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Hilton Reports Fourth Quarter and Full Year Revenue Declines for Owned and Leased Hotels

Achieved high end of guidance on system-wide comparable RevPAR with increases of 0.9 percent and 1.8 percent for the fourth quarter and full year 2016, respectively, on a currency neutral basis from the same periods in 2015

Hilton Worldwide Holdings Inc.  (NYSE: HLT) today reported its fourth quarter and full year 2016 results. The Company completed the spin-off of Park Hotels & Resorts Inc. and Hilton Grand Vacations Inc.n January 2017. All results herein present the performance of Hilton without giving effect to the spin-offs, unless otherwise specified. Additionally, all share and share-related information presented herein have been retroactively adjusted to reflect the 1-for-3 reverse stock split of Hilton’s outstanding common stock that occurred in January 2017, unless noted otherwise. Highlights include:

Overview

For the three months ended December 31, 2016, diluted loss per share was $1.17 compared to diluted earnings per share (“EPS”) of $2.47 for the three months ended December 31, 2015, and diluted EPS, adjusted for special items, was $0.70 for the three months ended December 31, 2016 compared to $0.65 for the three months ended December 31, 2015. Net loss was $382 million for the three months ended December 31, 2016 compared to net income of $816 million for the three months ended December 31, 2015, and Adjusted EBITDA was $751 million for the three months ended December 31, 2016 compared to $745 million for the three months ended December 31, 2015.

During the three months ended December 31, 2016, the Company incurred an aggregate tax charge of $513 million related to a corporate restructuring executed before the spin-offs, resulting in a net loss for the period. The event had no effect on cash taxes for the quarter. See “Non-GAAP Financial Measures Reconciliations—Net Income and Diluted EPS, Adjusted for Special Items” for additional information.

For the year ended December 31, 2016, diluted EPS was $1.05 compared to $4.26 for the year ended December 31, 2015, and diluted EPS, adjusted for special items, was $2.68 for the year ended December 31, 2016 compared to $2.44 for the year ended December 31, 2015. Net income was $364 million for the year ended December 31, 2016 compared to $1,416 million for the year ended December 31, 2015, and Adjusted EBITDA was $2,975 million for the year ended December 31, 2016 compared to $2,879 million for the year ended December 31, 2015.

Christopher J. Nassetta, President & Chief Executive Officer of Hilton, said, “For the quarter and full year, performance met our expectations. We also continued to increase our development activity this quarter and surpassed development records this year, approving 106,000 new rooms and opening nearly one hotel per day, contributing to net unit growth of over 45,000 rooms. With completion of the spin-offs, Hilton is a fee-based, capital-efficient and resilient business, with meaningful cash flow that we intend to be very disciplined in returning to stockholders.”

On January 3, 2017, Hilton completed the spin-offs of Park and HGV. As a result of the spin-offs, Hilton stockholders of record of its common stock as of close of business on December 15, 2016 received one share of Park common stock for every five shares of Hilton common stock and one share of HGV common stock for every ten shares of Hilton common stock. Transaction costs related to the spin-offs are in line with expectations.

Segment Highlights

Management and Franchise

Management and franchise fees were $436 million in the fourth quarter of 2016. RevPAR at comparable managed and franchised hotels in the fourth quarter of 2016 increased 1.0 percent on a currency neutral basis (flat in actual dollars) compared to the same period in 2015. The addition of new units also contributed to the fee growth during the fourth quarter of 2016, and, as new units stabilize in Hilton’s system, fees are expected to increase.

For the full year 2016, management and franchise fees were $1,786 million. RevPAR at comparable managed and franchised hotels for the full year 2016 increased 2.0 percent on a currency neutral basis (1.2 percent in actual dollars) compared to the same period in 2015. The addition of new units, the increase in RevPAR at comparable managed and franchised hotels and rising effective franchise fee rates have yielded continued fee growth during 2016.

Ownership

Revenues from the ownership segment were $1,029 million in the fourth quarter of 2016 and ownership segment Adjusted EBITDA was $259 million. RevPAR at comparable hotels in the ownership segment was flat on a currency neutral basis (a 2.7 percent decrease in actual dollars) in the fourth quarter of 2016 compared to the same period in 2015. Ownership segment RevPAR in the fourth quarter of 2016 was pressured by decreased group revenues at certain properties due to renovations and challenging year over year comparisons.

During the full year 2016, revenues from the ownership segment were $4,157 million and ownership segment Adjusted EBITDA was $1,029 million. RevPAR at comparable hotels in the ownership segment increased 0.8 percent on a currency neutral basis (a 0.7 percent decrease in actual dollars) for the full year of 2016 compared to the same period in 2015.

A portfolio of 67 of Hilton’s owned and leased hotels and resorts was included in the spin-off of Park and, as part of its on-going relationship with Park, Hilton has entered into long-term management or franchise agreements for each of these properties.

Timeshare

Timeshare segment revenues for the fourth quarter of 2016 were $370 million and timeshare Adjusted EBITDA was $103 million. Overall sales volume increased 14 percent in the fourth quarter of 2016, compared to the same period in 2015, as a result of increased tour flow and net volume per guest. Revenue from resort operations increased 20 percent during the fourth quarter of 2016 from the same period in 2015.

Timeshare segment revenues were $1,390 million for the full year 2016 and timeshare Adjusted EBITDA was $381 million. The improvement in timeshare segment revenues was a result of a rise in sales volume resulting from increases in both commissions recognized from the sale of third-party developed intervals and revenue from the sales of owned timeshare intervals, as well as growth in resort operations. These increases were partially offset by increased timeshare expenses resulting from higher selling and marketing expenses.

During the three months and year ended December 31, 2016, 54 percent and 60 percent of timeshare intervals sold were developed by third parties, respectively. Hilton’s overall supply of timeshare intervals as of December 31, 2016 was approximately 163,000 intervals, of which 117,000, or 72 percent, were third-party developed.

Hilton’s timeshare business was included in the spin-off of HGV and, as part of its on-going relationship with HGV, Hilton and HGV have entered into a 100-year license agreement for use of the timeshare brand.

Development

Hilton opened 105 hotels consisting of 15,700 rooms, of which over 22 percent were conversions from non-Hilton brands, and achieved net unit growth of 15,100 rooms during the fourth quarter of 2016. During the full year 2016, Hilton opened 354 hotels consisting of 51,500 rooms, of which over 22 percent were conversions form non-Hilton brands, and achieved net unit growth of over 45,000 rooms.

As of December 31, 2016, Hilton’s rooms pipeline totaled approximately 310,000 rooms at 1,968 hotels throughout 96 countries and territories, including 32 countries and territories where Hilton does not currently have any open hotels. Over 159,000 rooms, or more than half of the pipeline, were located outside of the United States. Additionally, over 157,000 of the rooms in Hilton’s pipeline were under construction.

Tru by Hilton had continued success in its initial year of development, with approvals for 35 hotels in the fourth quarter for a total of 179 hotels in the pipeline as of December 31, 2016. As of January 31, 2017, Tru had nearly 400 hotels in the pipeline or in various stages of approval. In January 2017, Hilton launched its 14th brand, Tapestry Collection by Hilton, offering travelers a refreshing choice for independent hotels in the growing upscale segment. As of January 31, 2017, Tapestry Collection by Hilton had over 40 deals in process. The first Tapestry is expected to open by the third quarter of 2017.

Balance Sheet and Liquidity

During the fourth quarter of 2016, in preparation for the spin-offs, Hilton entered into the following financing transactions, of which the debt incurred by Park and HGV is the sole obligation of those entities following the spin-offs:

Also during the fourth quarter of 2016, Hilton repaid the outstanding balance of $3,418 million on the CMBS loan entered into in 2013 and a $450 million mortgage loan, using net proceeds from 2016 borrowings and available cash.

As of December 31, 2016, Hilton had $10.2 billion of long-term debt outstanding, with a weighted average interest rate of 4.2 percent, of which $3.0 billion was transferred to Park and $0.5 billion was transferred to HGV in connection with the spin-offs.

Total cash and cash equivalents was $1,684 million as of December 31, 2016, including $266 million of restricted cash and cash equivalents, of which $350 million was transferred to Park and $151 million was transferred to HGV in connection with the spin-offs. No borrowings were outstanding under any of the revolving credit facilities as of December 31, 2016.

In December 2016, Hilton paid a quarterly cash dividend of $0.07 per share on its then outstanding shares of common stock, for a total of $70 million, bringing total cash dividends paid in 2016 to $277 million.

The HNA Tourism Group Co., Ltd. is expected to complete its acquisition of a 25 percent equity interest in each of Hilton, Park and HGV, subject to customary closing conditions, from affiliates of The Blackstone Group L.P. for approximately $6.5 billion during the first quarter of 2017.

Outlook

The Full Year 2017 and First Quarter 2017 outlooks include the effects of the spin-offs of Park and HGV. The outlooks of Park and HGV will be presented as part of their respective earnings releases. Beginning in the first quarter of 2017, commensurate with the completion of the spin-offs, the historical financial results of Park and HGV will be reflected as discontinued operations in Hilton’s consolidated financial statements.

Full Year 2017

First Quarter 2017

Non-GAAP Financial Measures

The Company refers to certain non-GAAP financial measures in this press release, including net income and EPS, adjusted for special items, Adjusted EBITDA, Adjusted EBITDA margin, net debt and net debt to Adjusted EBITDA ratio. Please see the schedules to this press release including the “Definitions” section for additional information and reconciliations of such non-GAAP financial measures.

Pro Forma Financial Information

This press release includes an unaudited pro forma condensed consolidated statement of operations, pro forma management and franchise fees and other revenues and pro forma Adjusted EBITDA, net debt and net debt to Adjusted EBITDA ratio for Hilton adjusted to reflect the spin-offs. The unaudited pro forma financial information has been prepared to reflect the spin-offs as if they had occurred on January 1, 2016. See “Definitions—Pro Forma Adjustments” for additional details. The unaudited pro forma financial information is provided for informational purposes only and is not necessarily indicative of what Hilton’s results of operations would actually have been had the spin-offs occurred on the date indicated or what Hilton’s results of operations will be after giving effect to the completion of the spin-offs.

In addition to the pro forma financial information herein, refer to Hilton’s Current Report on Form 8-K filed with the SEC on January 4, 2017 for certain prior periods.

About Hilton

Hilton (NYSE: HLT) is a leading global hospitality company, with a portfolio of 14 world-class brands comprising more than 4,900 properties with over 800,000 rooms in 104 countries and territories. Hilton is dedicated to fulfilling its mission to be the world’s most hospitable company by delivering exceptional experiences – every hotel, every guest, every time. The Company’s portfolio includes Hilton Hotels & Resorts, Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, Canopy by Hilton, Curio – A Collection by Hilton, DoubleTree by Hilton, Tapestry Collection by Hilton, Embassy Suites by Hilton, Hilton Garden Inn, Hampton by Hilton, Tru by Hilton, Homewood Suites by Hilton, Home2 Suites by Hilton and Hilton Grand Vacations. The Company also manages an award-winning customer loyalty program, Hilton Honors. Hilton Honors members who book directly through preferred Hilton channels have access to instant benefits, including a flexible payment slider that allows members to choose exactly how many Points to combine with cash, an exclusive member discount that can’t be found anywhere else and free standard Wi-Fi. 

 

HILTON WORLDWIDE HOLDINGS INC.

EARNINGS RELEASE SCHEDULES

TABLE OF CONTENTS

 

 

Consolidated Statements of Operations

Pro Forma Condensed Consolidated Statement of Operations

Segment Adjusted EBITDA

Comparable and Currency Neutral System-Wide Hotel Operating Statistics

Management and Franchise Fees and Other Revenues

Pro Forma Management and Franchise Fees and Other Revenues

Timeshare Revenues and Operating Expenses

Hotel and Timeshare Property Summary

Capital Expenditures

Non-GAAP Financial Measures Reconciliations

Definitions

 
 

HILTON WORLDWIDE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in millions, except per share data)

 
 
    Three Months Ended     Year Ended
December 31, December 31,
2016     2015 2016     2015
Revenues
Owned and leased hotels $ 1,021 $ 1,059 $ 4,126 $ 4,233
Management and franchise fees and other 425 407 1,701 1,601
Timeshare   370     334     1,390     1,308  
1,816 1,800 7,217 7,142
Other revenues from managed and franchised properties   1,104     1,056     4,446     4,130  
Total revenues 2,920 2,856 11,663 11,272
 
Expenses
Owned and leased hotels 765 785 3,100 3,168
Timeshare 251 224 948 897
Depreciation and amortization 177 173 686 692
Impairment loss 9 15 9
General, administrative and other   224     118     616     611  
1,417 1,309 5,365 5,377
Other expenses from managed and franchised properties   1,104     1,056     4,446     4,130  
Total expenses 2,521 2,365 9,811 9,507
 
Gain on sales of assets, net 7 9 306
 
Operating income 406 491 1,861 2,071
 
Interest income 2 8 12 19
Interest expense (153 ) (144 ) (587 ) (575 )
Equity in earnings (losses) from unconsolidated affiliates (10 ) 1 8 23
Gain (loss) on foreign currency transactions 20 (20 ) (13 ) (41 )
Other gain (loss), net   (11 )   5     (26 )   (1 )
 
Income before income taxes 254 341 1,255 1,496
 
Income tax benefit (expense)   (636 )   475     (891 )   (80 )
 
Net income (loss) (382 ) 816 364 1,416
Net income attributable to noncontrolling interests   (5 )   (2 )   (16 )   (12 )
Net income (loss) attributable to Hilton stockholders $ (387 ) $ 814   $ 348   $ 1,404  
 
Weighted average shares outstanding(1):
Basic   329     329     329     329  
Diluted   331     330     330     330  
 
Earnings (loss) per share:
Basic $ (1.18 ) $ 2.47   $ 1.06   $ 4.27  
Diluted $ (1.17 ) $ 2.47   $ 1.05   $ 4.26  
 
Cash dividends declared per share(1) $ 0.21   $ 0.21   $ 0.84   $ 0.42  
 
___________

(1)

 

Weighted average shares outstanding used in the computation of basic and diluted earnings (loss) per share and cash dividends declared per share were adjusted to reflect the 1-for-3 reverse stock split that occurred on January 3, 2017.

 
 

HILTON WORLDWIDE HOLDINGS INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2016

(unaudited, in millions, except per share data)

 
 
    As Reported    

Park and

HGV(1)

   

Pro Forma

Adjustments(2)

    Pro Forma
Revenues
Owned and leased hotels $ 4,126 $ (2,674 ) $ $ 1,452
Management and franchise fees 1,606 (68 ) 218 (a) 1,756
Other 95 (13 ) 82
Timeshare   1,390     (1,390 )        
7,217 (4,145 ) 218 3,290
Other revenues from managed and franchised properties   4,446     (136 )   1,138   (b)   5,448  
Total revenues 11,663 (4,281 ) 1,356 8,738
 
Expenses
Owned and leased hotels 3,100 (1,805 ) 1,295
Timeshare 948 (948 )
Depreciation and amortization 686 (322 ) 364
Impairment loss 15 15
General and administrative 547 (144 )

403
Other   69     (18 )  

    51  
5,365 (3,237 ) 2,128
Other expenses from managed and franchised properties   4,446     (136 )   1,138   (b)   5,448  
Total expenses 9,811 (3,373 ) 1,138 7,576
 
Gain on sales of assets, net 9 (1 ) 8
 
Operating income 1,861 (909 ) 218 1,170
 
Interest income 12 (2 ) 10
Interest expense (587 ) 193 (394 )
Equity in earnings from unconsolidated affiliates 8 (3 ) 5
Loss on foreign currency transactions (13 ) (3 ) (16 )
Other loss, net   (26 )   25         (1 )
 
Income before income taxes 1,255 (699 ) 218 774
 
Income tax expense   (891 )   327     (83 ) (c)   (647 )
 
Net income 364 (372 ) 135 127
Net income attributable to noncontrolling interests   (16 )   6         (10 )
Net income attributable to Hilton stockholders $ 348   $ (366 ) $ 135   $ 117  
 
Weighted average shares outstanding:
Basic   329   (d)   329  
Diluted   330   (d)   330  
 
Earnings per share:
Basic $ 1.06   (d) $ 0.36  
Diluted $ 1.05   (d) $ 0.36  
 
___________

(1)

 

Represents the elimination of the historical results of operations of Park and HGV.

(2)

See “Definitions—Pro Forma Adjustments” for additional details.

 
 

HILTON WORLDWIDE HOLDINGS INC.

SEGMENT ADJUSTED EBITDA

(unaudited, in millions)

 
 
        Three Months Ended     Year Ended
December 31, December 31,
2016     2015 2016     2015
Management and franchise $     436 $     428 $     1,786 $     1,691
Ownership(1) 259 275 1,029 1,064
Timeshare 103 93 381 352
Corporate and other       (47 )         (51 )         (221 )         (228 )  
Adjusted EBITDA(2)(3) $     751     $     745     $     2,975     $     2,879    
 
____________

(1)

 

Includes unconsolidated affiliate Adjusted EBITDA.

(2)

See “Non-GAAP Financial Measures Reconciliations—Adjusted EBITDA and Adjusted EBITDA Margin” for a reconciliation of net income (loss) to Adjusted EBITDA.

(3)

Adjusted EBITDA includes the following intercompany charges that were eliminated in the consolidated financial statements:

 
             

Three Months Ended

Year Ended

December 31,

December 31,

2016

   

2015

2016

   

2015

Rental and other fees(a)

$

8

$

8

$

27

$

25

Management, royalty and intellectual property fees(b)

31

32

135

131

Licensing fee(c)

12

12

45

43

Laundry services(d)

1

1

7

7

Other(e)

 

 

1

 

4

 

4

Intersegment fees elimination

$

52

$

54

$

218

$

210

 
      ____________

(a)

 

Represents fees charged to the timeshare segment by the ownership segment.

(b)

Represents fees charged to the ownership segment by the management and franchise segment.

(c)

Represents fees charged to the timeshare segment by the management and franchise segment.

(d)

Represents charges to the ownership segment for services provided by Hilton’s wholly owned laundry business, which was owned by Park effective January 3, 2017 as a result of the completion of the spin-offs. Revenues from the laundry business are included in corporate and other.

(e)

Represents other intercompany charges, which are a benefit to the ownership segment and a cost to corporate and other.

 
 

HILTON WORLDWIDE HOLDINGS INC.

COMPARABLE AND CURRENCY NEUTRAL SYSTEM-WIDE HOTEL OPERATING STATISTICS

BY REGION

(unaudited)

 
 
    Three Months Ended December 31,
Occupancy     ADR     RevPAR
2016     vs. 2015 2016     vs. 2015 2016     vs. 2015
Americas 70.6 % (0.2 )% pts. $ 139.74 1.2 % $ 98.71 0.9 %
Europe 75.0 1.3 139.76 0.4 104.76 2.2
Middle East & Africa 62.5 (2.7 ) 158.17 (1.6 ) 98.82 (5.7 )
Asia Pacific 73.9 3.6 146.61 (3.4 ) 108.28 1.5
System-wide 71.0 0.1 140.62 0.7 99.79 0.9
 
 
Year Ended December 31,
Occupancy ADR RevPAR
2016 vs. 2015 2016 vs. 2015 2016 vs. 2015
Americas 75.7 % (0.1 )% pts. $ 142.57 2.1 % $ 107.95 1.9 %
Europe 73.9 (0.7 ) 146.04 2.0 107.95 1.1
Middle East & Africa 63.1 (3.3 ) 166.26 3.6 104.94 (1.5 )
Asia Pacific 71.5 3.8 145.75 (2.1 ) 104.26 3.5
System-wide 75.0 143.63 1.9 107.65 1.8
 
 

HILTON WORLDWIDE HOLDINGS INC.

COMPARABLE AND CURRENCY NEUTRAL SYSTEM-WIDE HOTEL OPERATING STATISTICS

BY BRAND

(unaudited)

 
 
    Three Months Ended December 31,
Occupancy     ADR     RevPAR
2016     vs. 2015 2016     vs. 2015 2016     vs. 2015
Waldorf Astoria Hotels & Resorts 63.7 % 0.5 % pts. $ 300.59 2.3 % $ 191.59 3.1 %
Conrad Hotels & Resorts 70.5 1.0 256.95 (5.9 ) 181.11 (4.5 )
Hilton Hotels & Resorts 72.0 (0.1 ) 163.74 0.4 117.95 0.3
Curio – A Collection by Hilton 66.9 (2.6 ) 186.86 1.8 125.00 (2.0 )
DoubleTree by Hilton 70.6 (0.1 ) 132.80 1.1 93.74 1.0
Embassy Suites by Hilton 74.9 0.4 155.53 1.6 116.43 2.2
Hilton Garden Inn 70.5 (0.1 ) 130.29 0.9 91.83 0.8
Hampton by Hilton 68.8 0.1 117.02 1.1 80.56 1.2
Homewood Suites by Hilton 74.7 0.8 130.37 0.8 97.33 1.9
Home2 Suites by Hilton 73.9 3.0 115.06 0.4 85.03 4.6
System-wide 71.0 0.1 140.62 0.7 99.79 0.9
 
 
Year Ended December 31,
Occupancy ADR RevPAR
2016 vs. 2015 2016 vs. 2015 2016 vs. 2015
Waldorf Astoria Hotels & Resorts 65.2 % 0.1 % pts. $ 301.81 6.0 % $ 196.70 6.2 %
Conrad Hotels & Resorts 70.0 1.4 251.90 (4.1 ) 176.26 (2.1 )
Hilton Hotels & Resorts 74.5 (0.4 ) 167.05 2.1 124.47 1.5
Curio – A Collection by Hilton 72.2 (0.8 ) 185.47 4.2 133.96 3.1
DoubleTree by Hilton 74.3 0.4 135.60 2.2 100.73 2.8
Embassy Suites by Hilton 79.3 0.4 161.12 2.5 127.71 3.0
Hilton Garden Inn 75.4 (0.1 ) 133.00 1.6 100.33 1.5
Hampton by Hilton 74.0 (0.2 ) 120.80 1.6 89.38 1.4
Homewood Suites by Hilton 79.1 0.1 134.48 1.7 106.32 1.8
Home2 Suites by Hilton 79.1 3.6 116.61 1.4 92.20 6.2
System-wide 75.0 143.63 1.9 107.65 1.8
 
 

HILTON WORLDWIDE HOLDINGS INC.

COMPARABLE AND CURRENCY NEUTRAL SYSTEM-WIDE HOTEL OPERATING STATISTICS

BY SEGMENT

(unaudited)

 
  Three Months Ended December 31,
Occupancy   ADR   RevPAR
2016   vs. 2015 2016   vs. 2015 2016   vs. 2015
Ownership(1) 76.7 % 0.1

% pts.

$ 184.43 (0.5 )% $ 141.49 (0.3 )%
U.S. 78.1 (0.6 ) 201.71 0.3 157.48 (0.4 )
International (non-U.S.) 75.2 0.9 163.82 (1.4 ) 123.13 (0.2 )
 
Management and franchise 70.4 0.1 136.10 0.9 95.83 1.0
U.S. 70.3 (0.2 ) 136.74 1.2 96.14 1.0
International (non-U.S.) 70.8 1.1 133.50 (0.2 ) 94.58 1.3
 
System-wide 71.0 0.1 140.62 0.7 99.79 0.9
U.S. 70.8 (0.2 ) 141.00 1.1 99.78 0.8
International (non-U.S.) 71.6 1.0 139.31 (0.5 ) 99.79 1.0
 
Year Ended December 31,
Occupancy ADR RevPAR
2016 vs. 2015 2016 vs. 2015 2016 vs. 2015
Ownership(1) 78.7 % (0.6

)% pts.

$ 186.89 1.5 % $ 147.07 0.8 %
U.S. 81.6 (0.7 ) 201.15 2.3 164.20 1.4
International (non-U.S.) 75.3 (0.5 ) 169.16 0.4 127.41 (0.2 )
 
Management and franchise 74.6 139.31 1.9 103.92 2.0
U.S. 75.6 (0.1 ) 139.84 2.0 105.67 1.8
International (non-U.S.) 70.7 0.5 137.01 1.9 96.83 2.5
 
System-wide 75.0 143.63 1.9 107.65 1.8
U.S. 75.9 (0.1 ) 143.75 2.0 109.14 1.8
International (non-U.S.) 71.5 0.3 143.19 1.5 102.41 1.9
 
 

HILTON WORLDWIDE HOLDINGS INC.

MANAGEMENT AND FRANCHISE FEES AND OTHER REVENUES

(unaudited, dollars in millions)

 
  Three Months Ended
December 31,
  Increase / (Decrease)
2016   2015 $   %
Management fees:
Base fees(1) $ 89 $ 90 (1 ) (1.1 )
Incentive fees(2)   40     41   (1 ) (2.4 )
Total base and incentive fees 129 131 (2 ) (1.5 )
Other management fees(3)   11     7   4   57.1
Total management fees 140 138 2 1.4
Franchise fees(4)   296     290   6   2.1
Total management and franchise fees 436 428 8 1.9
Other revenues(5) 33 24 9 37.5
Intersegment fees elimination(1)(2)(4)(5)   (44 )   (45 ) 1   (2.2 )
Management and franchise fees and other revenues $ 425   $ 407   18   4.4
 
Year Ended
December 31,
Increase / (Decrease)
2016 2015 $ %
Management fees:
Base fees(1) $ 354 $ 347 7 2.0
Incentive fees(2)   155     148   7   4.7
Total base and incentive fees 509 495 14 2.8
Other management fees(3)   40     31   9   29.0
Total management fees 549 526 23 4.4
Franchise fees(4)   1,237     1,165   72   6.2
Total management and franchise fees 1,786 1,691 95 5.6
Other revenues(5) 102 91 11 12.1
Intersegment fees elimination(1)(2)(4)(5)   (187 )   (181 ) (6 ) 3.3
Management and franchise fees and other revenues $ 1,701   $ 1,601   100   6.2
 
____________

(1)

 

Includes fees charged to consolidated owned and leased properties of $30 million and $31 million for the three months ended December 31, 2016 and 2015, respectively, and $122 million and $121 million for the years ended December 31, 2016 and 2015, respectively.

(2)

Includes fees charged to consolidated owned and leased properties of $1 million for the three months ended December 31, 2016 and 2015, and $13 million and $10 million for the years ended December 31, 2016 and 2015, respectively.

(3)

Includes timeshare homeowners’ association, early termination, product improvement plan and other fees.

(4)

Includes a licensing fee charged to the timeshare segment of $12 million for the three months ended December 31, 2016 and 2015, and $45 million and $43 million for the years ended December 31, 2016 and 2015, respectively.

(5)

Includes charges to consolidated owned and leased properties for services provided by Hilton’s wholly owned laundry business of $1 million for the three months ended December 31, 2016 and 2015, and $7 million for the years ended December 31, 2016 and 2015.

 
 

HILTON WORLDWIDE HOLDINGS INC.

PRO FORMA MANAGEMENT AND FRANCHISE FEES AND OTHER REVENUES

(unaudited, in millions)

 
  Pro Forma Management and Franchise Fees and Other Revenues
For the Three Months Ended  

Year Ended
December 31,
2016

March 31,
2016

 

June 30,
2016

 

September 30,
2016

 

December 31,
2016

Management fees:
Base fees $ 77

$

80

$ 77 $ 77 $ 311
Incentive fees 50 49 48 54 201
Other management fees   2     2     2     4   10
Total management fees 129 131 127 135 522
Franchise fees   271     333     334     296   1,234
Total management and franchise fees 400 464 461 431 1,756
Other revenues   17     18     18     29   82
Management and franchise fees and other revenues $ 417  

$

482

  $ 479   $ 460 $ 1,838
 

RECONCILIATIONS BY QUARTER:

 

For the Three Months Ended March 31, 2016

Hilton
Historical

Intersegment
Fees
Elimination(1)

Park and
HGV(2)

Pro Forma
Adjustments(3)

Pro Forma
Management fees:
Base fees $ 85 $ (27 ) $ $ 19 $ 77
Incentive fees 42 (6 ) 14 50
Other management fees   9         (7 )     2
Total management fees 136 (33 ) (7 ) 33 129
Franchise fees   273     (10 )   (10 )   18   271
Total management and franchise fees 409 (43 ) (17 ) 51 400
Other revenues 22 (2 ) (3 ) 17
Intersegment fees elimination   (45 )   45          
Management and franchise fees and other revenues $ 386   $   $ (20 ) $ 51 $ 417
 
For the Three Months Ended June 30, 2016

Hilton
Historical

Intersegment
Fees
Elimination(1)

Park and
HGV(2)

Pro Forma
Adjustments(3)

Pro Forma
Management fees:
Base fees $ 93 $ (35 ) $ $ 22 $ 80
Incentive fees 36 (3 ) 16 49
Other management fees   10         (8 )     2
Total management fees 139 (38 ) (8 ) 38 131
Franchise fees   332     (11 )   (10 )   22   333
Total management and franchise fees 471 (49 ) (18 ) 60 464
Other revenues 23 (1 ) (4 ) 18
Intersegment fees elimination   (50 )   50          
Management and franchise fees and other revenues $ 444   $   $ (22 ) $ 60 $ 482
 
 

HILTON WORLDWIDE HOLDINGS INC.

PRO FORMA MANAGEMENT AND FRANCHISE FEES AND OTHER REVENUES

(unaudited, in millions)

 

RECONCILIATIONS BY QUARTER (continued):

 
For the Three Months Ended September 30, 2016

Hilton
Historical

 

Intersegment
Fees
Elimination(1)

 

Park and
HGV(2)

 

Pro Forma
Adjustments(3)

  Pro Forma
Management fees:
Base fees $ 87 $ (30 ) $ $ 20 $ 77
Incentive fees 37 (3 ) 14 48
Other management fees   10         (8 )     2
Total management fees 134 (33 ) (8 ) 34 127
Franchise fees   336     (12 )   (10 )   20   334
Total management and franchise fees 470 (45 ) (18 ) 54 461
Other revenues 24 (3 ) (3 ) 18
Intersegment fees elimination   (48 )   48          
Management and franchise fees and other revenues $ 446   $   $ (21 ) $ 54 $ 479
 
For the Three Months Ended December 31, 2016

Hilton
Historical

Intersegment
Fees
Elimination(1)

Park and
HGV(2)

Pro Forma
Adjustments(3)

Pro Forma
Management fees:
Base fees $ 89 $ (30 ) $ $ 18 $ 77
Incentive fees 40 (1 ) 15 54
Other management fees   11         (7 )     4
Total management fees 140 (31 ) (7 ) 33 135
Franchise fees   296     (12 )   (8 )   20   296
Total management and franchise fees 436 (43 ) (15 ) 53 431
Other revenues 33 (1 ) (3 ) 29
Intersegment fees elimination   (44 )   44          
Management and franchise fees and other revenues $ 425   $   $ (18 ) $ 53 $ 460
 
____________

(1)

 

Represents the removal of the following intersegment eliminations included in Hilton Historical results:

 

management, royalty and intellectual property fees charged to Hilton’s owned and leased hotels included in base and incentive fees;

license fees charged to HGV, prior to the spin-off, included in franchise fees; and

charges to Hilton’s owned and leased hotels for services provided by its wholly owned laundry business, which was owned by Park effective January 3, 2017 as a result of the completion of the spin-offs, included in other revenues.

(2)

Represents the elimination of the historical results of operations of Park and HGV.

(3)

See (a) in “Definitions—Pro Forma Adjustments” for additional details.

 
       
HILTON WORLDWIDE HOLDINGS INC.
HOTEL AND TIMESHARE PROPERTY SUMMARY
As of December 31, 2016
 
Owned / Leased(1) Managed Franchised Total
Properties   Rooms Properties   Rooms Properties   Rooms Properties   Rooms
Waldorf Astoria Hotels & Resorts
U.S. 4 1,174 9 5,403 13 6,577
Americas (excluding U.S.) 1 142 1 984 2 1,126
Europe 2 463 4 898 6 1,361
Middle East & Africa 3 703 3 703
Asia Pacific 2 436 2 436
Conrad Hotels & Resorts
U.S. 4 1,316 4 1,316
Americas (excluding U.S.) 1 294 1 294
Europe 1 192 2 707 1 256 4 1,155
Middle East & Africa 1 614 3 1,079 4 1,693
Asia Pacific 14 4,320 2 776 16 5,096
Canopy by Hilton
Europe 1 112 1 112
Hilton Hotels & Resorts
U.S. 25 23,089 37 23,895 179 54,032 241 101,016
Americas (excluding U.S.) 3 1,668 22 7,432 18 5,810 43 14,910
Europe 68 17,695 44 14,912 31 8,510 143 41,117
Middle East & Africa 6 2,279 45 13,968 1 411 52 16,658
Asia Pacific 7 3,403 77 28,832 7 2,826 91 35,061
Curio – A Collection by Hilton
U.S. 1 224 1 1,000 22 4,921 24 6,145
Americas (excluding U.S.) 4 585 4 585
Europe 2 311 2 311
Middle East & Africa 1 201 1 201
DoubleTree by Hilton
U.S. 10 4,093 27 8,140 289 68,840 326 81,073
Americas (excluding U.S.) 5 1,035 17 3,365 22 4,400
Europe 12 3,348 74 12,512 86 15,860
Middle East & Africa 9 2,114 4 488 13 2,602
Asia Pacific 45 12,799 2 965 47 13,764
Embassy Suites by Hilton
U.S. 10 2,402 33 8,935 181 41,296 224 52,633
Americas (excluding U.S.) 3 634 5 1,322 8 1,956
Hilton Garden Inn
U.S. 2 290 4 430 598 82,497 604 83,217
Americas (excluding U.S.) 8 1,071 31 4,954 39 6,025
Europe 20 3,578 32 5,270 52 8,848
Middle East & Africa 6 1,334 6 1,334
Asia Pacific 16 3,362 16 3,362
Hampton by Hilton
U.S. 1 130 49 5,992 2,017 196,579 2,067 202,701
Americas (excluding U.S.) 11 1,420 86 10,210 97 11,630
Europe 13 2,090 35 5,108 48 7,198
Asia Pacific 9 1,585 9 1,585
Homewood Suites by Hilton
U.S. 25 2,687 375 42,377 400 45,064
Americas (excluding U.S.) 2 219 16 1,821 18 2,040
Home2 Suites by Hilton
U.S. 126 13,032 126 13,032
Americas (excluding U.S.) 3 317 3 317
Other     2   888   5   1,038   7   1,926
Lodging 141 57,716 559 165,320 4,175 573,404 4,875 796,440
Hilton Grand Vacations     47   7,657       47   7,657
Total 141   57,716   606   172,977   4,175   573,404   4,922   804,097
____________
(1)  

Fluctuation in terms of percentage change is not meaningful.

(2)

Timeshare capital expenditures for inventory additions were $34 million and $37 million for the three months ended December 31, 2016 and 2015, respectively, and $84 million and $147 million for the year ended December 31, 2016 and 2015, respectively, and timeshare costs of sales were $36 million and $24 million for the three months ended December 31, 2016 and 2015, respectively, and $111 million and $114 million for the years ended December 31, 2016 and 2015, respectively.

       
HILTON WORLDWIDE HOLDINGS INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
NET INCOME AND DILUTED EPS, ADJUSTED FOR SPECIAL ITEMS
(unaudited, in millions, except per share data)
 
Three Months Ended Year Ended
December 31, December 31,
2016     2015 2016     2015
Net income (loss) attributable to Hilton stockholders, as reported $     (387 ) $     814 $     348 $     1,404
Diluted earnings (loss) per share, as reported $ (1.17 ) $ 2.47 $ 1.05 $ 4.26
Special items:
Impairment(1) $ 17 $ 9 $ 32 $ 9
Transaction and financing costs(2) 112 180
Share-based compensation expense(3) 66
Asset acquisitions and dispositions(4) (3 ) 6 15 (166 )
Gain on capital lease amendment(5) (24 )
Tax-related adjustments(6) 513 (640 ) 360 (636 )
Other adjustments(7) 13     5     13     7    
Total special items before tax 652 (620 ) 600 (744 )
Income tax benefit (expense) on special items (32 )   20     (62 )   145    
Total special items after tax $     620     $     (600 )   $     538     $     (599 )  
 
Net income, adjusted for special items $     233     $     214     $     886     $     805    
Diluted EPS, adjusted for special items $     0.70     $     0.65     $     2.68     $     2.44    
 
Diluted EPS, adjusted for special items, before giving effect to the Reverse Stock Split $     0.23     $     0.22     $     0.89     $     0.81    
____________
(1)  

Includes impairment losses and, for the three months and year ended December 31, 2016, Hilton’s pro rata share of impairment loss on an investment in affiliate of $17 million, which was recognized in equity in earnings (losses) from unconsolidated affiliates.

(2)

Includes $97 million and $151 million of expenses related to the spin-offs and other restructuring costs that were recognized in general, administrative and other expenses during the three months and year ended December 31, 2016, respectively. Also includes expenses incurred in connection with certain financing transactions related to the spin-offs, of which $5 million was recognized in interest expense during the year ended December 31, 2016 and $15 million and $24 million were recognized in other gain (loss), net during the three months and year ended December 31, 2016, respectively.

(3)

Represents expense related to share-based compensation prior to and in connection with the initial public offering included in general, administrative and other expenses.

(4)

Includes a $7 million gain on the sale of an asset recognized in gain on sales of assets, net, as well as severance costs from the sale of the Waldorf Astoria New York that were recognized in general, administrative and other expenses during the three months and year ended December 31, 2016. The amounts included for the three months and year ended December 31, 2015 are detailed as follows and all amounts were recognized in other gain (loss), net, except for the gain on sale and severance costs:

         

Three Months

Year

Ended

Ended

Gain on sale of the Waldorf Astoria New York and Hilton Sydney, net of transaction costs

$

$

(306

)

Severance costs from the sale of the Waldorf Astoria New York

6

95

Transaction costs related to properties acquired with the proceeds of the sale of the Waldorf Astoria New York

26

Reduction of an unamortized management contract intangible asset related to a property that was managed by Hilton prior to its acquisition

13

Reduction of remaining deferred issuance costs related to the mortgage loan secured by the Waldorf Astoria New York

 

6

 

$

6

 

$

(166

)

 
(5)

Represents a gain recorded as a result of the modification of a lease agreement recognized in other gain (loss), net.

(6)

The three months and year ended December 31, 2016, includes an aggregate tax charge of $513 million incurred in the fourth quarter related to a corporate restructuring executed before the spin-offs, which did not have an effect on cash paid for taxes during the year. The amount during the year ended December 31, 2016 also relates to the release of reserves of unrecognized tax benefits that Hilton has either settled or determined that Hilton was more likely than not to receive the full benefit for. The amount during the three months and year ended December 31, 2015 relates to a $640 million deferred tax benefit resulting from transactions involving the conversion of certain U.S. subsidiaries from corporations to limited liability companies and the election to disregard certain foreign subsidiaries for U.S. federal income tax purposes. The amount during the year ended December 31, 2015 also includes the effect of the reduction in the statutory tax rate on March 31, 2015 in a foreign jurisdiction in which the Company had deferred tax assets, resulting in a reduction to the deferred tax asset and a corresponding recognition of income tax expense of $6 million, including $2 million attributable to noncontrolling interests. These amounts were recognized in income tax expense.

(7)

Includes estimated settlement costs for a contractual dispute, secondary offering expenses and a loss on termination of an employee benefit plan recognized in general, administrative and other.

 
HILTON WORLDWIDE HOLDINGS INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
(unaudited, dollars in millions)
   
Three Months Ended Year Ended
December 31, December 31,
2016   2015 2016   2015
Net income (loss) $ (382 ) $ 816 $ 364 $ 1,416
Interest expense 153 144 587 575
Income tax expense (benefit) 636 (475 ) 891 80
Depreciation and amortization 177 173 686 692
Interest expense, income tax and depreciation and amortization included in equity in earnings (losses) from unconsolidated affiliates 7   12   30   32  
EBITDA 591 670 2,558 2,795
Gain on sales of assets, net (7 ) (9 ) (306 )
Loss (gain) on foreign currency transactions (20 ) 20 13 41
FF&E replacement reserve 14 12 56 48
Share-based compensation expense 21 19 91 162
Impairment loss 9 15 9
Impairment loss included in equity in earnings (losses) from unconsolidated affiliates 17 17
Other loss (gain), net(1) 11 (5 ) 26 1
Other adjustment items(2) 124   20   208   129  
Adjusted EBITDA $ 751   $ 745   $ 2,975   $ 2,879  

____________

(1)

 

Represents costs related primarily to financing transactions, acquisitions of property and equipment and a gain from a lease restructuring.

(2)

Represents adjustments for spin-off and reorganization costs, severance and other items.

 
   
Three Months Ended Year Ended
December 31, December 31,
2016   2015 2016   2015
Total revenues, as reported $ 2,920 $ 2,856 $ 11,663 $ 11,272
Less: other revenues from managed and franchised properties (1,104 ) (1,056 ) (4,446 ) (4,130 )
Total revenues, excluding other revenues from managed and franchised properties $ 1,816   $ 1,800   $ 7,217   $ 7,142  
 
Adjusted EBITDA $ 751 $ 745 $ 2,975 $ 2,879
 
Adjusted EBITDA margin 41.4 % 41.4 % 41.2 % 40.3 %
 
 
HILTON WORLDWIDE HOLDINGS INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
NET DEBT AND NET DEBT TO ADJUSTED EBITDA RATIO
(unaudited, in millions)
 
December 31,
2016   2015
Long-term debt, including current maturities $ 10,118 $ 9,951
Add: unamortized deferred financing costs 92   90  
Long-term debt, including current maturities and excluding unamortized deferred financing costs 10,210 10,041
Add: Hilton’s share of unconsolidated affiliate debt, excluding unamortized deferred financing costs 225 229
Less: cash and cash equivalents (1,418 ) (609 )
Less: restricted cash and cash equivalents (266 ) (247 )
Net debt $ 8,751   $ 9,414  
 
Adjusted EBITDA $ 2,975 $ 2,879
 
Net debt to Adjusted EBITDA ratio 2.9   3.3  
 

HILTON WORLDWIDE HOLDINGS INC.

NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
PRO FORMA ADJUSTED EBITDA, NET DEBT AND NET DEBT TO ADJUSTED EBITDA RATIO
(unaudited, in millions)
 
Year Ended
December 31,
2016
Net income $ 127
Interest expense 394
Income tax expense 647
Depreciation and amortization 364
Interest expense, income tax and depreciation and amortization included in equity in earnings from unconsolidated affiliates 6  
EBITDA 1,538
Gain on sales of assets, net (8 )
Loss on foreign currency transactions 16
FF&E replacement reserve 55
Share-based compensation expense 83
Impairment loss 15
Other loss, net 1
Other adjustment items(1) 63  
Adjusted EBITDA $ 1,763  
 

____________

(1)  Represents adjustments for reorganization costs, severance and other items.

 

December 31,

2016

Long-term debt, including current maturities

6,616

Add: unamortized deferred financing costs and discount

 

90

 

Long-term debt, including current maturities and excluding unamortized deferred financing costs and discount

6,706

Add: Hilton’s share of unconsolidated affiliate debt, excluding unamortized deferred financing costs

12

Less: cash and cash equivalents

(1,077

)

Less: restricted cash and cash equivalents

 

(106

)

Net debt

$

5,535

 
 

Adjusted EBITDA

$

1,763

 

Net debt to Adjusted EBITDA ratio

 

3.1

 
 
 
HILTON WORLDWIDE HOLDINGS INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
OUTLOOK: NET INCOME AND DILUTED EPS, ADJUSTED FOR SPECIAL ITEMS
FORECASTED 2017
(unaudited, in millions, except per share data)
 
Three Months Ending March 31, 2017
Low Case   High Case
Net income from continuing operations attributable to Hilton stockholders, before special items $ 80 $ 98
Diluted EPS from continuing operations, before special items $ 0.24 $ 0.29
 
Net income, adjusted for special items $ 80   $ 98
Diluted EPS, adjusted for special items $ 0.24   $ 0.29
 
Year Ending December 31, 2017
Low Case High Case
Net income from continuing operations attributable to Hilton stockholders, before special items $ 547 $ 584
Diluted EPS from continuing operations, before special items $ 1.65 $ 1.75
 
Net income, adjusted for special items $ 547   $ 584
Diluted EPS, adjusted for special items $ 1.65   $ 1.75
 

HILTON WORLDWIDE HOLDINGS INC.
DEFINITIONS

Pro Forma Adjustments

The unaudited condensed consolidated pro forma statement of operations is based on Hilton’s consolidated statement of operations for the year ended December 31, 2016 and has been adjusted to reflect the spin-offs of Park and HGV as if they had occurred on January 1, 2016. The unaudited pro forma adjustments are based on estimates, accounting judgments and currently available information and assumptions that Hilton management believes are reasonable. The pro forma adjustments include the following:

Refer to pro forma financial information included in the Current Report on Form 8-K filed with the SEC on January 4, 2017 for additional details on the pro forma adjustments.

The adjustments in the unaudited pro forma condensed consolidated statement of operations do not include general and administrative expenses that do not meet the requirements to be presented in discontinued operations as they are not specifically related to Park or HGV. Accordingly, the pro forma general and administrative expenses are not necessarily indicative of future general and administrative expenses of Hilton. The unaudited pro forma condensed consolidated statement of operations also does not reflect any cost savings that Hilton believes could have been achieved had the spin-offs been completed on the date indicated.

Net Income and EPS, Adjusted for Special Items

Net income and EPS, adjusted for special items, are not recognized terms under U.S. GAAP and should not be considered as alternatives to net income (loss) or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. In addition, the Company’s definition of net income and EPS, adjusted for special items, may not be comparable to similarly titled measures of other companies.

Net income and EPS, adjusted for special items, are included to assist investors in performing meaningful comparisons of past, present and future operating results and as a means of highlighting the results of the Company’s ongoing operations.

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin

Earnings before interest expense, taxes and depreciation and amortization (“EBITDA”), presented herein, reflects net income (loss), excluding interest expense, a provision for income taxes and depreciation and amortization.

Adjusted EBITDA, presented herein, is calculated as EBITDA, as previously defined, further adjusted to exclude certain items, including gains, losses and expenses in connection with: (i) asset dispositions for both consolidated and unconsolidated investments; (ii) foreign currency transactions; (iii) debt restructurings/retirements; (iv) non-cash impairment losses; (v) furniture, fixtures and equipment (“FF&E”) replacement reserves required under certain lease agreements; (vi) reorganization costs; (vii) share-based compensation expense; (viii) severance, relocation and other expenses; and (ix) other items.

Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of total revenues, excluding other revenues from managed and franchised properties.

EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are not recognized terms under U.S. GAAP and should not be considered as alternatives to net income (loss) or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. In addition, the Company’s definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDA margin may not be comparable to similarly titled measures of other companies.

The Company believes that EBITDA, Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors about the Company and its financial condition and results of operations for the following reasons: (i) these measures are among the measures used by the Company’s management team to evaluate its operating performance and make day-to-day operating decisions; and (ii) these measures are frequently used by securities analysts, investors and other interested parties as a common performance measure to compare results or estimate valuations across companies in the industry. Additionally, these measures exclude certain items that can vary widely across different industries and among competitors within the Company’s industry. For instance, interest expense and income tax expense are dependent on company specifics, including, among other things, the Company’s capital structure and operating jurisdictions, respectively, and, therefore could vary significantly across companies. Depreciation and amortization are dependent upon company policies, including the method of acquiring and depreciating assets and the useful lives that are used. For Adjusted EBITDA, the Company also excludes items such as (i) share-based compensation expense, as this could vary widely among companies due to the different plans in place and the usage of them; (ii) FF&E replacement reserve to be consistent with the treatment of FF&E for its owned and leased hotels where it is capitalized and depreciated over the life of the FF&E; and (iii) other items that are not core to the Company’s operations and are not reflective of the Company’s performance.

EBITDA, Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools and should not be considered either in isolation or as a substitute for net income (loss), cash flow or other methods of analyzing results as reported under U.S. GAAP.

Net Debt

Net debt, presented herein, is a non-GAAP financial measure that the Company uses to evaluate its financial leverage. Net debt is calculated as (i) long-term debt, including current maturities and excluding unamortized deferred financing costs; and (ii) the Company’s share of investments in affiliate debt, excluding unamortized deferred financing costs; reduced by (a) cash and cash equivalents; and (b) restricted cash and cash equivalents.

The Company believes net debt provides useful information about its indebtedness to investors as it is frequently used by securities analysts, investors and other interested parties to compare the indebtedness of companies. Net debt should not be considered as a substitute to debt presented in accordance with U.S. GAAP. Net debt may not be comparable to a similarly titled measure of other companies.

Net Debt to Adjusted EBITDA Ratio

Net debt to Adjusted EBITDA ratio, presented herein, is a non-GAAP financial measure and is included as it is frequently used by securities analysts, investors and other interested parties to compare the financial condition of companies. Net debt to Adjusted EBITDA ratio should not be considered as an alternative to measures of financial condition derived in accordance with U.S. GAAP and it may not be comparable to a similarly titled measure of other companies.

Comparable Hotels

The Company defines comparable hotels as those that: (i) were active and operating in the Company’s system for at least one full calendar year as of the end of the current period, and open January 1st of the previous year; (ii) have not undergone a change in brand or ownership during the current or comparable periods reported; and (iii) have not sustained substantial property damage, business interruption, undergone large-scale capital projects or for which comparable results are not available.

Of the 4,875 hotels in the Company’s system as of December 31, 2016, 3,740 were classified as comparable hotels. The 1,135 non-comparable hotels included 135 properties, or approximately three percent of the total hotels in the system, that were removed from the comparable group during the last twelve months because they sustained substantial property damage, business interruption, underwent large-scale capital projects or comparable results were not available.

Occupancy

Occupancy represents the total number of room nights sold divided by the total number of room nights available at a hotel or group of hotels. Occupancy measures the utilization of the hotels’ available capacity. Management uses occupancy to gauge demand at a specific hotel or group of hotels in a given period. Occupancy levels also help management determine achievable Average Daily Rate levels as demand for hotel rooms increases or decreases.

Average Daily Rate (“ADR”)

ADR represents hotel room revenue divided by total number of room nights sold in a given period. ADR measures average room price attained by a hotel and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. ADR is a commonly used performance measure in the industry, and management uses ADR to assess pricing levels that the Company is able to generate by type of customer, as changes in rates have a different effect on overall revenues and incremental profitability than changes in occupancy, as described above.

Revenue per Available Room (“RevPAR”)

The Company calculates RevPAR by dividing hotel room revenue by total number of room nights available to guests for a given period. Management considers RevPAR to be a meaningful indicator of the Company’s performance as it provides a metric correlated to two primary and key drivers of operations at a hotel or group of hotels: occupancy and ADR. RevPAR is also a useful indicator in measuring performance over comparable periods for comparable hotels.

References to RevPAR, ADR and occupancy throughout this press release are presented on a comparable basis and references to RevPAR and ADR are presented on a currency neutral basis (all periods use the same exchange rates), unless otherwise noted.

Posted by on February 15, 2017.

Categories: Financial

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