to 17.0%			5.0% to 17.0%

For the vacation ownership and residential segment, we record an estimate of expected uncollectibility on our VOI notes receivable as a reduction of revenue at the time we recognize profit on a timeshare sale. We hold large amounts of homogeneous VOI notes receivable and, therefore, assess uncollectibility based on pools of receivables. In estimating loss reserves, we use a technique referred to as static pool analysis, which tracks uncollectible notes for each year’s sales over the life of the respective notes and projects an estimated default rate that is used in the determination of our loan loss reserve requirements. As of September 30, 2014 and December 31, 2013, the average estimated default rate for our pools of receivables was approximately 9.2% and 9.3%, respectively.

The activity and balances for our loan loss reserve were as follows (in millions):


	Securitized			Unsecuritized			Total
Balance at June 30, 2014	$	33		$	67		$	100
Provisions for loan losses		1			8			9
Write-offs		—			(8	)		(8	)
Other		(3	)		3			—

Balance at September 30, 2014	$	31		$	70		$	101


Balance at December 31, 2013	$	43		$	60		$	103
Provisions for loan losses		(1	)		18			17
Write-offs		—			(19	)		(19	)
Other		(11	)		11			—

Balance at September 30, 2014	$	31		$	70		$	101


Balance at June 30, 2013	$	54		$	53		$	107
Provisions for loan losses		—			7			7
Write-offs		—			(8	)		(8	)
Other		(5	)		5			—

Balance at September 30, 2013	$	49		$	57		$	106


Balance at December 31, 2012	$	73		$	48		$	121
Provisions for loan losses		(9	)		18			9
Write-offs		—			(24	)		(24	)
Other		(15	)		15			—

Balance at September 30, 2013	$	49		$	57		$	106

We use the origination of the notes by brand (Sheraton, Westin, and Other) and the Fair Isaac Corporation (FICO) scores of the buyers as the primary credit quality indicators to calculate the loan loss reserve for the vacation ownership notes, as we believe there is a relationship between the default behavior of borrowers and the brand associated with the vacation ownership property they have acquired, supplemented by the FICO scores of the buyers. In addition to quantitatively calculating the loan loss reserve based on our static pool analysis, we supplement the process by evaluating certain qualitative data, including the aging of the respective receivables and current default trends by brand and origination year.

During the nine months ended September 30, 2014, we recorded a net adjustment to the reserve of $17 million, driven by a $19 million increase in the provision for new contract sales, partially offset by a $2 million favorable adjustment from improved performance in the portfolio. During the three months ended September 30, 2014, we recorded a net adjustment to the reserve of $9 million, primarily driven by a $7 million increase in the provision for new contract sales, and a $2 million unfavorable adjustment due to decreased performance in the portfolio.

Balances of our VOI notes receivable by brand and by FICO score were as follows (in millions):


	As of September 30, 2014
	700+		600-699		<600		No Score		Total
Sheraton	$	157	$	136	$	16	$	60	$	369
Westin		188		90		6		35		319
Other		9		3		—		6		18

	$	354	$	229	$	22	$	101	$	706


	As of December 31, 2013
	700+		600-699		<600		No Score		Total
Sheraton	$	156	$	130	$	19	$	59	$	364
Westin		199		91		7		37		334
Other		11		3		—		7		21

	$	366	$	224	$	26	$	103	$	719

Given the significance of our pools of VOI notes receivable, a change in the projected default rate can have a significant impact to our loan loss reserve requirements, with a 0.1% change estimated to have an impact of approximately $4 million.

We consider a VOI note receivable delinquent when it is more than 30 days outstanding. Delinquent notes receivable amounted to $46 million and $48 million as of September 30, 2014 and December 31, 2013, respectively. All delinquent loans are placed on nonaccrual status, and we do not resume interest accrual until payment is made. We consider loans to be in default upon reaching 120 days outstanding, at which point, we generally commence the repossession process. Uncollectible VOI notes receivable are charged off when title to the unit is returned to us. We generally do not modify vacation ownership notes that become delinquent or upon default.

Past due balances of VOI notes receivable were as follows (in millions):


	Total Receivables		Current		Delinquent
	Total Receivables		Current		30-59 Days		60-89 Days		>90 Days		Total
As of September 30, 2014	$	706	$	660	$	8	$	5	$	33	$	46
As of December 31, 2013	$	719	$	671	$	9	$	5	$	34	$	48

Note 7. Debt

Long-term debt and short-term borrowings consisted of the following, excluding securitized vacation ownership debt (in millions):


	September 30, 2014			December 31, 2013
Senior Credit Facility:
Revolving Credit Facility, maturing 2020	$	6		$	—
Senior Notes, interest at 7.375%, maturing 2015		294			294
Senior Notes, interest at 6.75%, maturing 2018		371			372
Senior Notes, interest at 7.15%, maturing 2019		208			207
Senior Notes, interest at 3.125%, maturing 2023		349			349
Senior Notes, interest at 3.75%, maturing 2025		346			—
Senior Notes, interest at 4.50%, maturing 2034		291			—
Capital lease obligations		155			3
Commercial paper, weighted average interest at 0.296% at September 30, 2014		106			—
Mortgages and other, interest rates ranging from non-interest bearing to 4.15%, various maturities		40			42

		2,166			1,267
Less current maturities		(3	)		(2	)

Long-term debt	$	2,163		$	1,265

In the second quarter of 2014, we entered into a master lease arrangement to lease the entire buildings and land where we are headquartered in Stamford, Connecticut. The term of the lease is 20 years, with two five-year extensions at our option. We have fixed annual payments of approximately $10 million, which escalate at 3% per year. As a result of this transaction, we recorded a capital lease obligation of approximately $153 million with an interest rate of 5.82%.

In the third quarter of 2014, we entered into the Fourth Amendment of our $1.75 billion Revolving Credit facility (the Facility). The amendment extended the maturity of the Facility by two years to February 2020. The Facility, when drawn upon, has an applicable margin, inclusive of a commitment fee, of 1.20%, plus the applicable currency LIBOR rate. We paid fees of approximately $2 million in connection with this amendment and capitalized these costs as deferred financing costs. Additionally, in connection with this amendment, we recorded a net charge of approximately $1 million in the loss on early extinguishment of debt, net line item to write-off certain existing deferred financing costs.

In the third quarter of 2014, we established a Commercial Paper Program (Commercial Paper), which gives us the ability to issue up to $1.75 billion of short-term unsecured notes. The minimum issuance amount is $250,000. We reserve unused capacity under the Facility to repay outstanding Commercial Paper borrowings in the event that the commercial paper market is not available to us for any reason when outstanding borrowings mature. While any outstanding Commercial Paper and Facility borrowings generally have short-term maturities, we classify the outstanding borrowings as long-term based on our ability and intent to refinance the outstanding borrowings on a long-term basis.

In the third quarter of 2014, we completed a public offering of $350 million in aggregate principal amount of Senior Notes due 2025 (the 2025 Notes) and $300 million in aggregate principal amount of Senior Notes due 2034 (the 2034 Notes). The 2025 Notes and 2034 Notes are direct, unsecured obligations and rank equally with all of our existing and future unsecured and unsubordinated obligations. The 2025 Notes bear interest at a fixed rate of 3.75% per annum and mature on March 15, 2025. The 2034 Notes bear interest at a fixed rate of 4.50% per annum and mature on October 1, 2034. We will pay interest on the 2025 Notes on March 15 and September 15 each year until maturity, beginning on March 15, 2015. We will pay interest on the 2034 Notes on April 1 and October 1 each year until maturity, beginning on April 1, 2015. We intend to use the net proceeds for general corporate purposes, which may include the repayment of commercial paper, repurchases of our common stock or the payment of previously announced regular and special dividends to our stockholders.

We may redeem all or a portion of the 2025 Notes at our option at any time prior to December 15, 2024 at the make-whole redemption price equal to the greater of (1) 100% of the aggregate principal amount of the 2025 Notes being redeemed, plus accrued and unpaid interest to, but excluding, the redemption date; and (2) the sum of the present values of the remaining scheduled payments of principal and interest in respect of the 2025 Notes being redeemed (exclusive of any interest accrued to the date of redemption) discounted to the redemption date on a semi-annual basis at the Treasury Rate (as defined in the Supplemental Indenture) plus 25 basis points, plus accrued and unpaid interest to, but excluding, the redemption date. At any time on or after December 15, 2024, we may redeem all or a portion of the 2025 Notes at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest to, but excluding, the redemption date.

We may redeem all or a portion of the 2034 Notes at our option at any time prior to April 1, 2034 at the make-whole redemption price equal to the greater of (1) 100% of the aggregate principal amount of the 2034 Notes being redeemed, plus accrued and unpaid interest to, but excluding, the redemption date; and (2) the sum of the present values of the remaining scheduled payments of principal and interest in respect of the 2034 Notes being redeemed (exclusive of any interest accrued to the date of redemption) discounted to the redemption date on a semi-annual basis at the Treasury Rate plus 25 basis points, plus accrued and unpaid interest to, but excluding, the redemption date. At any time on or after April 1, 2034, we may redeem all or a portion of the 2034 Notes at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest to, but excluding, the redemption date.

Note 8. Securitized Vacation Ownership Debt

As discussed in Note 5, our VIEs associated with the securitization of our VOI notes receivable are consolidated in our financial statements. Long-term and short-term securitized vacation ownership debt consisted of the following (in millions):


	September 30, 2014			December 31, 2013
2009 securitization, interest rate at 5.81%, maturing 2015	$	18		$	36
2010 securitization, interest rates ranging from 3.65% to 4.75%, maturing 2021		78			101
2011 securitization, interest rates ranging from 3.67% to 4.82%, maturing 2025		87			105
2012 securitization, interest rates ranging from 2.00% to 2.76%, maturing 2023		89			113

		272			355
Less current maturities		(81	)		(97	)

Long-term securitized debt	$	191		$	258

Note 9. Other Liabilities

Other liabilities consisted of the following (in millions):


	September 30, 2014		December 31, 2013
Deferred gains on asset sales	$	882	$	870
Starwood Preferred Guest point liability ^(a)		821		780
Deferred revenue including VOIs and residential sales		50		37
Benefit plan liabilities		45		46
Deferred rent		27		53
Insurance reserves		46		44
Other		78		74

	$	1,949	$	1,904

(a)	Includes the actuarially determined liability and certain deferred revenues related to the Starwood Preferred Guest program.

Deferred Gains. We defer gains realized in connection with the sale of a property that we continue to manage through a long-term management agreement and recognize the gains over the initial term of the related agreement (see Note 4). As of September 30, 2014 and December 31, 2013, we had total deferred gains of approximately $966 million and $954 million, respectively, included in accrued expenses and other liabilities in our consolidated balance sheets. Amortization of deferred gains is included in management fees, franchise fees and other income in our consolidated statements of income and totaled approximately $22 million and $65 million in the three and nine months ended September 30, 2014, respectively, compared to $23 million and $68 million in the three and nine months ended September 30, 2013, respectively.

Frequent Guest Program. Starwood Preferred Guest (SPG) is our frequent guest incentive marketing program. SPG members earn points based on spending at our owned, managed and franchised hotels, as incentives to first-time buyers of VOIs and residences, and through participation in affiliated partners’ programs such as co-branded credit cards and airline travel. Points can be redeemed at substantially all of our owned, managed and franchised hotels as well as through other redemption opportunities with third parties, such as conversion to airline miles.

We charge our owned, managed and franchised hotels the cost of operating the SPG program, including the estimated cost of our future redemption obligation, based on a percentage of our SPG members’ qualified expenditures. Our management and franchise agreements require that we are reimbursed for the costs of operating the SPG program, including marketing, promotions and communications and performing member services for the SPG members. As points are earned, we increase the SPG point liability for the amount of cash we receive from our managed and franchised hotels related to the future redemption obligation. For our owned hotels, we record an expense for the amount of our future redemption obligation with the offset to the SPG point liability. When points are redeemed by the SPG members, the hotels recognize revenue and the SPG point liability is reduced.

Through the services of third-party actuarial analysts, we determine the value of the future redemption obligation based on statistical formulas which project the timing of future point redemptions based on historical experience, including an estimate of the “breakage” for points that will never be redeemed, and an estimate of the points that will eventually be redeemed as well as the cost of reimbursing hotels and other third parties in respect of other redemption opportunities for point redemptions.

We consolidate the assets and liabilities of the SPG program including the liability associated with the future redemption obligation which is included in other long-term liabilities and accrued expenses in the consolidated balance sheets. The total actuarially determined liability, as of September 30, 2014 and December 31, 2013 was $1,096 million and $1,036 million, respectively, of which $331 million and $313 million, respectively, was included in accrued expenses.

Note 10. Derivative Financial Instruments

We enter into forward contracts to manage foreign exchange risk based on market conditions and to hedge certain forecasted transactions. These forward contracts have been designated and qualify as cash flow hedges, and their change in fair value is recorded as a component of other comprehensive income and reclassified into earnings in the same period or periods in which the forecasted transaction occurs. To qualify as a hedge, we need to formally document, designate and assess the effectiveness of the transactions that receive hedge accounting. The notional dollar amounts of the outstanding Euro forward contracts at September 30, 2014 were $4 million, with average exchange rates of 1.37, generally with terms of less than one year. We review the effectiveness of our hedging instruments on a quarterly basis and record any ineffectiveness into earnings. We discontinue hedge accounting for any hedge that is no longer evaluated to be highly effective. From time to time, we may choose to de-designate portions of hedges when changes in estimates of forecasted transactions occur. For the three and nine months ended September 30, 2014, each of these hedges was highly effective in offsetting fluctuations in foreign currencies.

We also enter into forward contracts to manage foreign exchange risk on intercompany loans that are not deemed permanently invested. These forward contracts are not designated as hedges, and their change in fair value is recorded in our consolidated statements of income during each reporting period. These forward contracts provide an economic hedge, as they largely offset foreign currency exposures on intercompany loans.

We enter into interest rate swap agreements to manage interest expense. The swaps qualify as fair value swaps and modify our interest rate exposure by effectively converting debt with a fixed rate to a floating rate. Our objective is to manage the impact of interest rates on the results of operations, cash flows and the market value of our debt. At September 30, 2014, we had five interest rate swap agreements with an aggregate notional amount of $250 million under which we pay floating rates and receive fixed rates of interest (Fair Value Swaps). The Fair Value Swaps hedge the change in fair value of certain fixed rate debt related to fluctuations in interest rates and mature in 2018 and 2019. These interest rate swaps have been designated and qualify as fair value hedges and have met the requirements to assume zero ineffectiveness.

The counterparties to our derivative financial instruments are major financial institutions. We evaluate the credit ratings of the financial institutions and believe that credit risk is at an acceptable level.

The following tables summarize the fair value of our derivative instruments (in millions).

September 30,
2014

December 31,
2013

Balance Sheet
Location

Fair
Value

Balance Sheet
Location

Fair
Value

Derivatives designated as hedging instruments

Asset Derivatives

Interest rate swaps

Other assets

Liability Derivatives

Forward contracts

Accrued expenses

—

Accrued expenses

September 30,
2014

December 31,
2013

Balance Sheet
Location

Fair
Value

Balance Sheet
Location

Fair
Value

Derivatives not designated as hedging instruments

Asset Derivatives

Forward contracts

Prepaid expenses and other

Liability Derivatives

Forward contracts

Accrued expenses

The following table presents the effect of our derivatives on our Consolidated Statements of Income (in millions):

Derivatives not

designated as hedging

instruments

Location of Gain (Loss)
Recognized
in Income on Derivative

Amount of Gain
(Loss) Recognized
in Income on Derivative

Three Months Ended
September 30,

2014

2013

Foreign forward exchange contracts

Interest expense, net

)

Derivatives not

designated as hedging

instruments

Location of Gain
Recognized
in Income on Derivative

Amount of Gain
Recognized
in Income on Derivative

Nine Months Ended
September 30,

2014

2013

Foreign forward exchange contracts

Interest expense, net

The interest rate swaps and forward contracts are financial assets and liabilities measured at fair value on a recurring basis.

The interest rate swaps are valued using an income approach. Expected future cash flows are converted to a present value amount based on market expectations of the yield curve on floating interest rates, which are readily available on public markets, and as such, are classified as Level 2.

The forward contracts are over-the-counter contracts that do not trade on a public exchange. The fair values of the contracts are based on inputs such as foreign currency spot rates and forward points that are readily available on public markets, and as such, are classified as Level 2. We consider both our credit risk, as well as our counterparties’ credit risk, in determining fair value, and we did not make an adjustment as it was deemed insignificant based on the short duration of the contracts and our rate of short-term debt.

Note 11. Pension and Postretirement Benefit Plans

We sponsor, or have previously sponsored, numerous funded and unfunded domestic and foreign pension and postretirement benefit plans. The net periodic benefit cost for our domestic pension benefits, foreign pension benefits and postretirement benefits amounted to less than $1 million for the three months ended September 30, 2014 and 2013 and for the nine months ended September 30, 2014 and 2013.

During the three and nine months ended September 30, 2014, we contributed approximately $2 million and $11 million, respectively, to our pension and postretirement benefit plans. For the remainder of 2014, we expect to contribute approximately $4 million to our pension and postretirement benefit plans. A significant portion of the contributions relate to the foreign pension plans, for which we are reimbursed by our managed hotels.

Note 12. Income Taxes

The total amount of unrecognized tax benefits as of September 30, 2014, was $216 million, of which $70 million would affect our effective tax rate if recognized. It is reasonably possible that approximately $18 million of our unrecognized tax benefits as of September 30, 2014 will reverse within the next twelve months.

We recognize interest and penalties related to unrecognized tax benefits through income tax expense. As of September 30, 2014, we had $16 million accrued for the payment of interest and $4 million accrued for the payment of penalties.

During the nine months ended September 30, 2014, we resolved a previous dispute related to foreign operating losses, which resulted in a tax benefit of $52 million. As a result, we recognized a previously unrecognized tax benefit, reversed associated interest accruals, and recognized a deferred tax asset for the balance of net operating losses available as of December 31, 2013. In addition, we recognized certain deferred tax assets, with a fully offsetting valuation allowance, that are not more likely than not realizable due to the requirement of future income of a special character. In the event that we can forecast such income, we may change our judgment regarding the realizability of these assets.

During the nine months ended September 30, 2013, we recorded a tax benefit of $70 million as a result of the reversal of state income tax and interest reserves associated with an uncertain tax position, which was related to a previous disposition. The applicable statute of limitation for this tax position lapsed during the first quarter of 2013.

We are subject to taxation in the U.S. federal jurisdiction, as well as various state and foreign jurisdictions. As of September 30, 2014, we are no longer subject to examination by U.S. federal taxing authorities for years prior to 2007 or to examination by any U.S. state taxing authority prior to 2002. All subsequent periods remain eligible for examination. In the significant foreign jurisdictions in which we operate, we are no longer subject to examination by the relevant taxing authorities for any years prior to 2007.

We are currently under audit by the Internal Revenue Service (IRS) for years 2007 through 2009. Through September 30, 2014, we received certain Notices of Proposed Adjustment from the IRS for such years; however, we disagree with the IRS on certain of these adjustments and intend to vigorously contest them, including pursuing all available remedies such as the IRS Appeals process and litigation, if necessary. These unagreed adjustments, if upheld, would result in a significant cash tax and interest payment. More than half of this amount would not affect the effective tax rate due to the timing nature of certain issues. We believe we will prevail in the eventual resolution of certain of these matters and have not adjusted our results of operations to the extent we believe it is more likely than not that we will ultimately prevail.

As we pursue opportunities to sell owned real estate, we continually assess our tax positions, indefinite reinvestment assertions, and our ability to realize deferred tax assets to identify if changes in recognition are required.

Note 13. Stockholders’ Equity

The following tables represent changes in stockholders’ equity that are attributable to our stockholders and non-controlling interests for the three and nine months ended September 30, 2014 (in millions):


				Equity Attributable to Starwood Stockholders
	Total			Common Shares		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Equity Attributable to Noncontrolling Interests
Balance at June 30, 2014	$	3,145		$	2	$	533		$	(330	)	$	2,937		$	3
Net income		109			—		—			—			109			—
Equity compensation activity and other		24			—		25			—			—			(1	)
Dividends		(184	)		—		—			—			(184	)		—
Share repurchases		(857	)		—		(530	)		—			(327	)		—
Other comprehensive income		(87	)		—		—			(87	)		—			—

Balance at September 30, 2014	$	2,150		$	2	$	28		$	(417	)	$	2,535		$	2


				Equity Attributable to Starwood Stockholders
	Total			Common Shares		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Equity Attributable to Noncontrolling Interests
Balance at December 31, 2013	$	3,363		$	2	$	661		$	(335	)	$	3,032		$	3
Net income		399			—		—			—			399			—
Equity compensation activity and other		66			—		67			—			—			(1	)
Dividends		(569	)		—		—			—			(569	)		—
Share repurchases		(1,027	)		—		(700	)		—			(327	)		—
Other comprehensive income		(82	)		—		—			(82	)		—			—

Balance at September 30, 2014	$	2,150		$	2	$	28		$	(417	)	$	2,535		$	2

Share Issuances and Repurchases. During the three and nine months ended September 30, 2014, we issued approximately 0.1 million and 0.5 million of our common shares, respectively, as a result of stock option exercises.

In the third quarter of 2014, our Board of Directors authorized a $1.1 billion increase to the share repurchase program. During the three months ended September 30, 2014, we repurchased 10.4 million common shares at a weighted average price of $82.57 for a total cost of approximately $857 million. During the nine months ended September 30, 2014, we repurchased 12.5 million common shares at a weighted average price of $81.90 for a total cost of approximately $1,027 million. As of September 30, 2014, $688 million remained available under the share repurchase authorization approved by our Board of Directors.

Dividends. In September 2014, we paid approximately $181 million of dividends, or $1.00 per share consisting of a regular quarterly dividend of $0.35 per share and a special dividend of $0.65 per share, to stockholders of record as of September 5, 2014. In addition, we accrued dividends of approximately $3 million related to unvested equity awards, which will be paid when the awards lapse.

For the nine months ended September 30, 2014, we paid approximately $560 million of dividends, or $3.00 per share consisting of regular quarterly dividends totaling $1.05 per share and special dividends totaling $1.95 per share. In addition, we accrued dividends of approximately $9 million related to unvested equity awards, which will be paid when the awards lapse.

Accumulated Other Comprehensive Loss.

The following table presents the changes in accumulated other comprehensive loss by component for the nine months ended September 30, 2014 (in millions):


	For the Nine Months Ended September 30, 2014 ^(a)
	Cash Flow Hedges		Defined Benefit Pension and Postretirement Benefit Plans ^(b)			Foreign Currency Translation Adjustments ^(c)			Total
Balance at December 31, 2013	$	—	$	(64	)	$	(271	)	$	(335	)

Other comprehensive income before reclassifications		1		—			(80	)		(79	)
Amounts reclassified from accumulated other comprehensive income		—		1			(4	)		(3	)

Total before tax		1		1			(84	)		(82	)
Tax (expense) benefit		—		—			—			—

Net current year other comprehensive income		1		1			(84	)		(82	)

Balance at September 30, 2014	$	1	$	(63	)	$	(355	)	$	(417	)

(a)	Amounts in parentheses indicate debits.

(b)	Pretax amortization of defined benefit pension and postretirement benefit plans is reclassified to selling, general, administrative and other.

(c)	During the nine months ended September 30, 2014, we recognized $4 million in the gain (loss) on asset dispositions and impairments, net line item due to the substantial liquidation of a foreign entity.

During the three and nine months ended September 30, 2014, gains included in accumulated other comprehensive loss related to intra-entity foreign currency transactions that are of a long-term investment nature amounted to $57 million and $65 million for the three and nine months ended September 30, 2014, respectively, compared to losses of $22 million and $28 million for the three and nine months ended September 30, 2013, respectively.

Note 14. Stock-Based Compensation

In accordance with our 2013 Long-Term Incentive Compensation Plan (the 2013 LTIP), during the nine months ended September 30, 2014, we granted restricted stock, restricted stock units and performance shares to executive officers, members of the Board of Directors and certain employees.

In February 2014, a target number of contingent performance shares, which contain a market condition, were awarded to certain executives. Vesting of the performance shares is dependent upon a market condition and three years of continuous service beginning at date of grant, subject to a prorated adjustment for employees who are terminated under certain circumstances or who retire. The market condition is based on our total stockholder return relative to the total stockholder return of a specified group of peer companies at the end of a three-calendar-year performance period beginning January 1, 2014 and ending December 31, 2016. The number of performance shares earned is determined based on our percentile ranking among these companies. The performance shares are entitled to any dividends made during the performance period in the same proportion as the number of performance shares that vest. Dividends will be paid at the end of the service period.

We classified the performance shares as a share-based equity award, and as such, compensation expense related to these shares is based on the grant-date fair value, which will be recognized ratably over the requisite service period. We determined the fair value of the performance shares using a Monte Carlo simulation valuation model. The Monte Carlo simulation estimates the fair value of our performance awards primarily based on the terms associated with the grant and public information that is readily available. The underlying principles in the Monte Carlo simulation are that publicly traded stocks are fairly priced and the future returns of a stock may be estimated primarily by the stock’s assumed volatility. During the nine months ended September 30, 2014, we granted approximately 177,000 performance shares with a grant date fair value of $103.65 per share. In addition, we granted approximately 948,000 shares of restricted stock and restricted stock units that had a weighted average grant date fair value of $81.71 per share or unit.

We recorded stock-based employee compensation expense, including the impact of reimbursements from third parties, of $14 million and $38 million in the three and nine months ended September 30, 2014, respectively, compared to $13 million and $40 million, in the three and nine months ended September 30, 2013, respectively. Stock-based compensation expense for the nine months ended September 30, 2014 benefited from approximately $3 million of forfeitures related to the resignation of an executive officer in the second quarter of 2014.

As of September 30, 2014, there was approximately $79 million of unrecognized compensation cost, net of estimated forfeitures, including the impact of reimbursements from third parties, which is expected to be recognized on a straight-line basis over a weighted-average period of 1.6 years.

Note 15. Fair Value

We believe the carrying values of our financial instruments related to current assets and current liabilities approximate fair value. The following table presents the carrying amounts and estimated fair values of our long-term financial instruments (in millions):


		September 30, 2014				December 31, 2013
	Hierarchy Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Restricted cash	1	$	4	$	4	$	3	$	3
VOI notes receivable	3		280		352		217		271
Securitized vacation ownership notes receivable	3		246		311		315		398
Other notes receivable	3		38		38		18		18

Total financial assets		$	568	$	705	$	553	$	690

Liabilities:
Long-term debt	1	$	2,163	$	2,273	$	1,265	$	1,367
Long-term securitized debt	3		191		199		258		270

Total financial liabilities		$	2,354	$	2,472	$	1,523	$	1,637

Off-Balance sheet:
Letters of credit	2	$	—	$	81	$	—	$	116
Surety bonds	2		—		27		—		81

Total off-balance sheet		$	—	$	108	$	—	$	197

The carrying value of our restricted cash approximates its fair value. We estimate the fair value of our VOI notes receivable and securitized VOI notes receivable using assumptions related to current or recent securitization market transactions. The amount is then compared to a discounted expected future cash flow model using a discount rate commensurate with the risk of the underlying notes, primarily determined by the credit worthiness of the borrowers based on their FICO scores. The results of these two methods are then evaluated to determine the estimated fair value. The fair value of other notes receivable is estimated based on the terms of the instrument and current market conditions. These financial instrument assets are recorded in the other assets line item in our consolidated balance sheet.

We estimate the fair value of our publicly traded debt based on the bid prices in the public debt markets. The carrying amount of our floating rate debt is a reasonable basis of fair value due to the variable nature of the interest rates. Our non-public, securitized debt and fixed rate debt fair value is determined based upon discounted cash flows for the debt rates deemed reasonable for the type of debt, prevailing market conditions and the length to maturity for the debt.

The fair values of our letters of credit and surety bonds are estimated to be the same as the contract values based on the nature of the fee arrangements with the issuing financial institutions.

Note 16. Segment Information

Our hotel business is segregated into three separate hotel segments: (i) the Americas, (ii) Europe, Africa and the Middle East (EAME), and (iii) Asia Pacific. The vacation ownership and residential business is a separate segment.

Our reportable segments each have a division president who is responsible for the management of the division. Each division president reports directly to our Chief Executive Officer who is also the Chief Operating Decision Maker (CODM). Financial information for each reportable segment is reviewed by the CODM to assess performance and make decisions regarding the allocation of resources.

Each hotel segment generates its earnings through a network of owned, leased, consolidated and unconsolidated joint venture hotels and resorts operated primarily under our proprietary brand names including St. Regis^®, The Luxury Collection^®, W^®, Westin^®, Le Méridien^®, Sheraton^®, Four Points^® by Sheraton, Aloft^®, and Element^®, as well as hotels and resorts which are managed or franchised under these brand names in exchange for fees.

The management of our vacation ownership and residential sales business is conducted by the vacation ownership and residential segment. The vacation ownership and residential segment generates its earnings through the acquisition, development and operation of vacation ownership resorts, marketing and selling of VOIs and residential units, and providing financing to customers who purchase such interests.

The CODM primarily evaluates the operating performance of a segment based on segment earnings. We define segment earnings as net income attributable to our common stockholders before interest expense, taxes, depreciation and amortization, as well as our share of interest, depreciation and amortization associated with our unconsolidated joint ventures, excluding certain recurring and nonrecurring items, such as restructuring and other special charges (credits), loss on early extinguishment of debt, net and gains (losses) on asset dispositions and impairments. Residential revenues generated at hotel properties are recorded in the corresponding geographic hotel segment. General, administrative and other expenses directly related to the segments are included in the calculation of segment earnings, whereas corporate general, administrative, and other expenses are not included in the segment earnings calculation. In addition to revenues recorded within our four segments, we also have other revenues from managed and franchised properties, which represent the reimbursement of costs incurred on behalf of managed and franchised property owners. These revenues, together with the corresponding expenses, are not recorded within our segments. Other corporate unallocated revenues and earnings primarily relate to other license fee income and are also reported outside of segment revenues.

The following tables present revenues and segment earnings for our reportable segments (in millions):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Revenues:
Americas	$	372		$	366		$	1,159		$	1,143
EAME		162			175			453			459
Asia Pacific		92			87			257			244
Vacation ownership and residential		157			197			497			736

Total segment revenues		783			825			2,366			2,582
Other revenues from managed and franchised hotels		686			663			2,052			1,965
Other corporate revenues – unallocated		24			20			72			62

	$	1,493		$	1,508		$	4,490		$	4,609


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Segment Earnings:
Americas	$	156		$	141		$	512		$	449
EAME		65			70			158			161
Asia Pacific		54			54			159			151
Vacation ownership and residential		37			57			125			235

Total segment earnings		312			322			954			996
Other corporate unallocated		25			20			73			64
Corporate selling, general, administrative and other – unallocated		(40	)		(41	)		(125	)		(111	)
Gain (loss) on asset dispositions and impairments, net		(22	)		3			(55	)		(5	)
Restructuring and other special (charges) credits		—			22			3			23
Adjustments to equity earnings ^(a)		(12	)		(14	)		(31	)		(33	)
Interest expense		(27	)		(26	)		(75	)		(79	)
Loss on early extinguishment of debt, net		(1	)		—			(1	)		—
Depreciation and amortization		(72	)		(65	)		(210	)		(195	)
Discontinued operations		—			—			1			70
Income tax expense		(54	)		(64	)		(135	)		(223	)

Net income attributable to Starwood	$	109		$	157		$	399		$	507

(a)	Includes impairment losses, interest expense, depreciation and amortization expense related to equity earnings not allocated to segment earnings.

Note 17. Commitments and Contingencies

Variable Interest Entities. We have determined that we have a variable interest in 22 hotels, generally in the form of investments, loans, guarantees, or equity. We determine if we are the primary beneficiary of these hotels by primarily considering the qualitative factors. Qualitative factors include evaluating if we have the power to control the VIE and have the obligation to absorb the losses and rights to receive the benefits of the VIE, that could potentially be significant to the VIE. We have determined that we are not the primary beneficiary of these VIEs and therefore, these entities are not consolidated in our financial statements. See Note 5 for the VIEs in which we are deemed the primary beneficiary and have consolidated the entities.

The 22 VIEs associated with our variable interests represent entities that own hotels for which we have entered into management or franchise agreements with the hotel owners. We are paid a fee primarily based on financial metrics of the hotel. The hotels are financed by the owners, generally in the form of working capital, equity and debt.

At September 30, 2014, we have approximately $108 million of investments and a loan balance of $2 million associated with 21 of the 22 VIEs. The maximum loss under these agreements equals the carrying value because we are not obligated to fund future cash contributions. In addition, we have not contributed amounts to the VIEs in excess of our contractual obligations.

Additionally, we have an investment of approximately $1 million and a performance guarantee associated with the remaining VIE. The performance guarantee has a possible cash outlay of up to $62 million, which if required, would be funded over several years and would be largely offset by management fees received under this contract.

At December 31, 2013, we evaluated the 23 hotels in which we had a variable interest. As of that date, we had approximately $116 million of investments and a loan balance of $2 million associated with 22 of the 23 VIEs. Additionally, we had an investment of approximately $1 million and a performance guarantee associated with the remaining VIE.

Guaranteed Loans and Commitments. In limited cases, we have made loans to owners of or partners in hotel or resort ventures for which we have a management or franchise agreement. Loans outstanding under this program totaled $18 million at September 30, 2014. We evaluate these loans for impairment, and at September 30, 2014, we believe these loans are collectible. Unfunded loan commitments aggregating $113 million were outstanding at September 30, 2014, of which $48 million is expected to be funded in the next twelve months. These loans typically are secured by pledges of project ownership interests and/or mortgages on the projects. We also have $167 million of equity and other potential contributions associated with managed or joint venture properties, $78 million of which is expected to be funded in the next twelve months.

Surety bonds issued on our behalf as of September 30, 2014 totaled $27 million, primarily related to requirements by state or local governments relating to our vacation ownership operations, certain tax appeals and by our insurers to secure large deductible insurance programs.

To secure management contracts, we may provide performance guarantees to third-party owners. Most of these performance guarantees allow us to terminate the contract rather than fund shortfalls if certain performance levels are not met. In limited cases, we are obligated to fund shortfalls in performance levels through the issuance of loans. Many of the performance tests are multi-year tests, tied to the results of a competitive set of hotels and have exclusions for force majeure and acts of war or terrorism. We do not anticipate any significant funding under performance guarantees, nor do we anticipate losing a significant number of management or franchise contracts in 2014.

In connection with the purchase of the Le Méridien brand in November 2005, we were indemnified for certain of Le Méridien’s historical liabilities by the entity that bought Le Méridien’s owned and leased hotel portfolio. The indemnity is limited to the financial resources of that entity, which have significantly decreased in recent years. We have received various claims on these historical liabilities; however, we do not expect to make any material fundings under such claims. If we have to fund any of these claims, there can be no assurance that we will be able to recover such amounts through the indemnification.

Litigation. We are involved in various legal matters that have arisen in the normal course of business, some of which include claims for substantial sums. Accruals have been recorded when the outcome is probable and can be reasonably estimated. As of September 30, 2014, certain contingencies have been evaluated as reasonably possible, but not probable, with a range of exposure of $0 to $40 million. While the ultimate results of claims and litigation cannot be determined, we do not believe that the resolution of these legal matters will have a material adverse effect on our consolidated results of operations, financial position or cash flow. However, depending on the amount and the timing, an unfavorable resolution of some or all of these matters could materially affect our future results of operations or cash flows in a particular period.

Item 2.

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

Forward-Looking Statements

This report includes “forward-looking” statements, as that term is defined in the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission in our rules, regulations and releases. Forward-looking statements are any statements other than statements of historical fact, including statements regarding our expectations, beliefs, hopes, intentions or strategies regarding the future. In some cases, forward-looking statements can be identified by the use of words such as “may,” “will,” “expects,” “should,” “believes,” “plans,” “anticipates,” “estimates,” “predicts,” “potential,” “continue,” or other words of similar meaning. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in, or implied by, the forward-looking statements. Factors that might cause such a difference include, but are not limited to, general economic conditions, our financial and business prospects, our capital requirements, our financing prospects, our relationships with associates and labor unions, and those disclosed as risks in other reports filed by us with the Securities and Exchange Commission, including those described in Part I of our most recently filed Annual Report on Form 10-K. We caution readers that any such statements are based on currently available operational, financial and competitive information, and they should not place undue reliance on these forward-looking statements, which reflect management’s opinion only as of the date on which they were made. Except as required by law, we disclaim any obligation to review or update these forward-looking statements to reflect events or circumstances as they occur.

INTRODUCTION

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and costs and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those relating to revenue recognition, bad debts, inventories, investments, plant, property and equipment, goodwill and intangible assets, income taxes, financing operations, frequent guest program liability, self-insurance claims payable, restructuring costs, retirement benefits and contingencies and litigation.

We base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions and conditions.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes discussion of our consolidated operating results, as well as discussion about each of our four segments. Additionally, Note 16 to the consolidated financial statements presents further information about our segments.

RESULTS OF OPERATIONS

The following discussion presents an analysis of results of our operations for the three and nine months ended September 30, 2014 and 2013.

For the three and nine months ended September 30, 2014, management fees, franchise fees and other income grew by 3.2% and 9.0%, respectively, and Same-Store Worldwide Systemwide Revenue per Available Room (REVPAR) increased 7.5% and 5.7%, respectively. All of our brands contributed to the continued growth in our fee business as each experienced increases in Worldwide Systemwide Same-Store REVPAR for the three and nine months ended September 30, 2014 compared to the prior year. Rising global wealth, growth in travel infrastructure, and a more interconnected business world, combined with the strength of our brands and our global footprint, have us poised to take advantage of an increase in demand for high-end travel.

At September 30, 2014, we had approximately 470 hotels in the active pipeline representing approximately 105,000 rooms, driven by strong interest in all Starwood brands. Of these rooms, 59% are in the upper upscale and luxury segments and 80% are outside of North America. During the third quarter of 2014, we signed 39 hotel management and franchise contracts, representing approximately 7,100 rooms, of which 34 are new builds and five are conversions from other brands. We also opened 18 new hotels and resorts representing approximately 3,500 rooms. During the third quarter of 2014, five hotels left the system, representing approximately 1,200 rooms.

In addition to our active pipeline, we have a 74% equity interest in Design Hotels AG, a company that represent and markets a distinct selection of over 280 independent hotels with nearly 21,500 rooms globally. Starwood and Design Hotels have recently entered into an agreement that allows greater coordination and cooperation between the companies. Our REVPAR metrics do not include revenue from Design Hotels.

An indicator of the performance of our owned, leased and consolidated joint venture hotels, as well as our managed and franchised hotels, is REVPAR, as it measures the period-over-period change in rooms’ revenues for comparable properties. Along with REVPAR, we also evaluate our hotels by measuring the change in Average Daily Rate (ADR) and occupancy. This is particularly the case in the United States, where there is no impact on this measure from foreign currency exchange rates.

We continually update and renovate our owned, leased and consolidated joint venture hotels and include these hotels in our Same-Store Owned Hotel results. We also undertake major repositionings of hotels. While undergoing major repositionings, hotels are generally not operating at full capacity and, as such, these repositionings can negatively impact our hotel revenues and are not included in Same-Store Owned Hotel results. We may continue to reposition our owned, leased and consolidated joint venture hotels as we pursue our brand and quality strategies. In addition, several owned hotels are located in regions which are seasonal, and therefore, these hotels do not operate at full capacity throughout the year.

The following represents our top five markets in the United States by metropolitan area as a percentage of our total owned, leased and consolidated joint venture revenues for the three and nine months ended September 30, 2014 and 2013:


Top Five Domestic Markets in the United States as a % of Total Owned Revenues for the Three Months Ended September 30, 2014 with Comparable Data for the Same Period in 2013 ⁽¹⁾
Metropolitan Area	2014 Revenues			2013 Revenues
New York, NY		10.8	%		9.1	%
Hawaii		8.6	%		7.2	%
Atlanta, GA		4.1	%		3.3	%
San Francisco, CA		3.9	%		6.5	%
Phoenix, AZ		3.8	%		3.9	%

(1)	Includes the revenues of hotels sold for the period prior to their sales.


Top Five Domestic Markets in the United States as a % of Total Owned Revenues for the Nine Months Ended September 30, 2014 with Comparable Data for the Same Period in 2013 ⁽¹⁾
Metropolitan Area	2014 Revenues			2013 Revenues
New York, NY		10.5	%		9.0	%
Hawaii		8.3	%		7.1	%
Phoenix, AZ		7.3	%		6.9	%
Atlanta, GA		3.9	%		3.4	%
San Francisco, CA		3.8	%		5.9	%

(1)	Includes the revenues of hotels sold for the period prior to their sales.

The following represents our top five international markets by country as a percentage of our total owned, leased and consolidated joint venture revenues for the three and nine months ended September 30, 2014 and 2013:


Top Five International Markets as a % of Total Owned Revenues for the Three Months Ended September 30, 2014 with Comparable Data for the Same Period in 2013 ⁽¹⁾
International Market	2014 Revenues			2013 Revenues
Canada		12.1	%		11.6	%
Spain		11.3	%		10.1	%
Italy		10.8	%		9.8	%
Australia		5.2	%		4.7	%
Mexico		4.7	%		4.5	%

(1)	Includes the revenues of hotels sold for the period prior to their sales.


Top Five International Markets as a % of Total Owned Revenues for the Nine Months Ended September 30, 2014 with Comparable Data for the Same Period in 2013 ⁽¹⁾
International Market	2014 Revenues			2013 Revenues
Canada		11.8	%		11.6	%
Italy		10.1	%		8.9	%
Spain		9.0	%		8.2	%
Mexico		5.6	%		5.0	%
Australia		5.0	%		4.9	%

(1)	Includes the revenues of hotels sold for the period prior to their sales.

Three Months Ended September 30, 2014 Compared with Three Months Ended September 30, 2013

Consolidated Results


	Three Months Ended September 30, 2014		Three Months Ended September 30, 2013		Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Owned, Leased and Consolidated Joint Venture Hotels*	$	393	$	398	$	(5	)		(1.3	)%
*Management Fees, Franchise Fees and Other Income*		255		247		8			3.2	%
*Vacation Ownership and Residential Sales and Services*		159		200		(41	)		(20.5	)%
*Other Revenues from Managed and Franchised Properties*		686		663		23			3.5	%

*Total Revenues*	$	1,493	$	1,508	$	(15	)		(1.0	)%

The decrease in revenues from owned, leased and consolidated joint venture hotels was primarily due to lost revenues from five owned hotels that were sold or closed and two leased hotels converted to a managed or franchised hotel in 2014 or 2013. These sold, closed or converted hotels had revenues of $3 million in the three months ended September 30, 2014 compared to $40 million for the corresponding period in 2013. Revenues at our Same-Store Owned Hotels (37 hotels for the three months ended September 30, 2014 and 2013, excluding the five hotels sold or closed, two converted to managed or franchised and five additional hotels undergoing significant repositionings or without comparable results in 2014 and 2013) increased 6.3%, or $18 million, to $320 million for the three months ended September 30, 2014 compared to $302 million in the corresponding period of 2013. Additionally, the five hotels undergoing significant repositionings or without comparable results had revenues of $64 million in the three months ended September 30, 2014 compared to $49 million for the corresponding period in 2013. As of September 30, 2014, the significant renovations at four of these hotels were substantially complete, as they were open and available to operate their guestrooms at full capacity.

REVPAR at our worldwide Same-Store Owned Hotels increased 7.7% to $181.76 for the three months ended September 30, 2014 compared to the corresponding period in 2013. The increase in REVPAR at these worldwide Same-Store Owned Hotels resulted from an increase of 4.0% in ADR to $236.85 for the three months ended September 30, 2014 compared to $227.68 for the corresponding period in 2013 and an increase in occupancy rates to 76.7% for the three months ended September 30, 2014, compared to 74.1% in the corresponding period in 2013. Growth in REVPAR was particularly strong in Mexico and Italy. Also, our owned hotel in Rio de Janeiro benefited from the last two weeks of the FIFA World Cup.

The increase in management fees, franchise fees and other income was primarily a result of a $6 million increase in management and franchise revenues to $248 million for the three months ended September 30, 2014 compared to $242 million for the corresponding period in 2013. Management fees increased 5.1% to $143 million and franchise fees increased 12.5% to $63 million. These increases were primarily due to the net addition of 43 managed or franchised hotels to our system since September 30, 2013 and a 7.5% increase in Same-Store Worldwide Systemwide REVPAR compared to the same period in 2013. These increases were offset by the inclusion in 2013 of a significant termination fee associated with the exit of one hotel from the system. As of September 30, 2014, we had 577 managed properties and 573 franchised properties with approximately 330,200 rooms.

Total vacation ownership and residential services revenue decreased $41 million to $159 million for the three months ended September 30, 2014, compared to the corresponding period in 2013, primarily due to the sellout of our St. Regis Bal Harbour Resort residential project (Bal Harbour) during the second quarter of 2014, whereas during the three months ended September 30, 2013, we closed sales of 12 units and realized revenues of $40 million.

Vacation ownership revenues for the three months ended September 30, 2014 remained flat at $157 million, compared to the corresponding period in 2013. Originated contract sales of vacation ownership intervals decreased 2.4% for the three months ended September 30, 2014, compared to the corresponding period in 2013, primarily due to a 2.6% decrease in the average price per vacation ownership unit sold to approximately $13,600, partially offset by a 0.6% increase in the number of contracts signed.

Other revenues from managed and franchised properties increased primarily due to an increase in payroll costs commensurate with a rise in the overall cost of labor at our existing managed hotels and payroll costs for the new hotels entering our system. These revenues represent reimbursements of costs incurred on behalf of managed hotels, vacation ownership properties and franchisees and relate primarily to payroll costs at managed properties where we are the employer. Since the reimbursements are made based upon the costs incurred with no added margin, these revenues and corresponding expenses have no effect on our operating income or our net income.


	Three Months Ended September 30, 2014		Three Months Ended September 30, 2013			Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Selling, General, Administrative and Other*	$	96	$	100		$	(4	)		(4.0	)%

During the third quarter of 2014, selling, general, administrative and other expenses decreased 4.0% to $96 million compared to $100 million in 2013, primarily due to a reduction in reserves for uncollectible receivables as a result of cash collections and the timing of expenses within the year.

	Three Months Ended September 30, 2014		Three Months Ended September 30, 2013			Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Restructuring and Other Special Charges (Credits), Net*	$	—	$	(22	)	$	22			100	%

During the three months ended September 30, 2013, we recorded a favorable adjustment to a legal reserve of approximately $22 million related to judgment and settlement, interest costs, legal fees and expenses in regards to a long standing litigation.

	Three Months Ended September 30, 2014		Three Months Ended September 30, 2013			Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Depreciation and Amortization*	$	72	$	65		$	7			10.8	%

The increase in depreciation and amortization expense for the three months ended September 30, 2014, compared to the corresponding period of 2013, was primarily due to additional depreciation related to the completion of certain hotel renovations, the new capital lease asset for our corporate headquarters, and information technology capital expenditures in 2014 and the latter half of 2013, partially offset by decreased depreciation expense related to sold hotels.

	Three Months Ended September 30, 2014		Three Months Ended September 30, 2013			Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Operating Income*	$	210	$	243		$	(33	)		(13.6	)%

The decrease in operating income for the three months ended September 30, 2014, compared to the corresponding period of 2013, was primarily due to the inclusion of other special charges (credits), net of ($22) million in 2013, a $19 million decrease in operations (revenues less expenses) from residential sales at Bal Harbour, and a $7 million increase in depreciation and amortization, partially offset by an $8 million increase in management fees, franchise fees and other income, a $5 million increase in operations (revenues less expenses) related to our owned, leased and consolidated joint venture hotels, and a $4 million decrease in selling, general, administrative and other expenses.

	Three Months Ended September 30, 2014		Three Months Ended September 30, 2013			Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Equity Earnings and Gains from Unconsolidated Ventures, Net*	$	3	$	—		$	3			n/m

n/m = not meaningful

Equity earnings and gains from unconsolidated joint ventures, net increased $3 million for the three months ended September 30, 2014, compared to the corresponding period in 2013, primarily due to a $4 million impairment charge in 2013 associated with a hotel in which we own a noncontrolling joint venture interest.


	Three Months Ended September 30, 2014			Three Months Ended September 30, 2013		Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Net Interest Expense*	$	27		$	25	$	2			8.0	%

Net interest expense increased $2 million for the three months ended September 30, 2014, compared to the same period of 2013, primarily due to an increase in our debt balance associated with borrowings to fund the significant increase in our share repurchase program, including the issuance of $650 million of senior notes during the third quarter of 2014 (see Note 7). Our weighted average interest rate was approximately 4.81% at September 30, 2014 compared to 5.61% at September 30, 2013.

	Three Months Ended September 30, 2014			Three Months Ended September 30, 2013		Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Loss on Early Extinguishment of Debt, net*	$	1		$	—	$	1			n/m

In the third quarter of 2014, we recorded a loss of $1 million related to the write-off of certain deferred financing costs associated with the amendment of our Revolving Credit Facility (see Note 7).

	Three Months Ended September 30, 2014			Three Months Ended September 30, 2013		Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Gain (Loss) on Asset Dispositions and Impairments, Net*	$	(22	)	$	3	$	(25	)		n/m

During the three months ended September 30, 2014, we recorded a loss of $22 million, primarily due to a $13 million impairment charge on one owned hotel, whose book value exceeded its fair value, and a loss of $7 million associated with the termination of our leasehold interest in a hotel which was converted to a franchised hotel (see Note 4). During the three months ended September 30, 2013, we recorded a gain of $3 million, primarily related to a $4 million gain realized on the sale of a non-core asset.

	Three Months Ended September 30, 2014			Three Months Ended September 30, 2013		Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Income Tax Expense*	$	54		$	64	$	(10	)		(15.6	)%

The decrease in income tax expense for the three months ended September 30, 2014, compared to the same period in 2013, was primarily due to a $20 million decrease related to lower pretax income, partially offset by a $5 million increase related to an overall higher effective tax rate and a $5 million tax benefit recognized in the third quarter of 2013 associated with a previous disposition.

Segment Results

The following table summarizes REVPAR, ADR and occupancy for our Same-Store Owned Hotels for the three months ended September 30, 2014 and 2013. The results for the three months ended September 30, 2014 and 2013 represent results for 37 owned, leased and consolidated joint venture hotels (excluding five hotels sold or closed, two leased hotels converted to managed or franchised, and five hotels undergoing significant repositionings or without comparable results in 2014 and 2013).


	Three Months Ended September 30,						Variance
	2014			2013			Variance
Worldwide (37 hotels with approximately 12,900 rooms)
REVPAR ⁽¹⁾	$	181.76		$	168.71			7.7	%
ADR	$	236.85		$	227.68			4.0	%
Occupancy		76.7	%		74.1	%		2.6

Americas (20 hotels with approximately 9,300 rooms)
REVPAR ⁽¹⁾	$	133.99		$	124.98			7.2	%
ADR	$	182.06		$	176.99			2.9	%
Occupancy		73.6	%		70.6	%		3.0

EAME (13 hotels with approximately 2,300 rooms)
REVPAR ⁽¹⁾	$	363.95		$	332.78			9.4	%
ADR	$	432.57		$	406.56			6.4	%
Occupancy		84.1	%		81.9	%		2.2

Asia Pacific (4 hotels with approximately 1,300 rooms)
REVPAR ⁽¹⁾	$	196.50		$	189.59			3.6	%
ADR	$	228.03		$	221.59			2.9	%
Occupancy		86.2	%		85.6	%		0.6

The following table summarizes REVPAR, ADR and occupancy for our Same-Store Systemwide Hotels for the three months ended September 30, 2014 and 2013. Same-Store Systemwide Hotels represent results for same-store owned, leased, managed and franchised hotels.


	Three Months Ended September 30,						Variance
	2014			2013			Variance
Worldwide (1,044 hotels with approximately 307,000 rooms)
REVPAR ⁽¹⁾	$	129.09		$	120.13			7.5	%
ADR	$	177.15		$	171.26			3.4	%
Occupancy		72.9	%		70.1	%		2.8

Americas (605 hotels with approximately 177,500 rooms)
REVPAR ⁽¹⁾	$	130.10		$	119.77			8.6	%
ADR	$	170.45		$	162.08			5.2	%
Occupancy		76.3	%		73.9	%		2.4

EAME (207 hotels with approximately 52,300 rooms)
REVPAR ⁽¹⁾	$	164.78		$	153.39			7.4	%
ADR	$	235.38		$	230.18			2.3	%
Occupancy		70.0	%		66.6	%		3.4

Asia Pacific (232 hotels with approximately 77,200 rooms)
REVPAR ⁽¹⁾	$	102.60		$	98.41			4.3	%
ADR	$	153.40		$	154.04			(0.4	)%
Occupancy		66.9	%		63.9	%		3.0

(1)	REVPAR is calculated by dividing room revenue, which is derived from rooms and suites rented or leased, by total room nights available for a given period. REVPAR may not be comparable to similarly titled measures such as revenues.

The following tables summarize segment revenues and segment earnings for the three months ended September 30, 2014 and 2013.


	Three Months Ended September 30, 2014		Three Months Ended September 30, 2013		Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
Segment Revenues
*Americas*	$	372	$	366	$	6			1.6	%
*EAME*		162		175		(13	)		(7.4	)%
*Asia Pacific*		92		87		5			5.7	%
*Vacation ownership and residential*		157		197		(40	)		(20.3	)%

*Total segment revenues*	$	783	$	825	$	(42	)		(5.1	)%


	Three Months Ended September 30, 2014		Three Months Ended September 30, 2013		Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
Segment Earnings
*Americas*	$	156	$	141	$	15			10.6	%
*EAME*		65		70		(5	)		(7.1	)%
*Asia Pacific*		54		54		—			—
*Vacation ownership and residential*		37		57		(20	)		(35.1	)%

*Total segment earnings*	$	312	$	322	$	(10	)		(3.1	)%

We primarily evaluate the operating performance of a segment based on segment earnings. We define segment earnings as net income attributable to our common stockholders before interest expense, taxes, depreciation and amortization, as well as our share of interest, depreciation and amortization associated with our unconsolidated joint ventures, excluding certain recurring and nonrecurring items, such as restructuring and other special charges (credits), loss on early extinguishment of debt, net and gains (losses) on asset dispositions and impairments. Residential revenues generated at hotel properties are recorded in the corresponding geographic hotel segment. General, administrative and other expenses directly related to the segments are included in the calculation of segment earnings, whereas corporate general, administrative, and other expenses are not included in the segment earnings calculation. In addition to revenues recorded within our four segments, we also have other revenues from managed and franchised properties, which represent the reimbursement of costs incurred on behalf of managed and franchised property owners. These revenues, together with the corresponding expenses, are not recorded within our segments. Other corporate unallocated revenues and earnings primarily relate to other license fee income and are also reported outside of segment revenues. Note 16 to the consolidated financial statements presents further information about our segments.

The Americas

Segment revenues increased $6 million in the three months ended September 30, 2014, compared to the corresponding period in 2013. The increase in revenues was primarily related to an $8 million increase in management fees, franchise fees and other income, partially offset by a $1 million decrease in revenues from our owned, leased and consolidated joint venture hotels and a $1 million decrease in residential revenues.

The decrease in revenues from our owned, leased and consolidated joint venture hotels was primarily due to lost revenues from four owned hotels that were sold in 2014 or 2013. These sold hotels had no revenues in the three months ended September 30, 2014 compared to $25 million for the corresponding period in 2013. Lost revenues from sold hotels were offset by a $15 million increase in revenues from five owned hotels without comparable results in 2014 and 2013 and a $9 million increase in Same-Store Owned Hotel revenues due to an increase in REVPAR of 7.2% to $133.99 for the three months ended September 30, 2014 compared to the corresponding period in 2013.

The increase in management fees, franchise fees and other income for the three months ended September 30, 2014, compared to the same period in 2013, was due to the net addition of 15 managed or franchised hotels since September 30, 2013 and an 8.6% increase in Same-Store Systemwide REVPAR compared to the same period in 2013. As of September 30, 2014, the Americas segment had 165 managed properties and 477 franchised properties with approximately 182,400 rooms.

Segment earnings increased $15 million in the three months ended September 30, 2014, compared to the corresponding period in 2013, primarily due to the increase in management fees, franchise fees and other income discussed above, and a $6 million increase in operations (revenues less expenses) related to our owned, leased and consolidated joint venture hotels.

EAME

Segment revenues decreased $13 million in the three months ended September 30, 2014, compared to the corresponding period in 2013. The decrease in revenues was primarily related to an $8 million decrease in management fees, franchise fees and other income and a $4 million decrease in revenues from our owned, leased and consolidated joint venture hotels, compared to the corresponding period in 2013.

The decrease in management fees, franchise fees and other income was primarily due to the inclusion, in 2013, of a significant termination fee associated with one hotel that exited the system. As of September 30, 2014, the EAME segment had 189 managed properties and 45 franchised properties with approximately 60,200 rooms.

The $4 million decrease in revenues from our owned, leased and consolidated joint venture hotels was primarily due to a $12 million decrease in revenues from one leased hotel that closed in the third quarter of 2014 and two leased hotels that were converted to managed or franchised during 2014. This decrease was partially offset by a $9 million increase in Same-Store Owned Hotel revenues due to an increase in REVPAR of 9.4% to $363.95 for the three months ended September 30, 2014 compared to the corresponding period in 2013.

Segment earnings decreased $5 million in the three months ended September 30, 2014, compared to the corresponding period in 2013, primarily due to the decrease in revenues discussed above, partially offset by a $3 million decrease in division overhead expenses.

Asia Pacific

Segment revenues increased $5 million in the three months ended September 30, 2014, compared to the corresponding period in 2013. The increase in revenues was primarily related to a $4 million increase in management fees, franchise fees and other income due to the net addition of 26 managed or franchised hotels since September 30, 2013 and an increase in Same-Store Systemwide REVPAR of 4.3% to $102.60 for the three months ended September 30, 2014 compared to the corresponding period in 2013. As of September 30, 2014, the Asia Pacific segment had 223 managed properties and 51 franchised properties with approximately 87,500 rooms.

Segment earnings remained flat in the three months ended September 30, 2014, compared to the corresponding period in 2013, as the increase in management fees, franchise fees and other income discussed above, was offset by a $4 million increase in division overhead expenses.

Vacation ownership and residential

Total vacation ownership and residential services segment revenue decreased $40 million to $157 million for the three months ended September 30, 2014 compared to the corresponding period in 2013, primarily due to fewer residential closings at Bal Harbour in 2014 as this project is now sold out. Segment earnings decreased $20 million in the three months ended September 30, 2014, compared to the corresponding period in 2013, primarily driven by the decrease in operating income from sales at Bal Harbour.

Revenues and expenses recognized at Bal Harbour for the three months ended September 30, 2014, with comparative data for the same period in 2013, were as follows (in millions, except for units closed):


	Three Months Ended September 30, 2014		Three Months Ended September 30, 2013			Increase / (decrease) from prior year			Percentage change from prior year
	(in millions, except unit data)
*Residential sales revenues*	$	—	$	40		$	(40	)		(100.0	)%
*Residential expenses*		—		21			(21	)		(100.0	)%

*Operating income*	$	—	$	19		$	(19	)		(100.0	)%

*Operating income margin*		n/m		47.5	%					(47.5	)%

*Units closed*		—		12			(12	)		(100.0	)%

Nine Months Ended September 30, 2014 Compared with Nine Months Ended September 30, 2013

Consolidated Results


	Nine Months Ended September 30, 2014		Nine Months Ended September 30, 2013		Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Owned, Leased and Consolidated Joint Venture Hotels*	$	1,171	$	1,196	$	(25	)		(2.1	)%
*Management Fees, Franchise Fees and Other Income*		763		700		63			9.0	%
*Vacation Ownership and Residential Sales and Services*		504		748		(244	)		(32.6	)%
*Other Revenues from Managed and Franchised Properties*		2,052		1,965		87			4.4	%

*Total Revenues*	$	4,490	$	4,609	$	(119	)		(2.6	)%

The decrease in revenues from owned, leased and consolidated joint venture hotels was primarily due to lost revenues from nine owned hotels that were sold or closed and two leased hotels converted to a managed or franchised hotel in 2014 or 2013. These sold, closed or converted hotels had revenues of $31 million in the nine months ended September 30, 2014 compared to $133 million for the corresponding period in 2013. Revenues at our Same-Store Owned Hotels (35 hotels for the nine months ended September 30, 2014 and 2013, excluding the nine hotels sold or closed, two converted to managed or franchised, and seven additional hotels undergoing significant repositionings or without comparable results in 2014 and 2013) increased 4.3%, or $37 million, to $896 million for the nine months ended September 30, 2014 compared to $859 million in the corresponding period of 2013. The seven hotels undergoing significant repositionings or without comparable results had revenues of $224 million in the nine months ended September 30, 2014 compared to $184 million for the corresponding period in 2013. As of September 30, 2014, the significant renovations at six of these hotels were substantially complete, as they were open and available to operate their guestrooms at full capacity.

REVPAR at our worldwide Same-Store Owned Hotels increased 5.7% to $168.02 for the nine months ended September 30, 2014 compared to the corresponding period in 2013. The increase in REVPAR at these worldwide Same-Store Owned Hotels resulted from an increase of 3.7% in ADR to $228.39 for the nine months ended September 30, 2014 compared to $220.30 for the corresponding period in 2013 and an increase in occupancy rates to 73.6% for the nine months ended September 30, 2014, compared to 72.2% in the corresponding period in 2013. Growth in REVPAR was particularly strong in the Southern and Western parts of the United States, Mexico and Italy. Also, our owned hotel in Rio de Janeiro benefited from the FIFA World Cup.

The increase in management fees, franchise fees and other income was primarily a result of a $62 million increase in management and franchise revenues to $745 million for the nine months ended September 30, 2014 compared to $683 million for the corresponding period in 2013. Management fees increased 6.8% to $424 million and franchise fees increased 11.2% to $178 million. These increases were primarily due to the net addition of 43 managed or franchised hotels to our system since September 30, 2013 and a 5.7% increase in Same-Store Worldwide Systemwide REVPAR compared to the same period in 2013. For the nine months ended September 30, 2014, other management and franchise revenues included approximately $25 million of fees associated with the termination of certain management and franchise contracts compared to $14 million for the same period in 2013. As of September 30, 2014, we had 577 managed properties and 573 franchised properties with approximately 330,200 rooms.

Total vacation ownership and residential services revenue decreased $244 million to $504 million for the nine months ended September 30, 2014, compared to the corresponding period in 2013, primarily due to fewer residential closings at Bal Harbour in 2014, as this project is now sold out. During the nine months ended September 30, 2014, we closed sales of four units and realized revenues of $20 million, compared to closing sales of 72 units and revenues of $243 million for the nine months ended September 30, 2013.

Vacation ownership revenues for the nine months ended September 30, 2014 decreased $17 million, or 3.4%, to $476 million, compared to the corresponding period in 2013, primarily due to an increase in revenues deferred under the percentage of completion method of $14 million and an increase in our loan loss reserve of $8 million due to the favorable adjustments recorded during the nine months ended September 30, 2013 due to a one-time enhancement to our static pool methodology. This is partially offset by an increase in resort and other revenues. Originated contract sales of vacation ownership intervals decreased 0.4% in the nine months ended September 30, 2014, compared to the corresponding period in 2013, primarily due to a 1.2% decrease in the number of contracts signed, partially offset by a 0.8% increase in the average price per vacation ownership unit sold to approximately $15,100.


	Nine Months Ended September 30, 2014			Nine Months Ended September 30, 2013			Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Selling, General, Administrative and Other*	$	293		$	278		$	15			5.4	%

During the nine months ended September 30, 2014, selling, general, administrative and other expenses increased 5.4% to $293 million compared to $278 million in the corresponding period of 2013 primarily due to an increase of $7 million in our funding of certain loyalty and technology development costs, a $3 million decrease in favorable benefits from certain government incentives received in connection with the relocation of our corporate headquarters and the increase in costs commensurate with our growth.

	Nine Months Ended September 30, 2014			Nine Months Ended September 30, 2013			Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Restructuring and Other Special Charges (Credits), Net*	$	(3	)	$	(23	)	$	20			87.0	%

During the nine months ended September 30, 2014, we reversed a $3 million reserve related to a note receivable, associated with a previous disposition, which is now deemed to be collectible. During the nine months ended September 30, 2013, we recorded a favorable adjustment of approximately $22 million related to judgment and settlement, interest costs, legal fees and expenses in regards to a long standing litigation.

	Nine Months Ended September 30, 2014			Nine Months Ended September 30, 2013			Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Depreciation and Amortization*	$	210		$	195		$	15			7.7	%

The increase in depreciation and amortization expense for the nine months ended September 30, 2014, compared to the corresponding period of 2013, was primarily due to additional depreciation related to the completion of certain hotel renovations, the new capital lease asset for our corporate headquarters, and information technology capital expenditures in 2014 and the latter half of 2013, partially offset by decreased depreciation expense related to sold hotels.

	Nine Months Ended September 30, 2014			Nine Months Ended September 30, 2013			Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Operating Income*	$	641		$	725		$	(84	)		(11.6	)%

The decrease in operating income for the nine months ended September 30, 2014, compared to the corresponding period of 2013, was primarily due to a $96 million decrease in operations (revenues less expenses) from residential sales at Bal Harbour, an unfavorable variance in other special charges (credits), net of $20 million, a decrease in operations (revenues less expenses) from our vacation ownership and residential sales, excluding Bal Harbour, of $19 million, an increase in selling, general, administrative and other expenses of $15 million, and a $15 million increase in depreciation and amortization, partially offset by a $63 million increase in management fees, franchise fees and other income, and an $18 million increase in operations (revenues less expenses) related to our owned, leased and consolidated joint venture hotels.

	Nine Months Ended September 30, 2014			Nine Months Ended September 30, 2013			Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Equity Earnings and Gains from Unconsolidated Ventures, Net*	$	21		$	17		$	4			23.5	%

Equity earnings and gains from unconsolidated joint ventures, net increased $4 million for the nine months ended September 30, 2014, compared to the corresponding period in 2013, primarily due to a $4 million impairment charge in 2013 associated with a hotel in which we own a noncontrolling joint venture interest.


	Nine Months Ended September 30, 2014			Nine Months Ended September 30, 2013			Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Net Interest Expense*	$	73		$	77		$	(4	)		(5.2	)%

Net interest expense decreased $4 million for the nine months ended September 30, 2014, compared to the same period of 2013, primarily due to a lower average securitized vacation ownership debt balance, partially offset by an increase in our debt balance associated with borrowings to fund the significant increase in our share repurchase program, including the issuance of $650 million of senior notes during the third quarter of 2014 (see Note 7). Our weighted average interest rate was approximately 4.81% at September 30, 2014 compared to 5.61% at September 30, 2013.

	Nine Months Ended September 30, 2014			Nine Months Ended September 30, 2013			Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Loss on Early Extinguishment of Debt, net*	$	1		$	—		$	1			n/m

During the nine months ended September 30, 2013, we recorded a loss of $1 million related to the write-off of certain deferred financing costs associated with the amendment of our Revolving Credit Facility (see Note 7).

	Nine Months Ended September 30, 2014			Nine Months Ended September 30, 2013			Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Gain (Loss) on Asset Dispositions and Impairments, Net*	$	(55	)	$	(5	)	$	(50	)		n/m

During the nine months ended September 30, 2014, we, recorded a loss of $55 million, primarily due to a $21 million loss associated with the conversion of a leased hotel to a managed hotel, a $13 million impairment charge on one owned hotel, whose book value exceeded its fair value, a loss of $7 million associated with the termination of our leasehold interest in a hotel which was converted to a franchised hotel, a $7 million impairment associated with one of our foreign unconsolidated joint ventures and a loss of $6 million related to the sale of an owned hotel, which was sold subject to a long-term franchise agreement (see Note 4). During the nine months ended September 30, 2013, we recorded a loss of $5 million, primarily related to losses of $8 million, net, on the sales of three owned hotels, two of which were sold subject to long-term franchise agreements and one of which was sold subject to a long-term management agreement, partially offset by a $4 million gain realized on the sale of a non-core asset (see Note 4).

	Nine Months Ended September 30, 2014			Nine Months Ended September 30, 2013			Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Income Tax Expense*	$	135		$	223		$	(88	)		(39.5	)%

The decrease in income tax expense for the nine months ended September 30, 2014, compared to the same period in 2013, was primarily due to a $40 million decrease related to lower pretax income, partially offset by a $4 million increase related to an overall higher effective tax rate and a $52 million tax benefit related to the favorable resolution of a previously unrecognized tax benefit (see Note 12).

	Nine Months Ended September 30, 2014			Nine Months Ended September 30, 2013			Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
*Discontinued Operations, Net*	$	1		$	70		$	(69	)		(98.6	)%

During the nine months ended September 30, 2013, we recorded a tax benefit of $70 million as a result of the reversal of state income tax and interest reserves associated with an uncertain tax position, which was related to a previous disposition. The applicable statute of limitation for this tax position lapsed during the first quarter of 2013 (see Note 12).

Segment Results

The following table summarizes REVPAR, ADR and occupancy for our Same-Store Owned Hotels for the nine months ended September 30, 2014 and 2013. The results for the nine months ended September 30, 2014 and 2013 represent results for 35 owned, leased and consolidated joint venture hotels (excluding nine hotels sold or closed, two leased hotels converted to managed or franchised, and seven hotels undergoing significant repositionings or without comparable results in 2014 and 2013).


	Nine Months Ended September 30,						Variance
	2014			2013			Variance
Worldwide (35 hotels with approximately 12,600 rooms)
REVPAR ⁽¹⁾	$	168.02		$	159.03			5.7	%
ADR	$	228.39		$	220.30			3.7	%
Occupancy		73.6	%		72.2	%		1.4

Americas (20 hotels with approximately 9,300 rooms)
REVPAR ⁽¹⁾	$	135.95		$	130.04			4.5	%
ADR	$	189.26		$	183.52			3.1	%
Occupancy		71.8	%		70.9	%		0.9

EAME (11 hotels with approximately 2,000 rooms)
REVPAR ⁽¹⁾	$	301.46		$	276.20			9.1	%
ADR	$	397.15		$	369.03			7.6	%
Occupancy		75.9	%		74.8	%		1.1

Asia Pacific (4 hotels with approximately 1,300 rooms)
REVPAR ⁽¹⁾	$	183.21		$	179.09			2.3	%
ADR	$	222.09		$	230.72			(3.7	)%
Occupancy		82.5	%		77.6	%		4.9

The following table summarizes REVPAR, ADR and occupancy for our Same-Store Systemwide Hotels for the nine months ended September 30, 2014 and 2013. Same-Store Systemwide Hotels represent results for same-store owned, leased, managed and franchised hotels.


	Nine Months Ended September 30,						Variance
	2014			2013			Variance
Worldwide (985 hotels with approximately 292,700 rooms)
REVPAR ⁽¹⁾	$	124.50		$	117.80			5.7	%
ADR	$	176.45		$	172.33			2.4	%
Occupancy		70.6	%		68.4	%		2.2

Americas (568 hotels with approximately 168,400 rooms)
REVPAR ⁽¹⁾	$	127.94		$	120.01			6.6	%
ADR	$	172.26		$	165.77			3.9	%
Occupancy		74.3	%		72.4	%		1.9

EAME (197 hotels with approximately 50,400 rooms)
REVPAR ⁽¹⁾	$	147.43		$	140.10			5.2	%
ADR	$	220.63		$	214.26			3.0	%
Occupancy		66.8	%		65.4	%		1.4

Asia Pacific (220 hotels with approximately 73,900 rooms)
REVPAR ⁽¹⁾	$	101.27		$	97.69			3.7	%
ADR	$	156.73		$	159.90			(2.0	)%
Occupancy		64.6	%		61.1	%		3.5

(1)	REVPAR is calculated by dividing room revenue, which is derived from rooms and suites rented or leased, by total room nights available for a given period. REVPAR may not be comparable to similarly titled measures such as revenues.

The following tables summarize segment revenues and segment earnings for the nine months ended September 30, 2014 and 2013.


	Nine Months Ended September 30, 2014		Nine Months Ended September 30, 2013		Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
Segment Revenues
*Americas*	$	1,159	$	1,143	$	16			1.4	%
*EAME*		453		459		(6	)		(1.3	)%
*Asia Pacific*		257		244		13			5.3	%
*Vacation ownership and residential*		497		736		(239	)		(32.5	)%

*Total segment revenues*	$	2,366	$	2,582	$	(216	)		(8.4	)%


	Nine Months Ended September 30, 2014		Nine Months Ended September 30, 2013		Increase / (decrease) from prior year			Percentage change from prior year
	(in millions)
Segment Earnings
*Americas*	$	512	$	449	$	63			14.0	%
*EAME*		158		161		(3	)		(1.9	)%
*Asia Pacific*		159		151		8			5.3	%
*Vacation ownership and residential*		125		235		(110	)		(46.8	)%

*Total segment earnings*	$	954	$	996	$	(42	)		(4.2	)%

The Americas

Segment revenues increased $16 million in the nine months ended September 30, 2014, compared to the corresponding period in 2013. The increase in revenues was primarily related to a $49 million increase in management fees, franchise fees and other income, partially offset by a $27 million decrease in revenues from our owned, leased and consolidated joint venture hotels and a $5 million decrease in residential revenues.

The decrease in revenues from our owned, leased and consolidated joint venture hotels was primarily due to lost revenues from eight owned hotels that were sold in 2014 or 2013. These sold hotels had $8 million in revenues in the nine months ended September 30, 2014 compared to $92 million for the corresponding period in 2013. Lost revenues from sold hotels were offset by a $37 million increase in revenues from five owned hotels without comparable results in 2014 and 2013 and a $19 million increase in Same-Store Owned Hotel revenues due to an increase in REVPAR of 4.5% to $135.95 for the nine months ended September 30, 2014 compared to the corresponding period in 2013.

The increase in management fees, franchise fees and other income for the nine months ended September 30, 2014, compared to the same period in 2013, was due to the continued growth of our fees business along with an increase in termination fees. During the nine months ended September 30, 2014, we received termination fees of approximately $25 million associated with the termination of certain management and franchise contracts, compared to $2 million for the same period in 2013. Additionally, the increase in management fees, franchise fees and other income was due to the net addition of 15 managed or franchised hotels since September 30, 2013 and a 6.6% increase in Same-Store Systemwide REVPAR compared to the same period in 2013.

Segment earnings increased $63 million in the nine months ended September 30, 2014, compared to the corresponding period in 2013, primarily due to the increase in management fees, franchise fees and other income discussed above, a $15 million increase in operations (revenues less expenses) related to our owned, leased and consolidated joint venture hotels, and an increase of $6 million in unconsolidated joint venture earnings, partially offset by a $5 million decrease in residential revenues.

EAME

Segment revenues decreased $6 million in the nine months ended September 30, 2014, compared to the corresponding period in 2013. The decrease in revenues was primarily related to an $8 million decrease in management fees, franchise fees and other income, partially offset by an increase of $4 million in revenues from our owned, leased and consolidated joint venture hotels, compared to the corresponding period in 2013.

The decrease in management fees, franchise fees and other income was primarily due to the inclusion, in 2013, of a significant termination fee associated with one hotel that exited the system.

The $4 million increase in revenues from our owned, leased and consolidated joint venture hotels was primarily due to a $18 million increase in Same-Store Owned Hotel revenues due to an increase in REVPAR of 9.1% to $301.46 for the nine months ended September 30, 2014 compared to the corresponding period in 2013 and a $3 million increase in revenues from two owned hotels without comparable results in 2014 and 2013. These increases were partially offset by an $18 million decrease in revenues from one leased hotel that closed and two leased hotels that were converted to managed or franchised during the nine months ended September 30, 2014.

Segment earnings decreased $3 million in the nine months ended September 30, 2014, compared to the corresponding period in 2013, primarily due to the decrease in management fees, franchise fees and other income, partially offset by the increase in operations (revenues less expenses) related to our owned, leased and consolidated joint venture hotels.

Asia Pacific

Segment revenues increased $13 million in the nine months ended September 30, 2014, compared to the corresponding period in 2013. The increase in revenues was primarily related to a $13 million increase in management fees, franchise fees and other income due to the net addition of 26 managed or franchised hotels since September 30, 2013 and an increase in Same-Store Systemwide REVPAR of 3.7% to $101.27 for the nine months ended September 30, 2014 compared to the corresponding period in 2013. The increase in REVPAR was negatively impacted by the unfavorable impact of foreign currency exchange during the nine months ended September 30, 2014, compared to the corresponding period in 2013.

Segment earnings increased $8 million in the nine months ended September 30, 2014, compared to the corresponding period in 2013, primarily driven by the increase in management fees, franchise fees and other income discussed above, partially offset by $5 million increase in division overhead expenses.

Vacation ownership and residential

Total vacation ownership and residential services segment revenue decreased $239 million to $497 million for the nine months ended September 30, 2014 compared to the corresponding period in 2013, primarily due to fewer residential closings at Bal Harbour in 2014 as this project is now sold out, as well as an increase in revenues deferred under the percentage of completion method. Segment earnings decreased $110 million in the nine months ended September 30, 2014, compared to the corresponding period in 2013, primarily driven by the decrease in operating income from sales at Bal Harbour, an increase in income deferred under the percentage of completion method and an increase for certain remediation costs at one of our projects which is substantially sold out.

Revenues and expenses recognized at Bal Harbour for the nine months ended September 30, 2014, with comparative data for the same period in 2013, were as follows (in millions, except for units closed):


	Nine Months Ended September 30, 2014			Nine Months Ended September 30, 2013			Increase / (decrease) from prior year			Percentage change from prior year
	(in millions, except unit data)
*Residential sales revenues*	$	20		$	243		$	(223	)		(91.8	)%
*Residential expenses*		9			136			(127	)		(93.4	)%

*Operating income*	$	11		$	107		$	(96	)		(89.7	)%

*Operating income margin*		55.0	%		44.0	%					11.0	%

*Units closed*		4			72			(68	)		(94.4	)%

LIQUIDITY AND CAPITAL RESOURCES

Cash From Operating Activities

Cash flow from operating activities is generated primarily from management and franchise revenues, operating income from our owned hotels and resorts and sales of VOIs and residential units. Cash flow from operations decreased to $677 million for the nine months ended September 30, 2014, compared to $855 million for the nine months ended September 30, 2013, primarily due to a decrease in residential closings at Bal Harbour and certain other changes in working capital, partially offset by an increase in management fees, franchise fees and other income and operations at our owned, leased and consolidated joint venture hotels. Other sources of cash are distributions from joint ventures, servicing of financial assets and interest income. We use cash principally to fund our operating expenses, dividend payments, share repurchases, interest payments on debt, capital expenditures, and property and income taxes. We believe that our cash from operations and our existing borrowing availability together with capacity for additional borrowings will be adequate to meet all funding requirements for our operating expenses, dividend payments, share repurchases, principal and interest payments on debt, capital expenditures, and property and income taxes.

The ratio of our current assets to current liabilities was 0.91 and 1.04 as of September 30, 2014 and December 31, 2013, respectively. Consistent with industry practice, we sweep the majority of the cash at our owned hotels, in the same jurisdictions, on a daily basis and fund payables as needed through cash on hand or by drawing down on our existing revolving credit facility.

The majority of our restricted cash balance as of September 30, 2014 relates to cash payments received from buyers of vacation ownership units under construction which are held in escrow prior to obtaining a certificate of occupancy. Additionally, state and local regulations governing sales of VOIs and residential properties allow the purchaser of such a VOI or property to rescind the sale subsequent to its completion for a pre-specified number of days. We classify the cash received as restricted cash until a certificate of occupancy is obtained, the legal rescission period has expired and the deed of trust has been recorded in governmental property ownership records. Restricted cash also includes cash held by our VIEs from our securitization transactions (see Note 8). At September 30, 2014 and December 31, 2013, we had short-term restricted cash balances of $60 million and $134 million, respectively. During the nine months ended September 30, 2014, the decrease in our restricted cash balance resulted from the release of our restricted cash balances used as collateral on our letters of credit.

Cash Used for Investing Activities

Gross capital spending during the nine months ended September 30, 2014 was as follows (in millions):


Maintenance Capital Expenditures ⁽¹⁾:
Owned, leased and consolidated joint venture hotels	$	35
Corporate and information technology		98

Subtotal		133

VOI and Residential Capital Expenditures:
Net capital expenditures for inventory ⁽²⁾		(10	)
Development Capital		125

Total Capital Expenditures	$	248

(1)	Maintenance capital expenditures include renovations, asset replacements and improvements that extend the useful life of the asset.

(2)	Represents gross inventory capital expenditures of $38 million less cost of sales, excluding residential, of $48 million.

Gross capital spending during the nine months ended September 30, 2014 included approximately $133 million of maintenance capital and $125 million of development capital. Investment spending on gross VOI and residential inventory was $38 million, primarily at the Westin St. John in the U.S. Virgin Islands, the Westin Desert Willow in Palm Desert, California, the Westin Ka’anapali Ocean Resort in Maui, Hawaii, and the Sheraton Vistana Resort in Orlando, Florida. Our capital expenditure program includes both offensive and defensive capital. Defensive spending is related to maintenance and renovations that we believe are necessary to remain competitive in the markets in which we operate. Other than capital to address fire and life safety issues, we consider defensive capital to be discretionary, although reductions to this capital program could result in decreases to our cash flow from operations, as hotels in certain markets could become less desirable. Offensive capital expenditures, which primarily relate to new projects that we expect will generate a return, are also considered discretionary. We currently anticipate that our defensive capital expenditures for the full year 2014 (excluding vacation ownership and residential inventory) will be approximately $200 million for maintenance, renovations, and technology capital. In addition, for the full year 2014, we currently expect to spend approximately $200 million for investment projects, various joint ventures and other investments.

In order to secure management or franchise agreements, we have made loans to third-party owners, made non-controlling investments in joint ventures and provided certain guarantees and indemnifications. See Note 17 of the consolidated financial statements for our discussion regarding the amount of loans we have outstanding with owners, unfunded loan commitments, equity and other potential contributions, surety bonds outstanding, performance guarantees and indemnifications we are obligated under, and investments in hotels and joint ventures.

We intend to finance the acquisition of additional hotel properties (including equity investments), hotel renovations, VOI and residential construction, capital improvements, technology spend and other core and ancillary business acquisitions and investments and provide for general corporate purposes (including dividend payments and share repurchases) from cash on hand, net proceeds from asset dispositions, and cash generated from operations.

We periodically review our business to identify properties or other assets that we believe either are non-core (including hotels where the return on invested capital is not adequate), no longer complement our business, are in markets which may not benefit us as much as other markets during an economic recovery or could be sold at significant premiums. We are focused on enhancing real estate returns and monetizing investments.

Since 2006 and through September 30, 2014, we have sold 81 hotels realizing cash proceeds of approximately $6.5 billion in numerous transactions, including net cash proceeds of approximately $223 million from the sale of two hotels during the nine months ended September 30, 2014 (see Note 4). To date, where we have sold hotels, we typically have not provided significant seller financing or other financial assistance to buyers.

There can be no assurance that we will be able to complete future dispositions on commercially reasonable terms or at all.

Cash Used for Financing Activities

In 2014, we announced our intention to pay regular quarterly dividends and to return approximately $500 million in the form of a special dividend in connection with cash realized from the completion of The St. Regis Bal Harbour residential project and sale of the hotel. Accordingly, during the nine months ended September 30, 2014, we paid three regular quarterly dividends totaling $1.05 per share and special dividends totaling $1.95 per share. We also expect to pay the regular quarterly dividend of $0.35 per share and the additional special dividend of $0.65 per share for the fourth quarter in 2014. The total dividends paid in the nine months ended September 30, 2014 were approximately $560 million (see Note 13).

In the third quarter of 2014, our Board of Directors authorized a $1.1 billion increase to the share repurchase program. During the nine months ended September 30, 2014, we repurchased 12.5 million common shares at a weighted average price of $81.90 for a total cost of approximately $1,027 million. As of September 30, 2014, $688 million remained available under the share repurchase authorization approved by our Board of Directors (see Note 13).

The following is a summary of our debt portfolio excluding securitized vacation ownership debt and capital leases as of September 30, 2014:


	Amount Outstanding at September 30, 2014 ^(a)			Weighted Average Interest Rate at September 30, 2014			Weighted Average Remaining Term
	(Dollars in millions)						(In years)
Floating Rate Debt
Revolving Credit	$	6			11.91	%		5.4
Commercial paper		106			0.30	%		5.4
Mortgages and Other		37			4.15	%		2.2
Interest Rate Swaps		250			5.20	%		4.2

Total/Average	$	399			3.90	%		4.4


Fixed Rate Debt
Senior Notes	$	1,859			5.30	%		8.2
Mortgages and Other		3			0.89	%		11.2
Interest Rate Swaps		(250	)		6.91	%		4.2

Total/Average	$	1,612			5.04	%		8.8


Total Debt
Total Debt and Weighted Average Terms	$	2,011			4.81	%		7.9

(a)	Excludes approximately $212 million of our share of unconsolidated joint venture debt, $155 million of capital lease obligations, and securitized vacation ownership debt of $272 million, all of which is non-recourse.

In the third quarter of 2014, we established a Commercial Paper Program (Commercial Paper), which gives us the ability to issue up to $1.75 billion of short-term unsecured notes. Our Commercial Paper program does not have purchase commitments from buyers for our commercial paper; therefore, our ability to issue commercial paper is subject to market demand. We reserve unused capacity under our $1.75 billion Revolving Credit Facility (the Facility) to repay outstanding Commercial Paper borrowings in the event that the commercial paper market is not available to us for any reason when outstanding borrowings mature. We do not expect fluctuations in the demand for commercial paper to affect our liquidity, given our borrowing capacity under the Facility.

In the third quarter of 2014, we also completed a public offering of $350 million in aggregate principal amount of Senior Notes due 2025 (the 2025 Notes) and $300 million in aggregate principal amount of Senior Notes due 2034 (the 2034 Notes). The 2025 Notes bear interest at a fixed rate of 3.75% per annum and mature on March 15, 2025. The 2034 Notes bear interest at a fixed rate of 4.5% per annum and mature on October 1, 2034. We will pay interest on the 2025 Notes on March 15 and September 15 each year until maturity, beginning on March 15, 2015. We will pay interest on the 2034 Notes on April 1 and October 1 each year until maturity, beginning on April 1, 2015. We intend to use the net proceeds for general corporate purposes, which may include the repayment of commercial paper, repurchases of common stock or the payment of previously announced regular and special dividends to our stockholders.

In the third quarter of 2014, we entered into the Fourth Amendment of the Facility. The amendment extended the maturity of the Facility by two years to February 2020. We paid fees of approximately $2 million in connection with this amendment and capitalized these costs as deferred financing costs. Additionally, in connection with this amendment, we recorded a net charge of approximately $1 million in the loss on early extinguishment of debt, net line item to write-off certain existing deferred financings costs.

We have evaluated the commitments of each of the lenders in the Facility, and we have reviewed our debt covenants. We do not anticipate any issues regarding the availability of funds under the Facility. The cost of borrowing of the Facility is determined by a combination of our leverage ratios and credit ratings. Changes in our credit ratings may result in changes in our borrowing costs. Downgrades in our credit ratings would likely increase the relative costs of borrowing and reduce our ability to issue-long-term debt, whereas upgrades would likely reduce costs and increase our ability to issue long-term debt. A credit rating is not a recommendation to buy, sell or hold securities, is subject to revision or withdrawal at any time by the assigning rating organization and should be evaluated independently of any other rating.

Our Facility is used to fund general corporate cash needs. As of September 30, 2014, we have availability of approximately $1.64 billion under the Facility. The Facility allows for multi-currency borrowing and, when drawn upon, has an applicable margin, inclusive of the commitment fee, of 1.20%, plus the applicable currency LIBOR rate. Our ability to borrow under the Facility is subject to compliance with the terms and conditions under the Facility, including certain leverage covenants.

During the nine months ended September 30, 2014, we entered into a master lease arrangement to lease the entire buildings and land where we are headquartered in Stamford, Connecticut. The term of this lease is 20 years, with two five-year extensions at our option. We have fixed annual payments of approximately $10 million, which escalate at 3% per year. As a result of this transaction, we recorded a capital lease obligation of approximately $153 million with an interest rate of 5.82% (see Note 7).

Our debt and net debt for our portfolio and non-recourse securitized debt period-over-period is as follows:


	September 30, 2014			December 31, 2013
	(in millions)
Gross Unsecuritized Debt	$	2,166		$	1,267
less: cash (including restricted cash of $52 million in 2014 and $123 million in 2013)		(506	)		(739	)

Net Unsecuritized Debt	$	1,660		$	528


Gross Securitized Debt (non-recourse)	$	272		$	355
less: cash restricted for securitized debt repayments (not included above)		(12	)		(14	)

Net Securitized Debt	$	260		$	341

Total Net Debt	$	1,920		$	869

Based upon the current level of operations, management believes that our cash flow from operations, together with our significant cash balances, available borrowings under the Facility, and our capacity for additional borrowings will be adequate to meet anticipated requirements for share repurchases, dividend payments, working capital, capital expenditures, marketing and advertising program expenditures, other discretionary investments, interest and scheduled principal payments for the foreseeable future. However, there can be no assurance that we will be able to refinance our indebtedness as it becomes due and, if refinanced, on favorable terms. Approximately $477 million, included in our cash balance above, resides in foreign countries and could be subject to income taxes if we repatriated these amounts. In addition, there can be no assurance that in our continuing business we will generate cash flow at or above historical levels, that currently anticipated results will be achieved, or that we will be able to complete dispositions on commercially reasonable terms or at all.

If we are unable to generate sufficient cash flow from operations in the future to service our debt, we may be required to sell additional assets at lower than preferred amounts, reduce capital expenditures, refinance all or a portion of our existing debt or obtain additional financing at unfavorable rates. Our ability to make scheduled principal payments, to pay interest on, or to refinance our indebtedness depends on our future performance and financial results, which, to a certain extent, are subject to general conditions in or affecting the hotel and vacation ownership industries and to general economic, political, financial, competitive, legislative and regulatory factors beyond our control.

We had the following commercial commitments outstanding as of September 30, 2014 (in millions):


			Amount of Commitment Expiration Per Period
	Total		Less than 1 Year		1-3 Years		3-5 Years		After 5 Years
Standby letters of credit	$	81	$	77	$	—	$	—	$	4

CRITICAL ACCOUNTING POLICIES

Our preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. Those estimates and assumptions that we believe are critical and require the use of complex judgment in their application are included in our 2013 Form 10-K. Since the date of our 2013 Form 10-K, there have been no material changes to our critical accounting policies or the methodologies or assumptions we apply under them, with the exception of our accounting policy related to discontinued operations.

On July 1, 2014, on a prospective basis we adopted Accounting Standards Update No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” In accordance with this topic, we will record the operations of properties sold or held for sale prior to the sale date in discontinued operations only if the disposal represents a strategic shift that will have a major effect on our operations and financial results.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk.

We enter into forward contracts to manage foreign exchange risk in forecasted transactions based in foreign currencies and to manage foreign currency exchange risk on intercompany loans that are not deemed permanently invested. We also enter into interest rate swap agreements to hedge interest rate risk (see Note 10).

Item 4.

Controls and Procedures.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive and principal financial officers, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the Exchange Act)). Based upon the foregoing evaluation, our principal executive and principal financial officers concluded that our disclosure controls and procedures were effective and operating to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings.

We are involved in various claims and lawsuits arising in the ordinary course of business, none of which, in the opinion of management, is expected to have a material adverse effect on our consolidated results of operations, financial position or cash flow.

Item 1A.

Risk Factors.

The discussion of our business and operations should be read together with the risk factors contained in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed with the Securities and Exchange Commission, which describe various risks and uncertainties to which we are, or may become, subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. At September 30, 2014, there have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2013.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities


	Total Number of Shares Purchased		Weighted Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Program (in millions)
July 1 to July 31, 2014		495,856	$	81.54		495,856	$	404
August 1 to August 31, 2014 ^(a)		5,980,516	$	81.81		5,980,516	$	1,015
September 1 to September 30, 2014		3,901,132	$	83.88		3,901,132	$	688

Total		10,377,504	$	82.57		10,377,504

(a)	In August 2014, our Board of Directors authorized a $1.1 billion increase to the share repurchase program.

Item 6.

Exhibits.



4.1		Supplemental Indenture No. 2, dated as of September 15, 2014, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 15, 2014).

4.2		Form of 3.750% Senior Notes due 2025 (included in Exhibit 4.1)

4.3		Form of 4.500% Senior Notes due 2034 (included in Exhibit 4.1)

10.1		Employment Agreement, dated August 18, 2014, between the Company and Thomas B. Mangas (including the Non-Compete, Non-Solicitation, Confidentiality and Intellectual Property Agreement between the Company and Thomas B. Mangas) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 27, 2014).*
10.2		Severance Agreement, dated August 18, 2014, between the Company and Thomas B. Mangas (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on August 27, 2014).*
10.3		Form of Restricted Stock Award Retention Agreement Pursuant to the Starwood Hotels & Resorts Worldwide, Inc. 2013 Long-Term Incentive Compensation Plan*+
10.4		Third Amendment to Credit Agreement, dated as of July 29, 2014, by and among the Company, certain of its subsidiaries, as borrowers, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and other persons party thereto.+
10.5		Fourth Amendment to Credit Agreement, dated as of September 30, 2014, by and among the Company, certain of its subsidiaries, as borrowers, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and other persons party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 2, 2014).
31.1		Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 – Chief Executive Officer+
31.2		Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 – Chief Financial Officer+
32.1		Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code – Chief Executive Officer+
32.2		Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code – Chief Financial Officer+
101		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Condensed Statements of Cash Flows, and (v) notes to the consolidated financial statements.

+	Filed herewith.

*	Indicates management contract or compensatory plan or arrangement

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

By:		/s/ Frits van Paasschen

		Frits van Paasschen Chief Executive Officer and Director

By:		/s/ Alan M. Schnaid

		Alan M. Schnaid Senior Vice President, Corporate Controller and Principal Accounting Officer

Date: October 29, 2014

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