Attached files
| file | filename |
|---|---|
| EX-99.1 - EX-99.1 - Hilton Worldwide Holdings Inc. | d302894dex991.htm |
| EX-10.5 - EX-10.5 - Hilton Worldwide Holdings Inc. | d302894dex105.htm |
| EX-10.4 - EX-10.4 - Hilton Worldwide Holdings Inc. | d302894dex104.htm |
| EX-10.3 - EX-10.3 - Hilton Worldwide Holdings Inc. | d302894dex103.htm |
| EX-10.2 - EX-10.2 - Hilton Worldwide Holdings Inc. | d302894dex102.htm |
| EX-10.1 - EX-10.1 - Hilton Worldwide Holdings Inc. | d302894dex101.htm |
| EX-3.1 - EX-3.1 - Hilton Worldwide Holdings Inc. | d302894dex31.htm |
| EX-2.1 - EX-2.1 - Hilton Worldwide Holdings Inc. | d302894dex21.htm |
| 8-K - FORM 8-K - Hilton Worldwide Holdings Inc. | d302894d8k.htm |
Exhibit 99.2
HILTON WORLDWIDE HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Overview
On January 3, 2017, Hilton Worldwide Holdings Inc. (together with its consolidated subsidiaries, “Hilton,” “we,” “us” or “our”) completed the previously announced separation of its business into three independent, publicly traded companies (the “spin-offs”), which was accomplished by the distribution of the outstanding shares of common stock of Park Hotels & Resorts Inc. (“Park”) and Hilton Grand Vacations Inc. (“HGV”) to Hilton’s stockholders of record as of the close of business on December 15, 2016 (the “Distribution”). Park and HGV have their common stock listed on the New York Stock Exchange under the symbols “PK” and “HGV,” respectively. Park holds a portfolio of owned and leased hotels and resorts previously owned and operated by Hilton, and HGV owns and operates Hilton’s historical timeshare business. Hilton will continue to manage or franchise all of the hotels initially distributed to Park under long-term management and franchise agreements and will license certain intellectual property to HGV for use in its timeshare business under a long-term license agreement.
Beginning in the first quarter of 2017, the historical financial results of Park and HGV for periods prior to the Distribution will be reflected in Hilton’s condensed consolidated financial statements as discontinued operations. Additionally, immediately following the spin-offs, Hilton completed a 1-for-3 reverse stock split of its outstanding common stock (the “Reverse Stock Split”).
Basis of Pro Forma Presentation
The following unaudited pro forma condensed consolidated financial statements present the historical consolidated financial statements of Hilton adjusted to reflect the spin-offs and the Reverse Stock Split. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2016 and unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2016 and years ended December 31, 2015, 2014 and 2013 have been prepared to reflect the spin-offs and the Reverse Stock Split as if they had occurred on September 30, 2016 for the unaudited pro forma condensed consolidated balance sheet and January 1, 2013 for the unaudited pro forma condensed consolidated statements of operations.
The unaudited pro forma adjustments are based on estimates, accounting judgments and currently available information and assumptions that Hilton management believes are reasonable. These adjustments are included only to the extent that they are directly attributable to the spin-offs or the Reverse Stock Split, the information used is factually supportable and, for the unaudited pro forma condensed consolidated statements of operations, are expected to have a continuing effect on us. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with our historical audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2015, and our unaudited condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, and accompanying notes, in each case, which are available on the United States Securities and Exchange Commission’s website at www.sec.gov and Hilton’s website at www.hiltonworldwide.com.
The unaudited pro forma condensed consolidated financial statements are provided for informational purposes only and are not necessarily indicative of what our financial position or results of operations would actually have been had the spin-offs occurred on the dates indicated or what our future financial position or results of operations will be after giving effect to the completion of the spin-offs. The adjustments in the unaudited pro forma condensed consolidated statements 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 financial statements do not reflect any cost savings that we believe could have been achieved had the spin-offs been completed on the dates indicated.
1
HILTON WORLDWIDE HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2016
(In millions)
| Hilton Historical |
Park & HGV(1) |
Pro Forma Adjustments |
Pro Forma |
|||||||||||||
| ASSETS |
||||||||||||||||
| Current Assets: |
||||||||||||||||
| Cash and cash equivalents |
$ | 859 | $ | (353 | ) | $ | 766 | (a) | $ | 1,272 | ||||||
| Restricted cash and cash equivalents |
272 | (169 | ) | 31 | (a) | 134 | ||||||||||
| Accounts receivable, net of allowance for doubtful accounts |
1,021 | (273 | ) | — | 748 | |||||||||||
| Inventories |
508 | (502 | ) | — | 6 | |||||||||||
| Current portion of financing receivables, net |
128 | (126 | ) | — | 2 | |||||||||||
| Prepaid expenses |
171 | (59 | ) | — | 112 | |||||||||||
| Income taxes receivable |
17 | — | — | 17 | ||||||||||||
| Other |
48 | (22 | ) | — | 26 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total current assets |
3,024 | (1,504 | ) | 797 | 2,317 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Property, Intangibles and Other Assets: |
||||||||||||||||
| Property and equipment, net |
9,020 | (8,607 | ) | (54 | ) (b) | 359 | ||||||||||
| Financing receivables, net |
929 | (865 | ) | — | 64 | |||||||||||
| Investments in affiliates |
132 | (100 | ) | — | 32 | |||||||||||
| Goodwill |
5,855 | (605 | ) | (98 | ) (c) | 5,152 | ||||||||||
| Brands |
4,908 | — | — | 4,908 | ||||||||||||
| Management and franchise contracts, net |
1,044 | (57 | ) | — | 987 | |||||||||||
| Other intangible assets, net |
525 | (58 | ) | — | 467 | |||||||||||
| Deferred income tax assets |
75 | (3 | ) | — | 72 | |||||||||||
| Other |
359 | (20 | ) | — | 339 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total property, intangibles and other assets |
22,847 | (10,315 | ) | (152 | ) | 12,380 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| TOTAL ASSETS |
$ | 25,871 | $ | (11,819 | ) | $ | 645 | $ | 14,697 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| LIABILITIES AND EQUITY |
||||||||||||||||
| Current Liabilities: |
||||||||||||||||
| Accounts payable, accrued expenses and other |
$ | 2,354 | $ | (668 | ) | $ | — | $ | 1,686 | |||||||
| Current maturities of long-term debt |
101 | (105 | ) | — | (4 | ) | ||||||||||
| Current maturities of timeshare debt |
80 | (80 | ) | — | — | |||||||||||
| Income taxes payable |
63 | (7 | ) | — | 56 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total current liabilities |
2,598 | (860 | ) | — | 1,738 | |||||||||||
| Long-term debt |
9,883 | (2,969 | ) | — | 6,914 | |||||||||||
| Timeshare debt |
337 | (337 | ) | — | — | |||||||||||
| Deferred revenues |
96 | (24 | ) | — | 72 | |||||||||||
| Deferred income tax liabilities |
4,487 | (2,739 | ) | (16 | ) (b) | 1,732 | ||||||||||
| Liability for guest loyalty program |
853 | — | — | 853 | ||||||||||||
| Other |
1,126 | (13 | ) | — | 1,113 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total liabilities |
19,380 | (6,942 | ) | (16 | ) | 12,422 | ||||||||||
| Equity: |
||||||||||||||||
| Preferred stock |
— | — | — | — | ||||||||||||
| Common stock |
10 | — | — | 10 | ||||||||||||
| Additional paid-in capital |
10,198 | — | — | 10,198 | ||||||||||||
| Accumulated deficit |
(2,866 | ) | (5,062 | ) | 661 | (a)(b)(c) | (7,267 | ) | ||||||||
| Accumulated other comprehensive loss |
(826 | ) | 163 | — | (663 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Hilton stockholders’ equity |
6,516 | (4,899 | ) | 661 | 2,278 | |||||||||||
| Noncontrolling interests |
(25 | ) | 22 | — | (3 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total equity |
6,491 | (4,877 | ) | 661 | 2,275 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| TOTAL LIABILITIES AND EQUITY |
$ | 25,871 | $ | (11,819 | ) | $ | 645 | $ | 14,697 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | Represents the elimination of historical assets and liabilities of Park and HGV. |
See notes to unaudited pro forma condensed consolidated financial statements.
2
HILTON WORLDWIDE HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2016
(In millions, except per share data)
| Hilton Historical |
Park & HGV(1) |
Pro Forma Adjustments |
Pro Forma |
|||||||||||||
| Revenues |
||||||||||||||||
| Owned and leased hotels |
$ | 3,105 | $ | (2,016 | ) | $ | — | $ | 1,089 | |||||||
| Management and franchise fees and other |
1,276 | (63 | ) | 106 | (d) | 1,378 | ||||||||||
| 59 | (e) | |||||||||||||||
| Timeshare |
1,020 | (1,020 | ) | — | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 5,401 | (3,099 | ) | 165 | 2,467 | ||||||||||||
| Other revenues from managed and franchised properties |
3,342 | (101 | ) | 866 | (d) | 4,107 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
8,743 | (3,200 | ) | 1,031 | 6,574 | |||||||||||
| Expenses |
||||||||||||||||
| Owned and leased hotels |
2,335 | (1,354 | ) | — | 981 | |||||||||||
| Timeshare |
697 | (697 | ) | — | — | |||||||||||
| Depreciation and amortization |
509 | (236 | ) | — | 273 | |||||||||||
| Impairment loss |
15 | — | — | 15 | ||||||||||||
| General, administrative and other |
392 | (66 | ) | — | 326 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 3,948 | (2,353 | ) | — | 1,595 | ||||||||||||
| Other expenses from managed and franchised properties |
3,342 | (101 | ) | 866 | (d) | 4,107 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total expenses |
7,290 | (2,454 | ) | 866 | 5,702 | |||||||||||
| Gain on sales of assets, net |
2 | (1 | ) | — | 1 | |||||||||||
| Operating income |
1,455 | (747 | ) | 165 | 873 | |||||||||||
| Interest income |
10 | (1 | ) | — | 9 | |||||||||||
| Interest expense |
(434 | ) | 148 | — | (286 | ) | ||||||||||
| Equity in earnings from unconsolidated affiliates |
18 | (15 | ) | — | 3 | |||||||||||
| Loss on foreign currency transactions |
(33 | ) | (3 | ) | — | (36 | ) | |||||||||
| Other loss, net |
(15 | ) | 8 | — | (7 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income before income taxes |
1,001 | (610 | ) | 165 | 556 | |||||||||||
| Income tax expense |
(255 | ) | 244 | (63 | ) (f) | (74 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income |
746 | (366 | ) | 102 | 482 | |||||||||||
| Net income attributable to noncontrolling interests |
(11 | ) | 6 | — | (5 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income attributable to Hilton stockholders |
$ | 735 | $ | (360 | ) | $ | 102 | $ | 477 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings per share: |
||||||||||||||||
| Basic |
$ | 0.74 | (g) | $ | 1.45 | |||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
$ | 0.74 |
|
|
(g) |
$ | 1.45 | |||||||||
|
|
|
|
|
|||||||||||||
| Weighted average shares outstanding: |
||||||||||||||||
| Basic |
988 | (g) | 329 | |||||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
991 | (g) | 330 | |||||||||||||
|
|
|
|
|
|||||||||||||
| (1) | Represents the elimination of the historical results of operations of Park and HGV. |
See notes to unaudited pro forma condensed consolidated financial statements.
3
HILTON WORLDWIDE HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2015
(In millions, except per share data)
| Hilton Historical |
Park & HGV(1) |
Pro Forma Adjustments |
Pro Forma |
|||||||||||||
| Revenues |
||||||||||||||||
| Owned and leased hotels |
$ | 4,233 | $ | (2,637 | ) | $ | — | $ | 1,596 | |||||||
| Management and franchise fees and other |
1,601 | (75 | ) | 139 | (d) | 1,739 | ||||||||||
| 74 | (e) | |||||||||||||||
| Timeshare |
1,308 | (1,308 | ) | — | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 7,142 | (4,020 | ) | 213 | 3,335 | ||||||||||||
| Other revenues from managed and franchised properties |
4,130 | (119 | ) | 1,146 | (d) | 5,157 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
11,272 | (4,139 | ) | 1,359 | 8,492 | |||||||||||
| Expenses |
||||||||||||||||
| Owned and leased hotels |
3,168 | (1,754 | ) | — | 1,414 | |||||||||||
| Timeshare |
897 | (897 | ) | — | — | |||||||||||
| Depreciation and amortization |
692 | (307 | ) | — | 385 | |||||||||||
| Impairment loss |
9 | — | — | 9 | ||||||||||||
| General, administrative and other |
611 | (34 | ) | — | 577 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 5,377 | (2,992 | ) | — | 2,385 | ||||||||||||
| Other expenses from managed and franchised properties |
4,130 | (119 | ) | 1,146 | (d) | 5,157 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total expenses |
9,507 | (3,111 | ) | 1,146 | 7,542 | |||||||||||
| Gain on sales of assets, net |
306 | (143 | ) | — | 163 | |||||||||||
| Operating income |
2,071 | (1,171 | ) | 213 | 1,113 | |||||||||||
| Interest income |
19 | (1 | ) | — | 18 | |||||||||||
| Interest expense |
(575 | ) | 198 | — | (377 | ) | ||||||||||
| Equity in earnings from unconsolidated affiliates |
23 | (22 | ) | — | 1 | |||||||||||
| Loss on foreign currency transactions |
(41 | ) | — | — | (41 | ) | ||||||||||
| Other gain (loss), net |
(1 | ) | 33 | — | 32 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income before income taxes |
1,496 | (963 | ) | 213 | 746 | |||||||||||
| Income tax benefit (expense) |
(80 | ) | 431 | (81 | ) (f) | 270 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income |
1,416 | (532 | ) | 132 | 1,016 | |||||||||||
| Net income attributable to noncontrolling interests |
(12 | ) | 7 | — | (5 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income attributable to Hilton stockholders |
$ | 1,404 | $ | (525 | ) | $ | 132 | $ | 1,011 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings per share: |
||||||||||||||||
| Basic |
$ | 1.42 | (g) | $ | 3.07 | |||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
$ | 1.42 | (g) | $ | 3.07 | |||||||||||
|
|
|
|
|
|||||||||||||
| Weighted average shares outstanding: |
||||||||||||||||
| Basic |
986 | (g) | 329 | |||||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
989 | (g) | 330 | |||||||||||||
|
|
|
|
|
|||||||||||||
| (1) | Represents the elimination of the historical results of operations of Park and HGV. |
See notes to unaudited pro forma condensed consolidated financial statements.
4
HILTON WORLDWIDE HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2014
(In millions, except per share data)
| Hilton Historical |
Park & HGV(1) |
Pro Forma Adjustments |
Pro Forma | |||||||||||||
| Revenues |
||||||||||||||||
| Owned and leased hotels |
$ | 4,239 | $ | (2,463 | ) | $ | — | $ | 1,776 | |||||||
| Management and franchise fees and other |
1,401 | (56 | ) | 130 | (d) | 1,541 | ||||||||||
| 66 | (e) | |||||||||||||||
| Timeshare |
1,171 | (1,171 | ) | — | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 6,811 | (3,690 | ) | 196 | 3,317 | ||||||||||||
| Other revenues from managed and franchised properties |
3,691 | (124 | ) | 1,024 | (d) | 4,591 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
10,502 | (3,814 | ) | 1,220 | 7,908 | |||||||||||
| Expenses |
||||||||||||||||
| Owned and leased hotels |
3,252 | (1,666 | ) | — | 1,586 | |||||||||||
| Timeshare |
767 | (767 | ) | — | — | |||||||||||
| Depreciation and amortization |
628 | (265 | ) | — | 363 | |||||||||||
| General, administrative and other |
491 | (22 | ) | — | 469 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 5,138 | (2,720 | ) | — | 2,418 | ||||||||||||
| Other expenses from managed and franchised properties |
3,691 | (124 | ) | 1,024 | (d) | 4,591 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total expenses |
8,829 | (2,844 | ) | 1,024 | 7,009 | |||||||||||
| Operating income |
1,673 | (970 | ) | 196 | 899 | |||||||||||
| Interest income |
10 | (1 | ) | — | 9 | |||||||||||
| Interest expense |
(618 | ) | 202 | — | (416 | ) | ||||||||||
| Equity in earnings from unconsolidated affiliates |
19 | (16 | ) | — | 3 | |||||||||||
| Gain on foreign currency transactions |
26 | — | — | 26 | ||||||||||||
| Other gain, net |
37 | (29 | ) | — | 8 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income before income taxes |
1,147 | (814 | ) | 196 | 529 | |||||||||||
| Income tax expense |
(465 | ) | 311 | (74 | ) (f) | (228 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income |
682 | (503 | ) | 122 | 301 | |||||||||||
| Net income attributable to noncontrolling interests |
(9 | ) | 4 | — | (5 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income attributable to Hilton stockholders |
$ | 673 | $ | (499 | ) | $ | 122 | $ | 296 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings per share: |
||||||||||||||||
| Basic |
$ | 0.68 | (g) | $ | 0.90 | |||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
$ | 0.68 | (g) | $ | 0.90 | |||||||||||
|
|
|
|
|
|||||||||||||
| Weighted average shares outstanding: |
||||||||||||||||
| Basic |
985 | (g) | 328 | |||||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
986 | (g) | 329 | |||||||||||||
|
|
|
|
|
|||||||||||||
| (1) | Represents the elimination of the historical results of operations of Park and HGV. |
See notes to unaudited pro forma condensed consolidated financial statements.
5
HILTON WORLDWIDE HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2013
(In millions, except per share data)
| Hilton Historical |
Park & HGV(1) |
Pro Forma Adjustments |
Pro Forma | |||||||||||||
| Revenues |
||||||||||||||||
| Owned and leased hotels |
$ | 4,046 | $ | (2,286 | ) | $ | — | $ | 1,760 | |||||||
| Management and franchise fees and other |
1,175 | (31 | ) | 119 | (d) | 1,321 | ||||||||||
| 58 | (e) | |||||||||||||||
| Timeshare |
1,109 | (1,109 | ) | — | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 6,330 | (3,426 | ) | 177 | 3,081 | ||||||||||||
| Other revenues from managed and franchised properties |
3,405 | (99 | ) | 954 | (d) | 4,260 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
9,735 | (3,525 | ) | 1,131 | 7,341 | |||||||||||
| Expenses |
||||||||||||||||
| Owned and leased hotels |
3,147 | (1,577 | ) | — | 1,570 | |||||||||||
| Timeshare |
730 | (730 | ) | — | — | |||||||||||
| Depreciation and amortization |
603 | (261 | ) | — | 342 | |||||||||||
| General, administrative and other |
748 | (54 | ) | — | 694 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 5,228 | (2,622 | ) | — | 2,606 | ||||||||||||
| Other expenses from managed and franchised properties |
3,405 | (99 | ) | 954 | (d) | 4,260 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total expenses |
8,633 | (2,721 | ) | 954 | 6,866 | |||||||||||
| Operating income |
1,102 | (804 | ) | 177 | 475 | |||||||||||
| Interest income |
9 | (2 | ) | — | 7 | |||||||||||
| Interest expense |
(620 | ) | 49 | — | (571 | ) | ||||||||||
| Equity in earnings from unconsolidated affiliates |
16 | (12 | ) | — | 4 | |||||||||||
| Loss on foreign currency transactions |
(45 | ) | 6 | — | (39 | ) | ||||||||||
| Gain on debt extinguishment |
229 | — | — | 229 | ||||||||||||
| Other gain, net |
7 | — | — | 7 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income before income taxes |
698 | (763 | ) | 177 | 112 | |||||||||||
| Income tax expense |
(238 | ) | 301 | (67 | ) (f) | (4 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income |
460 | (462 | ) | 110 | 108 | |||||||||||
| Net income attributable to noncontrolling interests |
(45 | ) | 3 | — | (42 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income attributable to Hilton stockholders |
$ | 415 | $ | (459 | ) | $ | 110 | $ | 66 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings per share: |
||||||||||||||||
| Basic |
$ | 0.45 | (g) | $ | 0.21 | |||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
$ | 0.45 | (g) | $ | 0.21 | |||||||||||
|
|
|
|
|
|||||||||||||
| Weighted average shares outstanding: |
||||||||||||||||
| Basic |
923 | (g) | 308 | |||||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
923 | (g) | 308 | |||||||||||||
|
|
|
|
|
|||||||||||||
| (1) | Represents the elimination of the historical results of operations of Park and HGV. |
See notes to unaudited pro forma condensed consolidated financial statements.
6
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma condensed consolidated financial statements include the following pro forma adjustments:
| (a) | In connection with the spin-offs, Hilton received cash distributions from Park and HGV. |
| (b) | Represents the October 2016 transfer of a land parcel at historical carrying value from Hilton to HGV in connection with the spin-offs, including the removal of the related deferred tax liability. |
| (c) | Represents the incremental goodwill related to Park based upon its relative fair value allocable in conjunction with the spin-offs. |
| (d) | Reflects the change in management and franchise fee revenue and other revenues and expenses from managed and franchised properties related to the management and franchise agreements with Park effective upon completion of the spin-offs. Pursuant to the agreements, Park will pay agreed upon fees for various services that we will provide to support the operations of their hotels, as well as royalty fees for the licensing of our hotel brands. These fees are on different terms from those included within the intercompany management agreements in effect before the spin-offs, which were eliminated in consolidation in our historical consolidated financial statements. The terms of the management agreements generally include a base management fee, calculated as three percent of gross hotel revenues or receipts, and an incentive management fee, calculated as six percent of a specified measure of hotel earnings that will be calculated in accordance with the applicable management agreement. These fees are included in management and franchise fees and other. Additionally, payroll and related costs, certain other operating costs, marketing expenses and other expenses associated with our brands and shared services will be directly reimbursed to us by Park under the terms of the management and franchise agreements. This revenue is presented as other revenues from managed and franchised properties, with the corresponding expenses presented as other expenses from managed and franchised properties. |
| (e) | Reflects the change in franchise fee revenue related to the license agreement with HGV effective upon completion of the spin-offs. Pursuant to the license agreement, HGV will pay agreed-upon fees for the right to use certain Hilton-branded trademarks, trade names and related intellectual property in its business. These fees include royalties, calculated as five percent of gross revenues, as well as additional other fees. These fees are on different terms from those included in the agreement with HGV in effect before the spin-offs, which were eliminated in consolidation in our historical consolidated financial statements. |
| (f) | Represents the income tax expense effect of pro forma adjustments by applying an estimated statutory tax rate of 37.9 percent. |
| (g) | Pro forma basic and diluted weighted average shares outstanding were based on the historical weighted average number of common shares outstanding adjusted for the execution of the Reverse Stock Split immediately following the Distribution. The calculation of pro forma diluted weighted average shares outstanding also reflects the effect of the spin-offs. |
7