NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1
:
Organization and Basis of Presentation
Organization
Hilton Worldwide Holdings Inc. (the "Parent," or together with its subsidiaries, "Hilton," "we," "us," "our" or the "Company"), a Delaware corporation, is one of the largest hospitality companies in the world based upon the number of hotel rooms and timeshare units. We are engaged in owning, leasing, managing and franchising hotels, resorts and timeshare properties. As of
June 30, 2016
, we owned, leased, managed or franchised
4,680
hotel and resort properties, totaling
768,221
rooms in
104
countries and territories, as well as
47
timeshare properties comprising
7,645
units.
As of
June 30, 2016
, affiliates of The Blackstone Group L.P. ("Blackstone") beneficially owned approximately
45.8 percent
of our common stock.
Spin-off
In June 2016, Hilton Grand Vacations Inc. and Park Hotels & Resorts Inc. filed initial Registration Statements on Form 10 with the U.S. Securities and Exchange Commission ("SEC") in which they disclosed financial and other details of our previously announced spin-off transactions of a substantial portion of our ownership business, consisting primarily of our owned hotels located in the U.S., as well as our timeshare business resulting in two additional publicly traded companies. Completion of the spin-offs is subject to several conditions, including the SEC declaring effective the registration statements and final approval of the transactions by our board of directors.
Basis of Presentation
The accompanying condensed consolidated financial statements for the three and
six months ended June 30, 2016
and
2015
have been prepared in accordance with United States of America ("U.S.") generally accepted accounting principles ("GAAP") and are unaudited. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with U.S. GAAP. Although we believe the disclosures made are adequate to prevent the information presented from being misleading, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2015
.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and, accordingly, ultimate results could differ from those estimates. Interim results are not necessarily indicative of full year performance.
In our opinion, the accompanying condensed consolidated financial statements reflect all adjustments, including normal recurring items, considered necessary for a fair presentation of the interim periods. All material intercompany transactions have been eliminated in consolidation.
Note 2
:
Recently Issued Accounting Pronouncements
Adopted Accounting Standards
In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-03 ("ASU 2015-03"),
Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.
This ASU requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the debt liability rather than as an asset, which is consistent with the presentation of debt discounts and premiums. In August 2015, the FASB issued ASU No. 2015-15 ("ASU 2015-15"),
Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements
,which clarifies that absent authoritative guidance in ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the staff of the SEC would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. We adopted ASU 2015-03 and ASU 2015-15 retrospectively as of January 1, 2016. As a result, approximately
$94 million
of debt issuance costs that were previously
presented in other long-term assets as of December 31, 2015 are now included within long-term debt and timeshare debt. We elected to continue presenting the debt issuance costs related to our line-of-credit arrangements within other long-term assets.
In February 2015, the FASB issued ASU No. 2015-02 ("ASU 2015-02"),
Consolidation (Topic 810) - Amendments to the Consolidation Analysis
. This ASU modifies existing consolidation guidance for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. We elected, as permitted by the standard, to adopt ASU 2015-02 using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of January 1, 2016 of approximately
$5 million
. Additionally, certain consolidated entities that were not previously considered variable interest entities ("VIEs") prior to the adoption of ASU 2015-02 were considered to be VIEs for which we are the primary beneficiary and continue to be consolidated following adoption; prior period VIE disclosures do not include the balances or activity associated with these VIEs.
Accounting Standards Not Yet Adopted
In March 2016, the FASB issued ASU No. 2016-09 ("ASU 2016-09"),
Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
. This ASU is intended to simplify several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The provisions of ASU 2016-09 are effective for reporting periods beginning after December 15, 2016; early adoption is permitted. The provisions of this ASU contain specific transition guidance for each amendment. We are currently evaluating the effect that this ASU will have on our consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02 ("ASU 2016-02"),
Leases (Topic 842)
, which supersedes existing guidance on accounting for leases in
Leases (Topic 840)
and generally requires all leases, including operating leases, to be recognized in the statement of financial position as right-of-use assets and lease liabilities by lessees. The provisions of ASU 2016-02 are to be applied using a modified retrospective approach and are effective for reporting periods beginning after December 15, 2018; early adoption is permitted. We are currently evaluating the effect that this ASU will have on our consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09 ("ASU 2014-09"),
Revenue from Contracts with Customers (Topic 606)
.
This ASU supersedes the revenue recognition requirements in
Revenue Recognition (Topic 605)
, and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Subsequent to ASU 2014-09, the FASB has issued several related ASUs. The provisions of ASU 2014-09 and the related ASUs are to be applied retrospectively or using a modified retrospective approach. We are currently evaluating our method of adoption and the effect that this ASU will have on our consolidated financial statements.
Note 3
:
Acquisitions
Tax Deferred Exchange
During the
six months ended June 30, 2015
, we used proceeds from the sale of the Waldorf Astoria New York (see
Note 4
: "
Disposals
") to acquire, as part of a tax deferred exchange of real property, the following properties from sellers affiliated with Blackstone and an unrelated third party, for a total purchase price of
$1.87 billion
:
|
|
•
|
the resort complex consisting of the Waldorf Astoria Orlando and the Hilton Orlando Bonnet Creek in Orlando, Florida (the "Bonnet Creek Resort");
|
|
|
•
|
the Casa Marina Resort in Key West, Florida;
|
|
|
•
|
the Reach Resort in Key West, Florida;
|
|
|
•
|
the Parc 55 in San Francisco, California; and
|
|
|
•
|
the Juniper Hotel Cupertino in Cupertino, California.
|
We incurred transaction costs of
$7 million
and
$26 million
recognized in other gain (loss), net in our condensed consolidated statements of operations for the three and
six months ended June 30, 2015
, respectively.
The results of operations from these properties included in the condensed consolidated statements of operations were as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30, 2015
|
|
June 30, 2015
|
|
(in millions)
|
Total revenues
|
$
|
89
|
|
|
$
|
144
|
|
Income before income taxes
|
19
|
|
|
34
|
|
Note 4
:
Disposals
In February 2015, we completed the sale of the Waldorf Astoria New York for a purchase price of
$1.95 billion
, and we repaid in full the existing mortgage loan secured by the Waldorf Astoria New York property (the "Waldorf Astoria Loan") of approximately
$525 million
. As a result of the sale, we recognized a gain of
$144 million
included in gain (loss) on sales of assets, net in our condensed consolidated statement of operations for the
six months ended June 30, 2015
. The gain was net of transaction costs and a goodwill reduction of
$185 million
. The goodwill reduction was due to our consideration of the Waldorf Astoria New York property as a business within our ownership segment; therefore, we reduced the carrying amount of our goodwill by the amount representing the fair value of the business disposed relative to the fair value of the portion of our ownership reporting unit goodwill that was retained. Additionally, we recognized a loss of
$6 million
in other gain (loss), net in our condensed consolidated statement of operations for the
six months ended June 30, 2015
related to the reduction of the Waldorf Astoria Loan's remaining carrying amount of debt issuance costs.
Note 5
:
Property and Equipment
Property and equipment were as follows:
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
2016
|
|
2015
|
|
(in millions)
|
Land
|
$
|
3,473
|
|
|
$
|
3,486
|
|
Buildings and leasehold improvements
|
6,476
|
|
|
6,410
|
|
Furniture and equipment
|
1,321
|
|
|
1,263
|
|
Construction-in-progress
|
137
|
|
|
80
|
|
|
11,407
|
|
|
11,239
|
|
Accumulated depreciation
|
(2,300
|
)
|
|
(2,120
|
)
|
|
$
|
9,107
|
|
|
$
|
9,119
|
|
Depreciation of property and equipment, including assets recorded for capital lease assets, was
$90 million
and
$89 million
during the
three months ended June 30, 2016
and
2015
, respectively, and
$177 million
and
$172 million
during the
six months ended June 30, 2016
and
2015
, respectively.
As of June 30, 2016
and
December 31, 2015
, property and equipment included approximately
$155 million
and
$144 million
, respectively, of capital lease assets primarily consisting of buildings and leasehold improvements, net of
$82 million
and
$71 million
, respectively, of accumulated depreciation.
Note 6
:
Financing Receivables
Financing receivables were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
Securitized Timeshare
|
|
Unsecuritized Timeshare
(1)
|
|
Other
|
|
Total
|
|
(in millions)
|
Financing receivables
|
$
|
254
|
|
|
$
|
699
|
|
|
$
|
51
|
|
|
$
|
1,004
|
|
Less: allowance for loan loss
|
(11
|
)
|
|
(88
|
)
|
|
—
|
|
|
(99
|
)
|
|
243
|
|
|
611
|
|
|
51
|
|
|
905
|
|
|
|
|
|
|
|
|
|
Current portion of financing receivables
|
53
|
|
|
87
|
|
|
2
|
|
|
142
|
|
Less: allowance for loan loss
|
(2
|
)
|
|
(11
|
)
|
|
—
|
|
|
(13
|
)
|
|
51
|
|
|
76
|
|
|
2
|
|
|
129
|
|
|
|
|
|
|
|
|
|
Total financing receivables
|
$
|
294
|
|
|
$
|
687
|
|
|
$
|
53
|
|
|
$
|
1,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Securitized Timeshare
|
|
Unsecuritized Timeshare
(1)
|
|
Other
|
|
Total
|
|
(in millions)
|
Financing receivables
|
$
|
309
|
|
|
$
|
632
|
|
|
$
|
39
|
|
|
$
|
980
|
|
Less: allowance for loan loss
|
(14
|
)
|
|
(79
|
)
|
|
—
|
|
|
(93
|
)
|
|
295
|
|
|
553
|
|
|
39
|
|
|
887
|
|
|
|
|
|
|
|
|
|
Current portion of financing receivables
|
58
|
|
|
83
|
|
|
1
|
|
|
142
|
|
Less: allowance for loan loss
|
(3
|
)
|
|
(10
|
)
|
|
—
|
|
|
(13
|
)
|
|
55
|
|
|
73
|
|
|
1
|
|
|
129
|
|
|
|
|
|
|
|
|
|
Total financing receivables
|
$
|
350
|
|
|
$
|
626
|
|
|
$
|
40
|
|
|
$
|
1,016
|
|
____________
|
|
(1)
|
Included in this balance, we had
$164 million
and
$163 million
of gross timeshare financing receivables securing our revolving non-recourse timeshare financing receivables credit facility (the "Timeshare Facility"), as of
June 30, 2016
and
December 31, 2015
, respectively.
|
Timeshare Financing Receivables
As of
June 30, 2016
, our timeshare financing receivables had interest rates ranging from
5.15 percent
to
20.50 percent
, a weighted average interest rate of
11.88 percent
, a weighted average remaining term of
7.7
years and maturities through
2026
.
Our timeshare financing receivables as of
June 30, 2016
mature as follows:
|
|
|
|
|
|
|
|
|
|
Securitized Timeshare
|
|
Unsecuritized Timeshare
|
Year
|
(in millions)
|
2016 (remaining)
|
$
|
26
|
|
|
$
|
51
|
|
2017
|
54
|
|
|
74
|
|
2018
|
53
|
|
|
78
|
|
2019
|
50
|
|
|
80
|
|
2020
|
45
|
|
|
83
|
|
Thereafter
|
79
|
|
|
420
|
|
|
307
|
|
|
786
|
|
Less: allowance for loan loss
|
(13
|
)
|
|
(99
|
)
|
|
$
|
294
|
|
|
$
|
687
|
|
As of
June 30, 2016
and
December 31, 2015
, we had ceased accruing interest on timeshare financing receivables with an aggregate principal balance of
$34 million
and
$32 million
, respectively. The following table details an aged analysis of our gross timeshare financing receivables balance:
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
2016
|
|
2015
|
|
(in millions)
|
Current
|
$
|
1,046
|
|
|
$
|
1,035
|
|
30 - 89 days past due
|
13
|
|
|
15
|
|
90 - 119 days past due
|
4
|
|
|
4
|
|
120 days and greater past due
|
30
|
|
|
28
|
|
|
$
|
1,093
|
|
|
$
|
1,082
|
|
The changes in our allowance for loan loss were as follows:
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
June 30,
|
|
2016
|
|
2015
|
|
(in millions)
|
Beginning balance
|
$
|
106
|
|
|
$
|
96
|
|
Write-offs
|
(17
|
)
|
|
(15
|
)
|
Provision for loan loss
|
23
|
|
|
17
|
|
Ending balance
|
$
|
112
|
|
|
$
|
98
|
|
Note 7
:
Investments in Affiliates
Investments in affiliates were as follows:
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
2016
|
|
2015
|
|
(in millions)
|
Equity investments
|
$
|
120
|
|
|
$
|
129
|
|
Other investments
|
9
|
|
|
9
|
|
|
$
|
129
|
|
|
$
|
138
|
|
We maintain investments in affiliates accounted for under the equity method, which are primarily investments in entities that owned or leased
15
and
16
hotels as of
June 30, 2016
and
December 31, 2015
, respectively. These entities had total debt of approximately
$956 million
and
$959 million
as of
June 30, 2016
and
December 31, 2015
, respectively. Substantially all of the debt is secured solely by the affiliates' assets or is guaranteed by other partners without recourse to us.
Note 8
:
Consolidated Variable Interest Entities
As of
June 30, 2016
, we consolidated
nine
VIEs:
six
that own or lease hotel properties;
two
that are associated with our timeshare financing receivables securitization transactions that both issued debt (collectively, the "Securitized Timeshare Debt"); and
one
management company.
As of December 31, 2015
and prior to adoption of ASU 2015-02, we consolidated
three
VIEs that owned or leased hotel properties and
two
that issued our securitized timeshare debt. Of the
four
additional entities considered to be VIEs following the adoption of ASU 2015-02,
two
were previously consolidated by us and
two
were unconsolidated investments in affiliates.
We are the primary beneficiaries of these VIEs as we have the power to direct the activities that most significantly affect their economic performance. Additionally, we have the obligation to absorb their losses and the right to receive benefits that could be significant to them. The assets of our VIEs are only available to settle the obligations of these entities.
As of June 30, 2016
and
December 31, 2015
, our condensed consolidated balance sheets included the assets and liabilities of the
nine
and
five
VIEs, respectively, which primarily comprised the following:
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
2016
|
|
2015
|
|
(in millions)
|
Cash and cash equivalents
|
$
|
68
|
|
|
$
|
46
|
|
Restricted cash and cash equivalents
|
23
|
|
|
15
|
|
Accounts receivable, net
|
18
|
|
|
19
|
|
Property and equipment, net
|
264
|
|
|
72
|
|
Financing receivables, net
|
294
|
|
|
350
|
|
Deferred income tax assets
|
68
|
|
|
62
|
|
Other non-current assets
|
61
|
|
|
52
|
|
Accounts payable, accrued expenses and other
|
49
|
|
|
35
|
|
Long-term debt
|
391
|
|
|
219
|
|
Timeshare debt
|
295
|
|
|
353
|
|
During the
six months ended June 30,
2016
and
2015
, we did not provide any financial or other support to any VIEs that we were not previously contractually required to provide, nor do we intend to provide such support in the future.
In June 2015, one of our consolidated VIEs modified the terms of its capital lease, resulting in a reduction in long-term debt of
$24 million
. This amount was recognized as a gain in other gain (loss), net in our condensed consolidated statements of operations during the three and
six months ended June 30, 2015
, as the leased asset had previously been fully impaired.
Note 9
:
Debt
Long-term Debt
Long-term debt balances, including obligations for capital leases, and associated interest rates as of
June 30, 2016
, were as follows:
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
2016
|
|
2015
|
|
(in millions)
|
Senior secured term loan facility with a rate of 3.50%, due 2020
|
$
|
4,225
|
|
|
$
|
4,225
|
|
Senior notes with a rate of 5.625%, due 2021
|
1,500
|
|
|
1,500
|
|
Commercial mortgage-backed securities loan with an average rate of 4.15%, due 2018
(1)
|
3,418
|
|
|
3,418
|
|
Mortgage loans and other property debt with an average rate of 4.22%, due 2016 to 2022
(2)
|
622
|
|
|
616
|
|
Other unsecured notes with a rate of 7.50%, due 2017
|
54
|
|
|
54
|
|
Capital lease obligations with an average rate of 6.38%, due 2018 to 2097
|
274
|
|
|
245
|
|
|
10,093
|
|
|
10,058
|
|
Less: current maturities of long-term debt
(3)
|
(98
|
)
|
|
(94
|
)
|
Less: unamortized deferred financing costs and discount
|
(95
|
)
|
|
(107
|
)
|
|
$
|
9,900
|
|
|
$
|
9,857
|
|
____________
|
|
(1)
|
The current maturity date of the variable-rate component of this borrowing is November 1, 2016. We assumed all extensions, which are solely at our option, were exercised.
|
|
|
(2)
|
For mortgage loans with maturity date extensions that are solely at our option, we assumed they were exercised.
|
|
|
(3)
|
Net of unamortized deferred financing costs expected to be amortized in the next twelve months.
|
As of
June 30, 2016
, we had
$45 million
of letters of credit outstanding under our
$1.0 billion
senior secured revolving credit facility (the "Revolving Credit Facility"), and a borrowing capacity of
$955 million
.
In February 2015, we repaid the
$525 million
Waldorf Astoria Loan concurrent with the sale of the Waldorf Astoria New York. See
Note 4
: "
Disposals
" for further information on the transaction. We also assumed a
$450 million
mortgage loan secured by the Bonnet Creek Resort (the "Bonnet Creek Loan") as a result of an acquisition. See
Note 3
: "
Acquisitions
" for further information on the transaction.
Our commercial mortgage-backed securities loan secured by
22
of our U.S. owned real estate assets (the "CMBS Loan") and other mortgage loans require us to deposit with the lenders certain cash reserves for restricted uses. As of
June 30, 2016
and
December 31, 2015
, our condensed consolidated balance sheets included
$80 million
and
$49 million
, respectively, of restricted cash and cash equivalents related to these loans.
Timeshare Debt
Timeshare debt, and associated interest rates as of
June 30, 2016
, were as follows:
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
2016
|
|
2015
|
|
(in millions)
|
Timeshare Facility with a rate of 1.44%, due 2017
|
$
|
150
|
|
|
$
|
150
|
|
Securitized Timeshare Debt with an average rate of 1.97%, due 2026
|
298
|
|
|
356
|
|
|
448
|
|
|
506
|
|
Less: current maturities of timeshare debt
(1)
|
(88
|
)
|
|
(110
|
)
|
Less: unamortized deferred financing costs
|
(3
|
)
|
|
(4
|
)
|
|
$
|
357
|
|
|
$
|
392
|
|
____________
|
|
(1)
|
Net of unamortized deferred financing costs expected to be amortized in the next twelve months.
|
We are required to deposit payments received from customers on the pledged timeshare financing receivables and securitized timeshare financing receivables related to the Timeshare Facility and Securitized Timeshare Debt, respectively, into a depository account maintained by a third party. On a monthly basis, the depository account will be used to make any required principal, interest and other payments due with respect to the Timeshare Facility and Securitized Timeshare Debt. The balance in the depository account, totaling
$17 million
as of
June 30, 2016
and
December 31, 2015
, was included in restricted cash and cash equivalents in our condensed consolidated balance sheets.
Debt Maturities
The contractual maturities of our debt
as of June 30, 2016
were as follows:
|
|
|
|
|
|
|
|
|
|
Long-term Debt
|
|
Timeshare Debt
|
Year
|
(in millions)
|
2016 (remaining)
|
$
|
112
|
|
|
$
|
48
|
|
2017
|
71
|
|
|
225
|
|
2018
(1)
|
3,451
|
|
|
52
|
|
2019
(1)
|
445
|
|
|
38
|
|
2020
|
4,255
|
|
|
28
|
|
Thereafter
(1)
|
1,759
|
|
|
57
|
|
|
$
|
10,093
|
|
|
$
|
448
|
|
____________
|
|
(1)
|
We assumed all extensions that are solely at our option for purposes of calculating maturity dates.
|
Note 10
:
Derivative Instruments and Hedging Activities
During the
six months ended June 30, 2016
and
2015
, derivatives were used to hedge the interest rate risk associated with variable-rate debt as required by certain loan agreements, as well as foreign exchange risk associated with certain foreign currency denominated cash balances.
Cash Flow Hedges
As of
June 30, 2016
, we held
four
interest rate swaps with an aggregate notional amount of
$1.45 billion
, which swap three-month LIBOR on the senior secured term loan facility (the "Term Loans") to a fixed rate of
1.87 percent
and expire in October 2018. We elected to designate these interest rate swaps as cash flow hedges for accounting purposes.
Non-designated Hedges
As of
June 30, 2016
, we also held
one
interest rate cap in the notional amount of
$862 million
, for the variable-rate component of the CMBS Loan, that expires in November 2016 and caps one-month LIBOR at
6.9 percent
, and
one
interest rate cap in the notional amount of
$337 million
that expires in May 2017 and caps one-month LIBOR at
3.0 percent
on the Bonnet Creek Loan. We did not elect to designate any of these interest rate caps as hedging instruments.
As of
June 30, 2016
, we held
63
short-term foreign exchange forward contracts with an aggregate notional amount of
$340 million
to offset exposure to fluctuations
in our foreign currency denominated cash balances. We elected not to designate these foreign exchange forwar
d contracts as hedging instruments.
Fair Value of Derivative Instruments
The effects of our derivative instruments on our condensed consolidated balance sheets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
|
June 30,
|
|
December 31,
|
|
Balance Sheet Classification
|
|
2016
|
|
2015
|
|
|
|
(in millions)
|
Cash Flow Hedges:
|
|
|
|
|
|
Interest rate swaps
|
Other liabilities
|
|
$
|
25
|
|
|
$
|
15
|
|
|
|
|
|
|
|
Non-designated Hedges:
|
|
|
|
|
|
Interest rate caps
(1)
|
Other assets
|
|
—
|
|
|
—
|
|
Forward contracts
|
Other assets
|
|
7
|
|
|
1
|
|
Forward contracts
|
Accounts payable, accrued expenses and other
|
|
3
|
|
|
1
|
|
____________
|
|
(1)
|
The fair values of our interest rate caps were less than $1 million as of
June 30, 2016
and
December 31, 2015
.
|
Earnings Effect of Derivative Instruments
The effects of our derivative instruments on our condensed consolidated statements of operations and condensed consolidated statements of comprehensive income (loss) before any effect for income taxes were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
Classification of Gain (Loss) Recognized
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
(in millions)
|
Cash Flow Hedges:
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
(1)
|
Other comprehensive income (loss)
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
(10
|
)
|
|
$
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
Non-designated Hedges:
|
|
|
|
|
|
|
|
|
|
Forward contracts
|
Gain (loss) on foreign currency transactions
|
|
2
|
|
|
8
|
|
|
3
|
|
|
6
|
|
____________
|
|
(1)
|
There were no amounts recognized in earnings related to hedge ineffectiveness or amounts excluded from hedge effectiveness testing during the three and
six months ended June 30, 2016
and
2015
.
|
Note 11
:
Fair Value Measurements
We did not elect the fair value measurement option for any of our financial assets or liabilities. The fair value of certain financial instruments and the hierarchy level we used to estimate fair values are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
|
|
Hierarchy Level
|
|
Carrying Amount
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
(in millions)
|
Assets:
|
|
|
|
|
|
|
|
Cash equivalents
|
$
|
488
|
|
|
$
|
—
|
|
|
$
|
488
|
|
|
$
|
—
|
|
Restricted cash equivalents
|
20
|
|
|
—
|
|
|
20
|
|
|
—
|
|
Timeshare financing receivables
(1)
|
981
|
|
|
—
|
|
|
—
|
|
|
1,092
|
|
Liabilities:
|
|
|
|
|
|
|
|
Long-term debt
(2)(3)
|
9,685
|
|
|
1,616
|
|
|
—
|
|
|
8,290
|
|
Timeshare debt
(3)
|
445
|
|
|
—
|
|
|
—
|
|
|
448
|
|
Interest rate swaps
|
25
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
Hierarchy Level
|
|
Carrying Amount
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
(in millions)
|
Assets:
|
|
|
|
|
|
|
|
Cash equivalents
|
$
|
327
|
|
|
$
|
—
|
|
|
$
|
327
|
|
|
$
|
—
|
|
Restricted cash equivalents
|
18
|
|
|
—
|
|
|
18
|
|
|
—
|
|
Timeshare financing receivables
(1)
|
976
|
|
|
—
|
|
|
—
|
|
|
1,080
|
|
Liabilities:
|
|
|
|
|
|
|
|
Long-term debt
(2)(3)
|
9,673
|
|
|
1,619
|
|
|
—
|
|
|
8,267
|
|
Timeshare debt
(3)
|
502
|
|
|
—
|
|
|
—
|
|
|
506
|
|
Interest rate swaps
|
15
|
|
|
—
|
|
|
15
|
|
|
—
|
|
____________
|
|
(1)
|
Carrying amount includes allowance for loan loss.
|
|
|
(2)
|
Excludes capital lease obligations with a carrying value of
$274 million
and
$245 million
as of
June 30, 2016
and
December 31, 2015
, respectively, and debt of consolidated VIEs with a carrying value
of
$39 million
and
$32 million
, respectively.
|
|
|
(3)
|
Carrying amount includes unamortized deferred financing costs and discount.
|
The fair values of financial instruments not included in this table are estimated to be equal to their carrying amounts as of
June 30, 2016
and
December 31, 2015
. Our estimates of the fair values were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop the estimated fair values.
Cash equivalents and restricted cash equivalents primarily consisted of short-term interest-bearing money market funds with maturities of less than 90 days, time deposits and commercial paper. The estimated fair values were based on available market pricing information of similar financial instruments.
The estimated fair values of our timeshare financing receivables were based on the expected future cash flows discounted at weighted-average interest rates of the current portfolio, which reflect the risk of the underlying notes, primarily determined by the creditworthiness of the borrowers.
The estimated fair values of our Level 1 long-term debt were based on prices in active debt markets. The estimated fair values of our Level 3 long-term debt were based on indicative quotes received for similar issuances, the expected future cash flows discounted at risk-adjusted rates or the carrying value, where the interest rates approximated current market rates.
The estimated fair values of our Level 3 timeshare debt were based on the carrying values, excluding unamortized deferred financing costs, as the interest rates approximated current market rates.
We measure our interest rate swaps at fair value, which were estimated using an income approach. The primary inputs into our fair value estimate include interest rates and yield curves based on observable market inputs of similar instruments.
Note 12
:
Income Taxes
At the end of each quarter we estimate the effective tax rate expected to be applied for the full year. The effective income tax rate is determined by the level and composition of pre-tax income or loss, which is subject to federal, foreign, state and local income taxes. The lower effective tax rate, as compared to our statutory tax rate, for the
six months ended June 30, 2016
, was primarily attributable to changes in our uncertain tax positions.
Our total unrecognized tax benefits
as of June 30, 2016
and
December 31, 2015
were
$252 million
and
$407 million
, respectively. During the
six months ended June 30, 2016
, we released
$218 million
of reserves related to unrecognized tax benefits that we have either settled or determined that we are more likely than not to receive the full benefit for.
In April 2014, we received 30-day Letters from the Internal Revenue Service ("IRS") and the Revenue Agents Report ("RAR") for the 2006 and October 2007 tax years. We disagreed with several of the proposed adjustments in the RAR, filed a formal appeals protest with the IRS and did not make any tax payments related to this audit. The issues being protested in appeals relate to assertions by the IRS that: (1) certain foreign currency denominated intercompany loans from our foreign subsidiaries to certain U.S. subsidiaries should be recharacterized as equity for U.S. federal income tax purposes and constitute
deemed dividends from such foreign subsidiaries to our U.S. subsidiaries; (2) in calculating the amount of U.S. taxable income resulting from our Hilton HHonors guest loyalty program, we should not reduce gross income by the estimated costs of future redemptions, but rather such costs would be deductible at the time the points are redeemed; and (3) certain foreign currency denominated loans issued by one of our Luxembourg subsidiaries whose functional currency is U.S. dollar ("USD"), should instead be treated as issued by one of our Belgian subsidiaries whose functional currency is the euro, and thus foreign currency gains and losses with respect to such loans should have been measured in euros, instead of USD. Additionally, in January 2016, we received a 30-day Letter from the IRS and the RAR for the December 2007 through 2010 tax years. The RAR includes the proposed adjustments for tax years December 2007 through 2010 which reflect the carryover effect of the three protested issues from 2006 through October 2007. These proposed adjustments will also be protested in appeals and formal appeals protests have been submitted. In total, the proposed adjustments sought by the IRS would result in additional U.S. federal tax owed of approximately
$874 million
, excluding interest and penalties and potential state income taxes. The portion of this amount related to our Hilton HHonors guest loyalty program would result in a decrease to our future tax liability when the points are redeemed. We disagree with the IRS's position on each of these assertions and intend to vigorously contest them. However, as a result of recent developments related to the appeals process discussions that have taken place during 2016, we have determined based on on-going discussions with the IRS, it is more likely than not that we will not recognize the full benefit related to certain of the issues being appealed. Accordingly,
as of June 30, 2016
, we have recognized a
$46 million
unrecognized tax benefit.
We recognize interest and penalties accrued related to uncertain tax positions in income tax expense. We had accrued approximately
$27 million
for the payment of interest and penalties
as of June 30, 2016
and
December 31, 2015
. As a result of the expected resolution of examination issues with federal, state and foreign tax authorities, we believe it is reasonably possible that during the next 12 months the amount of unrecognized tax benefits will decrease up to
$1 million
. Included in the balance of unrecognized tax benefits
as of June 30, 2016
and
December 31, 2015
were
$209 million
and
$377 million
, respectively, associated with positions that, if favorably resolved, would provide a benefit to our effective tax rate.
We file income tax returns, including returns for our subsidiaries, with federal, state and foreign jurisdictions. We are under regular and recurring audit by the IRS and other taxing authorities on open tax positions. The timing of the resolution of tax audits is highly uncertain, as are the amounts, if any, that may ultimately be paid upon such resolution. Changes may result from the conclusion of ongoing audits, appeals or litigation in state, local, federal and foreign tax jurisdictions or from the resolution of various proceedings between the U.S. and foreign tax authorities. We are no longer subject to U.S. federal income tax examination for years through 2004.
As of June 30, 2016
, we remain subject to federal examinations from 2005-2014, state examinations from 1999-2014 and foreign examinations of our income tax returns for the years 1996 through 2015.
State income tax returns are generally subject to examination for a period of three to five years after filing the respective return; however, the state effect of any federal tax return changes remains subject to examination by various states for a period generally of up to one year after formal notification to the states. The statute of limitations for the foreign jurisdictions generally ranges from three to ten years after filing the respective tax return.
Note 13
:
Employee Benefit Plans
We sponsor multiple domestic and international employee benefit plans. Benefits are based upon years of service and compensation.
We have a noncontributory retirement plan in the U.S., which covers certain employees not earning union benefits. This plan was frozen for participant benefit accruals in 1996. We also have multiple employee benefit plans that cover many of our international employees. These include a plan that covers workers in the United Kingdom, which was frozen to further accruals in November 2013, and a number of smaller plans that cover workers in various other countries around the world. The net periodic pension cost for our employee benefit plans was
$2 million
and
$3 million
for the
three months ended June 30, 2016
and
2015
, respectively, and
$3 million
and
$6 million
for the
six months ended June 30,
2016
and
2015
, respectively.
Note 14
:
Share-Based Compensation
We issue time-vesting restricted stock units ("RSUs"), nonqualified stock options ("options"), performance-vesting restricted stock units and restricted stock (collectively, "performance shares") and deferred share units ("DSUs"). We recognized share-based compensation expense of
$26 million
and
$91 million
during the
three months ended June 30, 2016
and
2015
, respectively, and
$44 million
and
$121 million
during the
six months ended June 30, 2016
and
2015
, respectively, which included amounts reimbursed by hotel owners. Share-based compensation expense for the three and
six months ended June 30, 2015
included
$64 million
of compensation expense that was recognized when certain remaining awards granted in connection with our initial public offering vested in May 2015. As of
June 30, 2016
, unrecognized compensation costs for unvested awards
was approximate
ly
$143 million
, which is expected to be recognized over a weighted-average period of
2.0
years on a straight-line basis. As of
June 30, 2016
, there were
62,117,847
sha
res of common stock available for future issuance.
RSUs
During the
six months ended June 30, 2016
, we issued
3,508,885
RSUs with a weighted average grant date fair value of
$19.91
, which generally vest in equal annual installments over
two
or
three
years from the date of grant.
Options
During the
six months ended June 30, 2016
, we issued
1,509,451
options with an exercise price of
$19.61
, which vest over
three
years from the date of grant and terminate
10
years from the date of grant or earlier if the individual’s service terminates in certain circumstances.
The grant date fair value of these options was
$5.47
, which was determined using the Black-Scholes-Merton option-pricing model with the following assumptions:
|
|
|
|
Expected volatility
(1)
|
32.00
|
%
|
Dividend yield
(2)
|
1.43
|
%
|
Risk-free rate
(3)
|
1.36
|
%
|
Expected term (in years)
(4)
|
6.0
|
|
____________
|
|
(1)
|
Due to limited trading history of our common stock, we did not have sufficient information available on which to base a reasonable and supportable estimate of the expected volatility of our share price. As a result, we used an average historical volatility of our peer group over a time period consistent with our expected term assumption in addition to our historical and implied volatility. Our peer group was determined based upon companies in our industry with similar business models and is consistent with those used to benchmark our executive compensation.
|
|
|
(2)
|
Estimated based on the expected annualized dividend payment.
|
|
|
(3)
|
Based on the yields of U.S. Department of Treasury instruments with similar expected lives.
|
|
|
(4)
|
Estimated using the average of the vesting periods and the contractual term of the options.
|
As of
June 30, 2016
,
885,644
option
s outstanding were exercisable.
Performance Shares
During the
six months ended June 30, 2016
, we issued
1,804,706
performance shares. The performance shares are settled at the end of the
three
-year performance period with
50 percent
of the shares subject to achievement based on a measure of the Company’s total shareholder return relative to the total shareholder returns of members of a peer company group ("relative shareholder return") and the other
50 percent
of the shares subject to achievement based on the Company’s earnings before interest expense, taxes and depreciation and amortization ("EBITDA") compound annual growth rate ("EBITDA CAGR").
The grant date fair value of these performance shares based on relative shareholder return was
$20.81
, which was determined using a Monte Carlo simulation valuation model with the following assumptions:
|
|
|
|
Expected volatility
(1)
|
31.00
|
%
|
Dividend yield
(2)
|
—
|
%
|
Risk-free rate
(3)
|
0.92
|
%
|
Expected term (in years)
(4)
|
2.8
|
|
____________
|
|
(1)
|
Due to limited trading history of our common stock, we did not have sufficient information available on which to base a reasonable and supportable estimate of the expected volatility of our share price. As a result, we used an average historical volatility of our peer group over a time period consistent with our expected term assumption in addition to our historical and implied volatility. Our peer group was determined based upon companies in our industry with similar business models and is consistent with those used to benchmark our executive compensation.
|
|
|
(2)
|
As dividends are assumed to be reinvested in shares of common stock and dividends will not be paid to the participants of the performance shares unless the shares vest, we utilized a dividend yield of zero percent.
|
|
|
(3)
|
Based on the yields of U.S. Department of Treasury instruments with similar expected lives.
|
|
|
(4)
|
Midpoint of the 30-calendar day period preceding the end of the performance period.
|
The grant date fair value of these performance shares based on our EBITDA CAGR was
$19.61
. For these shares, we determined that the performance condition is probable of achievement and as of
June 30, 2016
, we recognized compensation expense based on the anticipated achievement percentage as follows:
|
|
|
|
Achievement Percentage
|
2014 grants
|
125%
|
2015 grants
|
88%
|
2016 grants
|
63%
|
DSUs
During the six months ended June 30,
2016
, we issued to our independent directors
34,099
DSUs with a grant date fair value of
$22.04
, which are fully vested and non-forfeitable on the grant date. DSUs are settled for shares of our common stock and deliverable upon the earlier of termination of the individual's service on our board of directors or a change in control.
Note 15
:
Earnings Per Share
The following table presents the calculation of basic and diluted earnings per share ("EPS"):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
(in millions, except per share amounts)
|
Basic EPS:
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
Net income attributable to Hilton stockholders
|
$
|
239
|
|
|
$
|
161
|
|
|
$
|
548
|
|
|
$
|
311
|
|
Denominator:
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
988
|
|
|
987
|
|
|
988
|
|
|
986
|
|
Basic EPS
|
$
|
0.24
|
|
|
$
|
0.16
|
|
|
$
|
0.56
|
|
|
$
|
0.32
|
|
|
|
|
|
|
|
|
|
Diluted EPS:
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
Net income attributable to Hilton stockholders
|
$
|
239
|
|
|
$
|
161
|
|
|
$
|
548
|
|
|
$
|
311
|
|
Denominator:
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
991
|
|
|
989
|
|
|
990
|
|
|
989
|
|
Diluted EPS
|
$
|
0.24
|
|
|
$
|
0.16
|
|
|
$
|
0.55
|
|
|
$
|
0.31
|
|
Approximately
3 million
and
4 million
share-based compensation awards were excluded from the computation of diluted EPS for the three and
six months ended June 30, 2016
, respectively, and
2 million
and
1 million
awards were excluded for the three and
six months ended June 30, 2015
, respectively, because their effect would have been anti-dilutive under the treasury stock method.
Note 16
:
Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss, net of taxes, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency Translation Adjustment
(1)
|
|
Pension Liability Adjustment
|
|
Cash Flow Hedge Adjustment
|
|
Total
|
|
(in millions)
|
Balance as of December 31, 2015
|
$
|
(580
|
)
|
|
$
|
(194
|
)
|
|
$
|
(10
|
)
|
|
$
|
(784
|
)
|
|
|
|
|
|
|
|
|
Other comprehensive loss before reclassifications
|
(37
|
)
|
|
(1
|
)
|
|
(6
|
)
|
|
(44
|
)
|
Amounts reclassified from accumulated other comprehensive loss
|
(1
|
)
|
|
3
|
|
|
—
|
|
|
2
|
|
Net current period other comprehensive income (loss)
|
(38
|
)
|
|
2
|
|
|
(6
|
)
|
|
(42
|
)
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2016
|
$
|
(618
|
)
|
|
$
|
(192
|
)
|
|
$
|
(16
|
)
|
|
$
|
(826
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency Translation Adjustment
(1)
|
|
Pension Liability Adjustment
|
|
Cash Flow Hedge Adjustment
|
|
Total
|
|
(in millions)
|
Balance as of December 31, 2014
|
$
|
(446
|
)
|
|
$
|
(179
|
)
|
|
$
|
(3
|
)
|
|
$
|
(628
|
)
|
|
|
|
|
|
|
|
|
Other comprehensive loss before reclassifications
|
(42
|
)
|
|
(2
|
)
|
|
(5
|
)
|
|
(49
|
)
|
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
Net current period other comprehensive income (loss)
|
(42
|
)
|
|
2
|
|
|
(5
|
)
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2015
|
$
|
(488
|
)
|
|
$
|
(177
|
)
|
|
$
|
(8
|
)
|
|
$
|
(673
|
)
|
____________
|
|
(1)
|
Includes net investment hedges and intra-entity foreign currency transactions that are of a long-term investment nature.
|
The following table presents additional information about reclassifications out of accumulated other comprehensive loss; amounts in parentheses indicate a loss in our condensed consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
(in millions)
|
Currency translation adjustment:
|
|
|
|
|
|
|
|
Gains on net investment hedges
(1)
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Tax benefit
(2)(3)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total currency translation adjustment reclassifications for the period, net of taxes
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Pension liability adjustment:
|
|
|
|
|
|
|
|
Amortization of prior service cost
(4)
|
$
|
(1
|
)
|
|
$
|
(1
|
)
|
|
$
|
(2
|
)
|
|
$
|
(2
|
)
|
Amortization of net loss
(4)
|
(2
|
)
|
|
(2
|
)
|
|
(3
|
)
|
|
(4
|
)
|
Tax benefit
(2)
|
1
|
|
|
1
|
|
|
2
|
|
|
2
|
|
Total pension liability adjustment reclassifications for the period, net of taxes
|
(2
|
)
|
|
(2
|
)
|
|
(3
|
)
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
Total reclassifications for the period, net of tax
|
$
|
(1
|
)
|
|
$
|
(2
|
)
|
|
$
|
(2
|
)
|
|
$
|
(4
|
)
|
____________
|
|
(1)
|
Reclassified out of accumulated other comprehensive loss to other gain (loss), net in our condensed consolidated statements of operations.
|
|
|
(2)
|
Reclassified out of accumulated other comprehensive loss to income tax expense in our condensed consolidated statements of operations.
|
|
|
(3)
|
The tax benefit was less than $1 million for the three and
six months ended June 30, 2016
.
|
|
|
(4)
|
Reclassified out of accumulated other comprehensive loss to general, administrative and other in our condensed consolidated statements of operations. These amounts were included in the computation of net periodic pension cost (credit).
|
Note 17
:
Business Segments
We are a diversified hospitality company with operations organized in
three
distinct operating segments: ownership; management and franchise; and timeshare. Each segment is managed separately because of its distinct economic characteristics.
The ownership segment included
143
properties totaling
57,996
rooms, comprising
121
hotels that we wholly owned or leased,
one
hotel owned by a consolidated non-wholly owned entity,
six
hotels owned or leased by consolidated VIEs and
15
hotels that are owned or leased by unconsolidated investments in affiliates, as of
June 30, 2016
. While we do not include equity in earnings (losses) from unconsolidated affiliates in our measures of segment revenues, we manage these investments in our ownership segment and the results are included in our measure of segment profit.
The management and franchise segment includes all of the hotels we manage for third-party owners, as well as all franchised hotels operated or managed by someone other than us. As of
June 30, 2016
, this segment included
537
managed hotels and
4,000
franchised hotels totaling
4,537
hotels consisting of
710,225
rooms. This segment also earns fees for managing properties in our ownership and timeshare segments.
The timeshare segment includes the development of vacation ownership clubs and resorts, marketing and selling of timeshare intervals, providing timeshare customer financing and resort operations. This segment also provides assistance to
third-party developers in selling their timeshare inventory. As of
June 30, 2016
, this segment included
47
timeshare properties totaling
7,645
units.
Corporate and other represents revenues and related operating expenses generated by the incidental support of hotel operations for owned, leased, managed and franchised hotels and other rental income, as well as corporate assets and related expenditures.
The performance of our operating segments is evaluated primarily based on Adjusted EBITDA. We define Adjusted EBITDA as EBITDA, further adjusted to exclude certain items, including, but not limited to, 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.
The following table presents revenues for our reportable segments, reconciled to consolidated amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
(in millions)
|
Revenues
|
|
|
|
|
|
|
|
Ownership
|
$
|
1,114
|
|
|
$
|
1,141
|
|
|
$
|
2,088
|
|
|
$
|
2,105
|
|
Management and franchise
|
471
|
|
|
434
|
|
|
880
|
|
|
825
|
|
Timeshare
|
336
|
|
|
319
|
|
|
662
|
|
|
640
|
|
Segment revenues
|
1,921
|
|
|
1,894
|
|
|
3,630
|
|
|
3,570
|
|
Other revenues from managed and franchised properties
|
1,166
|
|
|
1,061
|
|
|
2,237
|
|
|
2,011
|
|
Other revenues
|
23
|
|
|
21
|
|
|
45
|
|
|
42
|
|
Intersegment fees elimination
(1)
|
(59
|
)
|
|
(54
|
)
|
|
(111
|
)
|
|
(102
|
)
|
Total revenues
|
$
|
3,051
|
|
|
$
|
2,922
|
|
|
$
|
5,801
|
|
|
$
|
5,521
|
|
____________
(1)
Included the following intercompany charges that were eliminated in our condensed consolidated financial statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
(in millions)
|
Rental and other fees
(a)
|
$
|
7
|
|
|
$
|
5
|
|
|
$
|
13
|
|
|
$
|
11
|
|
Management, royalty and intellectual property fees
(b)
|
38
|
|
|
36
|
|
|
71
|
|
|
66
|
|
Licensing fee
(c)
|
11
|
|
|
11
|
|
|
21
|
|
|
20
|
|
Laundry services
(d)
|
1
|
|
|
1
|
|
|
3
|
|
|
3
|
|
Other
(e)
|
2
|
|
|
1
|
|
|
3
|
|
|
2
|
|
Intersegment fees elimination
|
$
|
59
|
|
|
$
|
54
|
|
|
$
|
111
|
|
|
$
|
102
|
|
____________
(a)
Represents charges to our timeshare segment by our ownership segment.
(b)
Represents fees charged to our ownership segment by our management and franchise segment.
(c)
Represents fees charged to our timeshare segment by our management and franchise segment.
(d)
Represents charges to our ownership segment for services provided by our wholly owned laundry business. Revenues from our laundry business
are included in other revenues.
(e)
Represents other intercompany charges, which are a benefit to the ownership segment and a cost to corporate and other.
The table below provides a reconciliation of segment Adjusted EBITDA to consolidated net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
(in millions)
|
Ownership
(1)(2)
|
$
|
299
|
|
|
$
|
318
|
|
|
$
|
506
|
|
|
$
|
508
|
|
Management and franchise
(2)
|
471
|
|
|
434
|
|
|
880
|
|
|
825
|
|
Timeshare
(2)
|
98
|
|
|
86
|
|
|
193
|
|
|
160
|
|
Segment Adjusted EBITDA
|
868
|
|
|
838
|
|
|
1,579
|
|
|
1,493
|
|
Corporate and other
(2)
|
(62
|
)
|
|
(61
|
)
|
|
(120
|
)
|
|
(117
|
)
|
Interest expense
|
(147
|
)
|
|
(149
|
)
|
|
(286
|
)
|
|
(293
|
)
|
Income tax expense
|
(156
|
)
|
|
(145
|
)
|
|
(110
|
)
|
|
(308
|
)
|
Depreciation and amortization
|
(171
|
)
|
|
(173
|
)
|
|
(340
|
)
|
|
(348
|
)
|
Interest expense, income tax and depreciation and amortization included in equity in earnings from unconsolidated affiliates
|
(7
|
)
|
|
(7
|
)
|
|
(15
|
)
|
|
(14
|
)
|
Gain (loss) on sales of assets, net
|
2
|
|
|
(3
|
)
|
|
2
|
|
|
142
|
|
Gain (loss) on foreign currency transactions
|
(13
|
)
|
|
5
|
|
|
(25
|
)
|
|
(13
|
)
|
FF&E replacement reserve
|
(16
|
)
|
|
(14
|
)
|
|
(29
|
)
|
|
(27
|
)
|
Share-based compensation expense
|
(26
|
)
|
|
(92
|
)
|
|
(44
|
)
|
|
(122
|
)
|
Impairment loss
|
—
|
|
|
—
|
|
|
(15
|
)
|
|
—
|
|
Other gain (loss), net
|
(5
|
)
|
|
18
|
|
|
(5
|
)
|
|
(7
|
)
|
Other adjustment items
|
(23
|
)
|
|
(50
|
)
|
|
(38
|
)
|
|
(69
|
)
|
Net income
|
$
|
244
|
|
|
$
|
167
|
|
|
$
|
554
|
|
|
$
|
317
|
|
____________
|
|
(1)
|
Includes unconsolidated affiliate Adjusted EBITDA.
|
|
|
(2)
|
Our measures of Adjusted EBITDA included intercompany charges that were eliminated in our condensed consolidated financial statements. Refer to the footnote to the segment revenues table above for the detail of the intercompany charges.
|
The following table presents total assets for our reportable segments, reconciled to consolidated amounts:
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
2016
|
|
2015
|
|
(in millions)
|
Ownership
|
$
|
11,346
|
|
|
$
|
11,269
|
|
Management and franchise
|
10,327
|
|
|
10,392
|
|
Timeshare
|
2,067
|
|
|
1,935
|
|
Corporate and other
|
2,113
|
|
|
2,026
|
|
|
$
|
25,853
|
|
|
$
|
25,622
|
|
The following table presents capital expenditures for property and equipment for our reportable segments, reconciled to consolidated amounts:
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
June 30,
|
|
2016
|
|
2015
|
|
(in millions)
|
Ownership
|
$
|
153
|
|
|
$
|
148
|
|
Timeshare
|
11
|
|
|
5
|
|
Corporate and other
|
5
|
|
|
6
|
|
|
$
|
169
|
|
|
$
|
159
|
|
Note 18
:
Commitments and Contingencies
As of
June 30, 2016
, we had outstanding guarantees of
$25 million
, with remaining terms ranging from
four years to seven years
, for debt and other obligations of third parties. We have
one
letter of credit for
$25 million
that has been pledged as collateral for
one
of these guarantees. Although we believe it is unlikely that material payments will be required under these guarantees or letters of credit, there can be no assurance that this will be the case.
We have also provided performance guarantees to certain owners of hotels that we operate under management contracts. Most of these guarantees allow us to terminate the contract, rather than fund shortfalls, if specified performance levels are not achieved. However, in limited cases, we are obligated to fund performance shortfalls. As of
June 30, 2016
, we had
seven
contracts containing performance guarantees, with expirations ranging from
2019 to 2030
, and possible cash outlays totaling approximately
$89 million
. Our obligations in future periods depend on the operating performance levels of these hotels over the remaining terms of the performance guarantees. We do not have any letters of credit pledged as collateral against these guarantees. As of
June 30, 2016
and
December 31, 2015
, we recorded current liabilities of approximately
$8 million
and non-current liabilities of approximately
$22 million
and
$25 million
, respectively, in our condensed consolidated balance sheets for outstanding performance guarantees that are related to certain VIEs for which we are not the primary beneficiary.
As of
June 30, 2016
, we had outstanding commitments under third-party contracts of approximately
$84 million
for capital expenditures at certain owned and leased properties. Our contracts contain clauses that allow us to cancel all or some portion of the work. If cancellation of a contract occurs, our commitment would be any costs incurred up to the cancellation date, in addition to any costs associated with the discharge of the contract.
We have entered into an agreement with an affiliate of the owner of a hotel whereby we have agreed to provide a
$60 million
junior mezzanine loan to finance the construction of a new hotel that we will manage. The junior mezzanine loan will be subordinated to a senior mortgage loan and senior mezzanine loan provided by third parties unaffiliated with us and will be funded on a pro rata basis with these loans as the construction costs are incurred. During the
six months ended June 30, 2016
and
2015
, we funded
$17 million
and
$6 million
of this commitment, respectively, and we currently expect to fund the remainder of our commitment as follows:
$21 million
in the remainder of 2016 and
$5 million
in 2017.
We have entered into certain arrangements with developers whereby we have committed to purchase timeshare units at a future date to be marketed and sold under our Hilton Grand Vacations brand. As of
June 30, 2016
, we are committed to purchase approximately
$195 million
of inventory over a period of
four
years. The ultimate amount and timing of the acquisitions is subject to change pursuant to the terms of the respective arrangements, which could also allow for cancellation in certain circumstances. During the
six months ended June 30, 2016
and
2015
, we purchased
$11 million
and
$17 million
, respectively, of inventory as required under our commitments. As of
June 30, 2016
, our remaining contractual obligations pursuant to these arrangements was expected to be incurred as follows:
$5 million
in the remainder of 2016;
$8 million
in 2017;
zero
in 2018; and
$182 million
in 2019.
In 2010, an affiliate of Blackstone settled a
$75 million
liability on our behalf in conjunction with a lawsuit settlement by entering into service contracts with the plaintiff. As part of the settlement, we entered into a guarantee with the plaintiff to pay any shortfall that this affiliate does not fund related to those service contracts up to the value of the settlement amount made by the affiliate. The remaining potential exposure as of
June 30, 2016
was approximately
$17 million
. We have not accrued a liability for this guarantee as we believe the likelihood of any material funding to be remote.
We are involved in other litigation arising in the normal course of business, some of which includes claims for substantial sums. While the ultimate results of claims and litigation cannot be predicted with certainty, we expect that the ultimate resolution of all pending or threatened claims and litigation as of
June 30, 2016
will not have a material effect on our condensed consolidated results of operations, financial position or cash flows.
Note 19
:
Condensed Consolidating Guarantor Financial Information
In October 2013, Hilton Worldwide Finance LLC and Hilton Worldwide Finance Corp. (the "Subsidiary Issuers"), entities formed in August 2013 that are
100 percent
owned by the Parent, issued
$1.5 billion
of
5.625%
senior notes due in 2021 (the "Senior Notes"). The obligations of the Subsidiary Issuers are guaranteed jointly and severally on a senior unsecured basis by the Parent and certain of the Parent's
100 percent
owned domestic restricted subsidiaries (the "Guarantors"). The indenture that governs the Senior Notes provides that any subsidiary of the Company that provides a guarantee of a senior secured credit facility consisting of the Revolving Credit Facility and the Term Loans (the "Senior Secured Credit Facility") will guarantee the Senior Notes. None of our foreign subsidiaries or U.S. subsidiaries owned by foreign subsidiaries or conducting foreign operations; our non-wholly owned subsidiaries; our subsidiaries that secure the CMBS Loan and
$448 million
in mortgage loans; or certain of our special purpose subsidiaries formed in connection with our Timeshare Facility and Securitized Timeshare Debt guarantee the Senior Notes (collectively, the "Non-Guarantors").
The guarantees are full and unconditional, subject to certain customary release provisions. The indenture that governs the Senior Notes provides that any Guarantor may be released from its guarantee so long as: (a) the subsidiary is sold or sells all of its assets; (b) the subsidiary is released from its guaranty under the Senior Secured Credit Facility; (c) the subsidiary is declared
"unrestricted" for covenant purposes; or (d) the requirements for legal defeasance or covenant defeasance or to discharge the indenture have been satisfied.
The following schedules present the condensed consolidating financial information
as of June 30, 2016
and
December 31, 2015
, and for the three and
six months ended June 30, 2016
and
2015
, for the Parent, Subsidiary Issuers, Guarantors and Non-Guarantors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
Parent
|
|
Subsidiary Issuers
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
(in millions)
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
294
|
|
|
$
|
516
|
|
|
$
|
—
|
|
|
$
|
810
|
|
Restricted cash and cash equivalents
|
—
|
|
|
—
|
|
|
154
|
|
|
117
|
|
|
—
|
|
|
271
|
|
Accounts receivable, net
|
—
|
|
|
—
|
|
|
598
|
|
|
407
|
|
|
—
|
|
|
1,005
|
|
Intercompany receivables
|
—
|
|
|
—
|
|
|
67
|
|
|
—
|
|
|
(67
|
)
|
|
—
|
|
Inventories
|
—
|
|
|
—
|
|
|
437
|
|
|
22
|
|
|
—
|
|
|
459
|
|
Current portion of financing receivables, net
|
—
|
|
|
—
|
|
|
59
|
|
|
70
|
|
|
—
|
|
|
129
|
|
Prepaid expenses
|
—
|
|
|
—
|
|
|
80
|
|
|
112
|
|
|
(6
|
)
|
|
186
|
|
Income taxes receivable
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
18
|
|
Other
|
—
|
|
|
—
|
|
|
9
|
|
|
43
|
|
|
—
|
|
|
52
|
|
Total current assets
|
—
|
|
|
—
|
|
|
1,716
|
|
|
1,287
|
|
|
(73
|
)
|
|
2,930
|
|
Property, Intangibles and Other Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
—
|
|
|
—
|
|
|
356
|
|
|
8,772
|
|
|
(21
|
)
|
|
9,107
|
|
Financing receivables, net
|
—
|
|
|
—
|
|
|
522
|
|
|
383
|
|
|
—
|
|
|
905
|
|
Investments in affiliates
|
—
|
|
|
—
|
|
|
82
|
|
|
47
|
|
|
—
|
|
|
129
|
|
Investments in subsidiaries
|
6,364
|
|
|
12,069
|
|
|
5,260
|
|
|
—
|
|
|
(23,693
|
)
|
|
—
|
|
Goodwill
|
—
|
|
|
—
|
|
|
3,851
|
|
|
2,011
|
|
|
—
|
|
|
5,862
|
|
Brands
|
—
|
|
|
—
|
|
|
4,405
|
|
|
506
|
|
|
—
|
|
|
4,911
|
|
Management and franchise contracts, net
|
—
|
|
|
—
|
|
|
820
|
|
|
257
|
|
|
—
|
|
|
1,077
|
|
Other intangible assets, net
|
—
|
|
|
—
|
|
|
378
|
|
|
165
|
|
|
—
|
|
|
543
|
|
Deferred income tax assets
|
11
|
|
|
6
|
|
|
—
|
|
|
76
|
|
|
(17
|
)
|
|
76
|
|
Other
|
—
|
|
|
8
|
|
|
187
|
|
|
118
|
|
|
—
|
|
|
313
|
|
Total property, intangibles and other assets
|
6,375
|
|
|
12,083
|
|
|
15,861
|
|
|
12,335
|
|
|
(23,731
|
)
|
|
22,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
$
|
6,375
|
|
|
$
|
12,083
|
|
|
$
|
17,577
|
|
|
$
|
13,622
|
|
|
$
|
(23,804
|
)
|
|
$
|
25,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable, accrued expenses and other
|
$
|
—
|
|
|
$
|
39
|
|
|
$
|
1,647
|
|
|
$
|
690
|
|
|
$
|
(6
|
)
|
|
$
|
2,370
|
|
Intercompany payables
|
—
|
|
|
—
|
|
|
—
|
|
|
74
|
|
|
(74
|
)
|
|
—
|
|
Current maturities of long-term debt
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
110
|
|
|
—
|
|
|
98
|
|
Current maturities of timeshare debt
|
—
|
|
|
—
|
|
|
—
|
|
|
88
|
|
|
—
|
|
|
88
|
|
Income taxes payable
|
—
|
|
|
—
|
|
|
70
|
|
|
37
|
|
|
—
|
|
|
107
|
|
Total current liabilities
|
—
|
|
|
27
|
|
|
1,717
|
|
|
999
|
|
|
(80
|
)
|
|
2,663
|
|
Long-term debt
|
—
|
|
|
5,666
|
|
|
55
|
|
|
4,179
|
|
|
—
|
|
|
9,900
|
|
Timeshare debt
|
—
|
|
|
—
|
|
|
—
|
|
|
357
|
|
|
—
|
|
|
357
|
|
Deferred revenues
|
—
|
|
|
—
|
|
|
160
|
|
|
1
|
|
|
—
|
|
|
161
|
|
Deferred income tax liabilities
|
—
|
|
|
—
|
|
|
1,953
|
|
|
2,597
|
|
|
(17
|
)
|
|
4,533
|
|
Liability for guest loyalty program
|
—
|
|
|
—
|
|
|
833
|
|
|
—
|
|
|
—
|
|
|
833
|
|
Other
|
—
|
|
|
26
|
|
|
790
|
|
|
244
|
|
|
—
|
|
|
1,060
|
|
Total liabilities
|
—
|
|
|
5,719
|
|
|
5,508
|
|
|
8,377
|
|
|
(97
|
)
|
|
19,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
Total Hilton stockholders' equity
|
6,375
|
|
|
6,364
|
|
|
12,069
|
|
|
5,274
|
|
|
(23,707
|
)
|
|
6,375
|
|
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(29
|
)
|
|
—
|
|
|
(29
|
)
|
Total equity
|
6,375
|
|
|
6,364
|
|
|
12,069
|
|
|
5,245
|
|
|
(23,707
|
)
|
|
6,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY
|
$
|
6,375
|
|
|
$
|
12,083
|
|
|
$
|
17,577
|
|
|
$
|
13,622
|
|
|
$
|
(23,804
|
)
|
|
$
|
25,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
Parent
|
|
Subsidiary Issuers
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
(in millions)
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
223
|
|
|
$
|
386
|
|
|
$
|
—
|
|
|
$
|
609
|
|
Restricted cash and cash equivalents
|
—
|
|
|
—
|
|
|
148
|
|
|
99
|
|
|
—
|
|
|
247
|
|
Accounts receivable, net
|
—
|
|
|
—
|
|
|
501
|
|
|
375
|
|
|
—
|
|
|
876
|
|
Intercompany receivables
|
—
|
|
|
—
|
|
|
89
|
|
|
—
|
|
|
(89
|
)
|
|
—
|
|
Inventories
|
—
|
|
|
—
|
|
|
419
|
|
|
23
|
|
|
—
|
|
|
442
|
|
Current portion of financing receivables, net
|
—
|
|
|
—
|
|
|
55
|
|
|
74
|
|
|
—
|
|
|
129
|
|
Prepaid expenses
|
—
|
|
|
—
|
|
|
39
|
|
|
129
|
|
|
(21
|
)
|
|
147
|
|
Income taxes receivable
|
—
|
|
|
—
|
|
|
120
|
|
|
—
|
|
|
(23
|
)
|
|
97
|
|
Other
|
—
|
|
|
—
|
|
|
9
|
|
|
29
|
|
|
—
|
|
|
38
|
|
Total current assets
|
—
|
|
|
—
|
|
|
1,603
|
|
|
1,115
|
|
|
(133
|
)
|
|
2,585
|
|
Property, Intangibles and Other Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
—
|
|
|
—
|
|
|
304
|
|
|
8,815
|
|
|
—
|
|
|
9,119
|
|
Financing receivables, net
|
—
|
|
|
—
|
|
|
451
|
|
|
436
|
|
|
—
|
|
|
887
|
|
Investments in affiliates
|
—
|
|
|
—
|
|
|
94
|
|
|
44
|
|
|
—
|
|
|
138
|
|
Investments in subsidiaries
|
6,166
|
|
|
11,854
|
|
|
5,232
|
|
|
—
|
|
|
(23,252
|
)
|
|
—
|
|
Goodwill
|
—
|
|
|
—
|
|
|
3,851
|
|
|
2,036
|
|
|
—
|
|
|
5,887
|
|
Brands
|
—
|
|
|
—
|
|
|
4,405
|
|
|
514
|
|
|
—
|
|
|
4,919
|
|
Management and franchise contracts, net
|
—
|
|
|
—
|
|
|
877
|
|
|
272
|
|
|
—
|
|
|
1,149
|
|
Other intangible assets, net
|
—
|
|
|
—
|
|
|
402
|
|
|
184
|
|
|
—
|
|
|
586
|
|
Deferred income tax assets
|
24
|
|
|
3
|
|
|
—
|
|
|
78
|
|
|
(27
|
)
|
|
78
|
|
Other
|
—
|
|
|
9
|
|
|
165
|
|
|
100
|
|
|
—
|
|
|
274
|
|
Total property, intangibles and other assets
|
6,190
|
|
|
11,866
|
|
|
15,781
|
|
|
12,479
|
|
|
(23,279
|
)
|
|
23,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
$
|
6,190
|
|
|
$
|
11,866
|
|
|
$
|
17,384
|
|
|
$
|
13,594
|
|
|
$
|
(23,412
|
)
|
|
$
|
25,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable, accrued expenses and other
|
$
|
—
|
|
|
$
|
39
|
|
|
$
|
1,542
|
|
|
$
|
646
|
|
|
$
|
(21
|
)
|
|
$
|
2,206
|
|
Intercompany payables
|
—
|
|
|
—
|
|
|
—
|
|
|
89
|
|
|
(89
|
)
|
|
—
|
|
Current maturities of long-term debt
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
106
|
|
|
—
|
|
|
94
|
|
Current maturities of timeshare debt
|
—
|
|
|
—
|
|
|
—
|
|
|
110
|
|
|
—
|
|
|
110
|
|
Income taxes payable
|
—
|
|
|
—
|
|
|
6
|
|
|
50
|
|
|
(23
|
)
|
|
33
|
|
Total current liabilities
|
—
|
|
|
27
|
|
|
1,548
|
|
|
1,001
|
|
|
(133
|
)
|
|
2,443
|
|
Long-term debt
|
—
|
|
|
5,659
|
|
|
54
|
|
|
4,144
|
|
|
—
|
|
|
9,857
|
|
Timeshare debt
|
—
|
|
|
—
|
|
|
—
|
|
|
392
|
|
|
—
|
|
|
392
|
|
Deferred revenues
|
—
|
|
|
—
|
|
|
282
|
|
|
1
|
|
|
—
|
|
|
283
|
|
Deferred income tax liabilities
|
—
|
|
|
—
|
|
|
2,041
|
|
|
2,616
|
|
|
(27
|
)
|
|
4,630
|
|
Liability for guest loyalty program
|
—
|
|
|
—
|
|
|
784
|
|
|
—
|
|
|
—
|
|
|
784
|
|
Other
|
205
|
|
|
14
|
|
|
821
|
|
|
242
|
|
|
—
|
|
|
1,282
|
|
Total liabilities
|
205
|
|
|
5,700
|
|
|
5,530
|
|
|
8,396
|
|
|
(160
|
)
|
|
19,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
Total Hilton stockholders' equity
|
5,985
|
|
|
6,166
|
|
|
11,854
|
|
|
5,232
|
|
|
(23,252
|
)
|
|
5,985
|
|
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(34
|
)
|
|
—
|
|
|
(34
|
)
|
Total equity
|
5,985
|
|
|
6,166
|
|
|
11,854
|
|
|
5,198
|
|
|
(23,252
|
)
|
|
5,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY
|
$
|
6,190
|
|
|
$
|
11,866
|
|
|
$
|
17,384
|
|
|
$
|
13,594
|
|
|
$
|
(23,412
|
)
|
|
$
|
25,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2016
|
|
Parent
|
|
Subsidiary Issuers
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
(in millions)
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased hotels
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
62
|
|
|
$
|
1,051
|
|
|
$
|
(8
|
)
|
|
$
|
1,105
|
|
Management and franchise fees and other
|
—
|
|
|
—
|
|
|
378
|
|
|
92
|
|
|
(26
|
)
|
|
444
|
|
Timeshare
|
—
|
|
|
—
|
|
|
319
|
|
|
17
|
|
|
—
|
|
|
336
|
|
|
—
|
|
|
—
|
|
|
759
|
|
|
1,160
|
|
|
(34
|
)
|
|
1,885
|
|
Other revenues from managed and franchised properties
|
—
|
|
|
—
|
|
|
1,276
|
|
|
133
|
|
|
(243
|
)
|
|
1,166
|
|
Total revenues
|
—
|
|
|
—
|
|
|
2,035
|
|
|
1,293
|
|
|
(277
|
)
|
|
3,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased hotels
|
—
|
|
|
—
|
|
|
44
|
|
|
788
|
|
|
(24
|
)
|
|
808
|
|
Timeshare
|
—
|
|
|
—
|
|
|
226
|
|
|
4
|
|
|
(7
|
)
|
|
223
|
|
Depreciation and amortization
|
—
|
|
|
—
|
|
|
81
|
|
|
90
|
|
|
—
|
|
|
171
|
|
General, administrative and other
|
—
|
|
|
—
|
|
|
98
|
|
|
37
|
|
|
(3
|
)
|
|
132
|
|
|
—
|
|
|
—
|
|
|
449
|
|
|
919
|
|
|
(34
|
)
|
|
1,334
|
|
Other expenses from managed and franchised properties
|
—
|
|
|
—
|
|
|
1,276
|
|
|
133
|
|
|
(243
|
)
|
|
1,166
|
|
Total expenses
|
—
|
|
|
—
|
|
|
1,725
|
|
|
1,052
|
|
|
(277
|
)
|
|
2,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sales of assets, net
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
—
|
|
|
—
|
|
|
310
|
|
|
243
|
|
|
—
|
|
|
553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
—
|
|
|
—
|
|
|
3
|
|
|
1
|
|
|
—
|
|
|
4
|
|
Interest expense
|
—
|
|
|
(67
|
)
|
|
(20
|
)
|
|
(60
|
)
|
|
—
|
|
|
(147
|
)
|
Equity in earnings from unconsolidated affiliates
|
—
|
|
|
—
|
|
|
7
|
|
|
1
|
|
|
—
|
|
|
8
|
|
Gain (loss) on foreign currency transactions
|
—
|
|
|
—
|
|
|
(67
|
)
|
|
54
|
|
|
—
|
|
|
(13
|
)
|
Other loss, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes and equity in earnings from subsidiaries
|
—
|
|
|
(67
|
)
|
|
233
|
|
|
234
|
|
|
—
|
|
|
400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (expense)
|
—
|
|
|
25
|
|
|
(93
|
)
|
|
(88
|
)
|
|
—
|
|
|
(156
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity in earnings from subsidiaries
|
—
|
|
|
(42
|
)
|
|
140
|
|
|
146
|
|
|
—
|
|
|
244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings from subsidiaries
|
239
|
|
|
281
|
|
|
141
|
|
|
—
|
|
|
(661
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
239
|
|
|
239
|
|
|
281
|
|
|
146
|
|
|
(661
|
)
|
|
244
|
|
Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
Net income attributable to Hilton stockholders
|
$
|
239
|
|
|
$
|
239
|
|
|
$
|
281
|
|
|
$
|
141
|
|
|
$
|
(661
|
)
|
|
$
|
239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
$
|
187
|
|
|
$
|
239
|
|
|
$
|
251
|
|
|
$
|
124
|
|
|
$
|
(609
|
)
|
|
$
|
192
|
|
Comprehensive income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
Comprehensive income attributable to Hilton stockholders
|
$
|
187
|
|
|
$
|
239
|
|
|
$
|
251
|
|
|
$
|
119
|
|
|
$
|
(609
|
)
|
|
$
|
187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2015
|
|
Parent
|
|
Subsidiary Issuers
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
(in millions)
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased hotels
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
61
|
|
|
$
|
1,079
|
|
|
$
|
(5
|
)
|
|
$
|
1,135
|
|
Management and franchise fees and other
|
—
|
|
|
—
|
|
|
349
|
|
|
83
|
|
|
(25
|
)
|
|
407
|
|
Timeshare
|
—
|
|
|
—
|
|
|
298
|
|
|
21
|
|
|
—
|
|
|
319
|
|
|
—
|
|
|
—
|
|
|
708
|
|
|
1,183
|
|
|
(30
|
)
|
|
1,861
|
|
Other revenues from managed and franchised properties
|
—
|
|
|
—
|
|
|
1,169
|
|
|
124
|
|
|
(232
|
)
|
|
1,061
|
|
Total revenues
|
—
|
|
|
—
|
|
|
1,877
|
|
|
1,307
|
|
|
(262
|
)
|
|
2,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased hotels
|
—
|
|
|
—
|
|
|
41
|
|
|
799
|
|
|
(23
|
)
|
|
817
|
|
Timeshare
|
—
|
|
|
—
|
|
|
221
|
|
|
4
|
|
|
(5
|
)
|
|
220
|
|
Depreciation and amortization
|
—
|
|
|
—
|
|
|
81
|
|
|
92
|
|
|
—
|
|
|
173
|
|
General, administrative and other
|
—
|
|
|
—
|
|
|
194
|
|
|
29
|
|
|
(2
|
)
|
|
221
|
|
|
—
|
|
|
—
|
|
|
537
|
|
|
924
|
|
|
(30
|
)
|
|
1,431
|
|
Other expenses from managed and franchised properties
|
—
|
|
|
—
|
|
|
1,169
|
|
|
124
|
|
|
(232
|
)
|
|
1,061
|
|
Total expenses
|
—
|
|
|
—
|
|
|
1,706
|
|
|
1,048
|
|
|
(262
|
)
|
|
2,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on sales of assets, net
|
—
|
|
|
—
|
|
|
1
|
|
|
(4
|
)
|
|
—
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
—
|
|
|
—
|
|
|
172
|
|
|
255
|
|
|
—
|
|
|
427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
2
|
|
Interest expense
|
—
|
|
|
(71
|
)
|
|
(15
|
)
|
|
(63
|
)
|
|
—
|
|
|
(149
|
)
|
Equity in earnings from unconsolidated affiliates
|
—
|
|
|
—
|
|
|
8
|
|
|
1
|
|
|
—
|
|
|
9
|
|
Gain (loss) on foreign currency transactions
|
—
|
|
|
—
|
|
|
(323
|
)
|
|
328
|
|
|
—
|
|
|
5
|
|
Other gain, net
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes and equity in earnings from subsidiaries
|
—
|
|
|
(71
|
)
|
|
(157
|
)
|
|
540
|
|
|
—
|
|
|
312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (expense)
|
(4
|
)
|
|
27
|
|
|
53
|
|
|
(221
|
)
|
|
—
|
|
|
(145
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity in earnings from subsidiaries
|
(4
|
)
|
|
(44
|
)
|
|
(104
|
)
|
|
319
|
|
|
—
|
|
|
167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings from subsidiaries
|
165
|
|
|
209
|
|
|
313
|
|
|
—
|
|
|
(687
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
161
|
|
|
165
|
|
|
209
|
|
|
319
|
|
|
(687
|
)
|
|
167
|
|
Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(6
|
)
|
Net income attributable to Hilton stockholders
|
$
|
161
|
|
|
$
|
165
|
|
|
$
|
209
|
|
|
$
|
313
|
|
|
$
|
(687
|
)
|
|
$
|
161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
$
|
356
|
|
|
$
|
167
|
|
|
$
|
240
|
|
|
$
|
481
|
|
|
$
|
(882
|
)
|
|
$
|
362
|
|
Comprehensive income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(6
|
)
|
Comprehensive income attributable to Hilton stockholders
|
$
|
356
|
|
|
$
|
167
|
|
|
$
|
240
|
|
|
$
|
475
|
|
|
$
|
(882
|
)
|
|
$
|
356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2016
|
|
Parent
|
|
Subsidiary Issuers
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
(in millions)
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased hotels
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
114
|
|
|
$
|
1,973
|
|
|
$
|
(15
|
)
|
|
$
|
2,072
|
|
Management and franchise fees and other
|
—
|
|
|
—
|
|
|
712
|
|
|
172
|
|
|
(54
|
)
|
|
830
|
|
Timeshare
|
—
|
|
|
—
|
|
|
628
|
|
|
34
|
|
|
—
|
|
|
662
|
|
|
—
|
|
|
—
|
|
|
1,454
|
|
|
2,179
|
|
|
(69
|
)
|
|
3,564
|
|
Other revenues from managed and franchised properties
|
—
|
|
|
—
|
|
|
2,492
|
|
|
246
|
|
|
(501
|
)
|
|
2,237
|
|
Total revenues
|
—
|
|
|
—
|
|
|
3,946
|
|
|
2,425
|
|
|
(570
|
)
|
|
5,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased hotels
|
—
|
|
|
—
|
|
|
87
|
|
|
1,526
|
|
|
(49
|
)
|
|
1,564
|
|
Timeshare
|
—
|
|
|
—
|
|
|
445
|
|
|
8
|
|
|
(13
|
)
|
|
440
|
|
Depreciation and amortization
|
—
|
|
|
—
|
|
|
161
|
|
|
179
|
|
|
—
|
|
|
340
|
|
Impairment loss
|
—
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
15
|
|
General, administrative and other
|
—
|
|
|
—
|
|
|
180
|
|
|
72
|
|
|
(7
|
)
|
|
245
|
|
|
—
|
|
|
—
|
|
|
873
|
|
|
1,800
|
|
|
(69
|
)
|
|
2,604
|
|
Other expenses from managed and franchised properties
|
—
|
|
|
—
|
|
|
2,492
|
|
|
246
|
|
|
(501
|
)
|
|
2,237
|
|
Total expenses
|
—
|
|
|
—
|
|
|
3,365
|
|
|
2,046
|
|
|
(570
|
)
|
|
4,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sales of assets, net
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
—
|
|
|
—
|
|
|
581
|
|
|
381
|
|
|
—
|
|
|
962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
—
|
|
|
—
|
|
|
5
|
|
|
2
|
|
|
—
|
|
|
7
|
|
Interest expense
|
—
|
|
|
(134
|
)
|
|
(31
|
)
|
|
(121
|
)
|
|
—
|
|
|
(286
|
)
|
Equity in earnings from unconsolidated affiliates
|
—
|
|
|
—
|
|
|
10
|
|
|
1
|
|
|
—
|
|
|
11
|
|
Gain (loss) on foreign currency transactions
|
—
|
|
|
—
|
|
|
(62
|
)
|
|
37
|
|
|
—
|
|
|
(25
|
)
|
Other loss, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes and equity in earnings from subsidiaries
|
—
|
|
|
(134
|
)
|
|
503
|
|
|
295
|
|
|
—
|
|
|
664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (expense)
|
192
|
|
|
51
|
|
|
(242
|
)
|
|
(111
|
)
|
|
—
|
|
|
(110
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity in earnings from subsidiaries
|
192
|
|
|
(83
|
)
|
|
261
|
|
|
184
|
|
|
—
|
|
|
554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings from subsidiaries
|
356
|
|
|
439
|
|
|
178
|
|
|
—
|
|
|
(973
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
548
|
|
|
356
|
|
|
439
|
|
|
184
|
|
|
(973
|
)
|
|
554
|
|
Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(6
|
)
|
Net income attributable to Hilton stockholders
|
$
|
548
|
|
|
$
|
356
|
|
|
$
|
439
|
|
|
$
|
178
|
|
|
$
|
(973
|
)
|
|
$
|
548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
$
|
506
|
|
|
$
|
350
|
|
|
$
|
400
|
|
|
$
|
185
|
|
|
$
|
(931
|
)
|
|
$
|
510
|
|
Comprehensive income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
Comprehensive income attributable to Hilton stockholders
|
$
|
506
|
|
|
$
|
350
|
|
|
$
|
400
|
|
|
$
|
181
|
|
|
$
|
(931
|
)
|
|
$
|
506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2015
|
|
Parent
|
|
Subsidiary Issuers
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
(in millions)
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased hotels
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
113
|
|
|
$
|
1,991
|
|
|
$
|
(12
|
)
|
|
$
|
2,092
|
|
Management and franchise fees and other
|
—
|
|
|
—
|
|
|
671
|
|
|
157
|
|
|
(50
|
)
|
|
778
|
|
Timeshare
|
—
|
|
|
—
|
|
|
597
|
|
|
43
|
|
|
—
|
|
|
640
|
|
|
—
|
|
|
—
|
|
|
1,381
|
|
|
2,191
|
|
|
(62
|
)
|
|
3,510
|
|
Other revenues from managed and franchised properties
|
—
|
|
|
—
|
|
|
2,250
|
|
|
229
|
|
|
(468
|
)
|
|
2,011
|
|
Total revenues
|
—
|
|
|
—
|
|
|
3,631
|
|
|
2,420
|
|
|
(530
|
)
|
|
5,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased hotels
|
—
|
|
|
—
|
|
|
82
|
|
|
1,548
|
|
|
(45
|
)
|
|
1,585
|
|
Timeshare
|
—
|
|
|
—
|
|
|
457
|
|
|
8
|
|
|
(11
|
)
|
|
454
|
|
Depreciation and amortization
|
—
|
|
|
—
|
|
|
173
|
|
|
175
|
|
|
—
|
|
|
348
|
|
General, administrative and other
|
—
|
|
|
—
|
|
|
288
|
|
|
66
|
|
|
(6
|
)
|
|
348
|
|
|
—
|
|
|
—
|
|
|
1,000
|
|
|
1,797
|
|
|
(62
|
)
|
|
2,735
|
|
Other expenses from managed and franchised properties
|
—
|
|
|
—
|
|
|
2,250
|
|
|
229
|
|
|
(468
|
)
|
|
2,011
|
|
Total expenses
|
—
|
|
|
—
|
|
|
3,250
|
|
|
2,026
|
|
|
(530
|
)
|
|
4,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sales of assets, net
|
—
|
|
|
—
|
|
|
—
|
|
|
142
|
|
|
—
|
|
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
—
|
|
|
—
|
|
|
381
|
|
|
536
|
|
|
—
|
|
|
917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
—
|
|
|
—
|
|
|
7
|
|
|
1
|
|
|
—
|
|
|
8
|
|
Interest expense
|
—
|
|
|
(144
|
)
|
|
(28
|
)
|
|
(121
|
)
|
|
—
|
|
|
(293
|
)
|
Equity in earnings from unconsolidated affiliates
|
—
|
|
|
—
|
|
|
11
|
|
|
2
|
|
|
—
|
|
|
13
|
|
Gain (loss) on foreign currency transactions
|
—
|
|
|
—
|
|
|
(140
|
)
|
|
127
|
|
|
—
|
|
|
(13
|
)
|
Other loss, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes and equity in earnings from subsidiaries
|
—
|
|
|
(144
|
)
|
|
231
|
|
|
538
|
|
|
—
|
|
|
625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (expense)
|
(5
|
)
|
|
55
|
|
|
(99
|
)
|
|
(259
|
)
|
|
—
|
|
|
(308
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity in earnings from subsidiaries
|
(5
|
)
|
|
(89
|
)
|
|
132
|
|
|
279
|
|
|
—
|
|
|
317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings from subsidiaries
|
316
|
|
|
405
|
|
|
273
|
|
|
—
|
|
|
(994
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
311
|
|
|
316
|
|
|
405
|
|
|
279
|
|
|
(994
|
)
|
|
317
|
|
Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(6
|
)
|
Net income attributable to Hilton stockholders
|
$
|
311
|
|
|
$
|
316
|
|
|
$
|
405
|
|
|
$
|
273
|
|
|
$
|
(994
|
)
|
|
$
|
311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
$
|
266
|
|
|
$
|
311
|
|
|
$
|
408
|
|
|
$
|
236
|
|
|
$
|
(949
|
)
|
|
$
|
272
|
|
Comprehensive income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(6
|
)
|
Comprehensive income attributable to Hilton stockholders
|
$
|
266
|
|
|
$
|
311
|
|
|
$
|
408
|
|
|
$
|
230
|
|
|
$
|
(949
|
)
|
|
$
|
266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2016
|
|
Parent
|
|
Subsidiary Issuers
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
(in millions)
|
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
211
|
|
|
$
|
498
|
|
|
$
|
(54
|
)
|
|
$
|
655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures for property and equipment
|
—
|
|
|
—
|
|
|
(19
|
)
|
|
(150
|
)
|
|
—
|
|
|
(169
|
)
|
Payments received on other financing receivables
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Issuance of other financing receivables
|
—
|
|
|
—
|
|
|
(18
|
)
|
|
—
|
|
|
—
|
|
|
(18
|
)
|
Distributions from unconsolidated affiliates
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
2
|
|
Proceeds from asset dispositions
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Change in restricted cash and cash equivalents
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
14
|
|
Contract acquisition costs
|
—
|
|
|
—
|
|
|
(16
|
)
|
|
(2
|
)
|
|
—
|
|
|
(18
|
)
|
Capitalized software costs
|
—
|
|
|
—
|
|
|
(35
|
)
|
|
—
|
|
|
—
|
|
|
(35
|
)
|
Net cash used in investing activities
|
—
|
|
|
—
|
|
|
(87
|
)
|
|
(135
|
)
|
|
—
|
|
|
(222
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(64
|
)
|
|
—
|
|
|
(64
|
)
|
Change in restricted cash and cash equivalents
|
—
|
|
|
—
|
|
|
—
|
|
|
(32
|
)
|
|
—
|
|
|
(32
|
)
|
Intercompany transfers
|
138
|
|
|
—
|
|
|
(53
|
)
|
|
(85
|
)
|
|
—
|
|
|
—
|
|
Dividends paid
|
(138
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(138
|
)
|
Intercompany dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(54
|
)
|
|
54
|
|
|
—
|
|
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
Net cash used in financing activities
|
—
|
|
|
—
|
|
|
(53
|
)
|
|
(239
|
)
|
|
54
|
|
|
(238
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
Net increase in cash and cash equivalents
|
—
|
|
|
—
|
|
|
71
|
|
|
130
|
|
|
—
|
|
|
201
|
|
Cash and cash equivalents, beginning of period
|
—
|
|
|
—
|
|
|
223
|
|
|
386
|
|
|
—
|
|
|
609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
294
|
|
|
$
|
516
|
|
|
$
|
—
|
|
|
$
|
810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2015
|
|
Parent
|
|
Subsidiary Issuers
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
(in millions)
|
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
300
|
|
|
$
|
416
|
|
|
$
|
(68
|
)
|
|
$
|
648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures for property and equipment
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
(145
|
)
|
|
—
|
|
|
(159
|
)
|
Acquisitions, net of cash acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,410
|
)
|
|
—
|
|
|
(1,410
|
)
|
Payments received on other financing receivables
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
2
|
|
Issuance of other financing receivables
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
(2
|
)
|
|
—
|
|
|
(6
|
)
|
Investments in affiliates
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
Distributions from unconsolidated affiliates
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
9
|
|
Issuance of intercompany receivables
|
—
|
|
|
—
|
|
|
(184
|
)
|
|
—
|
|
|
184
|
|
|
—
|
|
Payments received on intercompany receivables
|
—
|
|
|
—
|
|
|
184
|
|
|
—
|
|
|
(184
|
)
|
|
—
|
|
Proceeds from asset dispositions
|
—
|
|
|
—
|
|
|
—
|
|
|
1,869
|
|
|
—
|
|
|
1,869
|
|
Contract acquisition costs
|
—
|
|
|
—
|
|
|
(11
|
)
|
|
(8
|
)
|
|
—
|
|
|
(19
|
)
|
Capitalized software costs
|
—
|
|
|
—
|
|
|
(23
|
)
|
|
—
|
|
|
—
|
|
|
(23
|
)
|
Net cash provided by (used in) investing activities
|
—
|
|
|
—
|
|
|
(47
|
)
|
|
305
|
|
|
—
|
|
|
258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
—
|
|
|
—
|
|
|
—
|
|
|
34
|
|
|
—
|
|
|
34
|
|
Repayment of debt
|
—
|
|
|
(325
|
)
|
|
—
|
|
|
(636
|
)
|
|
—
|
|
|
(961
|
)
|
Intercompany borrowings
|
—
|
|
|
—
|
|
|
—
|
|
|
184
|
|
|
(184
|
)
|
|
—
|
|
Repayment of intercompany borrowings
|
—
|
|
|
—
|
|
|
—
|
|
|
(184
|
)
|
|
184
|
|
|
—
|
|
Change in restricted cash and cash equivalents
|
—
|
|
|
—
|
|
|
—
|
|
|
(29
|
)
|
|
—
|
|
|
(29
|
)
|
Intercompany transfers
|
—
|
|
|
325
|
|
|
(334
|
)
|
|
9
|
|
|
—
|
|
|
—
|
|
Intercompany dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(68
|
)
|
|
68
|
|
|
—
|
|
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
Excess tax benefits from share-based compensation
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
8
|
|
Net cash used in financing activities
|
—
|
|
|
—
|
|
|
(326
|
)
|
|
(694
|
)
|
|
68
|
|
|
(952
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
|
—
|
|
|
(9
|
)
|
Net increase (decrease) in cash and cash equivalents
|
—
|
|
|
—
|
|
|
(73
|
)
|
|
18
|
|
|
—
|
|
|
(55
|
)
|
Cash and cash equivalents, beginning of period
|
—
|
|
|
—
|
|
|
270
|
|
|
296
|
|
|
—
|
|
|
566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
197
|
|
|
$
|
314
|
|
|
$
|
—
|
|
|
$
|
511
|
|