HYATT HOTELS CORP, 10-K filed on 2/13/2013
Annual Report
Document and Entity Information Document (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Jun. 30, 2012
Jan. 31, 2013
Common Class B
Jan. 31, 2013
Common Class A
Document Information [Line Items]
 
 
 
 
Entity Registrant Name
Hyatt Hotels Corp 
 
 
 
Entity Central Index Key
0001468174 
 
 
 
Current Fiscal Year End Date
--12-31 
 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
 
Document Type
10-K 
 
 
 
Document Period End Date
Dec. 31, 2012 
 
 
 
Document Fiscal Year Focus
2012 
 
 
 
Document Fiscal Period Focus
FY 
 
 
 
Amendment Flag
false 
 
 
 
Trading Symbol
 
 
 
Entity Common Stock, Shares Outstanding
 
 
115,434,342 
46,637,780 
Entity Well-known Seasoned Issuer
Yes 
 
 
 
Entity Voluntary Filers
No 
 
 
 
Entity Current Reporting Status
Yes 
 
 
 
Entity Public Float
 
$ 1,684.4 
 
 
Consolidated Statements Of Income (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
REVENUES:
 
 
 
Owned and leased hotels
$ 2,021 
$ 1,879 
$ 1,859 
Management and franchise fees
307 
288 
255 
Other revenues
78 
66 
45 
Other revenues from managed properties
1,543 
1,465 
1,368 
Total revenues
3,949 
3,698 
3,527 
DIRECT AND SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES:
 
 
 
Owned and leased hotels
1,549 
1,468 
1,493 
Depreciation and amortization
353 
305 
279 
Other direct costs
29 
24 
Selling, general, and administrative
316 
283 
276 
Other costs from managed properties
1,543 
1,465 
1,368 
Direct and selling, general, and administrative expenses
3,790 
3,545 
3,419 
Net gains and interest income from marketable securities held to fund operating programs
21 
21 
Equity earnings (losses) from unconsolidated hospitality ventures
(22)
(40)
Interest expense
(70)
(57)
(54)
Gains (losses) on sales of real estate
(2)
26 
Asset impairments
(6)
(44)
Other income (loss), net
(11)
71 
INCOME BEFORE INCOME TAXES
95 
83 
88 
(PROVISION) BENEFIT FOR INCOME TAXES
(8)
28 
(37)
INCOME FROM CONTINUING OPERATIONS
87 
111 
51 
DISCONTINUED OPERATIONS:
 
 
 
Loss from discontinued operations, net of income tax benefit of $0, $2, and $2 in 2011, 2010 and 2009, respectively
(3)
Gains on sales of discontinued operations, net of income tax expense of $0, $4, and $0 in 2011, 2010, and 2009, respectively
NET INCOME
87 
111 
55 
Comprehensive loss attributable to noncontrolling interests
(1)
(2)
(11)
NET INCOME ATTRIBUTABLE TO HYATT HOTELS CORPORATION
$ 88 
$ 113 
$ 66 
EARNINGS PER SHARE - Basic
 
 
 
Income from continuing operations
$ 0.53 
$ 0.66 
$ 0.29 
Income from discontinued operations
$ 0.00 
$ 0.00 
$ 0.03 
Net income attributable to Hyatt Hotels Corporation
$ 0.53 
$ 0.67 
$ 0.38 
EARNINGS PER SHARE - Diluted
 
 
 
Income from continuing operations
$ 0.53 
$ 0.66 
$ 0.29 
Income from discontinued operations
$ 0.00 
$ 0.00 
$ 0.03 
Net income attributable to Hyatt Hotels Corporation
$ 0.53 
$ 0.67 
$ 0.38 
Consolidated Statements Of Income (Parentheticals) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Tax benefit on discontined operations
$ 0 
$ 0 
$ (2)
Tax effect of gains on sale of discontinued operations
$ 0 
$ 0 
$ 4 
Consolidated Statements of Comprehensive Income (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Net income
$ 87 
$ 111 
$ 55 
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustments, Net of Tax (benefit) expense
29 
(31)
15 
Other Comprehensive Income (Loss), Unrealized gains (losses) on available-for-sale securities, net of tax (benefit) expense
(2)
Other Comprehensive Income (Loss), Unrecognized pension costs, net of tax (benefit) expense
(1)
Other Comprehensive Income (Loss), Unrealized gains (losses) on derivative activity, net of tax (benefit) expense
(8)
Other Comprehensive Income (Loss)
32 
(42)
15 
Comprehensive Income
119 
69 
70 
Comprehensive loss attributable to noncontrolling interests
11 
Comprehensive Income Attributable to Hyatt Hotels Corporations
$ 120 
$ 71 
$ 81 
Consolidated Statements of Comprehensive Income Parentheticals (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustments, Tax
$ (3)
$ (1)
$ 1 
Other Comprehensive Income (Loss), Unrealized Gains (Losses) on Available-for-sale Securities, Tax
(1)
Other Comprehensive Income (Loss), Unrecognized Pension Cost, Tax
(1)
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Activity, Tax
$ 0 
$ (5)
$ 0 
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
ASSETS
 
 
Cash and cash equivalents
$ 413 
$ 534 
Restricted cash
72 
27 
Short-term investments
514 
588 
Receivables, net of allowances of $11 and $10 at December 31, 2012 and December 31, 2011, respectively
531 
225 
Inventories
80 
87 
Prepaids and other assets
83 
78 
Prepaid income taxes
12 
29 
Deferred tax assets
19 
23 
Assets held for sale
34 
   
Total current assets
1,758 
1,591 
Investments
293 
280 
Property and equipment, net
4,139 
4,043 
Financing receivables, net of allowances
126 
360 
Goodwill
133 1
102 1
Intangibles, net
388 
359 
Deferred tax assets
183 
197 
Other assets
620 
575 
TOTAL ASSETS
7,640 
7,507 
LIABILITIES AND EQUITY
 
 
Current maturities of long term debt
Accounts payable
138 
144 
Accrued expenses and other current liabilities
338 
306 
Accrued compensation and benefits
137 
114 
Liabilities Held-for-sale
Total current liabilities
618 
568 
Long-term debt
1,229 
1,221 
Other long-term liabilities
962 
890 
Total liabilities
2,809 
2,679 
Commitments and Contingencies (see Note 16)
   
   
EQUITY:
 
 
Preferred stock, $0.01 par value per share, 10,000,000 shares authorized and none outstanding as of December 31, 2012 and 2011
   
   
Common stock
Additional paid-in capital
3,263 
3,380 
Retained earnings
1,605 
1,517 
Treasury stock at cost, 36,273 shares at December 31, 2012 and 2011
(1)
(1)
Accumulated other comprehensive income (loss)
(48)
(80)
Total stockholders' equity
4,821 
4,818 
Noncontrolling interests in consolidated subsidiaries
10 
10 
Total equity
4,831 
4,828 
TOTAL LIABILITIES AND EQUITY
$ 7,640 
$ 7,507 
Consolidated Balance Sheets Parentheticals (USD $)
In Millions, except Share data, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Allowance for Doubtful Accounts Receivable, Current
$ 11 
$ 10 
Preferred Stock, Par or Stated Value Per Share
$ 0.01 
$ 0.01 
Preferred Stock, Shares Authorized
10,000,000 
10,000,000 
Preferred Stock, Shares Outstanding
Treasury Stock, Shares
36,273 
36,273 
Common Class A
 
 
Common Stock, Par or Stated Value Per Share
$ 0.01 
$ 0.01 
Common Stock, Shares Authorized
1,000,000,000 
1,000,000,000 
Common Stock, Shares, Outstanding
46,631,778 
44,683,934 
Common Stock, Shares, Issued
46,668,051 
44,720,207 
Common Class B
 
 
Common Stock, Par or Stated Value Per Share
$ 0.01 
$ 0.01 
Common Stock, Shares Authorized
448,985,467 
452,472,717 
Common Stock, Shares, Outstanding
115,434,342 
120,478,305 
Common Stock, Shares, Issued
115,434,342 
120,478,305 
Consolidated Statements Of Cash Flows (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$ 87 
$ 111 
$ 55 
Gain on sale of discontinued operations
(7)
Loss from discontinued operations
Income from continuing operations
87 
111 
51 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
353 
305 
279 
Deferred income taxes
65 
(137)
(8)
Asset impairments
44 
Provisions on hotel loans
Equity losses from unconsolidated hospitality ventures, net of distributions received
44 
17 
54 
Income from cost method investments
(1)
(Gain) loss on sales of real estate
(26)
Foreign currency losses
Gain on extinguishment of debt
(35)
Net realized gains from other marketable securities
(17)
Net unrealized losses (gains) from other marketable securities
13 
(19)
Other
28 
32 
36 
Receivables, net
(33)
(17)
22 
Inventories
Prepaid Income Taxes
(6)
76 
Accounts Payable, Accrued Expenses, and Other Current Liabilities
81 
10 
11 
Accrued Compensation and Benefits
22 
11 
Other Long Term Liabilities
(118)
62 
(11)
Other, Net
(35)
(26)
(43)
Net cash provided by operating activities of continuing operations
499 
393 
450 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Purchases of marketable securities and short-term investments
(370)
(503)
(1,741)
Proceeds from marketable securities and short-term investments
467 
417 
1,343 
Contributions to investments
(90)
(44)
(84)
Proceeds from Sale of Investments
52 
Acquisitions, net of cash acquired
(233)
(716)
Capital expenditures
(301)
(331)
(310)
Issuance of Notes Receivable
(67)
(3)
(4)
Proceeds from sales of real estate
87 
90 
233 
Real estate sale proceeds transferred to escrow as restricted cash
(44)
(35)
(210)
Proceeds from sale of assets held for sale
18 
Real estate sale proceeds transferred from escrow to cash and cash equivalents
132 
113 
(Increase) decrease in restricted cash - investing
(25)
(1)
Other investing activities
(15)
(2)
Net cash used in investing activities of continuing operations
(489)
(1,015)
(663)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from issuance of long-term debt, net of issuance costs
10 
519 
Repayments of long-term debt
(54)
(39)
Repurchase of common stock
(136)
(396)
Other financing activities
(13)
Net cash provided by (used in) financing activities of continuing operations
(124)
56 
(39)
CASH PROVIDED BY DISCONTINUED OPERATIONS:
 
 
 
Proceeds from sale of discontinued operations
27 
Sale proceeds transferred to escrow as restricted cash
(22)
Sales proceeds transferred from escrow to cash and cash equivalents
22 
Net cash provided by investing activities of discontinued operations
27 
Net cash provided by discontinued operations
27 
EFFECT OF EXCHANGE RATE CHANGES ON CASH
(7)
(10)
NET DECREASE IN CASH AND CASH EQUIVALENTS
(121)
(576)
(217)
CASH AND CASH EQUIVALENTS-BEGINNING OF YEAR
534 
1,110 
1,327 
CASH AND CASH EQUIVALENTS—END OF PERIOD
413 
534 
1,110 
LESS CASH AND CASH EQUIVALENTS DISCONTINUED OPERATIONS
CASH AND CASH EQUIVALENTS CONTINUING OPERATIONS-END OF PERIOD
413 
534 
1,110 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
Cash paid during the period for interest
68 
49 
57 
Cash paid during the period for income taxes
50 
60 
63 
Non-cash investing activities are as follows:
 
 
 
Purchase of land
24 
Equity contribution of property and equipment, net
10 
Equity contribution of long-term debt (see Note 8)
25 
Contribution to investment (see Note 3)
20 
Change in Accrued Capital Expenditures
(40)
19 
Acquired capital lease (see Note 8)
$ 0 
$ 7 
$ 0 
Consolidated Statements Of Cash Flows Statement of Cash Flow Parenthetical (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Proceeds from issuance of long-term debt, issuance costs
$ 0 
$ 4 
$ 0 
Consolidated Statements of Changes in Stockholders' Equity (USD $)
In Millions, unless otherwise specified
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Treasury Stock [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Noncontrolling Interest [Member]
Balance - at Dec. 31, 2009
$ 5,040 
$ 2 
$ 3,731 
$ 1,338 
$ (2)
$ (53)
$ 24 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Total comprehensive income
70 
66 
15 
(11)
Distributions to noncontrolling interests
(1)
(1)
Purchase of shares in noncontrolling interests
(2)
(3)
Directors compensation
Employee stock plan issuance
Shares issued from treasury
Share-based payment activity
21 
21 
Balance - at Dec. 31, 2010
5,131 
3,751 
1,404 
(1)
(38)
13 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Total comprehensive income
69 
113 
(42)
(2)
Distributions to noncontrolling interests
(1)
(1)
Directors compensation
Employee stock plan issuance
Repurchase of common stock
(396)
(396)
Share-based payment activity
21 
21 
Balance - at Dec. 31, 2011
4,828 
3,380 
1,517 
(1)
(80)
10 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Total comprehensive income
119 
88 
32 
(1)
Purchase of shares in noncontrolling interests
(2)
(3)
Directors compensation
Employee stock plan issuance
Repurchase of common stock
(136)
(136)
Share-based payment activity
18 
18 
Balance - at Dec. 31, 2012
$ 4,831 
$ 2 
$ 3,263 
$ 1,605 
$ (1)
$ (48)
$ 10 
Organization
Organization
ORGANIZATION
Hyatt Hotels Corporation, a Delaware corporation, and its consolidated subsidiaries (“Hyatt Hotels Corporation”), provide hospitality services on a worldwide basis through the management, franchising and ownership of hospitality related businesses. We operate or franchise 249 full service, Hyatt-branded hotels, consisting of 103,141 rooms throughout the world. We hold ownership interests in certain of these hotels. We operate or franchise 226 select service, Hyatt-branded hotels with 29,938 rooms, of which 224 hotels are located in the United States. We operate these hotels in 46 countries around the world. We hold ownership interests in certain of these hotels. We develop, operate, manage, license or provide services to Hyatt-branded timeshare, fractional and other forms of residential or vacation properties.

Effective October 1, 2012 we realigned our corporate and regional operations. Our realignment changed our operating and reportable segments such that our historical North American management and franchising segment has been combined with operations in Latin America to form the Americas operating and reporting segment. The remaining components of our former International management and franchising segment have been broken out to form two new reportable segments, Asia Pacific ("ASPAC") and Europe, Africa, the Middle East and Southwest Asia ("EAME/SW Asia"). These operating segments, together with our owned and leased hotels form our four reportable segments. As part of our realignment, costs incurred in our global development efforts, which were previously aggregated in corporate and other have been allocated to the operating and reporting segment to which they relate. The results of our vacation ownership business, Hyatt co-branded credit card and unallocated corporate overhead continue to be reported within corporate and other. These operating and reporting changes did not change the legal holding structure of Hyatt Hotels Corporation, Hyatt Corporation or Hyatt International Corporation. See Note 20 for a discussion of our four reporting segments, which reflects historical financial data on a recast basis as if our realignment had been effective at the beginning of the earliest comparative period.
As used in these Notes, the terms “Company,” “HHC,” “we,” “us,” or “our” mean Hyatt Hotels Corporation and its consolidated subsidiaries.
As used in these Notes, the term “Pritzker family business interests” means (1) various lineal descendants of Nicholas J. Pritzker (deceased) and spouses and adopted children of such descendants; (2) various trusts for the benefit of the individuals described in clause (1) and trustees thereof; and (3) various entities owned and/or controlled, directly and/or indirectly, by the individuals and trusts described in (1) and (2).
Summary of Significant Accounting Policies (Notes)
Significant Accounting Policies [Text Block]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation—The consolidated financial statements present the results of operations, financial position, and cash flows of Hyatt Hotels Corporation and its majority owned and controlled subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates—We are required to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from such estimated amounts.
Revenue Recognition—Our revenues are primarily derived from the following sources and are generally recognized when services have been rendered:
Owned and leased hotel revenues are derived from room rentals and services provided at our owned, leased, and consolidated hospitality venture properties and are recorded when rooms are occupied and services have been rendered. Sales and occupancy taxes are recorded on a net basis in the consolidated statements of income.
Management and franchise fees earned from hotels managed and franchised worldwide:
Management fees primarily consist of a base fee, which is generally computed as a percentage of gross revenues, and an incentive fee, which is generally computed based on a hotel profitability measure. Base fee revenues are recognized when earned in accordance with the terms of the contract. We recognize incentive fees that would be due as if the contract were to terminate at that date, exclusive of any termination fees payable or receivable by us.
Realized gains from the sale of hotel real estate assets where we maintain substantial continuing involvement in the form of a long-term management contract are deferred and recognized as management fee revenue over the term of the underlying management contract.
Franchise fees are generally based on a percentage of hotel rooms’ revenues and are recognized as the fees are earned and become due from the franchisee and when all material services or conditions relating to the sale have been substantially performed or satisfied by the franchisor.
Other revenues
Other revenues primarily include revenues from our vacation ownership business. We recognize vacation ownership revenue when a minimum of 10% of the purchase price for the interval has been received, the period of cancellation with refund has expired, and receivables are deemed collectible. For sales that do not qualify for full revenue recognition, as the project has progressed beyond the preliminary stages, but has not yet reached completion, all revenue and associated direct expenses are initially deferred and recognized in earnings through the percentage-of-completion method.
Other revenues also include revenues from our co-branded credit card launched in 2010. We recognize revenue from our co-branded credit card upon: (1) the sale of points to our third-party partner; and (2) the fulfillment or expiration of a card member's activation offer. We receive incentive fees from our third-party partner upon activation of each credit card, which we defer until the associated compensated nights awarded on member activation are redeemed or expired.
Other revenues from managed properties represent the reimbursement of costs incurred on behalf of the owners of hotel properties we manage. These costs relate primarily to payroll costs at managed properties where we are the employer. Since the reimbursements are made based upon the costs incurred with no added margin, these revenues and corresponding expenses have no effect on our net income.
Cash Equivalents—We consider all highly liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents.
Restricted Cash—We had restricted cash of $72 million and $27 million at December 31, 2012 and 2011, respectively. The 2012 balance relates primarily to a like-kind exchange agreement under which $44 million in proceeds from sales were placed into an escrow account administered by an intermediary (see Note 8), a holdback escrow agreement of $10 million entered into in conjunction with the acquisition of a full service hotel in Mexico City, Mexico (see Note 8), and proceeds from $10 million drawn on a loan which will be used for completion of a property improvement plan and conversion of a non-Hyatt branded property to a Hyatt Place (see Note 10). The 2011 balance relates primarily to a holdback escrow agreement of $20 million we entered into in conjunction with the acquisition of hotels and other assets from LodgeWorks, L.P. and its private equity partners (collectively, "LodgeWorks") which was paid to LodgeWorks and therefore released from restricted cash in 2012 (see Note 8). The remaining $8 million and $7 million in 2012 and 2011, respectively, relates to secured real estate taxes, property insurance, escrow deposits on purchases of our vacation ownership intervals, escrow deposits on construction projects, security deposits, software contract deposits, property and equipment reserves, and long-term loans. These amounts are invested in interest-bearing accounts.
Investments—We consolidate entities under our control, including entities where we are deemed to be the primary beneficiary as a result of qualitative and/or quantitative characteristics. The primary beneficiary is the party who has the power to direct the activities of a variable interest entity ("VIE") that most significantly impact the entity’s economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity. Investments in unconsolidated affiliates over which we exercise significant influence, but do not control, including joint ventures, are accounted for by the equity method. In addition, our limited partnership investments in which we hold more than a minimal investment are accounted for under the equity method of accounting. Investments in unconsolidated affiliates over which we are not able to exercise significant influence are accounted for under the cost method.
We assess investments in unconsolidated affiliates for impairment quarterly. When there is indication that a loss in value has occurred, we evaluate the carrying value compared to the estimated fair value of the investment. Fair value is based upon internally developed discounted cash flow models, third-party appraisals, and if appropriate, current estimated net sales proceeds from pending offers. If the estimated fair value is less than carrying value, we use our judgment to determine if the decline in value is other-than-temporary. In determining this, we consider factors including, but not limited to, the length of time and extent of the decline, loss of values as a percentage of the cost, financial condition and near-term financial projections, our intent and ability to recover the lost value and current economic conditions. Impairments that are deemed other-than-temporary are charged to equity earnings (losses) from unconsolidated hospitality ventures on our consolidated statements of income.
Marketable Securities—Our investments in marketable securities are principally included within short-term investments and other assets in the consolidated balance sheets and are classified as either trading or available-for-sale (see Note 4). Marketable securities are recorded at fair value based on listed market prices or dealer price quotations where available.
Our marketable securities consist of various types of U.S. Treasury securities and agencies, mutual funds, common stock and fixed income securities, including government agencies, municipal, provincial, and corporate bonds. Realized and unrealized gains and losses on trading securities are reflected in the consolidated statements of income in other income (loss), net. Available-for-sale securities with unrealized gains and losses are reported as part of accumulated other comprehensive loss on the consolidated balance sheets. Realized gains and losses on available-for-sale securities are recognized in other income (loss), net based on the cost of the securities using specific identification. Available-for-sale securities are assessed for impairment quarterly. To determine if an impairment is other-than-temporary, we consider the duration and severity of the loss position, the strength of the underlying collateral, the term to maturity, credit rating and our intent to sell. For debt securities that are deemed other-than-temporarily impaired and there is no intent to sell, impairments are separated into the amount related to the credit loss, which is recorded in our consolidated statements of income and the amount related to all other factors, which is recorded in accumulated other comprehensive loss. For debt securities that are deemed other-than-temporarily impaired and there is intent to sell, impairments in their entirety are recorded in our consolidated statements of income.
Derivative Instruments—Derivative transactions are executed only to manage exposures arising in the normal course of business and not for the purpose of creating speculative positions or trading. As a result of the use of derivative instruments, we are exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate the counterparty credit risk, we only enter into contracts with carefully selected major financial institutions based upon their credit rating and other factors. Our derivative instruments do not contain credit-risk related contingent features.
All derivatives are recognized on the balance sheet at fair value. On the date the derivative contract is entered, we designate the derivative as one of the following: a hedge of a forecasted transaction or the variability of cash flows to be paid (cash flow hedge), a hedge of the fair value of a recognized asset or liability (fair value hedge), or an undesignated hedge instrument. Changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge are recorded in accumulated other comprehensive loss on the consolidated balance sheets until they are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Changes in the fair value of a derivative that is qualified, designated and highly effective as a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk are recorded in current earnings. Changes in the fair value of undesignated derivative instruments and the ineffective portion of designated derivative instruments are reported in current period earnings. Cash flows from designated derivative financial instruments are classified within the same category as the item being hedged on the consolidated statements of cash flows. Cash flows from undesignated derivative financial instruments are included in the investing category on the consolidated statements of cash flows.
At the designation date, we formally document all relationships between hedging activities, including the risk management objective and strategy for undertaking various hedge transactions. This process includes matching all derivatives that are designated as cash flow hedges to specific forecasted transactions and linking all derivatives designated as fair value hedges to specific assets and liabilities on the consolidated balance sheets.
We also formally assess both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair value or cash flow of hedged items. We discontinue hedge accounting prospectively, when the derivative is not highly effective as a hedge, the underlying hedged transaction is no longer probable, or the hedging instrument expires, is sold, terminated, or exercised.
Foreign Currency—The functional currency of our consolidated and nonconsolidated entities located outside the United States of America is generally the local currency. The assets and liabilities of these entities are translated into U.S. dollars at year-end exchange rates, and the related gains and losses, net of applicable deferred income taxes, are reflected in stockholders’ equity. Gains and losses from foreign currency transactions are included in earnings. Income and expense accounts are translated at the average exchange rate for the period. Gains and losses from foreign exchange rate changes related to intercompany receivables and payables of a long-term nature are generally included in other comprehensive income (loss). Gains and losses from foreign exchange rate movement related to intercompany receivables and payables that are not of a long-term nature are reported currently in income.
Financing Receivables—We define financing receivables as financing arrangements that represent a contractual right to receive money either on demand or on fixed or determinable dates and that are recognized as an asset on our consolidated balance sheets. We record all financing receivables at amortized cost in current and long-term receivables. We recognize interest income as earned and provide an allowance for cancellations and defaults. We have divided our financing receivables into three portfolio segments based on the level at which we develop and document a systematic methodology to determine the allowance for credit losses. Based on their initial measurement, risk characteristics and our method for monitoring and assessing credit risk, we have determined the class of financing receivables to correspond to our identified portfolio segments, which are as follows:
Secured Financing to Hotel Owners
These financing receivables are senior, secured mortgage loans and are collateralized by underlying hotel properties currently in operation. We determine our secured financing to hotel owners to be non-performing if either interest or principal is greater than 90 days past due based on the contractual terms of the individual mortgage loans.
– We individually assess all loans in this portfolio for impairment. We determine a loan to be impaired if it is probable that we will be unable to collect all amounts due in accordance with the contractual terms of the individual loan agreement. This assessment is based on an analysis of several factors including current economic conditions and industry trends, as well as the specific risk characteristics of the portfolio including loan performance, individual market factors, hotel performance, and the collateral of the underlying hotel. We measure loan impairment based on either the present value of expected future cash flows discounted at the loan’s effective interest rate or estimated the fair value of the collateral. The measurement method used is based on which would be most appropriate given the nature of the loan, the underlying collateral, and the facts and circumstances of the individual loan. For impaired loans, we establish a specific loan loss reserve for the difference between the recorded investment in the loan and the present value of the expected future cash flows or the estimated fair value of the collateral. The loan loss reserve is maintained at a level deemed adequate by management based on a periodic analysis of the individual loans.
– If we consider secured financing to hotel owners to be non-performing or impaired, we place the financing receivable on non-accrual status. We will recognize interest income when received for non-accruing finance receivables. Accrual of interest income is resumed when the receivable becomes contractually current and collection doubts are removed. We write off secured financing to hotel owners when we determine that the loans are uncollectible and when all commercially reasonable means of recovering the loan balances have been exhausted.

Vacation Ownership Mortgage Receivables
These financing receivables are comprised of various mortgage loans related to our financing of vacation ownership interval sales. We record an estimate of uncollectibility as a reduction of sales revenue at the time revenue is recognized on a vacation ownership interval sale. We evaluate this portfolio collectively as we hold a large group of homogeneous, smaller-balance, vacation ownership mortgage receivables and use a technique referred to as static pool analysis, which tracks uncollectibles over the entire life of those mortgage receivables. We use static pool analysis as the basis for determining our general reserve requirements on our vacation ownership mortgage receivables. The adequacy of the related allowance is determined by management through analysis of several factors, such as current economic conditions and industry trends, as well as the specific risk characteristics of the portfolio including defaults, aging and historical write-offs of these receivables. The allowance is maintained at a level deemed adequate by management based on a periodic analysis of the mortgage portfolio.
We determine our vacation ownership mortgage receivables to be non-performing if either interest or principal is greater than 120 days past due based on the contractual terms of the individual mortgage loans. We do not recognize interest income and write-off vacation ownership mortgage receivables that are over 120 days past due, the date on which we determine the mortgage receivables to be uncollectible.

Unsecured Financing to Hotel Owners
These financing receivables are primarily made up of individual loans and other types of unsecured financing arrangements provided to hotel owners. These financing receivables have stated maturities and interest rates, however, the repayment terms vary and may be dependent upon future cash flows of the hotel. We determine our unsecured financing to hotel owners to be non-performing if interest or principal is greater than 90 days past due or if estimates of future cash flows available for repayment of these receivables indicate that there is a collectibility risk. We do not recognize interest income on non-performing financing arrangements and only resume interest recognition if the financing receivable becomes current.
– We individually assess all financing receivables in this portfolio for collectability and impairment. We determine a loan to be impaired if it is probable that we will be unable to collect all amounts due according to the contractual terms of the individual loan agreement based on an analysis of several factors including current economic conditions and industry trends, as well as the specific risk characteristics of the portfolio including capital structure, individual hotel performance, and individual financing arrangement. We measure loan impairment based on the present value of expected future cash flows discounted at the loan’s effective interest rate. For impaired loans, we establish a specific impairment reserve for the difference between the recorded investment in the loan and the present value of the expected future cash flows. The impairment reserve is maintained at a level deemed adequate by management based on a periodic analysis of the individual loans.
We write off unsecured financing to hotel owners when we determine that the receivables are uncollectible and when all commercially reasonable means of recovering the receivable balances have been exhausted.
Inventories—Inventories are comprised principally of unsold vacation ownership intervals of $66 million and $68 million at December 31, 2012 and 2011, respectively, and food and beverage inventories at our owned and leased hotels. Vacation ownership inventory is carried at the lower of cost or market, based on relative sales value or net realizable value. Food and beverage inventories are generally valued at the lower of cost (first-in, first-out) or market. Vacation ownership interval inventory, which has an operating cycle that exceeds 12 months, is classified as a current asset consistent with recognized industry practice. Based on management's assessment, no impairment charges were recorded in 2012 related to vacation ownership inventory. During 2011 and 2010, management changed its plans for future development of multi-phase vacation ownership properties. These changes resulted in impairment charges of $5 million and $30 million during 2011 and 2010, respectively, recorded to asset impairments. In certain of these vacation ownership properties, our ownership interest is less than 100%. As a result, $1 million and $9 million of these impairment charges during 2011 and 2010, respectively, is attributable to our partners and is reflected in net loss attributable to noncontrolling interests. As a result, the net impairment charge attributable to Hyatt Hotels Corporation is $4 million and $21 million during 2011 and 2010, respectively.
Property and Equipment—Property and equipment are stated at cost, including interest incurred during development and construction periods. Depreciation and amortization are recognized over the estimated useful lives of the assets, primarily on the straight-line method. All repair and maintenance costs are expensed as incurred.
Useful lives assigned to property and equipment are as follows:
Buildings and improvements
15-50 years
Leasehold improvements
The shorter of the lease term or useful life of asset
Furniture and equipment
2-21 years
Computers
3-6 years

Long-Lived Assets and Definite-Lived Intangibles—We evaluate the carrying value of our long-lived assets and definite-lived intangibles for impairment by comparing the expected undiscounted future cash flows of the assets to the net book value of the assets when events or circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. If the expected undiscounted future cash flows are less than the net book value of the assets, the excess of the net book value over the estimated fair value is charged to earnings. Fair value is based upon discounted cash flows of the assets at a rate deemed reasonable for the type of asset and prevailing market conditions, appraisals, and, if appropriate, current estimated net sales proceeds from pending offers. We evaluate the carrying value of our long-lived assets and definite-lived intangibles based on our plans, at the time, for such assets and such qualitative factors as future development in the surrounding area and status of expected local competition. Changes to our plans, including a decision to dispose of or change the intended use of an asset, can have a material impact on the carrying value of the asset.
Acquisitions—Assets acquired and liabilities assumed in business combinations are recorded on our consolidated balance sheets as of the respective acquisition dates based upon their estimated fair values at such dates. The results of operations of businesses acquired by us have been included in the consolidated statements of income since their respective dates of acquisition. In certain circumstances, the purchase price allocations are based upon preliminary estimates and assumptions. Accordingly, the allocations are subject to revision when we receive final information, including appraisals and other analyses. There were no contingent payments, preliminary estimates, options, or commitments specified except as otherwise disclosed in Note 8.
Guarantees—We enter into performance guarantees related to certain hotels that we manage or debt repayment guarantees with respect to certain hotels in which we hold an equity investment.  We record a liability for the fair value of these performance and debt repayment guarantees at their inception date. The offset depends on the circumstances in which the guarantee was issued.  We amortize the liability for the fair value of a guarantee into income over the term of the guarantee using a systematic and rational, risk-based approach. Performance guarantees are amortized into income in other income (loss), net in the consolidated income statement and debt guarantees that relate to our equity method investments are amortized into income in equity earnings (losses) from unconsolidated hospitality ventures in the consolidated income statement. On a quarterly basis, we evaluate the likelihood of funding a guarantee. To the extent we determine an obligation to fund under a guarantee is both probable and estimable, we will record a separate contingent liability. The expense related to the separate contingent liability is recognized in other income (loss), net in the period that we determine funding is probable.
Goodwill—As required, we evaluate goodwill for impairment on an annual basis, and do so during the fourth quarter of each year using balances as of October 1 and at an interim date if indications of impairment exist. Goodwill impairment is determined by comparing the fair value of a reporting unit to its carrying amount. This is done either by performing a qualitative assessment or proceeding to the two-step process, with an impairment being recognized only where the fair value is less than carrying value. We define a reporting unit at the individual property or business level. In any given year we can elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is in excess of its carrying value. If it is not more likely than not that the fair value is in excess of the carrying value, or we elect to bypass the qualitative assessment, we proceed to the two-step process. When determining fair value, we utilize internally developed discounted future cash flow models, third party appraisals and, if appropriate, current estimated net sales proceeds from pending offers. Under the discounted cash flow approach we utilize various assumptions, including projections of revenues based on assumed long-term growth rates, estimated costs and appropriate discount rates based on the weighted-average cost of capital. The principal factors used in the discounted cash flow analysis requiring judgment are the projected future operating cash flow, the weighted-average cost of capital and the terminal value growth rate assumptions. The weighted-average cost of capital takes into account the relative weights of each component of our capital structure (equity and long-term debt) and is determined at the reporting unit level. Our estimates of long-term growth and costs are based on historical data, various internal estimates and a variety of external sources, and are developed as part of our routine, long-term planning process. We then compare the estimated fair value to our carrying value. If the carrying value is in excess of the fair value, we must determine our implied fair value of goodwill to measure if any impairment charge is necessary. The determination of our implied fair value of goodwill requires the allocation of the reporting unit’s estimated fair value to the individual assets and liabilities of the reporting unit as if we had completed a business combination. We perform the allocation based on our knowledge of the reporting unit, the market in which they operate, and our overall knowledge of the hospitality industry. See Note 9 for additional information about goodwill.
Income Taxes—We account for income taxes to recognize the amount of taxes payable or refundable for the current year and the amount of deferred tax assets and liabilities resulting from the future tax consequences of differences between the financial statements and tax basis of the respective assets and liabilities. We recognize the financial statement effect of a tax position when, based on the technical merits of the uncertain tax position, it is more likely than not to be sustained on a review by taxing authorities. These estimates are based on judgments made with currently available information. We review these estimates and make changes to recorded amounts of uncertain tax positions as facts and circumstances warrant. For additional information about income taxes, see Note 15.
Fair Value—We disclose the fair value of our financial assets and liabilities based on observable market information where available, or on market participant assumptions. These assumptions are subjective in nature, involve matters of judgment, and, therefore, fair values cannot always be determined with precision. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Accounting Principles Generally Accepted in the United States of America (“GAAP”) establishes a valuation hierarchy for prioritizing the inputs and the hierarchy places greater emphasis on the use of observable market inputs and less emphasis on unobservable inputs. When determining fair value, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of the hierarchy are as follows:
Level One—Fair values based on unadjusted quoted prices in active markets for identical assets and liabilities;
Level Two—Fair values based on quoted market prices for similar assets and liabilities in active markets, quoted prices in inactive markets for identical assets and liabilities, and inputs other than quoted market prices that are observable for the asset or liability;
Level Three— Fair values based on inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. Valuation techniques could include the use of discounted cash flow models and similar techniques.
We utilize the market approach and income approach for valuing our financial instruments. The market approach utilizes prices and information generated by market transactions involving identical or similar assets and liabilities and the income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). For instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the classification of fair value assets and liabilities within the fair value hierarchy.
The carrying values of cash equivalents, accounts receivable, financing receivable – current, accounts payable and current maturities of long-term debt approximate fair value due to the short-term nature of these items and their close proximity to maturity. For additional information about fair value, see Note 5. The fair value of marketable securities is discussed in Note 4; the fair value of financing receivable is discussed in Note 7; and the fair value of long-term debt is discussed in Note 10.
Hyatt Gold Passport Fund—The Hyatt Gold Passport Program (the “Program”) is our loyalty program. We operate the Program for the benefit of Hyatt branded properties, whether owned, operated, managed, or franchised by us. The Program is operated through the Hyatt Gold Passport Fund, which is an entity that is owned collectively by the owners of Hyatt branded properties, whether owned, operated, managed or franchised by us. The Hyatt Gold Passport Fund (the “Fund”) has been established to provide for the payment of operating expenses and redemptions of member awards associated with the Program. The Fund is maintained and managed by us on behalf of and for the benefit of Hyatt branded properties. We have evaluated our investment in the Fund and have determined that the Fund qualifies as a VIE and, as a result of the Company being the primary beneficiary, we have consolidated the Fund.
The Program allows members to earn points based on their spending at Hyatt branded properties. Points earned by members can be redeemed for goods and services at Hyatt branded properties, and to a lesser degree, through other redemption opportunities with third parties, such as the conversion to airline miles. Points cannot be redeemed for cash. We charge the cost of operating the Program, including the estimated cost of award redemption, to the hotel properties based on members’ qualified expenditures. Due to the requirements under the Program that the hotel properties reimburse us for the Program’s operating costs as incurred, we recognize this revenue from properties at the time such costs are incurred and expensed. We defer revenue received from the hotel properties equal to the fair value of our future redemption obligation. Upon the redemption of points, we recognize as revenue the amounts previously deferred and recognize the corresponding expense relating to the costs of the awards redeemed. Revenue is recognized by the hotel properties when the points are redeemed, and expenses are recognized when the points are earned by the members.
We actuarially determine the expected fair value of the future redemption obligation based on statistical formulas that project the timing of future point redemption based on historical experience, including an estimate of the “breakage” for points that will never be redeemed, and an estimate of the points that will eventually be redeemed. Actual expenditures for the Program may differ from the actuarially determined liability.
The Fund is financed by payments from the properties and returns on marketable securities. The Fund invests amounts received from the properties in marketable securities (see Note 4). As of December 31, 2012 and 2011, total assets of the Fund were $345 million and $297 million, respectively, including $78 million and $52 million of current assets, respectively. Marketable securities held by the Fund and included in other noncurrent assets were $267 million and $245 million as of December 31, 2012 and 2011, respectively (see Note 4). As of December 31, 2012 and 2011, total liabilities of the Fund were $345 million and $297 million, respectively, including $78 million and $60 million of current liabilities, respectively. The non-current liabilities of the Fund are included in other long-term liabilities (see Note 14).
Recently Issued Accounting Pronouncements

Adopted Accounting Standards

Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. ASU 2011-04 is intended to improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards. The amendments in ASU 2011-04 clarify the intent of the Financial Accounting Standards Board ("FASB") with regard to the application of existing fair value measurement requirements and change some requirements for measuring or disclosing information about fair value measurements. The provisions of ASU 2011-04 became effective for public companies in the first reporting period beginning after December 15, 2011. The adoption of ASU 2011-04 enhanced the disclosure of the fair value of certain financial assets and liabilities that are not required to be recorded at fair value within our financial statements. See Note 5 for discussion of fair value.

In June 2011, the FASB released Accounting Standards Update No. 2011-05 (“ASU 2011-05”), Comprehensive Income (Topic 220): Presentation of Comprehensive Income. ASU 2011-05 requires companies to present total comprehensive income, the components of net income, and the components of other comprehensive income in either a continuous statement or in two separate but consecutive statements. The amendments of ASU 2011-05 eliminate the option for companies to present the components of other comprehensive income within the statement of changes of stockholders' equity. The provisions of ASU 2011-05 became effective for public companies in fiscal years beginning after December 15, 2011. The adoption of ASU 2011-05 changed our presentation of comprehensive income.

In September 2011, the FASB released Accounting Standards Update No. 2011-08 (“ASU 2011-08”), Intangibles-Goodwill and Other (Topic 350): Testing for Goodwill Impairment. ASU 2011-08 gives companies the option to perform a qualitative assessment before calculating the fair value of the reporting unit. Under the guidance in ASU 2011-08, if this option is selected, a company is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The provisions of ASU 2011-08 became effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, but early adoption was permitted. We adopted ASU 2011-08 during the quarter ended March 31, 2012 and applied its provisions during our annual goodwill impairment test. See Note 9 for discussion of goodwill. ASU 2011-08 did not materially impact our consolidated financial statements.

In December 2011, the FASB released Accounting Standards Update No. 2011-12 (“ASU 2011-12”), Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. ASU 2011-12 defers only those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income. The provisions of ASU 2011-12 became effective for public companies in fiscal years beginning after December 15, 2011. The adoption of ASU 2011-12 did not materially impact our consolidated financial statements.

Future Adoption of Accounting Standards

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

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

In July 2012, the FASB released Accounting Standards Update No. 2012-02 (“ASU 2012-02”), Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. ASU 2012-02 gives companies the option to perform a qualitative assessment before calculating the fair value of the indefinite-lived intangible asset. Under the guidance in ASU 2012-02, if this option is selected, a company is not required to calculate the fair value of the indefinite-lived intangible unless the entity determines it is more likely than not that its fair value is less than its carrying amount. The provisions of ASU 2012-02 are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, but early adoption is permitted. We have elected not to early adopt the provisions of ASU 2012-02 and do not expect ASU 2012-02 to materially impact our consolidated financial statements.
Equity And Cost Method Investments
Equity And Cost Method Investments
EQUITY AND COST METHOD INVESTMENTS
We have investments that are recorded under both the equity and cost methods. These investments are considered to be an integral part of our business and are strategically and operationally important to our overall results. Our equity and cost method investment balances recorded at December 31, 2012 and 2011 are as follows:
 
December 31, 2012
 
December 31, 2011
Equity method investments
$
222

 
$
207

Cost method investments
71

 
73

Total investments
$
293

 
$
280


Of our $293 million total investment balance as of December 31, 2012, $272 million was recorded in our owned and leased hotels segment. Of our $280 million total investment balance as of December 31, 2011, $273 million was recorded in our owned and leased hotels segment.
Our income (loss) from equity method investments included in the consolidated statements of income for the years ended December 31, 2012, 2011, and 2010, were $(22) million, $4 million, and $(40) million, respectively. We recorded $1 million in income from our cost method investments for the year ended December 31, 2012. We recorded insignificant income from our cost method investments for the years ended December 31, 2011 and December 31, 2010. Gains or losses from cost method investments are recorded within other income (loss), net in our consolidated statements of income.
The carrying value and ownership percentages of our unconsolidated investments in hotel and vacation properties accounted for under the equity method as of December 31, 2012 and 2011 are as follows:
 
Ownership
Interests
 
Our Investment
December 31, 2012
 
December 31, 2011
Wailea Hotel & Beach Resort, L.L.C.
50.1%
 
$
83

 
$
20

Juniper Hotels Private Limited
50.0%
 
40

 
41

Noble Select JV
40.0%
 
17

 
18

Maui Timeshare Ventures, LLC
33.0%
 
16

 

Nuevo Plaza Hotel Mendoza Limited
50.0%
 
15

 
15

ADHP LLC
50.0%
 
6

 
7

Hotel Investments, L.P.
30.0%
 
5

 
22

Coast Beach, LLC
40.0%
 
5

 
5

Select Hotels Group, LLC
50.0%
 
4

 
5

Grand Aspen Holdings, LLC & Top of Mill Investors, LLC
25.8%
 
4

 
6

Other
 
 
27

 
68

Total
 
 
$
222

 
$
207


The following tables present summarized financial information for all unconsolidated ventures in which we hold an investment that is accounted for under the equity method.
 
Years Ended December 31,
2012
 
2011
 
2010
Total revenues
$
979

 
$
986

 
$
846

Gross operating profit
313

 
317

 
264

Income (loss) from continuing operations
12

 
22

 
(10
)
Net income (loss)
$
12

 
$
22

 
$
(10
)
 
 
As of December 31,
2012
 
2011
Current Assets
$
488

 
$
367

Noncurrent Assets
2,205

 
2,229

Total Assets
$
2,693

 
$
2,596

Current Liabilities
$
775

 
$
301

Noncurrent Liabilities
1,464

 
1,802

Total Liabilities
$
2,239

 
$
2,103


During 2012, we sold our interest in two joint ventures classified as equity method investments, which were included in our owned and leased segment, to a third party for $52 million. Each venture owns a hotel that we currently manage. At the time of the sale we signed agreements with the third party purchaser to extend by ten years our existing management agreements for the hotels owned by the ventures. A $28 million pre-tax gain on the sale was deferred and is being amortized over the life of the extended management agreements into management and franchise fees within the Americas management and franchise segment. The operations of the hotel prior to the sale are included in Adjusted EBITDA within our owned and leased segment.
During 2012, we increased our investment in a joint venture by $63 million, which is classified as an equity method investment, to develop, own and operate a hotel property in the State of Hawaii.
During 2011, we contributed $20 million to a newly formed joint venture with Noble Investment Group (“Noble”) in return for a 40% ownership interest in the venture (see Note 8). In addition, the Company and Noble agreed to invest in the strategic new development of select service hotels in the United States. Under that agreement, we are required to contribute up to a maximum of 40% of the equity necessary to fund up to $80 million (i.e. $32 million) of such new development (see Note 16).
In 2010, we entered into an agreement with an independent third party to acquire an interest in a hospitality venture that owns the Hyatt Regency New Orleans, which was closed in September 2005 due to damage from Hurricane Katrina. We contributed cash of $60 million for a preferred equity interest in this venture. The venture completed the renovation and the hotel was reopened during 2011. This investment is being accounted for under the cost method.
During 2012, 2011 and 2010 we recorded $19 million, $1 million and $31 million in total impairment charges in equity earnings (losses) from unconsolidated hospitality ventures, respectively. The impairment charges in 2012 relates to three properties, two of which are hospitality ventures, for which we recorded total impairment charges of $18 million and the third relates to a vacation ownership business for which we recorded an impairment charge of $1 million. The three investments impaired in 2012 are accounted for as equity method investments. The impairment charge in 2011 relates to one property in our vacation ownership business that is accounted for as an equity method investment. The impairment charge in 2010 relates to two hospitality ventures, for which we recorded $16 million of impairment charges and two vacation ownership properties for which we recorded $15 million in impairment charges; all four of the impaired investments in 2010 are accounted for as equity method investments. Impairment charges recognized were the result of our impairment review process, and impairments were recognized when the carrying amount of our assets was determined to exceed the fair value as calculated using discounted operating cash flows and a determination was made that the decline was other than temporary.

Marketable Securities (Notes)
Marketable Securities [Text Block]
MARKETABLE SECURITIES
We hold marketable securities to fund certain operating programs and for investment purposes. Marketable securities held to fund operating programs are recorded in other assets and prepaids and other assets. Marketable securities held for investment purposes are recorded in short-term investments.
Marketable Securities Held to Fund Operating Programs—At December 31, 2012 and 2011, total marketable securities held for the Hyatt Gold Passport Fund (See Note 2) and certain deferred compensation plans (see Note 13), carried at fair value and included in the consolidated balance sheets were as follows: 
 
December 31, 2012
 
December 31, 2011
Marketable securities held by the Hyatt Gold Passport Fund
$
292

 
$
267

Marketable securities held to fund deferred compensation plans
275

 
242

Total marketable securities
$
567

 
$
509

Less current portion of marketable securities held for operating programs included in prepaids and other assets
(25
)
 
(22
)
Marketable securities included in other assets
$
542

 
$
487


Included in net gains and interest income from marketable securities held to fund operating programs in the consolidated statements of income are $3 million, $4 million and $5 million of realized and unrealized gains and interest income, net related to marketable securities held by the Hyatt Gold Passport Fund for the years ended December 31, 2012, 2011 and 2010, respectively. Also included are $18 million, $(2) million, and $16 million of net realized and unrealized gains (losses) related to marketable securities held to fund deferred compensation plans for the years ended December 31, 2012, 2011 and 2010, respectively.
Marketable Securities Held for Investment Purposes—We periodically transfer cash and cash equivalent balances to investments in highly liquid and transparent commercial paper, corporate notes and bonds and U.S. treasuries and agencies. At December 31, 2012 and 2011, total marketable securities held for investment purposes, carried at fair value and included in the consolidated balance sheets were as follows: 
 
December 31, 2012
 
December 31, 2011
Available-for-sale investments
$
484

 
$
506

Time deposits
30

 
54

Other marketable securities

 
28

Total short-term investments
$
514

 
$
588


Gains (losses) on marketable securities held for investment purposes of $17 million, $(13) million and $19 million for the years ended December 31, 2012, 2011 and 2010, respectively are included in other income (loss), net (see Note 2).
Included in our portfolio of marketable securities are investments in debt and equity securities classified as available-for-sale. At December 31, 2012 and 2011, these were as follows: 
 
December 31, 2012
 
Cost or Amortized
Cost
 
Gross Unrealized
Gain
 
Gross Unrealized
Loss
 
Fair Value
Corporate debt securities
$
443

 
$
8

 
$
(8
)
 
$
443

U.S. government agencies and municipalities
31

 

 

 
31

Equity securities
9

 
1

 

 
10

Total
$
483

 
$
9

 
$
(8
)
 
$
484



 
December 31, 2011
 
Cost or Amortized
Cost
 
Gross Unrealized
Gain
 
Gross Unrealized
Loss
 
Fair Value
Corporate debt securities
$
406

 
$
5

 
$
(5
)
 
$
406

U.S. government agencies and municipalities
93

 

 

 
93

Equity securities
9

 

 
(2
)
 
7

Total
$
508

 
$
5

 
$
(7
)
 
$
506


Gross realized gains and losses on available-for-sale securities were insignificant for the years ended December 31, 2012, 2011 and 2010.
The table below summarizes available-for-sale fixed maturity securities by contractual maturity at December 31, 2012. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid with or without call or prepayment penalties. Securities not due at a single date are allocated based on weighted average life. Although a portion of our available-for-sale fixed maturity securities mature after one year, we have chosen to classify the entire portfolio as current. The portfolio’s primary objective is to maximize return, but it also is intended to provide liquidity to satisfy operating requirements, working capital purposes and strategic initiatives. Therefore, since these securities represent funds available for current operations, the entire investment portfolio is classified as current assets.
 
December 31, 2012
Contractual Maturity
Cost or Amortized
Cost
 
Fair Value
Due in one year or less
$
286

 
$
286

Due in one to two years
188

 
188

Total
$
474

 
$
474

Fair Value Measurement
Fair Value Disclosures [Text Block]
FAIR VALUE MEASUREMENT
We have various financial instruments that are measured at fair value including certain marketable securities and derivative instruments. We currently do not have non-financial assets or non-financial liabilities that are required to be measured at fair value on a recurring basis.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of December 31, 2012 and 2011, we had the following financial assets and liabilities measured at fair value on a recurring basis (refer to Note 2 for definitions of fair value and the three levels of the fair value hierarchy):
 
December 31, 2012
 
Quoted Prices in
Active Markets for
Identical Assets
(Level One)
 
Significant Other
Observable Inputs
(Level Two)
 
Significant
Unobservable
Inputs
(Level Three)
Marketable securities included in short-term investments, prepaids and other assets and other assets
 
 
 
 
 
 
 
Mutual funds
$
275

 
$
275

 
$

 
$

Equity securities
10

 
10

 

 

U.S. government obligations
111

 

 
111

 

U.S. government agencies
68

 

 
68

 

Corporate debt securities
540

 

 
540

 

Mortgage-backed securities
22

 

 
22

 

Asset-backed securities
10

 

 
10

 

Municipal and provincial notes and bonds
15

 

 
15

 

Marketable securities recorded in cash and cash equivalents
 
 
 
 
 
 
 
Interest bearing money market funds
117

 
117

 

 

Derivative instruments
 
 
 
 
 
 
 
Interest rate swaps
1

 

 
1

 

Foreign currency forward contracts
(1
)
 

 
(1
)
 

 
December 31, 2011
 
Quoted Prices in
Active Markets for
Identical Assets
(Level One)
 
Significant Other
Observable Inputs
(Level Two)
 
Significant
Unobservable
Inputs
(Level Three)
Marketable securities included in short-term investments, prepaids and other assets and other assets
 
 
 
 
 
 
 
Mutual funds
$
242

 
$
242

 
$

 
$

Equity securities
35

 
35

 

 

U.S. government obligations
102

 

 
102

 

U.S. government agencies
132

 

 
132

 

Corporate debt securities
487

 

 
487

 

Mortgage-backed securities
23

 

 
21

 
2

Asset-backed securities
7

 

 
7

 

Municipal and provincial notes and bonds
14

 

 
14

 

Marketable securities recorded in cash and cash equivalents
 
 
 
 
 
 
 
Interest bearing money market funds
60

 
60

 

 

Derivative instruments
 
 
 
 
 
 
 
Interest rate swaps
7

 

 
7

 

Foreign currency forward contracts
(1
)
 

 
(1
)
 


During the year ended December 31, 2012, there were no transfers between levels of the fair value hierarchy. During the year ended December 31, 2011, we requested that common shares we received as part of a private placement transaction be registered for resale. As a result of this registration, in 2011, we transferred a $6 million equity security from Level Two to Level One in the fair value hierarchy. There were no transfers in and out of Level Three of the fair value hierarchy during the year ended December 31, 2011. Our policy is to recognize transfers in and transfers out as of the end of each quarterly reporting period.
Marketable Securities
Our portfolio of marketable securities consists of various types of U.S. Treasury securities, mutual funds, common stock, and fixed income securities, including government agencies, municipal, provincial and corporate bonds. The fair value of our mutual funds and certain equity securities were classified as Level One as they trade with sufficient frequency and volume to enable us to obtain pricing information on an ongoing basis. The remaining securities, except for certain mortgage backed securities at December 31, 2011, were classified as Level Two due to the use and weighting of multiple market inputs being considered in the final price of the security. Market inputs include quoted market prices from active markets for identical securities, quoted market prices for identical securities in inactive markets, and quoted market prices in active and inactive markets for similar securities. See Note 4 for further details on our marketable securities.
The impact to net income from total gains or losses included in net gains and interest income from marketable securities held to fund operating programs due to the change in unrealized gains or losses relating to assets still held at the reporting date for the years ended December 31, 2012, 2011 and 2010 was insignificant.

We invest a portion of our cash balance into short-term interest bearing money market funds that have a maturity of less than ninety days. Consequently, the balances are recorded in cash and cash equivalents. The funds are held with open-ended registered investment companies and the fair value of the funds are classified as Level One as we are able to obtain market available pricing information on an ongoing basis.
Derivative Instruments
Our derivative instruments are foreign currency exchange rate instruments and interest rate swaps. The instruments are valued using an income approach with factors such as interest rates and yield curves, which represent market observable inputs and are generally classified as Level Two. Credit valuation adjustments may be made to ensure that derivatives are recorded at fair value. These adjustments include amounts to reflect counterparty credit quality and our nonperformance risk. As of December 31, 2012 and 2011, the credit valuation adjustments were insignificant. See Note 12 for further details on our derivative instruments.
Mortgage Backed Securities
Due to limited observability of market data and limited activity during the years ended December 31, 2012 and 2011, we classified the fair value of certain of our mortgage-backed securities as Level Three. During the year ended December 31, 2012, we sold mortgage backed securities that had been classified as Level Three at December 31, 2011. The following table provides a reconciliation of the beginning and ending balances for the mortgage backed securities measured at fair value using significant unobservable inputs (Level 3):
 
Fair Value Measurements at Reporting Date Using Significant Unobservable Inputs (Level 3) - Mortgage Backed Securities
 
2012
 
2011
Balance at January 1,
$
2

 
$
2

Transfers into (out of) Level Three

 

Settlements
(2
)
 

Total gains (losses) (realized or unrealized)

 

Balance at December 31,
$

 
$
2



Property and Equipment (Notes)
Property, Plant and Equipment Disclosure [Text Block]
PROPERTY AND EQUIPMENT
Property and equipment at cost as of December 31, 2012 and 2011, consists of the following:
 
December 31, 2012
 
December 31, 2011
Land
$
688

 
$
666

Buildings
4,062

 
3,878

Leasehold improvements
248

 
240

Furniture, equipment and computers
1,288

 
1,243

Construction in progress
65

 
56

 
6,351

 
6,083

Less accumulated depreciation
(2,212
)
 
(2,040
)
Total
$
4,139

 
$
4,043


Depreciation expense from continuing operations was $327 million, $288 million, and $265 million for the years ended December 31, 2012, 2011 and 2010, respectively. The net book value of capital leased assets at December 31, 2012 and 2011, is $185 million and $191 million, respectively, which is net of accumulated depreciation of $46 million and $38 million, respectively.
During 2012, we acquired property and equipment of $190 million in the acquisition of all of the outstanding shares of capital stock of a company that owned a full-service hotel in Mexico City and property and equipment of $38 million in the acquisition of Hyatt Regency Birmingham. During 2012, we sold seven Hyatt Place properties and one Hyatt House property which had property and equipment of $70 million. Additionally, during the fourth quarter of 2012, we committed to sell three Hyatt Place properties to a third party and classified the $34 million value of this portfolio as assets held for sale at December 31, 2012. Refer to Note 8 for further details on assets held for sale and the acquisitions and dispositions in 2012. During 2011, we acquired property and equipment of $594 million in the acquisition of properties and other assets from LodgeWorks.
Interest capitalized as a cost of property and equipment totaled $4 million, $4 million and $10 million for the years ended December 31, 2012, 2011 and 2010, respectively, and is recorded net in interest expense. The year ended December 31, 2010 includes a $14 million charge to asset impairments in the consolidated statements of income, related to an impairment of a Company owned airplane for $10 million recorded in Corporate and other and two impairments of property and equipment recorded in our owned and leased hotel segment and Corporate and other for $3 million and $1 million, respectively.
Financing Receivables
Financing Receivables
FINANCING RECEIVABLES
We have divided our financing receivables, which include loans and other financing arrangements, into three portfolio segments based on their initial measurement, risk characteristics and our method for monitoring or assessing credit risk. These portfolio segments correspond directly with our assessed class of receivables and are as follows:
Secured Financing to Hotel OwnersThese financing receivables are senior, secured mortgage loans and are collateralized by underlying hotel properties currently in operation. These loans consist primarily of a $277 million mortgage loan receivable to an unconsolidated hospitality venture, which is accounted for under the equity method, and was formed to acquire ownership of a hotel property in Waikiki, Hawaii. This mortgage receivable has interest set at 30-day LIBOR+3.75% due monthly and a stated maturity date of July 2013 and was therefore reclassified from a long-term to a current receivable during the year ended December 31, 2012. Secured financing to hotel owners also includes financing provided to certain franchisees for the renovations and conversion of certain franchised hotels. These franchisee loans accrue interest at fixed rates ranging between 5.0% and 5.5%.
Vacation Ownership Mortgages Receivables—These financing receivables are comprised of various mortgage loans related to our financing of vacation ownership interval sales. As of December 31, 2012, the weighted-average interest rate on vacation ownership mortgages receivable was 14.0%.
Unsecured Financing to Hotel Owners—These financing receivables are primarily made up of individual unsecured loans and other types of financing arrangements provided to hotel owners. During 2012, we entered into a loan agreement to provide a $50 million mezzanine loan for the construction of a hotel that we will manage. Under the loan agreement, interest accrues at the greater of one-month LIBOR plus 5.0%, or 6.5%. Our other financing receivables have stated maturities and interest rates. However, the expected repayment terms may be dependent on the future cash flows of the hotels and these instruments, therefore, are not considered loans as the repayment dates are not fixed or determinable. Because these arrangements are not considered loans, we do not include them in our impaired loans analysis. Since these receivables may come due earlier than the stated maturity date, the expected maturity dates have been excluded from the maturities table below.
The three portfolio segments of financing receivables and their balances at December 31, 2012 and 2011 are as follows:
 
December 31, 2012
 
December 31, 2011
Secured financing to hotel owners
$
317

 
$
319

Vacation ownership mortgage receivables at various interest rates with varying payments through 2022 (see below)
48

 
50

Unsecured financing to hotel owners
147

 
91

 
512

 
460

Less allowance for losses
(99
)
 
(90
)
Less current portion included in receivables
(287
)
 
(10
)
Total long-term financing receivables
$
126

 
$
360


Financing receivables held by us as of December 31, 2012 are scheduled to mature as follows:
Year Ending December 31,
Secured Financing to Hotel Owners
Vacation Mortgage Receivables
2013
$
278

$
7

2014
1

8

2015
38

7

2016

7

2017

6

Thereafter

13

Total
317

48

Less allowance
(7
)
(9
)
Net financing receivables
$
310

$
39


Allowance for Losses and Impairments
We individually assess all loans in the secured financing to hotel owners portfolio and the unsecured financing to hotel owners portfolio for impairment. We assess the vacation ownership mortgage receivables portfolio, which consists entirely of loans, for impairment on an aggregate basis. We do not assess, for impairment, our other financing arrangements included in unsecured financing to hotel owners. However, we do regularly evaluate our reserves for these other financing arrangements and record provisions in the financing receivables allowance as necessary. Impairment charges for loans within all three portfolios and reserves related to our other financing arrangements are recorded as provisions in the financing receivables allowance. We consider the provisions on all of our portfolio segments to be adequate based on the economic environment and our assessment of the future collectability of the outstanding loans.
The following tables summarize the activity in our financing receivables allowance for the year ended December 31, 2012 and 2011:
 
 
Secured Financing
 
Vacation Ownership
 
Unsecured Financing
 
Total
Allowance at January 1, 2012
$
7

 
$
8

 
$
75

 
$
90

   Provision

 
6

 
13

 
19

   Write-offs

 
(5
)
 
(3
)
 
(8
)
   Recoveries

 

 
(2
)
 
(2
)
Allowance December 31, 2012
$
7

 
$
9

 
$
83

 
$
99


 
Secured Financing
 
Vacation Ownership
 
Unsecured Financing
 
Total
Allowance at January 1, 2011
$
4

 
$
10

 
$
68

 
$
82

  Provisions
4

 
4

 
8

 
16

  Write-offs
(1
)
 
(6
)
 

 
(7
)
  Recoveries

 

 
(1
)
 
(1
)
Allowance at December 31, 2011
$
7

 
$
8

 
$
75

 
$
90

 
 
 
 
 
 
 
 

During the year ended December 31, 2010 we recorded provisions of $2 million, $2 million and $7 million for receivables within our secured financing to hotel owners, vacation ownership mortgage receivables and unsecured financing to hotel owners portfolio segments, respectively.
We routinely evaluate loans within financing receivables for impairment. To determine whether an impairment has occurred, we evaluate the collectability of both interest and principal. A loan is considered to be impaired when the Company determines that it is probable that we will not be able to collect all amounts due under the contractual terms. We do not record interest income for impaired loans unless cash is received, in which case the payment is recorded to other income (loss), net in the accompanying consolidated statements of income. During the year ended December 31, 2012, we recorded an allowance of $10 million for loans and wrote off a fully impaired loan of $3 million. During the year ended December 31, 2011, we established an allowance of $4 million for loans to hotel owners that we deemed to be impaired, which was recognized within other income (loss), net in the accompanying consolidated statements of income. The gross value of our impaired loans and related reserve does increase, outside of impairments recognized, due to the accrual and related reserve of interest income on these loans.

An analysis of our loans included in secured financing to hotel owners and unsecured financing to hotel owners had the following impaired amounts at December 31, 2012 and 2011, all of which had a related allowance recorded against them:
Impaired Loans
December 31, 2012
 
Gross
Loan Balance (Principal and Interest)
 
Unpaid
Principal
Balance
 
Related
Allowance
 
Average
Recorded Loan Balance
Secured financing to hotel owners
$
40

 
$
39

 
$
(7
)
 
$
40

Unsecured financing to hotel owners
53

 
40

 
(53
)
 
51


Impaired Loans
December 31, 2011
 
Gross
Loan Balance (Principal and Interest)
 
Unpaid
Principal
Balance
 
Related
Allowance
 
Average
Recorded
Loan Balance
Secured financing to hotel owners
$
41

 
$
40

 
$
(7
)
 
$
40

Unsecured financing to hotel owners
51

 
46

 
(46
)
 
51


Interest income recognized on these impaired loans within other income (loss), net on our consolidated statements of income for the year ended December 31, 2012 and 2011 was as follows:
Interest Income
 
 
 
Years Ended December 31,
 
2012
 
2011
 
2010
Secured financing to hotel owners
$
2

 
$
2

 
$
2

Unsecured financing to hotel owners
2

 
1

 



Credit Monitoring
On an ongoing basis, we monitor the credit quality of our financing receivables based on payment activity.
Past-due Receivables—We determine financing receivables to be past-due based on the contractual terms of each individual financing receivable agreement.
Non-Performing Receivables—Receivables are determined to be non-performing based upon the following criteria: (1) if interest or principal is more than 90 days past due for secured financing to hotel owners and unsecured financing to hotel owners; (2) if interest or principal is more than 120 days past due for vacation ownership mortgage receivables; or (3) if an impairment charge has been recorded for a loan or a provision established for our other financing arrangements. For the years ended December 31, 2012 and 2011, no interest income was accrued for secured financing to hotel owners and unsecured financing to hotel owners more than 90 days past due or for vacation ownership receivables more than 120 days past due. For the years ended December 31, 2012 and 2011, insignificant interest income was accrued for vacation ownership receivables past due more than 90 days but less than 120 days.
If a financing receivable is non-performing, we place the financing receivable on non-accrual status. We only recognize interest income when received for financing receivables on non-accrual status. Accrual of interest income is resumed when the receivable becomes contractually current and collection doubts are removed.
The following tables summarize our aged analysis of past-due financing receivables by portfolio segment, the gross balance of financing receivables greater than 90 days past-due and the gross balance of financing receivables on non-accrual status as of December 31, 2012 and December 31, 2011:

Analysis of Financing Receivables
December 31, 2012
 
Receivables Past Due
 
Greater than 90 Days Past Due
 
Receivables on Non-Accrual Status
Secured financing to hotel owners
$

 
$

 
$
40

Vacation ownership mortgage receivables
2

 

 

Unsecured financing to hotel owners*
3

 
3

 
81

Total
$
5

 
$
3

 
$
121



Analysis of Financing Receivables
December 31, 2011
 
Receivables Past Due
 
Greater than 90 Days Past Due
 
Receivables on Non-Accrual Status
Secured financing to hotel owners
$

 
$

 
$
41

Vacation ownership mortgage receivables
3

 

 

Unsecured financing to hotel owners*
6

 
6

 
76

Total
$
9

 
$
6

 
$
117


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

Fair Value—We estimated the fair value of financing receivables to approximate $417 million and $368 million as of December 31, 2012 and December 31, 2011, respectively. We estimated the fair value of financing receivables using discounted cash flow analysis based on current market assumptions for similar types of arrangements. Based upon the availability of market data, we have classified our financing receivables as Level Three. The primary sensitivity in these calculations is based on the selection of appropriate interest and discount rates. Fluctuations in these assumptions will result in different estimates of fair value.

 
Asset (Liability)
 
December 31, 2012
 
Carrying Value
 
Fair Value
 
Quoted Prices in
Active Markets for
Identical Assets
(Level One)
 
Significant Other
Observable Inputs
(Level Two)
 
Significant
Unobservable Inputs
(Level Three)
Financing receivables
 
 
 
 
 
 
 
 
 
Secured financing to hotel owners
$
310

 
$
314

 
$

 
$

 
$
314

Vacation ownership mortgage receivable
39

 
39

 

 

 
39

Unsecured financing to hotel owners
64

 
64

 

 

 
64


 
Asset (Liability)
 
December 31, 2011
 
Carrying Value
 
Fair Value
 
Quoted Prices in
Active Markets for
Identical Assets
(Level One)
 
Significant Other
Observable Inputs
(Level Two)
 
Significant
Unobservable Inputs
(Level Three)
Financing receivables
 
 
 
 
 
 
 
 
 
Secured financing to hotel owners
$
312

 
$
311

 
$

 
$

 
$
311

Vacation ownership mortgage receivable
42

 
42

 

 

 
42

Unsecured financing to hotel owners
16

 
15

 

 

 
15

Acquisitions, Dispositions, And Discontinued Operations
Acquisitions, Dispositions, And Discontinued Operations
    ACQUISITIONS, DISPOSITIONS, AND DISCONTINUED OPERATIONS

We continually assess and execute strategic acquisitions and dispositions to complement our current business.
Acquisitions
Hyatt Regency Birmingham - During the year ended December 31, 2012, we acquired the Hyatt Regency Birmingham in the United Kingdom for a total purchase price of approximately $44 million. As part of the purchase, we acquired cash and cash equivalents of $1 million, resulting in a net purchase price of $43 million. Of the total purchase price of $44 million, $38 million was property and equipment and the remaining assets acquired relate to working capital. The preliminary fair value asset allocation determined that the purchase price approximates the fair value of the property and equipment acquired and there will be no goodwill.
Hyatt Regency Mexico City—During the year ended December 31, 2012, we acquired all of the outstanding shares of capital stock of a company that owned a full service hotel in Mexico City, Mexico in order to expand our presence in the region. The total purchase price was approximately $202 million. As part of the purchase, we acquired cash and cash equivalents of $12 million, resulting in a net purchase price of $190 million. We began managing this property during the year ended December 31, 2012 and have rebranded it as Hyatt Regency Mexico City.
In conjunction with the acquisition, we entered into a holdback escrow agreement. Pursuant to the holdback escrow agreement, we withheld $11 million from the purchase price and placed it into an escrow account, which was classified as restricted cash on our consolidated balance sheet. During the year ended December 31, 2012 we released $1 million from escrow to the seller. The remaining funds in the escrow account will be released to the seller, less any indemnity claims, upon satisfaction of the release terms of the holdback escrow agreement within the year following the close of the transaction. Because we expect the terms of the holdback escrow agreement to be satisfied, we have recorded a corresponding liability in accrued expenses and other current liabilities on our consolidated balance sheet.
The following table summarizes the preliminary estimated fair value of the identifiable assets acquired and liabilities assumed in our owned and leased hotels segment for the acquisition (in millions):
Cash and cash equivalents
$
12

Other current assets
4

Land, property, and equipment
190

Intangibles
12

Total assets
218

Current liabilities
4

Other long-term liabilities
41

Total liabilities
45

     Total net assets acquired
$
173


Based on management's purchase accounting allocation, which was revised during the year ended December 31, 2012, the acquisition created goodwill of Mexican Peso ("MXP") 404 million at the date of acquisition, which is not deductible for tax purposes and is recorded within our owned and leased segment. Including the effect of currency, the acquired goodwill totaled $31 million at December 31, 2012. The definite lived intangibles, which are substantially comprised of management intangibles, will be amortized over a weighted average useful life of 17 years. The other long-term liabilities consist of a $41 million deferred tax liability, the majority of which relates to property and equipment.
The results of the Hyatt Regency Mexico City since the acquisition date have been included in our consolidated financial statements.  The following table presents the results of this property since the acquisition date on a stand-alone basis (in millions):
Hyatt Regency Mexico City's operations included in 2012 results
 
Year Ended
 
December 31, 2012
Revenues
 
$
29

Income from continuing operations
 
3



The following table presents our revenues and income from continuing operations on a pro forma basis as if we had completed the acquisition and rebranding of the Hyatt Regency Mexico City as of January 1, 2011 (in millions):
 
 
 
Year Ended December 31,
 
 
2012
 
2011
Pro forma revenues
 
$
3,967

 
$
3,743

Pro forma income from continuing operations
 
89

 
113


The above 2012 pro forma income from continuing operations for the year ended December 31, 2012 excludes $1 million of transaction costs that were recorded to other income (loss), net on our consolidated statements of income. The year ended December 31, 2011 pro forma income from continuing operations was adjusted to include these charges.
LodgeWorks—During 2011, we acquired 20 hotels from LodgeWorks, branding, management and franchising rights to an additional four hotels, and other assets for a purchase price of approximately $661 million. Of the four hotels for which we acquired management rights, three joined our portfolio in 2011 and one joined our portfolio in the first half of 2012. The number of assets within our owned and leased hotels segment increased as a result of this acquisition.
 In conjunction with the acquisition, we entered into a holdback escrow agreement with LodgeWorks. Pursuant to the holdback escrow agreement, we withheld approximately $20 million from the purchase price and placed it into an escrow account, which was classified as restricted cash on our consolidated balance sheet as of December 31, 2011. During 2012, the funds in the escrow account were released to LodgeWorks. As the 18-month escrow term had not yet been satisfied at December 31, 2012, the Company obtained a letter of credit from LodgeWorks in the amount of the unearned portion of the holdback. Upon completion of the 18-month escrow term and assuming the hotels meet certain profitability measures detailed in the holdback escrow agreement, we expect to release the letter of credit.
Woodfin Suites—During 2011, we acquired three Woodfin Suites properties in California for a total purchase price of approximately $77 million and rebranded them as Hyatt Summerfield Suites and, subsequently, as Hyatt House hotels.
Dispositions
Hyatt Place and Hyatt House 2012 - During 2012, we sold seven Hyatt Place properties and one Hyatt House property for a combined $87 million, net of closing costs, to an unrelated third party, resulting in a pre-tax gain of $14 million. The Company entered into long-term management agreements for each hotel with the purchaser of the hotels. The gain on sale has been deferred and is being recognized in management and franchise fees over the term of the management contracts, within our Americas management and franchising segment. The operations of the hotels prior to the sale remain within our owned and leased hotels segment. The proceeds from the sales of four of these hotels were classified into cash and cash equivalents as we did not enter into a like-kind exchange agreement related to these four hotels. In conjunction with the sale of the other four properties we entered into a like-kind exchange agreement. See “Like-Kind Exchange Agreements,” below, for further detail.
Hyatt Place and Hyatt Summerfield Suites 2011—During 2011, we sold six Hyatt Place and two Hyatt Summerfield Suites properties to a newly formed joint venture with Noble, in which the Company holds a 40% ownership interest. The properties were sold for a combined sale price of $110 million or $90 million, net of our $20 million contribution to the new joint venture (see Note 3). The sale resulted in a pre-tax loss of $2 million, which has been recognized in gains (losses) on sales of real estate on our consolidated statements of income. In conjunction with the sale, we entered into a long-term franchise agreement with the joint venture for each property. The six Hyatt Place and two Hyatt Summerfield Suites hotels continue to be operated as Hyatt-branded hotels and the two Hyatt Summerfield Suites hotels were subsequently rebranded as Hyatt House properties. The operating results and financial positions of these hotels prior to the sale remain within our owned and leased hotels segment.
Hyatt Regency Minneapolis—During 2011, we entered into an agreement with third parties to form a new joint venture, the purpose of which was to own and operate the Hyatt Regency Minneapolis. We contributed a fee simple interest in the Hyatt Regency Minneapolis to the joint venture as part of our equity interest subject to a $25 million loan to the newly formed joint venture. HHC has guaranteed the repayment of the loan (see Note 16). In conjunction with our contribution, we entered into a long-term management contract with the joint venture. The terms of the joint venture provided for capital contributions by the non-HHC partners that were used to complete a full renovation of the Hyatt Regency Minneapolis.
Hyatt Lisle, Hyatt Deerfield, and Hyatt Rosemont—During 2010, we sold the Hyatt Lisle, Hyatt Deerfield, and Hyatt Rosemont for a combined $49 million, net of closing costs, to an unrelated third party, resulting in a pre-tax gain of $20 million which was recognized in gains (losses) on sales of real estate on our consolidated statements of income. The Company entered into long-term franchise agreements for each of the hotels with the purchaser. The operating results and financial positions of these hotels prior to the sale remain within our owned and leased hotels segment. The proceeds from the sales of Hyatt Lisle and Hyatt Rosemont were classified into cash and cash equivalents as we did not enter into a like-kind exchange agreement related to these two hotels. In conjunction with the sale of Hyatt Deerfield, we entered into a like-kind exchange agreement. See “Like-Kind Exchange Agreements,” below, for further detail.
Grand Hyatt Tampa Bay—During 2010, we sold the Grand Hyatt Tampa Bay for $56 million, net of closing costs, to an unrelated third party, resulting in a pre-tax gain of $14 million. The Company entered into a long-term management agreement with the purchaser of the hotel. The gain on sale has been deferred and is being recognized in management and franchise fees over the term of the management contract, within our Americas management and franchising segment. The operations of the hotel prior to the sale remain within our owned and leased hotels segment.
Hyatt Regency Princeton—During 2010, a consolidated venture did not have sufficient cash flow to meet interest payment requirements under its mortgage loan. The assets and operations of the Hyatt Regency Princeton secured this mortgage loan and the debt service requirements were not guaranteed by HHC. When hotel cash flow became insufficient to service the loan, HHC notified the lender that it would not provide assistance as the estimated value of the hotel was less than the outstanding mortgage loan. In 2010, the ownership interest in the Hyatt Regency Princeton transferred to the lender through a deed in lieu of foreclosure transaction. A pre-tax gain of $35 million was realized on extinguishment of the $45 million secured mortgage debt. The hotel continues to be operated as a Hyatt-branded hotel. The pre-tax gain on extinguishment of debt for $35 million was recognized in other income (loss), net on our consolidated statements of income. The operations of the hotel prior to the transfer remain within our owned and leased segment.
Hyatt Regency Greenville—During 2010, we sold the Hyatt Regency Greenville for $15 million, net of closing costs, to an unrelated third party, resulting in a pre-tax gain of $6 million, which was recognized in gains (losses) on sales of real estate on our consolidated statements of income. The Company entered into a long-term franchise agreement with the purchaser of the hotel. The operating results and financial position of this hotel prior to the sale remain within our owned and leased hotels segment.
Hyatt Regency Boston—During 2010, we sold the Hyatt Regency Boston, which had been acquired in 2009 for $109 million, net of cash received, for net proceeds of $113 million, which was acquired in 2009 to Chesapeake Lodging Trust, an entity in which, at the time of sale, we owned a 4.9% interest, resulting in a pre-tax gain of $6 million. The hotel continues to be operated as a Hyatt-branded hotel and we will continue to manage the hotel under a long-term management contract. The gain on sale was deferred and is being recognized in management and franchise fees over the term of the management contract within our Americas management and franchising segment. The operations of the hotel prior to the sale remain within our owned and leased hotels segment.
Like-Kind Exchange Agreements
In conjunction with the sale of four of the Hyatt Place properties in 2012, we entered into a like-kind exchange agreement with an intermediary. Pursuant to the like-kind exchange agreement, the proceeds from the sale of these four hotels were placed into an escrow account administered by the intermediary. Therefore, we classified the net proceeds of $44 million as restricted cash on our consolidated balance sheet as of December 31, 2012. Pursuant to the like-kind exchange agreement, the cash remains restricted for a maximum of 180 days from the date of execution pending consummation of the exchange transaction.
In conjunction with the sale of three of the Hyatt Place properties in 2011, we entered into a like-kind exchange agreement with an intermediary. Pursuant to the like-kind exchange agreement, the proceeds from the sales of these three hotels were placed into an escrow account administered by the intermediary. Therefore, we classified the net proceeds of $35 million as restricted cash on our consolidated balance sheet as of June 30, 2011. During the second half of 2011, these net proceeds were utilized in a like-kind exchange agreement to acquire one of the LodgeWorks properties and were thus released from restricted cash on our consolidated balance sheet.
In conjunction with the sales of the Hyatt Deerfield, Grand Hyatt Tampa Bay and Hyatt Regency Greenville, we entered into like-kind exchange agreements with an intermediary. Pursuant to the like-kind exchange agreements, the proceeds from the sale of each hotel were placed into an escrow account administered by the intermediary. During the year ended December 31, 2011, we released the net proceeds from the sales of Grand Hyatt Tampa Bay and Hyatt Regency Greenville of $56 million and $15 million, respectively, from restricted cash on our consolidated balance sheet, as a like-kind exchange agreement was not consummated within applicable time periods. The net proceeds of $26 million from the sale of Hyatt Deerfield were utilized in a like-kind exchange agreement to acquire one of the Woodfin Suites properties.
Assets Held For Sale
During the fourth quarter of 2012, we committed to a plan to sell three Hyatt Place properties to a third party and classified the value of this portfolio as assets held for sale in the amount of $34 million, of which $33 million relates to property and equipment, net, and liabilities held for sale in the amount of $1 million at December 31, 2012 which is included in our owned and leased hotels segment. The sale transaction was completed in January 2013.
During 2011, we closed on the sale of a Company owned airplane to a third party for net proceeds of $18 million. The transaction resulted in a small pre-tax gain upon sale.
Discontinued Operations—The operating results, assets, and liabilities of the following businesses have been reported separately as discontinued operations in the consolidated balance sheets and consolidated statements of income. We do not have any significant continuing involvement in these operations.
Amerisuites Orlando—During 2010, we committed to a plan to sell the Amerisuites Orlando property. As a result, we classified the assets and liabilities of this property as held for sale in 2010. Based on a valuation of the property, the Company determined the fair value of the property was below the book value of the assets. As such, a pre-tax impairment loss of approximately $4 million was recorded as part of the loss from discontinued operations during 2010.
During 2010, we sold the Amerisuites Orlando property to an unrelated third party for net proceeds of $5 million. The transaction resulted in a pre-tax gain of $2 million upon sale as we have had no continuing involvement with the property.
Residences—During 2010, we sold an apartment building located adjacent to the Park Hyatt Washington D.C. to an unrelated third party for net proceeds of $22 million. The transaction resulted in a pre-tax gain of $9 million upon sale as we have no continuing involvement with the property.
Revenues for all discontinued operations for the years ended December 31, 2012, 2011, and 2010 were $0, $0, and $1 million, respectively.
As a result of certain of the above-mentioned dispositions, we have agreed to provide indemnifications to third-party purchasers for certain liabilities incurred prior to sale and for breach of certain representations and warranties made during the sales process, such as representations of valid title, authority, and environmental issues that may not be limited by a contractual monetary amount. These indemnification agreements survive until the applicable statutes of limitation expire, or until the agreed upon contract terms expire.
Goodwill And Intangible Assets
Goodwill And Intangible Assets
GOODWILL AND INTANGIBLE ASSETS
The following is a summary of changes in the carrying amount of goodwill for the years ended December 31, 2012 and 2011:
 
Owned and
Leased
Hotels
 
Americas Management and
Franchising
 
Other
 
Total*
Balance as of January 1, 2011
 
 
 
 
 
 
 
Goodwill
$
158

 
$
33

 
$
4

 
$
195

Accumulated impairment losses
(93
)
 

 

 
(93
)
Goodwill, net
65

 
33

 
4

 
102

No activity during the year
 
 
 
 
 
 
 
Balance as of December 31, 2011
 
 
 
 
 
 
 
Goodwill
158

 
33

 
4

 
195

Accumulated impairment losses
(93
)
 

 

 
(93
)
Goodwill, net
$
65

 
$
33

 
$
4

 
$
102

Activity during the year
 
 
 
 
 
 
 
Goodwill acquired
29

 

 

 
29

Foreign exchange**
2

 

 

 
2

Balance as of December 31, 2012
 
 
 
 
 
 
 
Goodwill
189

 
33

 
4

 
226

Accumulated impairment losses
(93
)
 

 

 
(93
)
Goodwill, net
$
96

 
$
33

 
$
4

 
$
133


 
*
The ASPAC management and franchising and EAME/SW Asia management segments contained no goodwill balances as of December 31, 2012 and 2011, respectively.

**
Foreign exchange translation adjustments related to the acquisition of Hyatt Regency Mexico City (see Note 8).
Definite lived intangible assets primarily include contract acquisition costs, acquired lease rights, and acquired franchise and management intangibles. Contract acquisition costs and franchise and management intangibles are generally amortized on a straight-line basis over their contract terms, which range from approximately 5 to 40 years and 20 to 30 years, respectively. Acquired lease rights are amortized on a straight-line basis over the lease term.
The following is a summary of intangible assets at December 31, 2012 and 2011:
 
December 31, 2012
 
Weighted
Average Useful
Lives
 
December 31, 2011
Contract acquisition costs
$
203

 
23
 
$
167

Acquired lease rights
139

 
112
 
133

Franchise and management intangibles
122

 
25
 
115

Other
10

 
11
 
7

 
474

 
 
 
422

Accumulated amortization
(86
)
 
 
 
(63
)
Intangibles, net
$
388

 
 
 
$
359



Amortization expense relating to intangible assets for the years ended December 31, 2012, 2011, and 2010 was as follows:
 
Years Ended December 31,
 
2012
 
2011
 
2010
Amortization Expense
$
26

 
$
17

 
$
14



Amortization expense of $7 million was recognized in 2012 related to the accelerated amortization of an intangible asset.
We estimate amortization expense for definite lived intangibles for the years 2013 through 2017 to be:
Years Ending December 31,