Hilton Worldwide Reports Second Quarter Results

Exceeding High End of Guidance for Adjusted EBITDA and EPS, Announces Quarterly Dividend and Raises Full Year Outlook

MCLEAN, Va. - July 29, 2015 - (BUSINESS WIRE) - Hilton Worldwide Holdings Inc. ("Hilton," "Hilton Worldwide" or the "Company") (NYSE: HLT) today reported its second quarter 2015 results and raised its full year 2015 outlook. Highlights include:

  • EPS, adjusted for special items, for the second quarter was $0.25, a 19 percent increase from the same period in 2014; without adjustments, EPS was $0.16
  • Net income attributable to Hilton stockholders for the second quarter was $161 million
  • Adjusted EBITDA for the second quarter increased 15 percent from the same period in 2014 to $777 million, and Adjusted EBITDA margin increased 320 basis points
  • System-wide comparable RevPAR increased 5.2 percent for the second quarter on a currency neutral basis from the same period in 2014
  • Management and franchise fees for the second quarter increased 17 percent from the same period in 2014 to $434 million
  • Net unit growth was over 11,000 rooms in the second quarter, a 56 percent increase from the same period in 2014
  • Approved 24,000 new rooms for development during the second quarter, growing Hilton's development pipeline to 1,510 hotels, consisting of more than 250,000 rooms, as of June 30, 2015
  • Reduced long-term debt by $175 million during the second quarter; additional $350 million prepayment on senior secured loan facility borrowings in July 2015, for a total reduction of $750 million through July 2015
  • Initiated regular quarterly cash dividend with the announcement on July 29, 2015 of a dividend of $0.07 per share to be paid on or before September 25, 2015
  • Increased outlook for full year Adjusted EBITDA to between $2,820 million and $2,870 million, an increase of $20 million at the midpoint adjusting for the sale of the Hilton Sydney

Overview

For the three months ended June 30, 2015, earnings per share ("EPS") was $0.16 compared to $0.21 for the three months ended June 30, 2014, and EPS, adjusted for special items, was $0.25 for the three months ended June 30, 2015 compared to $0.21 for the three months ended June 30, 2014. Adjusted EBITDA increased 15 percent to $777 million for the three months ended June 30, 2015, compared to $674 million for the three months ended June 30, 2014, and net income attributable to Hilton stockholders was $161 million for the three months ended June 30, 2015 compared to $209 million for the three months ended June 30, 2014.

For the six months ended June 30, 2015, EPS was $0.31 compared to $0.34 for the six months ended June 30, 2014, and EPS, adjusted for special items, was $0.37 for the six months ended June 30, 2015 compared to $0.35 for the six months ended June 30, 2014. Adjusted EBITDA increased 16 percent to $1,376 million for the six months ended June 30, 2015, compared to $1,182 million for the six months ended June 30, 2014, and net income attributable to Hilton stockholders was $311 million for the six months ended June 30, 2015 compared to $332 million for the six months ended June 30, 2014.

Christopher J. Nassetta, President & Chief Executive Officer of Hilton Worldwide, said, "We are pleased that strong business fundamentals and execution resulted in Adjusted EBITDA and EPS exceeding the high end of guidance. We remain confident in delivering strong performance going forward and are pleased to commence returning capital to stockholders with our announcement this morning of a quarterly dividend."

Nassetta added, “We continue to lead the industry in organic growth with the largest rooms pipeline and largest share of rooms under construction. Including rooms signed this month, we also reached the milestone of having one million rooms open or under development.”

Segment Highlights

Management and Franchise

Management and franchise fees were $434 million in the second quarter of 2015, an increase of 17 percent compared to the same period in 2014. RevPAR at comparable managed and franchised hotels in the second quarter of 2015 increased 5.2 percent on a currency neutral basis (a 3.4 percent increase in actual dollars) compared to the same period in 2014. The increase in RevPAR at comparable managed and franchised hotels and addition of new units have yielded continued strong fee growth during the second quarter of 2015.

Ownership

Revenues from the ownership segment were $1,141 million in the second quarter of 2015, and ownership segment Adjusted EBITDA was $318 million, an increase of 9 percent from the same period in 2014. Adjusted EBITDA margin(1) increased 200 basis points. RevPAR at comparable hotels in the ownership segment increased 5.2 percent on a currency neutral basis (a 1.0 percent decrease in actual dollars) in the second quarter of 2015 compared to the same period in 2014, with an increase in RevPAR of 6.5 percent at comparable ownership segment hotels in the United States. Outside of the United States, RevPAR at comparable ownership segment hotels increased by 3.4 percent on a currency neutral basis (a 10.5 percent decrease in actual dollars).

(1)Calculated as ownership segment Adjusted EBITDA divided by ownership segment revenues.

Timeshare

Timeshare segment revenue for the second quarter of 2015 was $319 million, an increase of 16 percent from the same period in 2014, and timeshare Adjusted EBITDA was $86 million, an increase of 21 percent. Commissions recognized from the sale of third-party developed timeshare intervals increased $24 million during the second quarter of 2015 from the same period in 2014, and sales revenue on owned inventory increased $14 million.

In the second quarter of 2015, 59 percent of intervals sold were developed by third parties. Hilton Worldwide's overall supply of timeshare intervals as of June 30, 2015 was approximately 124,000 intervals. With the addition of a recently signed condo-hotel conversion in Orlando, Hilton Worldwide increased its timeshare supply to nearly 136,000 intervals, or about six years of sales at current pace, with over 83 percent developed by third parties.

Development

Hilton Worldwide opened 82 hotels and achieved net unit growth of over 11,000 rooms during the second quarter of 2015. In July 2015, Hilton Worldwide entered two new countries with the openings of the Hilton Aruba Caribbean Resort & Casino and the Hilton Garden Inn Guatemala City, increasing Hilton Worldwide's global presence to 97 countries and territories.

As of June 30, 2015, Hilton Worldwide had the largest rooms pipeline in the lodging industry(2), with more than 250,000 rooms at 1,510 hotels throughout 85 countries and territories, including 32 countries and territories where Hilton Worldwide does not currently have any open hotels. Approximately 136,000 rooms, or 54 percent of the pipeline, were located outside of the United States. All of the development pipeline is in the capital light management and franchise segment, and over half, or approximately 128,000 rooms, were under construction. At nearly 20 percent, Hilton Worldwide also has the largest share of rooms under construction globally(2). Including all agreements approved but not signed, Hilton Worldwide's pipeline totaled nearly 265,000 rooms.

(2)Source: Smith Travel Research, Inc. ("STR") Global New Development Pipeline (June 2015).

Balance Sheet and Liquidity

During the second quarter of 2015, Hilton made voluntary prepayments of $175 million on its senior secured term loan facility. In July 2015, Hilton made an additional $350 million prepayment on its senior secured term loan facility using net proceeds from the sale of the Hilton Sydney.

As of June 30, 2015, Hilton had $10.4 billion of outstanding indebtedness with a weighted average interest rate of 4.2 percent, excluding $780 million of non-recourse debt.

Total cash and cash equivalents were $759 million as of June 30, 2015, including $248 million of restricted cash and cash equivalents. No borrowings were outstanding under the $1.0 billion revolving credit facility as of June 30, 2015.

Hilton Worldwide initiated a regular quarterly cash dividend with the announcement on July 29, 2015 of a dividend of $0.07 per share on shares of its common stock to be paid on or before September 25, 2015 to stockholders of record of its common stock as of the close of business on August 14, 2015.

Outlook

Full Year 2015

  • System-wide RevPAR is expected to increase between 5.0 percent and 7.0 percent on a comparable and currency neutral basis, with ownership segment RevPAR expected to increase between 4.0 percent and 6.0 percent on a comparable and currency neutral basis as compared to 2014.
  • Adjusted EBITDA is projected to be between $2,820 million and $2,870 million, an increase of $20 million at the midpoint adjusting for the sale of the Hilton Sydney.
  • Management and franchise fees are projected to increase approximately 11 percent to 13 percent.
  • Timeshare segment Adjusted EBITDA is projected to be between $335 million and $350 million.
  • Corporate expense and other is projected to remain flat to prior year.
  • Diluted EPS, adjusted for special items, is projected to be between $0.80 and $0.84.
  • Capital expenditures, excluding timeshare inventory, are expected to be between $350 million and $400 million.
  • Net unit growth is expected to be approximately 40,000 rooms to 45,000 rooms.
  • Expect cash available for debt prepayments or capital return to stockholders to be between $1.1 billion and $1.3 billion, which includes two expected dividend payments.

Third Quarter 2015

  • System-wide RevPAR is expected to increase between 4.5 percent and 6.5 percent on a comparable and currency neutral basis compared to the third quarter of 2014.
  • Adjusted EBITDA is expected to be between $730 million and $750 million.
  • Management and franchise fees are expected to increase approximately 10 percent to 12 percent.
  • Diluted EPS, adjusted for special items, is projected to be between $0.21 and $0.23.

Conference Call

Hilton Worldwide will host a conference call to discuss second quarter 2015 results on July 29, 2015 at 10:00 a.m. Eastern Time. Participants may listen to the live webcast by logging onto the Hilton Worldwide Investor Relations website at http://ir.hiltonworldwide.com/investors/events-and-presentations. A replay and transcript of the webcast will be available within 24 hours after the live event at http://ir.hiltonworldwide.com/investors/financial-reporting/quarterly-results.

Alternatively, participants may listen to the live call by dialing 1-877-201-0168 in the United States or 1-647-788-4901 internationally. Please use the conference ID 74328196. 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 1-855-859-2056 or 1-404-537-3406 using the Conference ID 74328196.

Forward-Looking Statements

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," "approximately," "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, management and franchise agreements and timeshare sales, risks related to doing business with third-party hotel owners, Hilton's significant investments in owned and leased real estate, 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, 2014, filed with the Securities and Exchange Commission ("SEC"), as such factors may be updated from time to time in Hilton's periodic filings with the SEC, 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.

Non-GAAP Financial Measures

The Company refers to certain non-GAAP financial measures in this press release, including net income and EPS, adjusted for special items, Adjusted EBITDA, Adjusted EBITDA margins and Net Debt. Please see the schedules to the press release and "Definitions" for additional information and reconciliations of such non-GAAP financial measures.

About Hilton Worldwide

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. For 96 years, Hilton Worldwide has been dedicated to continuing its tradition of providing exceptional guest experiences. The Company’s portfolio of twelve world-class global brands is comprised of more than 4,440 managed, franchised, owned and leased hotels and timeshare properties, with more than 730,000 rooms in 97 countries and territories, including Hilton Hotels & Resorts, Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, Canopy by Hilton, Curio - A Collection by Hilton, DoubleTree by Hilton, Embassy Suites by Hilton, Hilton Garden Inn, Hampton 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 HHonors®. Visit news.hiltonworldwide.com for more information and connect with Hilton Worldwide at www.facebook.com/hiltonworldwide, www.twitter.com/hiltonworldwide, www.youtube.com/hiltonworldwide, www.flickr.com/hiltonworldwide and www.linkedin.com/company/hilton-worldwide.

 

 

HILTON WORLDWIDE HOLDINGS INC.

EARNINGS RELEASE SCHEDULES
TABLE OF CONTENTS
 
 

Condensed Consolidated Statements of Operations

Segment Adjusted EBITDA
Comparable and Currency Neutral System-wide Hotel Operating Statistics
Management and Franchise Fees and Other Revenues
Timeshare Revenues and Operating Expenses
Hotel and Timeshare Property Summary
Capital Expenditures
Non-GAAP Financial Measures Reconciliations
Definitions
 

 

         
HILTON WORLDWIDE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
         
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2015   2014   2015   2014
Revenues                
Owned and leased hotels   $ 1,135     $ 1,117     $ 2,092     $ 2,062  
Management and franchise fees and other   407     354     778     666  
Timeshare   319     276     640     555  
    1,861     1,747     3,510     3,283  
Other revenues from managed and franchised properties   1,061     920     2,011     1,747  
Total revenues   2,922     2,667     5,521     5,030  
                 
Expenses                
Owned and leased hotels   817     833     1,585     1,604  
Timeshare   220     188     454     365  
Depreciation and amortization   173     158     348     311  
General, administrative and other   221     133     348     230  
    1,431     1,312     2,735     2,510  
Other expenses from managed and franchised properties   1,061     920     2,011     1,747  
Total expenses   2,492     2,232     4,746     4,257  
                 
Gain (loss) on sales of assets, net   (3 )       142      
                 
Operating income   427     435     917     773  
                 
Interest income   2     5     8     6  
Interest expense   (149 )   (158 )   (293 )   (311 )
Equity in earnings from unconsolidated affiliates   9     8     13     12  
Gain (loss) on foreign currency transactions   5     32     (13 )   46  
Other gain (loss), net   18     11     (7 )   14  
                 
Income before income taxes   312     333     625     540  
                 
Income tax expense   (145 )   (121 )   (308 )   (204 )
                 
Net income   167     212     317     336  
Net income attributable to noncontrolling interests   (6 )   (3 )   (6 )   (4 )
Net income attributable to Hilton stockholders   $ 161     $ 209     $ 311     $ 332  
                 
Weighted average shares outstanding                
Basic   987     985     986     985  
Diluted   989     985     989     985  
                 
Earnings per share                
Basic   $ 0.16     $ 0.21     $ 0.32     $ 0.34  
Diluted   $ 0.16     $ 0.21     $ 0.31     $ 0.34  
                                 

 

         
HILTON WORLDWIDE HOLDINGS INC.
SEGMENT ADJUSTED EBITDA
(unaudited, in millions)
         
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2015     2014(1)     2015     2014(1)
Management and franchise(2)   $ 434     $ 371     $ 825     $ 702  
Ownership(2)(3)(4)(5)   318     292     508     467  
Timeshare(2)(3)   86     71     160     153  
Corporate and other(4)   (61 )   (60 )   (117 )   (140 )
Adjusted EBITDA(6)   $ 777     $ 674     $ 1,376     $ 1,182  
                                 

 

____________
(1)   To facilitate comparison with the Company's competitors, beginning in the first quarter of 2015, Adjusted EBITDA excluded all share-based compensation expense. Historical results have been revised to reflect this change in the definition to allow for comparability.
(2)   Includes management, royalty and intellectual property fees of $36 million and $29 million for the three months ended June 30, 2015 and 2014, respectively, and $66 million and $56 million for the six months ended June 30, 2015 and 2014, respectively. These fees are charged to consolidated owned and leased properties and were eliminated in the condensed consolidated financial statements. Also includes a licensing fee of $11 million for the three months ended June 30, 2015 and 2014, and $20 million and $22 million for the six months ended June 30, 2015 and 2014, respectively, which is charged to the timeshare segment by the management and franchise segment and was eliminated in the condensed consolidated financial statements. While the net effect is zero, the measure of Adjusted EBITDA includes these fees as a benefit to the management and franchise segment and a cost to the ownership and timeshare segments.
(3)   Includes charges to timeshare operations for rental fees and fees for other amenities, which were eliminated in the condensed consolidated financial statements. These charges totaled $5 million and $8 million for the three months ended June 30, 2015 and 2014, respectively, and $11 million and $14 million for the six months ended June 30, 2015 and 2014, respectively. While the net effect is zero, the measure of Adjusted EBITDA includes these fees as a benefit to the ownership segment and a cost to the timeshare segment.
(4)   Includes charges to consolidated owned and leased properties for services provided by Hilton's wholly owned laundry business of $1 million and $2 million for the three months ended June 30, 2015 and 2014, respectively, and $3 million and $4 million for the six months ended June 30, 2015 and 2014, respectively. Also includes other intercompany charges of $1 million for the three months ended June 30, 2015 and 2014, and $2 million for the six months ended June 30, 2015 and 2014. These charges were eliminated in the condensed consolidated financial statements.
(5)   Includes unconsolidated affiliate Adjusted EBITDA.
(6)   See "Non-GAAP Financial Measures Reconciliations—Adjusted EBITDA and Adjusted EBITDA Margin" for a reconciliation of net income attributable to Hilton stockholders to Adjusted EBITDA.
     

 

     
HILTON WORLDWIDE HOLDINGS INC.
COMPARABLE AND CURRENCY NEUTRAL SYSTEM-WIDE HOTEL OPERATING STATISTICS
BY REGION
(unaudited)
     
    Three Months Ended June 30,
    Occupancy   ADR   RevPAR
    2015   vs. 2014     2015   vs. 2014     2015   vs. 2014
Americas   80.1 %  

0.9

%pts.

  $ 141.25   3.9 %   $ 113.17   5.1 %
Europe   80.5     1.6       158.03   2.6       127.22   4.6  
Middle East & Africa   67.8     4.4       139.21   (4.2 )     94.42   2.5  
Asia Pacific   67.6     6.1       140.54   (0.6 )     95.02   9.4  
System-wide   79.2     1.3       142.48   3.4       112.82   5.2  
     
     
    Six Months Ended June 30,
    Occupancy   ADR   RevPAR
    2015   vs. 2014   2015   vs. 2014   2015   vs. 2014
Americas   76.1 %  

1.3

%pts.

  $ 139.16   3.9 %   $ 105.87   5.7 %
Europe   74.3     2.2       150.61   1.9       111.84   5.0  
Middle East & Africa   66.6     3.5       151.92   (1.5 )     101.20   4.0  
Asia Pacific   66.8     6.4       143.50   (0.4 )     95.86   10.1  
System-wide   75.2     1.7       140.54   3.4       105.70   5.8  
                                     

 

       
HILTON WORLDWIDE HOLDINGS INC.
COMPARABLE AND CURRENCY NEUTRAL SYSTEM-WIDE HOTEL OPERATING STATISTICS
BY BRAND
(unaudited)
       
    Three Months Ended June 30,
    Occupancy   ADR   RevPAR
    2015   vs. 2014     2015   vs. 2014     2015   vs. 2014
Waldorf Astoria Hotels & Resorts   69.7 %  

4.2

%pts.

  $ 265.51   (0.1 )%   $ 185.14   6.2 %
Conrad Hotels & Resorts   71.0     4.7       244.55   (2.4 )     173.55   4.5  
Hilton Hotels & Resorts   78.9     1.7       166.48   2.9       131.32   5.2  
DoubleTree by Hilton   77.9     1.3       137.41   3.8       107.00   5.5  
Embassy Suites by Hilton   81.3     (0.1 )     158.01   5.1       128.40   5.0  
Hilton Garden Inn   80.6     0.9       132.40   3.6       106.65   4.8  
Hampton by Hilton   78.8     1.5       120.16   3.3       94.73   5.2  
Homewood Suites by Hilton   83.2     0.4       132.80   4.5       110.49   5.0  
Home2 Suites by Hilton   83.1     2.8       119.28   5.5       99.10   9.2  
System-wide   79.2     1.3       142.48   3.4       112.82   5.2  
           
     
    Six Months Ended June 30,
    Occupancy   ADR   RevPAR
    2015   vs. 2014   2015   vs. 2014   2015   vs. 2014
Waldorf Astoria Hotels & Resorts   69.6 %  

3.1

%pts.

  $ 286.91   1.8 %   $ 199.80   6.5 %
Conrad Hotels & Resorts   69.1     6.1       247.40   (3.1 )     170.99   6.2  
Hilton Hotels & Resorts   75.5     1.9       164.55   2.8       124.18   5.4  
DoubleTree by Hilton   74.0     1.6       134.20   4.2       99.34   6.4  
Embassy Suites by Hilton   78.4     0.5       155.80   5.1       122.17   5.7  
Hilton Garden Inn   76.4     1.4       129.43   3.5       98.86   5.5  
Hampton by Hilton   73.9     2.0       117.73   3.3       87.02   6.2  
Homewood Suites by Hilton   79.6     0.7       131.18   4.7       104.41   5.6  
Home2 Suites by Hilton   79.1     4.7       114.60   4.2       90.67   10.8  
System-wide   75.2     1.7       140.54   3.4       105.70   5.8  
                           

 

 
HILTON WORLDWIDE HOLDINGS INC.
COMPARABLE AND CURRENCY NEUTRAL SYSTEM-WIDE HOTEL OPERATING STATISTICS
BY SEGMENT
(unaudited)
     
    Three Months Ended June 30,
    Occupancy   ADR   RevPAR
    2015   vs. 2014     2015   vs. 2014     2015   vs. 2014
Ownership(1)   82.5 %   2.3% pts.   $ 189.12   2.3 %   $ 156.04   5.2 %
U.S.   86.2     2.1       203.46   3.9       175.44   6.5  
International (non-U.S.)   78.2     2.6       171.00        

133.79

  3.4  
                           
Management and franchise   78.9     1.2       137.81   3.5       108.68   5.2  
U.S.   80.1     0.8       137.85   3.9       110.35   4.9  
International (non-U.S.)   73.3     3.4       137.63   1.7       100.90   6.7  
                           
System-wide   79.2     1.3       142.48   3.4       112.82   5.2  
U.S.   80.4     0.8       141.96   3.9       114.16   5.0  
International (non-U.S.)   74.3     3.2       144.71   1.2       107.53   5.8  
     
     
    Six Months Ended June 30,
    Occupancy   ADR   RevPAR
    2015   vs. 2014   2015   vs. 2014   2015   vs. 2014
Ownership(1)   78.1 %   2.1% pts.   $ 184.24   2.0 %   $ 143.85   4.8 %
U.S.   82.2     1.7       197.11   3.2       161.98   5.4  
International (non-U.S.)   73.4     2.6       167.72   0.4       123.05   4.0  
                           
Management and franchise   74.9     1.7       136.18   3.6       102.05   6.0  
U.S.   75.9     1.3       135.75   4.0       103.03   5.7  
International (non-U.S.)   70.4     3.6       138.35   1.7       97.46   7.2  
                           
System-wide   75.2     1.7       140.54   3.4       105.70   5.8  
U.S.   76.3     1.3       139.61   3.9       106.48   5.7  
International (non-U.S.)   71.0     3.4       144.47   1.3       102.62   6.4  
                           

 

____________
(1)   Includes owned and leased hotels, as well as hotels owned or leased by entities in which Hilton owns a noncontrolling interest.
     

 

 
HILTON WORLDWIDE HOLDINGS INC.
MANAGEMENT AND FRANCHISE FEES AND OTHER REVENUES
(unaudited, dollars in millions)
         
    Three Months Ended    
    June 30,   Increase / (Decrease)
    2015   2014   $   %
Management fees:                
Base fees(1)   $ 89     $ 88     1     1.1  
Incentive fees(2)     36       31     5     16.1  
Total base and incentive fees     125       119     6     5.0  
Other management fees(3)     9       5     4     80.0  
Total management fees     134       124     10     8.1  
Franchise fees(4)     300       247     53     21.5  
Total management and franchise fees     434       371     63     17.0  
Other revenues(5)     21       25     (4 )   (16.0 )
Intersegment fees elimination(1)(2)(4)(5)     (48 )     (42 )   (6 )   14.3  
Management and franchise fees and other revenues   $ 407     $ 354     53     15.0  
           
         
    Six Months Ended    
    June 30,   Increase / (Decrease)
    2015   2014   $   %
Management fees:                  
Base fees(1)   $ 170     $ 167     3     1.8  
Incentive fees(2)     73       65     8     12.3  
Total base and incentive fees     243       232     11     4.7  
Other management fees(3)     17       12     5     41.7  
Total management fees     260       244     16     6.6  
Franchise fees(4)     565       458     107     23.4  
Total management and franchise fees     825       702     123     17.5  
Other revenues(5)     42       46     (4 )   (8.7 )
Intersegment fees elimination(1)(2)(4)(5)     (89 )    

(82

)

  (7 )   8.5  
Management and franchise fees and other revenues   $ 778     $ 666     112     16.8  
                   

 

____________
(1)   Includes management, royalty and intellectual property fees of $32 million and $29 million for the three months ended June 30, 2015 and 2014, respectively, and $58 million and $52 million for the six months ended June 30, 2015 and 2014, respectively. These fees are charged to consolidated owned and leased properties and were eliminated in the condensed consolidated financial statements.
(2)   Includes management, royalty and intellectual property fees of $4 million for the three months ended June 30, 2015 and $8 million and $4 million for the six months ended June 30, 2015 and 2014, respectively. Management, royalty and intellectual property fees for the three months ended June 30, 2014 were less than $1 million. These fees are charged to consolidated owned and leased properties and were eliminated in the condensed consolidated financial statements.
(3)   Includes timeshare homeowners' association, early termination, product improvement plan and other fees.
(4)   Includes a licensing fee earned from the timeshare segment of $11 million for the three months ended June 30, 2015 and 2014 and $20 million and $22 million for the six months ended June 30, 2015 and 2014, respectively.
(5)   Includes charges to consolidated owned and leased properties for services provided by a wholly owned laundry business of $1 million and $2 million for the three months ended June 30, 2015 and 2014, respectively, and $3 million and $4 million for the six months ended June 30, 2015 and 2014, respectively.
     

 

         
HILTON WORLDWIDE HOLDINGS INC.
TIMESHARE REVENUES AND OPERATING EXPENSES
(unaudited, dollars in millions)
         
    Three Months Ended    
    June 30,   Increase / (Decrease)
    2015   2014   $   %
Revenues                
Timeshare sales   $ 233   $ 195   38   19.5
Resort operations     51     48   3   6.3
Financing and other     35     33   2   6.1
    $ 319   $ 276   43   15.6
                 
Operating Expenses                
Timeshare sales   $ 172   $ 142   30   21.1
Resort operations     32     32    
Financing and other     16     14   2   14.3
    $ 220   $ 188   32   17.0
         
         
    Six Months Ended    
    June 30,   Increase / (Decrease)
    2015   2014   $   %
Revenues                
Timeshare sales   $ 470   $ 394   76   19.3
Resort operations     101     97   4   4.1
Financing and other     69     64   5   7.8
    $ 640   $ 555   85   15.3
                 
Operating Expenses                
Timeshare sales   $ 360   $ 277   83   30.0
Resort operations     63     62   1   1.6
Financing and other     31     26   5   19.2
    $ 454   $ 365   89   24.4
                     

 

                       
HILTON WORLDWIDE HOLDINGS INC.
HOTEL AND TIMESHARE PROPERTY SUMMARY
As of June 30, 2015
                       
    Owned / Leased(1)     Managed     Franchised     Total
    Hotels     Rooms     Hotels     Rooms     Hotels     Rooms     Hotels     Rooms
Waldorf Astoria Hotels & Resorts                                              
U.S.   4     1,148     8     5,555             12     6,703
Americas (excluding U.S.)           1     153     1     984     2     1,137
Europe   2     463     4     898             6     1,361
Middle East & Africa           3     703             3     703
Asia Pacific           2     431             2     431
Conrad Hotels & Resorts                                              
U.S.           4     1,341             4     1,341
Americas (excluding U.S.)                   1     294     1     294
Europe   1     191     2     707     1     256     4     1,154
Middle East & Africa   1     614     2     641             3     1,255
Asia Pacific           11     3,419     1     636     12     4,055
Hilton Hotels & Resorts                                              
U.S.   25     23,142     40     23,416     173     52,665     238     99,223
Americas (excluding U.S.)   3     1,836     23     7,687     19     5,889     45     15,412
Europe   71     18,423     54     15,847     27     7,587     152     41,857
Middle East & Africa   6     2,276     43     13,807     1     410     50     16,493
Asia Pacific   8     3,959     59     21,966     8     2,980     75     28,905
Curio - A Collection by Hilton                                              
U.S.   1     224     1     998     7     2,527     9     3,749
DoubleTree by Hilton                                              
U.S.   11     4,268     29     8,521     263     63,602     303     76,391
Americas (excluding U.S.)           3     637     14     2,647     17     3,284
Europe           12     3,608     46     8,073     58     11,681
Middle East & Africa           8     1,687     4     488     12     2,175
Asia Pacific           35     10,001     2     965     37     10,966
Embassy Suites by Hilton                                              
U.S.   10     2,523     35     9,415     170     38,992     215     50,930
Americas (excluding U.S.)           3     623     5     1,282     8     1,905
Hilton Garden Inn                                              
U.S.   2     290     4     430     554     75,841     560     76,561
Americas (excluding U.S.)           5     639     26     3,967     31     4,606
Europe           16     2,940     24     3,902     40     6,842
Middle East & Africa           1     180             1     180
Asia Pacific           7     1,123             7     1,123
Hampton by Hilton                                              
U.S.   1     130     50     6,178     1,889     183,251     1,940     189,559
Americas (excluding U.S.)           7     935     71     8,542     78     9,477
Europe           8     1,211     27     4,091     35     5,302
Asia Pacific                   1     72     1     72
Homewood Suites by Hilton                                              
U.S.           27     2,921     326     36,458     353     39,379
Americas (excluding U.S.)           2     224     15     1,699     17     1,923
Home2 Suites by Hilton                                              
U.S.                   55     5,759     55     5,759
Americas (excluding U.S.)           1     97     1     127     2     224
Other   3     1,272     3     957     2     302     8     2,531
Lodging   149     60,759     513     149,896     3,734     514,288     4,396     724,943
Hilton Grand Vacations           44     6,908             44     6,908
Total   149     60,759     557     156,804     3,734     514,288     4,440     731,851
                                               

 

____________
(1)   Includes hotels owned or leased by entities in which Hilton owns a noncontrolling interest.
     

 

 

HILTON WORLDWIDE HOLDINGS INC.

CAPITAL EXPENDITURES

(unaudited, dollars in millions)

 
   

Three Months Ended
June 30,

  Increase / (Decrease)
    2015   2014   $   %
Hotel property and equipment   $ 66     $ 64     2     3.1  
Timeshare property and equipment     3       1     2     NM(1)
Corporate and other property and equipment     2       2          
Total capital expenditures for property and equipment     71       67     4     6.0  
Software capitalization costs     15       17     (2 )   (11.8 )
Contract acquisition costs     8       5     3     60.0  
Expenditures for timeshare inventory net of costs of sales(2)     (1 )     (26 )   25     (96.2 )
Total capital expenditures   $ 93     $ 63     30     47.6  
         
    Six Months Ended
June 30,
  Increase / (Decrease)
    2015   2014   $   %
Hotel property and equipment   $ 148     $ 106     42     39.6  
Timeshare property and equipment     5       1     4     NM(1)
Corporate and other property and equipment     6       3     3     100.0  
Total capital expenditures for property and equipment     159       110     49     44.5  
Software capitalization costs     23       32     (9 )   (28.1 )
Contract acquisition costs     19       21     (2 )   (9.5 )
Expenditures for timeshare inventory net of costs of sales(2)     14       (26 )   40     NM(1)
Total capital expenditures   $ 215     $ 137     78     56.9  
                             

 

____________

(1)

  Fluctuation in terms of percentage change is not meaningful.

(2)

  Timeshare capital expenditures for inventory additions were $35 million and $8 million for the three months ended June 30, 2015 and 2014, respectively, and $76 million and $44 million for the six months ended June 30, 2015 and 2014, respectively, and timeshare costs of sales were $36 million and $34 million for the three months ended June 30, 2015 and 2014, respectively, and $62 million and $70 million for the six months ended June 30, 2015 and 2014, respectively.
     

 

 

HILTON WORLDWIDE HOLDINGS INC.

NON-GAAP FINANCIAL MEASURES RECONCILIATIONS

NET INCOME AND EPS, ADJUSTED FOR SPECIAL ITEMS

(unaudited, in millions, except per share data)

 
    Three Months Ended
June 30,
    2015   2014
Net income attributable to Hilton stockholders, as reported   $ 161     $ 209  
Diluted EPS, as reported   $ 0.16     $ 0.21  
         
Special items:        
Share-based compensation expense(1)   $ 64     $ 6  
Net loss (gain) on asset acquisitions and dispositions(2)   51     (11 )
Gain on capital lease amendment(3)   (24 )    
Secondary offering expenses(4)   2     6  
Total special items before tax   93     1  
Income tax expense on special items   (8 )   (1 )
Total special items after tax   $ 85     $  
         
Net income, adjusted for special items   $ 246     $ 209  
Diluted EPS, adjusted for special items   $ 0.25     $ 0.21  
     
    Six Months Ended
June 30,
    2015   2014
Net income attributable to Hilton stockholders, as reported   $ 311     $ 332  
Diluted EPS, as reported   $ 0.32     $ 0.34  
         
Special items:        
Share-based compensation expense(1)   $ 66     $ 19  
Net gain on asset acquisitions and dispositions(2)   (43 )   (11 )
Gain on capital lease amendment(3)   (24 )    
Secondary offering expenses(4)   2     6  
Foreign deferred tax adjustment(5)   4      
Total special items before tax   5     14  
Income tax benefit (expense) on special items   45     (1 )
Total special items after tax   $ 50     $ 13  
         
Net income, adjusted for special items   $ 361     $ 345  
Diluted EPS, adjusted for special items   $ 0.37     $ 0.35  
                 

 

____________

(1)

  This amount includes expense that was recognized in general, administrative and other expenses related to the share-based compensation prior to and in connection with the initial public offering. Amount excludes share-based compensation expense related to awards issued under the Hilton Worldwide Holdings Inc. 2013 Omnibus Incentive Plan (the "Stock Plan").

(2)

  The amount

###

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