Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________ 
FORM 10-Q
_______________________________________ 
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2013March 31, 2014
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File No. 1-13881
_______________________________________ 
MARRIOTT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
 _______________________________________
Delaware 52-2055918
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer
Identification No.)
  
10400 Fernwood Road, Bethesda, Maryland
(Address of principal executive offices)
 
20817
(Zip Code)
(301) 380-3000
(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  ý    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  ý    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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ý  Accelerated filer ¨
    
Non-accelerated filer 
¨ (Do not check if a smaller reporting company)
  Smaller Reporting Company ¨
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 299,538,446292,765,045 shares of Class A Common Stock, par value $0.01 per share, outstanding at OctoberApril 18, 20132014.





Table of Contents



MARRIOTT INTERNATIONAL, INC.
FORM 10-Q TABLE OF CONTENTS
 
  Page No.
   
Part I.
Financial Information (Unaudited):
 
   
Item 1.
Financial Statements
 
   
 
Condensed Consolidated Statements of Income - 92 Days Three Months Ended March 31, 2014 and 276 Days Ended September 30,March 31, 2013 and 84 Days and 252 Days Ended September 7, 2012
23
   
 
Condensed Consolidated Statements of Comprehensive Income - 92 DaysThree Months Ended March 31, 2014 and 276 Days Ended September 30,March 31, 2013 and 84 Days and 252 Days Ended September 7, 2012
34
   
 
Condensed Consolidated Balance Sheets - as of September 30, 2013,March 31, 2014 and December 28, 201231, 2013
45
   
 
Condensed Consolidated Statements of Cash Flows - 276 DaysThree Months Ended September 30,March 31, 2014 and March 31, 2013 and 252 Days Ended September 7, 2012
56
   
 
Notes to Condensed Consolidated Financial Statements
67
   
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
2221
   
 
Forward-Looking Statements
2221
   
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
5138
   
Item 4.
Controls and Procedures
5138
   
Part II.
Other Information:
 
   
Item 1.
Legal Proceedings
5239
   
Item 1A.
Risk Factors
5239
   
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
58
Item 5.
Other Information
5845
   
Item 6.
Exhibits
5946
   
 
Signatures
6047



1
Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

MARRIOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
($ in millions, except per share amounts)
(Unaudited)
 
Three Months Ended
92 Days Ended
September 30, 2013		 84 Days Ended
September 7, 2012		 276 Days Ended
September 30, 2013		 252 Days Ended
September 7, 2012		March 31, 2014
March 31, 2013
REVENUES          
Base management fees$150
 $134
 $469
 $399
$155
 $153
Franchise fees175
 149
 503
 420
163
 151
Incentive management fees53
 36
 183
 142
71
 66
Owned, leased, corporate housing, and other revenue220
 200
 690
 681
Owned, leased, and other revenue234
 224
Cost reimbursements2,562
 2,210
 7,720
 6,415
2,670
 2,548
3,160
 2,729
 9,565
 8,057
3,293
 3,142
OPERATING COSTS AND EXPENSES          
Owned, leased, and corporate housing-direct186
 174
 569
 572
Owned, leased, and other-direct185
 179
Reimbursed costs2,562
 2,210
 7,720
 6,415
2,670
 2,548
Depreciation and amortization36
 25
General, administrative, and other167
 132
 526
 439
148
 164
2,915
 2,516
 8,815
 7,426
3,039
 2,916
OPERATING INCOME245
 213
 750
 631
254
 226
Gains and other income1
 36
 14
 43
—
 3
Interest expense(28) (29) (88) (96)(30) (31)
Interest income5
 3
 13
 10
5
 3
Equity in losses—
 (1) (2) (10)
Equity in earnings2
 —
INCOME BEFORE INCOME TAXES223
 222
 687
 578
231
 201
Provision for income taxes(63) (79) (212) (188)(59) (65)
NET INCOME$160
 $143
 $475
 $390
$172
 $136
EARNINGS PER SHARE-Basic          
Earnings per share$0.53
 $0.45
 $1.55
 $1.19
$0.58
 $0.44
EARNINGS PER SHARE-Diluted          
Earnings per share$0.52
 $0.44
 $1.51
 $1.16
$0.57
 $0.43
CASH DIVIDENDS DECLARED PER SHARE$0.1700
 $0.1300
 $0.4700
 $0.3600
$0.1700
 $0.1300
See Notes to Condensed Consolidated Financial Statements

23
Table of Contents

MARRIOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in millions)
(Unaudited)

Three Months Ended
92 Days Ended
September 30, 2013		 84 Days Ended
September 7, 2012		 276 Days Ended
September 30, 2013		 252 Days Ended
September 7, 2012		March 31, 2014 March 31, 2013
Net income$160
 $143
 $475
 $390
$172
 $136
Other comprehensive income (loss):          
Foreign currency translation adjustments11
 5
 (2) (1)—
 (13)
Other derivative instrument adjustments, net of tax(6) —
 —
 1
1
 7
Unrealized gain (loss) on available-for-sale securities, net of tax—
 —
 4
 (1)
Reclassification of (gains) losses, net of tax—
 (1) (7) —
Total other comprehensive loss, net of tax5
 4
 (5) (1)
Unrealized gain on available-for-sale securities, net of tax1
 4
Reclassification of losses, net of tax1
 —
Total other comprehensive income (loss), net of tax3
 (2)
Comprehensive income$165
 $147
 $470
 $389
$175
 $134

See Notes to Condensed Consolidated Financial Statements


34
Table of Contents

MARRIOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
 
(Unaudited)  (Unaudited)  
September 30,
2013		 December 28,
2012		March 31,
2014		 December 31,
2013
ASSETS      
Current assets      
Cash and equivalents$144
 $88
$184
 $126
Accounts and notes receivable972
 1,028
Accounts and notes receivable, net1,035
 1,081
Current deferred taxes, net217
 280
235
 252
Prepaid expenses57
 57
59
 67
Other24
 22
52
 27
Assets held for sale232
 —
—
 350
1,646
 1,475
1,565
 1,903
Property and equipment1,489
 1,539
1,569
 1,543
Intangible assets      
Goodwill874
 874
874
 874
Contract acquisition costs and other1,115
 1,115
1,126
 1,131
1,989
 1,989
2,000
 2,005
Equity and cost method investments228
 216
222
 222
Notes receivable137
 180
Notes receivable, net141
 142
Deferred taxes, net671
 676
627
 647
Other320
 267
541
 332
$6,480
 $6,342
$6,665
 $6,794
LIABILITIES AND SHAREHOLDERS’ DEFICIT      
Current liabilities      
Current portion of long-term debt$52
 $407
$7
 $6
Accounts payable496
 569
616
 557
Accrued payroll and benefits733
 745
732
 817
Liability for guest loyalty programs583
 593
661
 666
Other558
 459
580
 629
2,422
 2,773
2,596
 2,675
Long-term debt3,104
 2,528
3,295
 3,147
Liability for guest loyalty programs1,450
 1,428
1,512
 1,475
Other long-term liabilities913
 898
887
 912
Shareholders’ deficit      
Class A Common Stock5
 5
5
 5
Additional paid-in-capital2,670
 2,585
2,664
 2,716
Retained earnings3,763
 3,509
3,917
 3,837
Treasury stock, at cost(7,798) (7,340)(8,170) (7,929)
Accumulated other comprehensive loss(49) (44)(41) (44)
(1,409) (1,285)(1,625) (1,415)
$6,480
 $6,342
$6,665
 $6,794

See Notes to Condensed Consolidated Financial Statements

45
Table of Contents

MARRIOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
(Unaudited)
 
Three Months Ended
276 Days Ended
September 30, 2013		 252 Days Ended
September 7, 2012		March 31, 2014 March 31, 2013
OPERATING ACTIVITIES      
Net income$475
 $390
$172
 $136
Adjustments to reconcile to cash provided by operating activities:      
Depreciation and amortization113
 100
36
 25
Share-based compensation25
 30
Income taxes67
 154
16
 33
Liability for guest loyalty programs5
 (9)30
 8
Asset impairments and write-offs19
 13
Working capital changes and other126
 160
Working capital changes(121) (154)
Other24
 40
Net cash provided by operating activities805
 808
182
 118
INVESTING ACTIVITIES      
Capital expenditures(226) (316)(61) (70)
Dispositions—
 65
292
 —
Loan advances(5) (2)(3) (3)
Loan collections and sales62
 126
Loan collections9
 20
Equity and cost method investments(16) (12)(1) (14)
Contract acquisition costs(36) (52)(6) (14)
Protea escrow deposit(192) —
Other(88) (22)4
 (7)
Net cash used in investing activities(309) (213)
Net cash provided by (used in) investing activities42
 (88)
FINANCING ACTIVITIES      
Commercial paper/credit facility, net268
 110
Issuance of long-term debt345
 590
Commercial paper/Credit Facility, net149
 722
Repayment of long-term debt(405) (368)(2) (402)
Issuance of Class A Common Stock141
 81
57
 41
Dividends paid(144) (110)(50) (41)
Purchase of treasury stock(644) (884)(320) (217)
Other(1) (11)
Net cash used in financing activities(440) (592)
Net cash (used in) provided by financing activities(166) 103
INCREASE IN CASH AND EQUIVALENTS56
 3
58
 133
CASH AND EQUIVALENTS, beginning of period88
 102
126
 88
CASH AND EQUIVALENTS, end of period$144
 $105
$184
 $221
See Notes to Condensed Consolidated Financial Statements


56
Table of Contents

MARRIOTT INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1.Basis of PresentationBASIS OF PRESENTATION
The condensed consolidated financial statements present the results of operations, financial position, and cash flows of Marriott International, Inc. (“Marriott,” and together with its subsidiaries “we,” “us,” or the “Company”). In order to make this report easier to read, we refer throughout to (i) our Condensed Consolidated Financial Statements as our “Financial Statements,” (ii) our Condensed Consolidated Statements of Income as our “Income Statements,” (iii) our Condensed Consolidated Balance Sheets as our “Balance Sheets,” (iv) our properties, brands, or markets in the United States and Canada as “North America” or “North American,” and (v) our properties, brands, or markets outside of the United States and Canada as “international.“International.” In addition, references throughout to numbered "Footnotes" refer to the numbered Notes in these Notes to Condensed Consolidated Financial Statements, unless otherwise noted.
During the 2014 first quarter, we modified the information that our President and Chief Executive Officer, who is our "chief operating decision maker" ("CODM"), reviews to be consistent with our continent structure. This structure aligns our business around geographic regions and is designed to enable us to operate more efficiently and to accelerate worldwide growth. We changed our operating segments to reflect this continent structure and have revised our prior period business segment information accordingly. See Footnote No. 11, "Business Segments."
Beginning with the 2014 first quarter, we reclassified amounts attributable to depreciation and amortization that we previously reported under the "General, administrative, and other" and "Owned, leased, and other-direct" captions of our Consolidated Statements of Income and presented these amounts in a separate "Depreciation and amortization" caption. We continue to report depreciation amounts that third party owners reimburse to us under "Reimbursed costs" in our Consolidated Statements of Income. In addition, in our Consolidated Statements of Cash Flows, we reclassified depreciation that third party owners reimburse to us from the "Depreciation and amortization" caption to the "Other" caption. We have reclassified the prior period amounts presented to conform to our 2014 first quarter presentation of these items.
These condensed consolidated Financial Statements have not been audited. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with U.S. generally accepted accounting principles (“GAAP”). Although we believe our disclosures are adequate to make the information presented not misleading, you should read theThe financial statements in this report should be read in conjunction with the consolidated financial statements and notes to those financial statementsthereto in our Annual Report on Form 10-K for the fiscal year ended December 28, 201231, 2013 (“20122013 Form 10-K”). Certain terms not otherwise defined in this Form 10-Q have the meanings specified in our 20122013 Form 10-K.
Preparation of financial statements that conform with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods, and the disclosures of contingent liabilities. Accordingly, ultimate results could differ from those estimates.
Beginning with ourIn 2013, fiscal year, we changed our financial reporting cycle to a calendar year-end reporting cycle and an end-of-month quarterly reporting cycle. Accordingly, our 2013 fiscal year began on December 29, 2012 (the day after the end of the 2012 fiscal year) and will endended on December 31, 2013, and our 2013 quarters include the three month periods ended March 31, June 30, September 30, and December 31, except that the period ended March 31, 2013 also included December 29, 2012 through December 31, 2012. Our future fiscal years will begin on January 1 and end on December 31. Historically, our fiscal year was a 52-53 week fiscal year that ended on the Friday nearest to December 31, and our quarterly reporting cycle included twelve week periods for the first, second, and third quarters and a sixteen week period (or in some cases a seventeen week period) for the fourth quarter. We have not restated and do not plan to restate historical results.
The table below shows the reporting periods as we refer to them in this report, their date ranges, and the number of days in each:
Reporting PeriodDate RangeNumber of Days
2013 third quarterJuly 1, 2013 - September 30, 201392
2012 third quarterJune 16, 2012 - September 7, 201284
2013 first three quartersDecember 29, 2012 - September 30, 2013276
2012 first three quartersDecember 31, 2011 - September 7, 2012252
2013 fiscal yearDecember 29, 2012 - December 31, 2013368
2012 fiscal yearDecember 31, 2011 - December 28, 2012364

each. As shown below, our 2014 first quarter had threefewer days of activity than our 2013 first quarter. Our 2014 calendar year will also have three fewer days of activity than our 2013 fiscal year.

67
Table of Contents

As a result of the change in our calendar, our 2013 third quarter had 8 more days of activity than our 2012 third quarter, and our 2013 first three quarters had 24 more days of activity than our 2012 first three quarters. Compared to the corresponding periods in 2012, our 2013 full fiscal year will have 4 more days and our 2013 fourth quarter will have 20 fewer days.
Reporting PeriodDate RangeNumber of Days
2014 first quarterJanuary 1, 2014 - March 31, 201490
2013 first quarterDecember 29, 2012 - March 31, 201393
2014January 1, 2014 - December 31, 2014365
2013December 29, 2012 - December 31, 2013368
In our opinion, ourOur Financial Statements reflect all normal and recurring adjustments necessary to present fairly our financial position as of September 30, 2013March 31, 2014, and December 28, 201231, 2013, the results of our operations for the 92 days and 276 daysthree months ended September 30, 2013March 31, 2014, and 84 days and 252 days ended September 7, 2012March 31, 2013, and cash flows for the 276 daysthree months ended September 30, 2013March 31, 2014, and 252 days ended September 7, 2012March 31, 2013. Interim results may not be indicative of fiscal year performance because of seasonal and short-term variations. We have eliminated all material intercompany transactions and balances between entities consolidated in these Financial Statements.
2.
New Accounting Standards
Accounting Standards Update No. 2013-02 - “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“ASU No. 2013-02”)
ASU No. 2013-02, which we adopted in our 2013 first quarter, amends existing guidance by requiring disclosure of the changes in the components of accumulated other comprehensive income for the current period and additional information about items reclassified out of accumulated other comprehensive income. Our adoption of this update required additional disclosures but did not have a material impact on our Financial Statements. Please see Footnote No. 10, "Comprehensive Income and Capital Structure" for those additional disclosures.
Future Adoption of Accounting Standards
Accounting Standards Update No. 2013-11 - “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (“ASU No. 2013-11”)
ASU No. 2013-11 provides financial statement presentation guidance on whether an unrecognized tax benefit must be presented as either a reduction to a deferred tax asset or separately as a liability. ASU No. 2013-11 will be effective for interim or annual periods beginning after December 15, 2013, which for us will be our 2014 first quarter. We do not believe the adoption of this updateexpect that accounting standard updates issued to date and that are effective after March 31, 2014 will have a material impacteffect on our financial statements.Financial Statements.

3.2.Income TaxesINCOME TAXES
Our effective tax rate decreased from 32.3% to 25.5% for the three months ended March 31, 2014 and included a $21 million favorable resolution of an issue with U.S. federal taxing authorities related to guest marketing. This benefit was partially offset by a $3 million benefit we recognized in the 2013 first quarter, which will not recur in 2014, due to retroactive provisions of the American Taxpayer Relief Act of 2012 and higher income before income taxes in the United States which were taxed at a higher rate.
For the 2014 first quarter, our unrecognized tax benefits balance was $14 million, decreasing $20 million from year-end 2013. The unrecognized tax benefits balance included $12 million of tax positions that, if recognized, would impact our effective tax rate.
We file income tax returns, including returns for our subsidiaries, in various jurisdictions around the world. The Internal Revenue Service ("IRS") has examined our federal income tax returns, and we have settled all issues for tax years through 2009. We participatedparticipate in the IRS Compliance Assurance Program, ("CAP"), which accelerates IRS examination of key transactions with the goal of resolving any issues before the taxpayer files its return, forreturn. As a result, the audits of our open tax years 2010 through 2013 tax years. For the 2010 and 2011 tax years, all but one issue, which we2012 are appealing, have been resolved,complete, including all matters that could affect the Company's cash tax benefits related to our spin-off in 2011 of our timeshare operations and timeshare development business. The audit forbusiness, while the 20122013 and 2014 tax year is substantially complete, and we expect that, with the exception of one issue which we will appeal, all issues will be resolved. The audit for the 2013 tax year isaudits are currently ongoing. Various foreign, state, and local income tax returns are also under examination by the applicable taxing authorities.
AtWe paid cash for income taxes, net of refunds of $25 million in the end of the 2013third2014 first quarter our unrecognized tax benefits balance was $29and $15 million, unchanged from the end of in the 2013 second quarter and year-end 2012. The unrecognized tax benefits balance included $13 million of tax positions that, if recognized, would impact our effective tax rate.
As a large taxpayer, the IRS and other taxing authorities continually audit us. We anticipate resolving an international issue which arose in 2011 related to financing activity during the next 12 months for which we have an unrecognized tax benefit of $5 million.

7
Table of Contents

On January 2, 2013, the American Taxpayer Relief Act of 2012 (the "Act") was signed into law. Some of the provisions contained in the Act were retroactive, and we recognized a$3 million benefit in the 2013 first three quarters related to the Act.quarter.

4.3.Share-Based CompensationSHARE-BASED COMPENSATION
Under our Stock and Cash Incentive Plan (the “Stock Plan”), we award: (1) stock options (our "Stock Option Program") to purchase our Class A Common Stock (our “common stock”); (2) stock appreciation rights (“SARs”) for our common stock (our “SAR Program”); (3) restricted stock units (“RSUs”) of our common stock; and (4) deferred stock units. We grant awards at exercise prices or strike prices that equal the market price of our common stock on the date of grant.

8
Table of Contents

We recorded share-based compensation expense for award grants of $2225 million for the 20132014 thirdfirst quarter and $1930 million for the 20122013 thirdfirst quarter, $69 million for the 2013 first three quarters, and $57 million for the 2012 first three quarters.quarter. Deferred compensation costs related to unvested awards totaled $137195 million at September 30, 2013March 31, 2014 and $122108 million at December 28, 201231, 2013.
RSUs
We granted 2.51.9 million RSUs during the 20132014 first three quartersquarter to certain officers and key employees, and those units vest generally over four years in equal annual installments commencing one year after the grant date. We also granted 0.2 million service and performanceperformance-based RSUs ("S&P RSUs"PSUs") during the 20132014 first three quartersquarter to certain named executive officers. In addition to generally being subject to pro-rata annual vesting conditioned on continued service consistent with the standard form of RSU, these S&P RSUs are alsoofficers and their direct reports, subject to the satisfaction of certain performance conditions over, or at the end of, a performance condition, expressed as an EBITDA goal.three-year vesting period. RSUs, including S&P RSUs,PSUs, granted in the 20132014 first three quartersquarter had a weighted average grant-date fair value of $3751.
SARs and Stock Options
We granted 0.70.3 million SARs and 0.1 million stock options to officers and key employees and directors during the 20132014 first three quartersquarter. These SARs and options generally expire ten years after the grant date and both vest and may be exercised in cumulative installments of one quarter at the end of each of the first four years following the grant date. The weighted average grant-date fair value of SARs granted in the 20132014 first three quartersquarter was $1317 and the weighted average exercise price was $3953. The weighted average grant-date fair value of stock options granted in the 20132014 first three quartersquarter was $1317 and the weighted average exercise price was $3953.
On the grant date, we use a binomial lattice-based valuation model to estimate the fair value of each SAR and option granted. This valuation model uses a range of possible stock price outcomes over the term of the SAR and option, discounted back to a present value using a risk-free rate. Because of the limitations with closed-form valuation models, such as the Black-Scholes model, we have determined that this more flexible binomial model provides a better estimate of the fair value of our options and SARs because it takes into account employee and non-employee director exercise behavior based on changes in the price of our stock and also allows us to use other dynamic assumptions.
We used the following assumptions to determine the fair value of the SARs and stock options we granted during the 20132014 first three quartersquarter:
Expected volatility30 - 31%
%
Dividend yield1.171.14%
Risk-free rate1.82.3 - 1.9%2.5%
Expected term (in years)8 - 107
In making these assumptions, we base expected volatility on the historical movement of Marriott's stock price. We base risk-free rates on the corresponding U.S. Treasury spot rates for the expected duration at the date of grant,

8
Table of Contents

which we convert to a continuously compounded rate. The dividend yield assumption takes into consideration both historical levels and expectations of future payout. The weighted average expected terms for SARs and options are an output of our valuation model which utilizes historical data in estimating the period of time that the SARs and options are expected to remain unexercised. We calculate the expected terms for SARs and options for separate groups of retirement eligible and non-retirement eligible employees. Our valuation model also uses historical data to estimate exercise behaviors, which includes determining the likelihood that employees will exercise their SARs and options before expiration at a certain multiple of stock price to exercise price. In recent years, non-employee directors have generally exercised grants in their last year of exercisability.
Other Information
As of the end of the 20132014 thirdfirst quarter, we had reserved 3429 million shares under the Stock Plan, including 139 million shares under the Stock Option Program and the SAR Program.

9
Table of Contents

5.4.Fair Value of Financial InstrumentsFAIR VALUE OF FINANCIAL INSTRUMENTS
We believe that the fair values of our current assets and current liabilities approximate their reported carrying amounts. We show the carrying values and the fair values of noncurrent financial assets and liabilities that qualify as financial instruments, determined under current guidance for disclosures on the fair value of financial instruments, in the following table:
At September 30, 2013 At December 28, 2012At March 31, 2014 At December 31, 2013
($ in millions)
Carrying
Amount
 Fair Value 
Carrying
Amount
 Fair Value
Carrying
Amount
 Fair Value 
Carrying
Amount
 Fair Value
Cost method investments$19
 $24
 $21
 $23
Senior, mezzanine, and other loans137
 138
 180
 172
$141
 $142
 $142
 $145
Marketable securities and other debt securities106
 106
 56
 56
111
 111
 111
 111
Total long-term financial assets$252
 $253
 $253
 $256
              
Total long-term financial assets$262
 $268
 $257
 $251
Senior Notes$(2,184) $(2,290) $(1,833) $(2,008)$(2,186) $(2,310) $(2,185) $(2,302)
Commercial paper(790) (790) (501) (501)(984) (984) (834) (834)
Other long-term debt(125) (131) (130) (139)(121) (124) (123) (124)
Other long-term liabilities(54) (54) (69) (69)
       
Total long-term financial liabilities$(3,153) $(3,265) $(2,533) $(2,717)$(3,291) $(3,418) $(3,142) $(3,260)
We estimate the fair value of our cost method investments by applying a cap rate to stabilized earnings (a market approach using Level 3 inputs). During the 2012 third quarter, we determined that a cost method investment was other-than-temporarily impaired and, accordingly, we recorded the investment at its fair value as of the end of the 2012 third quarter ($12 million) and reflected a $7 million loss in the "Gains and other income" caption of our Income Statement. We estimated the fair value of the investment using cash flow projections discounted at risk premiums commensurate with market conditions. We used Level 3 inputs for these discounted cash flow analyses and our assumptions included revenue forecasts, cash flow projections, and timing of the sale of each hotel in the underlying investment.
We estimate the fair value of our senior, mezzanine, and other loans, including the current portion, by discounting cash flows using risk-adjusted rates, both of which are Level 3 inputs.
We are required to carry our marketable securities at fair value. Our marketable securities include debt securities of the U.S. Government, its sponsored agencies and other U.S. corporations invested for our self-insurance programs, as well as shares of a publicly traded company, which we value using directly observable Level 1 inputs. The carrying value of these marketable securities at the end of our 20132014 thirdfirst quarter was $38111 million. In the 2013 second quarter, we acquiredWe also have a $65 million mandatorily redeemable preferred equity ownership interest in an entity that owns three hotels that we manage. We account for this investment as a debt security (with an amortized cost of $6871 million at the end of the 2013 third2014 first quarter, including accrued interest income), and we

9
Table of Contents

included it in the "Marketable securities and other debt securities" caption in the preceding table. We estimated the $6871 million fair value of this debt security by discounting cash flows using risk-adjusted rates, both of which are Level 3 inputs. The debt security matures in 2015 subject to annual extensions through 2018. We do not intend to sell the debt security and it is not more likely than not that we will be required to sell the investment before recovery of the amortized cost basis, which may be maturity.
In the 2013 second quarter, we received $22 million in net cash proceeds for the sale of a portion of our shares of a publicly traded company (with an amortized cost of $14 million at the date of sale) and recognized an $8 million gain in the "Gains and other income" caption of our Income Statements. This gain included recognition of unrealized gains that we recorded in other comprehensive income as of the end of the 2013 first quarter. See Footnote No. 10, "Comprehensive Income and Capital Structure" for additional information on the reclassification of these unrealized gains from accumulated other comprehensive income.
We estimate the fair value of our other long-term debt, including the current portion and excluding leases, using expected future payments discounted at risk-adjusted rates, both of which are Level 3 inputs. We determine the fair value of our senior notes using quoted market prices, which are directly observable Level 1 inputs. As noted in Footnote No. 9,8, "Long-term Debt," even though our commercial paper borrowings generally have short-term maturities of 30 days or less, we classify outstanding commercial paper borrowings as long-term based on our ability and intent to refinance them on a long-term basis. As we are a frequent issuer of commercial paper, we use pricing from recent transactions as Level 2 inputs in estimating fair value. At the end of the 20132014 thirdfirst quarter and year-end 20122013, we determined that the carrying value of our commercial paper approximated its fair value due to the short maturity. Our other long-term liabilitieslargely consist of guarantees. As noted in Footnote No. 11, "Contingencies," we measure our liability for guarantees at fair value on a nonrecurring basis, that is when we issue or modify a guarantee, using Level 3 internally developed inputs. At the end of the 2013third quarter and year-end 2012, we determined that the carrying values of ourguarantee liabilities approximated their fair values based on Level 3 inputs.
See the “Fair Value Measurements” caption of Footnote No. 1, “Summary of Significant Accounting Policies” of our 20122013 Form 10-K for more information on the input levels we use in determining fair value.


10
Table of Contents

6.5.Earnings Per ShareEARNINGS PER SHARE
The table below illustrates the reconciliation of the earnings and number of shares used in our calculations of basic and diluted earnings per share:
 
Three Months Ended
92 Days Ended
September 30, 2013		 84 Days Ended
September 7, 2012		 276 Days Ended
September 30, 2013		 252 Days Ended
September 7, 2012		March 31, 2014 March 31, 2013
(in millions, except per share amounts)          
Computation of Basic Earnings Per Share          
Net income$160
 $143
 $475
 $390
$172
 $136
Weighted average shares outstanding301.9
 319.4
 306.8
 327.0
296.1
 311.8
Basic earnings per share$0.53
 $0.45
 $1.55
 $1.19
$0.58
 $0.44
Computation of Diluted Earnings Per Share          
Net income$160
 $143
 $475
 $390
$172
 $136
Weighted average shares outstanding301.9
 319.4
 306.8
 327.0
296.1
 311.8
Effect of dilutive securities          
Employee stock option and SARs plans3.8
 6.0
 4.1
 6.5
3.4
 4.3
Deferred stock incentive plans0.8
 0.8
 0.8
 0.9
0.8
 0.8
Restricted stock units3.0
 3.1
 3.1
 3.1
3.0
 3.1
Shares for diluted earnings per share309.5
 329.3
 314.8
 337.5
303.3
 320.0
Diluted earnings per share$0.52
 $0.44
 $1.51
 $1.16
$0.57
 $0.43
We compute the effect of dilutive securities using the treasury stock method and average market prices during the period. We determine dilution based on earnings.

10
Table of Contents

Pursuant tohave excluded the applicable accounting guidance for calculating earnings per share, we have not included the following antidilutive stock options and SARs in our calculation of diluted earnings per share because thetheir exercise prices were greater than the average market prices for the applicable periods:
(a)
for the 20132014 thirdfirst quarter, 0.40.2 million options and SARs; and
(b)
for the 20122013 thirdfirst quarter, 1.0 million options and SARs;
(c)
for the 2013 first three quarters, 0.4 million options and SARs; and
(d)
for the 2012 first three quarters, 1.0 million options and SARs.

7.6.Property and EquipmentPROPERTY AND EQUIPMENT
The following table shows the composition of our property and equipment balances at the end of the 20132014 thirdfirst quarter and year-end 20122013:
 
At Period EndAt Period End
($ in millions)September 30,
2013		 December 28,
2012		March 31,
2014		 December 31,
2013
Land$550
 $590
$536
 $535
Buildings and leasehold improvements731
 703
777
 786
Furniture and equipment853
 854
777
 789
Construction in progress327
 383
374
 338
2,461
 2,530
2,464
 2,448
Accumulated depreciation(972) (991)(895) (905)
$1,489
 $1,539
$1,569
 $1,543

The following table shows the composition of these property and equipment balances that we recorded as capital leases:

11
Table of Contents

At Period EndAt Period End
($ in millions)September 30,
2013		 December 28,
2012		March 31,
2014		 December 31,
2013
Land$31
 $30
$8
 $8
Buildings and leasehold improvements150
 143
57
 68
Furniture and equipment42
 38
22
 37
Construction in progress2
 4
1
 1
225
 215
88
 114
Accumulated depreciation(89) (82)(58) (83)
$136
 $133
$30
 $31

See Footnote No. 12, "Acquisitions and Dispositions" for information on a $10 million impairment charge we recorded on three EDITION hotels in the "Depreciation and amortization" caption of our Income Statement.
8.7.Notes ReceivableNOTES RECEIVABLE
The following table shows the composition of our notes receivable balances (net of reserves and unamortized discounts) at the end of the 20132014 thirdfirst quarter and year-end 20122013:
At Period EndAt Period End
($ in millions)September 30,
2013		 December 28,
2012		March 31,
2014		 December 31,
2013
Senior, mezzanine, and other loans$189
 $242
$173
 $178
Less current portion(52) (62)(32) (36)
$137
 $180
$141
 $142


11
Table of Contents

The following table shows the expected future principal payments (net of reserves and unamortized discounts) as well as interest rates for our notes receivable as of the end of the 20132014 thirdfirst quarter:
 
Notes Receivable Principal Payments (net of reserves and unamortized discounts) and Interest Rates ($ in millions) Amount Amount
2013 $23
2014 38
 $32
2015 75
 82
2016 4
 3
2017 2
 3
2018 4
Thereafter 47
 49
Balance at September 30, 2013 $189
Weighted average interest rate at September 30, 2013 4.7%
Range of stated interest rates at September 30, 2013 0 to 8.0%
Balance at March 31, 2014 $173
Weighted average interest rate at March 31, 2014 4.5%
Range of stated interest rates at March 31, 2014 0 - 8.0%
The following table shows the unamortized discounts for our notes receivable at the end of the 20132014 thirdfirst quarter and year-end 20122013:

Notes Receivable Unamortized Discounts ($ in millions) Total
Balance at year-end 2012 $11
Balance at September 30, 2013 $12
Notes Receivable Unamortized Discounts ($ in millions) Total
Balance at year-end 2013 $12
Balance at March 31, 2014 $12

At the end of the 20132014 thirdfirst quarter, our recorded investment in impaired “Senior, mezzanine, and other loans” was $102 million, and we had a $9290 million notes receivable reserve representing an allowance for credit losses, leaving $1012 million of our investment in impaired loans, for which we had no related allowance for credit losses. At year-end 20122013, our recorded investment in impaired “Senior, mezzanine, and other loans” was $9399 million, and we had a $7990 million notes receivable reserve representing an allowance for credit losses, leaving $149 million of our

12
Table of Contents

investment in impaired loans, for which we had no related allowance for credit losses. Our average investment in impaired “Senior, mezzanine, and other loans” totaled $104$101 million for the 2013 third2014 first quarter, and $9894 million for the 2013 first three quarters, $101 million for the 2012 third quarter, and $99 million for the 2012 first three quarters.
The following table summarizes theWe had no activity related to our “Senior, mezzanine, and other loans” notes receivable reserve forduring the 20132014 first three quartersquarter:
($ in millions)
Notes  Receivable
Reserve
Balance at year-end 2012$79
Transfers and other13
Balance at September 30, 2013$92
. We do not have any past due senior, mezzanine, and other loans as of the end of the 20132014 thirdfirst quarter.


12
Table of Contents

9.8.Long-term DebtLONG-TERM DEBT
We provide detail on our long-term debt balances in the following table as of the end of the 20132014 thirdfirst quarter and year-end 20122013:
 At Period End
($ in millions)September 30,
2013		 December 28,
2012
Senior Notes:   
Series G, interest rate of 5.810%, face amount of $316, maturing November 10, 2015 (effective interest rate of 6.68%)(1)
$311
 $309
Series H, interest rate of 6.200%, face amount of $289, maturing June 15, 2016 (effective interest rate of 6.37%)(1)
289
 289
Series I, interest rate of 6.375%, face amount of $293, maturing June 15, 2017 (effective interest rate of 6.52%)(1)
292
 292
Series J, matured February 15, 2013—
 400
Series K, interest rate of 3.000%, face amount of $600, maturing March 1, 2019 (effective interest rate of 4.45%)(1)
595
 594
Series L, interest rate of 3.250%, face amount of $350, maturing September 15, 2022 (effective interest rate of 3.35%)(1)
349
 349
Series M, interest rate of 3.375%, face amount of $350, maturing October 15, 2020 (effective interest rate of 3.60%)(1)
348
 —
Commercial paper, average interest rate of 0.33% at September 30, 2013790
 501
$2,000 Credit Facility—
 15
Other182
 186
 3,156
 2,935
Less current portion(52) (407)
 $3,104
 $2,528
 At Period End
($ in millions)March 31,
2014		 December 31,
2013
Senior Notes:   
Series G, interest rate of 5.8%, face amount of $316, maturing November 10, 2015
(effective interest rate of 6.6%)(1)
$312
 $312
Series H, interest rate of 6.2%, face amount of $289, maturing June 15, 2016
(effective interest rate of 6.3%)(1)
289
 289
Series I, interest rate of 6.4%, face amount of $293, maturing June 15, 2017
(effective interest rate of 6.5%)(1)
292
 292
Series K, interest rate of 3.0%, face amount of $600, maturing March 1, 2019
(effective interest rate of 4.4%)(1)
596
 595
Series L, interest rate of 3.3%, face amount of $350, maturing September 15, 2022
(effective interest rate of 3.4%)(1)
349
 349
Series M, interest rate of 3.4%, face amount of $350, maturing October 15, 2020
(effective interest rate of 3.6%)(1)
348
 348
Commercial paper, average interest rate of 0.3% at March 31, 2014984
 834
$2,000 Credit Facility—
 —
Other132
 180
 3,302
 3,199
Less current portion classified in:   
Other current liabilities (liabilities held for sale)—
 (46)
Current portion of long-term debt(7) (6)
 $3,295
 $3,147
 
(1) 
Face amount and effective interest rate are as of September 30, 2013March 31, 2014.

All of our long-term debt was, and to the extent currently outstanding is, recourse to us but unsecured. Other debt in the preceding table includes capital leases, among other items.
In the 2013 first quarter, we madeWe are a $411 million cash payment of principal and interestparty to retire, at maturity, all of our outstanding Series J Notes.
In the 2013 third quarter, we amended and restated oura multicurrency revolving credit agreement (the “Credit Facility”) to extend the facility's expiration from June 23, 2016 to July 18, 2018 and increase the facility size from $1,750 million tothat provides for $2,000 million of aggregate effective borrowings. The material terms of the amended and restated Credit Facility are otherwise unchanged, and the facility continuesborrowings to support general corporate needs, including working capital, capital expenditures, share repurchases, and letters of credit. The availability of the Credit Facility also supports our commercial paper program. Borrowings under the Credit Facility generally bear interest at LIBOR (the London Interbank Offered Rate) plus a spread, based on our public debt rating. We also pay quarterly fees on the Credit Facility at a rate based on our public debt rating. While any outstanding commercial paper borrowings and/or borrowings under our Credit Facility 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. The Credit Facility expires on July 18, 2018. See the “Cash Requirements and Our Credit Facilities” caption later in this report in the “Liquidity and Capital Resources” section for information on our available borrowing capacity at September 30, 2013March 31, 2014.
In the 2013 third quarter, we issued $350 million aggregate principal amount of 3.375 percent Series M Notes due 2020 (the "Series M Notes"). We received net proceeds of approximately $345 million from the offering, after deducting the underwriting discount and estimated expenses. We will pay interest on the Series M Notes on April 15 and October 15 of each year, commencing on April 15, 2014. The Notes will mature on October 15, 2020, and we may redeem them, in whole or in part, at our option, under the terms provided in the form of Note. We issued the Series M

13
Table of Contents

Notes under an indenture dated as of November 16, 1998 with The Bank of New York Mellon, as successor to JPMorgan Chase Bank, N.A. (formerly known as The Chase Manhattan Bank), as trustee.
We show future principal payments for our debt as of the end of the 20132014 thirdfirst quarter in the following table:


13
Table of Contents

Debt Principal Payments ($ in millions) Amount Amount
2013 $2
2014 52
 $5
2015 318
 319
2016 297
 297
2017 301
 301
2018 993
Thereafter 2,186
 1,387
Balance at September 30, 2013 $3,156
Balance at March 31, 2014 $3,302
We paid cash for interest, net of amounts capitalized, of $5811 million in the 2014 first quarter and $21 million in the 2013 first three quarters and $62 million in the 2012 first three quartersquarter.

10.9.Comprehensive Income and Capital StructureCOMPREHENSIVE INCOME AND SHAREHOLDERS' (DEFICIT) EQUITY

The following table details the accumulated other comprehensive income (loss) activity for the 20132014 first three quartersquarter:

($ in millions)Foreign Currency Translation Adjustments Other Derivative Instrument Adjustments Unrealized Gains on Available-For-Sale Securities Accumulated Other Comprehensive Loss
Balance at year-end 2012$(32) $(19) $7
 $(44)
Other comprehensive (loss) income before reclassifications (1)
(2) —
 4
 2
Amounts reclassified from accumulated other comprehensive loss—
 (1) (6) (7)
Net other comprehensive loss(2) (1) (2) (5)
Balance at September 30, 2013$(34) $(20) $5
 $(49)
($ in millions)Foreign Currency Translation Adjustments Other Derivative Instrument Adjustments Unrealized Gains on Available-For-Sale Securities Accumulated Other Comprehensive Loss
Balance at year-end 2013$(31) $(19) $6
 $(44)
Other comprehensive income before reclassifications (1)
—
 1
 1
 2
Amounts reclassified from accumulated other comprehensive loss—
 1
 —
 1
Net other comprehensive income—
 2
 1
 3
Balance at March 31, 2014$(31) $(17) $7
 $(41)
(1) 
We present the portions of other comprehensive income (loss) before reclassifications for the 20132014 first three quartersquarter that relate to unrealized gains on available-for-sale securities net of $31 million of deferred taxes.

The following table details the effect on net income of significant amounts reclassified out of accumulated other comprehensive loss for the 2013 first three quarters:

14
Table of Contents

($ in millions) Amounts Reclassified from Accumulated Other Comprehensive Loss  
Accumulated Other Comprehensive Loss Components 276 Days Ended
September 30, 2013		 Income Statement Line Item Affected
     
Other derivative instrument adjustments    
Other, net $1
 Net income
     
Unrealized gains on available-for-sale securities    
Sale of an available-for-sale security $10
 Gains and other income
  10
 Income before income taxes
  (4) Provision for income taxes
  $6
 Net income
The following table details the changes in common shares outstanding and shareholders’ deficit for the 20132014 first three quartersquarter:

(in millions, except per share amounts)(in millions, except per share amounts)  (in millions, except per share amounts)  
Common
Shares
Outstanding
Common
Shares
Outstanding
  Total 
Class A
Common
Stock
 
Additional
Paid-in-
Capital
 
Retained
Earnings
 
Treasury Stock,
at Cost
 
Accumulated
Other
Comprehensive
Loss
Common
Shares
Outstanding
  Total 
Class A
Common
Stock
 
Additional
Paid-in-
Capital
 
Retained
Earnings
 
Treasury Stock,
at Cost
 
Accumulated
Other
Comprehensive
Loss
310.9
 Balance at year-end 2012$(1,285) $5
 $2,585
 $3,509
 $(7,340) $(44)
298.0
 Balance at year-end 2013$(1,415) $5
 $2,716
 $3,837
 $(7,929) $(44)
—
 Net income475
 —
 —
 475
 —
 —

 Net income172
 —
 —
 172
 —
 —
—
 Other comprehensive loss(5) —
 —
 —
 —
 (5)
 Other comprehensive income3
 —
 —
 —
 —
 3
—
 Cash dividends ($0.4700 per share)(144) —
 —
 (144) —
 —

 Cash dividends ($0.1700 per share)(50) —
 —
 (50) —
 —
5.1
 Employee stock plan issuance179
 —
 85
 (77) 171
 —
(15.6) Purchase of treasury stock(629) —
 —
 —
 (629) —
300.4
 Balance at September 30, 2013$(1,409) $5
 $2,670
 $3,763
 $(7,798) $(49)
3.4
 Employee stock plan issuance21
 —
 (52) (42) 115
 —
(7.0) Purchase of treasury stock(356) —
 —
 —
 (356) —
294.4
 Balance at March 31, 2014$(1,625) $5
 $2,664
 $3,917
 $(8,170) $(41)


11.10.
Contingencies
CONTINGENCIES
Guarantees
We issue guarantees to certain lenders and hotel owners, chiefly to obtain long-term management contracts. The guarantees generally have a stated maximum funding amount and a term of four to ten years. The terms of guarantees to lenders generally require us to fund if cash flows from hotel operations are inadequate to cover annual

14
Table of Contents

debt service or to repay the loan at the end of the term. The terms of the guarantees to hotel owners generally require us to fund if the hotels do not attain specified levels of operating profit. Guarantee fundings to lenders and hotel owners are generally recoverable as loans repayable to us out of future hotel cash flows and/or proceeds from the sale of hotels. We also enter into project completion guarantees with certain lenders in conjunction with hotels that we or our joint venture partners are building.
We measure and record our liability for the fair value of a guarantee on a nonrecurring basis, that is when we issue or modify a guarantee, using Level 3 internally developed inputs. We generally base our calculation of the estimated fair value of a guarantee on the income approach or the market approach, depending on the type of guarantee. For the income approach, we use internally developed discounted cash flow and Monte Carlo simulation models that include the following assumptions, among others: projections of revenues and expenses and related cash flows based on assumed growth rates and demand trends; historical volatility of projected performance; the guaranteed obligations; and applicable discount rates. We base these assumptions on our historical data and experience, industry projections, micro and macro general economic condition projections, and our expectations. For the market approach, we use internal analyses based primarily on market comparable data and our assumptions about market capitalization rates, credit spreads, growth rates, and inflation. We show the maximum potential

15
Table of Contents

amount of our future guarantee fundings and the carrying amount of our liability for guarantees for which we are the primary obligor at September 30, 2013March 31, 2014 in the following table:
($ in millions)
Guarantee Type
Maximum Potential
Amount  of Future Fundings
 Liability for  Guarantees
Maximum Potential
Amount  of Future Fundings
 Liability for  Guarantees
Debt service$76
 $6
$77
 $3
Operating profit105
 44
92
 34
Other16
 1
330
 4
Total guarantees where we are the primary obligor$197
 $51
$499
 $41
We included our liability at September 30, 2013March 31, 2014 for guarantees for which we are the primary obligor inon our Balance Sheet as follows: $3 million in “Other current liabilities” and $48 million in “Other long-term liabilities.”
Our guarantees listed in the preceding table include $13 million of debt service guarantees, $5 million of operating profit guarantees, and $1 million of other guarantees that will not be in effect until the underlying properties open and we begin to operate the properties or certain other events occur.occur consist of $20 million of debt service guarantees, $12 million of operating profit guarantees, and $315 million of other guarantees.
Other guarantees that were not currently in effect include a "put option" agreement we entered into in the 2014 first quarter with the lenders for a construction loan. In conjunction with entering into a management agreement for the Times Square EDITION hotel in New York City (currently projected to open in 2017), and the hotel's ownership group obtaining acquisition financing and entering into agreements concerning future construction financing for the mixed use project (which includes both the hotel and adjacent retail space), we agreed in the first quarter of 2014 to provide credit support to the lenders through a "put option" agreement. Under this agreement, we granted the lenders the right, upon an uncured event of default by the hotel owner under, and an acceleration of, the mortgage loan, to require us to purchase the hotel component of the property during the first two years after opening for $315 million. The lenders may extend this period for up to three years to complete foreclosure if the loan has been accelerated and certain other conditions are met. We do not expect that the lenders will exercise this "put option." We have no ownership interest in this hotel.
The preceding table does not include the following guarantees:
$10697 million of guarantees for Senior Living Services lease obligations of $7871 million (expiring in 2018) and lifecare bonds of $2826 million (estimated to expire in 2016), for which we are secondarily liable. Sunrise Senior Living, Inc. (“Sunrise”) is the primary obligor on both the leases and $4 million of the lifecare bonds; HCP, Inc., as successor by merger to CNL Retirement Properties, Inc. (“CNL”), is the primary obligor on $2321 million of the lifecare bonds,bonds; and Five Star Senior Living is the primary obligor on the remaining $1 million of lifecare bonds. Before we sold the Senior Living Services business in 2003, these were our guarantees of obligations of our then consolidated Senior Living Services subsidiaries. Sunrise and CNL have indemnified us for any fundings we may be called upon to make under these guarantees. Our

15
Table of Contents

liability for these guarantees had a carrying value of $3 million at September 30, 2013March 31, 2014. In 2011 Sunrise previously provided us $35 million of cash collateral to cover potential exposure under the existing lease and bond obligations for 2012 and 2013. In conjunction with our consent of the extension in 2011 of certain lease obligations for an additional five-year term until 2018, Sunrise provided us an additional $1 million of cash collateral and an $85 million letter of credit issued by Key Bank to secure our exposure under the lease guarantees for the continuing leases during the extension term and certain other obligations of Sunrise. The letter of credit balance was $81 million at the end of the 2014 first quarter, which decreased as a result of lease payments made and lifecare bonds redeemed. During the extension term, Sunrise agreed to make an annual payment to us from the cash flow of the continuing lease facilities, subject to a $1 million annual minimum. In the 2013 first quarter, Sunrise merged with Health Care REIT, Inc., and Sunrise's management business was acquired by an entity formed by affiliates of Kohlberg Kravis Roberts & Co. LP, Beecken Petty O'Keefe & Co., Coastwood Senior Housing Partners LLC, and Health Care REIT. In conjunction with this acquisition, Sunrise funded an additional $2 million cash collateral and certified that the $85 million letter of credit remains in full force and effect.
Lease obligations, for which we became secondarily liable when we acquired the Renaissance Hotel Group N.V. in 1997, consisting of annual rent payments of approximately $6 million and total remaining rent payments through the initial term of approximately $3634 million. Most of these obligations expire by the end of 2020. CTF Holdings Ltd. (“CTF”) had originally provided €35 million in cash collateral in the event that we are required to fund under such guarantees, approximately $54 million (€43 million) of which remained at September 30, 2013March 31, 2014. Our exposure for the remaining rent payments through the initial term will decline to the extent that CTF obtains releases from the landlords or these hotels exit the system. Since the time we assumed these guarantees, we have not funded any amounts, and we do not expect to fund any amounts under these guarantees in the future.
Certain guarantees and commitments relating to the timeshare business, which were outstanding at the time of the 2011 Timeshare spin-off and for which we became secondarily liable as part of the spin-off. These Marriott Vacations Worldwide Corporation ("MVW") payment obligations, for which we currently have a total exposure of $2216 million, relate to a project completion guarantee, various letters of credit and several

16
Table of Contents

other guarantees. MVW has indemnified us for these obligations. At the end of the 2013 third2014 first quarter, we expect these obligations will expire as follows: $1 million in 2013, $5 million in 2014, $3 million in 2017, and $1312 million (1714 million Singapore Dollars) in 2022. We have not funded any amounts under these obligations, and do not expect to do so in the future. Our liability for these obligations had a carrying value of $2 million at September 30, 2013March 31, 2014.
A guarantee for a lease, originally entered into in 2000, for which we became secondarily liable in 2012 as a result of our sale of the ExecuStay corporate housing business to Oakwood.Oakwood Worldwide ("Oakwood"). Oakwood has indemnified us for the obligations under this guarantee. Our total exposure at the end of the 20132014 thirdfirst quarter for this guarantee is $116 million in future rent payments if the lease is terminated through 2013 and will be reduced to $6 million if the lease is terminated from 2014 through the end of the lease in 2019. Our liability for this guarantee had a carrying value of $1 million at September 30, 2013March 31, 2014.
A guarantee for two adjoining leases, originally entered into in 2000 and 2006, for which we became secondarily liable in the 2013 third quarter as a result of our assignment of the leases to Accenture LLP.  Accenture is the primary obligor and has indemnified us for the obligations under these leases and the guarantee. Our total exposure at the end of the 2013 third quarter is $7 million related to future rent payments through the end of the leases in 2017. 
In addition to the guarantees described in the preceding paragraphs, in conjunction with financing obtained for specific projects or properties owned by joint ventures in which we are a party, we may provide industry standard indemnifications to the lender for loss, liability, or damage occurring as a result of the actions of the other joint venture owner or our own actions.
Commitments and Letters of Credit
In addition to the guarantees we note in the preceding paragraphs, as of September 30, 2013March 31, 2014, we had the following commitments outstanding:
A commitment to invest up to $10 million of equity for a noncontrolling interest in a partnership that plans to purchase North American full-service and limited-service properties, or purchase or develop hotel-anchored mixed-use real estate projects. We expect to fund $98 million of this commitment as follows: $7 millionin 2014, and $2 million in 2015.2014. We do not expect to fund the remaining $12 million of this commitment.
A commitment to invest up to $2322 million of equity for noncontrolling interests in partnershipsa partnership that planplans to purchase or develop limited-service properties in Asia. We expect to fund $23 million of this commitment as follows: $2 million in 2013, $1310 million in 2014 and $812 million in 2015.
A commitment, with no expiration date, to invest up to $11 million in a joint venture for development of a new property. We expect to fund this commitment as follows: $86 million in 2014 and $35 million in 2015.

16
Table of Contents

A commitment to invest $2018 million in the renovation of a leased hotel. We expect to fund this commitment by the end of 2015.2014.
We have a right and under certain circumstances an obligation to acquire our joint venture partner’s remaining 45 percent interest in two joint ventures over the next 8seven years years at a price based on the performance of the ventures. We made a $12 million (€9 million) deposit in conjunction with this contingent obligation in 2011 and $8 million (€6 million) in deposits in 2012. In the 2013 first quarter we acquired an additional five percent noncontrolling interest in each venture, applying $5 million (€4 million) of those deposits. The remaining deposits are refundable to the extent we do not acquire our joint venture partner’s remaining interests.
We have a right and under certain circumstances an obligation during the next year to acquire, for approximately $45 million (€33 million), the landlord’s interest in the real estate property and attached assets of a hotel that we lease. We have recorded the lease as a capital lease.

17
Table of Contents

Various commitments for the purchase of information technology hardware, software, as well as accounting, finance, and maintenance services in the normal course of business totaling $11685 million. We expect to fund these commitments as follows: $33 million in 2013, $5378 million in 2014, $175 million in 2015, and $132 million in 2016. The majority of these commitments will be recovered through cost reimbursement charges to properties in our system.
Several commitments aggregating $3435 million with no expiration date and which we do not expect to fund.
A commitment to invest up to $10 million under certain circumstances for additional mandatorily redeemable preferred equity ownership interest in an entity that owns three hotels. We may fund this commitment, which expires in 2015 subject to annual extensions through 2018; however, we have not yet determined the amount or timing of any potential funding.
A $59 million loan commitment that we extended to anthe owner of a lodging property into cover the 2013 third quartercost of renovation shortfalls which will expire in the 2013 fourth quarter. We funded $1 million in the 2013 third quarter,we expect to fund $3 millionin 2015. The commitment will expire at the 2013 fourth quarter, and do not expect to fundend of the remaining $1 million.2016 second quarter.
At September 30, 2013March 31, 2014, we had $6878 million of letters of credit outstanding ($6777 million outside the Credit Facility and $1 million under our Credit Facility), the majority of which were for our self-insurance programs. Surety bonds issued as of September 30, 2013March 31, 2014, totaled $121123 million, the majority of which federal, state and local governments requested in connection with our self-insurance programs.
Legal Proceedings
On January 19, 2010, several former Marriott employees (the "plaintiffs") filed a putative class action complaint against us and the Stock Plan (the "defendants"), alleging that certain equity awards of deferred bonus stock granted to the plaintiffs and other current and former employees for fiscal years 1963 through 1989 are subject to vesting requirements under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), that are in certain circumstances more rapid than those set forth in the awards. The plaintiffs seek damages, class attorneys' fees and interest, with no amounts specified. The action is proceeding in the United States District Court for the District of Maryland (Greenbelt Division) and Dennis Walter Bond Sr. and Michael P. Steigman are the current named plaintiffs. The parties completed limited discovery concerning the issuesMarriott's defense of statute of limitations with respect to Mr. Bond and Mr. Steigman and completed discovery concerning class certification. We opposed Plaintiffs'plaintiffs' motion for class certification in October 2012, and we filed a motion forsought summary judgment on the issue of statute of limitations in December 2012. A hearing on both issues was held on June 7, 2013, after which we submitted a post-hearing supplemental brief and plaintiffs responded. On August 9, 2013, the court denied our motion for summary judgment on the issue of statute of limitations and deferred its ruling on class certification. We moved to amend the court's judgment on our motion for summary judgment in order to certify an interlocutory appeal, which was denied. On January 7, 2014, the court denied plaintiffs' motion for class certification, and issued a Scheduling Order for full discovery of the remaining issues in this case. The parties filed a joint motion to modify the Scheduling Order on March 26, 2014. We and the Stock Plan have denied all liability, and while we intend to vigorously defend against the claims being made by the plaintiffs, we can give you no assurance about the outcome of this lawsuit. We currently cannot estimate the range of any possible loss to the Company because an amount of damages is not claimed, there is uncertainty as to whether a class willthe number of parties for whom the claims may be certified and if so as to the size of the class,pursued, and the possibility of our prevailing on our statute of limitations defense on appeal may significantly limit any claims for damages.

17
Table of Contents

In March 2012, the Korea Fair Trade Commission ("KFTC") obtained documents from two of our managed hotels in Seoul, Korea in connection with an investigation which we believe is focused on pricing of hotel services within the Seoul region. Since then, the KFTC has conducted additional fact-gathering at those two hotels and also has collected information from another Marriott managed hotel located in Seoul. We understand that the KFTC also has sought documents from numerous other hotels in Seoul and other parts of Korea that we do not operate, own or franchise. We have not yet received a complaint or other legal process. We are cooperating with this investigation.


18
Table of Contents

12.11.Business SegmentsBUSINESS SEGMENTS
We are a diversified global lodging companycompany. During the 2014 first quarter, we modified the information that our President and Chief Executive Officer, who is our CODM, reviews to be consistent with operations inour continent structure. This structure aligns our business around geographic regions and is designed to enable us to operate more efficiently and to accelerate worldwide growth. As a result of modifying our reporting information, we revised our operating segments to eliminate our former Luxury segment, which we allocated between our existing North American Full-Service operating segment, and the following four new operating segments: Asia Pacific, Caribbean and Latin America, Europe, and Middle East and Africa.
Although our North American Full-Service and North American Limited-Service segments meet the applicable accounting criteria to be reportable business segments, our four new operating segments do not meet the criteria for separate disclosure as reportable business segments. Accordingly, we combined our four new operating segments into an "all other" category which we refer to as "International" and have revised our prior period business segment information to conform to our new business segment presentation.
As of the end the 2014 first quarter, our fourthree business segments:segments include the following brands:
North American Full-Service Lodging, which includes the: Marriott Hotels, Marriott Conference Centers, JW Marriott, Renaissance Hotels, Renaissance ClubSport, Gaylord Hotels, The Ritz-Carlton (together with residential properties associated with some of The Ritz-Carlton hotels), and Autograph Collection properties located in the United States and Canada;
North American Limited-Service Lodging, which includes the: Courtyard, Fairfield Inn & Suites, SpringHill Suites, Residence Inn, and TownePlace Suites properties located in the United States and Canada, and, before its sale in the 2012 second quarter, our Marriott ExecuStay corporate housing business;Canada;
International Lodging, which includes the: Marriott Hotels, JW Marriott, Renaissance Hotels, Autograph Collection, Courtyard, AC Hotels by Marriott, Fairfield Inn & Suites, Residence Inn, The Ritz-Carlton (together with residential properties associated with some The Ritz-Carlton hotels), Bulgari Hotels & Resorts, EDITION and Marriott Executive Apartments properties located outside the United States and Canada; and
Luxury Lodging, which includes The Ritz-Carlton, Bulgari Hotels & Resorts, and EDITION properties worldwide (together with residential properties associated with some of The Ritz-Carlton hotels).Canada.
We evaluate the performance of our business segments based largely on the results of the segment without allocating corporate expenses, income taxes, or indirect general, administrative, and other expenses. We allocate gains and losses, equity in earnings or losses from our joint ventures, and divisional general, administrative, and other expenses to each of our segments. “Other unallocated corporate” represents thata portion of our revenues, general, administrative, and other expenses, equity in earnings or losses, and other gains or losses that we do not allocate to our segments. "Other unallocated corporate"It also includes license fees we receive from our credit card programs and license fees from MVW.
We aggregate Our CODM monitors assets for the brands presented within our segments considering their similar economic characteristics, types of customers, distribution channels, the regulatoryconsolidated company but does not use assets by business environments and operations within each segment and our organizational and management reporting structure.

Revenues
($ in millions)92 Days Ended
September 30, 2013		 84 Days Ended
September 7, 2012		 276 Days Ended
September 30, 2013		 252 Days Ended
September 7, 2012
North American Full-Service Segment$1,595
 $1,332
 $4,935
 $4,006
North American Limited-Service Segment695
 612
 1,970
 1,735
International Segment385
 321
 1,131
 898
Luxury Segment416
 394
 1,330
 1,221
Total segment revenues3,091
 2,659
 9,366
 7,860
Other unallocated corporate69
 70
 199
 197
 $3,160
 $2,729
 $9,565
 $8,057

when assessing performance or making business segment resource allocations.





1918
Table of Contents

Revenues
 Three Months Ended
($ in millions)March 31, 2014
March 31, 2013
North American Full-Service Segment$2,049
 $2,028
North American Limited-Service Segment667
 608
International Segment520
 445
Total segment revenues3,236
 3,081
Other unallocated corporate57
 61
 $3,293
 $3,142


Net Income (Loss)
 
Three Months Ended
($ in millions)92 Days Ended
September 30, 2013		 84 Days Ended
September 7, 2012		 276 Days Ended
September 30, 2013		 252 Days Ended
September 7, 2012		March 31, 2014 March 31, 2013
North American Full-Service Segment$96
 $76
 $341
 $275
$131
 $133
North American Limited-Service Segment131
 157
 372
 347
115
 106
International Segment39
 36
 111
 117
65
 50
Luxury Segment22
 20
 78
 66
Total segment financial results288
 289
 902
 805
311
 289
Other unallocated corporate(42) (41) (140) (141)(55) (60)
Interest expense and interest income(23) (26) (75) (86)(25) (28)
Income taxes(63) (79) (212) (188)(59) (65)
$160
 $143
 $475
 $390
$172
 $136
Equity in LossesAs a result of Equity Method Investeesthe changes to our operating segments discussed above, we reallocated goodwill among our affected reporting units based on the relative fair value of each remaining or newly identified reporting unit. We also determined that the estimated fair value of each reporting unit exceeded its carrying amount. The following table shows the reclassification of goodwill we previously associated with our former Luxury segment to our North American Full-Service and International segments.

Goodwill
($ in millions)92 Days Ended
September 30, 2013		 84 Days Ended
September 7, 2012		 276 Days Ended
September 30, 2013		 252 Days Ended
September 7, 2012
North American Full-Service Segment$1
 $—
 $3
 $1
North American Limited-Service Segment—
 —
 2
 1
International Segment(1) —
 (2) 2
Luxury Segment—
 —
 (3) (11)
Total segment equity in losses—
 —
 —
 (7)
Other unallocated corporate—
 (1) (2) (3)
 $—
 $(1) $(2) $(10)

Assets
 At Period End
($ in millions)September 30,
2013		 December 28,
2012
North American Full-Service Segment$1,546
 $1,517
North American Limited-Service Segment480
 492
International Segment1,140
 1,056
Luxury Segment1,321
 1,174
Total segment assets4,487
 4,239
Other unallocated corporate1,993
 2,103
 $6,480
 $6,342
($ in millions)
North American
Full-Service
Segment
 
North American
Limited-Service
Segment
 
International
Segment
 
Former Luxury
Segment
 
Total
Goodwill
Year-end 2013 balance:         
Goodwill$335
 $125
 $298
 $170
 $928
Accumulated impairment losses—
 (54) —
 —
 (54)
 $335
 $71
 $298
 $170
 $874
          
Segment reclassifications$57
 $—
 $113
 $(170) $—
          
March 31, 2014 balance:         
Goodwill$392
 $125
 $411
 $—
 $928
Accumulated impairment losses—
 (54) —
 —
 (54)
 $392
 $71
 $411
 $—
 $874

13.12.Acquisitions and DispositionsACQUISITIONS AND DISPOSITIONS

19


2013 Completed2014 Acquisitions

On the first day of our 2014 second quarter, we acquired Protea Hotels' brands and hotel management business ("Protea Hotels") for $193 million (ZAR 2.046 billion) in cash and recognized approximately: $183 million (ZAR 1.931 billion) in intangible assets consisting of deferred contract acquisition costs, a brand intangible, and goodwill; and $10 million (ZAR 115 million) of tangible assets consisting of property and equipment, equity method investments, and other current assets at the acquisition date. At the end of the 2014 first quarter, we transferred $192 million in cash to a third party in the form of an escrow deposit. As part of the transaction, Protea Hospitality Holdings created an independent property ownership company that retained ownership of the hotels Protea Hospitality Holdings formerly owned, and entered into long-term management and lease agreements with Marriott for these hotels. The property ownership company also retained a number of minority interests in other Protea-managed hotels. As a result of the transaction, we added over 100 hotels (over 10,000 rooms) across three brands in South Africa and six other Sub-Saharan African countries to our International segment portfolio and currently manage approximately 45 percent, franchise approximately 39 percent, and lease approximately 16 percent of those rooms.

2014 Dispositions

In the 2013 third2014 first quarter, we paidsold The London EDITION to a cash deposit ofthird party, received approximately $5 million toward the acquisition of a managed property we plan to renovate. After the 2013 third quarter, we acquired that property for an additional $110230 million in cash.

2013 Planned Dispositions
On July 30, 2013, wecash, and simultaneously entered into a non-binding letter of intent ("LOI")definitive agreements to sell the London,The Miami and The New York EDITION-brandedEDITION hotels that we are currently developing to the same third party. The total sales price for the three EDITION hotels will be approximately $800816 million. If the transaction goes forward, weWe expect the sale of the Londonto sell The Miami EDITION to occur in the 2013 fourth quartersecond half of 2014 and the sale of the Miami EDITION andThe New York

20

EDITION to occur afterin the first half of 2015, when we anticipate that construction is complete, with the company retainingwill be complete. We will retain long-term management agreements for each hotel. The London EDITION opened on September 12, 2013, and we subsequently reclassified the related $232 million in Luxury segment assets ($225 million in property and equipment and $7 million in current assets) to the "Assets held for sale" caption and $9 million in Luxury segment liabilities to liabilities held for sale within the "Other current liabilities" caption of the Balance Sheet as of the end of the 2013 third quarter. We did not recognize a gain or loss in the 2013 third quarter as a result of this reclassification.three hotels sold. We did not reclassify theThe Miami EDITION or theThe New York EDITION assets and liabilities as held for sale because the hotels are under construction and not available for immediate sale in their present condition.
14.Variable Interest Entities
Under In the applicable accounting guidance2014 first quarter, we evaluated the three hotels for recovery and subsequently recorded a $10 million impairment charge in the consolidation"Depreciation and amortization" caption of variable interest entities, we analyze our variable interests, including loans, guarantees, and equity investments,Income Statement as our current cost estimates exceed our total fixed sales price. We did not allocate that charge to determine if an entity in which we have a variable interest is a variable interest entity. Our analysis includes both quantitative and qualitative reviews. We baseany of our quantitative analysis on the forecasted cash flows of the entity, and our qualitative analysis on our review of the design of the entity, its organizational structure including decision-making ability, and relevant financial agreements. We also use our qualitative analysis to determine if we must consolidate a variable interest entity as its primary beneficiary.segments.
In the 2013 second2014 first quarter, we purchasedsold our right to acquire the landlord’s interest in a leased real estate property and certain attached assets of the property, consisting of $65106 million mandatorily redeemable preferred equity ownership interest in an entity that owns (three hotels, which we also manage. Please see Footnote No. 5, "Fair Value of Financial Instruments" for further information on the purchase and Footnote No. 11, "Contingencies" for information on the commitment we entered into as part of this transaction. Based on qualitative and quantitative analyses, we concluded that the entity in which we invested is a variable interest entity because it is capitalized primarily with debt. We did not consolidate the entity because we do not have the power to direct the activities that most significantly impact the entity's economic performance. Inclusive of our contingent future funding commitment, our maximum exposure to loss at the end of the 2013 third quarter is $78 million.
In conjunction with the transaction with CTF that we describe more fully in our Annual Report on Form 10-K for 2007 in Footnote No. 8, “Acquisitions and Dispositions,” under the caption “2005 Acquisitions,” we manage hotels on behalf of tenant entities that are 100 percent owned by CTF, which lease the hotels from third-party owners. Due to certain provisions in the management agreements, we account for these contracts as operating leases. At September 30, 2013, we managed four hotels on behalf of three tenant entities. The entities have minimal equity and minimal assets, consisting of hotel working capital and furniture, fixtures, and equipment. As part of the 2005 transaction, CTF placed money in a trust account to cover cash flow shortfalls and to meet rent payments. In turn, we released CTF from its guarantees fully for two of these properties and partially for the other two properties. The trust account was fully depleted prior to year-end 2011. The tenant entities are variable interest entities because the holder of the equity investment at risk, CTF, lacks the ability through voting rights to make key decisions about the entities’ activities that have a significant effect on the success of the entities. We do not consolidate the entities because we do not have the power to direct the activities that most significantly impact the entities' economic performance. We are liable for rent payments (totaling $6€77 million) forin property and equipment and two of the four hotels if there are cash flow shortfalls, and these two hotels have lease terms of less than one year. In addition, as of the end of the 2013third quarter we are liable for rent payments of up to an aggregate cap of $648 million for(€35 million) in liabilities. We received $62 million (€45 million) in cash and transferred $45 million (€33 million) of related obligations. We continue to operate the two other hotels if there are cash flow shortfalls. Our maximum exposure to loss is limited to the rent payments and certain other tenant obligationsproperty under the lease, for which we are secondarily liable.a long-term management agreement.

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
We make forward-looking statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report based on the beliefs and assumptions of our management and on information currently available to us. Forward-looking statements include information about our possible or assumed future results of operations, which follow under the headings “Business and Overview,” “Liquidity and Capital Resources,” and other statements throughout this report preceded by, followed by or that include the words “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions.
Any number of risks and uncertainties could cause actual results to differ materially from those we express in our forward-looking statements, including the risks and uncertainties we describe below and other factors we describe from time to time in our periodic filings with the U.S. Securities and Exchange Commission (the “SEC”). We therefore caution you not to rely unduly on any forward-looking statement. The forward-looking statements in this report speak only as of the date of this report, and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments, or otherwise.
In addition, see the “Item 1A. Risk Factors” caption in the “Part II-OTHER INFORMATION” section of this report.
BUSINESS AND OVERVIEW
Change in Reporting Cycle
As further detailed in Footnote No. 1, "Basis of Presentation," beginning with our 2013 fiscal year, we changed our financial reporting cycle to a calendar year-end reporting cycle and an end-of-month quarterly reporting cycle. Accordingly, our 2013 fiscal year began on December 29, 2012 (the day after the end of the 2012 fiscal year) and will end on December 31, 2013. The table below shows the reporting periods as we refer to them in this report, their date ranges, and the number of days in each. As shown below, our 2014 first quarter had threefewer days of activity than our 2013 first quarter and our 2014 calendar year will have three fewer days of activity than our 2013 fiscal year.
Reporting PeriodDate RangeNumber of Days
2013 third quarterJuly 1, 2013 - September 30, 201392
2012 third quarterJune 16, 2012 - September 7, 201284
2013 first three quartersDecember 29, 2012 - September 30, 2013276
2012 first three quartersDecember 31, 2011 - September 7, 2012252
Reporting PeriodDate RangeNumber of Days
2014 first quarterJanuary 1, 2014 - March 31, 201490
2013 first quarterDecember 29, 2012 - March 31, 201393
2014January 1, 2014 - December 31, 2014365
2013December 29, 2012 - December 31, 2013368
As a resultWe discuss the estimated impact of these differences in our reporting periods, we had eight morethe three fewer days of activity in our 2013 third2014 first quarter than we had in our 2012 third quarter, which we estimate resulted in $37 millionwithin the "Revenues" and "Operating Income" sections of additional combined base management fee, franchise fee, and incentive management fee revenues and $26 million of additional operating income. Likewise, we had 24 more days of activity in our 2013 first three quarters than we had in our 2012 first three quarters, which we estimate resulted in $99 million of additional combined base management fee, franchise fee, and incentive management fee revenues and $71 million of additional operating income. We discuss other aspects of the estimated impacts from the reporting period changes in more detail in the following sections beginning with “Revenues.”this report.
Lodging BusinessOverview
We are a worldwide operator, franchisor, and licensor of hotels and timeshare properties in 7271 countries and territories under numerous brand names. We also develop, operate, and market residential properties and provide services to home/condominium owner associations. At the end of the 2013 third2014 first quarter, we had 3,8833,934 properties (670,507679,321 rooms) in our system, including 3740 home and condominium products (4,0674,228 units) for which we manage the related owners’ associations.
We earn base management fees and in somemany cases incentive management fees from the properties that we manage, and we earn franchise fees on the properties that others operate under franchise agreements with us. Base

22
Table of Contents

fees typically consist of a percentage of property-level revenue while incentive fees typically consist of a percentage of net house profit adjusted for a specified owner return. Net house profit is calculated as gross operating profit (house profit) less management fees and noncontrollable expenses such as insurance, real estate taxes, capital spending reserves, and the like.reserves.

We use or license our trademarks for the sale
21
Table of residential real estate, either in conjunction with hotel development or on a stand-alone basis, under our The Ritz-Carlton, EDITION, JW Marriott, Autograph Collection, and Marriott brand names. Third-party developers typically build and sell residences with little, if any, of our capital at risk. While the worldwide residential market is very large, the luxurious nature of our residential properties, the quality and exclusivity associated with our brands, and the hospitality services that we provide, all serve to make our residential properties distinctive.Contents

Under our business model, we typically manage or franchise hotels, rather than own them. At September 30, 2013March 31, 2014, we operated 42 percent of the hotel rooms in our worldwide system under management agreements,agreements; our franchisees operated 55 percent under franchise agreements, unconsolidated joint ventures that we have an interest in held management and provided services to franchised hotels for 1 percent,agreements; and we owned or leased only 2 percent. The remainder represented our interest in unconsolidated joint ventures that manage hotels and provide services to franchised properties.
Our emphasis on long-term management contracts and franchising tends to provide more stable earnings in periods of economic softness, while adding new hotels to our system generates growth, typically with little or no investment by the company. This strategy has driven substantial growth while minimizing financial leverage and risk in a cyclical industry. In addition, we believe minimizing our capital investments and adopting a strategy of recycling the investments that we do make maximizes and maintains our financial flexibility.
We remain focused on doing the things that we do well; that is, selling rooms, taking care of our guests, and making sure we control costs both at company-operated properties and at the corporate level ("above-property"). Our brands remain strong as a result of skilled management teams, dedicated associates, superior customer service with an emphasis on guest and associate satisfaction, significant distribution, our Marriott Rewards and The Ritz-Carlton Rewards loyalty programs, a multichannel reservations system, and desirable property amenities. We strive to effectively leverage our size and broad distribution.
We, along with owners and franchisees, continue to invest in our brands by means of new, refreshed, and reinvented properties, new room and public space designs, and enhanced amenities and technology offerings. We address, through various means, hotels in the system that do not meet standards. We continue to enhance the appeal of our proprietary, information-rich, and easy-to-use website, Marriott.com, and of our associated mobile smartphone applications and mobile website that connect to Marriott.com, through functionality and service improvements, and we expect to continue capturing an increasing proportion of property-level reservations via this cost-efficient channel.
Our profitability, as well as that of owners and franchisees, has benefited from our approach to property-level and above-property productivity. Properties in our system continue to maintain very tight cost controls. We also control above-property costs, some of which we allocate to hotels, by remaining focused on systems, processing, and support areas.
Lodging Performance Measures
We believe Revenue per Available Room ("RevPAR"), which we calculate by dividing room sales for comparable properties by room nights available to guests for the period, is a meaningful indicator of our performance because it measures the period-over-period change in room revenues for comparable properties. RevPAR may not be comparable to similarly titled measures, such as revenues. References to RevPAR statistics, including occupancy and average daily rate, throughout this report for the 2013 first quarter reflect the three and nine calendar months ended September 30,period from January 1, 2013 or September 30, 2012, as applicable. to March 31, 2013. For the properties located in countries that use currencies other than the U.S. dollar, the comparisons to the prior year period are on a constant U.S. dollar basis. We calculate constant dollar statistics by applying exchange rates for the current period to the prior comparable period.

We define our comparable properties as those that were open and operating under one of our brands for at least one full calendar year as of the end of the current period and have not, in either the current or previous periods presented, (i) undergone significant room or public space renovations or expansions, (ii) been converted between company operated and franchised, or (iii) sustained substantial property damage or business interruption. Comparable properties represented the following percentage of our properties for the three months ended March 31, 2014 and March 31, 2013, respectively: (1) 91% and 95% of North American properties; (2) 79% and 68% of International properties; and (3) 90% and 91% of total properties.
We also believe company-operated house profit margin, which is the ratio of property-level gross operating profit (also known as house profit) to total property-level revenue, is a meaningful indicator of our performance because this ratio measures our overall ability as the operator to produce property-level profits by generating sales and controlling the operating expenses over which we have the most direct control. House profit includes room, food and beverage, and other revenue and the related expenses including payroll and benefits expenses, as well as repairs and maintenance, utility, general and administrative, and sales and marketing expenses. House profit does

2322
Table of Contents

not include the impact of management fees, furniture, fixtures and equipment replacement reserves, insurance, taxes, or other fixed expenses.
LodgingOperating Results
Conditions for our lodging business continued to improve in theOur 20132014 first three quartersquarter, reflecting generally low supply growth in the United States ("U.S."), results reflected a favorable economic climate in many markets around the world, low supply growth in most markets in the U.S. and Europe, improved pricing in most markets globally, and a year-over-year increase in the number of properties in our system. Demand was particularly strong at luxury properties, followed by full-service properties, and limited-service properties.
Comparable worldwide systemwide average daily rates forFor the three months ended September 30, 2013March 31, 2014, comparable worldwide systemwide RevPAR increased 3.46.2 percent to $103.72, average daily rates increased 3.2 percent on a constant dollar basis to $140.53, RevPAR increased 4.8 percent to $104.77,150.02, and occupancy increased 1.01.9 percentage points to 74.6 percent, compared to the same period a year ago. Comparable worldwide systemwide average daily rates for the nine months ended September 30, 2013 increased 3.4 percent on a constant dollar basis to $142.76, RevPAR increased 4.8 percent to $103.62, and occupancy increased 0.9 percentage points to 72.669.1 percent, compared to the same period a year ago.
Continuing uncertaintyStrong U.S. group demand as well as the shift in Easter to the 2014 second quarter contributed to increased RevPAR growth. The strength in group business during the quarter also contributed to increased food and beverage revenue at our company-operated hotels. Transient demand in the U.S., particularly associated with government austerity and its impact on the overall economy, had a dampening effect on short-term group customer demand through the 2013 second quarter. Short-term group customer demand improved in the 2013 third2014 first quarter benefiting from better attendance at group functions. Group bookings in the 2013 third quarter for future short-term group business also improved. Government and government-related demand was constrained due to government spending restrictions, particularly in Washington D.C. and the surrounding areas. For full year 2012, we estimate that government and government-related business made up 5 percent of room nights across our North American system. Transient demand was particularly strong in the western U.S. and Florida, where we continued to eliminate discounts, shift business into higher rated price categories, and raise room rates. Leisure destinations in the U.S. had strong demand. In the northeast U.S., weak group demand in the region, particularly in the first half of 2013, newNew supply in the city of New York City and weak government and government-related businessthe prior year comparison to the Presidential Inauguration in Washington D.C. somewhat constrained RevPAR improvement.
Western Europe experienced modestthe RevPAR growth in the 2014 first quarter.
Our U.S. group bookings for future short-term group business strengthened during the quarter. For group business, two-thirds is typically booked before the year of arrival and one-third is booked in the year of arrival. As of the end of the 2014 first quarter, the group revenue pace for company-operated Marriott Hotels brand properties in North America was up over five percent for stays in 2014, compared to 2013 thirdfirst quarter booking pace for stays in 2013, reflecting improved group demand and greater pricing power.
In Europe, the United Kingdom and Germany had strong demand in the 2014 first quarter, while weak demand in France reflected a weak economy. Eastern Europe and Russia in particular, as well as Northern United Kingdom had strong demand. London RevPAR declined, reflecting a tough comparison to last year’s Olympic Games. Demand remained weak in European marketsexperienced more dependent on regional travel and new supply and weak economies constrainedmoderate RevPAR growth, constrained by the political turmoil in a few markets.Russia and the Ukraine. In the Middle East and Africa, demand was strong in the United Arab Emirates more modest in Qatar, and weakened furtherJordan, but remained weak in Egypt and Jordan.due to political instability. Demand in the Asia Pacific region continued to moderate,strengthened during the quarter, as our hotels inGreater China, Japan, Australia, and India experienced weaker government-related travel due tohigher RevPAR growth, benefiting from increased special corporate and transient business. Thailand lodging demand was weakened by political instability during the country's change in leadership, moderating economic growth,quarter, and new supply continued to constrain growth in several markets. Thailand, Indonesia,certain markets in Southern China. In the Caribbean and Japan had higher demand andLatin America, strong RevPAR growth throughout the region was driven by group demand with particular strength in the 2013 first three quarters.Mexico.
We monitor market conditions and carefully price our rooms daily in accordance with individual property demand levels, generally adjusting room rates as demand changes. We also modify the mix of our business to increase revenue as demand changes. Demand for higher rated rooms improved in most markets in the 20132014 first three quartersquarter, which allowed us to reduce discounting and special offers for transient business in many markets. This mix improvement benefited average daily rates. For our company-operated properties, we continue to focus on enhancing property-level house profit margins and actively pursue productivity improvements.
The properties in our system serve both transient and group customers. Business transient and leisure transient demand were strong in the 2013 first three quarters. For group business, two-thirds is typically booked before the year of arrival and one-third is booked in the year of arrival. Also, during an economic recovery, group pricing tends to lag transient pricing due to the significant lead times for group bookings. During the recent economic recession, organizers of large group meetings scheduled smaller and fewer meetings to take place in 2013 than was previously typical. As the U.S. economy recovered, we replaced this lower level of large advance-purchase groups with smaller, last-minute group bookings and transient business. Last-minute group demand weakened during the first half of 2013, largely driven by weak corporate business and soft government demand at many properties, but improved in the 2013 third quarter relative to the 2013 first half. Government group demand remains weak, including fewer meetings and lower attendance.

24
Table of Contents

While the short-term group demand shortfalls in the 2013 first half were largely mitigated by strong transient demand leading to strong occupancy rates, property-level food and beverage revenues increased year over year more slowly than room revenue, as transient guests typically spend less on food and beverage than group customers. In addition, spending on food and beverage was cautious in the 2013 first three quarters due to the somewhat uncertain economic climate and government spending restrictions in the U.S.
As of the end of the 2013 third quarter, the group revenue pace for company-operated Marriott Hotels brand properties in North America for the remainder of 2013 is up nearly 7 percent. Our group revenue booking pace for company-operated Marriott Hotels brand properties in North America is up over 4 percent for 2014, compared to a 2 percent increase in group revenue booking pace for 2014 at the end of the 2013 second quarter and a 1 percent increase in group revenue booking pace for 2014 a year ago, reflecting improved group demand, greater pricing power, and increased bookings in the 2013 third quarter for corporate business such as training meetings and new product launches.
Lodging System Growth and Pipeline
During the 20132014 first three quartersquarter, we added 17,9005,855 rooms (gross) to our system. Approximately 3656 percent of new rooms are located outside the United States and 2918 percent of the room additions are conversions from competitor brands. At the end of the 2013 third2014 first quarter, we havehad over 144,000200,000 rooms in our lodging development pipeline, which we define as hotelsincludes hotel rooms under construction and under signed contracts, including hotels pending conversion to one of our brands, compared toas well as nearly 141,000 rooms at the end of the 2013 second quarter, using a comparable methodology. Beginning in the 2013 third quarter, we changed our methodology of measuring our lodging development pipeline conforming to the new STR (Smith Travel Research) guidelines designed to improve comparability across other lodging companies and more accurately measure industry supply growth.In addition to our lodging development pipeline, at the end of the 2013 third quarter, we also have more than 31,00030,000 hotel rooms approved for development but not yet under signed contracts compared tocontracts. Our pipeline does not include the over 15,000 such10,000 rooms atassociated with the endProtea transaction which closed on April 1, 2014. We expect the number of the 2013 second quarter. For the 2013 full year, we expect to add nearly 30,000our hotel rooms (gross) to our system. We expectwill increase by approximately10,000 rooms to exit the system during the 20136 full year, largely due to financialpercent in 2014, including the addition of rooms associated with the Protea transaction, and quality issues.approximately 5 percent, net of deletions. The figures in this paragraph do not include residential andor timeshare units.



23
Table of Contents

CONSOLIDATED RESULTS
The following discussion presents our analysis of the significant items of the results of our operations for the 2013 third2014 first quarter compared to the 2012 third quarter, and the 2013 first three quarters compared to the 2012 first three quartersquarter.
Revenues
ThirdFirst Quarter. Revenues increased by $431151 million (165 percent) to $3,1603,293 million in the 2014first quarter from $3,142 million in the 2013 third quarter from $2,729 million in the 2012thirdfirst quarter as a result of higher cost reimbursements revenue ($352122 million), higher franchise fees ($2612 million), higher owned, leased, and other revenue ($2010 million), higher incentive management fees ($175 million), comprised of an $11 million increase for North America and a $6 million increase primarily due to increases outside of North America, and higher base management fees ($162 million). We estimate that the $431 million increase in revenues included $37 million of combined base management fee, franchise fee, and incentive management fee revenues due to the additional eightthree fewer days of activity in the 2013 third2014 first quarter compared to the 2012 third2013 first quarter. reduced fee revenues by approximately $5 million.
Cost reimbursements revenue represents reimbursements of costs incurred on behalf of managed, franchised, and licensed properties and relates, predominantly, to payroll costs at managed properties where we are the employer, but also includes reimbursements for other costs, such as those associated with our Marriott Rewards and Ritz-Carlton Rewards programs. As we record cost reimbursements based upon costs incurred with no added markup, this revenue and related expense has no impact on either our operating income or net income. The $352122 million increase in total cost reimbursements revenue, to $2,5622,670 million in the 2014first quarter from $2,548 million in the 2013 third quarter from $2,210 million in the 2012thirdfirst quarter, reflected the impact of higher property-level demand at our properties and growth across the

25
Table of Contents

system. Since the end of the 2012 third2013 first quarter, our managed rooms increaseddecreased by 8,0601,822 rooms and our franchised rooms increased by 15,36718,312 rooms, net of hotels exiting the system.
The $162 million increase in total base management fees, to $150155 million in the 2014first quarter from $153 million in the 2013 third quarter from $134 million in the 2012thirdfirst quarter, mainly reflected the additional eight days of activity (approximately $13 million), the impact of unit growth across the system ($5 million), primarily driven by the Gaylord brand properties we began managing in the fourth quarter of 2012, stronger RevPAR due to increased demand ($4 million), and our recognition of previously deferred fees for a portfolio of hotels ($28 million), partially offset by the recognition in the 2012 third quarterdecreased fees due to properties that converted from managed to franchised ($3 million), foreign exchange losses ($2 million), and three fewer days of $7 million of previously deferred fees in conjunction with the sale of our equity interest in a North American-Limited Service joint venture.activity (approximately $2 million). The $2612 million increase in total franchise fees, to $175163 million in the 2014first quarter from $151 million in the 2013 third quarter from $149 million in the 2012thirdfirst quarter, primarily reflected the additional eight days of activity (approximately $12 million), stronger RevPAR due to increased demand ($78 million), and the impact of unit growth across the system and properties that converted to franchised from managed ($5 million), partially offset by three fewer days of activity (approximately $3 million). The $175 million increase in total incentive management fees, fromto $3671 million in the 2012 third2014 first quarter tofrom $5366 million in the 2013 thirdfirst quarter largely reflected the additional eight days of activity (approximately $12 million) and higher net property-level revenue, particularlypredominantly for full-serviceInternational segment hotels, in North America, which resulted in higher property-level income and margins ($5 million).margins.
The $2010 million increase in owned, leased, corporate housing, and other revenue, to $220234 million in the 2014first quarter from $224 million in the 2013 third quarter, from $200 million in the 2012thirdfirst quarter, predominantly reflected $10$13 million of higher owned and leased revenue, $5 million of higher termination fees, andpartially offset by $3 million of higher brandinglower termination fees. Higher owned and leased revenue reflected $8 million in revenue from a North American Full-Service managed property we acquired in the 2013 fourth quarter as well as strong demand in the U.S. and the additional eight days of activity.at several leased properties. Combined branding fees for credit card endorsements and the sale of branded residential real estate by others totaled $29 million in the 2013 third quarter and $26 million in the 2012third2014 first quarter quarter.
First Three Quarters.and Revenues increased by $1,508 million (19 percent) to $9,56525 million in the 2013first three quarters from $8,057 million in the 2012 first three quarters as a result of higher cost reimbursements revenue ($1,305 million), higher franchise fees ($83 million), higher base management fees ($70 million), higher incentive management fees ($41 million) comprised of a $31 million increase for North America and a $10 million increase outside of North America, and higher owned, leased, and other revenue ($9 million). We estimate that the $1,508 million increase in revenues included $99 million of combined base management fee, franchise fee, and incentive management fee revenues due to the additional 24 days of activity in the 2013 first three quarters compared to the 2012 first three quarters.
The $1,305 million increase in total cost reimbursements revenue, to $7,720 million in the 2013 first three quarters from $6,415 million in the 2012 first three quarters, reflectedthe impact of higher property-level demand and growth across the system.
The $70 million increase in total base management fees, to $469 million in the 2013 first three quarters from $399 million in the 2012 first three quarters, mainly reflectedthe additional 24 days of activity (approximately $38 million), the impact of unit growth across the system ($16 million), primarily driven by Gaylord brand properties we began managing in the fourth quarter of 2012, stronger RevPAR due to increased demand ($14 million), our recognition of previously deferred fees for a hotel portfolio ($4 million), and a favorable variance from fee reversals in the 2012 first three quarters to reflect contract revisions ($2 million), partially offset by the recognition in the 2012 third quarter of $7 million of previously deferred fees in conjunction with the sale of our equity interest in a North American-Limited Service joint venture. The $83 million increase in total franchise fees, to $503 million in the 2013 first three quarters from $420 million in the 2012 first three quarters, primarily reflectedthe additional 24 days of activity (approximately $42 million), stronger RevPAR due to increased demand ($17 million), the impact of unit growth across the system ($11 million), increased relicensing fees primarily for certain North American Limited-Service properties ($7 million), and an increase in MVW license fees ($3 million). The $41 million increase in incentive management fees from $142 million in the 2012 first three quarters to $183 million in the 2013 first three quarters largely reflectedhigher net property-level revenue, particularly for full-service hotels in North America, which resulted in higher property-level income and margins ($22 million) and fees for the additional 24 days of activity (approximately $19 million).

26
Table of Contents

The $9 million increase in owned, leased, corporate housing, and other revenue, to $690 million in the 2013 first three quarters, from $681 million in the 2012 first three quarters, reflected $17 million of higher owned and leased revenue, $15 million of higher branding fees, $7 million of higher hotel agreement termination fees, and $4 million of higher other revenue, partially offset by $35 million of lower corporate housing revenue due to the sale of the ExecuStay corporate housing business in the 2012 second quarter. Higher owned and leased revenue reflected strong demand and the additional 24 days of activity, partially offset by a $2 million business interruption payment received in the 2012 second quarter from a utility company. Combined branding fees for credit card endorsements and the sale of branded residential real estate by others totaled $84 million in the 2013 first three quarters and $69 million in the 2012 first three quarters.

Operating Income
ThirdFirst Quarter. Operating income increased by $3228 million to $245254 million in the 2014first quarter from $226 million in the 2013 third quarter from $213 million in the 2012thirdfirst quarter. The $3228 million increase in operating income reflected a $2616 million decrease in general, administrative and other expenses, $12 million increase in franchise fees, a $175 million increase in incentive management fees, $4 million of higher owned, leased, and other revenue net of direct expenses, and a $162 million increase in base management fees, and $8 million of higher owned, leased, corporate housing, and other revenue net of direct expenses, partially offset by a $35an $11 millionincrease in general, administrativedepreciation and other expenses. Approximately $26 million ofamortization expense. We estimate that the net increase in operating income was due to the additional eightthree fewer days of activity in the 2013 third2014 first quarter. decreased operating income by approximately $5 million. We discuss the reasons for the increases in base management fees, franchise fees, and incentive management fees compared to the 20122013 thirdfirst quarter in the preceding “Revenues” section.

24
Table of Contents

The $84 million (319 percent) increase in owned, leased, corporate housing, and other revenue net of direct expenses was largely attributable to $5$7 million of higher termination fees, as well as $3 million of higher branding fees from the additional eight days of activity, partially offset by $2 million of lower owned and leased revenue, net of direct expenses, (which included $1partially offset by $3 million of lower termination fees. Higher owned and leased revenue, net of direct expenses from the additional eight daysreflected $4 million in net favorable results at several leased properties and $3 million of activity). Lower owned and leased revenue, net of direct expenses primarily reflected $2 million in pre-opening expenses for two EDITION hotels and $3 million in lower results at one leaseda North American Full-Service managed property in London due to tough comparisons from the Olympicsthat we acquired in the prior year, partially offset by net stronger results at several other leased properties.2013 fourth quarter.
General, administrative, and other expenses increaseddecreased by $3516 million (2710 percent) to $167148 million in the 2014first quarter from $164 million in the 2013 third quarter from $132 million in the 2012thirdfirst quarter. The increasedecrease largely reflected approximately $12$5 million of expenses related to the additional eight days of activity, and the following 2013 third quarter items: $12foreign exchange gains, $4 million of increasedlower compensation and other overhead expenses, primarily associated with higher costs in international markets and branding and service initiatives to enhance and grow our brands globally; a $3 million impairment charge for deferred contract acquisition costs primarily for properties that had cash flow shortfalls or left our system;of lower legal expenses, and $2 million of higher compensation and other overhead expenses. The increase also reflected a net increase of $3 million in legallower expenses with lower 2013 third quarter legal expenses more than offset by the impact of a favorable litigation settlement in the year ago quarter.related to brand initiatives. The $3516 million increasedecrease in total general, administrative, and other expenses included $14 million that we did not allocate to any of our segments, and $212 million that we allocated as follows: $7 million to our Luxury segment, $6 million to our North American Full-Service segment, $4 million to our International segment, and $4 million to our North American Limited-Service segment.
First Three Quarters. Operating income increased by $119 million to $750 million in the 2013 first three quarters from $631 million in the 2012 first three quarters. The $119 million increase in operating income reflected an $83 million increase in franchise fees, a $70 million increase in base management fees, a $41 million increase in incentive management fees, and $12 million of higher owned, leased, corporate housing, and other revenue net of direct expenses, partially offset by an $87 million increase in general, administrative and other expenses. Approximately $71 million of the net increase in operating income was due to the additional 24 days of activity in the 2013 first three quarters. We discuss the reasons for the increases in base management fees, franchise fees, and incentive management fees compared to the 2012 first three quarters in the preceding “Revenues” section.
The $12 million (11 percent) increase in owned, leased, corporate housing, and other revenue, net of direct expenses was largely attributable to $15 million of higher branding fees (which included a $6 million increase in

27
Table of Contents

branding fees from the additional 24 days of activity), $7 million of higher hotel agreement termination fees, and $4 million of higher other revenue, partially offset by $14 million of lower owned and leased revenue, net of direct expenses. Lower owned and leased revenue, net of direct expenses was primarily due to $6 million in costs related to three International segment leases we terminated, $6 million in lower results at one leased property in London, $3 million in pre-opening expenses for two EDITION hotels, and a $2 million business interruption payment received in the 2012 second quarter from a utility company for our leased property in Japan, partially offset by a $4 million increase from the additional 24 days of activity.
General, administrative, and other expenses increased by $87 million (20 percent) to $526 million in the 2013 first three quarters from $439 million in the 2012 first three quarters. The increase largely reflected approximately $37 million of expenses related to the additional 24 days of activity, as well as the following 2013 first three quarters items: $21 million of increased other expenses primarily associated with higher costs in international markets and branding and service initiatives to enhance and grow our brands globally; $11 million of higher compensation and other overhead expenses; $10 million of impairment and accelerated amortization expense for deferred contract acquisition costs primarily for properties that left our system or had cash flow shortfalls; a $5 million performance cure payment for an International segment property; $4 million of amortization expense for deferred contract acquisition costs related to the fourth quarter 2012 Gaylord brand and hotel management company acquisition; and $3 million of increased expenses due to unfavorable foreign exchange rates. The increase also reflected favorable litigation settlements in 2012, partially offset by lower 2013 legal expenses, netting to an unfavorable $5 million in legal expenses. These increases were partially offset by a favorable variance from the accelerated amortization of $8 million of deferred contract acquisition costs in the 2012 first three quarters for a North American Full-Service segment property that exited our system. The $87 million increase in total general, administrative, and other expenses included $35 million that we did not allocate to any of our segments, and $52 million that we allocated as follows: $18 million to our International segment, $18 million to our Luxury segment, $91 million to our North American Full-Service segment and $71 million to our North American Limited-ServiceInternational segment.
GainsDepreciation and Other Income
We show our gains and other income for the 2013 and 2012third quarters and first three quarters in the following table:
($ in millions)92 Days Ended
September 30, 2013		 84 Days Ended
September 7, 2012		 276 Days Ended
September 30, 2013		 252 Days Ended
September 7, 2012
Gains on sales of real estate and other$1
 $22
 $4
 $26
Gain on sale of joint venture and other investments—
 21
 9
 21
Income from cost method joint ventures—
 —
 1
 3
Impairment of cost method joint venture investment and equity securities—
 (7) —
 (7)
 $1
 $36
 $14
 $43
Third Quarter. Gains and other income decreasedamortization expense increased by $35$11 million (97 percent) (44 percent) to $1$36 million in thethird quarter compared to $36 million in the 20122014 thirdfirst quarter. This decrease in gains and other income primarily reflected an unfavorable variance to the following 2012 third quarter items: (1) a $21 million gain on the sale of a North American Limited-Service joint venture (formerly two joint ventures which were merged before the sale), reflected in the "Gain on sale of joint venture and other investments" caption above; and (2) recognition of the $20 million remaining gain we deferred in 2005 due to contingencies in the original transaction documents associated with the sale of land to one of the joint ventures, reflected in the "Gains on sales of real estate and other" caption above. This decrease in gains and other income was partially offset by a favorable variance from an other-than-temporary $7 million impairment of a cost method joint venture investment we recorded in the 2012 third quarter.
First Three Quarters. Gains and other income decreased by $29 million (67 percent) to $14 million in the 2013 first three quarters compared to $43 million in the 2012 first three quarters. This decrease in gains and other income principally reflected a favorable variance from a total 2012 third quarter gain of $41 million on the sale of the equity interest in a North American Limited-Service joint venture which we discuss in the preceding "Third

28
Table of Contents

Quarter" discussion. This decrease in gains and other income was partially offset by a gain of $8 million we recognized in the 2013 first three quarters on the sale of a portion of our shares of a publicly traded company and a favorable variance from an other-than-temporary $7 million impairment we recorded in the 2012 third quarter which we discuss in the preceding "Third Quarter" discussion.
Interest Expense
Third Quarter. Interest expense decreased by $1 million (3 percent) to $2825 million in the 2013 third quarter compared to $29 million in the 2012thirdfirst quarter. This decrease in interest expense principallyThe increase primarily reflected a net $2the $10 million decrease due to net Senior Note retirements and new Senior Note issuances at lower interest rates. These decreases in interest expense were partially offset by interest expense related toimpairment charge on the additional eight days of activity in the 2013 third quarter.
First Three Quarters. Interest expense decreased by $8 million (8 percent) to $88 million in the 2013 first three quarters compared to $96 million in the 2012 first three quarters. This decrease in interest expense principally reflected a net $8 million decrease due to net Senior Note retirements and new Senior Note issuances at lower interest rates, and $7 million of increased capitalized interest associated with construction projects largely to develop three EDITION hotels. These decreaseshotels discussed in interest expense were partially offset by interest expense related to the additional 24 days of activity in the 2013 first three quarters.Footnote No. 12, "Acquisitions and Dispositions."

Interest Income and Income Tax
ThirdFirst Quarter. Interest income increased by $2 million (67 percent) to $5 million in the 2013 third2014 first quarter compared to $3 million in the 2012 third2013 first quarter. This increase in interest income primarily reflected $2 million earned on the $65 million mandatorily redeemable preferred equity ownership interest acquired in the 2013 second quarter. See Footnote No. 5,4, "Fair Value of Financial Instruments" for more information on the acquisition.this interest.
Our tax provision decreased by $166 million (209 percent) to $6359 million in the 20132014 thirdfirst quarter compared to $7965 million in the 2012 third2013 first quarter. The decrease was primarily due to higher income before income taxes in jurisdictions outsidethe $21 million favorable resolution of thea U.S. with lowerfederal tax rates and true-ups of foreign tax provisions in the 2013 third quarter.
First Three Quarters. Interest income increasedissue relating to a guest marketing program, which was partially offset by $3 million (30 percent) to $13 million in the 2013 first three quarters compared to $10 million in the 2012 first three quarters. Thisan increase in interest income primarily reflected $3 million earned on the mandatorily redeemable preferred equity ownership interest discussed in the preceding "Third Quarter" discussion.
Our tax provision increased by $24 million (13 percent) to $212 million in the 2013 first three quarters compared to $188 million in the 2012 first three quarters. The increase resultedresulting from higher income before income taxes, principallypre-tax earnings due to increased demand and the additional 24 days of activity, partially offset by a lower effective tax rate in the 2013 first three quarters (30.8 percent in 2013 and 32.5 percent in 2012) primarily due to higher income before income taxes in jurisdictions outside of the U.S. with lower tax rates.demand.
Equity in Losses
Third Quarter. Equity in losses of zero in the 2013 third quarter decreased by $1 million from equity in losses of $1 million in the 2012 third quarter. The decrease primarily reflected the sale in the 2012 third quarter of an equity interest in a North American Limited-Service Lodging segment joint venture with losses.
First Three Quarters. Equity in losses of $2 million in the 2013 first three quarters decreased by $8 million from equity in losses of $10 million in the 2012 first three quarters. The decrease primarily reflected a favorable variance from the following 2012 first three quarters items: (1) $8 million in losses at a Luxury segment joint venture for the impairment of certain underlying residential properties; and (2) a $2 million loan loss provision for certain notes receivable due from another Luxury segment joint venture. These favorable variances were partially offset by a $4 million impairment charge in the 2013 second quarter associated with a corporate joint venture (not allocated to one of our segments) that we determined was fully impaired because we do not expect to recover the investment.

29
Table of Contents

Net Income
ThirdFirst Quarter. Net income increased by $1736 million to $160172 million in the 2014first quarter from $136 million in the 2013 third quarter from $143 million in the 2012thirdfirst quarter, and diluted earnings per share increased by $0.080.14 per share (1833 percent) to $0.52 per share from $0.440.57 per share in the 20122014 thirdfirst quarter from $0.43 per share in the 2013first quarter. As discussed in more detail in the preceding sections beginning with “Revenues” or as shown in the Condensed Consolidated Statements of Income, the $1736 million increase in net income compared to the year-ago quarter was due to lower general, administrative, and other expenses ($16 million), higher franchise fees ($2612 million), lower income taxes ($6 million), higher incentive management fees ($175 million), higher owned, leased, and other revenue net of direct expenses ($4 million), higher base management fees ($16 million), lower income taxes ($16 million), higher owned, leased, corporate housing, and other revenue net of direct expenses ($82 million), higher interest income ($2 million), lowerhigher equity in lossesearnings ($12 million), and lower interest expense ($1 million). These increases were partially offset by higher general, administrative,depreciation and other expenses ($35 million)amortization expense ($11 million) and lower gains and other income ($35 million).
First Three Quarters. Net income increased by $85 million to $475 million in the 2013 first three quarters from $390 million in the 2012 first three quarters, and diluted earnings per share increased by $0.35 per share (30 percent) to $1.51 per share from $1.16 per share in the 2012 first three quarters. As discussed in more detail in the preceding sections beginning with “Revenues” or as shown in the Consolidated Statements of Income, the $85 million increase in net income compared to the year-ago period was due to higher franchise fees ($83 million), higher base management fees ($70 million), higher incentive management fees ($41 million), higher owned, leased, corporate housing, and other revenue net of direct expenses ($12 million), lower interest expense ($8 million), lower equity in losses ($8 million), and higher interest income ($3 million). These increases were partially offset by higher general, administrative, and other expenses ($87 million), lower gains and other income ($29 million), and higher income taxes ($24 million).
Earnings Before Interest Expense, Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted EBITDA
EBITDA, a financial measure that is not prescribed or authorized by United States generally accepted accounting principles (“GAAP”), reflects earnings excluding the impact of interest expense, provision for income taxes, depreciation and amortization. We believe that EBITDA is a meaningful indicator of operating performance because we use it to measure our ability to service debt, fund capital expenditures, and expand our business. We also use EBITDA, as do analysts, lenders, investors and others, to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company’s capital structure, debt levels, and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can

25
Table of Contents

also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. EBITDA also excludes depreciation and amortization expense which we report under "Depreciation and amortization" as well as depreciation we include under "Reimbursed costs" in our Consolidated Statements of Income, because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.
We also believe that Adjusted EBITDA, another non-GAAP financial measure, is a meaningful indicator of operating performance. Our Adjusted EBITDA reflects an adjustment to exclude share-based compensation expense for the $41 million pre-tax gain on the 2012 third quarter sale of an equity interest in a North American Limited-Service joint venture discussed earlierall periods presented. Because companies use share-based payment awards differently, both in the "Gainstype and Other Income" caption.quantity of awards granted, we excluded share-based compensation expense to address considerable variability among companies in recording compensation expense. We believe that Adjusted EBITDA that excludes this item is a meaningful measure of our operating performance because it permits period-over-period comparisons of our ongoing core operations before this item and facilitates our comparison of results from our ongoing operations before this item with results from other lodging companies.
EBITDA and Adjusted EBITDA have limitations and should not be considered in isolation or as substitutes for performance measures calculated under GAAP. Both of these non-GAAP measures exclude certain cash expenses that we are obligated to make. In addition, other companies in our industry may calculate EBITDA and in particular Adjusted EBITDA differently than we do or may not calculate them at all, limiting EBITDA's and Adjusted EBITDA's usefulness as comparative measures.

30
Table of Contents

We show our EBITDA and Adjusted EBITDA calculations for the 20132014 and 20122013 thirdfirst quarters andthat reflect the 2013 and 2012 first three quarterschanges we describe above and reconcile those measures with Net Income in the following table:
Three Months Ended
($ in millions)92 Days Ended
September 30, 2013		 84 Days Ended
September 7, 2012		 276 Days Ended
September 30, 2013		 252 Days Ended
September 7, 2012		March 31, 2014 March 31, 2013
Net Income$160
 $143
 $475
 $390
$172
 $136
Interest expense28
 29
 88
 96
30
 31
Tax provision63
 79
 212
 188
59
 65
Depreciation and amortization39
 33
 113
 100
36
 25
Less: Depreciation reimbursed by third-party owners(5) (3) (14) (11)
Depreciation classified in reimbursed costs12
 12
Interest expense from unconsolidated joint ventures1
 1
 3
 9
1
 1
Depreciation and amortization from unconsolidated joint ventures3
 2
 9
 16
4
 3
EBITDA$289
 $284
 $886
 $788
$314
 $273
Less: Gain on Courtyard joint venture sale, pretax—
 (41) —
 (41)
Share-based compensation (including share-based compensation reimbursed by third-party owners)25
 30
Adjusted EBITDA$289
 $243
 $886
 $747
$339
 $303

BUSINESS SEGMENTS
We are a diversified global lodging companycompany. During the 2014 first quarter, we modified the information that our President and Chief Executive Officer reviews to be consistent with operations in fourour continent structure. This structure aligns our business segments:around geographic regions and is designed to enable us to operate more efficiently and to accelerate worldwide growth. As a result of modifying our reporting information, we revised our operating segments to eliminate our former Luxury segment, which we allocated between our existing North American Full-Service Lodging,operating segment, and the following four new operating segments: Asia Pacific, Caribbean and Latin America, Europe, and Middle East and Africa.
Although our North American Full-Service and North American Limited-Service Lodging, International Lodging,segments meet the applicable accounting criteria to be reportable business segments, the four new operating segments do not meet the criteria to be reportable and Luxury Lodging.were combined into an "all other" category, which we refer to as "International." We

26
Table of Contents

revised prior period business segment information to conform to our new business segment presentation. See Footnote No. 12,11, “Business Segments,” to our Financial Statements for further information on our segments including how we aggregate our individual brands into each segment changes and other information about each segment, including revenues and assets, as well as a reconciliation of segment results to net income.
We added 154163 properties (31,88226,158 rooms) and 4354 properties (9,16510,131 rooms) exited our system since the end of the 20122013 thirdfirst quarter. These figures do not include residential units. During that time we also added twothree residential properties (140161 units) and no residential properties exited the system.
See the "CONSOLIDATED RESULTS" caption earlier in this report for additionalfurther information.
ThirdFirst Quarter. Total segment financial results decreasedincreased by $122 million to $288311 million in the 20132014 thirdfirst quarter from $289 million in the 20122013 thirdfirst quarter, and total segment revenues increased by $432155 million to $3,0913,236 million in the 2014first quarter, a 5 percent increase from revenues of $3,081 million in the 2013 third quarter, a 16 percent increase from revenues of $2,659 million in the 2012thirdfirst quarter.
The quarter-over-quarter increase in segment revenues of $432155 million was a result of a $360128 million increase inof higher cost reimbursements revenue, a $2612 million increase in franchise fees, $8 million of higher owned, leased, and other revenue, a $175 million increase in incentive management fees, and $2 million of higher base management fees. The quarter-over-quarter increase in segment results of $22 million across our business reflected a $1612 million increase in franchise fees, $5 million of higher incentive management fees, a $2 million increase in base management fees, and a $13 million increase in owned, leased, corporate housing, and other revenue. The quarter-over-quarter decrease in segment results of $1 million across our lodging business reflected $41 million of lower gains and other income and a $21 million increase in general, administrative, and other expenses, mostly offset by a $26 million increase in franchise fees, a $17 million increase in incentive management fees, a $16 million increase in base management fees, and a $2 million increase inof higher owned, leased, corporate housing, and other revenue net of direct expenses.expenses, a $2 million decrease in general, administrative, and other expenses, and a $1 million increase in equity in earnings, partially offset by a $2 million increase in depreciation and amortization expense. For more information on the variances see the preceding sections beginning with “Revenues.”
In the 20132014 thirdfirst quarter, 3236 percent of our managed properties paid incentive management fees to us versus 2833 percent in the 2012 third2013 first quarter. Also, 34 International segment properties that did not earn any incentive management fees in the year-ago quarter earned a combined $4 million in incentive management fees in the 2014 first quarter. In addition, in the 20132014 thirdfirst quarter, 6655 percent of our incentive fees came from properties outside the United States, versus 7952 percent in the 2012 third2013 first quarter. In North America, 1621 percent of managed properties paid incentive management fees to us in the 2013 third2014 first quarter, compared to 1219 percent in the 2012 third2013 first quarter. Further, in North America, 23 North American Full-Service segment properties and 17 North American Limited-Service segment properties earned a combined $10 million in incentive management fees in the 2013 third quarter, but did not earn any incentive management fees in the year-ago quarter.
See “Statistics” below for detailed information on Systemwide RevPAR and Company-operated RevPAR by segment, region, and brand.
Compared to the 2013 first quarter, worldwide comparable company-operated house profit margins in the 2014 first quarter increased by 1.3 percentage points and worldwide comparable company-operated house profit per available room ("HP-PAR") increased by 10.6 percent on a constant U.S. dollar basis, reflecting higher occupancy, rate increases, and improved productivity. These same factors contributed to North American company-operated house profit margins increasing by 1.6 percentage points compared to the 2013 first quarter. HP-PAR at those same properties increased by 12.9 percent. International company-operated house profit margins increased by 0.7 percentage points, and HP-PAR at those properties increased by 6.3 percent reflecting increased demand and higher RevPAR in most locations and improved productivity.


3127
Table of Contents

First Three Quarters. Total segment financial results increased by $97 million to $902 million in the 2013 first three quarters from $805 million in the 2012 first three quarters, and total segment revenues increased by $1,506 million to $9,366 million in the 2013 first three quarters, a 19 percent increase from revenues of $7,860 million in the 2012 first three quarters.
The year-over-year increase in segment revenues of $1,506 million was a result of a $1,325 million increase in cost reimbursements revenue, an $81 million increase in franchise fees, a $70 million increase in base management fees, and a $41 million increase in incentive management fees, partially offset by an $11 million decrease in owned, leased, corporate housing, and other revenue. The year-over-year increase in segment results of $97 million across our lodging business reflected an $81 million increase in franchise fees, a $70 million increase in base management fees, a $41 million increase in incentive management fees, and $7 million in decreased joint venture equity losses, partially offset by a $52 million increase in general, administrative, and other expenses, $43 million of lower gains and other income, and a $7 million decrease in owned, leased, corporate housing, and other revenue net of direct expenses. For more information on the variances see the preceding sections beginning with “Revenues.”
In the 2013 first three quarters, 38 percent of our managed properties paid incentive management fees to us versus 32 percent in the 2012 first three quarters. In addition, in the 2013 first three quarters, 56 percent of our incentive fees came from properties outside the United States, versus 65 percent in the 2012 first three quarters. In North America, 22 percent of managed properties paid incentive management fees to us in the 2013 first three quarters, compared to 15 percent in the 2012 first three quarters. Further, in North America, 32 North American Full-Service segment properties, 24 North American Limited-Service segment properties, and 2 Luxury segment properties earned a combined $15 million in incentive management fees in the 2013 first three quarters, but did not earn any incentive management fees in the 2012 first three quarters.

Summary of Properties by Brand
Including residential properties, we added 4432 lodging properties (6,5805,855 rooms) during the 20132014 thirdfirst quarter, while 814 properties (2,2202,154 rooms) exited the system, increasing our total properties to 3,8833,934 (670,507679,321 rooms). These figures include 3740 home and condominium products (4,0674,228 units), for which we manage the related owners’ associations.
Unless otherwise indicated, our references to Marriott Hotels throughout this report include JW Marriott and Marriott Conference Centers, references to Renaissance Hotels include Renaissance ClubSport, and references to Fairfield Inn & Suites include Fairfield Inn.

3228
Table of Contents

At September 30, 2013March 31, 2014, we operated, franchised, and licensed the following properties by brand:brand:
 
Company-Operated Franchised / Licensed 
Other (3)
Company-Operated Franchised / Licensed 
Other (3)
BrandProperties Rooms Properties Rooms Properties RoomsProperties Rooms Properties Rooms Properties Rooms
U.S. Locations                      
Marriott Hotels133
 68,982
 182
 55,380
 —
 —
130
 67,762
 182
 55,534
 —
 —
Marriott Conference Centers10
 2,915
 —
 —
 —
 —
10
 2,915
 —
 —
 —
 —
JW Marriott15
 9,735
 7
 2,914
 —
 —
15
 9,735
 7
 2,911
 —
 —
Renaissance Hotels33
 15,035
 41
 11,805
 —
 —
33
 15,035
 41
 11,805
 —
 —
Renaissance ClubSport—
 —
 2
 349
 —
 —
—
 —
 2
 349
 —
 —
Gaylord Hotels5
 8,098
 —
 —
 —
 —
5
 8,098
 —
 —
 —
 —
Autograph Collection—
 —
 30
 8,059
 —
 —
—
 —
 34
 8,842
 —
 —
The Ritz-Carlton37
 11,048
 —
 —
 —
 —
37
 11,040
 —
 —
 —
 —
The Ritz-Carlton-Residential (1)
30
 3,598
 —
 —
 —
 —
30
 3,598
 —
 —
 —
 —
Courtyard275
 43,200
 555
 73,349
 —
 —
274
 43,127
 563
 74,991
 —
 —
Fairfield Inn & Suites4
 1,197
 690
 62,088
 —
 —
4
 1,197
 691
 62,022
 —
 —
SpringHill Suites29
 4,582
 274
 30,971
 —
 —
29
 4,582
 281
 31,852
 —
 —
Residence Inn123
 17,884
 499
 57,215
 —
 —
118
 17,090
 508
 58,544
 —
 —
TownePlace Suites22
 2,440
 196
 19,190
 —
 —
19
 2,123
 203
 19,964
 —
 —
Timeshare (2)
—
 —
 48
 10,560
 —
 —
—
 —
 47
 10,578
 —
 —
Total U.S. Locations716
 188,714
 2,524
 331,880
 —
 —
704
 186,302
 2,559
 337,392
 —
 —
                      
Non-U.S. Locations                      
Marriott Hotels137
 40,456
 35
 10,340
 —
 —
139
 41,070
 39
 11,545
 —
 —
JW Marriott35
 12,841
 4
 1,016
 —
 —
38
 13,982
 4
 1,016
 —
 —
Renaissance Hotels56
 18,478
 22
 6,725
 —
 —
54
 17,772
 24
 7,037
 —
 —
Autograph Collection1
 308
 14
 1,729
 5
 348
3
 584
 18
 2,543
 5
 348
The Ritz-Carlton42
 12,660
 —
 —
 —
 —
47
 13,777
 —
 —
 —
 —
The Ritz-Carlton-Residential (1)
7
 469
 —
 —
 —
 —
9
 575
 1
 55
 —
 —
The Ritz-Carlton Serviced Apartments4
 579
 —
 —
 —
 —
4
 579
 —
 —
 —
 —
EDITION2
 251
 —
 —
 —
 —
2
 251
 —
 —
 —
 —
AC Hotels by Marriott—
 —
 —
 —
 75
 8,491
—
 —
 —
 —
 74
 8,329
Bulgari Hotels & Resorts2
 117
 1
 85
 —
 —
2
 117
 1
 85
 —
 —
Marriott Executive Apartments27
 4,295
 —
 —
 —
 —
28
 4,423
 —
 —
 —
 —
Courtyard60
 12,829
 56
 9,898
 —
 —
63
 13,300
 56
 9,898
 —
 —
Fairfield Inn & Suites—
 —
 16
 1,896
 —
 —
1
 148
 16
 1,944
 —
 —
SpringHill Suites—
 —
 2
 299
 —
 —
—
 —
 2
 299
 —
 —
Residence Inn6
 749
 17
 2,480
 —
 —
6
 749
 18
 2,600
 —
 —
TownePlace Suites—
 —
 2
 278
 —
 —
—
 —
 2
 278
 —
 —
Timeshare (2)
—
 —
 15
 2,296
 —
 —
—
 —
 15
 2,323
 —
 —
Total Non-U.S. Locations379
 104,032
 184
 37,042
 80
 8,839
396
 107,327
 196
 39,623
 79
 8,677
                      
Total1,095
 292,746
 2,708
 368,922
 80
 8,839
1,100
 293,629
 2,755
 377,015
 79
 8,677
 
(1)Represents projects where we manage the related owners’ association. We include residential products once they possess a certificate of occupancy.
(2)Timeshare properties licensed by MVW under the Marriott Vacation Club, The Ritz-Carlton Destination Club, The Ritz-Carlton Residences, and Grand Residences by Marriott brand names. Includes products that are in active sales as well as those that are sold out. MVW's property and room counts are reported on a period-end basis for the MVW quarter ended September 6, 2013.March 28, 2014 and includes products that are in active sales as well as those that are sold out.
(3)Properties operated by or franchised in connection with unconsolidated joint ventures that hold management agreements and also provide services to franchised properties.


3329
Table of Contents

Total Lodging and Timeshare ProductsProperties by Segment
At September 30, 2013March 31, 2014, we operated, franchised, and licensed the following properties by segment:
 
Total Lodging and Timeshare ProductsTotal Lodging Properties
Properties RoomsProperties Rooms
U.S. Non-U.S. Total U.S. Non-U.S. TotalU.S. Non-U.S. Total U.S. Non-U.S. Total
North American Full-Service Lodging Segment (1)
           
North American Full-Service Segment (1)
           
Marriott Hotels315
 15
 330
 124,362
 5,355
 129,717
312
 15
 327
 123,296
 5,355
 128,651
Marriott Conference Centers10
 —
 10
 2,915
 —
 2,915
10
 —
 10
 2,915
 —
 2,915
JW Marriott22
 1
 23
 12,649
 221
 12,870
22
 1
 23
 12,646
 221
 12,867
Renaissance Hotels74
 2
 76
 26,840
 790
 27,630
74
 2
 76
 26,840
 790
 27,630
Renaissance ClubSport2
 —
 2
 349
 —
 349
2
 —
 2
 349
 —
 349
Gaylord Hotels5
 —
 5
 8,098
 —
 8,098
5
 —
 5
 8,098
 —
 8,098
Autograph Collection30
 —
 30
 8,059
 —
 8,059
34
 1
 35
 8,842
 233
 9,075
The Ritz-Carlton37
 1
 38
 11,040
 267
 11,307
The Ritz-Carlton-Residential (2)
30
 2
 32
 3,598
 214
 3,812
The Ritz-Carlton Serviced Apartments—
 —
 —
 —
 —
 —
458
 18
 476
 183,272
 6,366
 189,638
526
 22
 548
 197,624
 7,080
 204,704
North American Limited-Service Lodging Segment (1)
           
North American Limited-Service Segment (1)
           
Courtyard830
 21
 851
 116,549
 3,835
 120,384
837
 21
 858
 118,118
 3,835
 121,953
Fairfield Inn & Suites694
 14
 708
 63,285
 1,562
 64,847
695
 14
 709
 63,219
 1,610
 64,829
SpringHill Suites303
 2
 305
 35,553
 299
 35,852
310
 2
 312
 36,434
 299
 36,733
Residence Inn622
 19
 641
 75,099
 2,808
 77,907
626
 20
 646
 75,634
 2,928
 78,562
TownePlace Suites218
 2
 220
 21,630
 278
 21,908
222
 2
 224
 22,087
 278
 22,365
2,667
 58
 2,725
 312,116
 8,782
 320,898
2,690
 59
 2,749
 315,492
 8,950
 324,442
International Lodging Segment (1)
           
International Segment (1)
           
Marriott Hotels—
 157
 157
 —
 45,441
 45,441
—
 163
 163
 —
 47,260
 47,260
JW Marriott—
 38
 38
 —
 13,636
 13,636
—
 41
 41
 —
 14,777
 14,777
Renaissance Hotels—
 76
 76
 —
 24,413
 24,413
—
 76
 76
 —
 24,019
 24,019
Autograph Collection—
 15
 15
 —
 2,037
 2,037
Autograph Collection (3)
—
 25
 25
 —
 3,242
 3,242
Courtyard—
 95
 95
 —
 18,892
 18,892
—
 98
 98
 —
 19,363
 19,363
Fairfield Inn & Suites—
 2
 2
 —
 334
 334
—
 3
 3
 —
 482
 482
Residence Inn—
 4
 4
 —
 421
 421
—
 4
 4
 —
 421
 421
AC Hotels by Marriott (3)
—
 74
 74
 —
 8,329
 8,329
Marriott Executive Apartments—
 27
 27
 —
 4,295
 4,295
—
 28
 28
 —
 4,423
 4,423
—
 414
 414
 —
 109,469
 109,469
Luxury Lodging Segment           
The Ritz-Carlton37
 42
 79
 11,048
 12,660
 23,708
—
 46
 46
 —
 13,510
 13,510
Bulgari Hotels & Resorts—
 3
 3
 —
 202
 202
—
 3
 3
 —
 202
 202
EDITION—
 2
 2
 —
 251
 251
—
 2
 2
 —
 251
 251
The Ritz-Carlton-Residential (2)
30
 7
 37
 3,598
 469
 4,067
—
 8
 8
 —
 416
 416
The Ritz-Carlton Serviced Apartments—
 4
 4
 —
 579
 579
—
 4
 4
 —
 579
 579
67
 58
 125
 14,646
 14,161
 28,807
—
 575
 575
 —
 137,274
 137,274
Unconsolidated Joint Ventures           
Autograph Collection—
 5
 5
 —
 348
 348
AC Hotels by Marriott—
 75
 75
 —
 8,491
 8,491
—
 80
 80
 —
 8,839
 8,839
           
           
Timeshare (3)
48
 15
 63
 10,560
 2,296
 12,856
Timeshare (4)
47
 15
 62
 10,578
 2,323
 12,901


 

 

 

 

 



 

 

 

 

 

Total3,240
 643
 3,883
 520,594
 149,913
 670,507
3,263
 671
 3,934
 523,694
 155,627
 679,321
 
(1)North American includes properties located in the United States and Canada. International includes properties located outside the United States and Canada.
(2)Represents projects where we manage the related owners’ association. We include residential products once they possess a certificate of occupancy.
(3)All AC Hotels by Marriott properties and five Autograph Collection properties included in this table are operated by unconsolidated joint ventures that hold management agreements and also provide services to franchised properties.
(4)Timeshare properties licensed by MVW under the Marriott Vacation Club, The Ritz-Carlton Destination Club, The Ritz-Carlton Residences, and Grand Residences by Marriott brand names. Includes products that are in active sales as well as those that are sold out. MVW's property and room counts are reported on a period-end basis for the MVW quarter ended September 6, 2013.March 28, 2014 and includes products that are in active sales as well as those that are sold out.



3430
Table of Contents

The following tables show occupancy, average daily rate, and RevPAR for comparable properties, for each of the brands in our North American Full-Service and North American Limited-Service segments, and for our International segment by region, and our Luxury segment.region. Systemwide statistics include data from our franchised properties, in addition to our owned, leased, and managed properties.

35
Table of Contents

Comparable Company-Operated
North American Properties (1)
 
Comparable Systemwide
North American Properties (1)
 
Comparable Company-Operated
North American Properties (1)
 
Comparable Systemwide
North American Properties (1)
 
Three Months Ended
September 30, 2013		 
Change vs.
Three Months Ended September 30, 2012
 Three Months Ended
September 30, 2013		 
Change vs.
Three Months Ended September 30, 2012
 Three Months Ended
March 31, 2014		 
Change vs.
Three Months Ended March 31, 2013
 Three Months Ended
March 31, 2014		 
Change vs.
Three Months Ended March 31, 2013
 
Marriott Hotels                
Occupancy75.1% 0.6 %pts. 73.2% 0.7%pts. 73.1% 1.7%pts. 70.5% 1.9%pts. 
Average Daily Rate$172.54
 4.7 % $159.50
 4.4% $186.20
 3.0% $171.30
 3.5% 
RevPAR$129.53
 5.5 % $116.74
 5.4% $136.07
 5.5% $120.80
 6.3% 
Renaissance Hotels                
Occupancy74.3% 0.6 %pts. 73.0% 0.7%pts. 71.1% 1.5%pts. 69.9% 2.2%pts. 
Average Daily Rate$161.64
 2.3 % $148.25
 3.2% $172.46
 1.5% $157.92
 2.6% 
RevPAR$120.06
 3.2 % $108.27
 4.2% $122.63
 3.8% $110.37
 5.9% 
Autograph Collection                
Occupancy*
 *
 77.8% 2.3%pts.*
 *
 75.8% 1.5%pts.
Average Daily Rate*
 *
 $192.53
 2.2% *
 *
 $230.70
 10.7% 
RevPAR*
 *
 $149.77
 5.4% *
 *
 $174.82
 13.0% 
Composite North American Full-Service        
Occupancy75.0% 0.6 %pts. 73.3% 0.8%pts. 
Average Daily Rate$171.10
 4.4 % $158.98
 4.2% 
RevPAR$128.26
 5.2 % $116.56
 5.3% 
The Ritz-Carlton North America                
Occupancy70.5% 0.9 %pts. 70.5% 0.9%pts. 72.5% 1.0%pts. 72.5% 1.0%pts. 
Average Daily Rate$308.96
 7.4 % $308.96
 7.4% $348.56
 3.7% $348.56
 3.7% 
RevPAR$217.77
 8.8 % $217.77
 8.8% $252.58
 5.2% $252.58
 5.2% 
Composite North American Full-Service and Luxury         
Composite North American Full-Service         
Occupancy74.5% 0.6 %pts. 73.2% 0.8%pts. 72.5% 1.7%pts. 70.7% 1.9%pts. 
Average Daily Rate$184.20
 4.9 % $167.17
 4.5% $199.70
 2.8% $182.24
 3.6% 
RevPAR$137.26
 5.7 % $122.30
 5.6% $144.87
 5.3% $128.88
 6.5% 
Residence Inn                
Occupancy80.0% — %pts. 81.9% 0.5%pts. 75.3% 3.0%pts. 75.4% 2.1%pts. 
Average Daily Rate$127.88
 2.5 % $127.51
 3.6% $129.90
 2.0% $126.03
 2.8% 
RevPAR$102.29
 2.5 % $104.45
 4.2% $97.75
 6.2% $94.97
 5.7% 
Courtyard                
Occupancy72.0% 1.5 %pts. 74.1% 1.3%pts. 66.5% 2.9%pts. 67.2% 1.7%pts. 
Average Daily Rate$121.93
 4.0 % $124.51
 3.7% $127.44
 3.8% $126.17
 3.8% 
RevPAR$87.74
 6.2 % $92.25
 5.5% $84.77
 8.6% $84.74
 6.4% 
Fairfield Inn & Suites                
Occupancynm
 nm
pts. 73.0% 1.1%pts. nm
 nm
pts. 63.7% 1.4%pts. 
Average Daily Ratenm
 nm
  $101.02
 3.4% nm
 nm
  $98.56
 2.9% 
RevPARnm
 nm
  $73.72
 5.0% nm
 nm
  $62.82
 5.2% 
TownePlace Suites                
Occupancy76.6% (0.3)%pts. 76.9% 0.2%pts. 68.9% 7.1%pts. 70.5% 3.7%pts. 
Average Daily Rate$90.17
 6.3 % $92.53
 1.9% $94.64
 3.9% $94.73
 2.6% 
RevPAR$69.10
 5.9 % $71.13
 2.1% $65.23
 15.8% $66.75
 8.2% 
SpringHill Suites                
Occupancy74.5% 0.2 %pts. 75.9% 1.7%pts. 69.6% 1.4%pts. 70.3% 2.8%pts. 
Average Daily Rate$102.04
 1.0 % $109.10
 3.1% $113.49
 1.4% $109.52
 2.9% 
RevPAR$76.00
 1.3 % $82.77
 5.5% $79.03
 3.4% $77.02
 7.1% 
Composite North American Limited-Service                
Occupancy74.6% 1.0 %pts. 76.1% 1.0%pts. 69.2% 2.9%pts. 69.0% 2.0%pts. 
Average Daily Rate$120.78
 3.5 % $116.80
 3.5% $126.04
 3.2% $116.82
 3.1% 
RevPAR$90.04
 4.9 % $88.91
 4.9% $87.23
 7.7% $80.62
 6.2% 
Composite North American - All                
Occupancy74.5% 0.8 %pts. 75.0% 0.9%pts. 71.2% 2.2%pts. 69.6% 2.0%pts. 
Average Daily Rate$157.60
 4.4 % $134.60
 3.9% $171.58
 2.7% $141.66
 3.3% 
RevPAR$117.46
 5.5 % $101.01
 5.2% $122.23
 6.0% $98.67
 6.3% 

* There are no company-operated properties.
 nm means not meaningful as the brand is predominantly franchised.
(1)Statistics include only properties located in the United States.

3631
Table of Contents

Comparable Company-Operated
Properties		 
Comparable Systemwide
Properties
 Comparable Company-Operated
Properties		 
Comparable Systemwide
Properties
 
Three Months Ended
September 30, 2013		 
Change vs.
Three Months Ended September 30, 2012
 Three Months Ended
September 30, 2013		 
Change vs.
Three Months Ended September 30, 2012
 Three Months Ended
March 31, 2014		 
Change vs.
Three Months Ended March 31, 2013
 Three Months Ended
March 31, 2014		 
Change vs.
Three Months Ended March 31, 2013
 
Caribbean and Latin America                
Occupancy71.6% 0.5 %pts. 71.3% 1.6 %pts. 77.7% 2.5 %pts. 73.1% 2.5 %pts. 
Average Daily Rate$192.09
 8.1 % $167.64
 5.1 % $296.31
 7.5 % $248.27
 6.2 % 
RevPAR$137.62
 8.9 % $119.51
 7.5 % $230.36
 11.0 % $181.37
 9.9 % 
Europe                
Occupancy80.4% 3.1 %pts. 79.1% 3.1 %pts. 63.4% 1.4 %pts. 61.6% 1.7 %pts. 
Average Daily Rate$169.52
 (3.4)% $164.08
 (1.7)% $181.47
 0.3 % $175.22
 0.8 % 
RevPAR$136.27
 0.5 % $129.76
 2.2 % $115.08
 2.6 % $107.97
 3.6 % 
Middle East and Africa                
Occupancy46.3% (10.8)%pts. 47.4% (9.7)%pts. 59.6% — %pts. 60.5% 0.5 %pts. 
Average Daily Rate$142.57
 7.7 % $138.65
 6.9 % $202.06
 (0.6)% $196.10
 (0.5)% 
RevPAR$66.03
 (12.7)% $65.72
 (11.3)% $120.44
 (0.6)% $118.65
 0.4 % 
Asia Pacific                
Occupancy73.5% 2.9 %pts. 74.2% 2.9 %pts. 70.8% 2.2 %pts. 71.2% 2.2 %pts. 
Average Daily Rate$133.20
 (1.3)% $142.79
 (0.2)% $182.05
 2.9 % $179.96
 3.1 % 
RevPAR$97.97
 2.8 % $105.90
 3.8 % $128.90
 6.3 % $128.17
 6.4 % 
Regional Composite (1)
        
Total International (1)
        
Occupancy73.0% 1.2 %pts. 73.3% 1.6 %pts. 67.7% 1.7 %pts. 66.6% 1.9 %pts. 
Average Daily Rate$156.38
 (0.3)% $155.98
 0.5 % $200.98
 2.7 % $192.16
 2.7 % 
RevPAR$114.14
 1.3 % $114.32
 2.7 % $136.07
 5.3 % $128.07
 5.7 % 
International Luxury (2)
        
Total Worldwide (2)
        
Occupancy61.1% 0.1 %pts. 61.1% 0.1 %pts. 70.1% 2.0 %pts. 69.1% 1.9 %pts. 
Average Daily Rate$339.55
 7.1 % $339.55
 7.1 % $180.57
 2.7 % $150.02
 3.2 % 
RevPAR$207.36
 7.3 % $207.36
 7.3 % $126.61
 5.8 % $103.72
 6.2 % 
Total International (3)
        
Occupancy71.6% 1.1 %pts. 72.1% 1.5 %pts. 
Average Daily Rate$174.97
 0.9 % $170.90
 1.3 % 
RevPAR$125.23
 2.5 % $123.24
 3.4 % 
 

(1)Company-operated statistics include properties located outside of the United States and Canada for the Marriott Hotels, Renaissance Hotels, The Ritz-Carlton, Bulgari Hotels & Resorts, Autograph Collection, Courtyard, and Residence Inn brands. In addition to the foregoing brands, systemwide statistics also include properties located outside of the United States and Canada for Autograph Collection and Fairfield Inn & Suites brands.
(2)International Luxury includes The Ritz-Carlton properties located outside the United StatesCompany-operated and Canada, as well as Bulgari Hotels & Resorts and EDITION properties.
(3)Total International includes Regional Composite statistics and International Luxury statistics.



37
Table of Contents

 Comparable Company-Operated
Properties		 
Comparable Systemwide
Properties
 
 Three Months Ended
September 30, 2013		 
Change vs.
Three Months Ended September 30, 2012
 Three Months Ended
September 30, 2013		 
Change vs.
Three Months Ended September 30, 2012
 
Composite Luxury (1)
        
Occupancy65.9% 0.5%pts. 65.9% 0.5%pts. 
Average Daily Rate$322.77
 7.2% $322.77
 7.2% 
RevPAR$212.70
 8.1% $212.70
 8.1% 
Total Worldwide (2)
        
Occupancy73.6% 0.9%pts. 74.6% 1.0%pts. 
Average Daily Rate$162.97
 3.2% $140.53
 3.4% 
RevPAR$119.93
 4.4% $104.77
 4.8% 

(1)Composite Luxury includes worldwide properties for The Ritz-Carlton, Bulgari Hotels & Resorts, and EDITION brands.
(2)Company-operatedsystemwide statistics include properties worldwide for Marriott Hotels, Renaissance Hotels, Autograph Collection, Gaylord Hotels, The Ritz-Carlton, Bulgari Hotels & Resorts, EDITION, Residence Inn, Courtyard, Fairfield Inn & Suites, TownePlace Suites, and SpringHill Suites brands. In addition to the foregoing brands, systemwide statistics also include properties worldwide for the Autograph Collection brand.



38
Table of Contents

 
Comparable Company-Operated
North American Properties (1)
 
Comparable Systemwide
North American Properties (1)
 
 Nine Months Ended
September 30, 2013		 
Change vs.
Nine Months Ended September 30, 2012
 Nine Months Ended
September 30, 2013		 
Change vs.
Nine Months Ended September 30, 2012
 
Marriott Hotels        
Occupancy74.6% 0.7 %pts. 72.5% 1.0 %pts. 
Average Daily Rate$177.73
 4.6 % $163.51
 4.0 % 
RevPAR$132.60
 5.6 % $118.52
 5.4 % 
Renaissance Hotels        
Occupancy75.0% 0.4 %pts. 72.7% 0.9 %pts. 
Average Daily Rate$170.37
 3.5 % $153.11
 3.5 % 
RevPAR$127.73
 4.2 % $111.37
 4.8 % 
Autograph Collection        
Occupancy*
 *
 77.2% 1.6 %pts.
Average Daily Rate*
 *
 $201.70
 4.0 % 
RevPAR*
 *
 $155.65
 6.3 % 
Composite North American Full-Service        
Occupancy74.7% 0.6 %pts. 72.7% 1.0 %pts. 
Average Daily Rate$176.75
 4.5 % $163.29
 4.0 % 
RevPAR$131.95
 5.4 % $118.67
 5.4 % 
The Ritz-Carlton North America        
Occupancy72.2% 1.3 %pts. 72.2% 1.3 %pts. 
Average Daily Rate$319.98
 6.3 % $319.98
 6.3 % 
RevPAR$230.95
 8.2 % $230.95
 8.2 % 
Composite North American Full-Service and Luxury         
Occupancy74.4% 0.7 %pts. 72.6% 1.0 %pts. 
Average Daily Rate$190.71
 4.8 % $172.11
 4.2 % 
RevPAR$141.89
 5.8 % $125.03
 5.7 % 
Residence Inn        
Occupancy77.7% 0.8 %pts. 78.9% 0.5 %pts. 
Average Daily Rate$128.06
 2.8 % $125.57
 3.8 % 
RevPAR$99.51
 3.8 % $99.13
 4.4 % 
Courtyard        
Occupancy69.7% 0.6 %pts. 71.6% 0.8 %pts. 
Average Daily Rate$122.25
 4.3 % $123.50
 3.9 % 
RevPAR$85.17
 5.2 % $88.43
 5.0 % 
Fairfield Inn & Suites        
Occupancynm
 nm
pts. 69.4% 0.6 %pts. 
Average Daily Ratenm
 nm
  $98.70
 3.6 % 
RevPARnm
 nm
  $68.52
 4.6 % 
TownePlace Suites        
Occupancy70.1% (2.7)%pts. 73.4% (0.5)%pts. 
Average Daily Rate$88.89
 6.8 % $92.06
 2.4 % 
RevPAR$62.36
 2.8 % $67.54
 1.7 % 
SpringHill Suites        
Occupancy73.4% 1.5 %pts. 73.6% 1.2 %pts. 
Average Daily Rate$107.40
 2.4 % $108.32
 3.5 % 
RevPAR$78.83
 4.5 % $79.72
 5.2 % 
Composite North American Limited-Service        
Occupancy72.2% 0.6 %pts. 73.3% 0.6 %pts. 
Average Daily Rate$121.43
 3.9 % $115.41
 3.7 % 
RevPAR$87.70
 4.8 % $84.55
 4.6 % 
Composite North American - All        
Occupancy73.5% 0.7 %pts. 73.0% 0.8 %pts. 
Average Daily Rate$162.16
 4.5 % $135.85
 4.0 % 
RevPAR$119.17
 5.5 % $99.22
 5.1 % 

* There are no company-operated properties.
nm means not meaningful as the brand is predominantly franchised.
(1)Statistics include only properties located in the United States.

39
Table of Contents

 Comparable Company-Operated
Properties		 
Comparable Systemwide
Properties
 
 Nine Months Ended
September 30, 2013		 
Change vs.
Nine Months Ended September 30, 2012
 Nine Months Ended
September 30, 2013		 
Change vs.
Nine Months Ended September 30, 2012
 
Caribbean and Latin America        
Occupancy74.4% 0.6 %pts. 72.7% 1.8 %pts. 
Average Daily Rate$208.03
 5.1 % $182.24
 3.4 % 
RevPAR$154.70
 6.0 % $132.52
 5.9 % 
Europe        
Occupancy73.9% 1.7 %pts. 72.3% 1.7 %pts. 
Average Daily Rate$170.44
 (2.4)% $165.35
 (1.6)% 
RevPAR$125.93
 (0.1)% $119.51
 0.8 % 
Middle East and Africa        
Occupancy55.9% (0.7)%pts. 56.5% (0.4)%pts. 
Average Daily Rate$145.70
 2.8 % $142.31
 2.9 % 
RevPAR$81.45
 1.4 % $80.39
 2.2 % 
Asia Pacific        
Occupancy72.0% 1.7 %pts. 72.4% 1.8 %pts. 
Average Daily Rate$140.98
 0.3 % $145.72
 0.6 % 
RevPAR$101.51
 2.7 % $105.56
 3.2 % 
Regional Composite (1)
        
Occupancy71.2% 1.3 %pts. 70.9% 1.6 %pts. 
Average Daily Rate$161.61
 — % $159.73
 0.3 % 
RevPAR$115.11
 1.9 % $113.29
 2.5 % 
International Luxury (2)
        
Occupancy65.1% 2.2 %pts. 65.1% 2.2 %pts. 
Average Daily Rate$365.24
 4.2 % $365.24
 4.2 % 
RevPAR$237.90
 7.8 % $237.90
 7.8 % 
Total International (3)
        
Occupancy70.5% 1.4 %pts. 70.4% 1.6 %pts. 
Average Daily Rate$183.99
 1.1 % $177.97
 1.1 % 
RevPAR$129.72
 3.1 % $125.24
 3.5 % 


(1)Company-operated statistics include properties located outside of the United States and Canada for the Marriott Hotels, Renaissance Hotels, Courtyard, and Residence Inn brands. In addition to the foregoing brands, systemwide statistics also include properties located outside of the United States and Canada for Autograph Collection and Fairfield Inn & Suites brands.
(2)International Luxury includes The Ritz-Carlton properties located outside the United States and Canada, as well as Bulgari Hotels & Resorts and EDITION properties.
(3)Total International includes Regional Composite statistics and International Luxury statistics.

40
Table of Contents

 Comparable Company-Operated
Properties		 
Comparable Systemwide
Properties
 
 Nine Months Ended
September 30, 2013		 
Change vs.
Nine Months Ended September 30, 2012
 Nine Months Ended
September 30, 2013		 
Change vs.
Nine Months Ended September 30, 2012
 
Composite Luxury (1)
        
Occupancy68.7% 1.7%pts. 68.7% 1.7%pts. 
Average Daily Rate$340.88
 5.3% $340.88
 5.3% 
RevPAR$234.34
 8.0% $234.34
 8.0% 
Total Worldwide (2)
        
Occupancy72.5% 0.9%pts. 72.6% 0.9%pts. 
Average Daily Rate$168.90
 3.4% $142.76
 3.4% 
RevPAR$122.52
 4.7% $103.62
 4.8% 

(1)Composite Luxury includes worldwide properties for The Ritz-Carlton, Bulgari Hotels & Resorts, and EDITION brands.
(2)Company-operated statistics include properties worldwide for Marriott Hotels, Renaissance Hotels, The Ritz-Carlton, Bulgari Hotels & Resorts, EDITION, Residence Inn, Courtyard, Fairfield Inn & Suites, TownePlace Suites, and SpringHill Suites brands. In addition to the foregoing brands, systemwide statistics also include properties worldwide for the Autograph Collection brand.



4132
Table of Contents

North American Full-Service Lodgingincludes Marriott Hotels, JW Marriott, The Ritz-Carlton,Renaissance Hotels, Gaylord Hotels, and Autograph Collection Hotels .located in the United States and Canada.
Three Months Ended  
($ in millions)92 Days Ended
September 30, 2013		 84 Days Ended
September 7, 2012		 
Change
2013/2012
 276 Days Ended
September 30, 2013		 252 Days Ended
September 7, 2012		 
Change
2013/2012
March 31, 2014 March 31, 2013 
Change
2014/2013
Segment revenues$1,595
 $1,332
 20% $4,935
 $4,006
 23%$2,049
 $2,028
 1 %
Segment results$96
 $76
 26% $341
 $275
 24%$131
 $133
 (2)%
Since the 20122013 thirdfirst quarter, across our North American Full-Service Lodging segment we added 2014 properties (12,0183,341 rooms) and 1211 properties (4,6164,259 rooms) left the system.
ThirdFirst Quarter. For the three months ended September 30, 2013March 31, 2014, compared to the three months ended September 30, 2012,March 31, 2013, RevPAR for comparable systemwide North American Full-Service properties increased by 5.36.5 percent to $116.56128.88, occupancy for these properties increased by 0.81.9 percentage points to 73.370.7 percent, and average daily rates increased by 4.23.6 percent to $158.98182.24.
The $202 million increasedecrease in segment results, compared to the 20122013 thirdfirst quarter, was primarily driven by $17$3 million of higher basedepreciation and amortization expense, $1 million of lower incentive management fees, and $1 million of lower owned, leased, and other revenue net of direct expenses, partially offset by $3 million of higher franchise fees and $9$1 million of higher incentive management fees, partially offset by $6 million of higherlower general, administrative and other expenses. The increase in depreciation and amortization expense was primarily a result of depreciation for a North American Full-Service property that we acquired in the 2013 fourth quarter. The decrease in owned, leased, and other revenue net of direct expenses primarily reflected $3 million of lower termination fees, $2 million of net lower results at several leased properties, partially offset by $3 million of revenue, net of direct expenses for a North American Full-Service property that we acquired in the 2013 fourth quarter. Higher base management and franchise fees stemmed from bothwere a result of higher RevPAR growth due to increased demand and unit growth, including the Gaylord brand properties we began managing in the 2012 fourth quarter, and also reflected fees for the additional eight days of activity. The $9 million increase in incentive management fees primarily reflected fees for the additional eight days of activity, as well as higher property-level revenue which resulted in higher property-level income and margins. The $6 million increase in general, administrative, and other expenses largely reflected the following 2013 third quarter items: $3 million of increased amortization of deferred contract acquisition costs, primarily associated with the Gaylord brand and hotel management company acquisition and $3 million in other net miscellaneous cost increases (which included expenses for the additional eight days of activity).growth.
Cost reimbursements revenue and expenses for our North American Full-Service Lodging segment properties totaled $1,4381,838 million in the 2014first quarter, compared to $1,824 million in the 2013 third quarter, compared to $1,206 million in the 2012thirdfirst quarter.
First Three Quarters. For the nine months ended September 30, 2013, compared to the nine months ended September 30, 2012, RevPAR for comparable systemwide North American Full-Service properties increased by 5.4 percent to $118.67, occupancy for these properties increased by 1.0 percentage points to 72.7 percent, and average daily rates increased by 4.0 percent to $163.29.
The $66 million increase in segment results, compared to the 2012 first three quarters, was driven by $56 million of higher base management and franchise fees and $25 million of higher incentive management fees, partially offset by $9 million of higher general, administrative, and other expenses and $6 million of lower owned, leased, and other revenue net of direct expenses. Higher base management and franchise fees stemmed from both higher RevPAR due to increased demand and unit growth, including the Gaylord brand properties we began managing in the 2012 fourth quarter, and also reflected fees for the additional 24 days of activity. The $25 million increase in incentive management fees primarily reflected fees for the additional 24 days of activity, as well as higher property-level revenue which resulted in higher property-level income. The $9 million increase in general, administrative, and other expenses reflected the following 2013 first three quarters items: $4 million of amortization of deferred contract acquisition costs associated with the Gaylord brand and hotel management company acquisition, the $3 million impairment of deferred contract acquisition costs related to three properties that left the system, and $10 million in other net miscellaneous cost increases (which included expenses for the additional 24 days of activity). These increases were partially offset by a favorable variance from the accelerated amortization through the 2012 second quarter of $8 million of deferred contract acquisition costs for a property that exited our system and for which we earned a $14 million termination fee. The $6 million decrease in owned, leased, and other revenue net of direct expenses was primarily driven by our recognition in the 2012 second quarter of a $14 million termination fee for one property, partially offset by $7 million in termination fees received in the 2013 first three quarters for four properties and $3 million of stronger results at one leased property.

42
Table of Contents

Cost reimbursements revenue and expenses for our North American Full-Service Lodging segment properties totaled $4,411 million in the 2013 first three quarters, compared to $3,570 million in the 2012 first three quarters.

North American Limited-Service Lodging includes Courtyard, Fairfield Inn & Suites, SpringHill Suites, Residence Inn, and TownePlace Suites, and included Marriott ExecuStay until we sold that businesslocated in the 2012 second quarter.United States and Canada.
Three Months Ended  
($ in millions)92 Days Ended
September 30, 2013		 84 Days Ended
September 7, 2012		 
Change
2013/2012
 276 Days Ended
September 30, 2013		 252 Days Ended
September 7, 2012		 
Change
2013/2012
March 31, 2014 March 31, 2013 
Change
2014/2013
Segment revenues$695
 $612
 14 % $1,970
 $1,735
 14%$667
 $608
 10%
Segment results$131
 $157
 (17)% $372
 $347
 7%$115
 $106
 8%
Since the 20122013 thirdfirst quarter, across our North American Limited-Service Lodging segment we added 96107 properties (11,29413,107 rooms) and 1627 properties (1,8802,834 rooms) left the system. The majority of the properties that left the system were Courtyard and Fairfield Inn & Suites properties. In the 2012 second quarter, we completed the sale of our ExecuStay corporate housing business. The revenues, results of operations, assets, and liabilities of our ExecuStay business were not material to the Company's financial position, results of operations or cash flows for any of the periods presented.Residence Inn properties.
ThirdFirst Quarter. For the three months ended September 30, 2013March 31, 2014, compared to the three months ended September 30, 2012,March 31, 2013, RevPAR for comparable systemwide North American Limited-Service properties increased by 4.96.2 percent to $88.9180.62, occupancy for these properties increased by 1.02.0 percentage points to 76.169.0 percent, and average daily rates increased by 3.53.1 percent to $116.80116.82.
The $269 million decreaseincrease in segment results, compared to the 2012 third2013 first quarter, primarily reflected $40 million of lower gains and other income and $4$8 million of higher general, administrative, and other expenses, partially offset by $16 million of higher base management and franchise fees, and $2 million of higher incentive management fees. Lower gains and other income reflected an unfavorable variance from a $41 million gain on the sale of our equity interest in a joint venture in the 2012 third quarter. See the "Gains and Other Income" caption earlier in this report for additional information on the sale of this equity interest. Higher general, administrative, and other expenses reflected net miscellaneous cost increases (which included expenses for the additional eight days of activity). Higher base management and franchise fees were driven by higher RevPAR due to increased demand, some of which is attributableunit growth, and conversions to the favorable effect of property renovations, and higher relicensing fees, as well as the additional eight days of activity, partially offset by an unfavorable variancefranchised from the 2012 third quarter recognition of $7 million of deferred base management fees in conjunction with the sale of our equity interest in a joint venture. The increase in incentive management fees primarily reflected higher property-level revenue which resulted in higher property-level income and margins and also reflected fees for the additional eight days of activity.managed properties.
Cost reimbursements revenue and expenses for our North American Limited-Service Lodging segment properties totaled $521511 million in the 2014 first quarter, compared to $461 million in the 2013 third quarter, compared to $459 million in the 2012 thirdfirst quarter.
First Three Quarters. For the nine months ended September 30, 2013, compared to the nine months ended September 30, 2012, RevPAR for comparable systemwide North American Limited-Service properties increased by 4.6 percent to $84.55, occupancy for these properties increased by 0.6 percentage points to 73.3 percent, and average daily rates increased by 3.7 percent to $115.41.
The $25 million increase in segment results, compared to the 2012 first three quarters, primarily reflected $66 million of higher base management and franchise fees, $5 million of higher incentive management fees, and $2 million of higher owned, leased, and other revenue net of direct expenses, partially offset by $42 million of lower gains and other income and $7 million of higher general, administrative, and other expenses. Higher base management and franchise fees were driven by higher RevPAR due to increased demand, some of which is attributable to the favorable effect of property renovations, and higher relicensing fees, as well as the additional 24 days of activity, partially offset by an unfavorable variance from the 2012 third quarter recognition of $7 million of

4333
Table of Contents

deferred base management fees in conjunction with the sale of our equity interest in a joint venture. The increase in incentive management fees primarily reflected higher property-level revenue which resulted in higher property-level income and margins, and also reflected fees for the additional 24 days of activity. Lower gains and other income primarily reflected an unfavorable variance from a $41 million gain on the sale of our equity interest in a joint venture in the 2012 third quarter, as indicated in the preceding "Third Quarter" discussion. Higher general, administrative, and other expenses reflected net miscellaneous cost increases (which included expenses for the additional 24 days of activity).
Cost reimbursements revenue and expenses for our North American Limited-Service Lodging segment properties totaled $1,472 million in the 2013 first three quarters, compared to $1,284 million in the 2012 first three quarters.

International Lodging includes Marriott Hotels, JW Marriott, Renaissance Hotels, Autograph Collection, Courtyard, AC Hotels by Marriott, Fairfield Inn & Suites, Residence Inn, and Marriott Executive Apartmentsproperties located outside the United States and Canada.
Three Months Ended  
($ in millions)92 Days Ended
September 30, 2013		 84 Days Ended
September 7, 2012		 
Change
2013/2012
 276 Days Ended
September 30, 2013		 252 Days Ended
September 7, 2012		 
Change
2013/2012
March 31, 2014 March 31, 2013 
Change
2014/2013
Segment revenues$385
 $321
 20% $1,131
 $898
 26 %$520
 $445
 17%
Segment results$39
 $36
 8% $111
 $117
 (5)%$65
 $50
 30%
Since the 20122013 thirdfirst quarter, across our International Lodging segment we added 3345 properties (7,3179,772 rooms) and 613 properties (1,3892,838 rooms) left the system.
ThirdFirst Quarter. For the three months ended September 30, 2013March 31, 2014, compared to the three months ended September 30, 2012,March 31, 2013, RevPAR for comparable systemwide international properties increased by 2.75.7 percent to $114.32,$128.07, occupancy for these properties increased by 1.61.9 percentage points to 73.366.6 percent, and average daily rates increased by 0.52.7 percent to $155.98.$192.16. See "Business and Overview" for a discussion of results in the various International Lodging segment regions.
The $315 million increase in segment results, compared to the 20122013 thirdfirst quarter, predominantly reflected $7consisted primarily of $5 million of higher incentive management fees, $3 million of higher base management and franchise fees, and $3 million of higher incentive management fees, partially offset by $4 million of higher general, administrative, and other expenses and $3 million of lower owned, leased, and other revenue net of direct expenses. The increase in base management and franchise fees largely reflected the additional eight days of activity, new unit growth, and higher RevPAR due to increased demand. The $3 million increase in incentive management fees was primarily driven by fees for the extra eight days of activity, as well as new unit growth. The $4 million increase in general, administrative, and other expenses reflected $5 million of increased expenses for functions moved from corporate headquarters to the continent offices and initiatives to enhance and grow our brands globally and $2 million of net other miscellaneous cost increases (which included expenses for the additional eight days of activity), partially offset by a favorable variance from a $3 million guarantee accrual for one property in the 2012 third quarter. The $3 million decrease in owned, leased, and other revenue net of direct expenses largely reflected $3 million in weaker results at one leased property in London due to tough comparisons from the Olympics in the prior year (which included the additional eight days of activity).
Cost reimbursements revenue and expenses for our International Lodging segment properties totaled $241 million in the 2013 third quarter, compared to $186 million in the 2012 third quarter.
First Three Quarters. For the nine months ended September 30, 2013, compared to the nine months ended September 30, 2012, RevPAR for comparable systemwide international properties increased by 2.5 percent to $113.29, occupancy for these properties increased by 1.6 percentage points to 70.9 percent, and average daily rates increased by 0.3 percent to $159.73. See "Business and Overview" for a discussion of results in the various International Lodging segment regions.

44
Table of Contents

The $6 million decrease in segment results, compared to the 2012 first three quarters, predominantly reflected $18 million of higher general, administrative, and other expenses, $7 million of lower owned, leased, and other revenue net of direct expenses, and $4 million of decreased joint venture equity earnings, partially offset by $17 million of higher base management and franchise fees and $5 million of higher incentive management fees. The $18 million increase in general, administrative, and other expenses primarily reflected $12 million of increased expenses for functions moved from corporate headquarters to the continent offices and initiatives to enhance and grow our brands globally, a $5 million performance cure payment for one property, and $6 million of other net miscellaneous cost increases (which included expenses for the additional 24 days of activity), partially offset by a favorable variance from $5 million of guarantee accruals in the 2012 first three quarters. The $7 million decrease in owned, leased, and other revenue net of direct expenses largely reflected $6 million in weaker results at one leased property in London (which included the additional 24 days of activity) and $6 million in costs related to three International segment leases we terminated, partially offset by $6 million of higher termination fees principally associated with one property. Lower joint venture equity earnings were primarily driven by decreased earnings at one joint venture. The increase in base management and franchise fees largely reflected the additional 24 days of activity, new unit growth and higher RevPAR due to increased demand. The $5 million increase in incentive management fees was primarily driven by the extra 24 days of activity and new unit growth, partially offset by lower property-level revenue at certain properties which resulted in lower property-level income and margins.
Cost reimbursements revenue and expenses for our International Lodging segment properties totaled $688 million in the 2013 first three quarters, compared to $474 million in the 2012 first three quarters.

Luxury Lodging includes The Ritz-Carlton, Bulgari Hotels & Resorts, and EDITION worldwide.
($ in millions)92 Days Ended
September 30, 2013		 84 Days Ended
September 7, 2012		 
Change
2013/2012
 276 Days Ended
September 30, 2013		 252 Days Ended
September 7, 2012		 
Change
2013/2012
Segment revenues$416
 $394
 6% $1,330
 $1,221
 9%
Segment results$22
 $20
 10% $78
 $66
 18%
Since the 2012third quarter, across our Luxury Lodging segment we added three properties (1,005 rooms) and two properties (737 rooms) left the system. Since the 2012third quarter, we also added two residential products (140 units) and no residential products left the system.
Third Quarter. For the three months ended September 30, 2013, compared to the three months ended September 30, 2012, RevPAR for comparable systemwide luxury properties increased by 8.1 percent to $212.70, occupancy increased by 0.5 percentage points to 65.9 percent, and average daily rates increased by 7.2 percent to $322.77.
The $2 million increase in segment results, compared to the 2012third quarter, largely reflected $4 million of higher owned, leased, and other revenue net of direct expenses, a $3 million increase in incentive management fees, and $2 million of higher base management fees, partially offset by a $7 million increaseequity in general, administrative, and other expenses. Higher base management fees primarily stemmed from the additional eight days of activity. The $3 million increase inearnings. Increased incentive management fees waswere primarily driven by higher property-level revenue which resulted in higher property-level income and margins, new unit growth, as well as recognition of an incentive fee for one property due to a contract revision. The increase in base management and also reflectedfranchise fees forwas driven by new unit growth and higher RevPAR due to increased demand, partially offset by the extra eight daysimpact of activity. Higherunfavorable foreign exchange rates. The increase in owned, leased, and other revenue net of direct expenses largely reflected $7 million of termination fees for two properties, partially offset by $2 million of lower branding fees and $2 million of pre-opening expenses for two EDITION hotels. The $7 million increase in general, administrative, and other expenses reflected an unfavorable variance from a $3 million guarantee accrual reversal in the 2012 third quarter, a $2 million impairment of deferred contract acquisition costs for a property with cash flow shortfalls, and $2 million of other net miscellaneous cost increases (which included the additional eight days of activity).favorable results at several leased properties.
Cost reimbursements revenue and expenses for our Luxury LodgingInternational segment properties totaled $337304 million in the 2014 first quarter, compared to $240 million in the 2013third first quarter compared to $326 million in the 2012third quarter.

45
Table of Contents

First Three Quarters. For the nine months ended September 30, 2013, compared to the nine months ended September 30, 2012, RevPAR for comparable systemwide luxury properties increased by 8.0 percent to $234.34, occupancy increased by 1.7 percentage points to 68.7 percent, and average daily rates increased by 5.3 percent to $340.88.
The $12 million increase in segment results, compared to the 2012 first three quarters, reflected $12 million of higher base management fees, $8 million of decreased joint venture equity losses, a $6 million increase in incentive management fees, and $4 million of higher owned, leased, and other revenue net of direct expenses, partially offset by an $18 million increase in general, administrative, and other expenses. Higher base management fees stemmed from the additional 24 days of activity,a favorable variance from $3 million of fee reversals in the 2012 first three quarters for two properties with contract revisions, increased RevPAR due to increased demand, and new unit growth. The $8 million decrease in joint venture equity losses reflected a favorable variance from $8 million in losses in the 2012 first three quarters at a Luxury segment joint venture for the impairment of certain underlying residential properties. The $6 million increase in incentive management fees was primarily driven by higher property-level revenue which resulted in higher property-level income and margins, and also reflected fees for the extra 24 days of activity. The $4 million increase in owned, leased, and other revenue net of direct expenses primarily reflected $7 million of termination fees for two properties, partially offset by $3 million of pre-opening expenses for two EDITION hotels. The $18 million increase in general, administrative, and other expenses reflected an unfavorable variance from $5 million in guarantee accrual reversals in the 2012 first three quarters and the following 2013 items: (1) $3 million impairment of deferred contract acquisition costs for a property that left our system; (2)a $2 million impairment of deferred contract acquisition costs for a property with cash flow shortfalls; and (3) $8 million of other net miscellaneous cost increases (which included expenses for the additional 24 days of activity).
Cost reimbursements revenue and expenses for our Luxury Lodging segment properties totaled $1,076 million in the 2013third quarter, compared to $994 million in the 2012third quarter.

SHARE-BASED COMPENSATION
Under our Stock and Cash Incentive Plan, we award: (1) stock options to purchase our common stock (“Stock Option Program”); (2) stock appreciation rights (“SARs”) for our common stock (“Stock Appreciation Right Program”); (3) restricted stock units (“RSUs”) of our common stock; and (4) deferred stock units. We grant awards at exercise prices or strike prices that equal the market price of our common stock on the date of grant.
During the 20132014 first three quartersquarter, we granted 2.51.9 million RSUs, 0.2 million service and performanceperformance-based RSUs, 0.70.3 million SARs, and 0.1 million stock options. See Footnote No. 4,3, “Share-Based Compensation,” to our Financial Statements for more information.
NEW ACCOUNTING STANDARDS
See Footnote No. 2, “New Accounting Standards,”We do not expect that accounting standard updates issued to date and that are effective after March 31, 2014, will have a material effect on our Financial Statements for information related to our adoption of new accounting standards in the 2013 first three quarters and for information on our anticipated adoption of recently issued accounting standards.Statements.

4634
Table of Contents

LIQUIDITY AND CAPITAL RESOURCES
Cash Requirements and Our Credit Facilities
During the third quarter, we amended and restated our multicurrency revolving credit agreement (the “Credit Facility”) to extend the facility's expiration to July 18, 2018 and increase the facility size toOur Credit Facility provides for $2,000 million of aggregate effective borrowings.borrowings to support general corporate needs, including working capital, capital expenditures, share repurchases, and letters of credit. The material termsavailability of the amended and restated Credit Facility are otherwise unchanged. For more informationalso supports our commercial paper program. Borrowings under the Credit Facility generally bear interest at LIBOR (the London Interbank Offered Rate) plus a spread, based on our public debt rating. We also pay quarterly fees on the Credit Facility see Footnote No. 9, "Long-term Debt," and also seeat a rate based on our public debt rating. The term of the Current Report on Form 8-K that we filed with the SECfacility expires on July 19, 2013.18, 2018.
The Credit Facility contains certain covenants, including a single financial covenant that limits our maximum leverage (consisting of the ratio of Adjusted Total Debt to Consolidated EBITDA, each as defined in the Credit Facility) to not more than 4 to 1. Our outstanding public debt does not contain a corresponding financial covenant or a requirement that we maintain certain financial ratios. We currently satisfy the covenants in our Credit Facility and public debt instruments, including the leverage covenant under the Credit Facility, and do not expect the covenants to restrict our ability to meet our anticipated borrowing and guarantee levels or increase those levels should we decide to do so in the future.
We believe the Credit Facility and our access to capital markets, together with cash we expect to generate from operations, remain adequate to meet our short-term and long-term liquidity requirements, finance our long-term growth plans, meet debt service, and fulfill other cash requirements.
We issue commercial paper in the United States. We do not have purchase commitments from buyers for our commercial paper; therefore, our ability to issue commercial paper is subject to market demand. We classify any outstanding commercial paper and Credit Facility borrowings as long-term debt based on our ability and intent to refinance them on a long-term basis. We reserve unused capacity under our Credit 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 Credit Facility.
At September 30, 2013March 31, 2014, our available borrowing capacity amounted to $1,3531,199 million and reflected borrowing capacity of $1,2091,015 million under our Credit Facility and our cash balance of $144184 million. We calculated that borrowing capacity by taking $2,000 million of effective aggregate bank commitments under our Credit Facility and subtracting $790984 million of outstanding commercial paper and $1 million of outstanding letters of credit under our Credit Facility.
We monitor the status of the capital markets and regularly evaluate the effect that changes in capital market conditions may have on our ability to execute our announced growth plans. We expect to continue meeting part of our financing and liquidity needs primarily through commercial paper borrowings, issuances of Senior Notes, and access to long-term committed credit facilities. If conditions in the lodging industry deteriorate, or if disruptions in the capital markets take place as they did in the immediate aftermath of both the 2008 worldwide financial crisis and the events of September 11, 2001, we may be unable to place some or all of our commercial paper on a temporary or extended basis and may have to rely more on borrowings under the Credit Facility, which we believe will be adequate to fund our liquidity needs, including repayment of debt obligations, but which may or may not carry a higher cost than commercial paper. Since we continue to have ample flexibility under the Credit Facility’s covenants, we expect that undrawn bank commitments under the Credit Facility will remain available to us even if business conditions were to deteriorate markedly.
Cash and cash equivalents totaled $144184 million at September 30, 2013March 31, 2014, an increase of $5658 million from year-end 20122013, reflecting cash inflows associated with the following: dispositions ($292 million) primarily related to The London EDITION sale (see Footnote No. 12, "Acquisitions and Dispositions" for more information on our dispositions), operating cash inflows ($805182 million), net proceeds of approximately $345 million from the issuance of Series M Notes (see the "Contractual Obligations" caption later in this section for more information), increased borrowings related to the issuance of commercial paper ($268149 million), common stock issuances ($14157 million), and loan collections, and sales, net of loan advances ($576 million), and net other investing cash inflows ($4 million). The following cash outflows partially offset these cash inflows: purchase of treasury stock ($644320 million), long-term debt repayments ($405 million) primarilyProtea escrow deposit ($192 million) related to the maturitytransfer of Series J Senior Notes, capitalcash to a

4735
Table of Contents

third party for the Protea acquisition (see Footnote No. 12, "Acquisitions and Dispositions" for additional information), capital expenditures ($22661 million), dividend payments ($144 million), net other investing cash outflows ($8850 million), contract acquisition costs ($366 million), long-term debt repayments ($2 million), and equity and cost method investments ($16 million), and other financing activities ($1 million). Net other investing cash outflows included the purchase of a $65 million mandatorily redeemable preferred equity ownership interest in an entity that owns three hotels that we manage. We account for this investment as a debt security. See Footnote No. 5, "Fair Value of Financial Instruments" for more information.
Our ratio of current assets to current liabilities was roughly 0.70.6 to 1.0 at the end of the 2013 third2014 first quarter. We minimize working capital through cash management, strict credit-granting policies, and aggressive collection efforts. We also have significant borrowing capacity under our Credit Facility should we need additional working capital.
We made capital expenditures of $22661 million in the 2014 first quarter and $70 million in the 2013 first three quarters and $316 million in the 2012 first three quartersquarter that included expenditures related to the development and construction of new hotels and acquisitions of hotel properties, as well as improvements to existing properties and systems initiatives. Capital expenditures for the 2013 first three quartersdecreased by $90 million compared to the year-ago period, primarily due tothe 2012 first quarter acquisition of land and a building we plan to develop into a hotel.We expect investment spending for the 20132014 full year will total approximately $600800 million to $700 million1 billion, including approximately $100150 million for maintenance capital spending.spending and $193 million for Protea. See Footnote No. 12, "Acquisitions and Dispositions" for additional information on the April 1, 2014 acquisition of Protea. Investment spending also includes other capital expenditures (including property acquisitions such as the acquisition of a managed property described below)acquisitions), loan advances, contract acquisition costs, and equity and other investments. See our Condensed Consolidated Statements of Cash Flows for information on investment spending for the 20132014 first three quartersquarter.
In the 2013 third quarter, we paid a cash deposit of $5 million toward the acquisition of a managed property we plan to renovate. After the 2013 third quarter, we acquired that property for an additional $110 million in cash.
Over time, we have sold lodging properties, both completed and under development, subject to long-term management agreements. The ability of third-party purchasers to raise the debt and equity capital necessary to acquire such properties depends in part on the perceived risks inherent in the lodging industry and other constraints inherent in the capital markets as a whole. We monitor the status of the capital markets and regularly evaluate the potential impact of changes in capital market conditions on our business operations. We expect to continue making selective and opportunistic investments to add units to our lodging business, which may include loans and noncontrolling equity investments.
Fluctuations in the values of hotel real estate generally have little impact on our overall business results because: (1) we own less than one percent of hotels that we operate or franchise; (2) management and franchise fees are generally based upon hotel revenues and profits rather than current hotel property values; and (3) our management agreements generally do not terminate upon hotel sale or foreclosure.
From time to time we make loans to owners of hotels that we operate or franchise. Loan collections, and sales, net of loan advances, amounted to $576 million in the 2014 first quarter and $17 million in the 2013 first three quarters and $124 million in the 2012 first three quartersquarter. In the 20132014 first three quartersquarter, our notes receivable balance for senior, mezzanine, and other loans decreased by $535 million, primarily reflecting collections on two MVW notes receivable issued to us in 2011 in conjunction with the Timeshare spin-off.
Spin-off Cash Tax Benefits
As noted in Footnote No. 3,2, “Income Taxes,” all tax matters that could affect the Company's cash tax benefits related to the 2011 spin-off of our timeshare operations and timeshare development business were resolved in the 2013, first quarter, and we expect that the spin-off will result in our realization through 2015 of approximately $480 million of cash tax benefits, relating to the value of the timeshare business. We realized $228$363 million of those benefits through year-end 2012, $95 million of those benefits in the 2013, first three quarters, and expect to realize approximately $35$60 million of further cash tax benefits in the 2013 fourth quarter.



48
Tableremainder of Contents2014.

Contractual Obligations
As of the end of the 2013 third2014 first quarter, there have been no significant changes to our “Contractual Obligations” table in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our 20122013 Form 10-K, other than those resulting from changes in the amount of outstanding debt including the Series M note issuance, issuances of commercial paper, and the maturity of Series J Notes discussed below.
At the end of the 20132014 thirdfirst quarter, debt increased by $221103 million to $3,1563,302 million, compared to $2,935$3,199 million at year-end 20122013, and reflected our 2013 third quarter issuance of $348 million (book value) of Series M Senior Notes (described more fully below) and a $289150 million increase in commercial paper borrowings, partially offset by the $400 million (book value) retirement, at maturity, of our Series J Senior Notes, $15 million in decreased borrowings under our Credit Facility, and decreases of $147 million in other debt (which includes capital leases). primarily related to the sale of our right to acquire the landlord’s interest in a leased real estate property and certain attached assets of the property. At the end of the 20132014 thirdfirst quarter, future debt payments plus interest (not including capital leases) totaled $3,6263,769 million and

36
Table of Contents

are due as follows: $31 million in 2013; $11394 million in 2014; $422 million in 2015;2015; $373 million in 2016;2016; $358 million in 2017; 2017$1,040 million; in 2018; and $2,3291,482 million thereafter.
During our 2013 first quarter, we made a $411 million cash payment of principal and interest to retire, at maturity, all of our outstanding Series J Senior Notes. During our 2013 third quarter, we issued $350 million aggregate principal amount of 3.375 percent Series M Notes due 2020. We received net proceeds of approximately $345 million from the offering, after deducting the underwriting discount and estimated expenses. We expect to use these proceeds for general corporate purposes, which may include working capital, capital expenditures, acquisitions, stock repurchases, or repayment of commercial paper borrowings as they become due.
Our financial objectives include diversifying our financing sources, optimizing the mix and maturity of our long-term debt, and reducing our working capital. At the end of the 2013 third2014 first quarter, our long-term debt had an average interest rate of 3.53.3 percent and an average maturity of approximately 5.44.8 years. The ratio of fixed-rate long-term debt to total long-term debt was 0.7 to 1.0 at the end of the 2013 third2014 first quarter.
Guarantee Commitments
There have been no significant changes to our “Guarantee Commitments” table in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our 20122013 Form 10-K, other than those described below resulting from: (1)from changes in the amount of guarantees where we are the primary obligor; and (2) changes in the amount of guarantees where we are secondarily liable.obligor.
At the end of the 2013 third2014 first quarter, guarantees where we are the primary obligor decreasedincreased by $27300 million to $197499 million, compared to $224199 million at year-end 20122013, and reflected a $19313 million increase in other guarantees primarily related to the new "put option" agreement we entered into in the 2014 first quarter with the lenders for a construction loan extended to a hotel ownership group, partially offset by a $7 million decrease in operating profit guarantees and a $126 million decrease in debt service guarantees, partially offset by a $4 million increase in other guarantees. At the end of the 2013 third2014 first quarter, future guarantee commitment expirations are as follows: $8 million in 2013; $3728 million in 2014; $191 million in 2015; $113 million in 2016; $4642 million in 2017; $333 million in 2018; and $8682 million thereafter.
As of the end of the 2013 third quarter, guarantees where we are secondarily liable decreased by $57 million to $182 million, compared to $239 million at year-end 2012, and primarily reflected a $40 million decrease for an operating profit guarantee, which terminated upon restructuring of the underlying debt. At the end of the 2013 third quarter, future guarantee commitment expirations are as follows: $9 million in 2013; $40 million in 2014; $30 million in 2015; $33 million in 2016; $23 million in 2017; and $47 million thereafter. See the "Guarantees" caption in Footnote No. 11,10, "Contingencies" for additional information on our guarantees.
Share Repurchases
We purchased 15.67.0 million shares of our common stock during the 20132014 first three quartersquarter, at an average price of $40.3150.79 per share. See Part II, Item 2 of this Form 10-Q for more information on our share repurchases. As of September 30, 2013March 31, 2014, 18.732.3 million shares remained available for repurchase under authorizations from our Board of Directors. See Part II, Item 2 of this report for more information on our share repurchases.

49
Table of Contents

Dividends
On February 15, 2013, our Board of Directors declared a quarterly cash dividend of $0.13 per share, which we paid on March 29, 2013 to shareholders of record on March 1, 2013. On May 10, 201314, 2014, our Board of Directors declared a quarterly cash dividend of $0.17 per share, which we paid on JuneMarch 28, 20132014 to shareholders of record on May 24, 2013. On August 8, 2013, our Board of Directors declared a quarterly cash dividend of $0.17 per share, which we paid on September 27, 2013 to shareholders of record on August 22, 2013February 28, 2014.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. We have discussed those policies and estimates that we believe are critical and require the use of complex judgment in their application in our 20122013 Form 10-K. Since the date of our 20122013 Form 10-K, there have been no material changes to our critical accounting policies or the methodologies or assumptions we apply under them.

5037
Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk has not materially changed since December 28, 201231, 2013.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this quarterly report, we evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, the effectiveness 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”)). Management necessarily applied its judgment in assessing the costs and benefits of suchthose controls and procedures, which by their nature, can provide only reasonable assurance about management’s control objectives. You should note that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Based upon this evaluation, our Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective and operating to provide reasonable assurance that we record, process, summarize and report the information we are required to disclose in the reports that we file or submit under the Exchange Act within the time periods specified in the rules and forms of the SEC, and to provide reasonable assurance that we accumulate and communicate such information to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions about required disclosure.
Internal Control Over Financial Reporting
We made no changes in internal control over financial reporting during the 2013 third2014 first quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. However, in the first quarter of 2013, we began the phased implementation of an enterprise-wide financial systems project to upgrade our general ledger and reporting tools. In conjunction with that effort, we converted to a calendar year-end reporting cycle and an end-of-month quarterly reporting cycle. We are performing the implementation in the ordinary course of business to increase efficiency and align our processes on a global basis, and we expect to continue the implementation over the next several quarters.
 

5138
Table of Contents

PART II – OTHER INFORMATION

Item 1. Legal Proceedings
Please seeSee the information under "Legal Proceedings" in Footnote No. 11,10, "Contingencies" to our Financial Statements in Part I, Item 1 of this Form 10-Q.
From time to time, we are also subject to other legal proceedings and claims in the ordinary course of business, including adjustments proposed during governmental examinations of the various tax returns we file. While management presently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, cash flows, or overall trends in results of operations, legal proceedings are inherently uncertain, and unfavorable rulings could, individually or in aggregate, have a material adverse effect on our business, financial condition, or operating results.
Item 1A. Risk Factors
We are subject to various risks that could have a negative effect on us or on our financial condition. You should understand that these risks could cause results to differ materially from those expressed in forward-looking statements contained in this report or in other Company communications. Because there is no way to determine in advance whether, or to what extent, any present uncertainty will ultimately impact our business, you should give equal weight to each of the following:
Our industry is highly competitive, which may impact our ability to compete successfully with other hotel properties for customers. We generally operate in markets that contain numerous competitors. Each of our hotel brands competes with major hotel chains in national and international venues and with independent companies in regional markets. Our ability to remain competitive and to attract and retain business and leisure travelers depends on our success in distinguishing the quality, value, and efficiency of our lodging products and services, including our loyalty programs and consumer-facing technology platforms and services, from those offered by others. If we cannot compete successfully in these areas, our operating margins could contract, our market share could decrease, and our earnings could decline.
Economic uncertainty could continue to impact our financial results and growth. Weak economic conditions in Europe and other parts of the world, the strength or continuation of recovery in countries that have experienced improved economic conditions, potential disruptions in the U.S. economy as a result of governmental action or inaction on the federal deficit, budget, and related issues, including the recent U.S. federal government shutdown, political instability in some areas, and the uncertainty over how long any of these conditions will continue, could continue to have a negative impact on the lodging industry. U.S. government travel is also a significant part of our business, and this aspect of our business maywill likely continue to suffer as automaticdue to recent U.S. federal spending cuts and any further limitations that began in March 2013 and the recent U.S. federal government shutdown in October 2013 reduce the amount of travel by U.S. government employees and contractors andmay result in potential limitations on other aspects of travel.from congressional action or inaction. As a result of such current economic conditions and uncertainty, we continue to experience weakened demand for our hotel rooms in some markets. Recent improvements in demand trends in other markets may not continue, and our future financial results and growth could be further harmed or constrained if the recovery stalls or conditions worsen. Further, new lodging supply in individual markets could have a negative impact on the hotel industry and hamper our ability to increase room rates or occupancy in those markets.
Operational Risks
Premature termination of our management or franchise agreements could hurt our financial performance. Our hotel management and franchise agreements may be subject to premature termination in certain circumstances, such as the bankruptcy of a hotel owner or franchisee, or a failure under some agreements to meet specified financial or performance criteria that are subject to the risks described in this section, which the Company fails or elects not to cure. In addition, some courts have applied principles of agency law and related fiduciary standards to managers of third-party hotel properties, including us (or have interpreted hotel management agreements as “personal services contracts”). This means, among other things, that property owners may assert the right to terminate management agreements even where the agreements provide otherwise, and some courts have upheld such assertions regarding

39
Table of Contents

our management agreements and may do so in the future. In the event of any such termination, we may need to

52
Table of Contents

enforce our right to damages for breach of contract and related claims, which may cause us to incur significant legal fees and expenses. Any damages we ultimately collect could be less than the projected future value of the fees and other amounts we would have otherwise collected under the management agreement. A significant loss of agreements due to premature terminations could hurt our financial performance or our ability to grow our business.
Our lodging operations are subject to global, regional, and national conditions. Because we conduct our business on a global platform, our activities are affected by changes in global and regional economies. In recent years, our business has been hurt by decreases in travel resulting from weak economic conditions and the heightened travel security measures that have resulted from the threat of further terrorism. Our future performance could be similarly affected by the economic environment in each of the regions in which we operate, the resulting unknown pace of business travel, and the occurrence of any future incidents in those regions.
The growing significance of our operations outside of the United States also makes us increasingly susceptible to the risks of doing business internationally, which could lower our revenues, increase our costs, reduce our profits, or disrupt our business. We currently operate or franchise hotels and resorts in 7271 countries, and our operations outside the United States represented approximately 1718 percent of our revenues in the 20132014 thirdfirst quarter. We expect that the international share of our total revenues will continue to increase in future years. As a result, we are increasingly exposed to the challenges and risks of doing business outside the United States, which could reduce our revenues or profits, increase our costs, result in significant liabilities or sanctions, or otherwise disrupt our business. These challenges include: (1) compliance with complex and changing laws, regulations and policies of governments that may impact our operations, such as foreign ownership restrictions, import and export controls, and trade restrictions; (2) compliance with U.S. and foreign laws that affect the activities of companies abroad, such as anti-corruption laws, competition laws, currency regulations, and laws affecting dealings with certain nations; (3) limitations on our ability to repatriate non-U.S. earnings in a tax effective manner; (4) the difficulties involved in managing an organization doing business in many different countries; (5) uncertainties as to the enforceability of contract and intellectual property rights under local laws; (6) rapid changes in government policy, political or civil unrest in the Middle East and elsewhere, acts of terrorism, or the threat of international boycotts or U.S. anti-boycott legislation; and (7) currency exchange rate fluctuations.
Our new programs and new branded products may not be successful. We cannot assure you that our recently launched, newly acquired, or recently announced brands, such as EDITION, Autograph Collection, and AC Hotels by Marriott brands, our recent acquisition ofin the Americas, Gaylord brand, our recently announcedHotels, Protea Hotels, Moxy Hotels brand, or any other new programs or products we may launch in the future will be accepted by hotel owners, potential franchisees, or the traveling public or other customers. We also cannot be certain that we will recover the costs we incurred in developing or acquiring the brands or any new programs or products, or that the brands or any new programs or products will be successful. In addition, some of our new brands involve or may involve cooperation and/or consultation with one or more third parties, including some shared control over product design and development, sales and marketing, and brand standards. Disagreements with these third parties could slow the development of these new brands and/or impair our ability to take actions we believe to be advisable for the success and profitability of such brands.
Risks relating to natural or man-made disasters, contagious disease, terrorist activity, and war could reduce the demand for lodging, which may adversely affect our revenues. So called “Acts of God,” such as hurricanes, earthquakes, tsunamis, and other natural disasters and man-made disasters in recent years, such as Hurricane Sandy in the Northeastern United States, the earthquake and tsunami in Japan, and the spread of contagious diseases in locations where we own, manage, or franchise significant properties and areas of the world from which we draw a large number of customers, could cause a decline in the level of business and leisure travel and reduce the demand for lodging. Actual or threatened war, terrorist activity, political unrest, or civil strife, such as recent events in Syria, Egypt, Libya,Ukraine and Bahrain,Russia, the Middle East, and other geopolitical uncertainty could have a similar effect. Any one or more of these events may reduce the overall demand for hotel rooms and corporate apartments or limit the prices that we can obtain for them, both of which could adversely affect our profits.
Disagreements with the owners of the hotels that we manage or franchise may result in litigation or may delay implementation of product or service initiatives. Consistent with our focus on management and franchising, we own very few of our lodging properties. The nature of our responsibilities under our management agreements to manage

40
Table of Contents

each hotel and enforce the standards required for our brands under both management and franchise agreements may

53
Table of Contents

be subject to interpretation and will from time to time give rise to disagreements, which may include disagreements over the need for or payment for new product or service initiatives. Such disagreements may be more likely when hotel returns are weaker. We seek to resolve any disagreements in order to develop and maintain positive relations with current and potential hotel owners and joint venture partners but are not always able to do so. Failure to resolve such disagreements has resulted in litigation, and could do so in the future. If any such litigation results in a significant adverse judgment, settlement, or court order, we could suffer significant losses, our profits could be reduced, or our future ability to operate our business could be constrained.
Our business depends on the quality and reputation of our brands, and any deterioration in the quality or reputation of these brands could have an adverse impact on our market share, reputation, business, financial condition, or results of operations. Events that may be beyond our control could affect the reputation of one or more of our properties or more generally impact the reputation of our brands. If the reputation or perceived quality of our brands declines, our market share, reputation, business, financial condition, or results of operations could be affected.
Actions by our franchisees and licensees could adversely affect our image and reputation. We franchise and license many of our brand names and trademarks to third parties in connection with lodging, timeshare, and residential services. Under the terms of their agreements with us, our franchisees and licensees interact directly with customers and other third parties under our brand and trade names. If these franchisees or licensees fail to maintain or act in accordance with applicable brand standards, experience operational problems, or project a brand image inconsistent with ours, our image and reputation could suffer. Although our franchise and license agreements provide us with recourse and remedies in the event of a breach by the franchisee or licensee, including termination of the agreements under certain circumstances, pursuing any such recourse, remedy, or termination could be expensive and time consuming. In addition, we cannot assure you that a court would ultimately enforce our contractual termination rights in every instance.
Damage to, or losses involving, properties that we own, manage, or franchise may not be covered by insurance. We have comprehensive property and liability insurance policies with coverage features and insured limits that we believe are customary. Market forces beyond our control may nonetheless limit the scope of the insurance coverage we can obtain or our ability to obtain coverage at reasonable rates. Certain types of losses, generally of a catastrophic nature, such as earthquakes, hurricanes and floods, or terrorist acts, or liabilities that result from breaches in the security of our information systems may be uninsurable or too expensive to justify obtaining insurance. As a result, we may not be successful in obtaining insurance without increases in cost or decreases in coverage levels. In addition, in the event of a substantial loss, the insurance coverage we carry may not be sufficient to pay the full market value or replacement cost of our lost investment or that of hotel owners or in some cases could result in certain losses being totally uninsured. As a result, we could lose some or all of the capital we have invested in a property, as well as the anticipated future revenue from the property, and we could remain obligated for guarantees, debt, or other financial obligations for the property.
Development and Financing Risks
While we are predominantly a manager and franchisor of hotel properties, our hotel owners depend on capital to buy, develop, and improve hotels, and our hotel owners may be unable to access capital when necessary. In order to fund new hotel investments, as well as refurbish and improve existing hotels, both the Company and current and potential hotel owners must periodically spend money. The availability of funds for new investments and improvement of existing hotels by our current and potential hotel owners depends in large measure on capital markets and liquidity factors, over which we can exert little control. The difficulty of obtaining financing on attractive terms can, at times, be constrained by the capital markets for hotel and real estate investments. In addition, owners of existing hotels that we franchise or manage may have difficulty meeting required debt service payments or refinancing loans at maturity.
Our growth strategy depends upon third-party owners/operators, and future arrangements with these third parties may be less favorable. Our growth strategy for development of additional lodging facilities entails entering into and maintaining various arrangements with property owners. The terms of our management agreements,

41
Table of Contents

franchise agreements, and leases for each of our lodging facilities are influenced by contract terms offered by our

54
Table of Contents

competitors, among other things. We cannot assure you that any of our current arrangements will continue or that we will be able to enter into future collaborations, renew agreements, or enter into new agreements in the future on terms that are as favorable to us as those that exist today.
Our ability to grow our management and franchise systems is subject to the range of risks associated with real estate investments. Our ability to sustain continued growth through management or franchise agreements for new hotels and the conversion of existing facilities to managed or franchised Marriott brands is affected, and may potentially be limited, by a variety of factors influencing real estate development generally. These include site availability, financing, planning, zoning and other local approvals, and other limitations that may be imposed by market and submarket factors, such as projected room occupancy, changes in growth in demand compared to projected supply, territorial restrictions in our management and franchise agreements, costs of construction, and anticipated room rate structure.
Our development activities expose us to project cost, completion, and resale risks. We develop new hotel and residential properties, and previously developed timeshare interval and fractional ownership properties, both directly and through partnerships, joint ventures, and other business structures with third parties. As demonstrated by the 2009 and 2011 impairment charges for our former Timeshare business, our ongoing involvement in the development of properties presents a number of risks, including that: (1) continued weakness in the capital markets may limit our ability, or that of third parties with whom we do business, to raise capital for completion of projects that have commenced or for development of future properties; (2) properties that we develop could become less attractive due to further decreases in demand for hotel and residential properties, increases in mortgage rates and/or decreases in mortgage availability, market absorption or oversupply, with the result that we may not be able to sell such properties for a profit or at the prices or selling pace we anticipate, potentially requiring additional changes in our pricing strategy that could result in further charges; (3) construction delays, cost overruns, lender financial defaults, or so called “Acts of God” such as earthquakes, hurricanes, floods, or fires may increase overall project costs or result in project cancellations; and (4) we may be unable to recover development costs we incur for any projects that we do not pursue to completion.
Development activities that involve our co-investment with third parties may result in disputes that could increase project costs, impair project operations, or increase project completion risks. Partnerships, joint ventures, and other business structures involving our co-investment with third parties generally include some form of shared control over the operations of the business and create added risks, including the possibility that other investors in such ventures could become bankrupt or otherwise lack the financial resources to meet their obligations, or could have or develop business interests, policies, or objectives that are inconsistent with ours. Although we actively seek to minimize such risks before investing in partnerships, joint ventures, or similar structures, actions by another investor may present additional risks of project delay, increased project costs, or operational difficulties following project completion. Such disputes may also be more likely in difficult business environments.
Risks associated with development and sale of residential properties associated with our lodging properties or brands may reduce our profits. In certain hotel and timeshare projects we participate, either directly or through noncontrolling interests and/or licensing agreements, in the development and sale of residential properties associated with our brands, including residences and condominiums under our The Ritz-Carlton, EDITION, JW Marriott, Autograph Collection, and Marriott brand names and trademarks. Such projects pose further risks beyond those generally associated with our lodging businesses, which may reduce our profits or compromise our brand equity, including the following: (1) the continued weakness in residential real estate and demand generally may continue to reduce our profits and could make it more difficult to convince future hotel development partners of the value added by our brands; (2) increases in interest rates, reductions in mortgage availability, or increases in the costs of residential ownership could prevent potential customers from buying residential products or reduce the prices they are willing to pay; and (3) residential construction may be subject to warranty and liability claims, and the costs of resolving such claims may be significant.
Some hotel openings in our existing development pipeline and approved projects may be delayed or not result in new hotels, which could adversely affect our growth prospects. At the end of the 2013 third2014 first quarter we reported over 8501,200 hotels in our development pipeline, which we define asincludes hotels under construction and under signed contracts, including hotels pending conversion to one of our brands. Separately, we also report the number ofas well as 186 hotels approved for development but not yet under signed contracts. The eventual opening of the

5542
Table of Contents

but not under signed contracts. The eventual opening of the hotels in our development pipeline and, in particular, the hotels approved for development that are not yet under contract, is subject to numerous risks, including in some cases the owner’s or developer’s ability to obtain adequate financing or governmental or regulatory approvals. Accordingly, we cannot assure you that our development pipeline, and in particular hotels approved for development, will result in new hotels that enter our system, or that those hotels will open when we anticipate.
Planned transactions that we announce may be delayed, not occur at all, or involve unanticipated costs. From time to time we announce transactions that we expect will close at a future date, such as the disposition of our EDITION hotels in Miami Beach and New York upon completion of construction. If the conditions to consummating these transactions are neither satisfied nor waived by the time we expect, the closings could be delayed or not occur at all. In addition, the EDITION contracts are for a fixed purchase price based upon the estimated total development costs for the hotels and we will not recover any development costs in excess of the agreed purchase price, so we will bear those development costs to the extent that they are higher than we anticipated when we agreed to the transaction.
Technology, Information Protection, and Privacy Risks
A failure to keep pace with developments in technology could impair our operations or competitive position. The lodging industry continues to demand the use of sophisticated technology and systems, including those used for our reservation, revenue management, and property management systems, our Marriott Rewards and The Ritz-Carlton Rewards programs, and technologies we make available to our guests. These technologies and systems must be refined, updated, and/or replaced with more advanced systems on a regular basis, and if we cannot do so as quickly as our competitors or within budgeted costs and time frames, our business could suffer. We also may not achieve the benefits that we anticipate from any new technology or system, and a failure to do so could result in higher than anticipated costs or could impair our operating results.
An increase in the use of third-party Internet services to book online hotel reservations could adversely impact our business. Some of our hotel rooms are booked through Internet travel intermediaries such as Expedia.com®, Travelocity.com®, and Orbitz.com®, as well as lesser-known online travel service providers. These intermediaries initially focused on leisure travel, but now also provide offerings for corporate travel and group meetings. Although Marriott’s Look No Further® Best Rate Guarantee has helped prevent customer preference shift to the intermediaries and greatly reduced the ability of intermediaries to undercut the published rates at our hotels, intermediaries continue to use a variety of aggressive online marketing methods to attract customers, including the purchase, by certain companies, of trademarked online keywords such as “Marriott” from Internet search engines such as Google®, Bing®, Yahoo®, and Baidu® to steer customers toward their websites (a practice that has been challenged by various trademark owners in federal court). Although Marriott has successfully limited these practices through contracts with key online intermediaries, the number of intermediaries and related companies that drive traffic to intermediaries’ websites is too large to permit us to eliminate this risk entirely. In addition, recent class action litigation against several online travel intermediaries and lodging companies, including Marriott, challenges the legality under antitrust law of contract provisions that support programs such as Marriott's Look No Further® Best Rate Guarantee, and we cannot assure you that the courts will ultimately uphold such provisions. Our business and profitability could be harmed if online intermediaries succeed in significantly shifting loyalties from our lodging brands to their travel services, diverting bookings away from Marriott.com, or through their fees increasing the overall cost of Internet bookings for our hotels.
Failure to maintain the integrity of internal or customer data could result in faulty business decisions, operational inefficiencies, damage to our reputation and/or subject us to costs, fines, or lawsuits. Our businesses require collection and retention of large volumes of internal and customer data, including credit card numbers and other personally identifiable information of our customers in various information systems that we maintain and in those maintained by third parties with whom we contract to provide services, including in areas such as human resources outsourcing, website hosting, and various forms of electronic communications. We and third parties who provide services to us also maintain personally identifiable information about our employees. The integrity and protection of that customer, employee, and company data is critical to us. If that data is inaccurate or incomplete, we could make faulty decisions. Our customers and employees also have a high expectation that we and our service providers will adequately protect their personal information. The information, security, and privacy requirements

43
Table of Contents

imposed by governmental regulation and the requirements of the payment card industry are also increasingly demanding, in both the United States and other jurisdictions where we operate. Our systems or our franchisees' systems may not be able to satisfy these changing requirements and employee and customer expectations, or may require significant additional investments or time in order to do so. Efforts to hack or breach security measures, failures of systems or software to operate as designed or intended, viruses, operator error, or inadvertent releases of data all threatenmay materially impact our and our service provider'sproviders' information systems and records. Our reliance on computer, Internet-based and mobile systems and communications and the frequency and sophistication of efforts by hackers to gain unauthorized access to such systems have increased significantly in recent years. A significant theft, loss, or fraudulent use of customer, employee, or company data could adversely impact our reputation and could result in remedial and other expenses,

56
Table of Contents

fines, or litigation. A breachBreaches in the security of our information systems or those of our franchisees or service providers or other disruptions in data services could lead to an interruption in the operation of our systems, resulting in operational inefficiencies and a loss of profits.
Changes in privacy law could adversely affect our ability to market our products effectively. We rely on a variety of direct marketing techniques, including email marketing, online advertising, and postal mailings. Any further restrictions in laws such as the CANSPAM Act, and various U.S. state laws, or new federal laws on marketing and solicitation or international data protection laws that govern these activities could adversely affect the continuing effectiveness of email, online advertising, and postal mailing techniques and could force further changes in our marketing strategy. If this occurs, we may not be able to develop adequate alternative marketing strategies, which could impact the amount and timing of our sales of certain products. We also obtain access to potential customers from travel service providers or other companies with whom we have substantial relationships and market to some individuals on these lists directly or by including our marketing message in the other company’s marketing materials. If access to these lists was prohibited or otherwise restricted, our ability to develop new customers and introduce them to our products could be impaired.

Other Risks
Changes in laws and regulations could reduce our profits or increase our costs. Our businesses are subject to a wide variety of laws, regulations, and policies in jurisdictions around the world, including those for financial reporting, taxes, health care,healthcare, and the environment. Changes to these laws, regulations, and policies, including those associated with healthcare,health care, tax or financial reforms, could reduce our profits. Further, we anticipate that many of the jurisdictions in which we do business will continue to review tax and other revenue raising laws, regulations, and policies, and any resulting changes could impose new restrictions, costs, or prohibitions on our current practices and reduce our profits. In particular, governments may revise tax laws, regulations, or official interpretations in ways that could have a significant impact on us, including modifications that could reduce the profits that we can effectively realize from our non-U.S. operations, or that could require costly changes to those operations, or the way in which they are structured. For example, most U.S. company effective tax rates reflect the fact that income earned and reinvested outside the United States is generally taxed at local rates, which are often much lower than U.S. tax rates. If changes in tax laws, regulations, or interpretations significantly increase the tax rates on non-U.S. income, our effective tax rate could increase and our profits could be reduced. If such increases resulted from our status as a U.S. company, those changes could place us at a disadvantage to our non-U.S. competitors if those competitors remain subject to lower local tax rates.
The 2011 spin-off of our former Timeshare business could result in significant tax liability to us and our shareholders. As discussed in more detail in Footnote No. 16, "Spin-off" to our Financial Statements in our 2012 Form 10-K, in 2011 we completed the spin-off of our timeshare operations and timeshare development business. Although we received a private letter ruling from the Internal Revenue Service ("IRS") and an opinion from our tax counsel confirming that the distribution of MVW common stock will not result in recognition, for U.S. federal income tax purposes, of income, gain or loss to us or our shareholders (except to the extent of cash received in lieu of fractional shares of MVW common stock), the private letter ruling and opinion that we received are subject to the continuing validity of any assumptions and representations reflected therein. In addition, an opinion from our tax counsel is not binding on the IRS or a court. Moreover, certain future events that may or may not be within our control, including certain extraordinary purchases of our stock or MVW's stock, could cause the distribution not to qualify as tax-free. Accordingly, the IRS could determine that the distribution of the MVW common stock was a taxable transaction and a court could agree with the IRS. If the distribution of the MVW common stock was determined to be taxable for U.S. federal income tax purposes, we and our shareholders who received shares of MVW common stock in the spin-off could incur significant tax liabilities. Under the tax sharing and indemnification agreement that we entered into with MVW, we are entitled to indemnification from MVW for certain taxes and related losses resulting from the failure of the distribution of MVW common stock to qualify as tax-free as a result of (1) any breach by MVW or its subsidiaries of the covenants on the preservation of the tax-free status of the distribution, (2) certain acquisitions of equity securities or assets of MVW or its subsidiaries, and (3) any breach by MVW or its subsidiaries of certain representations in the documents submitted to the IRS and the separation documents relating to the spin-off. If, however, the distribution failed to qualify as a tax-free transaction

57
Table of Contents

for reasons other than those specified in the indemnification provisions of the tax sharing and indemnification agreement, liability for any resulting taxes for the distribution would be apportioned between us and MVW based on our relative fair market values.
If we cannot attract and retain talented associates, our business could suffer. We compete with other companies both within and outside of our industry for talented personnel. If we cannot recruit, train, develop, and retain sufficient numbers of talented associates, we could experience increased associate turnover, decreased guest satisfaction, low morale, inefficiency, or internal control failures. Insufficient numbers of talented associates could also limit our ability to grow and expand our businesses. Any shortage of skilled labor could also require higher wages that would increase our labor costs, which could reduce our profits of our third-party owners.
Delaware law and our governing corporate documents contain, and our Board of Directors could implement, anti-takeover provisions that could deter takeover attempts. Under the Delaware business combination statute, a stockholder holding 15 percent or more of our outstanding voting stock could not acquire us without Board of Director consent for at least three years after the date the stockholder first held 15 percent or more of the voting stock. Our governing corporate documents also, among other things, require supermajority votes for mergers and

44
Table of Contents

similar transactions. In addition, our Board of Directors could, without stockholder approval, implement other anti-takeover defenses, such as a stockholder’s rights plan.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a)Unregistered Sale of Securities
None.
(b)Use of Proceeds
None.
(c)Issuer Purchases of Equity Securities
(in millions, except per share amounts)        
  
Total Number
of Shares
Purchased
 
Average Price
per Share
 
Total Number of
Shares Purchased as Part of Publicly
Announced Plans or
Programs (1)
 
Maximum Number
of Shares That May Yet Be Purchased
Under the Plans or
Programs (1)
July 1, 2013 - July 31, 2013 0.5
 $40.53
 0.5
 21.4
August 1, 2013 - August 31, 2013 2.0
 $40.36
 2.0
 19.4
September 1, 2013 - September 30, 2013 0.7
 $40.62
 0.7
 18.7
(in millions, except per share amounts)        
Period 
Total Number
of Shares
Purchased
 
Average Price
per Share
 
Total Number of
Shares Purchased as Part of Publicly
Announced Plans or
Programs (1)
 
Maximum Number
of Shares That May Yet Be Purchased
Under the Plans or
Programs (1)
January 1, 2014 - January 31, 2014 3.0
 $49.43
 3.0
 11.3
February 1, 2014 - February 28, 2014 2.0
 $48.88
 2.0
 34.3
March 1, 2014 - March 31, 2014 2.0
 $54.86
 2.0
 32.3
 
(1) 
On February 15, 2013,14, 2014, we announced that our Board of Directors increased, by 25 million shares, the authorization to repurchase our common stock. Prior to that authorization, we had announced on February 15, 2013, that our Board of Directors had increased, by 25 million shares, the authorization to repurchase our common stock. As of September 30, 2013March 31, 2014, 18.732.3 million shares remained available for repurchase under Board approved authorizations. We may repurchase shares in the open market andor in privately negotiated transactions.

Item 5.Other Information
On October 18, 2013, we voluntarily ceased the listing of our Class A Common Stock, par value $0.01 per share, on the New York Stock Exchange, and on the next business day, October 21, 2013, our common stock commenced trading on The NASDAQ Global Select Market (“NASDAQ”). The Company’s stock symbol remains “MAR.”

5845
Table of Contents

Item 6. Exhibits
 
Exhibit
No.
  Description  
Incorporation by Reference
(where a report is indicated below, that
document has been previously filed with
the SEC and the applicable exhibit is
incorporated by reference thereto)
3.1  Restated Certificate of Incorporation.  Exhibit No. 3.(i) to our Form 8-K filed August 22, 2006 (File No. 001-13881).
   
3.2  Amended and Restated Bylaws.  Exhibit No. 3.(i) to our Form 8-K filed November 12, 2008 (File No. 001-13881).
     
4.110 FormAsset Purchase and Sale Agreement for The New York EDITION between MI NY Clock Tower, LLC (a wholly-owned subsidiary of 3.375% Series M Notes Due 2020Marriott International, Inc.) and Black Slate B 2013, LLC, dated January 7, 2014. 
Exhibit No. 4.110.1 to our Form 8-K filed September 27, 2013January8, 2014 (File No. 001-13881).
10U.S. $2,000,000,000 Third Amended and Restated Credit Agreement dated as of July 18, 2013 with Bank of America, N.A. as administrative agent and certain banks.Exhibit No. 10 to our Form 8-K filed July 19, 2013 (File No. 001-13881).
     
12  Statement of Computation of Ratio of Earnings to Fixed Charges.  Filed with this report.
   
31.1  Certification of Chief Executive Officer Pursuant to Rule 13a-14(a).  Filed with this report.
   
31.2  Certification of Chief Financial Officer Pursuant to Rule 13a-14(a).  Filed with this report.
   
32  Section 1350 Certifications.  Furnished with this report.
   
101.INS  XBRL Instance Document.  Submitted electronically with this report.
   
101.SCH  XBRL Taxonomy Extension Schema Document.  Submitted electronically with this report.
   
101.CAL  XBRL Taxonomy Calculation Linkbase Document.  Submitted electronically with this report.
   
101.DEF  XBRL Taxonomy Extension Definition Linkbase Document.  Submitted electronically with this report.
   
101.LAB  XBRL Taxonomy Label Linkbase Document.  Submitted electronically with this report.
   
101.PRE  XBRL Taxonomy Presentation Linkbase Document.  Submitted electronically with this report.
We have attached the following documents formatted in XBRL (Extensible Business Reporting Language) as Exhibit 101 to this report: (i) the Condensed Consolidated Statements of Income for the 92 daysthree months ended September 30, 2013March 31, 2014, and 84 days ended September 7, 2012, as well as the 276 days ended September 30,March 31, 2013, and 252 days ended September 7, 2012; (ii) the Condensed Consolidated Statements of Comprehensive Income for the 92 daysthree months ended September 30, 2013March 31, 2014, and 84 days ended September 7, 2012, as well as the 276 days ended September 30,March 31, 2013, and 252 days ended September 7, 2012; (iii) the Condensed Consolidated Balance Sheets at September 30, 2013March 31, 2014, and December 28, 201231, 2013; and (iv) the Condensed Consolidated Statements of Cash Flows for the 276 daysthree months ended September 30, 2013March 31, 2014, and 252 days ended September 7, 2012March 31, 2013.


5946
Table of Contents

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.
 
  MARRIOTT INTERNATIONAL, INC.
31st 30th day of October, 2013April, 2014
 
/s/ Arne M. Sorenson
Arne M. Sorenson
President and Chief Executive Officer
 
/s/ Carl T. Berquist
Carl T. Berquist
Executive Vice President and
Chief Financial Officer


6047