MCLEAN, Va. - February 15, 2017 - (BUSINESS WIRE) - Hilton Worldwide Holdings Inc. ("Hilton," or the "Company") (NYSE: HLT) today reported its fourth quarter and full year 2016 results. The Company completed the spin-off of Park Hotels & Resorts Inc. ("Park") and Hilton Grand Vacations Inc. ("HGV") (the "spin-offs") in 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 (the "Reverse Stock Split"), unless noted otherwise. Highlights include:
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.
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.
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.
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
Hilton will host a conference call to discuss fourth quarter and full year 2016 results on February 15, 2017 at 10:00 a.m. Eastern Time. Participants may listen to the live webcast by logging onto the Hilton Investor Relations website at http://ir.hilton.com/events-and-presentations. A replay and transcript of the webcast will be available within 24 hours after the live event at http://ir.hilton.com/financial-reporting/quarterly-results/2016.
Alternatively, participants may listen to the live call by dialing 1-888-317-6003 in the United States or 1-412-317-6061 internationally. Please use the conference ID 7354038. Participants are encouraged to dial into the call or link to the webcast at least fifteen minutes prior to the scheduled start time. A telephone replay will be available for seven days following the call. To access the telephone replay, dial 1-877-344-7529 in the United States or 1-412-317-0088 internationally using the conference ID 10099116.
Park and HGV will individually host conference calls to discuss their respective results and outlook.
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, statements related to the expectations regarding the performance of Hilton's business, financial results, liquidity and capital resources and other non-historical statements, including the statements in the "Outlook" section of this press release. You can identify these forward-looking statements by the use of words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "could," "seeks," "projects," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties, including, among others, risks inherent to the hospitality industry, macroeconomic factors beyond Hilton's control, competition for hotel guests and management and franchise agreements, risks related to doing business with third-party hotel owners, performance of Hilton's information technology systems, growth of reservation channels outside of Hilton's system, risks of doing business outside of the United States and Hilton's indebtedness. Additional factors that could cause Hilton's results to differ materially from those described in the forward-looking statements can be found under the section entitled "Part I-Item 1A. Risk Factors" of the Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed with the Securities and Exchange Commission (the "SEC"), as such factors may be updated from time to time in Hilton's periodic filings with the SEC, including in Hilton's Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which is expected to be filed on or about the date of the press release, which are accessible on the SEC's website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in Hilton's filings with the SEC. The Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
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.
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.
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. Visit newsroom.hilton.com for more information and connect with Hilton on facebook.com/hiltonnewsroom, twitter.com/hiltonnewsroom, linkedIn.com/company/hilton, instagram.com/hiltonnewsroom and youtube.com/hiltonnewsroom.
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HILTON WORLDWIDE HOLDINGS INC.
DEFINITIONS
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:
(a) The management and franchise fee revenue related to the management and franchise agreements with Park, effective at completion of the spin-offs, as well as the franchise fee revenue related to the license agreement with HGV, effective at completion of the spin-offs.
(b) The revenues and expenses for payroll and related costs, certain other operating costs, marketing expenses and other expenses associated with Hilton's brands and shared services that will be directly reimbursed to Hilton by Park under the terms of the management and franchise agreements with Park, effective at completion of the spin-offs.
(c) Represents the income tax expense effect of pro forma adjustments by applying an estimated statutory tax rate of 38 percent.
(d) Pro forma basic and diluted weighted average shares outstanding were based on the historical weighted average number of common shares outstanding and the calculation of pro forma diluted weighted average shares outstanding reflects the effect of the spin-offs.
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, 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.
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, 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, 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.
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 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.
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.
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.
Jill Slattery
Investor Relations
+1 703 883 6043
Aaron Radelet
Media Relations
+1 703 883 5804
SOURCE Hilton
Hilton Worldwide (NYSE: HLT) is a leading global hospitality company, spanning the lodging sector from luxury and full-service hotels and resorts to extended-stay suites and focused-service hotels.